Everyone’s Short Bitcoin — Wall Street Is Buying the Plumbing

[music] It all comes down to computers communicating. >> The information [music] superighway can be a confusing mix of on-ramps and off-ramps. Bitcoin is [music] worthless artificial gold. >> Is it still rat poison? >> Probably [music] rat poison squared. >> We need to get into the world of okay, this is actually foundational technology. What the internet [music] of money does is it creates a single network which can do a microtransaction [music] to a giga transaction. [music] The internet is going to be one of the major forces for [music] reducing the roll of gun. The one thing that's missing but that will soon be developed is a reliable ecash. Alrighty, gentlemen. Welcome back to another episode of Final Settlement. Today is Monday, November 3rd, 10:07 a.m. Eastern time. Uh big show. I think we've got a great show. A lot of links. A lot happened over the past 7 days since we last uh last spoke. Um and we're going to start off hot. We're going to go to some big deals. Uh the first of which is Mastercard to buy Zero Hash for $2 billion. Um there's some backstory to this in terms of some other deals that uh almost went through and now you know Coinbase and uh BNB BNBK which we'll get to but we'll start with this Mastercard poised to acquire crypto startup Zero Hash for $2 billion sources say uh Mike I'll kick it to you for initial thoughts. Yeah. So, there there's a lot here. Maybe before jumping into it, we were talking about um you know, we always before getting on, what what's the hottest thing? What's the thing that gives momentum coming into the show and there was discussions. Do we talk like deeper into Bitcoin or do we talk about this $2 billion acquisition? Um and we're not sure we're not sure yet. So, as you listen to the end of this podcast, drop a comment. Let us know if you want to go deep into Bitcoin on the the top of the hour or um really like huge news that I see that ties into Bitcoin. It's just second and third order effects. So, this zero hash deal really like was huge in my mind seeing it come across the screen. Um, there there are a number of ways to look at this. We'll talk about stable coins. We'll talk about market infrastructure. The thing that I mainly took at this is how misunderpriced the future Bitcoin companies that are building um will be and the acquisition sprees. The reason why I say that is because Zero Hash um there was a few things that went into this deal. Brian alluded to a little bit that um there's a lot of acquisitions specifically on orchestration, creation of digital dollars, movement of capital. Um you saw this with the bridge acquisition about 6 to 12 months ago and then um rumored BVNK uh is being shopped around or being acquired by Coinbase. But it was rumored that uh Mastercard lost out on this BVNK deal and this is where the Zero Hash deal came in. Now Zero Hash is in interesting um because they bank or like provide infrastructure crypto infrastructure for a lot of notable people that I don't think most people know about like DraftKings, Koshi, Interactive Brokers, Franklin Temple and Stripe along with other big partners. But why this is important is because they enable buys like you know they enable $10 buys, $100 buys. Um they provide infrastructure, there's a lot of tooling, MTLS. There's a lot of value for a legacy firm like Mastercard to acquire. But the point is that these are around like capital flows from dollars to BTC which is generally a retail application um through these apps and then um you know some payment orchestration and wallet infrastructure. But the point being is right now stable coins are the hot thing. We'll run through later in the podcast a number just it was crazy last week the number of fundings that happened and there's so many use cases. So I do get how it's very interesting from a crypto madeup VC perspective and a trifi VC perspective to invest in these assets. Um they're going to have markups. They're going to have exits to large fintexs. But I just can't help but you know uh feel how big of a miss that's happening right now because Bitcoin has just effectively lulled everyone to sleep. It sits at 110K and all these institutions just fundamentally believe that the market structure around custody is just figured out. We're going to trust omnibus wallets. ETFs are going to handle it. People are going to hold a hardware device and we're just good to go. And nobody talks about what we're talking about here when it comes from the Bitcoin native side. They're focused on god knows what. And then you have the crypto side that's focused, you know, again on the things we're just chatting about. And there's just this real reality that Bitcoin next to stable coins and especially Bitcoin with sophisticated products like multi-institution are the things that banks are going to want to pipe in uh acquire and uh it's very bullish in my mind. I was I was thinking about this a lot um this morning and over the weekend and it's just a huge opportunity if you have the right lens of like stable coins will matter. They will move capital. will provide value, but that value is going to net settle in something that is not a dollar. And um that like blending of those two is just so missed right now on the market. >> What what do you think the timeline is on that? because I I hear what you're saying and I would generally agree like we've talked about this in the past around this notion of stable coins, this notion of digital dollars sort of normalizing digital assets to some extent and then the extension of that is you you ultimately figure out and get to you know the end truth that you want to save your save your and store your value in bitcoin and maybe it's marginally uh more um efficient and cheaper to transact in some form of digital dollar. Um, but all of these uh acquisitions and deals um seem to be missing that to your point. Like what is what is the timeline of of people realizing that? Um is it you know the next 12 months? Is it longer than that? Like what I'm trying to gauge like how you think this actually plays out in terms of people recognizing that they're missing you know you have to get closest to the Bitcoin. >> I mean it's it's such a loaded question. I think um because when you when you think about it like people use dollars for a number of things and so the thing that I think most of these firms are mostly interested in in stable coins is really really I mean there's multiple there's remittances but I think one of the main ones is like B2B flow uh international for multinationals because of the amount of um you know efficiencies gained and that are captured in the traditional um visa MX systems um But like there's multiple levels. The the initial ones that come to mind is if you are these stable coin issuers will end up passing back the yield. They'll end up juicing the yield and naturally the yield comes from somewhere, right? And so as investors learn um you know that nominal yield isn't keeping up with inflation isn't a better unit because of counterparty risk. They'll naturally sink some uh seek something that's a little more stable. Very similarly with banks. you will start to see banks bifurcate where banks will offer and go a little bit harder on the Bitcoin side and offer better best-in-class custody. They'll get known for that. The the alternative will be crypto forward banks and they naturally won't have the sophisticated offerings and maybe they don't um fit the user that is needed or they go belly up or they get uh hacked. Um there's multiple angles on how this like kind of blends together. It's the same way of like the question is very similar to like how does Bitcoin become ubiquitous as money, right? It's like, well, it probably will power aentic AI. It probably will be used for some level of remittances. It'll probably be used for backing credit. You know, it's just like, well, which part is the most relevant and how will it happen? And it's like, well, the number going up really has the best entrepreneurs coming in. Um, the