Bitcoin Hits $75K as It Starts Catching Up to Gold | Bits + Bips

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Hey everyone, welcome to Bits and Bibs where we explore how crypto and macro collide one basis point at a time. I'm your host Austin Campbell, high scholar of Zero Knowledge Group here with my co-host Raoul Paluwalia, master of wealth, leader of Lumina, and Chris Perkins, the golden hand of CoinFund. We're here to discuss the latest stories in the worlds of crypto and macro and we have a couple of those to go today, but before we start, just remember that nothing we say here is investment advice. Check unchainedcrypto.com/bitsandbibs for more disclosures. And before we begin, a quick commercial break.

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All right, so before we get into the macro topics of the world, uh despite all of the turbulence, the conference circuit continues relentlessly in this space. I know DAS is coming next week, but Chris, you were somewhere interesting recently. Do you want to give us the download on FIA? Yeah, so I used to be on the board of FIA and last week I attended their annual conference. It's called FIA Boca. It's kind of under the radar for crypto people, but I'm telling you it's uh it's the place to be. And the reason why is that derivatives, as we've talked about, are probably the most important asset, I would say, in the crypto space. You know, as you're thinking about how the markets mature. Um and it's been really weird over the years. It's kind of ebbed and flowed with with with crypto

participation. There was a famous brawl, like literally, between SBF and Terry Duffy a few years back. And then the crypto people pulled back. Um but it's where every exchange in the world shows up, the intermediaries show up, the regulators show up. And this year a lot of crypto people showed up. I mean, I met with, you know, everyone from Kraken, uh Polymarket was there. Kalshi, I'd say the the two They were joking that the pretty girls in the room were Kalshi and Polymarket. Um but, you know, what were people talking about? Obviously, prediction markets. Perpetuals, absolutely in focus. 24/7 markets.

Hyperliquid was like kind of a little under the radar. Um just starting to be talked about. I don't know about you guys. I was watching Hyperliquid, you know, all weekend to see what happened to oil, you know, when after we bombed Kharg. But, um yes, super interesting times. And if anyone gets a chance, I recommend going. Um a lot of announcements, a lot of regulatory movement. Um what do I take away? I think prediction markets are going to have a tough go um going forward. Why? Uh because they're running out of friends in DC. Uh a lot of Democrats don't like them. A lot of Republicans will side with the states. And so I see there's some volatility on the horizon.

That said, you know, they're the prettiest girl at the dance right now. Everybody wants to dance with them. And, you know, and and prediction markets are here. Perpetuals, um a lot of focus on getting them in place in the US. Some of the problems we have is like outdated market structure. Um and like that kind of goes hand-in-hand with 24/7 markets. And so do we take out the intermediaries, like I testified in Congress a while back? Um how do you make it all happen? What happens if there's no expiry? And in speaking to Chairman Seeleg, um I you know, he's on a mission and he's he's going to get it done. Uh and then 24/7 markets, man. Like if if you if you cannot figure out 24/7, you'll be obsolete overnight. Uh many of the

traditional exchanges have views. Um the other thing is like that that's partners, right? Like Kraken is out there, you know, really pushing X stocks. You had um ICE with their OKX X announcement. And so, everyone's looking to, you know, who are their dance partners going into the future? I think a lot of deals were done behind the scenes. Uh but yeah, definitely a conference worth going. Totally different than than the crypto conferences that that I've attended that I typically attend. But I go every year. What do you think? >> So, here's my uh first thought hearing all of that. The prediction markets thing, which I know were a booming topic, you know, in the world writ large. How do you think integration of those markets is

ultimately going to play out in the United States? Because to me, it feels like to get that right, we've got to have it under CFTC jurisdiction at the federal level. I think a 50-state framework for this is going to largely break a lot of these things because the nuance between all of those will be catastrophic. We have enough regulators of financial products. But then the other part is I would imagine over time, regulators are going to have views on what kinds of trading activity is permissible, e.g. like insider trading problems, who can participate in markets, but also what kind of markets writ large are permissible. Like I saw a report on Twitter today of some journalist in Israel like being harassed and attempted to be bribed and then

threatened with death cuz he wouldn't report that a missile landed in Israel when it hadn't. And there was like millions on Polymarket writing on this. So, I'm curious as to how you think all of that shakes out. >> There's two things that I think about. The first is around insider trading. And I think this is an absolute joke. Um insider trading is illegal. Always has been, always will be. Sometimes it's hard to quantify, but to the extent that you blatantly use inside information and manipulate markets, you're on the other side of the law. So, good luck to you. And the CFTC did put out guidance, and they said, "Guys, let me remind you, insider trading is illegal, and we're going to catch you."

So, like, to me that's not even a discussion. Like, we >> It's a ramp. It Wouldn't you agree, Chris? I I was pitched by a hedge fund, and I said, "What's your edge?" I always say, "We have friends in DC." I mean, what are you kidding me? That's illegal. So, you I I agree, everything you're saying is right, but by the way, these this fund was run by like some 20-plus-year-old kids. They have no idea what they're doing. Well, I think, you know, what's the What do they say? FA FO? It's just a matter of time, right? Like, the law's the law, and like, this is an issue that we've dealt with with crypto from day one, where we kind of like ignore like, you know, common standards of law, and we're like, "Oh, it doesn't apply cuz I have this new shiny technology." Insider trading, illegal.

If you use a prediction prediction markets, illegal. You manipulate markets, illegal. So, I think eventually people are going to come around, and I To the extent something's on chain, it's it's probably easier to prosecute. So, that's one issue. Go ahead, Ron. Uh just briefly, I would say it's illegal, but it's happening, right? The day before the Venezuela raid, oil field services energy stocks ramped up. You saw people ramp into energy before the Iran conflict. You see uh kind of the Pelosi Act, and people are front-running Congress. So, yeah. People are saying, "Hey, if they can do it, why can't I?"

