B (4:37)

Yeah. And it's, I think, a really good sort of illustration of the turmoil that you're talking about is what hap. Is what's happening with the rates on the U.S. 10 years, because they're, they're continuing to, to go down. And it sort of seems a little like kind of orthodox in a world where the, where the dollar is going up. So what, what do you make of that?

A (4:58)

Yeah, I think what's like, very clear is that there's, the market is concerned about accelerating inflation.

B (5:06)

Right.

A (5:07)

And like, I, I don't think there's any doubt in that. I think there's also. And the market is concerned about, you know, the fact that growth might slow and we might have a, you know, in this stagflationary period could, could come. But at the same time, you look at, you know, Kevin Warsh coming in office, right, and he should take office at the Fed, like, you know, call it like mid May, right? And so I think like May 15th. And, you know, the, the question that the markets I'm trying to figure out about Warsh has been, is he, you know, he, he's been, you know, he's been a hawk at times, right. In his public statements. But there's also a perspective that, you know, maybe he's somebody who's like, very close to the administration. And clearly, you know, President Trump wants him to cut rates. And if that's the case, you know, how does he think about his personal views and how he might think about monetary policy relative to, you know, what should the administration would want him to do and how does he react to, like, political pressure? I think people are very confused by that. And I think the market initially reacted in a way that said, hey, we think, you know, we're thinking about future monetary policy based on how, you know, things that he has said in the past. And now it seems like people are coming around to this idea that maybe potentially he is just going to give in to more political pressure. We'll see. I think there's, there's also the story we haven't talked about here, which is the, the IPA ruling over at, in the Supreme Court, which, you know, obviously deemed that the way that we had, you know, kind of put forth tariffs was illegal and was kind of an expansion of, you know, executive power. And then obviously, you know, President Trump came out right away and said, well, we're going to use this different legal justification to be able to put on tariffs for at least, I think it's about 180 days. He's allowed to up to 15%. First he said it was 10%. Then they're saying they're going to go up to 15%. What happens after that, we don't know. And so it's, it's very clear to me right now that there's just more confusion in the market than ever. And you actually have different people who trade these different markets who are coming to different conclusions in a way that we haven't seen before.

B (7:21)

Yeah, I think so too. And I, I believe I actually briefly misspoke with the way I phrased the first question because yields are actually going up right now, which is sort of what you would not expect. Like bonds, obviously they move inversely with bond prices and you would think bonds would be going up along with the dollar, but they're going in opposite directions, which is again, really epitomizes that source of confusion that you were talking about with Kevin Warsh coming in the expectation of lowering rates, especially with inflation that seems to sort of be, I mean it's not quite 2% but, but it's not increasing like some fear as a result of, of the tariffs. But with oil and everything else happening here that could just permeate through the entire global economy and challenge any efforts at cutting rates if and when Kevin Warsh is even confirmed as Fed chair. Because who knows what's going to happen with Jenny Imperial's investigation of Jerome Powell and everything like that. But yeah, it is really kind of, it's a tough juxtaposition and I want to kind of broaden the conversation a little bit to just kind of get a sense of what's going to happen over the, I guess the near to midterm because I mean, as you mentioned and plenty of other commentators around the world have been discussing over the last 48 hours or so, the timeline on when this may or may not end is fluid. And it seems like President Trump is once again trying to thread the needle that he did in Venezuela when he was able to extract Nicholas Maduro. The vice president essentially agreed to play ball and follow US Guidance. Guidance, I guess is interesting term for, for I think what the US Is dictating to her to do. But it's not quite, I'm not sure what is going to happen in Iran. I mean, as you, I think you mentioned, they've talked about regime change or not regime change. Like would they find someone within the IRGC or, or like clerical leadership that would be willing to work with the US or because if it's going to be true regime change, that can be a lot bloodier, a lot messier. And I don't see that happening in four weeks. Especially if the US Wants to rely solely on air power as a way to sort of eliminate casualties, which just, I find, again, I find it very hard to accomplish your mission in a country of 93 million people. So that's kind of my long preamble, preamble to the question of like, how are you positioning, how are some of the people you're talking about positioning in this environment? Especially like looking at recent history, like the Liberation Day tariffs or even the bombing of Iran last summer or like where we have these like V shaped recoveries that are pretty quickly. Maybe this is a different situation.

A (9:59)

Yeah, so we're a little bit different than, you know, probably some of your listeners. And the fact that like we take very long views on the market, right. And we invest with the idea that like we will be in positions for, you know, you know, at a, at a minimum, like, you know, call it a year. Right. So for years.

B (10:15)

Right.

