Bitcoin Has a New Problem

Bankless Nation, it's time for another weekly rollup. It is the third week of June and once again, Ryan Sean Adams is on vacation. Welld deserved. And we got Tom Schmidt. Usually, we tap in his SE, but we have tapped in his like so many times. So, we're bringing we're bringing my BFF back. Uh Tom Tom, welcome back. >> I'm glad I'm the BFF, not his. I've seen him on on Bake List too many times. So, thanks for having me. >> Yeah. Yeah. Really really appreciate you. Uh Tom, um you're in New York. Why aren't you at the Knicks parade? >> Uh I, you know, I'm gainfully employed, so I felt like it's very difficult to do both that and be at the Knicks parade. But it looked insane. I I was like that Fton Street just completely jammed full of people. So I'm also I'm also happy to to just observe it digitally, you know? >> Yeah. I I wake up and do the thing that you shouldn't do, which is I immediately open up my phone and I pulled up an Instagram and looked at stories and there were all of my friends like I'm 2 hours ago already in Manhattan at like 6:30 in the morning like Jesus, what are you guys doing? >> I I don't get it. Uh I'm also, you know, I'm one of those those uh you know bandwagon Nicks fans. So I can't I can't really cop to being a Knicks fan, you know. I'm just like I'm here. >> Yeah, I am. I'm I'm glad it's happening. The energy in the city is great. I get to ride it. We got some news to talk about. Equities are up on the week, but crypto is down. Strategies stretch is trading 15% off par while there's a lot of grave dancing going on on Twitter. Uh we have the new FOMC meeting with the new brand new shiny new Fed chair Kevin Wsh. He said while he was getting the job, while he was going through the job interview process that he's going to cut and then once he got the job, uh turns out when he just was saying what Trump wanted him to say, now he's got the job, he doesn't have to say that anymore. So now he's saying something else. Uh there was the SpaceX IPO on Friday and now it's the seventh largest company in the world. And I got a question, why is JTO, the uh block building software on Salana up 70% in 30 days. And then also Coinbase launched 21 new products all with their system update event. We're going to go through all of this and more. But first before we get into today's episode, Tom, I got to talk to our friends and sponsors over at OKX. uh the Intercontinental Exchange, which is the parent company of the New York Stock Exchange. They backed OKX at a $25 billion valuation with a plan to launch tokenized New York Stock Exchange stons and derivatives later this year on OKX. This is putting just Tradfi and DeFi into the same app. Finally, OKX is trusted by over 120 million global users and is bringing products to the US market that Wall Street has been talking about for years and OKX is delivering them. This is the OKX new money app. It's not just a vision, but it's a roadmap with institutional backing to execute on it. Not an OKX user yet? If you are not, you can get $500 in Bitcoin through the link in the show notes unless you are living in New York or Texas. Sorry about that. Uh, all you got to do go to OKX, click that link, verify your identity, deposit $100, you get some money, deposit more money, get some more money, trade more money, get more money, all up to $500. There's a link in the show notes to get started. Let's just go back to to equities. Equities looking good on the week. Still rallying after the Iran war. Uh peace deal got minted. Uh Bitcoin and crypto followed them shortly. Uh but not anymore. Uh not yesterday and definitely not today. Uh Bitcoin is now trading back right at the 200E moving average of $62,600. I think uh maybe this is just me, but I think people's eyes are all on Michael Sailor's Stretch product uh which was starting to recover after it dipped down to $91 uh last week, June 5th. Uh and it recovered up to like 96 97, but it caught all the way down to $82 Tom this morning. is trading back up to $87. Almost so far almost 20% off of its peg of $100, making people very bearish about the confidence of strategy. I don't know if you pay attention to stretch. I pay attention to stretch quite a lot. Uh what do you think about all this? >> Yeah, I think um this is really the first time I think we have strong evidence that sailor and strategy are weighing heavily on the market. People have been saying this for months like why is Bitcoin going down? Why is it being underperforming? And people say, "Oh, well, you there's there's the sailor risk, but the market was not reflecting that." And, you know, it's kind of like, you know, you look at at the bonds market, the bond market to determine, you know, sort of confidence in in in government and and credence around government policy. Um, this feels like, you know, uh the the sort of uh tariff tantrum equivalent, but for for sailor, there was definitely um a dislocation here because we could have been bullish, the equities market, bullish all week. Uh the FOMC hawkishness, we'll talk about that. But what didn't seem to be too bad, crypto was going up. Everything was going up except for stretch. Stretch never recovered. And it seems to be that like it is actually kind of a focal point of the Bitcoin market. And in therefore like usually we've seen assets like hyperlquid uh VVV the revenue generating assets which have been counteryclical to Bitcoin. This today they are cyclical to Bitcoin. Bitcoin is literally dragging everything down and it seems to be that like Bitcoin can't get bullish until this get this gets resolved. >> Yeah. I uh you obviously sailor sold a couple Bitcoin um just a couple inoculate the market quote unquote and then obviously uh uh after the fact announced they bought you know several times more um you know Bitcoin. But >> I think it's it seems like this is always going to be a looming issue. It's a little bit like a, you know, token like a longdated token vest of um this is just always going to be this thing dangling over your head. Um, and so he needs to find a long-term plan for it. I think people discussed, hey, maybe just selling a larger amount of Bitcoin now so you have, you know, a year plus worth of of cash to be able to pay dividends. Um, but if anything, I think we're also just an interesting instrument to trade, right? We're coming up towards the end of the month when the first dividend, you know, should be should be coming out. Uh, funding has been going crazy. DSL lighter has a stretch per and so it's I was like for a while it was like 900% annualized so some people are also doing you know this cash and curry trade they're going to hold the stretch short the pers maybe try to collect the interest it's just like all sorts of a super interesting environment but I feel like we're going to get this resolved one way or another you know closer to the end of the month and I I don't quite know how because I I do find I'm not a particular big you strategy or sailor bull but he does have a ability to uh you know pull a rabbit out of a hat on demand so may be able to do something >> yeah the the the kind of the fundamental quandry that I see with Stretch is that the stated intention of Stretch is that if it trades below par, trades below 100, he'll simply just increase the interest rates to attract more buyers and it'll just he'll just pay more year to attract more cap, you know, you know, slap your hands together. So simple. But but the problem with that is that if you do that then you run out of money faster and there's like a confidence issue that you impose upon your asset. If you if you like jack up your interest rates from