The Banks Are Here — JPMorgan Just Made Bitcoin Collateral

It all comes down to computers communicating. >> The information superighway can be a confusing mix of on-ramps and off-ramps. Bitcoin is worthless artificial gold. >> Is it still rat poison? >> Probably rat poison squared. >> We need to get into the world of Okay, this is actually foundational technology. What the internet of money does is it creates a single network which can do a microtransaction to a giga transaction. The internet is going to be one of the major forces for reducing the roll of gun. The one thing that's missing but that will soon be developed is a reliable ecash. Hey guys, welcome back to another episode of Final Settlement. This was uh an exciting and action-packed episode. No shortage of M&A deals and um new products and releases in the ecosystem. Quick word from On-Ramp, an on-ramp business specifically. I'm not sure we've had a chance to share it here. We launched this a few weeks ago. Incredibly excited about the product. Um, we announced a case study with a large firm, but also really foundational infrastructure needed for businesses across the landscape that are adopting Bitcoin as a treasury reserve asset. Not only is multi-institution a superior way to custody the underlying than trusting a single custodian, but then naturally what's existed or what hasn't existed in the digital asset Bitcoin um world is governance accessbased controls and everything that generally exists in the traditional financial system has not been ported over when it comes to just treasury management of the underlying Bitcoin. And so with on business institutions, enterprises get access to multiple users. They get access to uh creating quorum of quorum. So they can decide on who has access to uh check off or approve a transaction before the withdrawal takes place and then you get complete audit controls as well as multiple uh wallets, different quorums, everything that a large scale institution would need. Really excited about this announcement. and we're starting to onboard publicly traded companies as well as other large institutions. If you want to learn more, I'd encourage you to book a consultation or reach out. All right, on to the episode. I hope you guys enjoy. >> All righty, boys. We are back. The banks are here. It's another episode of Final Settlement. Today is Monday, October 27th, 10:15 a.m. Eastern time. Joined as always by Liam Nelson, Michael Tanguma. Boys, how are we doing? Big list today. Huge list. >> We're doing good. the energy you're you're bringing because we've heard feedback from, you know, listeners and peers in the space and, you know, Jackson, they love him, but he comes in a little little slow and warms up and, you know, it it gets the the juices flowing when you you kick us off like that. >> You got to bring the juices. It's Monday morning. The banks are here. They want your corn. Um, they also want stable coins. >> Uh, >> for your guys' time in the space, when are your like most uh enjoyed pops? I have two that come to mind that ties into this is Sunday nights are always great going into Monday, but I really think the favorite from, you know, from the past whatever eight 10 years is uh Friday. >> Yeah, >> we got the opposite a few weeks ago. But yeah, the Friday evening right into market close, I think are the best pumps. >> It doesn't even matter what day of the week. It's just like when you wake up at 3:00 a.m. and need to pee or something and then like accidentally check your phone and it's up like $3,000 more dollars than when you went to bed. Those are just the best feelings. >> No, there's there's a day. Everyone has the day. There there's a certain vibe because the one that I'll describe is Friday after work. I remember specifically being in New York City and happy hour is happening and the price is just like ripping and nobody has any idea what's going on. You're just sitting there by yourself and you may have had a couple cocktails and the price is just like running. And this would happen every so often in like 2018 19 I think. Um, and it's just Friday afternoon. Uh, because you're going into the weekend, you're just, you know, you're becoming wealthier. I don't know. >> That's it's the it's the meme of the guy in the party at the corner. No one knows that Bitcoin's price is ripping >> and it's just moving on your phone. It's just like this thing that's it's it's a it's a thing. It's a thing. But Liam 3 rips 3M pisses uh ripping pisses at any day of the night. He's he's agnostic to win the price pumps. >> Always a good time for a price pump. >> That is true. Uh, as I said, big list. We're going to get into it. Uh, we're going to start with JP Morgan. Uh, I said the banks are coming. They are here and they're going to let clients pledge BTC and Ethereum as loan collateral by year end. It's almost year end. We're end of October here. So, this is in the next two months. They're going to let um, Bitcoin be collateral. And this is uh, pretty big news for a number of reasons. Few different ways we can unpack this. The first one to me is just you know if you think about what is deemed collateral and asset classes moving into you know uh reserve status or being used as collateral you have different sort of epochs of things being used as collateral. You could look at you know pre971 as uh gold you know predominantly being used as a form of collateral um neutral reserve etc. And then you know post 1971 you really moved towards US treasuries uh as the default form of collateral. Um and you could also say in that time period that real estate was a predominant form of capital or uh collateral. Uh and now we're adding basically a new asset to the mix of acceptable collateral which is a pretty big deal just again in the sort of timeline of asset progression, asset development and use as collateral. Um, and so we're, you know, very early stages, as early as you could possibly be in terms of this this new asset class being deemed uh worthy of of being collateral. So, what are you guys thoughts on this? >> Yeah, I mean, this one is is huge. It's even even you just sharing the collateral notion makes me think it's so much bigger. Um, I won't go in any direct order, but you know, having talked with banks, regional banks, they see stable coins as a big um, disruptor and they want to get in the game. And I think it it's a little bit of a misnomer, mis misguided view. Um, I think that they have to at best be in parallel looked at as uh priorities because on the traditional banking like two-dimensional take is they're going to see capital flight. It's better money movement, crossborder, all the things. And I know that's true, but the reality is most people, most banking institutions do not like from a retail, even business perspective, they still have to get trained up on how to use stable coins. So that's still years away versus if they're looking for Bitcoin exposure. We've seen what the ETFs have done. You should open up, turn on the ability not only to trade, but also actively custody, get closest to that underlying, which is that collateral we're talking about. And now you can start to offer whether it's Bitcoin back loans which you know obviously banks are in the the the game of lending money cross collateralization. So I think this is big because it shows another layer of um not risk but uh potential disruption that the big banks have already been disrupting and disintermediating the regional banks. So there there's that I think huge from just Jamie Diamond being one of the largest you know uh and JP Morgan in financial institutions of the world to um basically dismiss yeah call it tulip bulbs and ultimately come back and um get involved. And then there's also the example of I think that they're going to let you do both when it comes to um pledging your ETF shares as well as the underlying which is really fascinating because I think the if it was just ETF shares I'd be a little bit less interested or think it's so you know groundbreaking but the fact that they're going to get in the game of the underlying and figure out the underlying custody have to figure out you know the rest of that and it shows also that they're like competing with um deposits. They're competing with the underlying custody. They get that they want to be right next to it and offer financial services. The last part I'll say though is all it is great. It also kind of is um I don't want to say it doesn't matter, but you got to be very wary because for 15 years people have tried to lend against Bitcoin and they've pretty much blown up. Now, obviously, JP Morgan Chase is different, but I just think that it's very it's worth sharing that when anybody drops a new product in this space, you really want to take a step back and just see what happens, how it worked, especially with something that has historically not worked well for the lender because this stuff is truly alien technology. I forgot who I was talking to about it last. It was actually a large bank and uh one of the largest banks in the country and I was referencing um because they were interested in MIC. and was explaining like this is alien technology in the sense that it trades 24/7. If you look at