A (10:15)

And so, you know, we try to be opportunistic sometimes on like the entry point, but mostly it's around. Okay, well what do we think are the, like the global, the global backdrop, the macroeconomic backdrop over some long period of time? And I think there's, there's a, there's two kind of answers to your question. I think the first is. Well, I actually think it's quite positive that crypto and, and bitcoin held up quite well over the weekend. Right. Even at a time when you knew that, you know, equity futures were going to open down or trade down. And there's, you know, there's some conversations. Okay, well, you know, bitcoin is a store of value. And so like, you know, commodities are up, bitcoin be up. But bitcoin hasn't traded that way obviously for, you know, for months right now. And so I think it's positive that maybe it did, you know, have that correlation or traded that way. And I think it looks like, you know, the type of trading you've seen, you know, around these events recently and around the Citrini article, when equities sold down, etc. Implies to you that there aren't necessarily a lot of sellers left. Right. Most of the people are holding now are much more long term perspectives. And so I think that's a good setup for being in crypto over some period of time. Now that doesn't mean anything for the long tail of alt tokens because there's other structural issues there around what happens with market structure and whether or not these things should be worth what they're Worth and know, revenue and, and, and you know, fundamental value and things like that. So I, I think there's, there's that base, so that's really constructive Now I think in the short term though, you know, to your point, right, there's so many things happening that are real risk. Right. So like the equity market kind of rallied after Nvidia really beat earnings and they gave, you know, good guidance in the future and then like it faded that rally super quickly. Right. The equity market also when this Trini article came out, like a bunch of stuff traded down right away and like, you know, Citrini, I really like the, the rating that they do, but this isn't like a household name. This isn't somebody that everybody looks at and is like, okay, well like I, I definitely should be trading off of, you know, what they think. And there was a lot in that article that was like just science fiction. Right.

B (12:24)

And I reminded you a lot of like George Orwell's 1984 type of type panic.

A (12:30)

Yeah, no, a hundred percent. Right. And so I think that's, it's very obvious that there's a lot of fragility in the market too. Right, right. And I do expect that, you know, kind of the long term setup for, you know, crypto is so very good with potential for market structure with how many, you know, kind of institutions are adopting. But it, you just, it's very hard, I think, to bet on crypto if you think that the equity market might take a kind of a real bath here. I think there was a couple articles out over the weekend or some sell side reports which were trying to figure out. Okay, well if you fundamental, there's some fundamental value loss around a increase in inflation and a slowdown in growth because of the rise in oil prices. And depending on how long this goes on, maybe we're looking at something like a 10 to 15% correction in the S and P. And if that happens, it's hard to see Bitcoin holding up. Right. Even considering all the really good mental value or fundamental backdrop that we're talking about at a time when there's just all of these other things that are unclear when it comes to tariffs and when it comes to the anything to do with, you know, AI risk and etc.

B (13:40)

Yeah, it's funny, I think I saw an article in the FT over the weekend that I think there was no better like representation of traders not knowing what to do than seeing the whole market trade down like 3% on a block report or a blog that was published. So I think that, I think that kind of epitomizes things pretty well. So let's talk about here.

A (14:00)

I think it's important to note just to, you know, and I, because I want to really re, you know, make this point which is that the long term outlook for the broader crypto ecosystem right now is probably as good as it's ever been. Right. And we continue to have this like dislocation around. Okay, well what are the, what's happening in Wall street terms of adoption of tokenized assets? What's happening with stablecoin demand? What does that mean for you know, real economic activity on chain? Like, you know what, you know, if we get a market structure bill pass now can talk a little bit about that, but I think that's a little bit up in the air. But like all of these things are really good over the long run if you have that type of time horizon.

B (14:35)

Yeah, yeah, and we'll get to all that because those are all really kind of good points. And I know most of my listeners are not day traders. They're the more long term investors much, much like you guys are. But I mean, I was actually looking around der bit this morning at some of like the options position here and I think it speaks to a lot of what you just discussed. I mean, by far the, the biggest open interest is I think a put at 60,000, especially like settling over the next couple of days. But then once we kind of like span out even to like the end of the month, I mean then we're talking about calls at like 90, 100. I mean it completely switches. Like there's very, very, very bare sentiment or at least people are trying to protect their downside over the next couple days. But then, then things certainly are, are changing. And that might also speak to what I was talking about earlier, how usually these like big like, like acute conflagrations resolve themselves pretty quickly, be it the tariffs or, or the strikes on the Iranian nuclear facilities last year. That's one thing I think Trump has actually done that the market's mispricing the risk of some of these, these issues that everyone thought was, were big red lines that maybe they weren't. And I guess it just depends on how much of a red line this one was.

A (15:42)

Well, I think it's like I'm not an expert in the military or in war or anything of that, and I won't pretend to be, but it does seem like pricing this like it's June again is probably pretty wrong considering the fact that, you know, that was like very Targeted military strikes. And obviously this time we, we've, you know, eliminated a large part of the leadership. There's been a lot of, I think you can already kind of see the news shifting towards negative sentiment this morning. Right. Yeah, there's been, I think, you know, at first, you know, there was an idea that this would end really quickly. Then President Trump came out and said, okay, well now it's four weeks, which probably means longer. And then you, you haven't actually seen the US Be able to enter Iranian airspace yet, which I think has been very surprising for people because they're, you know, to go and eliminate these, a lot of these like missile silos. And again, like this is, this is what I'm reading from, from experts and some things that I'm getting, but I'm not an expert myself. A lot of these missile silos, you need actually like short range missiles to be able to go find them. So you need to be able to get the fighter jets and the bombers into Iranian airspace. And that hasn't happened yet. Which means that we haven't taken down their third of that systems. Right. To allow for that. Right. And you actually saw today, I guess like a couple F15s got shot down to Kuwait accidentally. Yeah, yeah. And so there's, there's, there's. And it seems like, you know, reading between the lines, that there might be some surprise at the, how expansive the Iranian kind of reaction has been. Right. And you know, an entire region and clearly trying to put some pressure on the ally, the economic footprint of the allies in the region and what that means for us. And so that type of reaction and the longer this goes on before we can really start to, you know, get, you know, really take control of the Trader Muse and the Iranian airspace does, I think, project out that this could be a, you know, kind of a quite long conflict.