like 11% which is already high like how many other yield sources are you beating with 11% like most of them and so you go up to 13 14% in order to attract more buyers of the stretch asset like well you're just going to run out of your cash balance faster which is going to reduce the confidence and so it doesn't really seem to be a solid elegant solution. It seems to you're just kind of taking from one pocket putting another and then everything like nets out at the end. is still a fundamental problem. >> Yeah, I think um there's a lot of uh businesses um or investment strategies that are um sort of predicated on this idea of you know Coinbase keger from past you know decade or so. Um but you know the problem is you don't eat kegger right like the United States on average is maybe you know thousand feet above sea level and then you hit the Rocky Mountains and it's like oh [ __ ] I was not prepared for this. Um and the question is how do you sort of um you know uh moderate some of this this volatility while you are structurally long-term Bitcoin. Um I think the plan is you know you should have more of a uh you know insurance fund for this kind of thing. But um ultimately you know if you're long strategy probably if you're buying stretch you're also long bitcoin. Um the question is you know why this instrument to express that view. >> Yeah I think that's a big question going on is like why buy and hold MSTR. Jeff Dorman put out a tweet that people are are really liking on Twitter. He goes, "My base case right now is 70% odds that they keep on doing what they're doing strategy, which is selling small amounts of MSR every month at non-creative levels, crushing the stock until it falls to.7 MNAV. This would at least give stretch holders a glimmer of hope. Bitcoin would be fine, but MSCR would be hammered." Uh, he's been hammering MSTR to this point. at least it's it is still above MNAV but nonetheless value capture in MSTR does not really seem to be a thing. So that's his first uh case. 25% chance for his next case is that he does the right thing according to Jeff. Admits he messed up uh when he bought back the debt. Sells three to4 billion dollars of Bitcoin. Buys a ton of time which is marginally good for MSTR. Very good for Stretch but bad for Bitcoin. And then a 5% chance that he does the nuclear option which is just kill the dividends. Let the preferred fall to 30 to 40 cents on the dollar which would close the capital markets to Michael Sailor. But at least he shuts off the $1.7 billion dollars per year cash outlay problem. Uh at some point I'm like, dude, like you don't have an infinite money printer. Like you've bought all the Bitcoin that the market is allowing you to have. I don't think the last option is too crazy for him. It's just an for it's very painful. It's a bad look. There's probably lawsuits, a bunch of stuff involved with that. I don't know if you have an opinion on which is the most likely outcome here. >> Well, I see you uh wearing that jersey and really the question is do you want to be Brazil or do you want to be Argentina? And those are kind of the two paths open to you. Um, but I I think one is maybe, you know, uh, short-term painful, long-term better the better path. The other ones, you kind of kick the can down the road a little bit more. >> I I really, uh, am not the specialist, not the person to call when it comes to um, you interrogating the psyche of of of Michael Sailor, which ultimately feels like you kind of have to uh, understand and underwrite if you want to buy any of these assets. So, um, I don't know. Oh, that's a certainly an interesting area to specialize in in terms of the market. But I I I think if anything, um again, I think you probably find some way to cover cover some of this this this short-term debt. And then hey, maybe we just give us gives ourselves you a little bit more window and hope that Bitcoin goes up in that in that remaining window. >> Speaking of the psyche of Michael Sailor, this clip went around that people really didn't like. Uh this was an interview that Michael Sailor gave on Coindes. He was asked about how he had came up with stretch, the philosophy behind it, and he just goes like, "Oh yeah, I sat down with AI and I use artificial intelligence to build stretch." Uh, which is not a good clip to have to give confidence in the market. Although I think we all you everyone uses AI. I use AI. I'm sure Tom, you use AI. So I don't really think I'm not blaming Taylor for using AI. >> It sounds a little goofy. Maybe he was Fable 5, you know, uh maybe he had he had early mythos access and that was uh that was what really designed Stretch. So people are are are nerating it, you know, we had a almost ASI level model designing this instrument. >> Yeah, I suppose it really depends on what model he uses. We'll uh we'll reserve my bullish or bearish takes depending on the model he used. Uh all right, let's get into uh FOMC meetings. So this is Kevin Warsha, brand new Fed chair, his first FOMC meeting. There's a quote from Black Rockck that I'll read. Uh Rick Reer, the head of fixed income at BlackRock, says, "Today we believe that the Federal Reserve's FOMC ushered in a new era of monetary policy in the United States." Uh and so this is seemingly the news that the market is trying to digest is what is the Fed's new strategy? Because there was a huge deliberate regime change at the Fed showed by Kevin Worsh's disposition. He held rates at 3.5 to 3.75%. So that's that's not uh any different. That's not the regime change that's happening. The regime change is what the Fed is communicating to the market. And so Powell had this like cookie cutter 341word like typical response like like formulaic speech that he would give to the market. Uh Kevin Worsh cut that by 130 words and he also intentionally killed forward guidance. Uh and he also was the first chair to not submit his own dot on the Fed dot plot showing to just shot not show his cards on his future opinion on rates. Uh and in the past Kevin Worsh has just shown articulated to disdain for forward guidance and he says it just hamstrings policy. So analysts are calling it a green style span return to constructive ambiguity and so letting the market be a little confused and unsure and the Fed just not showing its cards in order to give the Fed a little bit more flexibility and uh you know ammo about what they can do. Tom, what was your reaction? >> Yeah, I uh I think most of the critiques around were more I felt like aesthetic. You know, it's it's sad to see you know POW out and you know >> looks like a Fed chair. >> Yeah. And uh I think specifically people miss the uh the good afternoon instead of uh the good day with with with uh with I um I don't know I I think you know it's it's still very early and ultimately like what we've seen from Fed chairs in the past is um really where they kind of show their true character is when there's a crisis and that's when they decide what to do. Obviously, Bernie, very famous with 08, Powell with um uh uh with with uh COVID. Um and so, you know, I think there I've seen some um charts flinging around where you look at um not not dop um uh banking analysts pro projections of uh you know uh several years out of of of interest rate and it's basically always wrong because there's always some exogenous event that that ultimately ends up affecting um Fed policy and that's really the moment when these things kind of kind of matter. So, um I don't know. I think we uh we got a few more years and a few more maybe hectic events before we see how good War is. >> Business as usual until something crazy happens until the AI bubble pops and