all the volatile periods, they happen at these nights and weekends. Thanksgiving night when we used to run our London desk on chain, those were always the most volatile. It was a running joke on Thanksgiving. You were just stuck uh near the near the computer. And then you have this asset that can go from 20 to 30 40% draw downs uh that you're not used to on a 247 market. And then you have if you're caught short or naked, there's no bailouts. Um it's just a different ballgame and so TBD how it plays out for JP Morgan Chase. >> Yeah, I think that there's a a ton here. Um one, everybody's going to come kicking and screaming just because the market forces will demand it. Um we've seen how profitable the ETFs have been and the clients just demand it. Um they want to be able to trade Bitcoin and Bitcoin ETFs. Um they're they've definitely done this not because Jamie Diamond is uh you know spearheading this internally and super excited about it. Um and he just you know one sees that uh the clients are going to go somewhere else if they can't do it themselves. Uh a lot of these hedge funds will trade on margin and so they want to lever up um their actual amounts of trade. And so that's not to say they're going to you know put you know out of all their portfolio 500% uh long Bitcoin. it's going to be like a relatively small percent of their portfolio and they'll trade against you know uh future expectations of where the market's headed yada yada yada but um as you've seen everything from the popularity of the ETFs um the amount of you know clients that have got exposure to Bitcoin for the first time through the ETFs and a lot of them probably are starting to get smarter on it is it's become a larger percentage of their portfolio and and they dip their toes in what was it? January of last year now. Um, and they've gotten more comfortable with the asset and they want the underlying themselves. Um, it's just the the perfect example of every detractor that um doesn't want Bitcoin. They think it's a scam until they can actually make money from it and they're they're going to be educated from their clients or their clients are just going to leave. But because JP Morgan's so big and they can have such a big balance sheet to lend against um people are going to want to work with them. Um it's just a massive s uh just move for the industry. And but the last thing that I will say um I am impressed with how quickly they're getting to market. I doubt that they're going to use a custodian themselves. I would imagine it's probably a subcustodian, but they can offer a very big lending book that they can lend against. Um so it'll be interesting to see how much adoption this gets early on. I don't think it will be just I mean it'll be massive in in Bitcoin terms but it will probably be relatively small as people um want to check out how this actually works to your point Michael as well. >> Yeah, agree with all of that. I think very good points around just the narrative, the bending of the knee. You watch the ETFs have such great success. You see Black Rockck it's their most um you know uh profit generating uh product at this point in time. Um, and you can't just ignore that. And and you know, we've also discussed the past few weeks uh around this idea that you know, whether it's OG Wales or just people moving into these ETF products due to security concerns or the ability to to get margin against uh IBIT shares. um this is a natural competitive sort of uh move or pivot for the JP Morgans of the world to say well to your point exactly Michael let's get let's just get closer to the underlying and do very similar uh financial services around the asset um but in a way that is not in a in a rapper vehicle now the interesting question is you know how how are they going to actually go about building out custody themselves or acquiring it using a subcoddian like you referenced and maybe that's a nice transition to uh another headline from the past week. Um, which relates to, you know, effectively single custodians and this notion of the big boys are here, the banks are stepping in. You know, we we've seen things like this in the past in terms of um certain entities or uh trust companies being deemed quote unquote qualified custodians um being trusted to custody digital assets. But ultimately um you know uh being a single custodian brings a lot of risks in terms of having single points of failure uh and the ability for things to go wrong without fault tolerance and without fallbacks in place. And so I think this relates uh pretty closely to to this news from uh Nevada shutting down Fortress Trust over insolveny. Now, if you recall a few years ago, um I believe this is, you know, some of the same management team, if not the same management team from Prime Trust, um that went insolvent a few years back, lost 80 million in client funds. Um Michael, maybe I'll kick this one to you. Uh thoughts on on this announcement or this development because this has sort of been happening in in uh slow motion over the past couple years. >> Yeah, this unfortunately has. I didn't even I was kind of surprised that they were still around. And I guess they had still been some in some way operate operating. Um, this whole situation stinks. If anybody's been close to the industry, you can search on Twitter and probably back into not only what happened with Fortress. Um, I didn't know it was as big as 80 million um, in the losses and then ultimately some of the executive team that went over to uh, I'm sorry, at Prime and then went over to Fortress. The real nasty part about the prime and fortress is there's a bunch of companies um that back in the day when those comp when the assets were lost understood that knew before the market did they actually took assets off of them because prime trust used to be a custodian for a large percentage of the Bitcoin only firms and then ultimately now there's lawsuits out there around clawbacks because it's been understood you can just track the the movement whether it's uh the blockchain or the ledgers that they use on capital leading from their subcustodial relationships with Prime Trust and Fortress Trust. Um, and now there's a bunch of clients holding the bag. Uh, included on top of that is when you look at your IRA custodian and then naturally there's been uh a stain when it comes to subcustodial arrangements in the IRA space because certain assets were stuck there. Um, all this to say this really ties into kind of also what I think Brian what you're all relating to on the JP Morgan Chase side is kind of feel like sometimes we're taking crazy pills but we explain that there's a reason on a long enough time horizon the market will demand multi-institution custody and it really uh breaks down for this exact reason that once somebody an institution an individual gets material amounts of Bitcoin something that is greater than you know speculative exposure they will naturally demand and better assurances uh for the underlying whether it's just custody or custody for um the underlying loan that they've taken against their Bitcoin. And there's a number of reasons for that. From the fact that you can't lose the asset, you cannot move it or lose it uh in a scenario like that. But also um when it comes to if one of the custodians is tied up in some kind of bankruptcy uh proceedings or anything that you know would in prohibit them from signing or moving the asset, the assets are still okay to be moved um depending on the construct in a current iteration. it's the case because the client remains uh the title owner of the Bitcoin and then they they're able to direct the uh agent on behalf of them that is safeguarding that cryptographic material. And so yeah, I think this just it's just going to take time. Um but it's really sad to see and and I can almost promise we'll see more of this in the next 24 months. Uh as liquidity comes into the space, the need and the the recognition from multi institution will only become more apparent. That's the thing that I I think everyone just fundamentally misses and would love to take bets on this is that the liquidity doesn't come in a vacuum. So going from 120 to 170 to 250 isn't all uh you know butterflies and rainbows or whatever. It's actual risk will be inserted because it is still the wild west and people love to do weird stuff because it already they only do weird stuff in the traditional system. it. This is exponentially increased once you get into crypto and digital assets. And as that happens, that's when the market wakes up to redundant fault tolerant solutions. We just forgot what happened in 22 and we live in a world um that's just traditionally trusting and it just doesn't work that way in digital assets and Bitcoin. >> Well said. I think uh yeah, I mean that's that's why many of the people severed the internet connection and took their assets offline in the very early days um because they'd seen so many instances like this and and there there are those challenges with um you know taking all of your Bitcoin offline as well and and keeping it on your person but um you know the emergence of you know bankruptcy remote accounts and um the ability to actually you know use a custodian does have