Bitwise on why Bitcoin looks like a strong risk-adjusted buy

Transcript

GM, good morning. Welcome to the Milk Road Show. The daily crypto show that helps decode this market acting like a clingy X just wants to know where this thing is going. I'm your host Jay Hamilton. It's Wednesday, April the 2nd and we are live. What's up, chat? Fantastic seal. Throw some comments, ask your questions because today we've got the Bitwise boys back in the house. I'm talking about Ryan Russ Muen, head of research over at Bitwise, and Matt Hogan, CIO. Today, we're going to talk about why Matt believes that now is the best time in history to purchase Bitcoin on a risk adjusted basis. We're also going to talk about why stable coins are the answer to the US debt crisis and how

they will enable U, the US dollar to extend its time frame as the global reserve currency. We're also going to talk about Circle's IPO filing and so much more. Now, if you guys want to hang out with me on a daily basis, we got a Telegram group where you can know about the guests that are coming on the show ahead of time. Help me think about what questions to ask them. So, hit the link in the show notes. Join us in Telegram. Today's episode is brought to you by Moon Pay. Trade crypto fee free, fast, and on your terms. And Coin Shift powering top crypto treasuries with their yieldbearing stable coin, CSUSDL. Matt, Ryan, welcome back to the Milk Road Show. It's so great to be here. Excited for it. Likewise, always.

Always great to have you guys. Always great to have you guys. Okay. Um, let's start out uh with a a little bit of a a a zoom out on uh we've got a massive shift that's been happening in macro over the last several months uh with Trump coming in and this new fiscal regime. Uh what's your current take on macro? How are you thinking about it? There's so many things happening. I mean, today is liberation day. Maybe we finally get some certainty. I hope and we can move forward. I don't know. I can't tell. What What's your guys thought on the current macro setup? Oh man, I can't wait to hear what Ryan has

to say. I find it annoying. Annoying is the word I have for the current macro setup. There's so much good things going on in Bitcoin specifically and crypto more broadly that we should be ripping to all-time highs right now. And because of this macro volatility, we're just a wash on the sea of Trump's tariffs. Um, uncertain of where we go next. It's annoying. I can't wait for it to be over. I'm with you. I want some certainty. I care less about what it is. I think once we have uncertainty baked into the market, the fundamentals of crypto will take back over and we will be back at all-time highs. I've actually been tremendously heartened by the strength of Bitcoin in the face of this

macro uncertainty. Right? Since the election, I know everyone's hyped about gold. Since the election, Bitcoin has strongly outperformed gold. It's strong. There it is. It's strongly outperformed the S&P 500. It's crushed the cues. It's in a position to race to all-time highs and then beyond. But we have to get through this uncertainty. So, I find it annoying. That's my word for it. I'm annoyed, too. Thanks, Matt. Can we Can we call up Scott Essen and Trump and let them know this? They should know that we're annoyed, right? They should know. They should know. Let's Let's Let's Maybe we maybe we'll get there today, but let's get past this. Let's get over over this and uh and let's get on to the real stuff in crypto. That's

for for those listening. I just want to I've got Matt's tweet up here and uh this this is I feel like most people aren't noticing this is returns since election day. Bitcoin up 24%, gold up 14%. SPY down, QQQ down. So that that's actually nice. That's that's reassuring to see that. Yeah, it is reassuring that we've we've outperformed. Um, I'll also say it says something important about what's going on in the macro space, which is the government is getting more heavily involved in the economy, and that's been bad for equities and good for things that don't pay attention to the government, which is Bitcoin and gold. I do think it's it's making a

pretty bold statement about what wins in this environment and what doesn't win in this environment. Ryan, would any thoughts to add on the macro side? Yeah, I think that's that's a great point that Matt just made. kind of plays out that thesis in real time around the importance of a store of value that's untethered to the traditional finance system that's untethered to any one government or any single government. So, I think that's a really uh really interesting thesis that we're seeing play out in real time. I agree with you guys. I'm frustrated by the uncertainty in the market. I do think we're closer to the end of the uncertainty than the beginning. And I think that is really bullish for where we head from here over the next few months and through the end of the year.

Before we jumped on this podcast, I was thinking a bit about the price predictions that Matt and I made and our team at Bitwise made going into 2025. I know we're a ways away from there, but I do think as we move through this uncertainty, we move past this, you know, waiting on pins and needles every single day for some new tariff to drop or some crazy thing to happen in DC. I think we'll get closer and closer to crypto reaching that escape velocity that we anticipated for 2025 at the end of 2024. So frustrated by the uncertainty, but I I remain excited about, as you guys mentioned, when crypto fundamentals take back over and the uncertainty is behind us. And I think we're closer to that point than most of the market believes. It it's it's a good point and

I'm glad you brought up uh your predictions from last time you were on the show because one thing I'm asking a lot of people right now is have your predictions changed? And with with regards to Bitcoin, I think there's there's a lot of people there maybe shifting their thoughts on altcoins and how the cycles will go from here. Uh not to say that altcoins won't come back or anything like that, but the timeline might be a little bit different. But with regards to Bitcoin, a lot of people are saying that their predictions haven't changed and that this really is just a a bull market dip. Are you guys feeling the same?