B (17:41)

Yeah.

A (17:41)

Especially I think President Trump came out again yesterday, I think it was, and said that we, we wanted to do regime change, but that the people that we thought would be good leaders, we actually accidentally, we killed. So I was, I wasn't unclear if that was accidental or not accidental. So it's very odd the messaging right now and it seems like there's, and there's like leaks coming out of the CIA that potentially, you know, we weren't prepared for, know, the, the aerial onslaught. We're worried about, you know, running out of these interceptor missiles in the region and, and so that the, just reading the tea leaves, it seems like there's a shift and you know, how we're Thinking about the length and, and how expansive the, this war.

B (18:19)

Yeah, I mean it's, I mean, I'm not sure if we've ever spoken about this. I actually worked for the US military for five years as a. Oh, I didn't know that but, but I wasn't, I didn't do like combined weapons like combat or that type of, that type of analysis. So I'm not an expert in like taking down air defenses and that type of stuff either. But one thing I do know from like, like helping our war fighters in Afghanistan and Iraq and other places is once the bullets start firing, anything goes. And when a regime like Iran feels that they're seems quite accurately under facing existential threat, they're going to empty the chamber one, one way or another. And it's, it's hard to, I mean even when you have the best laid plans and very clear objectives, it's hard obviously very hard to, to achieve them, let alone sometimes when there's this type of confusion. But let's kind of turn things back to the markets. A couple of things I want to discuss before we get into a few other issues that, a few other topics not related to Iran for one

A (19:19)

it

B (19:19)

seemed, I mean, I don't know if basically the data out from Garabit, et cetera, suggests that we're mispricing the market. I mean you also mentioned too how if the rest of the market tanks, even if Bitcoin is structurally better set up than other assets, it's still going to go down as well. But I mean, I guess maybe do you think that the market is mispricing some of the risk when it comes to Iran because of how messy it could become? And then again in a very not financial advice way, um, traders, people listening here might wonder how they can better protect their downside. What, what do you think are like one or two ways that they could, could do it if they so chose?

A (19:57)

Yeah, I think, I think market's probably pretty correctly pricing in risk to be honest. You know, the equity of markets only being down a little over a point, you know, I think makes sense. Right. Bitcoin is actually up 2% over the weekend. Right. And so it's been kind of sideways. You know, obviously this, you know, I'm not an expert in and a lot of what's happening on the, on the option side right now. But you know, it seems very clear that people are trying to protect, you know, like near term downside, but our long term, structurally, you know, bullish. That all makes sense to me. Right. Because you Know, this, this is happening in real time. I think when you put that in kind of context of everything else that is happening on the, on the rate side, on the, you know, the AI, you know, concern side. I mean, obviously, you know, we talked about the Citrini article, but you know, one of the things that happened, maybe it was Friday is that Block came out and said they were going to cut 40% of their workforce. Right. That is the largest correction or largest layoff and I think S and P history for a company of that size, of a public company. Right. And like that, you know, it's not clear for sure that that will happen, you know, across all of these other, you know, all of these other companies. But it is, you know, sort of a canary in the coal mine of maybe there will be actually a lot of layoffs. Right. And what does that mean for the economy and the market if it does? Right. And that's a longer term risk, but it's, you know, that sign people are trying to now price that in. Right. And so I think there's just so many things happening and so many variables that's an impossible to, you know, really isolate, oh, Iran risk versus, you know, risk of, of everything else.

B (21:37)

Right.

A (21:38)

And so it seems pretty correct to me at the moment. And I think like cautious with the right, you know, in the near term, with the right outlook over the long term. Makes sense. I think there's also we've been on the crypto side, we've been trying to price in the likelihood of a market structure Bill. And if you look at poly market today, I think it's, you know, 52% ish. Right. The people I talk to on the Hill, if they're not in crypto, but they happen to be close to it, are more bearish than that. Call it like 35, 40%. If you talk to a lot of the lobbyists in crypto, they're more bullish than that, but of course that makes sense. And so there's just so many variables happening right now that I think it's really hard to make sense of the market and it's moving so quickly, right?

B (22:28)

Yeah, absolutely. A couple more market questions and then we're going to get to clarity and a few other topics. For one, I feel like bitcoin for the most part, most of the time has been unfairly punished when bad things happen over the weekends because it's typically the only asset that is trading. But we are now moving into a world where there's tokenized stocks, other tokenized assets that do trade 247 gold. Etc. I know especially for, for stocks it's very, very early days for, for them. But I'm curious if you've seen anything, if you saw anything interesting over the weekend with how any of those assets are are traded or if not like maybe just prognosticate a little bit on how like once those markets become bigger and, and more liquid that could sort of like impact the way that assets trade over, over the weekend when incidents like this occur.

A (23:25)

Yeah, I, I mean that is a very interesting topic too because if you look at what happened on Hyper Liquid over the weekend right there, there's a significant amount of trading volume. What's that?

B (23:35)

Oh rocket. I mean I think, I think hype is up. I was gonna ask you about height. I think it's up like 12% since the, since the, the attacks began. So maybe.

A (23:44)

Yeah, it traded channels a bit this morning, but it was up like. Yeah it was, it was up 10, 12% over the weekend.

B (23:49)

Yeah, it might be the safe haven asset in crypto these days.

