Bitcoin Breaks $80K as Washington Moves on Clarity

Transcript

Bitcoin ETFs threw down $1.1 billion dollars in net flows over the last two days. That's like a lot of buying. >> If I had to point to one single market driver that is pushing Bitcoin, let's say towards or even above the 80k range, I would still say it's macro and the riskcon environment. >> I do think it's majority macro. But I'm now perhaps more optimistic in this year on clarity act than I've ever been. There looks like there's a compromise that all parties are happy with. Um, and that bodess well for the passage of the bill. I think all else being equal, the banks want this to die. Like if they can kill it through other means, uh, through other provisions, then so be it.

>> The end boss in this is ethics. Uh, that's the thing that could torch this. >> [music] >> As always, note that none of the information discussed constitutes investment advice or any offer, recommendation, or solicitation by Block Works, Galaxy, Bitwise, or Anchorage, or any of its affiliates to buy or sell any securities. Hey everyone, welcome back to Inflection Point. I'm your host Mark Arjun and as always I'm honored to be joined by Matt Hogan, David Lawant and

Michael Mark Antonio. Um I think coincidentally Michael and David you both are in Miami. Yeah. >> Yes, we are. >> Sure. Those who are in the video can see my Arctico background here. I'm in Miami Beach getting ready for consensus. It's it's a big week for crypto in Miami. A lot of people are here. So excited. >> Got consensus. got accelerate. Pretty uh pretty good. And then you had F1 last weekend, so pretty good vibes overall. >> Feeling the FOMO. I'm feeling the FOMO.

I'm stuck at home watching the kids, so you guys will have to tell me how it goes. >> Well, you you travel a lot, Matt, to be fair. But uh I mean, another good news is Bitcoin's above 80K. It's at like 81 something now. We talked about this last week. So, you know, maybe we maybe we're manifesting this a little bit. Um, how are you guys feeling? >> Feeling great. >> I feel great. >> I feel great. It's beautiful to see it not just wick 80, but sort of sit there and uh and hang out. I think there's a pretty strong backdrop for all the reasons that it's doing that. I think there's progress on the Clarity Act.

You're seeing these big VC fundraises. You're seeing good news out of the stable coin market. You're seeing uh risk assets doing okay. I think uh I've been surprised at this ability to stick here and it's starting to give me confidence that maybe uh just maybe we'll be in a new higher channel than we've been in for uh the beginning of the year. >> I agree. I think risk assets are playing a big role here, right? Let's remember that just last Friday the S&P 500, Dandez, NASDAQ were breaking new all-time highs and Bitcoin is still like very far from its all-time high. So, I think it's interesting to see this kind of uh trickle down from the more traditional um uh asset classes into

crypto. Uh the one I'm very excited about the ADK level. We talked about this in the last uh in the last episode. If you asked any professional investor over the past nine months what they would think would happen to the Bitcoin price, they would say Bitcoin is probably going to trade between 60K and 80K. And we are touching this uh range for the first time I think since January. And it does feel much better. You have that meme right in January, Bitcoin at 80k in January, sad Drake, the Drake meme, and then Bitcoin at 80K in May. Happy Drake. I think that's that's that's a good vibe. U the one thing I'm paying attention to though are

liquidity trends. These are key things. They're not again not leading indicators, but they're good early confirming indicators to give us confidence that we are gearing up for a different stage in the market. Things like spot volume, things like what the order books are looking like, things like uh derivatives and funding rates and leverage. All these indicators are I think are interesting. We're not seeing them flagging as much though. I think they're all signaling that we're going to have a big battle here around the 80k level. It's great to see that, for example, if you look at the Bitcoin order book skew, uh we we uh the there's a lot of sell pressure that is coming at

around the 80K level and still prices are sustaining pretty much not even around the 80K level, but even a little bit above that. So, I'm I'm excited. But I think it's going to be a a battle. It we can go on like this for maybe even weeks, but I'm I'm excited to see a potential new leg up here, just like what Matt said. >> Yeah, I mean, I think April was just a really good month and I like you said, David, um it's it's liquidity. It's trading with the risk assets. actually have this this chart here that's showing how well Bitcoin has done with I mean with the NASDAQ with the S&P with some emerging markets and conversely gold and

long-term treasuries haven't performed so great. So we we're definitely getting more in that risk on environment and you know the the I've been hearing that as Tradfire integrates a little bit more into crypto that they are seeing or they believe that Bitcoin should just trade as a higher beta version to gold. And I I feel like maybe that's partly our fault in the crypto marketing languages by calling it digital gold, but I don't think that's really how a lot of, you know, insiders view the assets. I I don't know if this is just my timeline or or not, but I I don't know, Matt, have you is is this something you come

up with a lot when in terms of like gold versus Bitcoin? >> Yeah, pe people certainly expect it, but the reality is throughout history, they have not traded similarly at all. You know, it's also worth noting that gold was dancing on the grave of Bitcoin a month and a half ago and we've outperformed by 26% over the last 40 days. So maybe gold is dead and should be written [laughter] off for all I mean it's so ridiculous. Um look the reality I think what actually that says underneath the surface mark is that they're driven by different things. The gold rally was driven by central bank buying and then fast money particularly in Asian markets. Bitcoin today is being driven by corporate buying and by institutional capital trickling into the

asset and then some element of high beta risk asset from hedge fund investors. These are just different investors. And I think to the thing to remember is Bitcoin is driven by supply and demand. And if you just think about who's buying or who's selling at a particular moment, you can explain why Bitcoin is rallying or gold is rallying. I do think for what it's worth, the sustained purchases by treasury companies have uh surprised everyone to the upside. I think this is one of the the the the highest growth quarters ever. April was a huge month for purchases. I think very few people had that on their bingo card, but I suspect that that will continue into Q2.