Yeah, look, uh you know what are predictions without conviction, right? We we made those predictions thinking long term about what's driving Bitcoin, Salana, Ethereum, and Coinbase higher in 2025. And despite some short-term headwinds or choppiness or whatever analogy Matt used at the beginning of this about being a drift in the in the macro sea, despite any of that, I believe that we're still headed to those highs by the end of 2025. And uh you know, this gives an even better entry point for investors who, you know, are with us with that conviction. Yeah. You know, the way I always think that during bare markets or choppy periods, the market ignores good news, but it doesn't disappear. It gets stored as dry powder for when that volatility removes. And if

you think back over the last few months, boy, have we had a lot of good news. The US established a strategic Bitcoin reserve. I believe they're going to actively buy more Bitcoin before the end of this year. We found out that Abu Dhabi is buying Bitcoin. The SEC removed essentially all of its negative lawsuits against the crypto industry. People think we're going to get stable coin and market structure regulation before the August congressional recess. It's been a clean sweep of everything we want, right? This is a market that should be already at 150k and going higher and it just hasn't been able to because it's liberation day today and that's all that people can focus on. I do think once

that is removed, we will get to those all-time highs. I have a stronger conviction in our 200,000 December Bitcoin call than I did when we made it. I actually feel better about it today than I did back then because there's been so much delivery of good news in the interim. Yes. Yes. I love, man, I love it when you bring that that conviction to the show. So great. That's what we need right now because there's just the the the the stress and the dread on crypto Twitter is so different. And I think for you guys, you live, you know, we all live in in an echo chamber.

We live in a bubble. And you guys are you're you're going to Dash. You're talking to institutions where there is so much bullishness right now because they're not down bad because they haven't been here for, you know, one, two cycles and they're tired of this and there's so many people that are just like quitting right now. They're just done. They're fed up with it. But I think you really like I keep saying and I I can't say it enough like just hold on everybody. Like just hold on. Don't don't leave now because if you leave now it's possibly the worst time because as Matt said we've never we've never had a setup like this before. Uh this kind of connects into a memo that you wrote recently, Matt, where you you said you called it the great d-risisking of

Bitcoin, uh highlighting the some of the the things that have happened, as you said, with regards to the strategic Bitcoin reserve and governments and sovereign wealth funds buying Bitcoin. Why why do you believe I mean I love the statement that now is the best time to buy Bitcoin on a riskadjusted basis? Give us the uh the thesis for that. And actually, let me let me pull up an image to start you off from your recent memo. Yes, the new Liberty Standard. I love this image so much. You know, I I I wrote that memo about the first time that I really heard about Bitcoin was when it crossed a dollar in in February of 2011. And I mentioned in the memo that I I ran a meeting and uh you know,

at the end of that meeting, we had done a discussion on Bitcoin. I could have gone out and bought $1,000 of Bitcoin. and I'd have $88 million today. And uh instead I left the office and got a cup of coffee, which is a true story. Uh it's a very expensive cup of coffee. But then I I use this as an example because let's say I had decided to buy $1,000 of Bitcoin. The largest exchange in crypto at the time was New Liberty Standard and this is its terms of service. You can buy bitcoins by sending a PayPal payment to this address. I try to process it in 48 hours. This is a personal hobby.

Everything on this site is legal as far as I know. So, so, so like, like it's easy to say today I should have gone and bought a thousand dollars of Bitcoin, but at the time it meant sending $1,000 to a random dude who said it maybe is legal what I'm doing. Like, there was just so much risk. And if you think about that's been true throughout crypto's history, we had trading risk. Then we had custody risk. Where would I have custodied my crypto? Probably at Mount Gaus. like oh that didn't turn out so well right and then we had uh regulatory risk and then there was the risk of would institutions adopt it and you know would we ever get uh an ETF there were just so many risks in crypto

all along the way that from a riskadjusted basis like of course from an absolute basis I should have gone out and bought Bitcoin when it was a dollar but adjusting for all the risk the trading risk the custody risk the regulatory risk etc It was a terrible investment. That's why I didn't do it. You shouldn't feel bad if you didn't do it as well. The point I was making to get to this idea that this is the best risk adjusted moment to buy Bitcoin is history is we've removed all of the existential risks. The last existential risk, the one that I was still worried about as recently as six months ago was that the US government would ban it. that one day the US government would feel the dollar was threatened by Bitcoin and it would ban

it the way it effectively banned the private ownership of gold in the 1930s. And that was still a major risk. Like your investment could go down a lot if that happened. But now we have a strategic Bitcoin reserve. Now it's in the US's interest to support Bitcoin. So we've removed all of the existential risks from Bitcoin. And yet we still have a 10x to go before we match gold. And I think Bitcoin will ultimately be much more than gold. So there's still 10 20x more upside and very little of this existential risk on the downside.