A (23:52)

Yeah, well, and, and because it's clear and, and what has happened right is these, these HIP three markets which is you know, Trade xyz, which is where they're doing a lot of the tokenized commodity perps and the tokenized stock perps and etc. They We've seen significant, significant uptick in volume on the commodity side and on the, on some of the rates and like like side as well. The, the stock volume hasn't been quite as high. It's been much more around commodities. I think at one point silver or did itself like in a 24 hour period like a third of all hyper liquid volume. Right. And so oil this weekend was like absolutely the most, the most highly traded asset. But these, these markets still do have like some structural issues in terms of allowing people to take risk over the weekend. Because how are the market makers going to hedge out that risk? Like you know how there's still, you have these kind of buffers put in on, on Trade XYZ where you know, they don't want to allow these things to trade more than 10% over the weekend one one way or another because of the fact that you know, if you, if, especially if it's equities, if you, if you like limit open and things move really quickly, you could just, you could have like mass liquidations. Right. Even just on like that, that ball there. And so there's, there's a lot of structural issues on it as well. But the derivatives and the perp side or the purpose side for the, for the commodities have been much easier for people to market make because of the fact that these are markets that you can more easily, you know, whirl with the sun and that they are open for much longer periods of time than equities. Equities is a harder problem to solve and so I think we're going to continue to see that grow. Hyper liquid is doing awesome. But I, I think there's. The long term outlook continues to be better for assets that have, are more highly correlated across global markets versus our, you know, call it individual assets and the US market or you know, European market, etc. I also tend to be, I think relatively bearish on the current state of spot equity on markets. Right. And on onchain right now the way spot works today for most of the products. So you know like Kraken bought a thing called StockX. Yeah, sorry. And, and there was, you know, there's ondo and there's a few others and there's. The one way they work right now mostly is that it's some sort of, you know, SPV that you know, somebody has a market maker has to go and like you know, put in an order to that SPV and then SPV it goes through a US broker dealer and that US broker dealer then buys the thing and you know, during like off periods you can't necessarily redeem. And so there's these dislocations that happen and it's very clunky and it's really hard to like scale that product. And so I'm, I'm much more bullish on the, on the derivative side. And I think we've, we've seen that happen today. I think there's a future where you know, call it natively issued stock on chain where it's its own primary market that I think has a much better chance of growing than the current state of what has happened on these kind of like, you know, SPV wrappers that exist on chain.

B (27:11)

Okay, no good explanation and sounds like we could probably have a series of podcasts on that topic then. Yeah. So one more question and then we'll move on to a few other topics. But I'm just curious, is there one or two charts markets that you're really going to be paying attention to over the next, excuse me, couple of days to get a sense of what's happening. It could be crypto, commodities, equities, anything.

A (27:39)

Yeah, so I'm not a, I'm not a huge chart guy and so I, because of the way we invest. But listen, I think what's happening to

B (27:46)

your boy around even just like an indicator or like a piece of news that you're.

A (27:52)

Yeah, well, so I think the most important thing for the markets right now is what is the likelihood of this thing lasting a long period of time or of it be de escalated pretty quickly. And so, you know, you saw President Trump come out, I think it was yesterday morning, and say that, hey, the Iranian new regime wants to, wants to talk and potentially there's, you know, possibility for, you know, some sort of de escalation that was refunded, rebuilded right away. Right. And so I, I want to see if there's any change in that conversation and what comes out in the media around that. I think you'll see the yield curve react pretty quickly. That'll probably be one of the first things that will react pretty quickly to that. And then oil prices. Right. And so I think those tell you a lot about what the likelihood is of the, you know, of a sustained confidence that affects a bunch of other parts of the economy. Right. So, you know, if oil starts roughly enough to, you know, people start to think that there's, there's going to be, you know, huge supply chain issues and oil starts getting close to $100, which people are talking about. Right. That implies to you that there's going to be massive amounts of issues and, you know, in broader economic situation for what should theoretically also be bad for, you know, any risk asset crypto. And so that, that's what I'm most focused on right now is what is the. How does the conversation evolve on de escalation? And if you start to hear President Trump and the Israeli media talk about, you know, sustained conflict, you know, further, you know, call it US Member deaths. Unfortunately, we had a few over the weekend, you know, things around, you know, continuing to increase the amount of bombing, etc. I mean, that is all an indication that we expect this to be a sustained conflict that will have broader macroeconomic effects and will have broader effects on the crypto market itself. Great.

B (29:42)

All right, so we're going to switch gears here, but before we do so, we're going to take another quick break to hear from some of our show's sponsors.

C (29:49)

Quick note before we continue with today's episode. Bits and BIPS now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed macro AI and how it all collides with crypto. If you want to keep up with our weekly Livestreams and macro meets crypto breakdowns. Make sure you're following bits and bips directly. We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new Bits and Bips channels at unchained crypto.com bitsandbips. You can also find us by searching bits and bips on YouTube, Apple Podcasts, Spotify or wherever, wherever you listen.