So, um look, Bitcoin, gold driven by different things. If you think about how the buyers are behaving, you can explain why there's that asset divergence. >> Yeah, 100%. And then I I have one on the screen here um treasury asset um digital asset treasury companies purchases by month. April was a reaceleration uh over over March. Um we're also looking at uh ETF flows again. That's you know web two consecutive months in a row. That was pretty positive. Uh I was I'm reading this newsletter called Ecoinometrics and they they are basing Bitcoin's you know they're looking at the correlation

between Bitcoin and the NASDAQ and then you know pricing it in in terms of that and and this chart I have on the screen here shows that according to this historical correlation that Bitcoin is actually trading at a 50% discount or at least it was maybe it's like 40 something% now um I don't really believe in models like these or stock toflow models or stuff like that. But I like to see headlines that even in in these kind of quote unquote bare markets that say Bitcoin should be at $168,000, right? So I like these kind of markets. But it is interesting that Bitcoin has diverged so much um from the NASDAQ recently. Uh especially I mean the the Bitcoin's correlation with the NASDAQ seems very fleeting. Sometimes they're buddies and

sometimes they're enemies. And uh yeah, I have this 10day rolling uh correlation chart here. And of of all of the indexes that I've charted uh Bitcoin to, I find it most interesting that if I look at a three-year uh time span and do a 30-day rolling correlation, the index that it actually has the highest correlation to is the gaming ETF index, which to me still says that Bitcoin is still considered a risk asset for Generally speaking, holistically speaking, maybe in times of banking crisis or in times of like some kind of geopolitical turbulence, maybe that uh that there's sitting elements to bitcoin that it gets

these hedging properties and this flight to safety. But I think generally speaking uh it it has that risk on higher beta correlation. And I mean I think most people want to see that continue because those tend to have you know higher kaggers, higher future kaggers. Um, but also some people want to see that also that volatility and that kind of correlation to risk assets decline as well. And I I'm not I'm not I I'm mixed. I'm not sure if that's a good thing either one way. I don't know if uh you know, Michael, if you have any thoughts here.

>> Um, no, I don't have any thoughts on that. I I think that the asset will naturally become less of a risk on asset as it gets bigger, right? I think one of the main reasons why it's uh seen as a risk-on asset is because it is still fairly small um and therefore a few holders can still manipulate not manipulate but uh move the price quite considerably. Um I I'm I'm curious to know the the group's views on what is driving the price because I read that uh strategy has slowed its bitcoin purchases over the last couple days. Um is it news on clarity act? Maybe this a good sort of also segue into clarity act. Is it is it news on clarity act? Um

what do we think? >> Yeah. Uh David why don't you go for that then I have I have a note on correlations as well but David go ahead. >> Yeah sounds great. Um Michael I think it is true that Micro Strategy has slowed down their activity from what we can see in the public data but this is coming off from a very strong pace of purchases. the chart that Mark showed with DAT uh buying the last two months that we saw and the two rightmost bars that we're seeing here. Mark, correct me if I'm wrong, but I think a stretch is probably a huge part of this. Um, and it's I mean, we did a full episode on Stretch what, two or three weeks ago. We don't need to delve into it, but I just

want to highlight that Stretch has been way more successful than I think anybody could have expected just just a few months ago. And it is true that maybe they haven't been buying recently. Uh but I do think that uh DATs have been a big driver in at least an earlier stage of this price recovery. If I had to point to one single market driver that is pushing Bitcoin, let's say towards or even above the 80k range, I would still say it's macro and the riskcon environment because everything outside of Bitcoin if you look I mean Mark also showed a chart uh equities even emerging markets I mean a lot of these assets are showing that the market is looking for uh taking a risk constance and I think

Bitcoin is basically reflecting that in a way honestly that I think it could have been doing usually way more when you are in a riskcon market. You Bitcoin is usually not in the middle of the pack there. It's usually one of the better performing assets because it tends to have a higher beta behavior. So yeah, let's see how it goes from here. But if I had to point only to one indicator, I would definitely say it's a broader riskcon environment. What do you guys think? >> Yeah, I mean I would I would add that Bitcoin ETFs threw down $1.1 billion dollars in net flows over the last two days. That's like a lot of buying, right? So, I think of it a little bit as a relay race, Mike. It's like uh it was micro strategy with stretch and now ETF issuers have come

>> and we'll see how long ETF flows can continue. Um I'm sure some of that is long only flows, some of it is basis flows. Um but that's sort of like like the relay handoff question I think is uh the beautiful thing about this rally. One of the reasons it's been so persistent is because you've had multiple drivers. You've had corporate buying, you've had ETF long only buying, you've had some hedge fund risk on buying. And when you have those three things, then they can eb and flow um over time. I think that's also true about the correlation question you raised, Mark, just to go back and touch on that. Uh I love people always try to pin down Bitcoin as either a risk asset or a riskoff asset or a macro driven asset or another asset. I think it's

like asking if food is spicy. Sometimes food is spicy, sometimes food is not spicy. But you can't say like food is spicy or not. It can be both. Um, Bitcoin is driven by multiple factors. Macro is one of them. When the macro factor is really strong, it acts like a risk asset. When the macro factor is weaker, then the cryptonative factors are the dominant driver and it has no correlation to risk assets at all. And the variation you see in those correlations with things like the NASDAQ reflect periods where the macro factor is strong or weak and periods where the crypto factors are strong or weak. And trying to binary it just misses the point. It's not going to be a stable relationship ever because it has these

two different primary drivers that vary in strength over time. And so whichever is the more dominant one will determine how close that correlation is. That's a great way to put it. The one thing I would say though is I think at least for the time being, for most of the time, I think Bitcoin has been behaving as a risk asset. Uh correlations versus the NASDAQ or the big equity averages, they they have been increasing over the past like couple of years. And what I would say is that this is kind of almost I'm not sure if this is good or bad, but I think this is what it should be because Bitcoin is still relatively early in its development. Uh

there's still a whole price discovery process. I also say that there's a utility discovery process mean people trying to better figure out what does it mean to have a sound money digital bearer asset in their portfolios. This is a process that will develop over many years if not decades and it's normal for Bitcoin to behave as a risk asset as this transition is taking place. >> The final thing I would say is this should be great news because this is exactly where the asymmetric upside lies. A symmetric upside lies on the market not understanding certain market behaviors or certain asset characteristics. And the fact that