the Fed the Fed has to like watch to do see see if it needs to step in there or not. >> It is worth noting that um nine of the 18 Fed officials now do see a hike by the end of the year, which is not what the markets were positioned for. So the one bad week in the market or the one bad day in the market this week was uh right after this which was uh yesterday Wednesday uh S&P dropped 1.2% 2% two-year yields jumped up. Uh the dollar has gone up. Uh odds of an October rate hike has gone up to 60%, Bitcoin fell 3%, gold sold off. It's just like, yeah, it's a one-time response to the market. I don't think it's anything structural as of yet. The structural change is the game theory that Fed the game that the Fed is trying to play around game theory. There's also something that I'm going to keep an eye on is um Kevin War introduced Task Force. So he just said task force over and over and over again. So there's a communications task force, a balance sheet task force, a data task force, a productivity and AI task force. Uh all of these task force uh I think analysts are being interpreting uh them as like these are just Kevin Walsh building mechanisms to build the consensus that he wants to build. So like it's bureaucracy, but like Kevin Walsh wants to do something and so he's setting a team of task force to give him the response to give him the justification to do the strategy. So giving him leverage in the future. That's my read. That's a bunch of other people's reads. I don't know if you have to take on that, Tom. Uh I have less of a read. I will say on on the data front um you know I was always under the assumption that um you really the Fed was maybe the most authoritative um most most accurate um um source when it comes to looking at these different measures of inflation or inflation that they um obviously use to influence um um policy. Um, I was talking to Trun uh Chitra from from Gauntlet and Robot who's a co on my podcast a while ago and uh he was [ __ ] on the Fed's you know data efforts and said they actually have like incredibly poor data infrastructure and it's like you know these these u you know private market investors have like you know way more sophisticated models for for CPS. So maybe the answer is he's um trying to turn the Fed AI native or something like that. Um I don't know maybe that's favorable. >> That would align with what Mike Cook is trying to do at the CFTC. He's just like let's build this institution up in an AI era first. And so I like that. I like that. That sounds very sci-fi. I'm into this. Uh speaking of sci-fi, let's go into SpaceX. So SpaceX is now the seventh largest company by market cap. Uh briefly it flipped Amazon uh before it fell back down. It was briefly ahead of Amazon. You know, Amazon, the thing that makes like $750 billion a year in revenue. SpaceX, which makes $18 billion a year in revenue, flipped Amazon. It's now back down to number nine by total uh assets by market cap, number seven by total companies by market cap. Uh it rallied post IPO uh which I think was a little bit surprising. Not consensus. The consensus was that this thing is a high FDV lowflat shitcoin and all the insiders are going to uh dump on you. Turns out it was a high FDV lowflat shitcoin which was very easy to pump. Uh it went it IPOed it popped up to 165 and then it got all the way up to 216. It has since traded down uh down to 180. Uh brand new company in the top 10 company market caps. Tom, what do you think? >> Just to be clear, you know, that may still happen. The uh the unlock schedule for SpaceX is is is insane. >> Um >> I uh I I like this uh like a Bill Aman tweet today or yesterday. It was a the thing that makes SpaceX so valuable is that it's so valuable. um I think referring to their ability to do all these acquisitions of X and XAI and now Cursor just using this extremely high um you know uh uh share price. Um and so it's this really interesting instrument where um you know you can almost say it's sort of a um you micro strategy like in that way where it's you're trading at some huge premium to maybe where these assets would normally otherwise be trading which allows you to sort of suck it up into into this vehicle and maybe there's some synergies maybe there's you know sort of the Elon Musk you know aura around it but um I think on the other hand it it is like this unique oneofone instrument right um people love uh Starlink and you know obviously you know I think Amazon has their and the competitor, but everyone knows Starlink, the brand, and they're they're the ones everywhere. And not many other companies, if any, you know, have the kind of ability to get, you know, large payloads in flight that that SpaceX has. The fact that it has all these other things wrapped up into it, maybe more of a kind of a rounding error. It's kind of like, you know, Square buying title or something. But, um, I don't know. I, um, I think I was also surprised by how, uh, warm the market was to it post IPO. um where for a while it seemed like you know this thing was getting shopped around everywhere. Fidelity lowered the you know minimum assets on on platform required to participate from like you know 100,000 to like 2,000. Um and it just felt like okay this thing is getting super shopped around. Is it even going to get you know filled ended up being obviously very overs subbed and then you know totally totally popping after the IPO. So um I don't know where it's going to go from here but I I certainly think you know Elon is is not one to doubt. Yeah, the the Bill Aman tweet that you just mentioned where they SpaceX has so much leverage because it's valuable. I think it just goes beyond I I love the take. I think it just goes beyond capital, but just like the clout of E Elon and the prowess of Elon and the uniqueness of the fact that like what other company is exposure to space. The interesting thing about SpaceX is that I I think it could have in an alternative timeline IPOed on the stock market at like 1/100th of valuation and that would have been another normal day and that would have been totally fine and no one would have thought anything of it but there's like so much surface area for financial engineering and I don't say that in like a negative way but just Elon knows knows this game and he intentionally did the high FTV lowflat thing. There's a lot of stakeholders at play who are incented to make this thing go up. Not even just inside of the SpaceX arena, but like yo, think about the OpenAI and Anthropic IPOs that people want to be bullish on and we want those to go up. And there's the whole IPO vertical around those. So if I if SpaceX plummets, that's not looking good for OpenAI and SpaceX. And so like there's just like a lot of if you do it right and you financially engineer it correctly, you just manifest a new market cap. And it seems kind of weird that that's true. Like shouldn't be shouldn't companies be traded on their fundamentals? But like I think it's a question of like is it is it hot air or is it just smart financial engineering? And I'm in the latter camp. >> I I think there's a lot of yeah like path dependency to it, right? like the the way in which you you raise the capital and you know um I think of almost some of these other you know businesses as almost like kind of filling in the gaps in like a you know jar of nuts of like oh yeah you can't just rely on this very chunky um sort of not as you immediately repeatable or sexy like government contracts to do these space launches. We also have all these little things kind of kind of sprinkled in that allow you to sort of get there long term in addition to obviously you know the Elon