The Last Trade E054: Gold, Bitcoin, & Counterparty Risk with Mark Valek

Brian Cubellis (00:02.894) Gentlemen, back for another week. It's beautiful here in South Jersey. The sun sets here. You forget how good the sunsets are until you get back. I've seen a couple of those posts, I think two nights in a row is at you outside having a nice glass of rose and just watching the sunset. We don't get those in Texas, not at least in central Texas. Marty, are you a rose guy? I'll drink some rose every once in a while. I want to call myself a rose guy, but. So not rose all day, rose once in a while. Yeah, every once in a while. So you ease in with the rose with Marty and then you can go to the harder stuff later as the sun sets. depends what the wafer opens up. Brian Cubellis (00:47.374) That's how it goes. Yeah. Yeah. So we're joined by Shala Medan from Formidium doing fun admin for a bunch of the funds in the Bitcoin and broader digital asset space. Full suite operation. Welcome to the show, Shala. It's great to have you. Thank you for having me, guys. So before we jump into the particulars of what you guys are doing at Formidium, Why don't we learn a little bit about you, your background, from what I understand you're a former hedge fund manager, have run family office, you're chairman of the Hedge Fund Association. What was your career like before for Medium and why did you decide to step into the fund admin space for all these digital asset funds? Yeah, so I started in the financial services business in the alternative business that is about three years after I started in financial services. So this will mark the 24th year in alternative investments. I started in hedge fund consultancy in 2000 in the year 2000 in New York. I kind of spent a few years doing that. 2004, I entered the hedge funder funds world. Back then, it was still a bit of an emerging world. People didn't really understand what hedge funds were, let alone funder funds. So funder funds were a pretty necessary part of the ecosystem. I was promoted pretty quickly to portfolio manager right before the financial crisis, precisely May 2007, and had the pleasure of managing multi -strategy hedge fund portfolios throughout the financial crisis. Unfortunately, the firm that I was with had some other issues and we were basically shuttered by the parent company. And I had to go look for a job. And that was around about 2010. As you can imagine, the environment wasn't very pleasurable back then. Had a young family, quite stressful. But interestingly enough, Brian Cubellis (03:05.454) I had this notion and this belief that I should be in the family office world. I felt that I'd be well placed there. I also wanted to expand my horizons outside of hedge funds and understand things like real estate investing, private equity, venture capital, structure credit, a little bit more. And so I got into a family office job, which was, I think, pretty forward back then, 2010. Not a lot of family offices were hiring. Pretty sought after for a position, I think. And I helped build this family office that had a pile of cash after the financial crisis because they had sold their company right before steel prices had collapsed. And they held it in cash. And it was actually quite informative to my investment strategy as well, just learning about their story. But I had the opportunity to do that for about seven years, built out a portfolio across asset classes, both direct and through funds. Amazing experience, but around 2017 I Don't know I Call me somewhat paranoid I guess but I felt like I wasn't adding value and as an intellectualist I feel like in order for you to compensate me I have to add value now our returns were good We had double the AUM but I felt that I could do more and I was also a little concerned not concerned but looking forward into the future and wondering if things like artificial intelligence could effectively replace allocation, probably way ahead of that curve. But nonetheless felt that I had to take my personal destiny into my own hands. And like a lot of people do when they get that feeling, I became an entrepreneur. Mind you, at that point I was 42 years old, so probably a little bit older than the average startup entrepreneur, startup fund manager. But nonetheless, felt this was my... my time to do it, my time in my life. So I started Bodhi Tree Asset Management. It was a quantitative macro firm. My background is macro. It's a passion of mine, still is, although much harder to understand the macro these days than back then. And I ran a quantitative strategy. I had some family office backers. I had built out a number of algorithms across asset classes. And those algorithms were really meant to be a precursor to Brian Cubellis (05:30.254) and eventually moved to using artificial intelligence. I did that for five and a half years, but along the way, only about a year after I started the fund, I needed a service provider. I needed a fund administrator. I needed a whole bunch of things. You don't necessarily need a fund administrator or part of me, an auditor at the get -go, but you might need a fund administrator. You might need some past results. fixed up for performance fees, just simple accounting, things like that. And I ran into the founder of Formidium, thought what they were doing, it was very interesting. By the way, it was not called Formidium at the time, it was called Sidrania Fund Services. Inexpensive, efficient, great service, so why don't I try this out? Lo and behold, it turns out that I was one of the first clients of the firm. So it's kind of been an interesting journey because I've seen the firm from the beginning and the really the the point of the firm was and what was articulated to me was, you know, we have a vision to use technology. I got really interested and began chatting with the founder, probably once a week, twice a week, really just giving my input based on this experience that I had already had. And about a year later decided. You know what, this hedge fund thing is kind of difficult. Maybe I should hedge my bets like a hedge fund manager, right? And I invested in Sidroni. I seeded the firm with zero revenues or near zero and began to advise the firm, came on as an advisor and continued to advise the firm and saw the firm growing while my hedge fund was difficult to say the least in terms of growing it, was not trading crypto, probably should have been. And I ended up at the end of 2019, right before COVID, writing probably the largest, one of the largest checks to date that the firm has received on my behalf and those of my syndicate to further invest in the firm and took on a, effectively what was a co -founder role. And then I really began to advise the firm. And the first thing I did was move into. Brian Cubellis (07:49.262) crypto and digital assets, which we can speak about. And yeah, the story of Sudrania and then Formidium is pretty well known, I think, for those in this space, rapid, rapid growth. We did an acquisition in the meantime of a firm called Triple Leo, which was a pioneer in crypto fund admin, took over the clients. That was very difficult to do in a pandemic, do it when you're experiencing hyper growth. But between the years of 2020 and mid 2022, we effectively saw 2000 % growth in the business, partially under my stewardship and of course under the stewardship of our fearless founder. So that's my story. 