Bitcoin doesn't act exactly as we would like it to, right? We who understand all the intrinsic characteristics it has and can see Bitcoin as this gold equivalent or even something bigger in the future. If if Bitcoin was already behaving like that, it would also not be trading at 80K. it would be trading at 450800K. So I I think in a way that should be also exciting because that's where a lot of the returns can come from. >> Yeah, I absolutely agree with that. I'd also note that those correlations really took a step function up postcoid when I think macro began playing a bigger role in all assets. So that's like you know

you really we really were roughly pinned around zero and since co we've been pinned around like 3 to 0.5 and I think that's probably where we're going like it's going to be more correlated than it was in the early days of Bitcoin uh because macro is stronger and it's more established to your fact David but yeah you have to embrace this because this is what gives the potential for those massive upside returns >> and and I I saw I think it was this week or last week that I bit options and I bit is the uh ETF for for Black Rockck for their Bitcoin. I bit options now have more open interests than the entire of Dera Bits. So now most of BTC options are actually on shore in the US and in

the form of ETFs. So I mean this is just one more sign in the further of integration into the trady system which I think is a positive thing to see. Um, and Michael, you did mention, you did ask if Clarity Act was one of the drivers. I I I mean I I do agree with David that I do think it's majority macro, but I'm now perhaps more optimistic in this year on Clarity Act than I've ever been. I know Poly Market odds still have it at 5050 or something around there. No, >> I think it jumped. Didn't it jump to 62 recently?

>> It jumped up. Oh yeah. Okay. Well, uh maybe Michael, can you tell us why? >> Well, because there's been some positive developments on the Clarity Act. I believe uh Senator Scott said on Fox News yesterday that we're in the red zone. Um I think the most recent amendments uh were a compromise. There's some controversy there about calling it a compromise, but uh I think um the recent amendments on stable coin yield or lack thereof um are moving in the right direction. um in terms of a passage of the bill. I'm not going to say whether I I mean I can say whether I support those those compromises or not, but um yeah, so I think uh that was the big one of the big hurdles, the banks

versus Coinbase and cryptonatives. Um and I think that there looks like there's a compromise that all parties are happy with. Um and that bodess well for the passage of the bill. >> Yeah. I would also note that I think uh crypto has been more skeptical than poly market on the odds of passage. I was certainly an under on the poly market odds and I think the I think part of this catchup is that crypto has been re underwriting its own probability like the internal crypto chatter was that this thing was not going to happen. Uh I think it was much at least my perception was it was more pessimistic than the odds we were seeing on poly market and I

do think that chatter has improved. Uh I don't think it's a done deal by any means. There like a number of big hurdles left but even for myself I'm more optimistic than I was a couple weeks ago. I was I I was reading this compromise for the yield and it seems like I'm going to you know I'm not a lawyer Michael but I'm I'm going to put this try and explain this. It seems like you know you can't give interest on stable coin deposits. It can't it cannot seem like it's a deposit and you you cannot receive interest from doing nothing.

Instead the language seems to me as though it needs to be activities based. Um, but you know, maybe if I'm using it as payments or maybe if I'm doing something with it. But then this is the path that I'm perhaps the language was made very vague on purpose because that's it's up to the regulators post um post enacting to figure out. But it seems to me like activities could be nearly anything. Um, and maybe there's a way, and I, and I, and I don't want any bankers to hear this, but maybe there's a way to gamify it such that it's almost um, equivalent.

Maybe you can do things like a subscription or you stake it. I don't know. I don't know if that's too similar, but like did did you did you do you have any thoughts on this? >> Yeah, I mean, so the [clears throat] the the business model of setting it and forgetting it, um, that is going to be proscribed. I mean, it's it's going to be not allowed. Um, but if you do something with your stable coins like staking it, which doesn't make sense today. Um, but it could make sense in the context of yield, uh, in in the context of a vault, right? I think this is actually, not to plug vaults, uh, which we've been doing quite consistently on this pod, but, um, putting them in a vault, um, and having

a vault manager manage your stables, I think that would be consistent with being able to generate yield. um that's not outlawed. I would have argued that that wouldn't have been outlawed regardless of this compromise because it's not it's silent, but I think it's been made explicit that um basically if you do something with your stables um you can generate yield. I think there'll be some clever games that crypto companies play. I think crypto companies are going to be able to figure out a bunch of different ways to generate yield that's consistent with the act um way before lobbyists for the banking industry have time to complain about them. Um, but I do think that this is uh this is a this could this could be a nothing

burger, but is just helping us get the bill through or it could be quite significant and laying the foundation for a new type of uh a new type of stable coin sort of business model. >> Yeah. It's also worth noting that I I think it's more it's it's about getting the the bill through, right? It's >> worth noting that to date interest is not the killer app of stable coins. We've gone to zero from zero to 300 billion. Most of that is yielding zero. It's convenience and access to dollars that have really been the killer app. And therefore, just having a positive regulatory environment is the most important thing. Look, I think morally people should be able to earn interest on their stable coins. And I think uh like Mike said, we'll be able to do that through vaults and other structures.

Yield will find a way to to flow downhill. But uh the most important thing is just having a firm regulatory framework that allows stable coins to scale because it it's really interest u most people aren't even uh yield maxing in their daily lives, right? What is the average interest payment on a checking account? I think it's one basis point. So I I think just getting this over the line is the big win. and the yield stuff while we should be able to have yield um is less important than than I think establishing this regulatory framework.