Aura. Um I think is also an incredible um vindication for Pepio Ps and onchain per um I don't know if you talked about this on the last show but uh I think trade XYZ um which is the uh uh RWA per platform on on on Hyperlid HIPP3 markets. They priced the IPO pretty much perfectly. they priced at like 160 and it got there at the end of the trading day. And even today, they're still doing hundreds of millions of volume on SpaceX. And so, um, you know, we saw a little bit of this with the Cerebrous IPO, um, a couple weeks ago, but it feels like this is something that we're going to see continuing for OpenAI, Anthropic, and every new, um, you know, hot IPO that that's coming out uh, this year in coming years. >> I think that's right. I don't have that in the agenda, that topic in the agenda, but you're totally right. I do think that the Cerebr Cerebrus IPO was the shot across the bow where like you saw the Cerebrris uh you saw that picture of the people on the trading floor with Hyperlid pulled up and you could see the red banner of like band in your jurisdiction but it doesn't matter cuz they were just looking at it for the price action and that was like the first indicator that was the spark and everyone was watching hyperlquid as just for just for the pricing data like it wasn't people on Wall Street probably weren't trading it or maybe they were but that didn't really matter. is about the brand of Hyperlid and the effectiveness of the pricing mechanism showing up and now it showed up for the biggest IPO ever. Like this was game time for Hyperlid and the preo markets and they hit it out of the park and there's two more gargantuan IPOs coming down the pike. So it's actually pretty cool to see something come out of the crypto world kind of like the tail that wags the dog in the Trady world. Like that's one of our victories. That's a huge Hyperlid victory. It feels like a little bit of a crypto victory, which we are desperately in need of these days. And so I kind of expect this to be an unfolding story as the private markets still get more kind of frothy and bigger and all the stratifi world kind of pays attention to to the perpetual and all this kind of stuff. >> Yeah. Uh totally agreed. I mean, in some ways it reminds me of kind of the uh 24 election and and and poly market and hey, you have this, you know, uh third market that you're probably not paying attention to, but it's providing way more signal, way more insight and and um you know, way more accurate information than than you're getting through kind of your conventional signals. And that ultimately ends up being, you know, the way the market goes. Markets don't move one asset at a time. One day it's Bitcoin, the next Nvidia, then gold, and then the S&P. 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Uh and so it's very Yeah, it's very uh intimately intertwined with Salana block building and transaction ordering. uh and they in May 5th at the Salon Accelerate conference in May in Miami uh they announced JTX which is going to be a an actual product rather than like a backend infrastructure product for Salana is a front-end user interface that's a spot exchange and per protocol using goto technology uh but on the Salana blockchain kind of just using turning Salana into like a a an exchange app chain if you will you know if go successful just use all of Salana from this block space. So, people are pretty excited about the incoming JTX exchange. When JTX goes live, 80% of fees are going to go back to uh buy and uh return Geo tokens back to the Jet Dow and then 20% will go to re uh reinvest into the ecosystem for marketing, trading, competitions, and growth. So, that's why people are are pretty bullish on on JTO, the geo token. Um, I think it's just kind of interesting that like uh now Salana's got a perp dex and you know, Ethereum's got lighter as the perplex. Hyperl is the spearhead of perplexes. Ono is releasing a real world asset per deck. We're going to talk about Coinbase in a second. Coinbase released preipo per. Everyone is doing pers left and right. What do you think? >> Yeah, I uh I think as always it's like it takes one person to kind of break open a category and then you have many fast followers. I think some of them definitely have um you know a right to be there and they take an original idea and and twist it a little bit or serve a unique audience or um you know have have some interesting distribution story. Um some of them I will say also as a VC uh do not and you as soon as you know um some new categories been out for a year you get like a million new copycat kind of pitches. Um it is interesting to see I would say like the next evolution of a lot of these um you pretty OG DeFi protocols um that have maybe hit the ceiling of what their original market looks like. And so if you're a Geto okay great you have this great product on Salana works super well you've eaten up a pretty good share of of kind of legal staking volume. Where do you go next? Um I think if I look at you know something like like Ether right on on Ethereum there's only so big you know the restaking market could be. um and and moved into building a neo bank which has been uh pretty successful. Um it seems like Jetto is kind of going the opposite route of hey where do we kind of go next with the next big market and obviously there's a lot of synergies between um you know a product that can do um you know really good order routing and really good block building and something like a perex which um you know naturally needs you know a matching engine that has fairness and and transparency and and um you know good execution. So um it's cool. I'm excited to see it in the wild. I do enjoy the per phenomenon simply because it's the most revenue generating product crypto has ever produced since blockchains themselves. I think that's a correct statement. Or maybe Dex is like Unis makes a bunch of revenue too. Um and so like that's what gives me some amount of like hope orium about the phenomenon of perplexes. It does feel like the making of a bubble. Like we are somewhere up the youth in Asia roller coaster. I don't I don't know quite where. Um doesn't seem to be too frothy at the moment, but I don't know. I don't know if if you have an opinion on this. >> I think at the very least we I don't think we're seeing um you know a bunch of uh leverage or credit being pumped into this that are going to have to un unwind at some point. Like maybe you could argue with >> ironically though the product is itself leverage. >> That is true. That is true. Luckily self-contained. It's like a little uh you know implosion in a dome or something like that. But I also think we're we're working our way through the alphabet when it comes to the the TXs. You know, we already had FTX. Uh there's no no GTX. Luckily, we got HTX, we got we got JTX. >> Um I you know, I don't know with what's next, but um you know, I I would encourage entrepreneurs maybe to, you know, think outside the box a little bit. And there other naming conventions, >> get away from the X. >> Yes. Yeah. >> What is TX? >> Is that a thing at all? >> Uh I don't think so. Oh, I forget what what the actually FTX stood for initially. There was some acronym which I'm I'm totally >> is always for exchange. I don't know how T got there. >> Yeah. Um I >> What did FTX stand for? >> I I'm just going to Futures Trading Exchange. I don't know. Um >> did FTX stand for? >> Uh I got nothing, dude. >> Nothing. >> Futures token exchange. Futures token exchange. That doesn't even make any sense. F futures exchange. But yeah, it uh >> futures not >> bad name. Bad name. >> Yeah, probably don't want to