benefits as well. So as um it's just kind of like the JP Morgan deal and uh offering collateral on the underlying assets themselves and enough customers that become educated will ultimately demand it and it will just be market forces that um push assets from omnibus accounts where um you know you can actually be uh have your assets clawed back in if there's ever a bankruptcy to um more bankruptcy remote type accounts um in the future. >> Can we go >> or go ahead? Yeah, go ahead. >> I see if we're if we're good with this. I want to go bullish because there's a lot of happenings. I thought we were going to go from uh JPMC to Zel. Um because >> that's where I was going next. I'll pull that up right now. >> So, yeah, Zel. >> Go ahead. >> I was just going to say we were we were looking up before we hit record because I had some understanding of like what Zel is. I've used it before. Uh but it turns out it's owned by a consortium of pretty much all the big banks. Um, so that's just a a noteworthy um disclaimer as as we introduce this story and why it's relevant. But go ahead. >> Yeah, I mean that was um I had an I have an uncle that worked for Wells Fargo and I I don't remember why I end up digging into this but there there was always a weird um I think because he was initially the person asked for Zel and I was like well that's interesting he download it. Um, but Zel's fascinating because when you look at the genesis, it was part of the combating of the fintech apps like the PayPals, the Venmos, the cash apps of historically um these systems are um and I think Latin America, Europe has really great um when it comes to the interoperability of the banking system where the US is very fractured and so you'll ultimately end up with these layers on top, right? these databases like a cash app, Venmo, PayPal that are able to net settle out transactions and um via flows and other reasons. Zel was established I think maybe close to 10 years ago but to Brian's point it was some of the largest banking institutions the Wells Fargo um I think US Bank JPMC and what makes this really interesting there's another like four others is that now they're uh positioning stable coins for crossborder to start um which is pretty big because if you have the largest banks getting in it doesn't say much about like what blockchain my instincts tell me that it's probably tied to about a couple weeks ago And I think we had called this a few months ago that the large consortiums like this were going to establish some kind of stable coin because it just made too much sense from the distribution mechanics. Uh and so anyway, I think this is just a big deal from a directional point of once US citizens get comfortable with the notion of money being digital and they can move it around. Um and it just ties that connectivity around being able to you know swap into BTC that this just is a signal for the industry that it's moving in the direction that you're not going to come back from. Now it's also going to be very overwhelmed because a lot of this stuff is going to be you know we don't have to go let's keep it bullish but it's not going to end up good if people think stable coins are the innovation. The sad part is I think most people are actually going to like end up as stable coins are innovation. I don't think everyone adopts Bitcoin. Uh starting to realize that that's a different conversation. Well, um there are two two links that we have that are related to this, too. I don't know if you saw the Western Union news, but um it sounds like they're pretty much going all in on Bitcoin. I mean, Western Union or Stablecoin, sorry, not Bitcoin. Um they they've um alluded to having a stable coin partner um which they haven't actually named their names, but they're just uh pretty much seems to be focusing on expanding globally fiat on off ramps to stable coins. Um it's just going to be, you know, we've talked about this a while uh for a while now, but it seems like the move is just they're going to um just essentially stable uh coinize the world with US dollars as the uh intermediary and just making sure that there are different banking partners for um all across the world for on and off ramps between these stable coins um will be a massive part of that too. Um it's just going to be increasingly uh the currency will probably be US dollar, Bitcoin, and gold. Um as that ramps up a little bit more and there's just more um information like money is just essentially data and information at the end of the day. Uh except for maybe gold which is physical. Um but as that ramps up um just information wants to be free and so we're going to see greater currency competition over the the next um decade or so or even longer. Yeah, the the Western Union deal is uh particularly interesting to me just because um in a in a prior life in my in my private banking days uh we used to cover a manager that had an allocation to Western Union. It was a sort of a longonly equity midcap fund. And uh this was like 10 years ago now. And in in sort of our quarterly updates, I would always bring up the fact that like, you know, uh reminces are, you know, in the process of being uh disrupted in a real way. Um at the time, you know, I I was sort of uh agnostic to which blockchain would be the real disruptor. Um but I knew that, you know, from a technological standpoint that, you know, these guys were being disrupted. So, you know, it's it's interesting to see you basically a decade later, they're now actually doing something about it. I guess that's sort of to be expected from an incumbent like Western Union um to not see the writing on the wall that's really been there for several years at this point. Um but yeah, that makes sense that they're, you know, at least finally moving in that direction uh of realizing that they're going to have to do something in stable coin land if they're going to want to be competitive with all these fintexs, all the banks that are going to basically eat their lunch if they don't do anything about it. Um, all right. We had a slew of sort of more crypto deals. Uh, if we want to run through some of those. Uh, some M&A, some acquisitions. Um, I'm going to start just with this one. Salesforcebacked paycheck firm, modern treasury acquires Beam stable coin startup for 40 million. I'm going to be honest, I've never heard of either of these companies. Um, Michael, I think you brought this on the list. Um, any any thoughts on this one? Yeah, Beam I hadn't heard of, but Modern Treasury I have. Um, they're a large kind of they sit like as a middleware between traditional uh fintexs or like crypto companies and then the backend um um banking layer. So if you like think about you have an exchange, you have some type of brokerage business and you need to manage not only your treasury, your capital movement, your cash flow from incoming, but then um as individuals are setting up like FBO or accounts with your business, they need API infrastructure to build those accounts and it all just needs to like talk to each other. So modern charge is pretty big firm. Um probably multi-billion dollar I think what does it say raise 1383 million? Yeah. $2 billion valuation and then they just uh this deal with beam which is effectively uh what is that? Yeah. So they're part of the do the global dollar consortium which is with um Anchorage. The main idea here is that you're going to start seeing more and more of like what we saw with uh Stripe, Tempo, and this integration between startups, FinTechs, um and the ability to either leverage existing stable coins or launch your own to manage capital movement. Um I think the the um the uh Western Union stuff is obviously big from crossborder and like that's just self-preservation. I think the zel thing is a little fundamentally different because of the plumbing activity between all these banks. Like those banks probably make up over 50 plus percent of um business accounts. You think about, you know, Stripe's involvement with businesses. And then you take something like JPMC, Wells Fargo, and the others. And if those individuals have business accounts and business capital we talked about before, Stripe um only has 1% of international B2B. what does it look like for the modern treasuries and these other companies that because that's really where the the real use case is when you think about from scale and actually um operationalizing like to get every user to learn how to use stables to go and send money and how much money can they send how much fees can you really take if it's a race to zero versus if you're a business that is a multinational and you need to net settle from whether it's invoices to payroll like that's the real disruption and I think we're going to start to see more and more of that um and that's really where like a cropolis uh a treasury or a portfolio company can shine because the notion of putting Bitcoin as that core underlying asset next to stable coins I think is something that's not historically been done very well. Um and there's a big opportunity for that. >> Yep. Well said. The opportunity is there to put them close to each other. I think we're a ways away from some of these folks realizing that. I think they're sort of