>> Yeah, I I agree with that. The the other thing I would add is I think the right place to have this conversation is probably at the OC level and not at the Senate Banking Committee level. Right? So I think the legislature did its job in kind of defining the guard rails and defining more or less what are the guiding principles but the actual discussion to your point Marcus I'm sure there's going to be a lot of conversation on hey I want to do this activity is this basically under the the allowed rule or not this is a conversation that needs to happen at the agency level and not at the legislature so I'm actually very happy uh with with where we are at clarity. My

gr my kind of grounding principle is that if you have an agreement that every party's kind of complaining but not fully leaving the table, this probably means that this is a good agreement. Like um it it was something that a lot of folks would say would be impossible to square just like a a month or two ago. And I think we got to a point that if you talk to the crypto industry, definitely not everybody's happy, but kind of everybody's feeling that that's enough for us to move forward. It's kind of the same on the banking side as well.

At least looking from the public statements that their associations are saying, they don't seem very happy. But it's kind of also what was was able to move the discussion forward. I think the main thing here to keep in mind is that the market structure bill which in theory shouldn't even have those stable coin related discussions, right? These are leftovers from a previous leg legislation landmark, the Genius Act that was approved mid last year. I'm very happy that we got to a compromise and now we can focus on the market structure piece which honestly can be just as big as genius. I mean the whole idea of defining jurisdiction between

the CFTC and the SEC, what is a crypto security, what is a crypto commodity and enshrining these things in law. I think this is a major milestone for the industry. I'm very happy that we can now start to focus on these things and hopefully get this thing passed in maybe a few months, hopefully before the the the uh the recess. Yeah, I think what matters to your point um to your point David, what matters is that it passes like uh and what I mean by that is the Genius Act passed. It presumably allows for yield to transfer to stable coins. So then of course the banks immediately run to Washington and you know try to amend that previous

rule, right? So, um, what matters is that it passes and even if there's some stuff in there that the indust crypto industry doesn't like, we can live to fight another day on future amendments to that legislation. Um, but rather than getting tied up on like to Matt's point, things that are not the killer app of stable coins and to your point, David, she's like this is not even supposed to be about stable coins. this this bill is supposed to be about market structure um I think is doing a disservice to to crypto long term um or the longer that this goes. So I'm glad to see that this debate is wrapping up.

>> Yeah. I would add the other thing that matters as we get past this. I think look when when institutional investors we speak with think about investing in stable coins and tokenization they think it's almost feta comply that the world will move on to stable coin and tokenization based rails. the almost is underwritten by but this act could could fail. >> Yep. >> Right. And I think that's uh slowed the flow of capital into this space because people expect the market to reset downwards if it fails and so they're waiting for that moment. If we get to the point where uh people expect it to pass or it does pass or even if we just decide we're not going to get there, I think that will unlock capital into the

space and lift assets higher. So, I do think it's like a little a little dam that's been holding back some amount of institutional capital from allocating to stable coin and tokenization plays. >> 100%. Perhaps it's also interesting to recap where we are and exactly what stage the Clarity Act is. So, as I understand, Michael, correct me if I'm wrong here. Um, there was a Clarity Act that passed the House and that stage is mostly clear. There's probably going to have to be some sort of reconciliation process because the bill that passed in the House didn't have these new provisions, the stable coin yield reward. So, we're we're we're probably

going to have some some sort of reconciliation. In the Senate, we already had a an egg committee markup and it passed along party lines. This happened maybe a few months ago. And the next milestone that we're expecting to see hopefully in the next week or two is the markup in the Senate Banking Committee. So these are the two markups that we need in order to get this bill to the floor. Hopefully get it voted in the Senate, I don't know, within the next month, maybe six to eight weeks. And then we will go through a reconciliation process so that this is ready at President Trump's desk by late uh late July, maybe early August before

the recess. So that's kind of the timeline that I think everybody's paying attention to. To Matt's point, I think we've probably overcome the biggest hurdle that was holding the Clarity Act. This is not the only one. Uh there's another one on ethics which is about the extent to which government officials can engage with crypto. There's a few other things here and there. I would probably say that the the the the stable coin yield rewards was was maybe the main sticking point here. So we'll see how it goes from from here on. But I'm I'm I'm I'm positive. I don't know. Um, I think uh we're going to have a good surprise in the next uh couple months or so.

>> I think I think that was a great summary and timeline. David, I I would note that what happens if we don't get the bill out to the floor of the Senate by May or June. um it looks it starts to look pretty dire um in the sense that if it doesn't get to the floor in May or June and it doesn't get to uh it doesn't pass the Senate and then it doesn't get reconciled this summer. Many analysts are saying that this thing is going to be it's toast for the year. So it's like a very big month for the next two months. Um very very critical.

Um so I I and I think that's right. Um assuming that the midterms, you know, swing in the Democrats favor, um which I think most people are expecting, um you might not see a Clarity Act at all until 2030 if it doesn't pass over the next if it doesn't get out of the Senate and get reconciled um this summer. >> Yeah, I would definitely push it. Uh and then uh important to remember we have midterms, right? So the focus will radically shift uh in the next few months. That's why our window is relatively tight.