the last thing I'll say, though, is this is really what's bullish about the crypto. Uh, I I find crypto and like fintech and all this crazy VC money super fascinating because it's not completely crazy. Like, when you listen to them, they're very sophisticated. They're very smart. They have very strong thesises. They're just missing like that fundamental groing of like what is value, what it derives, how does it net settle. Um, but the point being is that these things when you get the most sophisticated people that finally get that it's the denominator and it's the underlying, that's when these the best-in-class net new I hate using them, but I'll just use them like the Googles, the Amazons will be built. We've been led by a hobbyist industry. We have crazy people making spaxs and all this crazy nonsense for like just the things that don't make sense. Um, and we talk about that later if you guys want, but the point being is there's just all these products and services that nobody uses, nobody's willing to pay for because the only thing to do with Bitcoin is to buy and hold, but they will be inserted into the traditional finance system. They will be inserted into fintex, but they have to be done at a very elegant way that meets the market where commercialization has existed. And Bitcoiners haven't just really built in the real world traditionally. they've just known bitcoin. So, how can you build that? Um, and that's why these payment systems are becoming very interesting because you had crypto natives building stable coins and everything else related. And now you have Tempo and Stripe and David Marcus and like the big boys coming in and this was always the case that the, you know, first 15 years hobbyists have led the industry and then the big boys are going to come in and just mop the floor because that's just what happens when you have actual professional experience. >> Yeah. No, that makes sense. Uh Liam, do you have thoughts there or I was going to move to a few different Coinbase uh headlines from last week. They reported earnings uh beat estimates. I think the stock was up on the day. Uh but then there were some other deal news deal news as well. But uh Liam, any thoughts on on any of this? >> Yeah, just on the zero hash one. Um [clears throat] it's interesting too because most of these folks just generally will focus on one part of the uh digital assets market. It's typically either um you know at least these startups are tokenization, stable coins or you know digital asset exchanges uh is generally the um essentially the three verticals in the digital asset space almost and uh I think they they essentially bought Zero Hash because uh these traditional finance folks don't generally know which one for sure is going to be the hot one in the future, right? they're they're just trying to get exposure to the digital asset industry because they uh see that they're taking share and they don't necessarily have the um you know real understanding of the Bitcoin and digital asset space and how this is going to play out over time. So I do think that there is a lot of truth there of just like the uh payment uh and stable coin infrastructure is going to be significantly better than what we have today and that's going to be a big driver in the future. But also um just even having any sort of digital asset and and Bitcoin exposure is going to be net new benefit to those folks just because you know most people aren't like us and they don't think about Bitcoin extremely deeply. They just want to get exposure to it. Um but then the tokenization I think is going to be something that is going to see a lot of value destroyed. Not because tokenization is completely worthless by itself, but there's just not a lot of value to be captured there. And so when uh kind of taking a step back and looking at a bunch of these different types of folks and we can talk about it soon with the Coinbase um Q3 earnings um they're kind of hedging their bets on where this industry is going to go moving forward. Is it going to be people that just want to um create value by offering low lower fee stable coins especially for uh international payments? There's going to be tokenization and then there there's going to be trading and just holding the underlying as well. Um, and this industry has been run by hobbyists for sure, but also a lot of these net new folks don't necessarily have the whole vision for where everything is going. I think that they kind of see parts of it, but not necessarily the whole picture of everything that settling into BTC, etc. >> Yeah. But the the kicker is you don't have to you can be both because you can have been playing around in your personal account understanding all these primitives and then left Stripe and left Google. And that's the point is like people will get like the uh golden handcuffs ripped off because their crypto bags or Bitcoin bags are heavy enough where they can leave with a air cover. Um the other aspect of this and it it goes back to first principle of like just financial services is there's two ways to make money. you can get closest to the asset from a savings perspective or or or storage or closest to the movement. And right now, everyone's making bets on the movement. And to Liam's point, they don't necessarily know where, but they know it's going to be moving. Velocity is going to be faster. But the other side of it, like the call to make is that whether it's 6, 12, 18 months as Bitco Bitcoin goes from 150 to, you know, 250 or whatever, everyone's going to start to make their bets on the custody because it's going to just become apparent of like, holy crap, there's actually better, more sophisticated ways that people are demanding. And then you're going to see this shift and then it's going to be like, well, where does the custody sit? Because there's only 21 million of these, there's infinite number of digital dollars that can be created and it all starts to just become commoditized. uh because they're all looking for also distribution which is the big problem. It's not actually the tech anymore. It's the distribution that matters. >> Yeah, those are all good points. And and on the Coinbase front, as as uh we alluded to, they reported last week um I believe they bought more Bitcoin during the quarter the quarter. So, uh uh there has been a nice pivot at least in terms of uh Coinbase's treasury management that they're appreciating Bitcoin a little bit more uh than they historically have. You know, I think the reality on the ground is that they should have way more Bitcoin in their treasury than they do today. Um, so they're sort of playing catch-up in that regard. Um, but reported a good quarter. And then a few other headlines from last week around Coinbase was uh, City and Coinbase joined forces to boost digital asset payment capabilities for global clients. Uh, they will collaborate to develop digital asset payment capabilities. is the collaboration will first focus on streamlining fiat payin payouts and payments orchestration enhancing the bridge between traditional and digital finance for Coinbase's on on and off ramps. Um thoughts on on on this deal or um there was another one that I'll pull up here. Coinbase asset management u and Apollo partner to develop stablecoin credit strategies. Um so more on the stable coin side. Yeah, I mean I think the net the net net is Coinbase is really becoming a juggernaut because they're playing they're playing the right angle of going at it from um like birectionally meaning they're digital native they're they're building digitally native products you know Coinbase what's interesting and I heard this from somebody else it sounds like talking our book but um it's like the institutions are focused to use Coinbase but any sophisticated Bitcoin investor doesn't use Coinbase at least that's what what was understood Um, but they're building the products on this side and then they're taking those digital primitives and then exporting them out to allow other firms to use like the City Banks and Apollo's. What I think is fascinating