There's no risk that Bitcoin is going to zero. It's like an incredible setup. That's why I've been so excited to be on the road and sort of help people realize this. The best moment in history to buy Bitcoin uh from where I sit. When when you're telling people this is everybody like thumbs up, I get it. Like let's go 1% 3% 5%. Like what's the what's the reaction you get? Cuz the way I'm sitting here like it's like duh. Don't know. I don't know why you wouldn't be in. I agree. I mean it does resonate. I I'll say I gave a talk at the Baron's top 100 conference a couple weeks ago which is the largest 100 adviserss in the room in in the US,

right? These are the big dogs managing billions. And uh four of them told me afterwards that they bought Bitcoin during my talk. So I will say that this message res like on their phone when they should have been listening to me. Um I will say No, I think they were listening actually. That's right. You're right. It worked. Your sales pitch worked. Totally allowed to to to to buy Bitcoin during my talk. That's fine. Um but I do think it resonates. I think it's a very simple framing. One of the big challenges in Bitcoin is we come with all this anchor, all this history, all this Silk Road and Mount Gox and all these negative stories and really reminding people this is a different asset. This is an asset that Larry Frink just wrote in his annual letter could

replace the dollar. I mean, we are in a different era of Bitcoin. And I think, you know, explaining it this way sort of wakes people up. I do think it's an effective framing that that is bringing people over the line. Uh how do you guys think about um two things I want to touch on is one is uh as the as the US and different governments start to buy Bitcoin, there's this moment of are we are we accepting that Bitcoin is going to be a new global reserve currency and does that push the US dollar away from being the global reserve currency? and is that

a risk for the US in the long term? Uh how do you think about that? And then I also want to touch on like Bitcoin versus gold within that correlation which does not seem to be correlating right now as gold continues to go up. Although actually I shouldn't say that Matt you pointed out that go that it is up since the election. Um yeah, I can take one more stab at this. This is a topic I care about deeply and then I promise Ryan I'll shut up. Um keep going. Keep going. I'm over here buying Bitcoin while you're talking. So, we're No, you're buying GameStop. Don't lie.

That's right. That's right. Uh, we'll get to that in a sec. We'll get to that. Uh, you know, here's the thing that I really care about this. So, so Cliff Asness, who runs AQR, uh, you know, an incredible investor, incredible hedge fund investor, wrote a letter after the Bitcoin strategic reserve was announced and said that this is akin to the US establishing a Chinese yuan reserve, right? promoting something to replace the dollar as the world's reserve currency. And that's actually precisely wrong. I'm a strong proponent of the US dollar being the world's reserve currency. I know we'll talk about how stable coins can extend the period of time that the US dollar can serve as the world's reserve currency. It's good for

America, which is a country that I live in. But we have to accept that there is a possible world in the future where we seed sole ownership of being the world's reserve currency. It's happened to every world reserve currency in the past. We have highly, you know, accelerating debt and deficits. It could happen to the US in the future. And if it does, what do we want to happen? Do we want it to go to a non-political currency like Bitcoin or do we want to go to a currency of one of our enemies, right, or another foreign government? And all the strategic Bitcoin reserve does is it tilts that alternate stream that says if the world wants to move off the dollar as the sole reserve asset, maybe the future will be dollar and then

apolitical bitcoin. And that's a lot better future for the US than going from dollar to Chinese yuan, which is the other option. So we can't ignore the possibility that this might happen in the future. And I think it's very forward thinking to sort of aim the flow of where we end up to something that's at least neutral, which is what Bitcoin is. Uh Ryan, let's talk about uh GameStop's announcement of buying Bitcoin. We're seeing more corporations jumping into buying Bitcoin. We've talked about governments, corporations are doing it, too. Uh what what are your thoughts on this this movement of more corporations buying Bitcoin and the impact that that will have? I think we're just at the

beginning of seeing non-crypto industry corporations purchasing Bitcoin as a treasury asset. So, GameStop just announced that they raised one and a half billion dollars or uh to to purchase Bitcoin. And I think what people don't understand is that's going to make them the fourth largest, as you have on the screen here, the fourth largest holder of Bitcoin among public companies. So, they're automatically jumping past a ton of Bitcoin miners, a ton of other companies like Metaplanet and others who have adopted this Bitcoin standard in recent months with one purchase. Now, GameStop, of course, is a bit of a unique equity, a bit of a unique investment because it's lived in this realm of Wall Street bets and and

meme stocks now for a couple of years. But I think this is a broader signal of investors or rather executives at companies recognizing that investors will reward companies who invest in Bitcoin. We've seen it happen with Micro Strategy, which went from a relatively small technology stock, to now be included in the NASDAQ 100 following its immense Bitcoin buy. So I think this is more of a signal of what's to come. And there's a really nuanced kind of accounting rule that changed the beginning of 2025 where it made it a lot less risky talking about the d-risking of Bitcoin.