predominantly focused on stable coins for now. I think they're for the most part missing that second sort of leg of what you're describing where you need to get close to the Bitcoin as savings and have you know stables for uh spending and and you know running a business operationally. Um so we're probably still a ways away from people realizing the the sort of full picture there. Um I'll go to this one next. Uh prime broker Falcon X to buy 21 shares amid crypto M&A spree. Uh there was another headline that said uh crypto M&A surges 30fold as niche firms shift to mainstream. Um thoughts on this one? >> I thought that this one was super interesting just because um I saw an interview with Ragu who's the CEO of Balcon X. He said 20 to 30% of net new entrance into the Bitcoin industry are coming in through ETFs now which um kind of validated a lot of what we're seeing in the space. Um, but also just like we talked about with JP Morgan, people are going to want some exposure to ETFs, some exposure to spot bitcoin, and we've seen a lot about how the um options on the black rockck ETFs are actually like outpacing options on underlying Bitcoin itself. And so I think it's just going to be um Falcon X is doing a lot that's kind of interesting, too. But just the entire stack of um you know ETFs uh options on them and then just the fact that um I mean these ETFs are just great business models too because it's a taxable event if you want to actually get out and so they're going to be able to pretty much charge whatever fee that they want to for a sustained amount of time. They can they have their own custody that they can move it over to if they um want that. And so the this is probably just extremely profitable business model for them. Yeah, I didn't even think about um it's a really great point around and I don't know how much this took part of it but like the notion that over a long enough time horizon once somebody buys into digital assets specifically Bitcoin the realization is you want the underlying there's just going to be a lot more you can do with it and uh specifically from a counterparty risk perspective right like the base if the base is you can insert governance in a world where you never could then everything else will be a derivative of that. And the opposite is also to be true is if the base is fractured, meaning you have a single counterparty with the underlying custody and you create all these derivatives on top. When it unwinds, it's going to be very bloody. Um, with all that said, when somebody first comes in, they're used to buying it in an equity-like rapper, and then you naturally have that conversion over. Um, but then to your point, there's a lot of other things around execution, uh, financial products, derivatives. One thing that uh I don't know if you had something on that, Brian, but I did want to pull this up because you tied into it if we want to keep things bullish is uh this was the Bloomberg article that crypto M&A transactions um and the amount in Q3 was close to 10 billion uh which is basically I think about a 3x from Q1. I think it's also just getting started. Like I've always find it interesting when you see some of these um these raises. I think we saw some of the IPOs and it makes sense, right? Like when uh 10T is a a fund that they've really executed well on the thesis that you know institutional investors Dan Tapiro's fund, they couldn't get exposure to Bitcoin wasn't their mandate. So the way they would go is invest in growth um companies that already had some kind of like or definitely had product market fit and they were like preipo. So the Geminis, the Ledgers, uh the Darabits, they crushed it. But point being is they used this past like two quarter window because it looked like the cycle the top, right? So, you want to like go in and you saw a lot of raises and you heard like Bitco IPOing and I think like there you can't you can't money uh morning quarterback it because we don't know where the market's going to go but my instincts tell me they probably like shot the they overshot uh or they like they they shot the gun too early basically that we probably 12 to 18 months before that optimal time where there's going to be like insane um fervor froth in the market and this is a example of it is like if this is 10 billion in Q3 three where we're heading in 26 because everyone's trying to place their chips on the table with the acquisition so they can get their integration with like what what are their plans right you've heard Wells Fargo coming into the space city bank's coming into the space uh you know Facebook is looking at it it's always been rumored that Facebook will go back and buy David Marcus to get you know Spark involved um that it's really the underpinning thesis of everything we're kind of doing here is there's real opportunities to build generational businesses that are standalone businesses that you know effectively print BTC to pass back, but then there's going to be lots of opportunities for companies all over the world and financial institutions to buy these firms because remember similar with like the audio investment in Latin America, that's a whole region that's going to need financial services. They're not going to buy a US-based firm generally to go and offer services in the same way in the Middle East in Asia Pacific. Um, so I think this is very bullish for the thesis of like these companies are going to have to there's going to be an insane amount of M&A and it's just getting started. Next year we'll probably see like 5 to 10x of what we saw in the last half of this year. >> Yeah, I think that's um I think that's spot on. I think this is a an obviously a a huge jump from what you saw on the screen there in the past years, but that's to be expected. You know, we heard 2 three years ago there was lots of similar announcements, similar plans in place, and then when everything deleveraged, everyone sort of uh shelved a lot of those plans. And so it's natural that you saw that dip in um activity over the past two years. And I think you're I think you're exactly right that we're just scratching the surface of what this could look like um sort of in the coming coming months and years even because what we do know is that these incumbents whether the trades, you know, they're more bureaucratic just generally speaking. They're going to be slower moving. They're putting their plans in place now. they're getting their chips on the table, but it's going to take some time for these things to actually, you know, be in market, uh, be productized. Um, and we'll just have to see how that plays out. But there was another few other deals to run through. Uh, Coinbase bought a investment platform called Echko for 375 million. This one was particularly interesting uh, or funny just given so Echko uh, is a investment platform. My understanding is it's sort of like um a crowdfunding token launch platform but sort of more credible. Uh not anyone can just launch a token uh within the platform. It sort of has to be vetted. Um and so there's some air of credibility around it. Um Kobe who is a crypto Twitter personality uh actually started the the platform Echo. Um and he also had a podcast a few years ago called Up Only. Coinbase bought the podcast for 25 million prior to announcing this deal. So, sort of a little marketing gimmick stunt uh to buzz interest around uh what they would announce literally the next day uh buying Kobe's platform for uh 375 million. Uh thoughts on this guys? >> Yeah. Um thoughts are generally that Bitcoin dominance is not going higher in the immediate term. Um, I think that, you know, this is a good example of the adults in the room or the perceived adults in the room when looking from the outside and they're allowing for any company to go out there and raise their own token. Um, and so it's it's just a lot of distraction, too. And so, you're going to see a lot of just M&A focused on on distraction um rather than just the underlying Bitcoin itself. Um, I don't think that there's going to be I mean, they're probably going to make a lot of money off of this just because uh they can put their name on it and there will be other tokens that they will want to sell. Um, and the market's uneducated for on what actually creates value over time and so they'll buy what the perceived adult in the room um is willing to put their name next to. But it's just a a sign that, you know, the market isn't necessarily as uh quite as developed as as we would all like to see. Yeah, this remind this reminds me a little bit of like there's a truth in every lie in the sense that what they'll probably come back to the push back I'm about to give on this is u small companies and whatever need to raise capital um you know and get exposure to additional um funding mechanisms but the reality is this is a big uh point it's probably the biggest point around the market structure bill um haven't followed as closely but our friends at BPI have really reports and just up um commentary on what's going on. It really comes down to um securities being uh deemed uh commodities by the CFTC and figuring out how do they basically like whitewash all this and allow things to trade in a more free uh not