2022, going through that bear market, I kind of said, you know, I can't do both. It's very difficult. I was doing both by the way. It's hard enough to be a hedge fund manager. hard enough to run a fund admin, it's impossible to do both, especially if you want to grow both. I think that's the key. You can manage money, but to grow business is a completely different thing. And so I decided to let go of my hedge fund, my baby, and focus on my attention on for a medium and as well as my personal investments. That's my story. Let's see. Incredible journey for Medium. That's funny. I used to actually work at a fund of funds in the alt space as well, managed futures fund at index CTAs. That is a fascinating industry. And it was a good experience for me, young, 21, 22 on the portfolio management team. I think the best part of the fund is you just get to talk to all these managers with different strategies and get a... a pretty wide perspective on what's going on in the world. Yeah, I understand. Great. So, Shaolin, how did crypto come into what Formidium was doing? It sounds like it wasn't there from the very beginning. And then what was it that led you or your co -founder to decide that that would be a big part of the strategy for Formidium? So, Brian Cubellis (10:06.958) I think it's safe to say that a lot of the vision of the firm is being directed by me. Not a lot of the management, but definitely a lot of the vision. And that kind of, you know, stems of course from my background as an allocator investor, family office guy, former hedge fund manager. So I became interested in crypto and Bitcoin after the crash of 2017, the previous crash. So I, began to invest in crypto on my own. I was investing in some of the well -known protocols that we know today like chainlink, Bitcoin, Ethereum, et cetera. And really getting my feet wet, if you will. And it came to, I really surmised that as an entrepreneur, I think it's good to be a good position to be in as a big fish in a small. And that is something that we could do in crypto. And we had all of five clients, by the way, when I gave my further round of investment to Sudrania and became co -founder. But I had a vision. And I was really also informed by my macro trading as well. If everyone will recall, in 2019 and even 2018, We had trillions of dollars of negatively yielding debt. It almost seems like a forgotten memory at this point, but central banks had negative interest rates and long -term bonds were trading at negative yields. It was a surreal environment, impossible to trade my strategy, which had a lot of fixed income. And it just led me to believe that, you know, if this is going to be the case, I need to find ways to hedge myself. And that's how I learned about Bitcoin and said, you know, well, if I'm investing in this, others will probably start following at some point. And fund administration is a nice picks and shovels business to be in. Why don't we do this? Secondarily, because the ethos of the firm was to fix the issues that we saw in traditional fund administration, a lot of that revolved around the technology and building our own technology systems. So it seemed very suited to build a Brian Cubellis (12:33.486) a new stack, if you will, around crypto and digital assets, because we already had the capability to build technology solutions around accounting. So to me, it just made a lot of sense. And we just went forward with it in 2020, including an acquisition of Cripple Leo. Yeah, I think the visionary aspect's really important because you were on a call once and you brought up the notion of some of the stuff you're doing on the event side that we can talk about and you referenced, the investment in working with firms like OnRamp and others that you work with as a vision of like bridging into the future and how there's an old world that's kind of like moving away. And curious if you saw that at the time and that was part of it or that like was solidified further down after running Ormedium and seeing that like the old guard is just not going to catch up to this. Like how did that realization, because you said it once on a call and it always stuck with me of like, you're, while you, while we're smaller, not just us, just any firm that's in the space. it's an investment in that we will be the leaders in the future because of where it's going. And I thought it was very astute. And I'm just curious if like, that's how you looked at it from back in the day when you got involved or did that like thesis kind of, did you grow into that thesis over time after seeing the market and also seeing, you know, everything in the financial plumbing and how it's just fundamentally broken and that they can't come back from it and the existing models? yeah, I think that not only, do I hold that notion, I've tripled down on it. really. I think that there are a lot of good things that I learned being in the family office world, managing money for wealthy people, but it doesn't necessarily parlay to the individual person. So when you have billions of dollars, your main concern is capital preservation. And if you can compound that money a couple of bits above a 60 -40 portfolio, you're golden. You're doing great. Right. And so when I structured my hedge fund, I was really trying to meet objectives around that. Like, hey, look, you know, I can get you two or three points of alpha against a 60 40 portfolio. Look how great I am. The truth of the matter is that in order to differentiate yourself as a startup and be outstanding, you really have to have something that's different and is solving a true problem. I thought I was solving a problem. Brian Cubellis (15:03.214) Certainly the results of endowments and other multi asset class investors have proven that my thesis was correct, that the model was broken, the endowment models, what we called it, but it wasn't good enough to run a fund. And so, yeah, I mean, the sort of returns that were being generated amongst crypto managers, the sort of opportunities, the new technologies, I... I realized that I kind of need to, you know, crumple up the paper, throw it out and start all over. And I had to have a younger mindset. And I think that is actually something that all hedge fund investors know. A little rule of thumb with investing in hedge funds is you kind of want to invest with young and hungry guys. That's always been a thing. And I always viewed myself as young and hungry. And I am hungry and I'm young at heart, but I had to relearn a few things. And, you know, to answer your point, it's exactly right. Like I'd rather be in the frontier and cutting edge of opportunities rather than trying to compete in, you know, very crowded and competitive spaces where I don't know, there's really very difficult to have an edge unless you're say Citadel or Millennium. Brian Cubellis (16:28.302) It always has to be evolving. Coming back to the Fund Admin side of things and trying to upgrade the services of the incumbent Fund Admin landscape via Formidium, what are some of the top of mind problems that exist with typical Fund Administrators that you guys are looking to upgrade and improve on at Formidium? I think it's really a question of, I think owning your own software and being able to do the accounting internally is incredibly important because off the shelf systems don't give you the sort of flexibility you need to handle emergent and exciting asset classes. And that's where I want to be. I want to be the leader in everything that's new and cool is what I say. And you have to have your own tech in order to do that because it's not worthwhile for an off the shelf system to handle, you know, XYZ, you know, number 454 rank protocol on QueryMarketChat, if you know what I mean. So I think that that is important. I think that we are dedicated to building out our own technology across the board, which is, I call it an end -to -end system, which is connected, as opposed to having competing systems attempt to communicate with each other. And that allows a much more seamless experience. It's also the name of our accounting system. But it gives clients that ability to have comfort that... you know, the work can be done. So one of the things that is notable, notable about for medium is that we rarely, if ever say no to any sort of work. We want to get our hands on it. It's going to be a little messy in the beginning, especially if even the manager barely understands the asset class. It's hard for us to understand it too. But one thing that we do dedicate ourselves to is learning about things. And then once we've learned about them, we, we, we automate it and. That's a big part of what our mantra is, automation, automation, automation, reduce the number of mistakes, increase the efficiency, increase the delivery times, and make the client experience overall easier. So I think that is the difference between Formidium and others. I think the work, the staff that we have, the dedicated workforce, the desire to