follow in their footsteps. But um >> uh let's talk about the uh the Coinbase system update. So they announced 21 products all at once. This was on a June 16th uh under this like everything exchange brand and push trying to become users primary financial account not just for crypto but for everything. So, some of the headline products that they released, tokenized stocks backed onetoone by US shares with onchain dividends and shareholder rights. Pretty cool, but this is only for non US uh um customers of Coinbase. Kind of ironic. Uh but this does allow for 24/7 trading on US equities. Kind of cool. Uh in the coming months, they announced options trading for crypto and stocks. They also announced real world asset perpetual futures and preIPO perthropic and opinion AI. they hinted as coming soon. They also uh popping open the hood of Coinbase, they talked about a unified order book liquidity uh like order like order book uh platform for their US spot, international derivatives, derabit and so one single order book to power all of their frontends. Uh they also announced private transactions on base to bring privacy to base and then also Coinbase advisor. This is a Lincoln Mrs. project out of Coinbase. Uh first SEC registered AI investment advisor. Seems pretty hypy. Uh Tom, what do you what do you what's most exciting exciting to you here out of all these products? >> I actually thought the uh the base private transactions were pretty cool. I feel like we're seeing this this, you know, privacy mini mini mini renaissance obviously starting with >> with Zcash and then I saw recently today um or this week uh Zama was doing these private deposit pools with Morpho and now we have this and so it feels like again this sort of missing um elephant in the room. Some it's missing and it's also an elephant in the room when it comes to crypto. Um and now we're seeing hey maybe there's some green screen green sheets popping up around um bringing privacy back. Um I think this feels I mean cool suite of products. I think some of these are obviously again followers of other companies that have have gotten there first and now Coinbase is being the second mover with their distribution. But um the question is just like hey can they actually get people to treat them as the everything exchange and when they wake up in the morning and they want to you know go buy some some some SpaceX are they going to think I'm going to go to go to Coinbase or are they going to think I'm going to go to Robin Hood or Fidelity or whatever my other brokerage is and um you know to compete at least you need you need something special to get people >> That's right. Yeah, that's that was exactly what I was thinking. It's important that Coinbase becomes feature complete and so I can buy Bitcoin alongside SpaceX and I want that in the same spot and I don't want a new tab. I just want it all right then and there. But that's like kind of getting up to par and they need they need to get there. I don't know why they would why the generic user of the world, the generic investor of the world would use Coinbase over Robin Hood over Interactive Brokers. And so there needs to be a little bit of secret sauce there. And I don't know quite know what they tap into in order to unlock that. >> Yeah, I uh I do always think too I uh I think they could use a little bit of a rebrand. Ironically, I think actually >> Are you talking about the UI the UI of Coinbase.com? >> Oh, I mean that I feel like is always every every two months they're they're moving things around. I I think more weirdly enough, I think Bass would have been a great rebrand for Coinbase versus Bass the chain. Um you know, when when you're thinking about going to Coinbase, >> you know, the name really says it all. you were thinking probably thinking about trading some coins um versus maybe thinking about getting a mortgage or maybe thinking about uh opening a 401k but um a little minor nit. >> I I don't know if that's minor because like crypto has the worst brand it's ever had ever and I kind of don't see that changing anytime soon. Like crypto right now seems to be kind of fading into its backend infrastructure era where like hyperlid is just going trying to become a platform. you know, Ethereum is becoming a platform. All the blockchaininess is fading away as designed. It was always supposed to be this way. And I think that kind of reduces our industry's ability to like change our brand because no one interfaces with us anymore. And so it's just left with how it is, which was FTX and Donald Trump like uh implosions and griffs. And I don't know how we like take control of our brand. And that maybe that's bearish, but like I Coinbase could to your point just like step away from it and be like we're just not a crypto company anymore. We serve crypto products. We also serve stocks. The fact that it's tokenized is not your concern. That's our concern. Like you just buy the thing and we take care of the rest which is how brokerages work. >> Yeah. I I think that's you know uh probably a much bigger you know audience today and and seems to be the way even the crypto world is going or or if anything I think it's more maybe more bifurcating where uh you know stable coins are very hot. So maybe they should call it uh Steel Coinbase and and do the other rebrand. >> Yeah, you mentioned privacy and how privacy is having a little bit of a renaissance. Uh this isn't in my our agenda, but I do want to uh talk about near confidential intent TVL which is climbing. It's still pretty small. So it's a this is actually a little bit uh of old data. This is 3 days old. I think it's past like 40 million. What near is doing is near is providing uh confidential pools kind of like kind of like Zcash privacy pools but for other chains and other assets. So on here is a near but also USC and Zcash and uh tether and ETH. And so it's creating little privacy pools for other blockchains and it's also growing. There is a little there is a big privacy renaissance happening at the margins. you know, Zcash is growing, near is growing, um, uh, Bass has private transactions, Zama is doing stuff. Uh, and, uh, it feels good. It feels good that we are getting privacy in where like it's kind of like the crypto industry putting our our money where our mouth is. >> Yeah. I again, it's it's been um, something that's been long promised and it's cool to also see just the real adoption. I think a lot of builders in the space and there have been a lot of false starts throughout the years not not for any particular reason but hey just the market wasn't there the liquidity wasn't there the demand wasn't there um and now people see oh if I want to live my entire financial life on chain I'd probably also want privacy um if I'm going to be you spending uh you know with with a with a debit card out of my wallet or you know custodying my my my tokenized stocks and my my wallet I probably also want to be able to then you know go go spend and and not let everyone you know what I hold and um again I think the numbers numbers kind of speak for themselves. >> Are you a Zcash bull Tom? >> Uh do you know not we do hold you know um Zcash and um I think it has you know kind of a special special place in the industry and um obviously give them a lot of credit for pioneering I think a lot of the ZKP research that has influenced and a lot of other you know downstream projects ended up using. >> I want to bring up this post from Nathan McCully who works at Anchorage. Uh he said exciting launch today. Anchorage Digital's linked staking and trading for Hyperlquid is now live. Clients can simply link their Anchorage Digital staking