be registered as or not be recognized as unregistered securities. Coinbase is obviously very close with them. the ability to launch anybody their own token is kind of a corlary or similar to like whatever the pontf fun where you can do it like in a less scrupulous way uh you know on the blockchain anonymously whatever but it also reminds me very similarly of a poly market and everything's going to become a market and we're just all going to trade around on ideas um it's just this kind of high velocity trash economy where everyone's speculating um and we have the piece that I was we were looking at they were going to release about, you know, investing on a Bitcoin standard. And it and it just like kind of it is fresh on my mind when you think about, well, when you have a sound money uh world, you just hold the underlying. You don't have to put it at risk anymore. Um, and that's the opposite of what these people uh push. It's more of like here, jump on the platform and then go ahead and let get off to the race on speculating and everyone just ends up with like less money and then definitely less Bitcoin. >> Yeah, agree with all that. The other takeaway as it relates to this acquisition in particular is it signals to me that they see, you know, Coinbase sees some real competitive threat vector from like the pump fund platforms of the world where they're basically missing out on the early the very earliest stages of some of these tokens or projects. Um, and so I think this is really an effort to own that full chain from like ideation, token creation, launch, funding, uh, all the way to trade, which is what they already own in terms of, you know, when these assets get added to the exchange and then tradable. Um, but I it's it's sort of, um, a signal to me that they see some real competitive threat from the pump f pump funds of the world. Um, just wanting to own that whole life cycle of of speculation basically um, from from sort of A to Z. It's and then it's just like the wrong uh fundamentally strategy in my opinion. I think uh they're trying to compete with the c casinos when uh there are a number of just in uh institutions who just want to safely uh hold their bitcoin and uh you know and even trade around a lot of their bitcoin in in a serious way and want serious counterparties. Um and you know trying to go too far out on the risk curve is going to push away some of those types of folks. Now they have a great brand name and people generally trust them and so it's only going to happen on the margins but I think it's a pretty big missed opportunity. Um moving along uh this was a late ad late ad to the list. Uh IBM launches digital assets platform as crypto activity jumps. I'll pull up the actual um press release from IBM here. IBM announces new platform for financial institutions and regulated enterprises entering the digital asset economy. Uh a lot of word salad here, but what what what we make we make of this IBM getting in the game. I wasn't able to look deep here, but I mean if I could think of a top five list of legacy companies to not touch, uh you know, Bitcoin, it would be IBM would be up there. A lot of buzzwords, a lot of HSM, hardware security modules, blockchain. um you know the level of attack surface I don't know I mean yeah it's it's really interesting because um I think about IBM and other firms getting into the space and like you know relatively speaking somebody can manage a private key um we see no shortage of different firms launch things the problem is every day you hear about different hacks different vulnerabilities and the thing I always draft to when we talk with institutions is on a long enough time horizon And you know, as the price runs, liquidity comes, people lose assets, and then ultimately people start to wake up. Well, like, well, what's the difference between your custody versus the other? And it all starts to look the same because either a somebody's not technical enough or b from an operational security perspective all the way from Coinbase to Fidelity and everyone in between, you can't actually ever tell anybody what you do with the underlying because that's, you know, a source of risk and attack vector. And so you never have real transparency understanding where the asset and then also um you know whether it's bad actors from a collusion perspective coming in and infiltrating organization to a long enough standing where um any kind of counterparty risk insolveny come to play. You just start to see everyone will step in with HSN's and multi-party computation all these different ways to custody but they will lead to vulnerabilities which will have the market feeling you know we'll look for standardized processes. So that's what I really come to think about. IBM's first foray into this. Uh it's probably going to be a little interesting. They probably won't get much traction to have any vulnerabilities, but um interesting nonetheless. >> Yeah, we'll see if they come out with anything or if it's just Long Island blockchain ICT or something like that and just like, you know, marketing pitch. >> 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. U quick word from on-ramp 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. Where 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@honorbitcoin.com. We're actually piling 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. Should we >> digital asset haven? >> Should we chat um Tether because I feel like there there's a number of things and you guys share where you want to go. I don't really have a direct one. It's like there was tether and a lot of the notion that came out this past week. Uh they've been talking about this, but like Tether and AI and just how the models will be created and the things they're doing there. I think uh the investment they're bringing on to really push USAT and and then I don't know if I couldn't understand or not if there's a Rumble token. um that's being launched for creating and tipping uh because it in some of the articles it said RUM as a Rumble token and then the other one was uh that they invested in a firm which is I think kind of interesting called Pave Bank um for kind of like digital digital banking u that I thought was was interesting as well. >> Yeah, a few different angles to take it. I think um the Rumble token. Yeah, it's it says right here, distribute the upcoming Rumble token, RUM. Um it's it's interesting because when I first saw this headline, I assumed that they were basically trying to turn on, you know, similar to uh on Noster with Zap's like lightning based tipping, but it seems like there's going to be some uh meaningless token involved, which is unfortunate. Um, and then yeah, I'll pull up the other uh deal which I mean if you know we talk a lot about Tether on the show um and generally how they think about capital deployment, their reserves um the advantages they have and and how they've uh accumulated that those reserves over time but they also have an investment arm and and so uh it's probably noteworthy to look at um anything that they're backing. So I I had never heard of this pave or pave bank before but raised 39 million in series 8 funding led by Excel with participation from Tether Investments, Wintermute and others. Businesses using the bank, which has a license in Georgia, can manage both fiat and digital assets in real time, automate treasury operations, and reduce reliance on intermediaries. So I'm not really sure exactly, you know, why Tether would be interested in this business in particular. It seems like they're doing a lot of these things themselves, but um curious your guys thoughts on on any of these Tether related headlines. The pave one is interesting because if you go I'll pull up their site. Um it kind of makes sense. It reminds me of the other one we talked about which was um uh dakota.xyz. We're going to start to see more of these >> mix between uh what we talked about like so modern treasury is like this intermediary um platform between the front layer fintech and then the backend banking or multiple banks you manage. And these digital first banks look like banks that offer ibands and other ways to take in different types of deposits. So multicurrency, but then they basically sit between um the firm. So it's basically uh vertically or collapsing what would be modern treasury as that intermediary management system and then the underlying bank. But then they're digital focus. So then what that really means is um uh robust and um more uh sophisticated APIs because that's one of the big things with the reason why these fintech sit in between is because traditional banking APIs are really kind of either they don't exist or they're super um um they are super unsophisticated is not the right word but I'll use it because ultimately banks are risk averse and they naturally need to maintain um certain levels of security so they don't open up a lot of infrastructure for usage and so this is where this limitless banking um you know pave or pave bank and so they reference multiasset 24/7 global banking um and the programmability when you're a digital asset firm if you're going to be doing either multicurrency stable coins or if you think about a lot of