make our clients happy. Brian Cubellis (18:52.654) That's something that is lacking. We were just speaking about that before the call started, but that's something that I think is lacking that we and only a few others have. And it's going to be important because technology will make a lot of different asset classes very easy to do. So how do you differentiate yourself as a business? I think you differentiate yourself by improving the trajectory and the potential for success of the businesses that we serve. I think that is a lot of people can do accounting, albeit few can do crypto accounting, even fewer can do DeFi instead of the more complex parts that we specialize in. But the service I think is paramount. Brian Cubellis (19:37.134) Yeah, it strikes me as like, you're a great microcosm of infrastructure being built in this nascent landscape of crypto. You know, we're focused on Bitcoin. There is a broader crypto ecosystem and everybody needs picks and shovel businesses. And there's massive entrepreneurial opportunity to create a service that is needed. and helps people who are, you know, themselves stepping into this landscape and need various services, need to buy picks and shovels. And, you know, I think we spend a lot of time in Bitcoin and in crypto in general, thinking about like, when will the rest of the world figure out that this is the future and just, you know, start showing up? And to me, it, you know, it takes time because the infrastructure like your business needs to be there in order for people to do business, you know, to arrive in the new frontier and have what they need in order to stay. And so, you know, it just strikes me as like, this is how this process plays out. This is how an industry grows from a frontier into, you know, a challenger to the establishment or mainstream, you know, TradFi way of doing things. And that just takes time and entrepreneurial endeavor to prove out that there's a better way to do things. And we've already built it and, you know, just, you know, just show up and start using this new service or this new asset class, because it's, it's been, it's been proven out, it's been de -risked and everything you need to succeed is now has been built by the entrepreneurs who came before you. So, you know, I, I It's exciting because to me, this is how, you know, for medium and businesses like it is how, is what's necessary for crypto Bitcoin in particular to become the juggernaut that we believe it can from its inherent properties, but it has to serve the needs of people. And the way that has to happen is through businesses like yours. Brian Cubellis (22:04.398) serving those needs. Yeah. I mean, or go ahead, Sean, cause I want to add you, but I want to hear your response first. I know. Look, I agree. I will say that having TradFi routes helps because it creates, a pathway to transition from a traditional to a digital world. you know, we're speaking with regulators all the time, you know, as mentioned, I'm the chairman of the digital assets committee for the hedge fund association. The Hedge Fund Association is the longest standing trade group on behalf of the hedge fund industry, was pivotal in terms of some of the negotiations around Dodd -Frank in 2009 and 10. So, of course, we're members of other groups as well. So I think, you know, having TradFy roots, but also being very open minded to what the future is going to look like and not attempting to toward it like I think some others in the unnamed banks are trying to do or at least gobble it up for themselves. I think that's key. Brian Cubellis (23:13.07) Yeah, I think part of what Jesse alluded to and what was exciting about your story and really fascinating is how many businesses and things have been impacted by individuals scratching their itch, either starting the business or as you found, like imagine for medium, if you hadn't been involved in what it would look like. And I go back to the story is kind of a little weird now, but Chris Sokka, who was an early, early like tech guy, he was at Google. He was one of the first checks into Twitter. And ultimately wrote a check. And then when someone does, when like you referenced, right. To check into a firm and you, excuse me. And you naturally needed to risk it. You start to provide value, you start to show up. And in his story, he would show up to Twitter and he was just like, look, this is the feedback. And there's the stories of you, like people are trying to figure out how you're going to monetize it. And he would just start, it would take him a year to try and explain the value of Twitter. And then eventually he just started buying their shares and ended up owning at like a 1%, like a one point, maybe 10 % of the business. and that story rings true to similar to what you were describing of you were in the hedge fund space. You needed a better product. You started using it and then you're like, well, maybe I can write a check cause this makes sense for an investment opportunity. And then naturally wanting to get your hands dirty and improve it. You started to de -risk it to the point you invested. it's even, it reminds me of similarly, like I was an early, unchained client when they moved from the, the, the loan product to the vault. And this is pre like caravan from the wallet config. And it was like tinkering with it. And it was like ledgers and, and, the USB sticks and the website and just like naturally trying to like, you just like scratching an itch of like, I need a product to solve for custody. And then you start providing feedback and, you know, I went and worked there for a few years and it's just this natural thing to Jesse's point of like, you gotta like be in the weeds using it, needing the product. And you naturally start to like, just give back, whether it's via economic or personal gain. And then it ultimately like starts to build this ground up infrastructure that's going to be ultimately needed to build where we want to go. And like all of those learnings, at least on our side, it like kind of transitioned along with Jesse's into like what we're doing here at OnRamp. So the story that you share just really resonates because it was like starts very small, but then it naturally can grow into something very big. And for anybody listening, this is like a great, you know, great time to like, if you're thinking about ops or thinking about ways to leverage your professional experience. Brian Cubellis (25:38.477) into building, it's the perfect time. And I think that's the key is professional experience because historically in Bitcoin or crypto, it's a lot of people that are generally tinkerers and they didn't really come from having already like an ingrained sense of professional like background to infuse in the Bitcoin ecosystem. And I think that's where the magic happens when somebody has their existing knowledge and market experience and expertise. And then they map that to this new system. I think that's when I've seen historically the real like foundational stuff be built versus somebody that's like naturally just like tinkering and doesn't really have the frame of reference of how the existing world has worked and where it can be grafted on, if that makes sense. No, it makes total sense. And I can tell you as I learned this from my own investment experience as well. And it's funny you mentioned guys like Chris Sokka, they were very informative in kind of my strategy as well, which continues to be my strategy today, which is that I generally only tend to invest in companies that I'm involved with. because I know that I can have meaningful impact in improving those companies. I like to say, even if you look at my LinkedIn profile, it says taking companies from zero to one in the fraction of the time. If you just avoid the really dumb mistakes of which I have made every single one, you will have a successful business. And it's kind of funny when I evaluate and look at businesses, I can tell within a few minutes just by speaking to the founders what's wrong and what's right. I keep my mouth shut, but if they want my... So it's just within my advice. I'll tell them and I'm very frank and direct about it because I don't think there's