You're seeing growth in apps that track what Congress is doing. So, anyway, go ahead. Yeah, look, I I I don't even know what else there is to discuss. I did I did notice that Trump did talk about the Stop Insider Trading Act twice in the State of the Union. I think that's probably how he's trying to navigate ethics with the market structure bill, but who knows? Um but the other point, Austin, that I think is going to be the battleground is really gaming. Uh gaming is kind of outside the CEA, and so like how we define gaming is going to be really key. To me that's the battle because like and Kalshi's, you know, pretty um concentrated on the gaming side.

I think that's that's the that's going to be the battle. What products are allowed, which ones are not. And by the way, I've seen some amazing hires. Like I linked up with a buddy of mine who just took over the institutional um BD role for for Kalshi. World class guy. Like world class. Um so good investment going on. I you know, met with the Polymarket team. They're thinking about their business model, how they're going to expand it. I thought it was super exciting how you know, what are we seeing? We're seeing this massive collision, this intersection. How can I take what I'm good at? How can I take my distribution, my liquidity and extend it into new exciting directions? I mean, like Hyperliquid right now is doing like 30-something percent non-crypto products. And so like it's just so exciting to see these worlds coming together because I guess I'm the I'm the

bull in the show. Well, I'd be bearish. Go ahead. There we go. Here we go. I'm with you, man. I'm actually like very bullish on prediction markets overall. I think the question is what they're going to cover cuz one of the things I've been keeping an eye on is what Kalshi runs into in terms of like courts. And right now, there's been a split. If you look at US states that are ruling on is Kalshi what's doing covered at the state level and essentially gaming or is it covered at the federal level and more like CFTC contracts? The answer from several different federal judges has been none of us agree. Right? So that topic is going to quite frankly fast-track itself to the Supreme Court because for those who are not like deep into like US

jurisprudence and law, the fastest way to get to the Supreme Court is to have different federal judges giving you different answers to the exact same question. Because at some point that needs to be resolved because it can't be that something is federally legal in New York but federally illegal in Arizona for the exact same conduct. It's like one law allegedly across the land. So, Chris, I think a lot of what's really interesting about the future here is which way does that case Unless, I mean, the other alternative is they slip something in through markups and in clarity, which is something that they could do. It's not It wouldn't be easy. Nothing in clarity is easy, but like you could make that the law lay of the land if that's what it takes to get done. And we're we're going to see some

final And I don't have any information that this is going to happen or not happen, but you could see that. Um but on the You go ahead, Ron. I would say like I'm bullish on usage and adoption. I was always a a fan of the Iowa electronic markets to track uh the presidential campaigns. It was the only legal market for decades. But I'm bearish on enterprise value creation here. Uh DraftKings is down 30% in the last 3 months. Genius Sports is down 50% now has a scorching hot forward P/E of 60 times earnings.

So, these private market companies are even more expensive than that. Now they're getting competition from all corners, including Nasdaq that wants to show up like the high school kid that shows up to the playground and takes the marbles from the small kids. That's happening now. So, I think in general, private venture capital is a bubble. Prediction markets are in a bubble, too, and you should try to sell the stock if you can. Th- This is also where I'm super interested how things work out on the gaming front because as much as prediction markets are on the way up, you know the gambling and gaming companies are not just going to let that fight pass them by. This has been their turf.

Yeah, and like we we talked about this a little bit even on the derivatives front. Like Hyperliquid's edge right now is this 24/7 reach. Uh the big boys are coming and they're going to have that capability. So, how do they extend that moat um and move faster when that's going to be table stakes before you blink an eye? All right. Well, let's move on from here because the world is moving extremely fast and we have a bunch of other things to catch up on. So, we'll start with the one that we're always talking about now, which is Iran. So, to give the updates on that front, we're in week three of uh the conflict with Iran. Today, we heard that Israel has limited and targeted ground operations that will be occurring in

southern Lebanon. Uh Dubai International Airport, which for those who are not paying attention, is basically the world's busiest airport, suspended all flights this morning after a drone hit a fuel depot near the airport. Uh it's the third incident in Dubai since the war began of this sort. A missile hit a civilian vehicle in Abu Dhabi. Trump has been trying to bring allies in to deal with the Strait of Hormuz problem. He's saying that NATO faces a quote very bad future if allies don't come to help. Uh said the US will remember countries that don't help and will help. I believe he said that the French uh were scoring an eight out of 10 and that nothing is perfect, but this

is France, so what did you expect on that front? Um and then ships have started to move through the strait today with some degree of transit occurring. Uh two tankers carrying uh LPG to India, I believe, sailed through. And so, Iran is now claiming that the blockade might only apply to enemy vessels. The EU is working on things. All of this, though, has led to oil spiking back up in price. So, I'll start right here is what do we think is going on with Iran from a geopolitical and military standpoint first Chris?

Uh on So, there's different levels of warfare. At the tactical level, it's been just absolute destruction. The US military's been performing exceptionally well, taking out target after target. I watched the briefings by uh Admiral Cooper. And um what they did is they moved past um like live munition sites. Now, they're going back into the logistics and the supply chains. So, so very very at the tactical level, it's been absolute dominance. Um, that said, the the Iranians are effective with low-cost asymmetric capabilities, things like mines. We've been talking about that. And mine warfare can be very problematic, um, etc. The other thing that happened last week is that we, um, we set the the the 31st MEU, um, which is a crack Marine unit. It's it's called

a a MAGTF for Marine Air-Ground Task Force out of El Canelo. I used to, uh, work with those guys and they're steaming over, uh, to Iran. Uh, that puts, you know, a Marine infantry battalion, about, I don't know, 1,200 people or so, Marines, uh, right there within striking distance and they have a variety of missions they can execute. Um, the one thing I was noticing, uh, was Lindsey Graham had this really interesting tweet about Kharg. The island of Kharg, we talked about it, controls 90% of of Iran's oil exports. We hit the military installations around it, but what sounds like we kept the oil intact, the oil rigs, etc.