This is one of those elements that d-risks Bitcoin as an investment for corporations. And that rule essentially said that before 2025, companies that invested in Bitcoin could only recognize a change in value when they wrote down the value of Bitcoin if the price fell. they weren't able to get a benefit in their earnings if the price of Bitcoin rose. So, it was a huge risk move from an earnings perspective or from signaling to the market what's happening with a company's growth in earnings if they purchased Bitcoin. But now, at the beginning of this year, that rule changed and now companies can get the benefit of Bitcoin appreciation on their balance sheet reflected in their earnings. I think that's a huge thing that's going to transform the market. We

had 70 plus companies buying Bitcoin before that rule change went into effect. They were buying Bitcoin when in the best case scenario the investment would stay flat and in a you know worst case scenario the the investment would fall and they would have to take a huge hit to their earnings. That's no longer the case and I think we're starting to see more non-crypto companies recognize the benefit they can get from investing in Bitcoin as a treasury asset. I think the US investing in Bitcoin as a strategic reserve asset certainly derisks a corporation doing that and looking dumb or coming off to investors like they don't know what they're doing.

Say look the US government is doing this. Some of the best investors out there Howard Lutnik uh you know Scott Bessant you have David Saxs they're looking to bring Bitcoin into the US government. Why shouldn't we be doing that as a corporation when we can get a benefit to our stock price? So, I think a lot more companies are going to buy Bitcoin this year and and GameStop's more the beginning of the trend than again the the people that are catching the falling knife here. Does that include Vanguard when you say more companies are going to buy Bitcoin? It it looks like it. I actually have to give this one uh uh to to Matt here because him and I were chatting last week uh and and I think he discovered this kind of mid-con conversation and we

were both both laughing at it. Yeah. If you guys are are listening or not watching the screen, uh Vanguard is the number one holder of GME and GME now is going to own Bitcoin. Therefore, Vanguard will also own Bitcoin. Uh and if you know anything about Vanguard, they're they're certainly not the the going to be the first buyer or the most bullish to buy Bitcoin, but you can't avoid it. It's it's it's happening. And I mean, this kind of connects into uh another topic that I wanted to discuss on before we get to stable coins, which is um the impact of of index funds. We we've talked about this with you guys before, and I know you guys just launched a new index. Uh let me pull that up here. Um

the Bitwise, man, you guys got the longest names on some of your indexes. the Bitwise Bitcoin Standard Corporations ETF, uh, tickers on N, O WNB, um, which is a an index of all the companies, all the corporations that hold Bitcoin on their balance sheet. Super interesting index. Uh, tell us a little bit about this and what the uh, the impetus was to launch this. C can I just say when we when uh when we were getting ready to launch this and I learned what the name was, I sent Matt the the Derek Zoolander meme of the school for kids who want can't read good and all like this is the longest name of a fund I've ever seen. So I agree with with you there, but I'll let Matt talk

about the index and the and the fund. Yeah. Well, I I'm with you. I like the ticker own B, you know, own Bitcoin. So we made it up on the ticker. gave up gave up on the name. Thank you. Um, look, we think this is a major theme. We think this is a trend that has legs. So, it's um it's it's companies that own at least a thousand Bitcoin as a as a treasury asset uh weighted largely by the amount of Bitcoin they own. So, Strategy is the largest holding, MEA, CleanSpark, etc. But we think this list is going to extend to a large number of companies. You know, the thing I was thinking about when Ryan was talking about GameStop starting to buy Bitcoin is I know a lot of people look

at this development and think it's all these weird companies like Michael Sailor and his messianic view of Bitcoin and these crypto miners. Um, but if you think back to like the early days of asset managers in crypto, it was unusual companies, too. It was it was Bitwise, it was Grayscale, it was family-owned businesses like Van and Fidelity. And now, guess what? It's Black Rockck and Invesco. And I think the same thing is going to happen here. I think we're going to, of course, it's people on the edges who do this first, but I think we're not that far removed from large cap S&P 500 companies own Bitcoin on their balance sheet as well. So this this ETF will kind of capture those

forward-thinking companies and I think there's a lot of demand for this kind of exposure from investors and I think it's a great set of companies. Okay, I want to shift to uh I I want to shift to stable coins. But even before we go there, I want to talk about L1s and altcoins. I hate that term because it's like 9 million tokens technically. Uh but uh I want to talk about the the rest of the space. But before we do, we just need to take a quick moment to hear from our sponsors who make the show possible. We'll be right back, folks. Let's be honest, everything in crypto comes with fees. But here's a nice surprise. Moonay Balance doesn't take a cut. You heard that right? No

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is trusted to manage over 1 billion in business treasuries onchain including a gitcoin and hundreds of leading institutions. Check it out. Seycus is gaining traction at milkroad.com/coinship. All right. Uh let's talk about your thoughts on on L1's. And so like the thesis on Bitcoin feels very clear right now. And I think that most even even crypto Twitter feels relatively clear on Bitcoin. It's the rest of the crypto market that is really causing the absolute storm, panic, everyday meltdown mode, stress, never ending, when is this going to end, rage

quit, goodbye. Like that's that's that's what's causing this really in the end. So, uh, how do you how do you think about ETH, Salana, the the rest? We don't need to go into memecoins or anything like that. Let's stick with the, uh, the the the top of the the market cap and the L1's. How do you think about them right now and where where when we'll see maybe a rally there or what area of altcoins you think the next rally might come in? Yeah, I'm happy to to take this one and Matt, you can build on it or disagree if that's if that's your uh take on it.