any other way you can be No here and there, of course, I'll invest in the hot deals in Silicon Valley if I can get my hands on them, but by and large if I'm going to Write a check to an early stage company. I need to be involved and You know, it's probably going to be in financial services. I have been involved with a jewelry company. It's complete zero you know, I wasn't involved actually invested passively. So a lot of my passive investments when I wasn't involved, a lot of them didn't really amount to much. But when I'm involved, I've noticed that particularly with young entrepreneurs, I can be tremendously helpful. And I think that's that that's a natural transition, I think, for those of us who have had a little bit of success in our lives and, you know, have earned some money and still want to be involved. But know that. Brian Cubellis (28:00.973) you know, we have to hand it over to perhaps a younger generation that has some very good vision, but crossing your T's and dotting your I's is absolutely important in running a business. And that's where, where guys like me can come in. That's awesome. Makes a lot of sense. It doesn't get talked about enough, but to really allocate capital well, specifically in venture, like you kind of have to have built things before because how are you supposed to discern if somebody's stories is true or not? 100 % 100 % No, I mean, especially in a space like Bitcoin, specifically, I know at 1031, we're very involved with a lot of the portfolio companies. And from the allocator side, like if you can actually add value, it is scarce in the Bitcoin space, because it's so nation and nobody, and we're still figuring out how to build things. And it is. cool being on the cutting edge. And now you see the emergence of AI, which is a topic I'd like to talk about with you, Shailen, incorporating it into Formidium. And I know you mentioned you built your quant state of algo with the idea that it eventually turned into AI. So being earlier to the trend back in 2017 and seeing where it is now has progressed more than you thought it would is AI on a trajectory that you assumed. that you assumed it would at this point and disruptive do you think it can be to the industry that we're in that's fund management or creating Bitcoin financial services? Brian Cubellis (29:40.845) I'm going to give a standard off the shelf response on this, but it is absolutely outstripped what I thought it could be. I can tell you that the first day that Chatcha BT3 came out, I signed up and I push it on the entire team. And it really became very influential in terms of helping me continue to evolve my view as to what I thought the future of our business could look like. So as an example, and I'm being very honest with you. So our center for accounting and all things operations is located offshore. We have client service reps in North America, but the hardcore skills that are required to do what's needed in this job are located primarily in India. But with that, at least in the past, could come some limitations. Perhaps an email comes in and it's funly worded, right? You have communication issues. Well, the interesting thing though is that when, for instance, I have my team now run all of their correspondences through chat to BT, making sure that there's no spelling mistakes. I think these things really matter in a business, right? They create the value where I really truly believe in the near future, the not too distant future, you're not really gonna care where the work is done anymore. You're gonna care that it's done right. You're going to care that the communication is nice and efficient. You're going to care about those sorts of things. And AI helps tremendously in doing that. I mean, you can barely know English and run an email or thought through AI and send something out. And as long as you know how to, I mean, you don't need to understand English to do accounting, right? And again, India is an example, it's a bilingual country. English is a national language, actually. I don't think a lot of people actually know that. It's one of the national languages. But the point being that now you really can't tell. And to me, as an investor, as an entrepreneur, it's such a major arbitrage that anybody who hasn't done it, who hasn't set up shop, I don't know how you can run a business where you have a shortage of workers in the Western world. That's known, shortage of graduates. So even if you could find one or two or three good guys, Brian Cubellis (32:01.869) It's hard to build a team. It's hard to build the necessary redundancies. If that guy leaves, we're done. You can't run a business like that. You can't have that sort of team and risk. And so I think a lot of people don't understand some of the limitations that are happening on the entrepreneur side, where in an ideal world, if there was a good supply of labor and the sort of things that are needed and consistency of that labor in order to do the work. for you, the clients, you would have your operation set up in a certain way. And if you could do it cost effectively, that's key. How do you administer a, say, a $10 million venture fund or a crypto fund that wants 24 -7 service in the United States, it wants doing DeFi with multiple wallets, the accounting costs alone would eat up a good proportion of the return of that fund. Right? So how do we do this in a way where we can still create businesses in the United States, where entrepreneurs can still have a chance to compete against the big monopolies, if you will, and do it cost effectively? And that's what AI is allowing us to do. It's something that I saw a few years ago in the Sedrania model, which was appealing to me, but it's even more appealing now with AI. Have you made the leap yet? It's been an interesting one to talk to you made the leap that like AI is kind of a, in my mind, synonymous with deflationary tools like software, right? Like you just need SaaS software. If you're going to run a business similar to AI, it allows you to do more with less. Have you made the leap on Bitcoin very similar in that sense? Like you referenced, if somebody gets, leverages the tools, then they're going to be successful. If they don't leverage the tools, pretty straightforward. But this notion that. if a company in a future state does not have some form of treasury in sweeping of cash flows into BTC, they're kind of working backwards because of just how bad I think pre 2020, this could probably be more debated or not true. But given what we know about the amount of empty money supply and everything that's happening with inflation is probably closer to 15 to 20 % year over year. And that Brian Cubellis (34:21.805) It's almost like upgrading in the same way. Forget about like, you know, the idea of money and the ideology and all the things that people in Bitcoin talk about, just this idea of like upgrading from an analog dollar to a digital form that preserves or increases. Have you, have you thought about that at all? I have, and I think my answer is as good as the next person with all caveats. I viewed Bitcoin as disruption. I've been a precious metals guy since the year 2001 when the first technology .com crash occurred, because I began to get very interested in Austrian economics. As I mentioned, I'm a macro guy. And so I've been an Austrian economist, if you want. I also graduated from Berkeley. with a degree in economics, and I also have an economic history background from NYU at my master. So I'm an economics guy and a history guy too. And I was very enamored with Austrian economics and sell money. And so the natural thing to do was to become an expert in gold. And I traded gold quite successfully in the global market of 2002 -ish to 2008 and 2011. So I wish I had learned about Bitcoin earlier. I wish I had been smart enough and I had mentioned that I was in a bit of an old school, old world mentality in a capital preservation mode managing a family office, which I think that if you really want to make 100x sort of returns, it's probably a mindset you have to get out of. And that's something that I had to deprogram myself on. But ultimately, here's my argument on Bitcoin. Its performance