Um, and at the end of that, he talked all about Kharg and then he said Semper Fi at the end as the 31st MEU was sailing. So, he's telegraphing that the MEU is going to do something to secure those oil assets. I I don't know if that's planned or or whatever, but, um, that that MEU will give you some extra capabilities. Now, I think we'll continue to really dominate at the tactical level. They can't really fight us back that well and you're seeing, um, you know, various other things happening. What I'm more worried about is the strategic level of war. And so, if you look at Vietnam, you know, we also did very well in the battlefield, but it ended up losing that public will to continue the fight.

Um, and so, I think it's really important that, um, the the goals, the mission, and we we start showing, you know, continued success, the economy, etc. Um, Trump's got to keep find a way to keep that oil in check. Now, it's come down a little bit. Um, and then fundamentally, before I turn it over to you guys, I've really noticed that crypto has stayed very very strong. I'd love to get your take on and and Austin. But it's it's really doing well. I called around to the trading desk before I got on. A lot of talk around the short gold long Bitcoin trade. And you know, I think this all feeds into this thing that we've talked about over and over again.

Realpolitik, trust is breaking down. Where do you go because real assets commodity are going to be in focus. That brings you to things like Bitcoin ETH and the rest of the crypto environment. So it feels like between some short squeezing that's going on. Um it feels like crypto starting to feels like it's bottomed and it feels like it's it's well positioned. But would love to get your take and happy to talk about any other thing else. We'll stay on Iran for a bit. So a couple quick thoughts. So one is Trump often does what he says. Now, we'll see about the whole third term thing, but he's talked about tariffs in the past, he did tariffs. He's talked about offensive operations against Iran decades ago, he followed through on

that. He released the Epstein files granted a lot of redactions and the UAP files and all the rest. So if you want to understand how long this conflict takes, listen to what Trump says. What Trump said today was the multiple levels here. One is he invited help from NATO. And he said if we don't get help, we're going to learn from that. He's always questioned whether NATO allies would be there to support him. At the same time he said we actually don't need your help. But I just want to see if you would come to our help. That's what he said today.

And he also said the UK uh offered to send two aircraft carriers now after the US didn't need the help, but not initially. The reason why I point this out is that the correction of last year a really accelerated when Zelensky was ejected from the White House. People around the world looked at that and said what just happened. My theory of the world isn't stable. I'm going to take risk off. And so if NATO is challenged, you could see something like that happen. He's opened the door to that to the public. So that's one. The second

is what are the objectives? Trump today said if Iran had nukes, they would nuke Israel and not just Israel, but all of Iran's neighbors including Saudi Arabia Saudi Arabia and by the way the evidence is look at what they do with these missiles or attacking civilians or attacking all of their neighbors including two of their allies. So my read on this now is that Trump's objective is to control the uranium. That is the standard I believe he is setting. And he's also pointed out at prior presidents uh who didn't take action. He said he had a phone call with one of them who said he wishes he had taken action. My read of the situation is that

uh Trump won't stop until there is some control on the Iranian. You can get control either through control of the material or working with the political leader that you have some confidence in. But he also said we don't know where the son of the Ayatollah is. Last week he said he was disfigured. He may be dead. So it's hard to see how you arrive at some negotiated settlement without a leader uh to deal with. Well, I I hear you on the uranium, but I think you're missing out on one big commodity and that's oil.

He wants the uranium and the oil. Do you agree? Oh, I agree. No, I think the whole the whole conflict the bigger backdrop is actually about China. Yes. The two ways to compete with China are US dollar hegemony. Uh petrodollars are part of that. The pricing of petrodollars uh and also be able to choke China with oil. They They have that objective in hand. It's imminent. They're going to They're going to get that objective. Uh but once they've gone this far with Iran. You've taken out the state leader in the first hour of action, right? You're You're That was a coup d'état move.

You know, you can't walk that back and say, "Look, I got the oil. We're good. You guys keep the uranium here. Let's go check back in another presidential admin." He's not going to want the fallout from that to be on his hands. He's going to want, I believe, to control that uranium. Yep. I think you're right. And by controlling the oil between that and Venezuela and our own domestic production, we're down to Russia that we have to deal with vis-à-vis China. And I do think it does put a pretty tight rope around China. And it helps prevent, you know, what they're seeking to do, which is probably take Taiwan.

Buys them some time. Um Russia >> How would you control it, Chris, though? Like, logistically, how do you control it? It's not easy to do. We talked with General Spider Marks last week. Someone's got to be on the ground, open up a cabinet, do a counter measurement, or put it on a you know, Apache and and take and retrieve it. Or you have to have someone you trust whose representations you rely on. We don't know who the heck that person is. So, how do you achieve that objective? You talking about the uranium? Uranium, yes. Yeah, I mean, you could have the IAEA international inspector. There I mean, I'm sure there's ways to do it. I'm not an expert in it it however.