>> Yeah. >> But now that the banks and crypto companies have have agreed on some kind of language, is it would the banks want to push this through? Because otherwise then doesn't the factor go to stable coin yields actually being allowed or in some kind of gray area. >> I think all else being equal, the banks want this to die. Um, and you know, like if they can kill it, um, through other means, uh, through other provisions, then so be it. Uh, that's just my that's just my intuition on it. Um, I don't think the and I think it's the wrong position for the banking industry. Quite frankly, the banking industry is larger than just the big banks on Wall Street, right? You've got you've got the local

credit unions, which have a very powerful lobby in DC, right? Um, so you've got a conglomerate of different actors that I think have largely or have had a monopoly over payments and uh monetary policy and monetary legislation for better part of you know last you know 20 20 plus years and um I think that without um crypto that position remains pretty solid with crypto it's quite disruptive and disruption for the financial system and for the banking sector is always going to be seen as bad, right? Um this is not an innovative uh area of our economy that embraces

change. >> Yeah, I think that's right. But the end boss in this is ethics. Uh that's the thing that could torch this is Elizabeth Warren uh sort of uh jumping up uh and and arguing the the ethics point. I think that's going to be the most challenging thing uh to overcome at this point. I'm hopeful that we don't cross that, but that's going to I think that is the biggest risk to it. Uh from >> doesn't that seem like something else that shouldn't be in this bill in a market structure bill? It seems like yield shouldn't have been in it. It seems like ethics should be external.

Am I misreading it here? >> You're you're you're I I hate to break this to you, but Washington doesn't always act in the best interest of individual citizens just with a plain view. Um yeah, of course you're right. Uh but that's why they they kitchen sink these things. Uh and it gets it gets very complex. >> No, this is this is a poison pill probably, right? Like the worst worst most uh sort of uh suspicious interpretation of Warren's uh moves on ethics. This is a poison pill. Uh it's meant to galvanize the Democrats, force them to either vote against her provision and therefore for President Trump or vote for the provision which the Republicans aren't going to stomach.

Right. So, um, that is a that's a typical tactic in legislation to, uh, insert something that on its face seems very reasonable, but, you know, it's dead on arrival and if it get makes its way into the bill, it's going to be very difficult. Yeah, unfortunately, that's how it works. In terms of signals to pay attention to, I would expect the Senate banking markup to the the bill to get approved along party lines, which is the exact same thing that happened in the Senate a committee. But the signal to pay attention to is the language that the Democrats will bring because just like we saw in the Senate a markup session, all the Democrats, they voted

against the the the market structure bill, but their language was actually very friendly. This was one of the friendliest discussions in the Senate [laughter] between Republicans and Democrats that I have seen. [snorts] So I think that's the thing to watch in the Senate banking markup. If you see like very friendly, very a very congenient environment even though the Democrats are voting against the bill, that's a good signal. It doesn't mean that there's not going to be discussions at the floor, but it does seem that uh I think that would be a signal that there is some sort of implicit agreement that everybody wants to move this thing forward. So, I wouldn't be concerned if you see it

passing only along party lines as long as the discussion is is friendly. >> Can I can I make one point on this actually that it's a little bit of a tangent, but um it is insane to me the Democratic party's position on crypto. um which frankly is like a relic of I think um Elizabeth Elizabeth Warren and Bernie Sanders sort of like anti- capitalism sort of anti-markets position. Um but it is insane to see a world in which you have a piece of legislation that is going to pass yield potentially um onto retail onto you know average mom and pops is going to

potentially disrupt the monopoly that is the financial and banking sector um and is going to democratize um the uh way in which we hold money. Um, and it is being opposed by the Democratic Party, which is supposed to be for all of those things, right? And it and by by virtue of opposing it, they are actually allied with the banks, which I never thought I would have seen Elizabeth Warren and Bernie Sanders and the Democratic Party been so allied with preserving the status quo in the financial sector and in our in our banking system. It's crazy to me.

>> It's absolutely wild. there. The stable coins are deeply progressive. Uh that is the baffling thing. If you think this is going to go to $3 trillion multiplied by that by the risk-free rate and that's the amount of money you're putting in Jamie Diamond's pocket, it's a it's it's a completely wild thing as you said, uh Mike to say this out there. >> Yeah. The good signal I would say or the good the good part here is that I think that the Elizabeth Warren wing is getting more and more isolated in this crypto interpretation. more and more you see Democrat politicians that are more aligned with the crypto industry which to your point Michael should should have been the case since the start. Uh so I I do think we we have some progress here

but of course Warren and Herwing are very powerful. They'll probably continue to be powerful in the next legislature. So we'll see how things shake out on that side. >> I I I do think it starts to change as education gets a little bit deeper. um like for the longest time we've said in this space the most bullish thing about Bitcoin or blockchain is just to be understood and I think maybe that's why we're starting to see some some swaying but then I mean and then you know even um Senator Phyllis on the Senate Banking Committee I mean he's even uh vocally said that he would not uh he would not support the bill if it didn't have an ethics um an ethics provision as well.

So I mean I mean it is interesting to see you know I I don't live in the US. I only see about the the the political divide from the media and and hear it from um friends and people like yourselves who live it. Um but it you know it seems like this like David like you said like crypto has probably been one of the few uh areas where there's probably the most agreement on and as there should be and I think uh I think the education stuff like what Matt does hopefully it reaches politicians but I think that that that kind of knowledge is really what we need in order to uh to to to progress this further. I know Michael you you you you brought up some news on when we were backstage before we started the pod about I mean two two big

topics about basically I guess transfer agents and tokenization vehicles and and in one case an exchange combining and this news I agree is very under under discussed uh yeah let's let's talk about it >> yeah so this morning it was announced that bullish is acquiring aquinity now most people I'm sure watching this do not know what equinity is. It is not a household name. Um but it is a very large very important institution in the United States. So Equinity is the second largest transfer agent in the US. Um the first is Computer Share. Um the Bullish Bullish is for those who don't know Bullish is a crypto exchange. So a

crypto exchange that just went public last year um is acquiring Equinity for $4.2 billion. Aquinity has no crypto aspects to it. This is not at all a crypto company. This is a trady transfer agent. Um what is a transfer agent? Maybe I should go there. A transfer agent is a core piece of our securities architecture. Um that is a middleman between a issuance of a security and the recordkeeping of where that security goes. Um, and there's two big players, computer share and uh and equinity. Bullish is buying Equinity.