But, you know, look, I look at Ethereum and Salana as technology platforms. My investment trajectory for those is decades long. It's not a one, two, three year outlook because I believe that these technology platforms are going to fundamentally change the way that businesses operate, that we interact with businesses as consumers and as businessto business interactions occur. And I I think that is a tremendously huge market. I felt that way since I learned about Ethereum early on in my crypto days. And I have strong conviction that that's still the case. I think the reason I think there's two reasons that there's so much despair in the market when it comes to you know altcoins or these competing L1s or DeFi

applications rather and I think on the one hand you have a lot of retail investors who probably went out too far on the risk curve and bought assets that have very low liquidity and when we saw a big selloff those were hit the hardest and now they're feeling the pain of that and kind of extrapolating that pain out across everything that isn't Bitcoin because Bitcoin's held up the most I that is unfortunate for those investors where that was the case. I don't think that means the thesis for Ethereum and Salana is dead over the long term. I think it's a bit of a reset on how the market is weighing further out risk assets versus the major blue chip crypto assets. And then on the other hand, you know, Matt and I spend so much of our time going and talking to professional

investors. Over the past month, I've been in Salt Lake City. I've been in Southern California, San Diego, Orange County, Los Angeles, talking to professional investors. These are wealth managers that manage billions of dollars on behalf of clients. They're still very much interested in crypto as a sector. They're still in many cases learning about Bitcoin. They previously heard of it, of course, because you have to live under a rock to have not heard of Bitcoin, but they haven't really taken it serious until the ETFs went live and until this regulatory shift is happening with the US government and regulators.

So, now they're learning about Bitcoin. But what I've seen happen in the past couple of months, in these meetings, and in these presentations and discussions is that the light bulb is turning on around their curiosity further out into the crypto ecosystem with things like Ethereum, with things like Salana. And so there's just a huge misunderstanding of what these crypto assets are by traditional investors who control billions or trillions of dollars worth of wealth. And it's not just a misunderstanding. Some of them don't even know it exists. Many of them mispronounce Salana or Ethereum when we talk about it. I think that what do they say? Uh you you know I had someone say Ethereum sounds like a drug. Uh another one was Sena which I thought was

interesting. I hadn't heard that a lot. Yeah. Yeah. Sena really wow hadn't heard that that is great to hear that is that really captures right we've been talking about these for for years but I think that just goes to show how early we actually are in the adoption and investment life cycle for these technology platforms which I do believe are fundamentally going to change the way that many businesses and consumers and investors operate and I think that's why I'm still so long-term bullish on these as a sector of the crypto economy yeah I I love that take and I agree with the long-term bullishness, but I have a I have a nuance to it uh which which Ryan may or not may not agree with, which is uh I think alt season is dead. I think we're

not entitled to alt season and I think the reason we historically had alt season was that crypto was a purely speculative asset class and all of what we were betting on on Ethereum, Salana, etc. was in the future. And I think where we're at now is we're in the fundamental era of crypto. And in a fundamental era of crypto, you won't have the same sort of clear seasonality where everything rallies together and you can throw a dart at the wall and whatever you hit will go up. What you'll have is a market where individual assets respond to individual fundamentals. So why did Salana do so well last year?

Well, the fundamentals of Salana last year were fantastic. massive developer activity, strong community activity, memecoin activity, huge revenue growth. Put those together, you have an asset rally. Why did East fumble? Because its fundamentals weren't as good. Why is Bitcoin doing so well right now? Because its fundamentals are strong. So, I think we sort of have to scrub from our mind the idea that we're entitled to alt season where everything rises. First, Bitcoin, then the like other 10 assets, and then the really speculative stuff.

That was when crypto was driven purely by speculation. And I think now we're increasingly driven by fundamentals and that's going to be differential performance. I'm very bullish about those fundamentals. I'm actually bullish even on east fundamentals long term, but I do think it's going to be asset specific to a greater degree than it has been in the past. I think the seasonality has changed. And who has nicel looking fundamentals right now? because there is some nice fundamentals beyond what you just said.

DeFi, DeFi is the one area that really has strong fundamentals. Plus, like a the tailwinds, who are they going to support? They're not supporting meme coins. They're supporting DeFi. Massive DeFi summer 2.0 is coming. I think DeFi assets are significantly undervalued. Huge regulatory unlock. Many of them are already at all-time highs on TVL. It still is like magic internet money that feels incredible when you first encounter it. And if you believe stable coin aum is going to 10x and you believe you're going to onboard millions of people into crypto wallets, all of a sudden they're just a sliver away from borrowing money on a just a sliver away from unis swap. Whereas right now

they're like six entry steps away from doing that. And when you put all those together, I think you get a massive I'm not saying it's going to happen in June or July, but I think you get a massive DeFi summer 2.0 where the market revalues these assets in a major way. It's one of the areas I'm most excited about in the market. Let's let's manifest that. Actually, I had I had thought if the macro does time happen quick enough and turn around quick enough, which none of us know. It might, you know, could be end of summer. Tough to know right now, but there's a possibility that the turnaround could happen in the macro in time for summer and then we could get DeFi summer 2.0. I really like that take. Let's go. I like it. Let's make it happen. Let's make it happen. Uh, okay. Let's uh oh I have I