is they're going to start to import more of what city and Apollo do into their services. Um because that's really where the the game is going to like end up converging is the digital native versus kind of like the incumbent and who can race to take you know from a first principles perspective the best products the best services the right client services the right distribution and then win where we're going in the future. Um, and so it'll be interesting to see sign up, but it makes sense like if somebody wants exposure to a credit fund, uh, and you can, not that it makes sense, but it makes sense that why Coinbase would want to, uh, either adopt like Kraken did in or Galaxy and letting people trade equities in the same way they would let people come to Coinbase to get access to credit funds versus having to go directly to the credit fund issuer and taking a, you know, a percentage of it. Got it. Yeah, I think it's uh taking a step back like yeah, right on their latest earnings it said we provide a trusted venue for individuals and institutions to trade in custody assets and then they go into uh that's like the first step of getting people into the space or bringing people on chain is whatever they say. Um, and so I think that they um they've essentially tried to say like that's been figured out like we we do that and um you know they do just because people do trust them and uh you know that's why the ETFs have so much Bitcoin in them. Um, I think it's but to your point, it's mostly those legacy uh or those institutions that just say these are the guys who have been in the industry the longest and haven't blown up. And so that just gives them a lot of brand and credibility um for net new people into the space. And they're doing a great job of um getting the partnerships and so they're going to be able to get a ton more of the flows between those other um I think they're calling it like crypto infrastructure as a service with PNC, etc. Um, so they're they're doing very well. And then the Derbit acquisition seems to have gotten them a ton of different options flow underneath. Um, so it's they're we're seeing a lot of different net new folks come into the space. And they're going to want a ton of different types of products. Everything from the stable coins, derivatives, and ETFs. and Coinbase has actually done a a pretty decent job of um you know catering to all of them but just not necessarily um and they're starting to focus a little bit more on Bitcoin just given how much their Treasury is inquiring. Um so >> we'll see. I would hate I would hate to be a financial service incumbent right now because think about it like there's no there's no move to make that is inev inevitable outside of like Bitcoin but even that is u in their mind the work hasn't been done so they look at that as you know whatever their their total ceiling but think about it like if you're a you know highly reputable firm that's been around for a long time do you launch an ETP do you launch Salana and stake like while everyone else is doing it. Do you launch a stable coin? Um do you focus on launching other people's tokens like digital, you know, RWA? Like there's just all these things that you can be you're getting pitched, you're getting talked about and um it's it's just an interesting deal because if you think about like if somebody just had somebody inside that was like look we can make these assumptions. These are all assumptions, but the one thing we know is this thing's market cap weighted axe, has the volume, has liquidity, has the custody. We should really go deep here and make sure we're just best-in-class here, and then we'll let the chips fall where they may around everything else. Um, obviously, it's oversimplifying, but nobody's really doing that. And um, yeah, it's fascinating. >> Yeah. >> Yeah. It's I was just gonna say it's like the default has become, you know, effectively for those types of firms like announce announce a partnership with Coinbase effectively. And I think, you know, that that sort of trajectory probably would have played out regardless of what happened with the Bitcoin ETFs. But I do think that Coinbase being the custodian for, you know, nine out of the 11 or whatever it is of the ETFs was a strong signal, uh, strong sort of piece of air cover for folks to say, um, you know, what we always say is like you won't get fired for going to Black Rockck or you won't get fired for going to Coinbase. Like that is where the air cover is in addition to the administration air cover, right? like there there's a confluence of factors here. Um but it has put Coinbase in this position where um you know a lot of these uh incumbent or you know Trady firms just feel like you know they basically need to announce something with Coinbase get something uh in process because to your point like yeah ideally they build out uh custody themselves but like you know that would take a number of years just given what we've seen you know in terms of the likes of Fidelity building it out themselves right like that was a sever a several year process they didn't just stand up a custody business overnight. Um, and so there will be partnerships, there will be acquisitions. Um, but it does seem like Coinbase is sort of the preeminent cover your ass uh partnership to to go with. >> Sorry, I'm cut you off. >> No, I was just going to say it's funny too because JP Morgan and Jamie Diamond was obviously the one who was most adverse to Bitcoin in general, but they seem to be like they're going to be the first that's actually going to offer clients to lend against their Bitcoin directly. And so by proxy, they're going to be able to get close to those who have some sort of capital and and trust JP Morgan just because they're, you know, almost too big to bail. Um, and so while they're they would get bailed out that Bitcoin wouldn't directly, but they're going to be able to learn a lot more about what the clients actually want and care about from a custody perspective, who the larger players are, um, etc. just because of that. So I would say that's one of the interesting ones, uh, and the trap space. And that's that's what I would honestly maybe focus on if I didn't actually, you know, want to go out and build the the custody or just like have any reps doing that. That's like a relatively low lift way to get into the space a little bit more. >> Yeah. I mean, the the net of all of this, if to simplify it, is everyone's short Bitcoin because if you really think about it, if the market wasn't from an individual to an institution perspective, they would come to these conclusions. Like it's not hard to recognize well if somebody or a large percentage of US citizens just as an example hold 10 to 50% of their wealth in Bitcoin and every custodian looks exactly the same and this is digital bearer asset. So you're bound to have either social engineering or physical attacks and hacks and then assets go missing. People will ask for differentiated models, right? Like you know as long as that continues down that path but like again every the why it's not rational, why it's not understood is because most people at these institutions and most individuals that work at them do not hold material balances in Bitcoin. So, it just is easier to go with the status quo, which is building omnibus wallets or sub custodying the underlying. Um, and that's the advantage for kind of a lot of the things we're invested in right now. >> Yeah. Um, another deal, uh, Michael, I think you put on the list. Um, Herk has raised 60 million in funding led by F-Prime with participation from Fulgar Venture, Fulgar Ventures, uh, Exponential Science and previous investors. Uh, what does Hurkle do and and, uh, why is this relevant? >> Yeah, so Herk was on a list of just a bunch of almost everything tying next to stable coins. So, there was I'll I'll list out a few and then we can talk about any of them. Standard Economics, which is a stable coin events app, they raised 9 million bucks this past week. Zar um by A16D, they raised, it's a stablecoin on-ramp network. They