Um I I think that's part of the goal, for sure. Like, none of the None of that neighborhood needs a nuclear-armed Iran. If there's a power vacuum, and look, what are they still looking for? They're looking for that strong man to take charge, just like the Venezuela model. Um and and to to Spider's point last week, it may take a little bit longer. But but I think I I don't think you're you're wrong. I think one thing that would be very interesting is where does this leave Russia, right? I have a thesis that Russia started all this in the first place. Uh they're getting their butts kicked in Ukraine. The whole world is lining up against them and they said, "Let's start a little bit of trouble in the Middle East. Uh Iran, go for it.

Like let's get these guys off our back." I've always believed that. And I think that that's distracted a lot of the world's attention to the Middle East. So tactically, it gave them some um it gave them some room because the all the world doubts focused on Iran. Uh oil prices are up. Russia's benefiting that from that. We I think we even gave them um the ability to to trade for the next I forget month or so in a despite sanctions to to to uh to bring more oil to the market. So right now, near term, I think Russia is a big winner. Um but I think medium term, the tide's going to turn because as we start um as this thing ends, I think the focus is going to pivot back on Russia.

So I'm going to go the other way on two of those points. Nice. One, I [snorts] don't think Russia is a big winner here. Right. Like following just Twitter >> right now. I'm just saying here and now like today, but but long term, no. This is this is they're going to get squeezed. Not even today. I think one of the things that we're finding, like I've been following a lot of the open accounts around uh the Ukraine and Russia conflict. One, I think Russia is losing ground again in that conflict. I think they're succumbing to some of the Ukrainian tactics with drones. I think they're running out of people who actually want to fight, who are qualified, and you're seeing like the degradation of Russian resources. So one, I agree with you that this created a

distraction for Russia, but I don't know that that was a good thing. And part of what it's done is sort of woken up some of the other European nations as to how big of a problem this sort of situation is. I think Russia's options have already collapsed. Two, the like internal situation in Iran, here's what I'm observing and what I'm starting to get more worried about as time goes on is we're seeing reports now with the IRGC uh going with Khamenei's son because he was essentially the guy they thought they could control, causing a rift with some of the clerics, causing a little bit of a breakdown within the internal order.

Exactly, Roum, as you were saying, like who are we negotiating with? Who's really in charge over there? What's the situation on the ground? By the way, as both ourselves and Israel continue to just hit IRGC forces wherever we reasonably can. >> Control points now that would otherwise be controlling the protesters. Correct. I I wonder if there's going to be a much more prolonged process of figuring out who's in charge of Iran before we get out the back end. Because remember, you know, I I think part of what colors our thinking is what's happened recently. So, if you look at like a Venezuela, we essentially kidnapped Maduro and another guy stepped in. But there's plenty of historical models that show that actually things

are way more chaotic than you think and there was no way to predict things at the start. Cuz like as a reminder for everybody, like let's take a famous collapse in history. If you look at the French Revolution, and you were in France at the start of that, somebody asked you, "Well, I want you to bet on the eventual winner." You're looking at like Lafayette versus the left and like Robespierre hadn't even emerged yet. But by the way, anybody you could possibly pick was the wrong answer. Cuz there's this Italian dude named Napoleon who's going to turn out to be the right pick and you're not even going to know that until many years forward.

As I watch the fragmentation in Iran, is that where we're going? I guess becomes my question. Uh it's it's a great perspective and I love the historical reference. Uh it's like the core underway for markets is how long does this conflict last? And when do the tankers move through the Strait of Hormuz at a regular pace. I would say the key information now is that this conflict will take longer than anticipated. There are missiles still striking from Iran. It's week three. Now the the percentage decline has been substantial. It's down 90%. But missiles are still getting through.

Uh and the the commentary from Pete Hegseth isn't really focused on the Strait of Hormuz yet. And as Chris pointed out, there are other primary objectives right now, taking out the launchers, then logistics. The Strait of Hormuz is a a topic, but it's not really addressed in these uh press conferences. So that's that's a big question. And the longer oil stays at these elevated levels, the more risk there is for an inflationary regime, which is terrible for asset prices. It hurts consumer spending. Yeah. It makes it hard for the Fed to cut rates. Rate cuts are already being kicked out.

Uh it hurts consumer discretionary stocks. It's an input uh into the cost of all retailers. Uh and that is something, you know, that I'm concerned about. So there there is a material likelihood of a correction. They really need to get the oil moving expeditiously, like now, tomorrow, the day after. If they don't, then I think after options expiration this Friday, you'll have more downside volatility. At what point So right now, Trump's saying, "Hey China, you you need this oil. I don't need it. I'm self-sufficient. You know, get it out yourself."

But to your point, in time it's going to hit the American consumer. And so what does he do? Hitting now. Gas- gasoline in California uh is $8.50. I think the last John Galt just left for Miami. Uh so yeah, no, I mean it's hitting the consumer now. It I will pile in here to say, is that hitting the American consumer or the Californian consumer? California has As somebody who grew up in California has been shooting itself in the foot and then stubbornly reloading and continuing to fire on the topic of energy for like decades now.

That's the quote of the episode. I mean, look, I'm just calling it like it is. I know this is allegedly a crypto podcast, but like California energy like policy is stupider than some of the NFT projects were. Just to bring it back to Marcus, like we had we had four down days in the S&P, which it's historically highly unusual not to get a relief rally, which is what we had today. Yes. And there's a lot of dealer pinning effects that happen happens before options expiration. Yes. And the rally today was kind of lackluster given the amount of the decay in the VIX.

So, you know, you should be cautious. This is not like, oh, hey, let's go up into the right. This is not that kind of environment. Uh, you know, what I saw in the markets most of last week, what felt more like VWAP sell orders. It was just consistent, orderly selling. So, uh, yeah, I I don't I don't like that. There There are opportunities that will open up and emerge. I think it's kind of remarkable that the S&P's only down five points from all-time highs given the the trauma of news that's hit markets from multiple angles.