have one more question actually on um on L1's uh with with index indexes growing and most a lot of the indexes are going to be you know top 10 top 50 top 200 is that is that going to keep a lot of these ghost chains and these like dinosaur chains around because they'll they'll just they'll they'll be they'll get buying from the index that'll keep them longterm. Like I I've always struggled in my mind to place, you know, the the the Cardanos of the world where there's not a ton of activity on the

chain and but the market cap is just insane in relative to its fundamentals. Like is there going to do you think the indexes will save some of these L1s? Yeah, you know, it's an interesting question. I think a lot of it revolves around index design and you can get creative or perhaps strategic is a better word uh for it when designing indexes to screen out certain criteria that these you know quote unquote ghost chains meet in order to remove them from a market cap weighted index. So, so what do I mean by that? Because that felt very jargony to me is that if you have a top 10 crypto asset uh index ranked by market cap, there's other criteria that

the assets have to meet beyond the fact that just their market cap is in the top 10. You could screen out things like memecoins or you would screen out things like stable coins, of course, and you can also screen out things like ghost chains, but you just have to get creative with the way that you do that or strategic with the way that you do that. I also think that there will be other indexes around crypto that will grow in popularity. At Bitwise, we launched a DeFi index in 2021 which invests in the top 10 DeFi assets by market cap. I think that's a sector where you don't have this kind of ghost chain creep into an index like that because fundamentally DeFi assets really don't work the same way that these, you

know, ghost blockchains that launched in in 2017 or what have you and are still ranked by market cap on Coinbase when a new user comes in and looks at one of the top trending assets, you know, fundamentally they they are a different uh type of type of asset and because of that you get a better indexed approach in some instances when you just take a clear market cap. weighted index for other sectors outside the top 10 crypto assets. But yeah, of course, you can clear other assets for entering the index uh for different eligibility criteria that would help screen out some of these ghost chains. I think that's likely to to happen as indexing grows in popularity in crypto just as it's a very popular way to get exposure to equities.

Yeah, it's it eventually the new the new better assets will win. Mhm. Um, you know, Bitcoin Cash was a top 10 asset for a long time and it's now 25th uh on Coin Gecko. Litecoin is now 23rd and that was number two or three for a long time. Um, so eventually the better assets win, but it's slower than all of us want. You know, there there may I can't report for sure, but there may have been some excitement at Bitwise when Bitcoin Cash fell out of the top 10. Um, so you know that but but eventually you know Salana bubbles up right and eventually these new assets

bubble up. So you're probably right on the margin but it doesn't it doesn't preserve them in amber um if this space is going to 10x the the best assets will rise to the top. Okay. Uh let's shift to stable coins and everybody knows that the US has a debt crisis. I mean every government in the world has a debt crisis. Let's not pick on America. Uh but um America's economy takes the bulk of the attention. Uh and one of the the biggest challenges with the debt crisis is who's going to buy the debt moving forward. And there's a lot less buyers now than there's been in the past. And so there is this fear of oh my gosh like and I've heard so many different

macroeconomists, not so much crypto macroeconomists talk about their theories of okay, who's going to buy the debt? But not a lot of people are talking about one theory which Scott Bessett has said himself which is that it could be stable coins. So here's a quote I've got up on screen here from Scott where he says we are going to keep the US as the dominant reserve currency in the world and we'll use stable coins to do that. Can you guys break down how stable coins could be the solution to the US debt crisis? Sure. Yeah, happy to take that. I mean, first, what an incredible quote. Every time you're bearish on crypto, go back and read this quote. Uh, if you don't think stable coins are going to be a big deal, uh, I don't think you're listening

to the US Secretary of Treasury. I mean, it's absolutely incredible. Remember, this is a position Gary Gensler wanted, uh, after he was SEC chair. This was his goal. And instead of that, uh, we have we have Bessant saying things like this. It it's it's what you said. We need someone to buy the debt. It used to be China. Uh Russia used to own a lot of debt, right? It used to be foreigners. They're not buying our debt anymore. We seized the Russian Treasury assets, which was a giant warning to people uh abroad to do it. And China now sees us as a geopolitical um you know, foe and is not going to be buying our debt either. So, so who will?

Well, stable coins are like this gift from God to the US because we can export the dollar all the way around the world and people in any economy that's facing high inflation can choose to save in stable coins instead of their local currency. and people in countries that have difficult financial rails where it costs five or 10% and takes five to 10 days to settle a transaction between country A and country B can use stable coins, keep their money in dollars and transact instantly over a blockchain.