B (30:27)

All right, so I said we were actually going to move off of Iran, but one quick tangent before we do so I am. I wanted to just briefly talk about Dubai. It's one part of the world that has really sort of tried to promote itself as a crypto hub. It hosts a major crypto conference that I believe is coming up soon, end of April. Yeah. And I mean, on top of that, I mean it has a crypto forward regulator. It put out one of the first regulatory regimes on crypto and has really become a base for a lot of big crypto companies and players. Just the way the war is right now. I mean, there was even. It may have been, I don't know if it was inadvertent or not where it landed, but a major hotel was hit over the weekend. And if Dubai, the UAE is a part of the world that is, is not immune to retaliation from, from Iran. I'm just curious like, what you think that might mean for its future as a crypto hub, at least in the short term. And, and, and, and yeah, I mean, what the impact on, on crypto could be. I know there's also a lot of investors in, in Dubai that companies are trying to court.

A (31:37)

Yeah. I do also think this is sort of a wait and see conversation. Right. Which is. It seems like the uh, what, what, what hit the Fairmont on, on the Palm was like debris. So there was a, like a missile that was launched that was then shot down. Some debris ended up hitting the Fairmont. Terrible.

B (31:55)

Right?

A (31:55)

And I think like, you know, it's, it's quite sad that that that happened. I, I also expect that we will learn a little bit more about like, what the actual or the reason that the, the Iranians have been. They seem to have been shooting purposely at some other hotels. Now what came out of like Iranian state media over the weekend was that the US government had moved like assets and people into hotels and out from, out from some of the bases. And so these were, you know, military operations. That's Iranian state media, which is always

B (32:29)

going to end, I feel like, I mean, I'm not an Expert on international law. But if that's true, I feel like that's a war crime if, if you hide things in civilian areas.

A (32:37)

So, so yeah, but then I think there was a, something that came out of the State Department today that said there were some people in like Bahrain in a, in a hotel, but it's unclear how that happened. And so it's like, it's all very. Yeah, the problem right now is, and this is a tangent, X is a great place to get information. You know, and it, and then the, the general media is, and it moves much quicker than you know, call it listening to New York Times or washpo or like whoever that person is that you, you think about. But there's also so much propaganda and so much fake stuff that it's like very, very hard to know exactly what's real and what's not. And so the best thing you can do is ingest as much information as possible and then try to figure out what's with. Yeah, well, we'll see. There's a lot of smoke that needs to clear. I think on Dubai specifically though. Listen, it's been a place where we've seen a lot of focus on tokenization, we've seen a lot of focus on building a startup ecosystem there. Abu Dhabi as well. Right. Like the Emirates has been very forward thinking. We're seeing a lot of new people move to adgm regulated entities as well. And, and you know, I, I think if it ends here, that probably doesn't stop some of this, you know, momentum. But if this goes on for a while and we continue to see destruction and you know, the surrounding regions. Yeah, it absolutely is going to be tough because you're not going to have the expat community be as robust. People are just not going to necessarily want to move there. And so we'll, it's, it's wait and see now on like token 2049 in Dubai. You know, I actually had a lot of our portfolio companies who are reaching out and I'm supposed to go and speak there in, you know, eight weeks or so. And that our, our, you know, kind of, you know, party line has been let's wait and see what happens. But certainly if this is still going on four weeks from now, the, the likelihood that that conflict is going or that the, the conference is going to happen in Dubai is, is very, very small.

B (34:33)

Yeah.

A (34:34)

To be a, a huge hit to, you know, to the kind of the ecosystem there, at least in the near term.

B (34:41)

Yeah. Okay. All right, so let's switch gears finally. And I Want to talk about clarity? There was supposed to be, I think the White House put a, a deadline, unofficial deadline of I believe last weekend to come up with some sort of compromise between the, the banks and crypto in particular to yield on, on stable coins. Clearly that, that has passed. I, I don't necessarily think it was just because of what happened with Iran. It seems like this is a bit of an intractable conflict, but you're tracking it closer than I am. So what are you hearing?

A (35:17)

Yeah, so it. I talked about a little bit before and I was wrong earlier. We, we did trade back up over the weekend from low 50s to it's polymarker is now at 70%. That clearity gets packed. So I hadn't checked it in two days. It really depends on who you ask right now. So for context, and I'm sure a lot of your listeners know this, but there was this Clarity act was passed by the House last summer. Their Senate had to mark it up. There was a Senate Banking Committee markup that came out, you know, I guess it was about a month or so ago that had this, you know, call it new language around yield. Right. For there's a few other things in it that the industry is very against around some of the conversation around, you know, tokenized assets and how exactly we think about them. Also things like developer protections and making sure that developers can't be treated as criminals if their software is used for nefarious activities. And so there's a few things that people are really focused on. But that yield language was kind of this new thing that got certain people and especially Coinbase kind of really up in arms. Right. That, you know, and then, you know, Brian Armstrong tweeted about the, the, you know, that, that markup and not being, you know, very happy with it, not being able to support it. And that threw the negotiations into a little bit of what I would say kind of overdrive because they, what everyone thought they were kind of like locked in arm, moving hand in hand there that started to know, I think create some division in, within, within Congress. You then got an ad committee markup that was much cleaner, much more like clarity. Looked a lot more like what the, you know, the industry had hoped to see. But you have to reconcile those two and you have to get it to, to the floor.

B (37:05)

Forgive me, I, I'm sorry, I might be wrong. Wasn't one of the markups canceled or did they both end up happening?

A (37:11)

So what happened is the Academy market was supposed to come out on a Thursday like a couple days after The Banking Committee, when Brian Armstrong came and tweeted and said he couldn't, he couldn't support the Banking Committee markup, it pushed it and it pushed about two weeks, but then it did eventually come in. So yeah, it just got pushed a couple weeks.