account to any external trading account. No bridging, no changes to cussy status and no interruptions to staking operation. Why I think this is interesting is in the trad world you have segregation of brokerage and execution. So the exchange does not also custody. And this is the actually the same market structure that's emerging here where you have Anchorage for custody but you just like plug in to Hyperlid to do exchange. And this is actually something that ironically Gary Gendler always pointed at the crypto industry is like look at these hooligans doing uncompliant things. We've learned these lessons. Don't conflate, don't do what Coinbase is doing, which is put custody and exchange in the same place because you have potential things that look like Alama and FTX and like we've learned these lessons and like all the people in the crypto industry, myself included, and I still am, are like, it's just more efficient and easier and this is what blockchain technology enables. Like actually, it's blockchains that are doing the custody. In Coinbase, it's actually just the exchange, but yeah, new technology kind of breaks people's brains. I do find it interesting that we are now mimicking traditional uh infrastructure via regulatory compliance but we're kind of doing it on our own. Uh I don't know if you have any takes or any thoughts on that. Yeah, I think you know in many respects this is kind of just an extension of the shift towards off exchange settlement for centralized exchanges that we saw post FTX where you saw stuff like you know fire blocks and and you know copper clear loop um you know take off as a way to again segregate exchange from um um settlement um and I think you know I'm assuming a lot of Anchorage customers um are probably asking for for Hyperlid I know I've talked to you know a couple different um primes and and trading desks and they have a lot of demand for um hyper liquid exposure specifically people wanting to trade um per or other instruments on hyperlquid um and so the answer is how do you go about doing that well we can plug it in like we do any other exchange and now this is a new venue that people um are able to trade on and so um I think it's the cool thing about crypto as you we've been saying is hey it's transparent and programmable and so if you you know want to go and you know custo your assets on a single exchange and trade there you can but hey you can also you know uh trade via a dex and sort of see what's actually happening on chain and it's all it's all modular and and um uh uh transparent which is kind of the the ultimate crux of of you know what a lot of the technology is about. >> Yeah. Yeah. I just looked it up. Anchorage has about $28 billion in aumumumumumumumumumumumumumumumumumumumum which now in theory is just like one click away from hyperlquid. That was always kind of the problem with hyperlquid is is bridging on to the exchange. This is kind of fitting in like one of my stories of the year I pay attention to like this is just my own internal model that I have about um threads story threads to pull on. Michael Sailor's Stretch is like a story I pull on and the platformization of of Hyperlid is a story that I'm paying attention to. How far can Hyperlid go from migrating from just being a a firstparty exchange that like me the user goes on to and presses buttons versus becoming a back-end platform. And this is firmly in the latter camp of like this is Hyperlid growing up and evolving into being a black backend platform tapping into the AUM of the world. Doesn't matter where the capital is, but the capital comes to Hyperlid because everyone wants to trade on Hyperlid. >> Yeah, I think it's it's kind of another flavor of this this DeFi mullet idea. I think it even, you know, Coinbase has more nickel. >> Yeah. Is that the rule? Maybe maybe maybe we'll we'll debate this. We'll uh we'll have a settlement offline. But um I um it it does seem like this is a natural way for these these markets to to end up again like the internet where you have different layers with standardized um you know protocols that uh you know really do their one single you know layer well and then kick the other responsibilities up to another layer of abstraction that can get more specific and sort of serve end clients. And you know maybe the answer is we have you know one big global standard for for liquidity and everyone else can build their own you know brokerage or their own execution services or their own um you know apps on top of it or whatever it might be. And so um I I don't know it's it's very cool to see how rapidly this has been um getting adopted as well as just um again it feels like this is kind of the the boring revolution of of crypto where you're using it in the back end and you don't even realize it. >> Yeah. Yeah. Speaking of the the boring revolution of crypto, uh crypto volumes are down the lowest ever since September 2024 on centralized trading volumes. Meanwhile, real world asset per hitting record highs. And so we've seen this in the Coinbase uh S1 and the Robin Hood S1 is just like crypto trading volume. Bitcoin, Ether, the blue chips and and all the all the coins as well just down and revenue just down for the centralized exchanges as a whole. But real world asset per volume is up and to the right. And this really started with Hyperlid um uh doing uh listing gold at the start of this year right before the gold mania followed by oil at the start of the Iran war. And there's been a growth of real world asset trading volumes on PERPS. Uh, and so again, this kind of is the story that we always said was going to happen. And unfortunately, it seems to coincide with like a a lowering of trading volume of Bitcoin and Ether. Like now that we have like golden oil, traders are trading gold and oil and they don't really care about Bitcoin and Ether. But it does seem like the sign of maturity of like we have real world asset per. do think that there's a very big real world asset per story for the second half of this year. >> Yeah, I think um like HIPP3 volumes um already hit like 40% of of hyperlquid volumes and I think are growing and I think there's a good chance through the end of the year that we see a day where HP3 volumes actually exceed the rest of of you know crypto volumes on on on Hyperlid um and other exchanges again probably looking very similar. Um I do think a lot of these um assets and that this asset focus is very very cyclical right like people want to trade oil when oil is very volatile and see some some you spike and then it goes back down and you know a year ago no one really wanted to trade oil and um the beauty of a lot of these you perexes is they are able to very quickly and aggressively list new assets um as they come online you have to wait for you know ID to list you know skinix you can just go go trade the per you know today and I um I think as long as we continue to see this kind of like hot ball of money, you know, new focus asset dynamic. Um, I think it's it's actually pretty bullish for for pers that have a lot more agility and ability to list these new assets in the same way that I would say, you know, unis swap did in kind of 2020 where, you know, new DeFi token comes out. Well, it's on unis swap before it's on Coinbase and um that is just a a leg up and a and a liquidity mode that kind of builds on itself. >> Yeah. Especially with being able to implement any asset that you can turn into a per, which is anything. So long as there's a bull market somewhere, so long as there's a frenzy somewhere, that's kind of bullish for the relevant per platform. The only thing that's like bearish for a per