raised 13 million um from a lot of the traditional crypto VCs. There was um Perl and then there's Tesser, which is an institutional stable coin uh payments platform for another one of like orchestration. Um the net of it is a lot of these firms are figuring out the use cases from payment movements and I think the three main trends are around crossborder and then sometimes they they they kind of intertwine so like crossber which is like remittances but then cross border um and B2B and then really orchestration right so how do you actually pull everything together from uh and like Anchorage has been a become a big player in this world I think that's one to talk about because uh we touched briefly about and ties into this which was uh Western Union's play into uh stable coins with Salana and I guess I had heard and I I directionally confident enough to say it um you probably dig it up is like Salana paid him like 25 million bucks to become sure which is pretty straightforward in front of like you know business relationships um but the reality is uh yeah a Western Union launches a stable coin on a Salana but then there's the intermediary very orchestrator which is effectively Anchorage. So Anchorage has their kind of like you know it's similar to like Apaxos. Um and yeah I think that's the the net trend what we're talking about is that so you have these larger uh incumbents that know they need to make moves. they're generally not going to go at this level because unless there's real product m market fit and traction like a bridge or privy you're going to go and even overpay at the time which at the time it looked like a crazy deal and I think now most pe participants would be like that was pretty cheap for uh stripe to buy bridge and the point being is so you have the incumbents layering in on what exists you're aqua hiring the teams and then you have net new players stepping in to try to figure out how to basically disrupt them and move money from p from the very base layer to part. Um, that's as much as I got. I don't know where this goes. It's not as much as I focus on. I The thing that I focus or I'm I'm mainly been thinking about and this is kind of a call and we'll start putting more ads out for the uh the uh stables and the um entrepreneur and residents is really and I've talked to Abu Bakr about this which we should probably talk about on a future pod with him is u there's really just a need for Bitcoin and stable coin infrastructure to sit next to each other. It's just it makes so much sense when it comes to if you're already in Bitcoin, you can have that sitting there. If you need access to stable coins, there's a whole shortage or slew of opportunities to get dollars against your that'll look like savings account where you can like have very low uh margin accounts for dollars. And then naturally, if you're not even ready for Bitcoin, but you're going to be moving capital and then you can basically swap in a BTC quickly, it's a perfect use case. And you don't see those blending together because usually it's the stable coin players that are so focused on like crypto and money movement and then it's the Bitcoiners that are so ideological that they don't see any value in stable coins. And I think that there's going to be a lot of opportunities to put those and blend those together. >> Hey everybody, hope you're enjoying the episode. Lots of uh interesting dialogue going on this week around stable coins, AI, and a lot of the M&A activity that's happening in the industry. Um quick word from Onramp and specifically around our inheritance product. We have no shortage of net new clients and existing clients that came over to on-ramp specifically because of inheritance. We've all been in this current situation where generally uh Bitcoin is male-dominated. Our significant others are perfectly fine with us allocating or even overallocating depending on who you are to the asset. But they also don't want any uh exposure have to deal with management of private keys, what to do if something happens to the individual, hardware devices, seed phrases, all the things um that account for self-custody. And so while clients sometimes feel perfectly fine with self- custody for themselves, it really comes to legacy planning, whether it's with inheritance, the dynasty trust release that we had. Inheritance comes with every product uh and every multi-institution account included with also insurance, IRA, and trade. But inheritance is the thing that I want to call out simply because as the price appreciates, as we get older, we start to recognize that we have to legacy plan. We have to be more mature with this asset. And so on really provides peace of mind there. Um, even if you're not necessarily ready for something like Onramp, but you want to learn more of how we solve for that and some of the other, you know, financial products we offer as Bitcoin naturally matures. It needs serious products and solutions, I'd encourage you to book time or you can reach out to me directly, michael@honoringbitcoin.com. We're actually piloting out some flat reduced base pricing that uh we're testing out this quarter and we'll go into 2026 with. If you'd like to opt into something like that, reach out and we'll share more. All right. Hope you enjoy the rest of the episode. Yeah. No, that's well said. And I think um maybe to round out this conversation around uh the broader crypto space and what seems to be now, you know, the trend is stable coins, real world assets, tokenization, all these things, the money movement as we've been talking about. Um I saw this thread uh yesterday which I I found pretty interesting. Um it's titled Why Crypto Can't Build Anything Long-Term. And it's written uh somewhat ironically by uh someone in crypto. So the head of growth at 10 protocol. Not exactly sure what that protocol does. Um but nonetheless there's I found it interesting because there's some self-awareness in here and there's some sort of truths and have truths uh around what he's saying and and why uh the crypto industry is very sort of hype cycle driven narrative driven. Um, and I think this is just genuinely true when you think about the ICOs in 17, 18, then the NFT sort of hype cycle, uh, DeFi summer, and now it's stable coin, real world assets, tokenization. And I, if I'm giving sort of the broader crypto industry some credit, I think that is a healthy progression from more pure speculative uh, type endeavors towards something with at least some, you know, marginal utility, marginal benefits, uh, as we've just discussed around all these uh, stable coins. uh and money movement sort of initiatives. Um but some of what he does call out in here is kind of spot on just in terms of the misalignment of incentives with a lot of crypto projects. um token sales, insiders, um these basically these short-lived cycles and and really a compression of cycles like if if you think about the 17 18 ICO era, you know, those were a little bit longer dated in the sense that you know, you could have some vaporware project uh exist and and hype a narrative for really like 3 to four years, whereas that that sort of hype cycle has compressed to where now, you know, it seems like it's really more of like 12 to 18 months in terms of like what's hot, what's new, what's getting funded uh before a pivot and like you know part of uh what's referenced as more recently is not only the stable coin stuff but in like prediction markets like that's in vogue that's getting funded that's uh what the new sort of um invogue trend is and so I thought this was just interesting in the context of everything we're discussing in the sense that I think we do need to sometimes zoom out and just think high level about you know the stable coin stuff I I do think is innovative like there's some marginal utility to be uh and and value to be created there. But it is just sort of the next thing in the crypto market. So I would say like you know to Liam your point earlier like there is going to be a lot of capital destroyed just like you know all of these other hype