I mean, a question that I will ask on that is how much of this selling is people like, call it, voluntarily de-risking versus involuntarily de-risking after the whipsawing in oil. Like, there are rumors running around the street that several of the major hedge funds are down like billions of dollars on some of these oil trades. So, I'm wondering if what you were seeing last week Rob was people being forced out of positions, deleveraging, de-balancing, right? These sorts of things versus call it people who are otherwise liquid, have no margin concerns, just dump it.

>> there's deleveraging happening, right? We had the deleveraging event start in crypto around 10 10 of last year, but pick an asset class. Private credit's deleveraging. Uh look at the gross leverage exposure that hedge funds have. They hit peak levels about a month ago. They're still in excess. So, they're deleveraging. Good names are being sold off because they're deleveraging. It's not about the name. The hedge fund has too much risk on. They have to deleverage. The quant funds and their factors aren't working. They're deleveraging. Fundamental long short, they're deleveraging.

The only players that are releveraging are the hyperscalers that are issuing boatloads of debt like Meta and Amazon, including Oracle, to go go buy more data center GPU compute from Nvidia who expects a trillion revenue between now and end of 2027. So, a question on that front then. If we're seeing everything sort of selling off in the manner that you're speaking Rob, are we at the point now where people should just step back and let that go by? Are there sectors where you're starting to see value where you would step in and start lifting things like where where are we in this cycle?

Cuz I I agree with you. We're seeing things like private credit starting to turn. You know, the valuations are are extended, you know, like I'm looking at industrials, which is a major component of the S&P, and you've got names like Caterpillar and John Deere uh that are like 30 35 times PE and GE Vernova and Teradyne like eight like many many like industrials are a bubble. They're a bubble. It's not only a bubble. Bubbles are great. They're a great way to make money. You want to ride the bubble up and then get out when the bubble pops. But, the bubble's also popped.

We're on the right shoulder of the bubble. So, there's some value maybe in home builders if you believe mortgage rates come down, but at the same time the 10 years is going up. Cuz inflation hurts stocks and bonds. They hurt stocks and bonds. You don't get the diversification benefit. So, I think this is a time to get smaller in terms of your risk exposures and uh wait for a a real capitulation. We actually haven't had that yet. Haven't had a real capitulation.

Uh or where where value really uh emerges. Where are you on crypto, Ron? I was going to say >> Last speaking Last Monday we were bullish. Today we were all Last Monday we were all bullish, right? We were right. You scored home, right? And that worked out. It was 4K. I believe all of us said if we were buyers we'd be buyers of Bitcoin there. That's right. >> We were right last week. You're at a key level. You're at a very key level. >> hitting some resistance. Where are you Where are you on Bitcoin right now? So, this I think >> 74 right now. I was just looking it up. My my view is that Bitcoin is running on MicroStrategy's or I guess it's Strategy's STRC issuance.

That is keeping the machine going. And they are doing a great job marketing STRC. It's attracting new flows. They had record volumes last Friday. So, when that marketing process starts to slow, then I believe the bid for Bitcoin will slow. So, I would take chips off the table now. Okay, but then that's not Is that driving into alts, too? I mean, we're seeing of all the darlings, ETH is material outperforming. So, where's that correlation? >> Is Is just Tom Lee? Is that just Tom Lee or retail saying, wait a second. Bitcoin This this correlation between gold and Bitcoin, which we've constantly seen, Bitcoin always trails gold and the ketchup trade is now on. We've been

watching uh uh BTC to gold ratios. That's starting It looks like it's it's it's uh it's bottomed. It's coming back. And then ETH pops up. He's like, hey, remember me? Uh Yeah. outperforming it all. That's just correlation, right? China created a bid in gold and other commodities followed suit. China's not buying other commodities. Something to note, the commodities are showing weakness now, too. Look at the DBC ETF. Look at gold, silver, or copper. It's an unusual state of affairs that we have right now in markets. You have Yeah.

Uh that you know, this is this is a a higher volatility, higher risk market. Better to wait for the fat pitch that it'll present itself at some point. >> Yeah. Look, I I I I still think that there's opportunity here on the crypto side because to your point, with the dollar decoupling, uh a lot of sovereigns bought gold. And when they bought gold, gold went way up and Bitcoin didn't move. And then the Bitcoin maxis are like, oh, no, uh my store value, what happened?

Like this whole digital gold narrative is breaking down, right? When it never did. And now that things are settling, they're like, wait a second. Now gold's Now Bitcoin's starting to get a bid. The BTC to gold ratio is coming back. Wait, maybe the narrative never broke down in the first place and do I do think that's a tailwind. On the ETH side, like it's just again the fundamentals. The fundamentals of an institutional crypto market with a really weird a delightfully weird asset. It's infrastructure. It's a tech company and it pays yield and it's ultra sound money and they're starting to get their head around it a little bit. And so I I do think that that that's that's going to be the tailwind on on the ETH side going forward. Of course, we're having Austin and I are arguing over the role

of the EF going forward, which I think we can talk about in a little bit, but I don't know. I I feel like it's it's still a decent setup for for crypto. I said it last week, I was right. Uh But it sounds like you're neutral now, Raoul. You're coming You're pulling back. You're pulling back the truck. >> bearish than neutral. You're bearish. Okay. Bearish. >> I also I also want to throw a dart on this one that I think is maybe something we don't see very effectively through the US markets lens, which is to say one of the things that you've got to think about from a non-US person's perspective with Bitcoin is that this is your way to get your money somewhere that is not exposed to your current system.