platform is if like there's a global recession and all trading volumes go to zero because then your business runs out. But I mean, if Bitcoin goes from 140,000 down to 60,000, but oil goes up, gold goes up, people want to trade those things anyways, that that's probably a decent amount of the reason why the hype token has just you don't see the Bitcoin bare market and the hype token whatsoever. >> Yeah, I I think you just see this again this this dispersion. I think that's kind of what a lot of these these crypto exchanges are now trying to do of, hey, we need to diversify away from just crypto trading. Um I think you know Coinbase and kind of 2022 was really trying to push outside of um just trading could go into um you know uh savings and yield and other types of assets which you've kind of seen now see manifested through their their card and you know their their other types of yield products. Um and maybe we're seeing that same kind of revolution but um you moving away from even you know crypto specific products as well. U I do think honestly even in a recession I think people are still going to want to trade. It's it's one of those like almost, you know, recession proof kind of things where humans love to speculate and it feels like the cultural trend of speculating is just has gone up to the right and I think short of some sort of um you know uh uh external force is going to kind of revert it. Um it seems like this is going to be something that's going to kind of kind of proliferate. >> Let's get into uh my neck of the woods, crypto media. Uh Blockworks has acquired Misari. And so Misari is like an OG data analytics platform that also just integrated like a news and research engine as well. Uh this was founded by Ryan Sulkus. Um I don't know what he's up to these days. I have him muted on Twitter. Most people do. Uh and this is actually >> for president. I don't know if you saw >> No. >> 28. Let's go. >> No, he's not. >> Well, anyone can run for president if you if you're 35 and and born in America. Is he seriously running for president? >> I don't know. Was Was Trump seriously running for president? Was Kanye seriously running for president? Who knows? >> Sure, but Trump was Trump and that's like you can't you can't say yeah. >> Let me put it this way. He changed his handle. >> What's his handle? >> I think I think it's like Ryan Suckas 2028. >> No way, dude. Hang on. I have to look this up. >> Oh my god. Wow. All right. Good luck, Ryan Sulus. So I have to show you that. But >> yeah. Yeah, you really did. Anyways, uh Ryan Selque has left um uh Mazzari forever ago. I think he got kind of kicked out by the board because he was being deranged on Twitter. That's why I'm reacting in the way that I am. Um it was a I don't know if we know specifically how much was paid but we the one rumor is that that is somewhere north of $10 million for Missouri which is actually a pretty steep discount because um there was a raise uh that Missouri did a series B back in 2022 which valued Missouri at over $300 million approximately $300 million. And so this is actually just a sign of a media broadly news is hard. uh media companies are not what they are today in the world of like AI volume based media is just not the same. Like it's all kind of like creatorled media rather than volume uh le media. Um and Blockworks got a deal for $10 million. So congrats to Blockworks team for uh picking up picking up Misari. >> Yeah, it's pretty crazy to see. I mean I I feel like when I got in the industry, Misari was likely authoritative. I mean we had sub and >> um I was thinking back in those days I mean Silkus was also just such a force on Twitter and in person and it was a large part of the >> normality around it. I mean yes I mean consensus was also just such a big >> um event >> there was misari mainet mainet mainet and um you know um I think I think you once the kind of air starts to leak out it's it's hard to kind of kind of plug the hole so um but is it is a good product so uh kudos to everyone involved on the on the acquisition >> in 2024 emerging markets generated over $15 billion in annual yield for investors with yields ranging between 10 to 40% these are some of the highest most persistent yields on Earth. The problem, DeFi can't access them. Bricks changes this. 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This is the guy that sent me a sell alert before the 1010 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years and this year we started recording weekly podcast episodes. Each one we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes. They're short. They're punchy. I think this crypto cycle is harder to navigate than most. So, let's do it together. Go subscribe to this podcast. Search the DeFi Report wherever you get your podcast. YouTube, Apple, Spotify, or find a link in the show notes. There's a new episode waiting for you. Now, >> Tom, you got kids? >> I do not have kids. >> Neither do I. So, we're going to talk as if we uh we do have kids. This is a Kier Starmer. He's the What's his title? Prime Minister of the UK. Uh he tweeted out, "I am simply not prepared to be a bystander when the safety and happiness of our children is at stake. We got governments coming to protect children by banning social media access for children under 16 to give children their childhood back." So this is the UK banning social media for children. Now broadly I kind of agree like kids don't be on Instagram go play tag. Uh and at first glance I think that's I think everyone can like kind of agree with that. But if you get into the implementation details of how you actually ban the internet for a specific person and not another specific person, I think that's when it gets a little bit crazy. I don't know if you have a take on banning social media for kids, Tom. Yeah, totally agree. Um, I don't think there's anything I think most people would agree actually with keeping under 16s off of social media. I think maybe one the points of disagreement might be you having this being implemented by the government instead of parents choosing to have this for their children, which I think most parents are probably choosing to have this for their children. >> And then two, like you said, how do you do this? You need more ID age verification. Um, which it just ends up creating this kind of slippery slope. this obviously also honeypot for um you know KYC information and so I think that's kind of the thing people you know push back on is today it's you know ID verification for for for kids uh you know tomorrow it's it's who knows what this does I know the UK is no longer Europe but this does seem like a very Europe thing to do and I don't really have too much faith in their leadership over there to be honest and so I am kind of worried that Europe or the UK is going to allow this foot in the door cuz it's like a slippery slope, right? Like once one government figures out how to do this, they kind of set a model for any other interested government to follow suit. And you know, you ban one piece of the internet over on our shore domestically in the inside United States. We had a piece of our internet get banned this week and that was Fable out of anthropic. You know, one service, one tiny little service out of all the billion users of the internet. like not too many people were using it but still government took down a small piece of the internet and I don't want to see that trend grow and the reason why I put this in the agenda is because crypto definitely feels like the bull work against this like crypto knows no borders knows no government you know same thing with like VPNs there's like