cycles because that's kind of just how these things go. Um and there was a related thread here that just talked more specifically about um the the notion of crypto companies selling both equity and tokens to investors is the single biggest unforced error holding the industry back as an investable asset class. So, I thought this was also kind of spot on in the sense that like um this is this has sort of been part of the issue with um the broader crypto space in general is that you know these things really look like unregistered securities and if you're going to sell both equity and a token then you're really sort of um you know saying the quiet part out loud that they are uh some form of of unregistered security. Um if there's also a token attached to you know a company that has is selling equity as well. Um, so this all just comes back to the short- termism in my mind in the broader crypto space. And so I would just I would say like I would I would agree with most of what we've discussed around stable coins and and all of this money movement that's that um seems to be the new hot thing, the new narrative. And there is um I think there's an argument to be made that it's uh more legitimate than past sort of crypto hype cycles. But um just wanted to sort of zoom out and give that context. cuz I don't know if you guys have any thoughts on on any of that. >> Yeah. I mean, all this stuff is so like it's nuanced because when you So, like if you think about like a spectrum and at the far end over here, you put like David Marcus down the journey and then over here you put somebody that's like crypto den. The sophisticated investors in crypto like the dragonflies and people that have been around long enough to survive are like pivoting to come more this way, right? Right. So they started to look at like fintech infrastructure, what does it look like? But they still kind of believe in this other world of decentralized future and then there's over here that's like you know kind of crazy developing tokens, credit markets and all of it. I think the big thing they miss outside of like Bitcoin obviously is um the notion of like all these things are monies are competing to be money and money is based on trust and and we're not there as a society. Now I'm not saying we'll never get there but to put like trust all in code. So when you develop financial products whether it's money movement, border movement, you know, institutional buying of hundreds of millions if not billions of dollars, credit markets, you need humans. You need to like get on a call with them. You need to see licenses. You need to see money transmission. You need uh all the things associated with that. And that's really where this side over here like can't bridge. And so that's like one example. The other one, and I forget who had this tweet last week, but it was really good about, you know, like the key to winning um in almost any endeavor is just like sticking around long enough because most people just get bored. Uh and they get bored because they get too successful when they sell. They get bored because they weren't on the right track and then they leave. And the point being is like these crypto firms, they continue to go away because the fundamentals are lacking or the traction's lacking. And so they go and so the need to understand and have the right lens of where the future is going is how you win in this market and pivot. Um but to your point if crypto is built on unsound foundations with an unsound premise then it gets really hard. Uh and to your the last point is like we've been saying this a lot like all these cycles in growth of this asset class is just a fractal and and the fractal is whether it's just and it's the the the common thread is destruction of capital right because not only is it there's two things happening. One is there's more dollars in the system, so all these valuations are greater. But there's also more people coming in with larger balance sheets. And so that's just more people coming in with the same fractal of like misnomer of what this asset is and what's happening. And it just gets bigger and bigger. Um, so it truly is just the wild west. And like there's going to be some people that stumble and pivot into success and there's others that are just going to be missing the the boat. And the I haven't fully got the analogy, but it reminds me the most of Blockbuster, Netflix. And if there was like Blockbuster trying to set up a consortium to like, you know, get a car to drive all the the the, you know, like the tapes that were out of stock into the next one, you know, they were thinking about this like physical world and how to manage it while like somebody just went online and completely like bypassed it. That's very similar. What I think's going to happen here is all these people are trying to build these networks and then David Marcus to the last point being on the other side of it was like he had to go through that whole traverse through the whole thing to see the other side of like oh this is just an open network. You can't stop it. It's interoperable. There's going to be multiple implementations. Everyone's going to have their own version of on-ramp off-ramp how you move capital around. And it's similar to the internet. It just makes sense to plug in not compete with it. Uh and that's why this stuff gets hard to explain because how the hell do you explain where people at in different parts of that journey? And then it's also relevant to their background, their business, and where they sit in in a local economy because somebody in Latin America is commands a different experience than somebody in the US versus Nigeria, versus Asia Pacific. >> Yeah, that's well said. A couple things there, too. I mean, like this this year alone, we've had like multiple different cycles. We've had like pumped up fun and uh you know, the paper Bitcoin summer, DAT summer, um, etc. And there's been a lot of different hype cycles that have kind of come and and uh you know some are sticking around longer than others etc. But um at the same time to uh your earlier point Michael like yeah David Marcus is super sophisticated and had to go through the whole journey and we're going is seeing more and more folks like that come into the space now but they're also going to need to go through their own journey. they can kind of like learn and uh get a little bit of that by by you know actually hearing the story of David Marcus and other people who have done X Y and Z and uh crypto etc. But like you know you can't really fake that experience right like you can learn from others who have done things wrong but a lot of these people will learn uh like do the same mistakes that have been made in the past and uh you know have to just come to that conclusion by being in the market for longer. So you just can't really fake being in you know the broader digital asset space and some people have gone too far and you know continue to think of tokens as the only thing and uh you know selling tokens uh for a company is not going to go away. I mean Coinbase's acquisition of Echo is a point that's you know going to bring more legitimacy from uh you know selling tokens from you know the perspective of businesses. But I also don't think the the Mastercards of the world are going to go out and try to sell Mastercard token just because they don't need to. They're they're going to be able to fund their business themselves and it's not worth taking that risk in order to do so. Um, and it yeah, to the last point, I think people don't put all their trust in code unless it's been battle tested and around for a long time. Like Bitcoin being around for 17 years now makes it just like have that level of trust that you can't really just bake or buy by spinning up your a network of your own despite um you know how robust that code may be just because there there's no such no alternative for the Lindy and you know just being around for a long time just uh just like we've seen with gold. >> Yeah, those are really good points. Go ahead, Mike. No, the only I was