Why? That's the big question. Before I get there, the other news which happened last week was Securitize inked a deal with Computershare to be their exclusive tokenization agent as far as I as far as I know. Um, now what the hell is going on here? Well, transfer agents are going to play potentially a very outsized role in the future tokenization efforts that you see.

Um, and the reason is, and this is very important because transfer agents have always taken kind of a back seat, right? Nobody's really focused on transfer agents, but transfer agents are in the prime driver seat for moving a security out of the DTCC and tokenizing it and being able to control the native token as a security. And so bullish acquiring Equinity was a brilliant, brilliant move in my mind because what they're going to do is they're going to be able to own the distribution of about 40% of public equities in the United States. Um what what that means is is that when you go to tokenize and I don't know if Aquinity

has this stock, but let's just assume Aquinity, you know, has has Tesla, right? When you go to tokenize Tesla in the future, you are actually going to an Aquinity transfer agent. And Aquinity, the transfer agent, is going to be tokenizing or agreeing to the tokenization of that stock. And that's where the investor is moving. Um, where the investor is interested in tokenizing. But what about whereinity or bullish is interested in trying to get as many public equities tokenized? Now all of a sudden bullish through equinity through the institution that has some of the best relationships with public

company issuers. Now is going to Proctor and Gamble or any of these other public publicly traded stocks uh and saying, "Hey, we're your trusted transfer agent." investors want your stock to be tokenized. Will you agree to that? Do you think that's a good idea? That's a much easier sell coming from a quinity or computer share than it is coming from Securitize or coming from Superstate or coming from any crypto native or bullish for that matter. So, I think this is massive news. Um, again, there's only two big transfer agents. That's it. Um, and so I think this is massively bullish news. um both on the uh the bullish front uh no pun intended and also on the securitiz

front. >> Yeah, I love that. I would also just note two things. One, they both got acquired both into tokenization. They own the market. If that doesn't tell you where this market is going, uh you're not paying attention. So, I think that's a fun point. The other fun I have a fun historical fact for you, which is I love Computershare just because the name tells you how old it is, right? It's from the 1970s. People didn't really know what computers were. They named their company computer share. It was like it was sort of the same disruption but 50 years ago, right? The reason computer share had a business and grew was we used to do this stuff by hand in individual banks. There was no one really who put it together and made it electronic. That was the whole computer

share premise was sort of upgrading this registry process 50 years ago. And we haven't had a change for 50 years. Uh now I think it's obvious that that is changing with both of these acquisitions. Um I think it's just such a great like turning of the page story uh for where we're going and and cementing the fact that the future is fully tokenized. Uh there sort of can be no doubt at this point that that's where we're going. >> I have two things to say about this. Number one, this is the only podcast where we're going to have an extended segment about transfer agents and crypto. So very thank you Michael. very unique content. Uh I don't think folks will find this anywhere else. But but

but more seriously, this is a very important point. Transfer agents are very a very important piece of institutional infrastructure. To me, crypto companies buying transfer agents would be the equivalent of like the uh crypto ETF issuer start regular ETF companies because crypto ETFs will take over the whole industry, right? and and we're going for the big guys here. So, this should be very exciting and to Matt's point, kind of show you where the fi the future lies. So, I like this this uh little uh graph graphic that you put up, Mark. Um I want to say a couple things about the transfer agent. So, when Galaxy

tokenized its NASDAQ listed shares, um what we had to do was we had to go to a Equinity is Galaxy's transfer agent. We had to go to Aquinity and we had to ask Aquinity to move our shares out of the corporate register, some some of the investor shares, right? Some Galaxy investor shares out of the corporate register, out of the corporate record into Superstate, which was a which is a transfer agent. Okay? and Superstate as a transfer agent would have the power to change the investor's name and the number of Galaxy shares that it owns to um the wallet address effectively and

the number of tokens it owns, right? In effect deeming the token the same as the security, the identical share, right? These are not in this model there. These are not uh rappers. These are the share. The share just is the token. Okay, which I think is very important. Um, it's the transfer agent that has that power. Uh, and so I think Bullish, if I would were to guess, seeing this said, oh, we want to own that distribution. um you know the the problem with securitizes business model historically um which they're doing a phenomenal job to correct but the problem was they were

and I I would not say this for most crypto companies but I'm going to say it here they were technology first but the technology is fairly commoditizable what they needed was the distribution so them penning a deal with computer share that has the distribution but does not have the technology I think was brilliant Um, and I think you're going to see an explosion of uh actual tokens as securities assets move on chain following both of these uh these announcements.

I love those points and I think maybe for those who are on chain a little bit more what why this is also important is that you know if you're on you know Jupiter and you're trading these tokenized stocks there are like seven different versions of Nvidia and and what this does is that it it fragments liquidity and it stifles growth and stifles volumes and but if there if these you know Michael as you said if the token is the share you know that this is the actual backing is the the regulatory and legal backing behind the transfer agent and the issuer. Um, and the SEC's has put out a a taxonomy of the different types of tokenization and this is number one, then you know that you're buying the actual Tesla stock or

whichever stock it is and and and and this has been one of the things holding back I think the growth of public equities on chain is this just fragmentation and and securityize to their credit they are doing this now in a massive way. they are doing the issuer direct sponsoring with transfer agents and I think when this becomes a little bit more popular and the companies themselves are a little bit more comfortable with uh issuing their shares on chain like Galaxy did I think then we're going to start to see my prediction happen a little bit more of of re real world asset tokenized value overtaking defy TVL by next year >> I think that's right >> good prediction >> I think that's right I think um before