like AI companies if this kind of ties into what I think is probably the full circle of the the stable coin aspect is stable stable coins will power AI, it makes more sense than credit card uh from an inference and a um programmability perspective. You go back full circle and if it ends up being some kind of utility where people need AI tokens for a bunch of things that you'll naturally need in your day-to-day life and kind of rounds out how uh USAT and Tether are looking to be with the bank. So they invest in the bank, they issue the stable coin, USATS, the distribution channel, and then you're you're able to basically build that into the programmability to however stable coins are going to proliferate, whether it's fintex, AI companies, or whatever. So I I can see it. I think it's going to be interesting to see how far how long it takes because I don't know how many use cases are yet available for stable coins that the market understands will will tolerate. But I think it's naturally coming. It's just when. >> Yeah. and starting with the digital asset companies makes a lot of sense. Um I I'm actually surprised that they haven't gone out and bought a bigger bank at this point. Um I think that Heather is one of those types of folks that wants to you know one you get a lot of uh information if there's information sharing rights on just you know the types of customers who's growing really quickly uh etc by uh working with the pave bank. And so that's just like interesting to know what uh you know either potential competitors or uh you know other folks in the space are really doing that are interesting that can apply back to your business and and just generally how you view the market. Um but also in a world where um I think that they know that the USD isn't going to be around forever just because of everything that's going along with um the debasement of the currency and uh they're naturally Bitcoiners and gold bugs as well. And so I'm more surprised that they haven't gone out and tried to either create a bank of themselves so they can uh actually lend directly to those types of folks and actually have eyes on the underlying asset um with their own um custody type models for you know both Bitcoin and gold which I would be surprised if we don't see within the next few years. >> Yeah. one one interesting example from what I was reading there and it'll make a lot of sense to your point too um on the um automation of Bitcoin back loans on like a micro example um I never thought of this but like when you think about um an Unchain a letin an arch you generally have some kind of minimum because there's operational requirements and you're ultimately originating and even though like Arch is world class at originating making it pretty straightforward where you can get the liquidity I strikes even doing this um in some respect. There's still like operational overhead and requirements and collateral management that end up like around the uh uh individual level. And you can imagine where in a certain level the wallet has a deposit, you have your stable coins issued and then there's uh automation tied into you know everything around again this isn't necessarily you can build a business around this and it's done but if a banking layer like this could do is out of the box you could lend against the underlying leverage the licenses have a lot of their uh triggers and permissions around um um when the price is reduced ucing to top off via you know the stable coin it brings it back up to to the the margin um requirement like I think there's a lot there where you can do it at like thousand level or $5,000 level you know something that would be less uh not economical in today's world if you have to manually do it I think some examples like that you'll start to see uh banks and that's exactly where the the opposite of the traditional banking system isn't they're used to underwriting and building out their traditional loan origination processes which are tied into dollar system around ACHs or wires. >> Yep. All great points. Um, all right. Where do you guys want to go from here? We had um there was a couple other headlines raise funding. Um, yeah. Where do you want to go? >> Let's go to the uh X42 deal with Coinbase and Gemini and um Claude. I think that's gotten a lot of traction as of recently. And um Michael brought up a a good point. I think there's uh I saw somewhere that they did over a 100,000 transactions in a day um of just a gentic to a gentic payment of uh I think it's mostly stable coins at this point, but it's interoperable between um whichever payment uh or token people want to use in order to pay um you know AI based on API usage. Um it sounds like co some folks internal within Coinbase too are actually thinking about so how it's going to work is um Coinbase will or or you can pay based on your tokens uh usage um APIs in real time but you could uh they're also planning to develop a credit card in which you can just pay on credit but the end user will receive the tokens instantaneously rather than have net 30 uh settlement. um and Coinbase will be able to um you know take the spread on on that and uh actually receive fees for it. So they give you both the option to pay net settle in real time as well as um offer credit card fees. And this is going to be extremely important as just the usage of AI ramps up over time just because in order to find the right information on the internet, there's going to be a lot more people are going to need to be incentivized in order to you know run the right models and um have everything there for you because the internet's going away from a advertising based system as uh more agents just go and try to find the right information for you and so um you'll naturally use it a little bit less. Um, so I don't necessarily know how all of this is going to play out. I know that, um, in on a much longer time horizon, those who are pretty sophisticated will want to, you know, save and and, uh, you know, demand to be paid in Bitcoin. But I think it's really interesting to to see just because we're seeing stable coins uh pick up a lot more just from uh you know other use cases outside of just being the uh other side and digital asset um transactions and uh for trading day-to-day. >> Yeah, I have some thoughts but Brian curious if you have anything before No, go for it. So this isn't worth much because the book ends are easy in life in the sense of like we're here today and then Bitcoin is money in the future. It's how you get there. But with that said, I think the book ends ends up to what Leo was saying is how do we end up where do we end up is in permission systems versus permissionless systems. And I think ultimately where all these large models end up is centralized controlled um and uh um having whatever ideological bent that's allowed and will say what is used to being said. and you will use regulated stable coins to access it and then you end up in this other side which is permission uh permission lists and you'll have these different models that are going to be governed in certain regions and certain local fashions and then you'll naturally need Bitcoin. Um I think that historically crypto has always been this like test net for where the market will go because it's there's more sophisticated people building on it. there's just more dollar attention towards it and so um you see more a surf surface of designing but ultimately it's all built on the old permission world that will will not like persist and so then you'll end up on the other side. The thing that kind of gets a little Orwell in is if we've talked about this a little bit before around the amount of infrastructure and capital invested into uh AI that will never be recruited at least in real terms and you can just see if you squint like how AI will somehow be so pervasive in our day-today usage whether it's you know uh health checking your own personal health score um access online to do different things where like it it surpasses search that um it starts to become a public utility effectively because you have to pay for the energy the the production the um the uh inferences and everything to run and so eventually where the UBI and the stable coins getting pushed from whatever version is like a public good and that's what runs but then you're stuck in that system because ultimately if that's what you recognize as digital money as these stable dollars and that's how you get them and that's how you get paid from your employer and that's what you recognize as the uh US dollar supporting the you know the government whatever it is that's one version of you know people using and then you end up in this other version which is people recognizing that not only uh what they're getting fed is the right or better version via the algo but also you have this form of money that's appreciating and probably has better permissioning or better um tooling because of the programmability and the interoperability versus these stable coins that'll inherently have certain limitations. I think this is where we end on a long time horizon. I don't know how fast we get there, but uh it's probably not going to be good. 