in the long term, once it's fully adopted, should be no better or worse than gold. Because it's effectively, in my opinion, the same thing, right? Gold already serves the purpose of what Bitcoin does. So there must be some other attraction to Bitcoin, which we of course know about. It's digital transfer, blockchain, all the various things that you can ascribe to why Bitcoin is a superior form of capital or money preservation. Brian Cubellis (36:38.733) from central banking, you know, profligacy, I think I view Bitcoin as a disruption story. As far as what inflation is, I think that inflation, it really depends on like if food and energy are going up, if you have a billion dollars, you don't give a shit, right? It's not a big part of your expenditures. I think inflation is a real personal issue for people, right? It really depends on where you are and this economic, you know, totem pole. And a lot of people are unfortunately in the United States and globally falling behind whereby inflation as we understand it, the price of gas, the price of food, the price of everyday items, hospital care, things like that, is hurting people. It's absolutely hurting people. It doesn't hurt somebody who's wealthy, but it hurts the poor. And I think that's where... Bitcoin with an ability to access it cheaply with an ability to access it in a fractionalized, you know amount ability to own something when everything else that you want to own be it real estate or Assets on the stock market even are so expensive. I can think of very few disruptive asset classes. So that's how I look at it in this current current moment. I manage my own portfolio. I personally think interest rates are in a real state, meaning that they're above zero. Right. It's just a nominal rate in dollars, nominal rate minus inflation. It's no surprise to me. That's why the dollar is rallying against other fiat trash. But and that's that's also why Bitcoin has been somewhat contained. Right. We have the adoption of the ETF. But again, from a macro standpoint, The real drivers for Bitcoin, like the kind that we saw during COVID, where it was complete insanity from a fiscal and monetary perspective, in my personal opinion, are not necessarily there. Now let's go into the future a little bit. Given the economic situation of the United States and the world and the average person, I have no doubt that at some point, the central bank and the fiscal authorities will, and I think the fiscal authorities have already done this, Brian Cubellis (39:01.357) will basically give up and they're going to go full Zimbabwe. And I think that's where Bitcoin really will shine. I think gold will do well as well. But because Bitcoin has the added factor of adoption, it's going to give you an exponentially better return than gold. Yeah. Yeah. I agree with that. The early stage adoption is, I think, key for looking forward why Bitcoin stands to outperform gold. But then the magic sauce for me, the thing that I just, you know, I get zealous about, so sorry, I'm going to get on my soapbox, but is the increasing scarcity function of Bitcoin is what sets it apart truly from gold because... Gold is what, one and a half to 2 % supply growth every year from gold mining. And it's a 12 to $16 trillion asset right now. So that's, boy, that's $320 billion every year of new supply that has to be absorbed by net inflowing demand. And so that's three billion, or wow, 30 billion a month of, of new supply creation that has to be absorbed by the market. And I feel like that sets the price, that sets the ceiling for what gold can be in the global asset landscape is like, you know, how large of an asset class can gold be? Well, it has to, the market has to absorb so much demand every supply every, every month on, on, on average. And then Bitcoin has this, you know, every four years, the amount gets cut in half such that. you know, 100 years from now, it'll be a zero creation. And that means that that ceiling of what it can possibly be just keeps ratcheting up because the amount of supply creation every month, every year ratchets down and then the market has to absorb less. So if those statements are true, then Bitcoin, the ceiling of what it can be keeps increasing and then... Brian Cubellis (41:19.905) It serves as a savings vehicle that allows people to buy now and hold for more than four years to see their purchasing power appreciate over time versus gold, which serves as a store of value without promising anything about growth really. Bitcoin doesn't make any promises either, but that's the math, I think. And so that's, I think, in addition to early stage adoption, I think the increasing scarcity side of Bitcoin, makes it something that is a better treasury asset to bring it back to what we originally talking about there of, you know, if you hold this thing for over time and yeah, it'll be volatile along the way, but on net because of the increasing scarcity and the early stage adoption, it will grow in purchasing power. And therefore, if you're, if you're an individual or a business, you're well -served to have it on your balance sheet. It certainly can hurt. And especially in a negative real real industry environment, which, you know, it seems like based on the trajectory of central banks, based on what I've been reading, we're creeping towards that again, looks like it's they're trying to hold the line. They're trying to hold the line. And that's what's keeping, I think, an all out feast in crypto assets and commodities at bay. But the numbers just don't look good, in my opinion. And I think that we saw Powell even admit that yesterday, that things like the job numbers, for instance, are not as rosy as the statistics might be displaying. So we know the hit. Sorry? I was like, didn't they come out yesterday if we go there? Because we've been saying this for over a year is like, didn't they come out that they are cooking the books with the numbers? Like, we've always known like these numbers on the employee and they're all just like, you know, kind of like smoothed over. But I think somebody from a very senior position came out and described it. Well, it was pal calling them out, right? They can never explicitly admit that they've been cooking the books on the job. Look, guys, I've got a part time job. Brian Cubellis (43:37.517) Uber Eats. I work part time at the gym and at night I sell my clothes on Poshmark. I've got three jobs. Three jobs. Yeah. Yeah. That sounds sustainable and healthy for an economy. Well, I mean, Powell's comments yesterday and the combination of that and the letter that Elizabeth Warren and one other senator sent earlier this week, that is... a scary predicament that we find ourselves in because historically you've always had this separation between the federal government and the Fed. The Fed's supposed to be operating independently. It seems like, and this has been going on for over a year now between Janet Yellen and Jerome Powell to a certain extent, maybe over a year, but it seems like that independent nature of the Fed, the federal government is trying to erode that to force interest rates lower to... improve, quote unquote, improve the economy during an election year. I think that if we if we want to just take it back to A .I. And this is kind of the I'm not the most popular guy at the cocktail parties, nor are we. Look, I've been around the block. OK, my dad was in the automotive industry. in the late 80s, early 90s. His business was obliterated during that recession. And I remember distinctly, you'd read the New York Times, I was really into, always kind of, you know, like young guys are, like interesting in the news, interested in the world. And I'd read about how it was unusual, how long it was taking for people to kind of get jobs. that was something that hadn't really been seen. Usually you'd have a recession and you just snap right back and people start working. It's part of the business cycle, right? Same thing happened after .com bust, right? Each and every cycle that I can remember starting with the 1990s, early 90s recession has been followed by an increasingly tougher market for job seekers to find jobs. And usually what ends up happening, depending