going to say is is more around um like once you get to material balances of one's wealth, they generally need somebody not just the code i.e. like Black Rockck ETF 100 billion, right? Like there's a notion of trust that's relayed and then specifically when you get to like the easiest one that's closer to us is like Bitcoin back lending. There's apps out there that offer like DLC's and all this stuff on Bitcoin, but those are always for the foreseeable future going to be low liquidity um you know relative to like CFI, you know, centralized finance around um somebody putting their name, their balance sheet, their reputation, their equity, their cap table there. um from an institutional perspective is I think the big thing because I think somehow like nobody's ever given the example they just say that we'll go to a decentralized finance future when it comes to like per um swapping of equities and all of these things in like Franklin Templeton there's all this stuff that's being discussed but somebody has to still manage all of that um and like what happens if it goes down how do you like plan around it and that's why like Salana I think is very interesting for a lot of these firms because there is somebody there it goes down, you turn it back on. Like, there's still some trust that's built into it that it's not like, oh, if this thing goes down, you know, um there's not somebody you can't point at. And I think that's going to be a big part of all of this. >> Yeah, for sure. There you want somebody to help you because a lot of people are still that new into the space or don't necessarily want to just be out on an island um you know, trying to read whatever code in order to figure out like, wait, how do I actually move my money around? especially when it's a very significant amount of your capital or or the capital of other people um who are your investors on the line. Yeah. All good points particularly around you know David Marcus and and his journey his learnings that led him to the point of saying no we need to build on the soundest strongest most robust resilient foundation um and everything is going to map on to that. Um it's very salient and I think you know it's obviously a function of what he went through and I think you're right Liam that like you know people aren't just going to take his word for it to a certain extent like you like I think they they will need to sort of proverbally put their hand on on the stove themselves um and figure that out because you know uh David Marcus it kind of feels like he's screaming into the void on Twitter like no one's really picking up what he's putting down at least in the crypto and trad space. Um but the other thing too is like you know it's a very good point around the Lindy the 17 years it never going down. Um because like just this morning I saw some tweets around um an Ethereumbased uh DeFi uh platform bankor uh was exploited uh for like 100 million. Um, and so like that that just points to smart contract risk, uh, non-resilient, non-battle tested, uh, protocols that are being purported and used for these types of things, whether it's real world assets, stable coins, uh, DeFi, whatever it may be. Um, yeah, I think there's going to be some hand on the stove moments, some rude awakenings for people that realize these things aren't as robust and decentralized um, as they're necessarily marketed. Um, but where do you guys want to go from here? We can talk a little DATs. There was a few uh headlines around MSTR um and some other DAT news. Um there were some AI things to get to some gold plumbing. Where do you want to go? >> Please no doubt. Um we can do a little bit, but >> can we talk the credit rating? Can we talk the credit rating for just a second? >> No, I don't. >> You want to talk the credit? I think it's interesting. I think it's interesting. >> Yeah, we could we could do it. Uh, so let's just make sure we co let's just make sure we cover enough time for the AI layoffs in the impact on business because I think that's honestly probably like the highest signal thing out of everything that's happened here more than even >> the BV and K and um zero hash news because that is a structural shift that nobody's talked about and nobody actually has given a good answer on why these layoffs are happening and I I think I have a pretty decent one to share. I don't know if we've talked about it. >> All right, we will get to the AI. We'll keep this quick. uh S&P global ratings assigned strategy a B minus uh credit rating. Now the reason I think this is interesting is because of basically how it was interpreted based on who you are, where you sit, and how you're incentivized. So everyone who's involved in Bitcoin Treasury companies was um cheering this on as as like the best thing ever to happen, a monument monumental moment. Um when in reality like a B minus is effectively a junk rating. Um, and if you look into the details of how they assigned this rating, they're basically dinging them for the the Bitcoin collateral that's on their balance sheet. They're not saying it's a benefit. They're not saying um it's a good thing. They're saying it's actually a bad thing, a detriment. Um, and that's what resulted in in the rating that they received. Now, they also call out, interestingly um the custody p from a custody perspective um this highlighted line here. where if private keys for digital wallets are lost, stolen or destroyed, the company may be unable to access at least some of its Bitcoin. So, they're calling out the custodial risk of of the setup. And really, this applies to pretty much all Bitcoin treasury companies in that um people are trusting single counterparties. And so, that was also a factor in this credit rating. Um and so, I'll I'll leave it there. Uh any thoughts before we move on to the AI stuff? >> Yeah, just real quick. I mean, there's there's a lot of there's a lot here. This is a sign that despite the Fazby rule changes, like other companies that are in the S&P 500 that are thinking about not going and doing full DAT, but just uh having a little bit of Bitcoin on their balance sheet, they're going to see this and not be super psyched about it, right? because then they're not going to be able to, you know, issue debt at the same amount of um, you know, credit rating just if they count the Bitcoin in their potential treasury is not being able to um, be credit uh, rating worthy to get some actual debt against it. Like you're not going to see more of the Teslas of the world go out and be able to just like, you know, put a little bit of their capital into Bitcoin. And so it's not a great thing to see that they're essentially counting uh their Bitcoin is is pretty much not on their balance sheet. Um so it's it's going to take a lot of education. We're just so far from uh you know having the deep understanding of of Bitcoin the asset and why it actually is you know liquid 24/7 365. Um but yeah, that's that's going to be an impediment for, you know, real businesses that are publicly traded adopting the asset that many people aren't really talking about. Um and then yeah, definitely there there's always a risk of uh private key loss. You can mitigate that um by, you know, using multi-institution custody. Um but yeah, this is this is not going to be something that's going to be looked on favorably by nondats. Yeah, I think the the quick hits are I I was mainly hesitant to talk about this because I was realizing the biggest annoyance of debts is the amount of time we've had to talk about how they don't make sense. Um the second part is the credit rating. I never understood it because these are the same credit rating businesses that you know did everything weird in uh 2008 and continue to and they say everything's whole and up to par and then you wake up one day and you're you're holding a a big goose egg. Um the last part is yeah absolutely like this is how early we are that the consumers and the investors in these products do not demand best-in-class custody that does not lose the asset like the fact that you have this amount of