If we're seeing increased geopolitical shocks out of places like Iran, which could bleed into Russia or bleed into China, and you're somebody who's there, this is about the time when you're supposed to start buying Bitcoin if you believe that thesis. And Tether? And Tether. Actually, yeah, Tether supply expanding would be another thing to keep your eye on. Like, if you should see Bitcoin price going up, but also Tether supply expanding. Yeah, but that's not >> I would be watching for those signs as a countervailing factor to US market forces here.

Yeah, I would look at US dollar also. Like, US dollar strength and if you have a flight to safety towards US assets, then that doesn't help digital assets. We'll see. You know, it's it's going to turn on facts on the ground around Iran. That's what the whole thing turns on. >> Yeah, 100%. >> And it's reading what Trump's plans and goals are. I'm saying that on the margin, it looks like the conflict will last longer based on his comments. What would Warsh do in this situation? Let's just say we had Warsh instead of Powell. What do you think would happen?

That's an interesting question. I mean, in this situation the United States, you're going to expect energy prices to go up. But the problem is cutting rates doesn't really help you the same way to supply shock. That was kind of the lesson of the Federal Reserve in the '70s, right? You got to make sure not to cause even more inflation by doing that. To be honest, this feels kind of like the situation where the Fed sits on their hands. Right? Cuz they're like, we can't cut our way to more oil. We don't want to cause inflation elsewhere. The thing that I actually I think would contraindicate that stance is the job market starts cratering.

It is a you know, it's a great point though, Chris. Like it it has been strong and resilient. It's It's like a change of character. There's no doubt about it, right? So like it's hard to have conviction. I would say it one way or the other. Um I I think that I think if Warsh is in the seat, it would be different. It wouldn't be I'm Jerome Powell, I'm on an island. It would be uh Secretary Brainard, let's put our heads together. What do you have? What do I have? And I think maybe there's some of that going on already, maybe not. Um but I think it'll be much more coordinated approach. Which should in the end be beneficial for the economy, I think.

All right. So, on that note, talking about things that are beneficial for economies, we do have to go to a set of second ads from our sponsor. And then, Chris, you and I can argue about the Ethereum Foundation. >> wait. First, a word from our sponsor. Step into a new era of wealth. Discover Nexo, the premier digital wealth platform. Manage your crypto portfolio with confidence and control. Receive interest on your digital assets. Borrow against them without selling. Trade a wide range of cryptocurrencies, all in one platform.

Now available in the US with 30 days of exclusive privileges for new clients. Experience Wealth Club Premier. Access enhanced interest rates, reduced borrowing costs, and crypto cashback on swaps. Get started today at nexo.com/unchained. Quick note before we continue with today's episode. Bits and Bips [music] now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed, macro, AI, and how it all collides with crypto. If you want to keep up with our weekly livestreams and macro meets crypto breakdowns, make sure you're following Bits and Bips directly. We won't start publishing until March, but

getting set up now means you'll be ready on day one. You can find the new Bits and Bips channels at unchainedcrypto.com/bitsandbips. [music] You can also find us by searching Bits and Bips on YouTube, Apple Podcast, Spotify, or wherever you listen. All right, everybody. Welcome back to Bits and Bips. Um as you can see, Brom cleared the floor so that Chris and I can now argue with each other. Uh because the Ethereum Foundation published a paper, a 38-page document defining what it is and what it is not.

Um the EF describes itself as Ethereum's first steward. They are now one of many, but like Julius Caesar remained the first citizen. And the central principle is self-sovereignty, that users must have final say over their identities, assets actions and agents. Um they've introduced a framework called props, which is about censorship resistance, open source and free, privacy and security. They call these sort of the indivisible whole of Ethereum's development. And their explicit goal is eventually to make the foundation unnecessary. Uh >> [clears throat] >> I read this,

and Chris, I know we're going to disagree somewhat on some of these topics, and thought to myself, ah, so they are going back towards their roots and making themselves an unappealing landing pad for real-world assets. And I think this is a view that's probably been a little bit misunderstood. So, I'm going to give credit. I had dinner over the weekend with one of my smarter friends who's a trader on the street and talked this issue through. I want to try to pose my objection through the following framework, which is that you can think about sort of the asset structure on blockchains in the form of a trilemma.

And that means you can have decentralization, right? And like, call it permissionless behavior. You can have real-world assets, and you can have smart contracts at various points on this, but what you can't do is have all three. And what I mean by that is the problem is not a chain that wants to be permissionless or self-sovereign in the way that the Ethereum Foundation talks about. Like, Chris, you and I are both fans of Bitcoin and like support that as a technology in the world, so I don't think there's a disagreement there.

I don't have a problem with the concept or existence of smart contracts. I don't have a problem with the existence of RWAs. I think the problem is when you try to do all three of these at once. As somebody who's run one, you put yourself in an untenable situation. And what I mean by that is, let's actually take Tether since we were just talking about them. Currently, there are, depending on where you look, anywhere from billions to tens of millions to hundreds of millions to billions of Tether in most major, like, call it protocols that are being used in crypto. If you looked at Uniswap and Aave alone, there's a ton in there.

And then, we have a chain that does not have, like, validator network or even coordinated protocol-level controls, nor are those enforced. And, of course, you have Tether as the real-world asset issuer. So, the hypothetical that I worry about here, as somebody who's had to be the paranoid person is what if somebody compromises Tether's smart contract keys? Right, if the North Koreans mint a trillion dollars of Tether, well, one, there's obviously not reserves to back that. And the answer that you always get is, well, the issuer can just drop another contract and that can be the real Tether.