B (37:29)

Got it. Thank you.

A (37:30)

And so that markup's out now as well. But the Banking Committee and because the banking lobby is so interested in it, they're the ones that are driving a lot of this conversation around yield. So now there's been a couple of roundtable sessions at the White House on, you know, trying to reconcile this language with the industry and with really the banking, it's the banks. And over the weekend there was some news or some, because some conjecture came out that essentially said that, you know, coinbase, the industry and the White House representatives and the, the government representatives think that we're at a good, you know, kind of middle ground. We're at a, we're at a really good resolution point. But the banks are still being, you know, kind of hardlined. Right. And so we need to get the bank, banking lobby and the banks themselves to say, okay, this resolution works for us. And the main thing in my mind and, and you know, this is a little bit different depending on the US is it's certainly important that we be able to still be able to do revenue share and allow people to fund things like reward programs and loyalty program through revenue from the stable coins. Right? That is really, really, really important. The question then that the banking lobby has is they don't want there to be the issuers to be able to send deal directly, programmatically to call it end consumers. But the, you know, where we fall in the middle of those two kind of extremes right now is what we are negotiating. And the banking lobby has said, okay, well like listen, we actually don't really care if clarity happens and if we don't really care if credit, we're going to take the most hardline stance, which is try to entrench ourselves on our regulatory moat and say that no revenue whatsoever from stablecoins should be allowed to ever pass on to a consumer. And that's also what the OCC initial rule said last week when the OCC put out their first guidance based on genius act. And so if there can be enough political pressure from the administration and call it the broader government apparatus to get the banks to get to somewhere in the middle ground here, I think the industry is there and if that happens, the rest of everything that's still open. There's like five open Items or so all of that is solvable. This is the, this is the main, main issue.

B (39:48)

Yeah, I mean I do wonder, I mean the, the all, everything you said just makes perfect sense. But I do wonder like what is that common ground that you could find a solution to even if it's not making everyone happy, find something everyone can live with. Because I mean banks pay virtually nothing to depositors. Yield that gets passed on to StableCoin holders is three and a half percent. I mean that would just eviscerate bank nims and that's like economically unsustainable for them. So this like you could argue that this is sort of existential to the entire banking model. I mean I'm curious like what the type of situation, what they could live with regardless of how much pressure gets strong armed by Washington. And obviously this is something that we all want. I mean frankly there's a good chance it is the, and maybe the only, the biggest, maybe the only catalyst that will be bullish for crypto this year. But it's just hard to figure out like everyone's trying to figure out what that might look like and I am. So if you have any other thoughts on that, I mean, please share it. But two, you said the odds ticked up from 50 to 70% on polymarket. I know sometimes markets can be manipulated, may not be the right word, but they, they can move based on certain traders putting on, on positions. I'm, I'm going to just ask you to speculate wildly here and wonder if you have any idea what was behind that, that like was it, is it a series of positions? Is it one major position that moved the market? I'd love to kind of just given what happened, it would, it would seem that the, luckily it would go down given that the deadline was missed and we're at war now. But it ticked up.

A (41:26)

Yeah, I think on the polling market side it looks like there was quite a lot of trading okay. Around 7:30 this morning. That ticked it up from you know, call it low 60s to 70 and then you know, over the weekend it from 50s to the 60s over the weekend. That was a little bit of what I talked about which is I think David Sachs and a few others tweeted that like hey, we, we have an agreement or we have a place that we think is acceptable for all parties. We just need the banking lobby to kind of walk through the door and to say okay, we just need though. Yeah. So but I think that got people excited which is that like the, like David Sachs is out tweeting about it right now and, and a few others. The, the, you know, to your original question, okay, well, what gets people or what, what can the bank, the banking lobbies live with? I think I, I think they should be able to live with whether or not they can. You know, I'm not close to, you know, Brian Moynihan and Jamie Dimon, but what I think they should be able to live with is an agreement that the issuers can't programmatically directly send yield to an end holder. Right. Because their perspective is that, oh, if you want to do that, then you are a money market fund, you are a security and you are operating like a bank issue. You should be a fully regulated bank to be able to do that, not just a charter bank. And you should be able. And you should be essentially regulated as securities. Right? So, okay, well, so if we take that off the table, that's fine, but in my mind that's not fine for everybody, but in my mind that's fine, but they should be able to live with an idea that, okay, well, companies make revenue from this. Companies should be able to do revenue share agreements with this the way like Circle and Coinbase has today. And then Coinbase should be able to do with their revenue whatever they want in terms of loyalty and rewards and cash back and anything else to their end customer. Like that feels to me like a very logical solution that everybody should be able to live with because that already happens in a lot of ways. Right? And so there's there if we get in a situation where we literally try to carve out the revenue from a stablecoin issuer and say that can't be used for loyalty or reward program or passing back cash back to an end consumer that's regressive. That's not just like, like it's not just like, oh, we're protecting the status quo, it's actually hurting current fintech more probably. And that's crazy to me and anyone would accept that is like nobody should say that that's it's. And the OCC putting out that, that guidance last week as well like that I think put a lot of people on alert as well because the, there's. Okay, well what happens in Clarity is one point. But even if, let's say this, we get to an agreement in Clarity, but then the OCC says, hey, well in our rulemaking ability relative to genius, we are putting this in there, that it then doesn't matter, it's a moot question. Right. And so we have to now fight the, the Fight on both, you know, kind of both sides, both on the rulemaking side with the SEC and also on the, on the legislation slide here at Clarity.