just Bitcoin speaking um forget about the crypto ones in um publicly traded holding Bitcoin and cannot credibly a say where the Bitcoin sits that it's onchain And then that if the assets are lost, they will be made whole is a huge flag because for 15 17 years at this point, there's been close to $700 billion in total losses if you lose all the money, all the shareholder value disappears. So, it makes complete sense that that would be the risk because nobody has secure Bitcoin for long enough. Um, and so anyway, yeah, like all that makes sense that if you're going to do this strategy long term, you're going to have to be able to credibly know, you know, show the market that where the coin sits or at least where the revenue is if you're generating some kind of yield and then also uh leverage something that you can't get knocked out of the game. Um, but again, we're that early that it's not really appreciated. Hey guys, hope you're enjoying the podcast. Wanted to give a quick word from early riders. Uh, we've had no shortage of exciting announcements the past few weeks. Last week we announced um an investment in audio, a Latin Americanbased on-ramp in um based in Mexico City and El Salvador. Wonderful founders, multiple exits had uh formerly exited verified Bitcoin and and launched Swapido which rebrand into audio um last week. And then also Argo, a Sprat family company. Incredibly excited about the uh intersection of gold and Bitcoin and what does that look like for managing and protecting wealth uh over the next coming, you know, call it decade and beyond. Um we've included no shortage of research, investment uh memos around those c company fundraising um processes just so folks understand how we think about companies, what we're looking at. If you're looking to build and are trying to get, you know, early writers involved, we'd encourage you to reach out. We'd love to speak with you. As well as if you're looking to get involved with early writers, we'd love to talk with you. Um, we have no shortage of other opportunities. We're actively looking at a very exciting 2026 is upon us. And as we talked about during this episode, there's no shortage of M&A. A lot of these companies, the reality is they can't really build. They're going to have to eventually buy companies to really insert best practices, best teams, best infrastructure. So, we're incredibly excited. what we're building. We're looking for best-in-class talent and folks to get involved. And so, if that's you, please reach out michael@arlywriters.com or you can reach out via the contact form. All right, guys. We'll talk to you uh later this week on the last trade. And I hope you enjoy the rest of the episode. >> Almost said and we can move on. Um let's go to AI. Let's go to layoffs. Uh I'm going to bring up this tweet around uh what Amazon CEO Andy Jasse had to say and kick it to you, Michael. >> Yeah. So, I don't know if you guys have um any of the tweets in front of you, but there was like last week, call it I don't know 10 there was a tweet that had like 10 major companies all the way from like 60,000 to like 10,000 layoffs across the board. Um in parallel to that, this all happened within like 24 to 72 hours. There was um Chipotle taking a huge hit because they came out in their earnings report about, you know, the market getting squeezed and people middle middle class not being able to afford a burrito. Um, and what I Yeah, here it is. So just pulling for anybody listening it was UPS 48,000 Amazon 30,000 Intel 24 Nestle 16 and then you know going down Accenture Ford Microsoft and there was a lot of conversation around is this AI is this um you know they've already been replaced is it earnings there's all these different things and and I don't think there was also something that came out yesterday about how 97% of companies aren't even efficiently using or using AI I think that was more of like somewhat FUD but I think there's still truth in that in the sense that artificial intelligence and streamlining and um you know offsetting human production is not implemented at these firms or others. Uh what I think all of this is about really comes down to we talk about it a lot in the market structure especially post 2020 and the amount of monetary units inserted in debt that the inflation only accelerates from here and you see this. So, if you're an individual going to the grocery store or if you're a business and you have your inputs and your outputs and they keep going up, you have to be prepared for that. And you're also doubling down on um infrastructure to help automate some of these processes. You have to get ahead of that because as the cost of your goods is continuing to go up, you're also reducing the amount of revenue or purchasing power from your uh employee or from your your uh clients of your services. So even if your revenue is going up, this again goes back to real versus nominal. So like earnings can be going up, but in real terms they can be going down just because they've raised the cost, but less people are buying those same good and services and there's less actual, you know, profit margin. And so I think this is what this is about. It's a it's a uh convergence of the recognition that the unity economics of the business are no longer uh sustainable because of persistent inflation because of all the other macro tailwinds and geopolitical tailwinds. And then there's the other side of it of investing. The only real way it's like cutting off your arm to save your body. It's like okay we got to get this right. And so that was the crude version of what uh Andy Jasse CEO of Amazon said here. The last uh I'll just read the last part of it. It says, "I don't know if there's ever been a time in history of Amazon or maybe business in general with technology transformation happening right now where important where it's important to be lean. It's important to be flat. It's important to move fast and that's what we're going to do." This is basically the early writer's thesis. Like the only companies that will win in the future are the ones that embody that. You have to that's business 101. That's not like 2025 101. That's not 1900 101. That is just business 101. that you have to consistently produce more value at a lower cost or somebody else will come in and eat your lunch. And so in an era where Zer is ending and where the reality is you need the best entrepreneurs that can run a tight ship and deliver best-in-class services and continue to get better and lower the cost or the people that will win. And Amazon might be that, maybe not because it's not Jeff Bezos running the show. But point being is there's a lot of companies that are effectively going to go to zero because they cannot operate. It's basically a different planet. Um, and I think that's the biggest takeaway is all the things that we wrote about and we discussing around like the denominator is broken structurally real versus nominal, but then ultimately in this world where inflation is persistent. So you have inflation running one way and then you have deflation of the technologies to build businesses are going the other way. And you need people to be able to build with the best-in-class technology while offsetting, you know, making sure that they're staying efficient to offsetting the inflation by holding a hard performing money like Bitcoin will be the early riders of the future. And I think this is just what we're starting to see play out and it'll just accelerate from here. >> Yep. There was a few other um articles and headlines around this um over the past week. There was one um in Reuters which I'll pull up right now that was basically saying this is um you know the Kodak moment of sorts for the consulting industry and um this was in reply to this article. So the article is basically saying, you know, AI is killing consulting. Um, which makes sense, right? Like if you just think about the the sort of value prop that consultants have historically put forth. It's um something that could be very easily um sort of disrupted by artificial intelligence