Defi TVL gets overtaken by RWAS um you're going to need to see um some clarity on market structure with respect to market makers and their ability to trade. Now the DeFi I I I believe just to hearken back to the Clarity Act discussion we just had. One thing that we didn't note was I believe that there is an Affir we've got some affirmative news that the DeFi provisions of the Clarity Act have largely been agreed to. Um and they're not going to be particularly a big point of contention. I think that's a pretty important piece. We'll see how that plays out. But no one's going to

tokenize their Tesla stock. No one's going to call up Aquinity and say please move my shares from the existing record holder which is you know seed and co which we can talk about but exist from the existing system to Salana or to Ethereum if there's no market makers there and there the bid ask is 300 bips right there's no one's going to do that there's like and and so what you need are market makers that are holding these assets that are able to quote as tightly if not tighter than what you see on the NASDAQ or what you see in darkpool. So, um we have a lot of work to do there as well, but it's definitely a positive

step forward. >> Absolutely. Uh gentlemen, I have to hop. I'll let you continue the conversation. I apologize for having to leave a little early today. Thanks everybody. >> Thanks for joining Matt. >> 100% agree, Michael. I actually saw that BlackRock put out a I think it was a 17page report to the um to the OC asking them to remove and I didn't even know that there was this limitation to remove the 20% tokenized limitation. And just for a little bit more uh clarity for the audience um only 20% of the shares can be tokenized. So if the if the company's worth a billion dollars then you can only have 200 million onchain. Um I mean obviously they're heavily incentivized to do this because the growth of Bidd uh

the forecasted growth of Bidd is is going to come onchain. So then this restriction severely impedes that but then I mean this opens the gateway for you know for for perhaps IPOs directly on chain in the future. >> Yeah 100%. I mean, IPOs are one of the most complex, convoluted processes that, as we've seen over the last year, don't often result in optimal conditions for the issuer, right? And what's interesting, especially with memecoins that have launched over the last couple years and a bunch of other launches that I even during the ICO craze, crypto's been able and NFT, especially with NFTTS

actually, crypto's really been able to iterate on the launch process in a way that I think is quite interesting. There's been a lot of work on how to do a fair launch. I mean, there's no such thing as a fair launch in IPO world, right? No one talks about fair launches in IPO world, but in crypto we talk about them all the time, right? And so, um, I think like crypto has a lot to add for securities that I think is going to be quite exciting. >> I fully agree there. I'm not sure if I'm lagging or uh if you guys can hear me well, but I think capital formation is one of the most underrated D5 primitives, but we still need to improve

a lot. To Michael's point, we've been kind of speedrunning the optimal uh fair launch process, right? We've we've gone through a lot of formats from ICO to private sale and incentives and airdrops. I don't think we have figured out what the exact formula is, but I do believe that one day in the future there's going to be an onchain asset issuance process that will be seen as better than the traditional IPO process. I don't know how that will look like and it might take us a while to get there, but I'm very sure we're going to we're going to see that happening one day.

>> It's critical that that happens. It's critical that we do get real world assets on chain. Um, real world assets on chain will make crypto assets on chain even better because they will provide more stable, more predictable collateral into borrow lend protocols. Um, and it will also um it will also draw in many new users that would otherwise not uh not would otherwise not be trying to trade on chain. Um, and so I think this is a really exciting time right now for tokenized equities. You know, the bullish news, the securitized

news, make no mistake about it, that is saying Bullish is so confident in the tokenized equities future that they're willing to spend 4.2 2 billion on aquinity, right? like this is a very strong signal um that and and and incidentally um the CEO of bullish I believe was the former CEO of the NY right so yeah so this is not like this is not these guys are pros at what they're doing um and I think it's really a really exciting time >> well we're coming up on time there but I I I'm doing a report now and I'm looking at tokenized assets assets across all of the chains and Ethereum is still the

number one. It has a little bit over 50% of all tokenized assets. Solana's in second place and then there's a long tail end of assets there. Um and you know in you know I was wondering I was thinking oh maybe this is just Lindy legacy effects and things haven't moved off but it it doesn't seem to be the case. Uh you know assets are coming onchain to Ethereum still and more quickly than ever. Same thing with Salana. Um I I I have to ask I mean I know I think correct me if I'm wrong Michael but Galaxy was issued on Salana but then so but why do we think that Ethereum is still getting so much of the mind share in the tokenization space? Is it is it to do with is it just to do with the EVMs Lindy and and and the

>> I would >> Yeah. >> Um can you look up what percentage is stable coins? >> Right. Um, >> excluding stable coins. >> Oh, excluding stable coins. Okay. >> Yeah. I mean, this is a huge this is a huge question in my mind too, right? Like what is so intuitively it makes a lot more sense for public uh equities, tokenized equities to trade on Salana because Salana has 400 millisecond block times that are being cut down every every year. Um, and you need very fast block times and very fast settlement times in order to sustain an environment similar to the NASDAQ or the NY. Um, Ethereum has 12 second block times. Like

just on its face, it seems very difficult to see a world in which significant public equities flows are trading on Ethereum. Now there's always there's always can be changes to the chain but um the but the TVL that you see on Ethereum is largely in Morpho and A and borrow lend protocols right um and there you don't need as fast of block times um there you are putting your assets in a vault and you are lending them out or you're borrowing and Ethereum has always had the lead on that um I think the only explanation I can see is that it's got a little it's got a more built out infrastructure. It's got

not just you know on Salana you've got Jup lend which is fairly new and you've got Camino on Ethereum you've got a you've got you know Morpho you've got uh compound you've got so many different you got you know Oiler you got so many different um borrowen platforms and so many different areas um that are just way more ahead of Salana that I think Salana could catch up on but it's a very formidable leap right now. Um the the large TVL on Ethereum is is something that you know I look at quite significantly. Um because I don't see a world in which you have a fully developed market just on the trading side. You need both. You need the borrow

lend you need the deposits and you need the trading. So I don't have an answer for you. Do you think we'll see a new chain emerging in that field like maybe Avalanche or Canton, one of these guys, or are we locked in Ethereum and Salana at this point? >> I think we're locked in Ethereum and Salana. Of course, I would have said the same thing about if you had asked me before Hyperlid um and then Hyperlid came about. Um, I think in order for um a new chain to come about, it needs to be so much better than Ethereum and Salana um that it makes the two almost antiquated. Um so I don't see a world in which Avalanche is able to overtake