on your age, of course, Brian Cubellis (46:00.237) But once you get to about my age, which I'm going to be 50 soon, it's harder. It's harder. And we know, I think retrospectively, when we philosophize and look at the past, we know that technology, efficiencies, offshore aimed, all the list of things that have affected and hurt workers in the Western world, and globally too, by the way. I mean, there are people getting jobs offshore, but there's a lot of people. don't have jobs too, just to be clear. I feel like this could be the last cycle. I think we're that close with AI. I fail to understand how you get a recovery as we've understood it in the traditional sense once you hit AGI, artificial general intelligence. And by a lot of respects, that's in 2027. It doesn't mean you don't need people. Let me just wanna be very clear about that. But it just means the number of people, you might never need more people. I think you're right. Something that nobody talks about is like when you understand, you know, individual looks at Bitcoin and efficient use of capital, how much fat exists at like we know the zombie companies that exist that are publicly traded. And you think about all of that couple of private companies. And if inflation increases and your margins decrease and all the things we know with business, you naturally have to fall into leveraging deflationary tools like AI. It's like how many things just kind of just move out and you can just build efficient businesses. And if those companies probably don't do it because it's already entrenched in their model, as you know, it's hard to kind of back out of a big business and switch the operating model. So but somebody will leave that company and go start a better firm for one tenth of the cost and one tenth of in one tenth of the time, one tenth of the cost. And then they'll be able to undercut any of the costs from the legacy business because they can just do it more efficiently. Brian Cubellis (48:00.461) I agree and I think that a lot of people are looking at this negatively too when they don't necessarily have to be. What does technology allow? I think technology gives us transparency and I think transparency equals freedom. The more you can gatekeep the tools for becoming successful, the fewer people who can become successful. Now you can just go on YouTube and learn about whatever crypto you want, learn about how to date women. Everything's on YouTube. I'm traveling to... As we mentioned, I'm traveling to Europe and I can take a bunch of videos and create my itinerary and just run it through chat .gbt. Amazing. So you are creating more sovereignty, I think, for the worker where people can become entrepreneurs much easier, right? They can start servicing business. They can use AI to help businesses as perhaps 1099 or contract workers rather than being beholden to the man, if you will. Brian Cubellis (49:05.353) Yeah, I agree. I agree. When you went to the political stuff, Marty, I was just thinking about Trump making Bitcoin great again in America. What was the quote that came out yesterday that all the bitcoins coming to America? All the bitcoins. The rest of the Bitcoin will be mined in America, which is great to see, honestly, somebody cheerleading for Bitcoin. I think it's a smart move on his front. And there was another headline today, too, that due to the energy infrastructure buildup that's required for all this Bitcoin mining and the increased demand coming from AI. There's a strong argument to be made that Bitcoin being this pioneer species for no cost energy can help AI proliferate. It sort of goes in first, builds out the infrastructure, gets the power deals, and then as hashrate goes up, it becomes uneconomical and you just replace it with AI data centers or a mixture of the two. On the Trump statement, it is good that mainstream politicians are now viewing Bitcoin as a way to win votes. I sure hope that the Democrats respond at some point soon by trying to copy this move, because that would be the way that we avoid this becoming a partisan issue. And that could just, you know, that could... be painful and hamstring adoption because if Bitcoin adoption is a political statement, then companies and individuals would be more reticent to adopt it when objectively it has properties that anybody should want to adopt. So here's hoping that we avoid the partisan nature of Bitcoin becoming partisan by you know, the White House realizing that they can't afford to alienate the crypto voters and trying to win them back when Trump has made this move already. Well, you'll be happy to learn, Jesse, that the Biden administration announced that they're currently figuring out a way to accept Bitcoin and crypto donations for this election. That's great. That's the game theory in action right there, right? Like they didn't give a shit about crypto until Trump realized that Brian Cubellis (51:29.645) Hey, this is an untapped opportunity that I'm going to take advantage of. So good. Yeah. And even as a mining comment, some people in the Bitcoin space, like we don't want all the hash right here. It's like, no, obviously not. But if Trump signals, hey, we're going to put a concerted effort here in the US to allow the Bitcoin mining industry to flourish and to grow. And you just put it out there. We're going to mine all the Bitcoin. You start this game theoretical battle. where if countries in the least like, no, we're going to buy another Bitcoin. And so they just start spinning up mining infrastructure and actually leads to a further decentralization of hash rate geographically. Yep. And for that matter, I think we should probably give some credit to RFK Jr. for making a splash with Bitcoin a year ago. And then, you know, somehow that made it through the Trump organization to say, like, you know, this went really well for him. and Vivek too. I was going to say, I would give some credit to Vivek Ramaswamy because I think, I mean, my personal opinion, you know, I am a fan of all the candidates that have run. He's absolutely one of the smartest people I've ever witnessed speak, frankly. He is just so knowledgeable about, you know, almost every single subject in a multifaceted way. And he certainly has the ear of a lot of young conservatives along with the Trump administration is trying to woo them. Yeah. Yeah. He's watching it happen. He's extremely impressive. I had him on TFTC in 2022. Sorry if you can hear my son screaming down there and all that's going on. But that was when he was he was still full on at Shrive. And at the time I couldn't. Imagine he'd be running for president, but looking back in retrospect, just saying I completely agree. He's extremely well -spoken, knows how to, and the other thing too, he knows how to reach out and actually engage people in conversation, even if they have differing views, which I really was impressed by during his campaign when he was running for the Republican. That's incredible. I didn't know he was on TFTC. You got to go find it. We were at the conference last year that Lee put on and I didn't get to hear his speech, but to your point, Shaul and he, Brian Cubellis (53:52.429) Everybody says that like he can just, he just like, or like he'll just go for 20, 30 minutes. Not even like, at least it doesn't look like it's, you know, pre -rehearsed. He's just like talking. He's just like that. He just knows multidisciplinary, multifaceted, can just touch on a lot of topics and really articulate them well. Would it be nice to have leaders who actually know subjects rather than criticizing them? It would also be nice to have leaders under the age of 75 too. Maybe that would be fun. Yeah. You got it. No, I was just going to say one thing conscious of his time, but Sean, you guys are doing a lot for medium on the side of the focus. We've talked about events previously privately. Would love for you to be able to share any of the stuff you're working on that you want to get out. I know there's an event happening in New York because I think you're trying to be forward thinking and you can call out the conference if you want. I don't want to name the name, but again, going back to that point of like recognizing