To which I say, except you just blew up all of DeFi. Right, there's no effective way for Aave to respond to that. There's no effective way for Uniswap to respond to that. The borrow lend protocols are gone. Any AMM pool that had Tether in it is gone. And so, what I've been trying to communicate to people is if you want to have this permissionless sort of ethos behind everything, which, again, I do not object to that on a standalone basis, you cannot introduce the layered complexity of smart contracts with real-world assets that are going to need to be responsive to call it non-chain concerns in a way that like the ETH token or Bitcoin does not.

And that is the root of why I thought this statement was actually very negative for the future of Ethereum as a platform for real-world assets, because I think the first time we have a grenade like that go off, and people realize how severe that problem is, you're going to have a flight of RWA off a platform like Ethereum and to chains with a lot more, call it, command and control and permissioning, conditional on you wanting to have the smart contracts. If you want to bring ETH back to a state where it's like, now, you can do one-way sends, and the transaction chains are not commingled, fine. But, Chris, is this not I'm going to say it in a way that will give us both a little bit of trauma, the 2008 interlink to like counterparty credit problem if something like that

happens? I have no idea what you're talking about. >> [laughter] >> Um All right, listen, man. I'm getting a lot of heat because I think that the Ethereum Foundation is acting as it probably should act in a mature environment, right? They're a non-profit organization and would have I've been on boards of many non-profit organizations. You're Many of them try to do something for the public good. In this case, they're saying, "Hey, we're going to, you know, be the shepherds of the principles of this network." But, I mean, who's the foundation of the internet, Austin? Do you know who it is?

Say more. No. There's no foundation of the internet. Yeah. Right? You got different organizations that contribute to the But it But is it truly decentralized medium? Nobody controls it. The EF does not control Ethereum. The EF does not force EIPs through by design. Do they have influence in the past? Yeah, probably. But in time, I would see them being more and more removed, focusing on those ideals in the direction and advocating for what they want out of this ecosystem that's controlled by the community itself. You know, one of the things I was thinking about was like with Nick Carter, we talked to him about and he's like, "You know what? BlackRock's just going to take over the validators, right?" So, who are the core developers today? They're a very diverse mix, right? And in time, that that composition's going to change and and

that community of of core developers will help shape the network. But like, what are the roles and responsibilities here? You have a lot of And again, it really starts as like, "What is Ethereum trying to do? What is its core differentiation?" In my mind, it wants to be incredibly robust. Haven't gone down in 10 years, guys. More than that now. Like, very important robustness. Decentralized. Um censorship resistant. Like, that is their moat. As you start introducing some of the things that you talked about, those are great. And, you know, if you're Solana, high throughput, high TPS, you're Canton, "Hey, I'm going to do something private and it's going to be more controlled, more permissioned."

These are all awesome. Like, in no way, or shape, or form, I'm trying to be an Eth maxi. I'm just saying that their moat Ethereum's moat is a really awesome one and it's it's the new internet. It's It's that settlement layer of the new internet, fully decentralized. Let them have it. Let the EF, you know, and like and they're like, "Well, EF EF needs to ship. EF needs to ship." I don't think so. Like, yeah, like it's it's a nonprofit, guys. What has Who has to ship? Tommy has to ship. You know, Ave has to ship. All these people that are building on Ethereum, those are the folks who are shifting. And then they have to work with that community to to to direct the network in a way that appeals, you know, for all. So, like again, I I think that people have been

very hard on the EF. I think the EF is doing great things. Um it it it it is over and over again, you know, helping to shape those ideals. And like, I don't know. I uh I I I I think that's my case, man. I So, I'll say I'll say I do agree with you that people who think the EF should be shipping or like explicitly building are misguided on the role that they're supposed to play within the ecosystem. I think you and I are aligned on that. Like, it you don't want in the case of something that is supposed to be a public good, like the nonprofit foundation being the ones responsible for shipping everything. You want to have for-profit entities doing that shipping. Now, that works a little bit different on a chain like say a

tempo that is explicitly created by a for-profit entity. I think we can all agree that's a different model. I I think the heart of my criticism is that I find the EF to be talking out of both sides of their mouth, and I'm not sure they understand they're doing that. Which is to say I don't have a problem with arguing for a decentralized self-sovereign chain to exist. Again, I'm very pro-Bitcoin. I support that. I support some of the privacy coins. Like, I firmly believe there is a time and a place for that sort of thing. I'm also a fan of real-world assets. Like, guys, I used to literally run a stable coins, like reserves and risk and like disclosure, everything, right? Okay. Fine. Totally

down with those. I'm a favor of smart contracts. Like, you and I both agree there's a huge amount of automation and tasks that can be fixed in traditional finance using smart contract technology that are profoundly broken right now. I think what I'm worried about is they don't understand the trade-offs that their own stances making, which is to say if you want to be like using the crops framework and focusing primarily on self-sovereignty and that external forces do not have control of the assets, I think you also have to say you shouldn't be putting RWA that have external control of those assets in smart contracts that will cause cascading failure.

>> I'm totally confused, right? Because today, if you have a stablecoin and you know this, Yes. >> you can issue it on chain. Yes. But the assets are off chain. They're They're in a custodian and you have freeze and seize. Correct. What's the issue? So, my issue is that exact problem that you have explained. So, theoretically, there's two ways for this to become a problem. Number one, I have this asset. I have the smart contract. Let's use Paxos as an example because I was there. This is not a knock on Paxos. I'm just familiar with it.