Salana. Um I don't see a world in which uh you know, you know, Canton is. Hyperliquid's a little different because Hyperlid is like a business and a chain. It's an exchange and a chain. Um, Hyperlid is in a very strong position right now to overtake parts of what would have otherwise been on Salana and parts of what would otherwise have been on Ethereum. Whether they overtake both uh in one fell swoop, we'll see. But I um I don't see a world in which other chains are uh are going to be able to displace uh Ethereum and Salana right now. Of course though I you know every time I say this I'm reminded that like Salana isn't even the next one up by market cap after Ethereum. It's it's

BNB, right? It's Binance Smart Chain. So I I don't want to totally discount Binance Smart Chain. Um and I don't want to totally discount some of the other uh players like Tron has a tremendous amount of stable coins and a tremendous amount of volume every day on stable coins. So, but those are existing incumbents. I don't see a brand new chain popping up that is going an all-purpose chain that is going to pop up and displace Ethereum or Salana. I don't um we'll watch watch Tempo to see on payments. I don't know what I don't know what to think about that right now.

I I think that you know uh a paymentsson blockchain never really made a lot of sense to me because there's no in like payments are actually one of the things that work best on blockchains right now on the existing blockchains. So you know we don't really have a problem there that we're trying to solve unlike on Hyperlid. Hyperlid solved a big problem because it would difficult to run a perex on Ethereum or Salana. Yeah, I do think Tempos are one to keep an eye on. I think what it has going for it is I remember when I was working cellside at UBS and I would write this Python program and put it in a doc.exe file for other analysts to use, it got

zero traction. But if I made an Excel spreadsheet with VLOOKUPs and index this, then everybody thought, "Oh, wow. This is so great. You're so technical." And I think that Tempo is kind of leaning into that kind of tradition. They'll have the ISO field. they'll have the memo index and they integrate with swift and so it just isn't maybe it's maybe it's not necessary maybe it's not necessarily better technology but it maybe it's just something that people that the old world is more familiar with and will latch on to especially given the credible backing of stripe and the other pay the other uh partners who have agreed to use this chain and then and then on that point you know I think you you made a point about having public

equities on chain, you need to be you need to match the NYC because otherwise nobody's going to want to put their tokenized assets there for a worse experience and a worse price um performance. And then I was looking at the data and you know a lot of the TVL on um on Ethereum like you said is more like on the lending and borrow side is actually mostly bonds um and digital private credit and um and commodities like gold and silver and stuff things that maybe you you know you will put in lending or you don't really need that fast block speed in but you know I think maybe that's why Salana hasn't overtaken it yet either because Solana still isn't at the level of an ICO or you know any of these other exchanges and and Maybe it it will take a couple of years before

public equities actually start to meaningfully um transport to that chain. >> Yeah, I would push back only on I think Salana could handle a significant amount and compete with NY or NASDAQ today. Um that's how much uh ground Salana has covered over the last two years or so in terms of infrastructure and development. Um, and I think in many ways Salon is already better than NER NASDAQ in that you have instant settlement. That said, um, you're right that it's still not as fast as a collo server in New Jersey, right? Um, it's not as fast as that, but it is blazingly fast. Um and uh I think

it will be pro I my guess is that it will be the dominant chain for trading tokenized securities. Um that's that's my view right now because the speed and because of the settlement um and because it just simply has been battle tested stronger and harder than any other chain. you know, you can execute something like 10,000 transactions uh right now a block every 400 milliseconds on on Salana. Um you can only execute about 200 transactions per block on Ethereum. 200 300. Um and so that alone makes it very difficult to convince me that like you're going to be able to do just the volume that would be

required on Ethereum, but we'll see. >> Interesting. What do you think um L2s like Mega ETH for Ethereum does for them to compete a lot better here? I don't think L2s can compete here, David. Um, this is a controversial take, but um, I think L2s, and I don't want to paint with a super broad brush because there's a million different types of L2s, but if you take your standard L2 like base or like arbitrum, um, I don't think tokenized securities are going to be permissible to be traded there, um, because they are too centralized and they're going to be sort of wrapped up in the same argument

for why tokenized securities can't trade on Binance. Right. Um, I think that the chain will need to be sufficiently decentralized in order for tokenized equities to trade there because if your arbitrum and you can roll back transactions like you saw with um the recent Kelpac um then you have a small body that is able to basically roll back any types of activities on the chain which is fine except the SEC is going to say someone's in charge of this saying you need to come in and register as an exchange, as a broker dealer. Right? I'm not saying that the SEC is opposed to control. They're just saying if you

exhibit control, then you there's no excuse. We can't possibly say in good in good uh faith that the NASDAQ has to comply with all these rules, but arbitrum does not, right? If arbitum is controlled by a centralized body. >> Look, this is this is such a fascinating fascinating debate. I could I could literally go on. I had like my points listing up there and I'm sure you know you and David as well. >> We're basically interviewing Michael at this point maybe. [laughter] >> Yeah. But this is definitely there's definitely a lot more for the next episode and a lot >> Yeah. Yeah. I'm I'm I'm realizing that now. Yeah. So, but we've come up on time and this is great. We have we'll have more content um future down the line.

But yeah, um listeners at home, thanks for joining us. Um I hope you tune in next week and cheers everyone. >> [music]