the old way of doing things is kind of done. This notion of like everybody's going to a big conference. It's like so much noise, all the things associated and. I thought that was an interesting dynamic of like how you're just thinking about other ancillary services and products and businesses outside of a four medium or tied to it, but not directly. if you want to talk about. So I think that everybody who is watching this has to understand that when we at Formidium are taking on untested clients, untested strategies, we're taking a risk too, right? We have to do tech build outs. We have to deal with perhaps certain individuals who don't have as much experience. You got to look at it from the service provider side as well. That being said, Brian Cubellis (55:46.989) having been an emerging manager, albeit a little bit older when I did it more experienced, I can empathize with the hardships of being an entrepreneur at all levels, by the way. I've got children and I understand how it is. So really, when I really began to meditate over it, I just felt like, how can you be, I don't think just being a service provider is enough. We have to become partners in business. And that means that not only am I providing you with good service, I'm helping you grow your business. And if I can help you grow your business, that's going to benefit me. You're going to, obviously, the fees that we can charge obviously go up, but you're going to tell people about us. I mean, it's such a wonderful virtuous circle when I can help our clients grow their businesses. that I don't know why more people don't do it. Now, there are some nuances around that. I cannot favor a client, right? We're the accountant. We have to be unbiased. That is, you know, we are old school in that sense. So then I really got to think about how can I create perhaps platforms that can help our clients and even be available to people who are funds who are not our clients? You know, there might be different service levels and whatnot, but... But nonetheless, how can I create a platform that can be available to the entire community? And so that was the genesis of our ALTS marketplace, ALTS marketplace .com. And what it is is the listing service where fund managers of all stripes, long short equity, it could be crypto mining, it could be global macro credit, multi -billion dollars, $15 million under management. Everybody can list their fund, have a basic listing, make themselves visible. to potential investors, have allowed those investors to kind of do some pre -due diligence. So when they're coming to the manager, they can be pre -qualified. And we're now complementing that with other aspects. For instance, if you have events, you can list them on our marketplace. If you have insights, you can post them on our marketplace. We'll distribute them. The reason we want to distribute your insights is because I think those insights are very valuable. Brian Cubellis (58:11.917) because so many people in this world do not understand what we do. We want to educate the end investor. And so I just see it as a win -win. It helps me grow my marketplace. It helps you grow your business. I was telegrammed yesterday by someone who said, you know, I heard that you're looking to invest in a few interesting funds. We're actually on your ALTS marketplace. So what did I do? I looked it up and I have a call with them tomorrow. So this actually works. I'm using it. I think that other serious allocators really need to be using it. I will express a little bit of disappointment, just to be honest with you, with some of the allocators in not even wanting to look at digital assets. I feel that that is a breach of fiduciary duty based on all the conversations we've had on Bitcoin as an example. But nonetheless, I digress. I think that for people who want to be on the cutting edge, who are serious investors, ALTS Marketplace is a fantastic tool. And the last way I think that I can compliment that is, again, I want to grow my community. I want to grow my community as service providers. I want to grow my community as fund managers and investors, high -network investors or credit investors. So to that end, we are hosting dinners on behalf of ALTS Marketplace members. in various cities like Miami and New York and Los Angeles where I will be in attendance as well, where you can pitch your strategies. And the beauty of this is because we're the accountant, we don't take any money for it. We don't take any money for any money raised, that is. We take money for costs. Of course, dinners are expensive. But we don't take any money for any money raised. If you raised $100 million on Alt's marketplace, I congratulate you. Please be one of our clients. It's very cool. I appreciate you bringing up the fiduciary stuff because we've been talking increasingly more with pensions in this notion. We've thought about this, right? It's like, well, I don't have a strategy. It's like, maybe that's a problem. You know, they would bring up initially, maybe we get sued. Like they bring up, well, maybe we get sued. It's like, well, maybe you get sued for adopting or like thinking about Bitcoin. So maybe you get sued if you haven't, you don't have a good response on why you don't. And I think the Wisconsin thing was a big deal. Brian Cubellis (01:00:29.133) because now everybody knows they're just dipping their toe. Nobody starts with 1 .1 % and something until like, and so you don't hear a lot and I feel bad in saying it because it's obviously talking in our book. We believe they need Bitcoin, but to hear it on the other side, it's like at a certain point it's going to be a breach and some people may get sued because they're like, why don't, A, it's going to be less about, I think, why didn't you allocate it to me more of like, what is your version or what's your thesis on why you didn't allocate? And most people are not going to have a good answer or response. The answer that I typically get is I don't understand it. And the answer that I respond is, isn't that your job? Yes. I mean, we're quickly reaching the point, if not already surpassed the point where I don't understand it is not going to cut it to your point, Michael. I think investors who are putting their capital with people that are supposed to be fiduciaries, they're going to say you are not a good fiduciary of my money if you missed out on the. the best performing asset of all time. Brian Cubellis (01:01:31.853) And before we wrap up here, I know we have 10 minutes, but one question I'm genuinely curious to hear your response to, Shailen, is like what, when it comes to managing fund admin for Bitcoin or digital asset focused funds, like what are the biggest difference with these funds compared to traditional alt funds? I imagine due to the 24 seven, 365 nature of the markets that a lot of these funds trade in. and the nature of the assets that they're trading adds a bit of a wrinkle to Funadmin. Yeah, yeah, I mean, there's that. There's the 24 -7 -365. There's the fact that there are certain rules are not necessarily established. So we've had to make up the rules and standardize those as time has gone on. We speak to regulators as well, and we explain to them how we're doing things. And... they're generally pretty cool with it. You know, Cayman's been a great friend of for medium as an example, the Cayman, the Cayman regulator, SEMA. So, so I think that is a challenge. I think that definitely the challenges are less going forward than if you were going forward than they were in the previous cycle. The previous cycle was a bit of a mess. unadulterated speculation, of course, that's great. You know, we like, we like that. but the lack of, understanding on all sides of the requirements to properly run businesses, administer asset classes. I mean, the whole nine yards, a lot of the fund managers in digital assets are younger. They don't necessarily have Trab -Fi experiences. They don't understand concepts like best practices. I think that when you are attempting to go 100 miles an hour and achieve a goal very quickly, things like best practices can seem like a hindrance. And what I always like to say is that it's better to go 60 miles an