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 verifiable Bitcoin and and launched Swapido, which ran into audio um last week. And then also Argo 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. >> Yeah, and that reminds me of um you know, just the the notion of you know, ultimately they become public utilities at some point, more so out of necessity because of the the energy uses and the need for uh token imprints. there was a a sort of flowchart or um infographic that was showing basically for every $1 of uh you know an end client paying chat GBT subscription. So for every $1 that they're paying in a subscription, there's about $8 of costs that go into producing whatever that you know the output of that dollar of spend is. And because along that chain uh of payments and revenue and cost uh are you know that sort of circular image that we've seen the meme around you know all these AI companies doing deals with each other that $8 is really just you know being paid back and forth to all you know all these different parts of the chain. Um and so you could see a world in in which you know these things do need to become sort of public utilities and uh mainly just because there's there's actually not a profitable endeavor here uh for for most of these companies outside of um you know what we've already seen. So that's that's an interesting sort of element of all of this as well. And what's funny though is like everyone knows public utilities are good or or or goods are inherently um less uh sophisticated and better than traditional private enterprises. Uh and so that kind of ties into if it's a public utility, you're going to get the slot that's given to everyone versus if you can pay additional in a better form of money. >> Um yeah, this is something I've just been thinking about. The the other thing that randomly came up and you'll appreciate because I know how much you uh love uh ETH is um I forgot it was a random uh podcast and they were referencing like this internal infighting and and and I'll save you guys remember having to listen to it because I don't know how I stumbled on it, but it was basically describing like this infighting with the ETH community about some of the lead developers going to Tempo. And um what was real fa really fascinating about it is like the um lack of fundamentals and foundation of all this crap we're talking about because >> nobody has any real basis on why they do what they're doing outside of like money um and incentives. So the ETH uh it was like rumored that they just like ETH pays all these people really bad whatever. It's not the ETH foundation. some like derivative of it, but it was looked at as like a prestigious thing for if you're uh an engineer to go work for. And then they like this one main guy had only made like 600k over like six years. And he was like a world-class engineer and effectively went to Tempo that just raised, you know, $500 million and is kind of like the hot thing or one of the hot things right now in crypto. And it was this reality of like it's always just the next thing because unless somebody fully understands the fundamentals and what's going to acrue value. They're just like missing the force of the treason and then it's like whether it's the uh philosophy or ideology of ETH and programility and world computer. Um but they don't have any real basis. So then they move with the wind because the next thing that comes is the next thing and then that person's willing to pay them more. And so the next round will be something else that's not Stripe and Tempo when they realize this permission system doesn't make sense. And I thought that was just fascinating because all these guys, if you if you if we were on a panel or somebody was listening that didn't really understand what we're talking about, they'd be like, "These guys are close-minded or like they don't understand what's happening or this is the next wave." payments. Like sure, it's going to work for a little bit, but the reality is um the best technology will generally win all on a time horizon, especially the best tooling and programmability and all these uh products are inherently flawed because of the lack of interoperability and also the just the underlying counterparty risk that's associated. The market on a long enough time horizon will realize all of this, but they don't get it. Like they're and a lot of it just comes to money. It's the same thing with the DATs, right? because like people went to DAT because they were promised you know either large equity payouts uh by former shares and also um base capital and the market inherently doesn't uh um you know think critically. It just follows what the the certain trend is. So if all these people are raising DAT or tempoing stable coins, well then it must have some innovation versus really just getting back to the fundamentals. Um so I just thought that was interesting with ETH and the natural this next cycle people are moving on to other blockchains. Well, yeah. I think part of the story there as it relates to Ethereum is effectively like, you know, put aside the flaws of these permission systems that we're just talking about, but that is effectively where they see, you know, these developers are seeing the puck going in effectively abandoning what was historically sort of this decentralization theater around Ethereum. you know, real world assets, stables are going to run on these uh permissionless quote unquote permissionless uh rails. That's sort of been abandoned in favor of whether it's Tempo or Stripe or or any of these fintech incumbents who are just going to build their own blockchain. Tether's going to do the same. Um and so you I think it's natural to see flight from those prior ecosystems which thought they were being decentralized and you know building things with a a crypto forward e ethos. Um, to me this is just indicative of effectively the abandonment of those those thesis and those narratives and just saying no like we're just going to build centralized databases that like that's what the act that's what the market actually wants. Like that's where the product market feed fit is for these stable coins. It's no one actually cares if they're decentralized or not. Uh they just need to be fast and cheap and we need to, you know, trust the issuer to some extent. Um and so I think that's exactly what you're seeing play out. Um, and so yeah, the Ethereum uh community is buttth hurt as as always. >> I mean, on that note, I know um Liam brought that link and I don't know if you want to pull it up or if there's anything that just stood out on the uh A16Z article or the the report that they put out. >> Yeah, I think that there are just a lot of uh people who just fundamentally view the industry incorrectly. I think um one of the biggest metrics that there was is just like these these people are trying to value um Bitcoin and all the cryptos like they're just companies when they're fundamentally different. Um there was a like uh okay but Salana and Hyperlid are capturing the um I think it's I don't know exactly what slide it is um but uh Salana and Hyperlid are capturing the majority of real economic value today a big economic a big shift from Bitcoin and Ethereum's dominance in the past and how they're measuring this is the amount of fees that each blockchain uh receives or is willing to pay and they think that um just because that's like pretty much like how to capture value in businesses is like how how much are customers willing to pay. Um and so they're just fundamentally looking at all of these blockchains which uh with the idea of like you know what's the network and uh customer willingness to pay rather than the actual um like how much value is it bringing to customers not how much are customers paying right and so that's a massive fundamental difference which uh with you know I think Bitcoin's brought all of us a lot of value by being able to store more of our money over time um and you know low fees have been uh been nice because we've been able to um move our money around on a very on a relatively cheap basis. Um and so I think that there's a fundamental difference and that's kind of how all uh private equity thinks as well which is just like okay um if the business isn't capturing value it's not worth a lot and uh that's fundamentally different with how much del uh value they're actually delivering to their end um end user or end customer. Um, and so I think it's just a an off way of thinking about the industry. Um, and then there were a few other charts in there that were interesting, mostly around just like stable coin usage, uh, decoupling from, uh, actual transaction volumes out there. Yeah. I mean, one thing I'll say about some of this transaction, you know, onchain economic economic activity is this is not good data. And I say that from experience from my time at Coinbase. like assessing some of these other blockchains like there was always this issue or concern of just looking at the highle transaction data or volume is just not indicative of actual economic activity because for a lot of these things you know the easiest example is probably just memecoin tradings trading which is predominantly occurs on Salana you know the vast majority of that trade