Stable coins are already one of the largest marginal buyers of US Treasury debt and that's before we have regulatory certainty and before the space goes from 250 billion to you know a couple trillion dollars which I think is the direction of travel. So, uh, the US needs someone to buy their debt. It's going to be it's going to be stable coins, right? It just is. It's amazing that it happened because we would be in a real panic without it, but I think they're going to sort of save and extend the US dollar. Brian, anything to add on uh on your side here? Yeah, I think, you know, Matt made a good point there that we're we're just the beginning of the stable co stable coin boom. I think a 200 billion market cap or 250 billion market cap of

stable coins is very very small and we'll look back at stable coins in hindsight and see that we were at the beginning of a a new era uh of a very new technology and it is a gift honestly because what were we going to do to find additional demand for for treasuries and what stable coins do is extends the ability to access dollars and buy that access or increased demand for treasuries across the world digitally and instantly. And as DeFi grows, like we've been talking about, and as Ethereum and Salana and other technology platforms or blockchain based technology platforms grow, stable coins will grow alongside them. And I that's just going

to move stable coins up this graphic that we have here of the largest foreign holders of US treasuries. Today, stable coins sit around 17th of the top 20. I think I will not be surprised to see them in the top 10 in a couple of years. And that's a function of two things. It's a function of, you know, other countries divesting from treasuries, but I think it's mainly a function of stable coins growing in use and stable coins growing in functionality and popularity globally, not just in the US, and not just to corporations, but to individuals alike. So, here's the question.

What does crypto look like if stable coins go to multi- trillions, which is what what we all believe is going to happen quite quickly. I think largely as a result of the regulation that as you said at the beginning of the episode, Matt, is coming like in the next few months, like way faster than anybody really thinks it is. What what what does crypto look like? What's the what's the wider impact? I think stable coins are a fascinating and very very appealing on-ramp to crypto for many users. If you think about the flow of using something like USDC on Coinbase, first you can buy USDC from your bank account instantly

for zero fees. So right away you have this movement from traditional dollars in your bank account to stable coins. And then what's the next thing that you can do is you can move that to a Coinbase wallet which is a very seamless experience. And now you can invest it in DeFi, which you know on base is extremely inexpensive. And so now you've gone from dollars in your bank account to Coinbase where you can earn yield just by holding USC on Coinbase or you can move it to your Coinbase wallet with relatively low friction and start using things like Morpho or Moonwell or other DeFi protocols. And I think it just moves you, it moves users through the crypto ecosystem at a faster rate than we've ever seen before. So I think there

are tremendous on-ramp for crypto. And I think what that means for the broader crypto economy is growth, right? More users lead to more revenue leads to more use cases, leads to more activity from companies that are coming in and looking to take advantage of that growth or get a piece of that growth. So I think net net it's only positive for crypto that stable coins continue to grow in popularity, continue to grow in size and just onboard more users, more businesses into the crypto economy. Absolutely. It's it's it's it's massive.

There are 84 million crypto wallets today. What if there were a billion? Do you think the price of Salana would be higher or lower? Sometime investing is not that complex, right? Sometimes you can boil it down to really simple equations like that. And if you have confidence that we're going to get to, you know, a billion people using stable coins, which I think we will, it's really hard to imagine talking about a crypto industry that is, you know, smaller than some individual companies in the world. It just doesn't make sense to me. Is is there bipartisan support for the legislation from what you guys know and what you're seeing? Because there's there still is. I mean, it still has to go through legislation. So, are is it going to whiz through and is is

everyone going to support it or is there going to be Dems that are slowing it down? There's Elizabeth Warren, but most of the Democratic party is in favor of stable coins. I mean, some people shout and and just love to be uh contrary, but there's broad bipartisan support. The one thing both parties in the US can agree on is running up debt. And so, they need someone to buy the debt. It's going to be stable coins. That's why there's so much support. Crypto wants it. Wall Street wants it. Democrats want it. Republicans want it. Trump has made it a national priority.

This thing is going to happen. We don't know the specifics about what the law will be, but I have every confidence that we will get comprehensive stablecoin regul regulation that brings mainstream institutions into the space and aggressively exports dollar demand around the world. It's it's like the thing I have the most conviction about in crypto over the next six months. Yeah. Could could I just add to that that I think we're seeing the same thing happen here with stable coins in a way that we saw with the ETFs in early 2024 and late 2023 and that in the past couple of months you've had the CEO of Bank of America say that they would likely launch a stable coin, the Bank of America coin once regulation is in place and legislation's in place for stable

coins. You have Fidelity exploring their own stable coin. So what you have now is not just these cryptonnative companies like Circle and Tether that are launching stable coins. What you have is, you know, pressure from these large financial institutions that are deeply deeply entrenched in the traditional financial ecosystem that are eager to get into the stable coin business. And what does that mean? That means lobbying dollars. That means other external forces come into the fold for the regulators and for the lawmakers. And I just think there's really very little reasoning for either side of the aisle to be anti-stable coin for all the reasons that we've spoken about. And and I'm confident that stable coin legislation will pass this year within