hour in the right direction than 100 miles an hour in the wrong direction. And I think that now that we have funds that are now being spun out, Brian Cubellis (01:03:51.053) for example, from say larger, more established entities, you have a new generation of portfolio managers who understand these concepts more. People are a little bit older now. People have a little, maybe some people have a little bit of gray hair now. I do think these things help and there is a sweet spot in terms of experience and type of experience that one can have to be a successful fund manager. I don't think that we were in that sweet spot in the previous cycle and we've seen a lot of fun shutter as a result. But I do think that we're in that sweet spot now. Brian Cubellis (01:04:31.597) Yeah, the days of giving your money to a crypto fund manager who has his ledger under his bed managing all your money are probably hopefully behind us. Who knows? There's probably still some out there doing it. Yeah. What do we think happens throughout the rest of this year? We've got the election. ETFs are picking up steam. We just had the halving in April. What are our predictions to end the year? I, you know, it was kind of funny. I've kind of given up on understanding this environment now and I've kind of made the recent decision to just allocate my money out. So I have almost like a little internal fund to funds now. Maybe that's just what happened. I don't understand valuations to say in the S &P 500. I think Nvidia and these companies are great, great, great companies, but at 35, 40 times revenues, I... I don't understand. So the way my mind works is let me find an Nvidia competitor. Maybe it's even in the private markets and let me fund that. That's actually something I'm doing. Can't mention the name, but you know, my personal mantra now is that I'm always looking for disruption and cutting edge investments. I'll even give you an example. I've been investing earlier this year in the Bitcoin DeFi, BRC20. ecosystem. So I think if you like Bitcoin, and we all do, why not try to find what else we could potentially do with Bitcoin? So that's how I'm looking at my personal investments now is things that are different, either disruptive, cutting edge, or have some sort of barrier to entry. As far as markets go, yeah, I'm a little bearish. Brian Cubellis (01:06:32.909) I'm a little bearish, not necessarily on crypto. I think crypto is going to have to take a breather. And it has been taking a breather since April. I think that could probably last all summer long. But until we get a very definitive, aggressive rate cutting cycle that takes the yield curve out of inversion into kind of a steepening mode, I am hesitant to take on too much risk personally. That's kind of my personal view as old man's, you know, you know, Catholic preservation view, but that's how I see it. Brian Cubellis (01:07:09.773) Yeah, I think it's a complete crap shoot what's going to happen. Everybody's trying to surmise what your own pal is going to do. Notice I didn't answer the election question on purpose. Definitely dodged that one. I think it's going to be chaotic and highly controversial, I think. That's the only take. I've got a ticket out of the country round about November 3rd. Call that call that an option, huh? It's tough because you know you have to you can't put your head in the sand. You have to be aware, but then you also have to have the same. It's like using both sides of the brain that you know you can impact. It can't and you can't let it influence almost anything you do in a day to day running a business. And so it's just like these two. Parts that are like hard to hold to. I think where you're explaining Sean's like click. There's the. It's all out of our control. And even if we have an understanding of where we think it goes, it's still out of our control, but you got to pay attention at least enough to have to get on that flight if you need to. And then it can't really impact your business because that's how you negative outcomes go. So you just have to build and work. You know, the only thing I would say a hundred percent, a hundred percent, you know, crypto effectively will say it started. When would you say guy 2009, 10, right. And even then it was. being adopted as Bitcoin very, very early. So, you know, we don't have a cycle, a down cycle of understanding, a macro down cycle of understanding for crypto. We almost had it. We kind of had it during COVID. And then the monetary and fiscal authorities threw so much money. I was shocked. I mean, I was utterly stunned that you could have negative interest rates and throw that much. I didn't think that these things are even possible. As an Austrian, you tend to be a rational, sound thinker about money. You're just like, what are you doing? And so now we have an inverted yield curve. Now we have fiscal spending, which is albeit high, not necessarily added a plus anymore unless they just run bigger deficits. Brian Cubellis (01:09:30.765) which of course is possible, running 15, 20 % deficits. I guess that's possible. I'm not counting anything out at this point, but we haven't yet seen that, right? And so it feels, and we haven't had job, like real sustained job losses during the crypto cycle that began in the early, you know, early 2010s we'll call it. So the answer is we don't know. We really don't know and I don't know either. All I know is that as somebody who does have a little bit of capital, I can make 6 % fairly safe, 10%, 12 % if I take some illiquidity risk, that's not too bad. I have my crypto, I have my speculative long -term kind of investments around alts, Bitcoin, BTC, L2s, things like that. But I think that there is going to be an opportunity where those of us who understand this asset class and who have dry powder can have tremendous opportunity. I am begging and waiting for some managers to be down 30 % and 40 % because I will be the guy standing there to write you a check. That's all I'm going to say. We should just, you know, what you should do is when Bitcoin goes 30, 40%, you should just, you can buy into the fun spot. Bitcoin. That's what I'm actually has that plan. Do that guys. So I'm sweating. I love it. Well, this has been, this has been awesome. Really appreciate your time on this Thursday afternoon here on the East coast, Michael, Jesse, anything you guys want to end up with? Thanks for joining, Shalan. Look forward to finally meeting in person, whether it's in Miami or down in Southern Florida or New York or the next kind of event you guys are hosting. So appreciate you chomping on. Yeah, if I could just mention, you know, we're on Twitter. Follow us at Formidium. We're on LinkedIn. Again, you can just look up Formidium and you can look up Alt's marketplace. We had mentioned a conference in New York. That's going to be on September 12th. It's navigating the crypto frontier. It's going to be at Station 3, which is the largest Brian Cubellis (01:11:45.293) co -working facility for blockchain AI in New York City and lower Manhattan. So, you know, anybody who wants to reach out to me is welcome to reach out via LinkedIn, or you can just hit me up at my email. It's first name, last name at formidium .com. First name dot last name, I should say, at formidium .com. Yeah, it's worth pointing out, Sean's super responsive has been insanely helpful since we started working with Formidium, made introductions. We have a came in fun coming live that mirrors our onshore. trust introductions to legal teams, the whole nine yards. I couldn't recommend Prometeo more from all across the board. So it's worth reaching out. Appreciate it gentlemen. Yeah, Shailen, thank you so much. It's an awesome conversation to hear your whole journey and perspective on markets and crypto and AI too. Yeah, thanks for having me. And yeah, the future is bright, everyone. I think that focus, being a sound mind, being a little bit stoic about things, I think these are the things that will help us all get through it. Yeah. There's light at the end of the tunnel. It's glowing. 100%. I always believe that. Yeah. All right. We'll see everybody next week. Thank you for joining us. Thanks, guys. Thank you.