volume is just not real like it's not actual economic activity um and so there was always this um process you know even you know at Coinbase on the sort of uh investment research side that would say well we have to discount this activity to some extent because we know uh that a lot of it is just you know patently not real. Um and so I would take a lot of this stuff with a grain of salt because um what is being sort of heralded as onchain economic activity is not always such. >> Yeah. The thing I think about with all of this is um is ultimately like there's so much liquidity and so many dollars in the system that you end up with all of this Frankenstein style like just these metrics and these numbers and these decks and everyone working on this the majority of people believe it's real innovation and there's a lot of incentives to doing it. It's kind of similar to AI where AI, you know, really popped up. Uh I think GPT launching in what 22 maybe 21 and then kind of like the Forever really picked up and how many like hundreds of billions of dollars have been deployed there. And similar with like crypto every couple years you have news cycles. the A6 A16Z's of the world and other large firms. They have real political capital, real lobbying dollars to not only further an industry, which we're seeing with this market structure bill, but then ultimately bring in large-scale capital allocators um via their subsequent their previous funds, but also their names and brands and under the guise of uh innovation. And so you end up directionally with innovation, which is happening with the ability to like move capital and store wealth, but then everything else ends up with all this noise. And so you see like how much money has been deployed into crypto and over, you know, right now we're in this like uptrend. So there's these metrics that you can mask and like hide that look like positive growth, but the second the market ends up in those bare markets where ultimately people aren't speculating, then everything and all the volume ends up going back to effectively nothing. >> And we saw, right? We s we saw exactly that two weeks ago in the in the, you know, flash crash when market makers step back and there's actually no volume for these things and they can crash, you know, 90% in 10 minutes. >> Yeah. No volume, no traction. And I think the key point there is it's not to say there's not money and value uh to be made, value to capture, value to acrewue, but it's around the fundamentals as Liam was sharing around like as you bring in all this capital and awareness, well, people naturally end up going through sometimes they have to touch the stove and they're like, "Okay, well this thing has fundamentals. There's only 21 million XYZ. Maybe I want to park more of my capital there. Well, then now I need to figure out how do I figure out the underlying custody? How do I lend against it? How do I have a best-in-class financial service partner? Generally, those are going to be in certain regions. Stable coins are of value in the sense that people, we still live in a dollar denominated world and the ability to move those um from a capital movement perspective. So, there's things that will acrew value, but it's really coming at through that lens and then you still have to add to that. Well, what are the right uh building blocks around how do I return more capital if I'm looking at it in a bitcoin layered world? Because if I raise, you know, 10 million bucks and I really don't have visibility into how to return anywhere near that, well, if the rational thing to do is build slow, hold that money in Bitcoin and then build value added services. And this is how we think about when we're looking at companies investing in the exposure we get. Uh and so it's very similar to like what when I think about multi- institution not really having any competitors because you're ultimately competing with um firms that are doing things in a um to the to the market that understands multi institution the value it provides as inferior offerings in the same way that like when we have investments and our investors they look at us and we're looking at a fundamental different landscape on the type of entrepreneur that's trying to accree and deliver and return more Bitcoin to the type of companies that are seeing through the noise of crypto and understanding okay well there are market opportunities and then Bitcoin really has is going to be the net settlement layer around any innovation around stable coins um so there's a lot of opportunity with all the noise but you have to be able to understand it and see through it and generally that comes with time that's the sad part is it's very hard for somebody out of Silicon Valley or Wall Street and you you know you guys know better and Liam being closest to that old world before joining of like how many people we were on a call last week with one uh worked at a large hedge fund and you know is used to trading and all the things associated, but like when it really comes down to well what what's the right way to do this and what's the right way to think from first principles if we're going to insert risk into our own um trying to return capital. Well, when the market gets really hot, is that really the time to really take a step back and think about what's happening? because usually that uh is preceded by kind of a downtrend and a deleveraging. All these things people just have to go through and there's a real proof of work of just like being in the market seeing these things that I think most people are lacking. Um and that's really the opportunity for us. >> Exactly. Well said. And um it's about durable um things that deliver value to their c to customers that they'll pay for over a long period of time. um just uh like you know some of these things that are going on in the AI space are are not necessarily that as well as um saw went through a little bit of Galaxy's financials just because they reported Q3 and um about half of their assets are assets under stake and they're um seeing a massive jump in customers of uh DATs who are now staking with them and um it's just like uh it's not very like we've seen this with cycles in the past like um the DAT phase is you know I'm not going to say it's over but Maybe for some of these other coins, um it's not necessarily going to be as durable as something like you know offering even though we know qualified custodianship is is not necessarily perfect like offering uh custody trading lending to um you know uh financial partners on Bitcoin who will be there for a long time and who actually understand where this is all going. Um so it's just like a massive divergence and um you know the opportunity for the space and and where some of the other folks are focused on. >> Yep. It's uh it all comes back to disordered price signals to me in in some sense whether it's you know looking at um you know phony transaction volume data um which then you know people build investment thesis around you know that poor quality or lowquality data. uh which then leads to you know funding and all this M&A and all these acquisitions and so there is sort of this um self referential loop uh component to all of this where um people are leveraging um you know data that is uh sort of mischaracterizing the actual economic value being created with a lot of these protocols. Um but you know for by and large a lot of these entities that are doing deals and investing in these things uh don't care because they know that there's money coming in and and um you know the the end result of that however is that there is going to be a lot of capital destruction and malinvestment that occurs as a result of this. Um so just something to keep in mind. Um all right gents we're a little over an hour here. Anything else you guys wanted to raise before we step away? No, I think um I think we covered a lot. I think it's going to be a pretty exciting TBD on an exciting end of year because this volatility is a little little little off with what's going on with the China Trump and everything else and market structure. But I think 2026 it feels uh you know maybe famous last words but 2026 is going to be pretty wild and active um from this area of the industry. It seems like things are just getting turned on um from the the the plumbing from institutions all the way to retail investors and we just need a little bit of uptick uh and reflexivity with like you know the market sentiment coming back and it's going to be an interesting next probably 12 to 24 months. >> Yeah. And I know you don't like to talk macro on the show, Michael, but big week in general for various events, interest rate decision Wednesday, uh Powell comments, uh lots of big public company earnings and then Trump to meet with she on Thursday. Uh that comes in the wake of the sort of tariff onoff volatility that we've seen over the past couple weeks. Um >> that just means a a great Friday night pump after all that. >> Yeah, could be. Could could mean exactly that. >> Um all right, gentlemen. Thanks as always. See you next week. >> Wonderful. >> See you. >> Thanks for listening to this week's episode of the show. 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