just in terms of um you know, for a long time. I think there's, you know, efficiencies to be gained from hiring consultants. maybe you um see some some value creation from them, but um the reality is is that you're probably paying way too much for it relative to what you could be um you know paying you know an AI subscription for to get you know very similar results. And I think um what we're seeing uh is shown here on on the screen in terms of a lot of these consulting uh companies, public companies um you know down anywhere from 25 to to 50% um year to date or over the past year. Um, and so yeah, I think this is a a a natural sort of area to start seeing early signs of dis disruption, but I think we're still very early in a lot of this. Like all the layoffs that we just had up on the screen earlier, like I think we're just scratching the surface of a lot of a lot of what this is going to look like uh going forward. >> Well, yeah, I would also say it's still uh unclear how much of it is, you know, AI driven versus just the absolute bloat and fat that uh acrewed at all these publicly traded firms. um you know in you know almost a decade of the ZER era um but I would also say it's going to be very um manager dependent on like what what do they actually do with this this excess savings like Amazon especially with Jeff Bezos um is like always been one who's been okay we'll cut the cost and then through um you know being able to have better unit economics we can pass that savings on to our customers and then we can reinvest in the business and then that'll grow our revenues and uh actual profits of the business as well and um then you can you know create better products and services invest in more distribution centers etc. Um and then there are going to be others that are seeing that are like CEOs of publicly traded companies and seeing all these other layoffs and feel like they're going to get dinged from uh being a public company if they don't actually make any of those same um you know cuts. And some will have a strategy of how to reinvest the capital. Others will just, you know, hold that in a melting ice cube on their balance sheet. And some will cut uh people just because they feel like they have to cut people and not actually, you know, have any plan to offset them through increased efficiency of other people out there. Um so I think it's going to be we're going to see a lot of um like massive divergences in the uh effectiveness of you know managers who are you know just love running a team of people and trying to get them all on board of you know being able to execute a plan versus people who actually know how to reinvest in the business and um can deliver more value to our customers at this stage. I think right now what we're seeing is just the the step one of like okay we need to cut more people because that's what the market's doing and I think it's going to be TBD like the Elons and uh you know I I would imagine uh if Amazon doesn't you know be able to reinvest the business effectively that Jeff Bezos will come in just because I could see him getting bored. But um we're going to be see massive divergences of the uh output of what this cutting actually does. >> Yeah. I mean this this ties directly into um the difference between like a founder le CEO and a managerial CEO. Um you know if you if you started the company you understand the company like the most simplest version is um from the tribal knowledge of how things were built and then like where you can actually reduce and you you effectively like built the house you know the foundation the studs and where there's weak points and where you can get efficiencies and you know tying that analogy it's very similar to if you're taking a firm and you have all this excess bloat and you stepped into it you basically are going to cut things that you know maybe should have been cut but also shouldn't have been cut. You're not necessarily going to know where and uh this just ties around to value again and you seen like the Zuckerbergs, the Bezos, the you know Larry and Sergeys and so to Liam's point I think you probably maybe do see some of that but then you also just see these companies again out competed by other uh net new firms. I forget where it was. It was like Starbucks brought in a management consultant. Um I think that was man Starbucks I recently brought in a management consultant completely like you know just like whiffed across earnings and bunch of other stuff and he he was like cut. Um but point being is that like the stakes have just never been greater is the net when you think about inflation coupled with u uh inflation coupled with just the purchasing power of individuals are being reduced. They're not all holding Bitcoin. So, you have you're getting like pressed from both sides and everyone's going to get forced to make moves and there some of them are not going to all make the best moves. >> Yeah, I think that's that's certainly fair to say. Um, all right. Well, we're around an hour. Is there anything else you guys wanted to cover? Um, on the on the AI topic, I did think Did you guys see this Extropic announcement from last week, Michael or >> Le? No, you you were talking about it a little bit. >> Yeah, I I I do think it's somewhat notable. So like this was announced last week this company Extropic that's basically built a new type of computing that is purpose-built for u basically you know running AI models and what they're claiming is effectively a 10,000 times uh increase in efficiency of these units um that will allow basically you know AI to scale much faster as you know the sort of um part of the I guess concern or um you know question around all this AI infrastructure buildout has been well we just we don't have enough data centers we don't have enough energy to actually scale any of these things to the the extent that everyone needs to to do all this inference to do all this modeling and so something like this would be um you know pretty big deal if it were to be true right and so the the rub on Twitter over the past few days has been like this does have some sort of Theronos vibes to it in the sense that um no one's seen a working demo or maybe a few people have but um it's not on video and so no one really knows if this thing is real. Um Elon was on Twitter this morning sort of futing it being like does do you have something that actually works? Um so just thought I would bring this up in the in the at the tail end of this AI conversation because all of this AI stuff is due to accelerate regardless but something like this would accelerate it even faster in my mind um if this is legit. >> Yeah. And regardless if this is or isn't, it's just uh an example of essentially how the world is moving into a different direction and using all the same frameworks that you have for uh you know, ZERP and you know, money that can be easily um debased and you know having ex uh exceptionally high amounts of debt and dollars isn't going to necessarily work in the future just because um it's you're not going to be able to breathe and compete. Just like the same way of like in a world where AI is proliferating everywhere like using uh you know general GPUs for um this type of hardware is going to be uh like incompatible just because you're going to be out competed by others who necessarily know um know how to specialize in in their field. Um, and so I don't know naturally if if this one is going to be something that um is worth the actual hype, but it's it's worth tracking and uh you know, keeping up to date with. >> Yeah. No, I think that's that's well said. Regardless of whether this is legit, I I think something some development like this is to be expected over the next decade, call it. Um so more more to come there and we'll wait and see on that one. But uh all right, I think we can uh wrap it there. Thanks for joining me, Liam. Michael has a jump and uh see you guys next week. >> Thanks, guys. >> Later. >> Thanks for listening to this week's episode of the show. 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