B (44:12)

Yeah, it's, it's really tough. I mean, I, I try to have sympathy for both sides. I mean, I've been in crypto for over a decade. I also used to work at Citibank. And I mean, I could. I mean, the banks, I mean, their deposits are insured. They, they pay into that insurance. They have like orders of magnitude more regulatory overhead than, than crypto exchanges. And it's a whole, it's a whole mess. But, I mean, I think you distilled it pretty, pretty nicely. Like at some point, bank should, or anyone should be able to pay, share rewards with customers if they want to. I mean, that's the competitive environment. So I don't know. We'll see. I have one more topic I want to discuss, but before I do, is there anything else related to Clarity or DC that you wanted to mention before we move on?

A (44:59)

No. I mean, I think that's where we are today. The, you know, you asked me before, like, what am I hearing? You know, that, that 70% for clarity on polymarket is much higher than I would say. I'm hearing from people on the ground that are, you know, maybe, you know, less economically, you know, directly aligned that are saying, hey, like, realistically, I think it's, you know, maybe a coin flip or maybe slightly less than that. And so that said, like, listen, I think we're all, you know, in the industry, we all want to get a deal done, but it has to preserve certain things. It has to preserve developer protections. It has to get somewhere that makes sense for yield. It has to make sure that these tokenization wrappers do not get treated so differently that they're, you know, you can't actually use them as like, you know, performing collateral, things like that. And so if all that gets, gets solved, I think, you know, there's a. The last open point is going to be that the Democrats want a. Some sort of, like, ethics language in there as well. I am told that that'll get solved, and the White House understands that and the administration sees a path forward there and that that won't kill the deal if we get the other stuff solved. And so that's a good sign. But I think it has to happen by Memorial Day. I think if you don't get a vote for by Memorial Day, I think we're, we're in a really tough spot.

B (46:20)

I'd actually like to just, I don't know if press is the right word, but just maybe explore a little more the ethics thing because, because that is a big, that is a very big issue that, that's central to, to Democrats. And I know Patrick Witt, the, I guess the, I forget his exact title, but he's basically the White House's appointment under David Sachs for, for all things crypto. He gave a comment, I think in CoinDesk that an ethics pledge was sort of off the table. But it sounds like there is a little bit of wiggle room. So can you expand on that at all?

A (46:53)

Yeah, I, my, my, this is me reading between the lines. I don't know anything, you know, personally. This is also what I'm being told by people on the ground. And so, so Patrick White is the, the, I think the deputy chief of staff at the opm, the, the Office of Personnel Management. But to your point, he's working, he is kind of the lead man on all of this, all of this conversation.

B (47:13)

He's leading all the negotiations between the,

A (47:15)

he's leading all the negotiations for the administration and the White House when it comes to trying to find a path to Yield and Clarity Act. And the thing that we have on our side here is that getting this passed is a core part. It's very important to the administration. It's very important to the White House. And typically when something is very important to the White House, they something happens because like the, you know, the Republican senators who want the support of the White House, they want to do what, you know, their leadership wants them to do, which, which the president is right. That helps them in the future and the party apparatus, etc. And so the fact that it's very important to the White House is a good sign. Right. And what I have been told is that, you know, this, hey, listen, we're not absolutely not going to do any ethics language whatsoever is sort of a opening posture, but is not actually where they're at. There's, there's some place to, you know, get something that, you know, Elizabeth Warren probably won't be happy with, but some Democrats will be happy enough with. Right. And get and that the, the White House can live with as well. But we'll see. I mean, we haven't gotten even to that point yet or that is not going to even be talked about until we get the other stuff solved first.

B (48:33)

Understood. Okay. All right, great. Well, thanks for that. Just last, last bit here. I'm curious. Congrats. I mean, your firm raised, I believe it's your fourth fund.

A (48:43)

Fourth fund. Yeah.

B (48:44)

Yeah. And $560 million which is, which is pretty sizable.

A (48:47)

650.

B (48:48)

That's what it. 650. So even more sizable. So congratulations on that.

A (48:55)

Thank you.

B (48:55)

As you, I mean as you very well know, I mean back when I was at Forbes, especially in the earlier part of this decade, I mean it seemed like every week we were getting an announcement about some VC fund raising billions or accelerator fund from one of the foundations behind a blockchain, like nine, ten figure things. That hasn't happened quite so much. But NVC funding has sort of, I think migrated from a lot of smaller projects that like some like doubling down on some of the bigger plays that have already proven successful. But I'd love for you to just spend a minute or two and, and sort of explain the rationale for, I mean aside from just your VC fund. So you want to keep raising funds. Like why now? The right, it was the right time. Why 650 million and like what are some of the areas that you're really targeting with this new fund?

A (49:40)

Yeah, absolutely. On the Y now I think we've been pretty good at raising in times of where the market is at a place where you want to put money to work. Right. And so I wouldn't say necessarily in bear markets, but the way VC should work and it's very odd that it doesn't work this way is that you should deploy a bunch of capital when markets are bad and you should probably not deploy as much capital when markets are good because prices are higher. Right. But you know what happens is that

B (50:11)

the anti Michael Saylor model.