anti-government anti-border technology out there and so this is something I'm kind of keeping my eye on because if this gets a little bit too authoritarian probably won't be next year probably won't be this election But I could see this being a growing trend into the 2030s. Crypto is going to have a role to play here one way or another. >> Yeah, I think I think crypto and decentralized technology ultimately is it's the ultimate opt out, right? Um a lot of private companies, you know, choose to implement these these kinds of, you know, age limiting features or other limiting features. I mean, Discord added, you know, age gating um you pretty recently, but it's it's a private company opting in and you they use some kind of smart text. You're not uploading your ID or whatever. Um the problem is when you can't escape um what do you do? Uh and I think always having an option to let people um you know choose their own path is is pretty important. >> Tom, that's all my topics. I got one more topic, but I I want to throw it to you first. What are you excited about? What are you interested in? What what's rattling around in your brain this week? >> What am I excited about? Um I um I was looking actually at uh some of the new um AI models that um again in the spirit of letting people, you know, choose their own path. after sort of this uh newfound you open source AI renaissance and so people are pretty happy about um GLM 5.2 which is this Chinese model that came out and has um you know performance that is uh on par maybe surpassing you know opus 4.8 eight and people say hey if you orchestrate it correctly it's similar to fable or open router um which was uh founded by Alex Atala pharmacy of openc podcast with him next week >> oh cool uh also came out with this sort of hybrid model that allows you to stitch together many different models and get sort of fable level performance and so it feels like there's this cool undercurrent and sort of similarities actually between crypto what's happening in the AI industry right now in terms of a move towards um you know open source and sort of self- sovereign compute um which is I think a much more optimistic vision for the future than than the alternative. >> Do you see that intersecting with crypto in any way or is it just kind of like the ethos that overlaps? >> I I think um we're we see you know some kind of kind of um you know fruits of that today. I think just hey in terms of like um uh hey you know how do these things ultimately get funded? How do you actually access you know compute for this if it's gets restricted on a on a um you know inference provider level? maybe as a way to tap into, you know, a more distributed um inference network in order to actually access some of these models. But, um, today it's more of a personality and and sort of ethos, you know, alignment, I would say, where you see a lot of early crypto people coming to AI and and and and vice versa, but ultimately driven by um these same sort of ideas that again go back to kind of the early days of of computing. There was one uh project I was talking to. There's a growing trend of AI labs kind of bait and switching you with their model where like they tell you one model but then you ask it and like I would like to use this particular model and then you ask the query and then they really just serve you another model in the back end and don't tell you and you know to some degree I when I ask when I accidentally ask you know opus 4.8 max a stupid question I don't need it. I can it can like downshift me. But that's one thing. If I'm if I'm like actually being intentional about my work and they're telling me I'm using Fable, but I'm actually getting some sonnet. I think that's a growing trend. And I have seen a handful of crypto projects trying to go after verified compute. I think this is what Noctchain is going after. Um and so actually verifying that like the model and and everything kind of end to end is kind of like auditable and secure in the same way that we would expect our blockchains to be. And so I this is also a growing trend that I know is out there. I'm not definitely not an expert in it. Uh but like something is brewing over in that neck of the woods. >> Totally. And I think there's also this and sort of private compute component in terms of just data. Um you know people I think trust um you know the these chat bots with a whole lot of personal information that they probably would not trust even even Google with not realizing that hey this is um you know can be retained for you know arbitrary amounts of time by the by these companies. it's subject to um you know subpoena, it could be trained out, it could leak, whatever. Um and I think that that it it seems unsustainable to me that maybe a future is one where uh yeah, people have had their entire personal lives you held on a single company's servers. Um and it seems like there's a a a move towards um having you know local or distributed private data maybe accompanied with with some sort of remote compute, but um it does seem like these two are kind of going to collide at some point. Isn't everything you're saying is what Near is doing, right? >> Near is doing a lot of this. Yes. Um I think it's it's like these sort of parallel currents between AI and crypto. Um are kind of what I'm observing. >> Yeah. Yeah. Yeah. Uh we got the USA game tomorrow, Tom. You going to watch it? >> Probably not. I am not really a soccer sports guy. >> No. I mean, >> neither am I to be clear. >> Wait, aren't you wearing a Argentina jersey? What is this? >> Uh yeah, you know, I'm I'm get Argentina pride for some reason. like like down into my soul. Uh and so I let me tell you about a trade that I made this week, Tom. >> There is the July 3rd Miami game which is like the one J versus 2H group and that is the first the first winner of the J group plays the runner up in the H group or vice versa, one of the two. There's like a 85% chance that that's Argentina versus someone. And so I bought tickets for that game on the chance that it's Argentina, which feels it feels good. It's probably priced accordingly. But if Argentina doesn't advance, then like then it's like I I don't Oh yeah, I could hedge it. I could hedge it on Poly Market, which is exactly what I'm going to show you right now. That's actually not even where I was going with this. Uh but like the if Argentina has got a 12% chance of winning the World Cup, but let's let's go and see the actual uh chances that they win the uh the bracket. Yeah. So, Argentina 84% odds on Poly Market that it wins its J group. It has a game versus Austria on the 22nd and that's going to be like my ticket either goes up in value or it goes down in value if Austria wins. And it if it goes up in value, it'll go up like 15%. But if if Argentina doesn't make it, then it's then then the new game is Austria versus like I think it's going to be uh like Uruguay or Spain or something. And that's just not as exciting because it's like if this is Messi's last World Cup and so I'm excited. I'm going to go down hopefully to Miami and watch the game. But this all rides on Argentina actually making it through their their uh their group. >> Yeah. I I hope for your sake that they do because the Austria versus Uruguay does not sound nearly as exciting. But >> Spain. Yeah. >> Anyways, that's the trade I'm in. Uh Tom, thanks for coming on the show and helping fill in for Ryan. Uh always a pleasure to have you. >> Thanks for having me. Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in. But this is Frontier. It's not for everyone. And we're glad you are with us on the bankless journey. Thanks a lot.