the next six months. Were you surprised to see Circle file so quickly for their IPO? I don't think so. You know, Circle's been looking or thinking about going public for years now. the the climate for IPOs, not just in crypto, but for all IPOs, was uh pretty bleak over the past few years under the Biden administration and and you know, I I think we saw Gemini uh in talks to to go public. Kraken is another one we believe will go public this year. And I think there's a lot of pentup demand by these companies that are looking for uh looking to go public. And so, you know, Circle is one that I think a lot of people will be interested in. It's a company that generates, you know, one and a half billion in revenue over the

past year. It's a very profitable business, right? What do you you know, Matt loves to use these analogies of comparing two companies, which I think is very very uh illuminating, right? And I think would you rather invest in Circle which does one and a half billion in revenue and is a highly profitable business model or would you rather invest in Yelp which also does one and a half billion in revenue or would you rather invest in Shake Shack which does less than one and a half billion in revenue when you know how large the stable coin ecosystem is going to be when you see that there's so much bipartisan support behind stable coins that the traditional banks are looking to get into the stable coin business and I think Circle has a huge head start given that it is the largest US-based issuer of stable coins. It already has

one and a half billion in revenue and already has a distribution agreement with Coinbase where anyone who uses Coinbase, which is the most popular crypto app in the world, automatically gets USDC thrown in their face and can automatically earn yield if they just buy some USDC. Matt, any takes on Circle ID? I love that. That was great. I mean, I think it makes sense for them to get out now while there is huge upside view on the growth of stable coins and not yet any competitors. I get asked all the time, how can I invest in stable coin growth?

And you can say things like, oh, you can buy Coinbase, it's 17th of their revenue, or oh, you could buy ETH, it's roughly 10% of ETH fees. Uh, if you could say, oh, you could buy Circle, it's a 100% of their revenue. That's going to get a lot of demand. So I think you know getting out now where they would be the only real pure play public equity uh in a very hot market would attract a lot of attention. So I think it makes all the sense in the world. Okay, last question before I let you guys go and I realize we're a few minutes over time. So sorry to whoever your next meeting is. Uh if uh the one risk the one risk right now coming back to what we started the conversation with is the macro side. That is the one thing that we we can't control. And the the

big risk would be if Trump and his government decided that they really wanted to go further down the path of austerity. That would that would be bad and everybody knows that. Do you think that happens? No. What government doesn't push the easy button? I just haven't seen it since we we discovered the easy button in 2008. And since then, every time there's even a ripple of uncertainty, we push the easy button and we win votes and we aren't punished and we push the easy button and you know, grease happens and we push the easy button, whatever it takes. And uh you know, the taper tantrum happens and we

push the easy button. Some banks run into trouble and we push the easy button. every time we've pushed until that pattern stops repeating, I'm going to believe it's going to keep repeating. I could be wrong. And if Trump goes hardcore austerity and we cut $2 trillion from the budget deficit and we go hard in on tariffs, that would be a difficult time for crypto assets and all risk assets. Um, but I just don't believe it. Right? Every time a government even tries to do it, they get thrown out on their ear. The Trump administration is very good at listening to public sentiment. I think that easy button is so big and glows so red that governments just can't help but push it.

And I think that they will. Ryan, you're nodding your head. You you agree. Yeah, I agree with the easy button sentiment. We've already we already know that Jerome Pal investment have have spoken. We already know that Trump investment want interest rates to come down. We already, you know, know as Matt mentioned that when it comes to times of difficulty in times where public sentiment is very low around the economy. What happens is the Fed prints more money. It drops interest rates and it goes back even before 2008. It goes back to the 70s and the 80s where you really had the political influence coming into the fold. It's supposed to be an independent entity, the Fed from politics, but in reality it hasn't been

for many decades. And I think we'll continue to see the pressure coming from Trump and Bessant and the administration on drone pal to cut interest rates in the near future. I think it's likely we see cuts this year. I think it's highly unlikely we see interest rate hikes and you know as long as uh you know sentiment in the market doesn't completely uh bottom out of everything. I think we're going to be going higher and I'm excited for for what that means for crypto. Everybody just be patient. Just just go touch some grass. Just be patient. Uh, sentiment will crash if you're not patient, but if you're patient, we're going we're going places here. I mean, I can't I can't It's It's so bizarre. Every day I'm recording and it's so bullish right now. Like, I don't

have a single person. Don't get me wrong, shortterm, yes, there is uncertainty. Nobody knows when it's going to end. So, there's some tactical decisions that need to be made with everybody's portfolio, but long term, it is just we've never had a better setup. Thank you so much for joining us again today, Jets. would really appreciate your time. Thanks for having us. This is fun. Let's do it again. Let's do it again. Let's do it again. Everybody, thanks for joining in. Uh before I let you go, I need to let you know that none of this was investment advice. Uh this should go without saying, but you should do your own research. Any investment you make, you should be willing to take that risk and think about it yourself. This is for educational purposes only. I am not your financial adviser. Neither is

Matt or Ryan. Before I let you guys go, if you want to hang out in person, I'm going to be at Consensus Toronto in May, May 14th to 16th, along with a couple other members of the Milkro team. We'll be doing interviews live on stage. We got a discount code for you guys in the show notes. Hit it if you want to show up to one of the best conferences of the year. Thanks for listening in everybody. Have a wicked awesome day.