A (50:13)

Exactly what happens is sort of the opposite a lot because there's more entrepreneurs enter the space. You know, when, when prices are up, there's excitement. You know, LPs want to put more capital to work. When you know prices are up, there's just like more excitement. Right. So when there's fear, people don't necessarily want to, to give you money. So the key is, is to raise the money when from the LPs when prices are up and then deploy it when, when, when prices are down. And we, and we try to do that. And so you know, the way venture fundraisers work and so everybody knows is, you know, we announced yesterday or sorry last month but the, it takes some period of time and you have to have, you know, you have first close and you do a couple closes after that took us about, you know, call it, you know, close to a year, which is very typical. Right. And so in 21 to your point, in 22 people were closing funds in like three, four, five months. That never happened in the history of venture and it has not happened since. And so we were able to raise during this time when there was a lot of excitement about what a new administration would bring, what genius act would do for the space, and then, and things like polymarket, which we're large investors in, got their investment from ice. And now it strikes us that the time is now for us to go and actually give a lot of capital to startups who are really excited about building during this period where there's not as much distraction in fomo, et cetera. So we think it's a perfect time to go to go shopping and go invest right now, to your point around. And actually before I even pivot to that, I talked about this earlier, but there are so many structural tailwinds behind our space right now. When it comes to stablecoin adoption, when it comes to tokenization, when it comes to real world businesses building on top of blockchain rails, when it comes to the product market fit, we're seeing with some of DeFi, with things like hyperliquid and a lot of these vault products. It is in my mind one of the best times to be building in our space, especially around any sort of financial product. And then we're starting to see some, call it innovation or at least some experimentation around crypto AI and we'll see what happens there. Right? And so I think it's a perfect time to be building in our space especially. And I think really the only other two spaces that are as exciting would be call it AI, maybe AI, robotics and biotech. And I think that's it. I think that those are the only areas that like want to be on the edge of in frontier tech right now. So I, I think it's an awesome time to be putting money into work when you're building. And I think on top of that, you know, you asked, okay, well, why $650 million? Well, you know, we, our last one was also 650. We had done the same exact thing that we did last time, which is we went out with a $500 million target. And then we put on what we talk about with our LPs, all hard cap. Because the LPs don't you want you to get too big? And so we said, okay, we'll hard cap it at 650,500 million dollar target. We fill it all the way to our hard cap. And why'd we do that? We did that because the LPs were obviously very bullish on wanting to back us. And we were lucky enough to have, you know, really convicted investors. But, but also the reason we're not allowing ourselves to go bigger than that is our perspective is that this space is still not so big that you can, you know, invest, you know, call it a billion, one and a half, $2 billion and, you know, protect returns. Right. And so there comes a. I like to say this to a lot of people which there comes a time in every asset manager's life or where you become, or every venture capitalist life where you become either an asset manager and you solve for the 2% management fees or you stay a venture capitalist and you focus on the 20% carried interest because you get really good returns. Right?

B (53:50)

Yeah.

A (53:51)

So you've seen this play out and call it Traditional Venture 2, where in Dries and Horowitz goes and they raise $15 billion. Right. Or some not more than that. And you know, I think you look at the returns of their funds and I can almost certainly tell you that across every vertical that they're in, they're not the best returning fund. Right. But they have this big media organization. They do a lot of portfolio support. They have a, you know, they have kind of all of these assets under management, do so many different things. Right. And then you look at like a benchmark which has continued to raise, you know, call it, you know, 400, $500 million for years, like 18 funds now. And you look at their returns and their returns are consistently better than, you know, the entries inside the world.

B (54:29)

There's just not enough places to put all that money. That correct? Yeah.

A (54:34)

And so then, so we, we, so we try to thread that needle of being big enough to do we do. We have great portfolio support team. We have a, you know, large talent team that does all of this hiring where we've got, you know, teams in Washington that are working with our, you know, our portfolio companies and, you know, trying to help them navigate what's happening on D.C. and so we try to be big enough to have enough management fees to support all of that. Right. While also protecting the returns. And not necessarily. I mean, I think, you know, there's been, you know, a lot of conversation or there's been some, some articles around, you know, other firms raising even more money again right into the billions of dollars. And, you know, I think you probably do have to expand your aperture a little bit if you're going to put one and a half to two and a half billion dollars to work today. And we still believe that there's enough opportunity in our space that we should be heavily focused on the thing that we know we do well, which is stablecoins, crypto, you know, the. The, you know, the kind of the intersection of the two. The financialization of new market Rails. Right. And kind of the digitization of Rails coming into tokenized assets and being on blockchains. And so that's what we're really excited about.

B (55:44)

Yeah, I guess raising aperture is sort of a euphemism for lowering standards is. I guess.

A (55:50)

Well, it's either that or you look at, you know, call it other verticals

B (55:52)

or just going completely different verticals that have nothing to do. Okay. All right. Well, I think this is a good place to end it. Rob, is there anything that we didn't discuss that you wanted to share? Sure.

A (56:04)

No, I, you know, I think you heard it from me throughout the podcast and in this interview, but I am very bullish on where we're going over time, but short term, you know, there's a lot of things that we don't know. Right. And so I continue to be, you know, cautiously optimistic and very optimistic over the long term.

B (56:23)

Gotcha. All right, great. Well, thanks so much for joining. We'll obviously have to have you back another time. Thank you to everybody for watching and listening.

A (56:31)

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