You've got USDP. So, I've got, I don't know, at the time, $2 billion of reserves at a bank and I've got $2 billion tokens on chain. It should be one token per dollar in the bank. Fine. Easy to do. My concern is somebody compromises my smart contract keys and now there's 20 billion of USDP and I still have the $2 billion in the bank. Now what? How do we remediate that in a way that doesn't break a bunch of other things? How is that unique to Ethereum? I totally agree that like like, you know, you need to like cyber, I've talked about this a million times. Like like cyber robustness, you know, you know, yes, people criticize Solidity as a language all the time, but like absolutely security robustness very very

important. Whose fault is that is your question. If is that Ethereum's fault or is it the issuers whose smart contract wasn't designed the correct way? Like I don't understand why this is a serious problem. And like why is it okay to put it on Solana or Canton or whomever? >> I didn't Well, let me start by saying I didn't endorse Solana on this one. The contrast that I'll actually draw to that one will be something like JP Morgan Zonalix, where the answer to what you do if that sort of break happens is you freeze the whole thing until you fix it. Right. So, what I'm saying is without the willingness to enforce any level of validator controls around these sorts of products, you're going to have a problem sooner or later. Right? Like the Bybit hack is a good example of ETH not

interdicting that contra. So, let's give an example of somebody who went the other way. And although they could have done a better job and stopped all of it, they stopped most of it if you look at the Cetus hack on Sui. They actually did push through a validator patch and bring those assets and got them back. And I'm specifically saying when it comes to real-world assets, if you don't adopt a framework where you're willing to have network-level controls, it's a matter of time until breaks happen where bad things will occur Well, and Chris, let me finish the point. Where bad things will occur and you're not going to be able to find a responsible party who can fix the damage. Because to me, that's the key to getting into the smart contract land.

>> I understand what you're saying. You're saying you want to have systems where you can roll back the chain, is what you're saying. >> It specifically if you're going to have a bunch of interlinked smart contracts. Because here's the problem with USDP. As soon as that hack happens where you go from 2 billion to 20 billion, it's not that Paxos has to freeze it and drop a new contract. They can do that. That's easy. You've saved all the USDP holders. Congrats. You just [ __ ] every single Uniswap pool with USDP in it. You [ __ ] Aave if they took it as collateral. Morpho is exploding. Like any pool that had this as a composed asset is now broken. So, unless they are all linked with you so that the moment you deprecate a contract, they freeze everything and

have a liquidation like methodology, you have a problem. That's my point about the network level controls for these things where the interaction with the smart contracts of the RWAs what creates the problem. Because I would like as much as I would like to say things won't get hacked, things are going to get hacked. I look, hacking is a massive issue. I've been I've been proposing policy uh solutions to that like everyone write your congressman, give me my private tiers back. But look, I I think if a chain or an organization wants to roll back their chain uh for those protections, let them do it. And that that that's that's fine.

That that's not that's not self censorship resistant. It's not self sovereign and like they're welcome to do that commercially. I don't know if you can have Ethereum roll back. The validators are too diverse. There's a million of them, right? So, what does that mean? That means that as people build on that chain, by the way, I was watching I love Face the Nation. I was watching it this weekend and wouldn't you know it, the foreign minister of of Iran was there chirping away talking about how he felt on Zoom like using the internet that he they no one could shut down. You can't show shut down Iran mining Bitcoin any more than you can shut them from mining gold. Like if it's in their country, they can do it, right?

So, I guess the point is when you're dealing with an ecosystem like Ethereum, do we need to invent and to ensure like if companies are putting their assets onto that chain, should they have controls? What do you have for securities? You have a transfer agent, right? Where you're tracking who owns what. If it gets hacked, you you can you can address it through the transfer agent. Is that a perfect solution? No, it's not. Why? Because if the bad guys move too fast, they track it, it gets swapped into Bitcoin and off it goes. But what what I would I I think you're throwing out the baby with the bathwater. Let the ecosystem be censorship resistant, decentralized, and have the apps be very thoughtful in the controls that they put on to ensure

that there's robustness. But, I don't think that it >> there is where I'm saying I think the EF is talking out of both sides of their mouth. It's to put forward the statement that they put forward without also addressing that and proposing those kinds of fixes and quite frankly saying, "Hey, you should probably, like as weird as this sounds, if we're going to preserve these principles, you should be doing less with smart contracts on this chain because you're going to create like a ticking time bomb if you do not. Right, this is the classic like if Tether gets hacked, they're essentially the AIG who wrote all the CDS, everything else goes.

Look, yeah, I and again, I think the onus is on those folks who deploy the smart contracts to make sure that and and you know, I think cyber's going to be there's there's a there's some real big challenges coming up um with with you know, the way that people are going to be able to replicate your voice and your likeness. Um there's also some some amazing defenses coming in. Agents are going to protect us. So, it works in both directions. Uh but again, I think that something that's fully censorship resistant, open source, private, and secure, I think there's I think there's a need for that in this world.

Um particularly if you're sitting there in Iran and you're looking for a for a access to dollar liquidity, you know, you're in a developing world, um you know, if you start entering into these systems, um and if you can censor them, they will be censored. And so, I do think that I do think that there's a role in the world for something that's censorship resistant. My two cents. I and again, I don't disagree with the censorship resistant. I'm totally for that. It's the layering of all these concerns to create like the Jenga tower of fun. Like the EF doesn't control Ethereum. They don't.

Right? They're a nonprofit that tries to steward and and set goals and yes, they're influential, but they're not if they were in control of it, it wouldn't be decentralized. So, I just think people have been way too hard on them. Yeah, I I suppose my complaint with them is I feel like you've kind of half-assed your mission statement, right? If anybody from the EF is listening to be clear about that one, which is to say if you want to go that hard down decentralization and self-sovereignty, which I get it, I'm going to continue to use. >> Yeah, and fine. Then you also need to go a lot harder on don't build like castles on top of a swamp on this sort of thing because when it breaks, nobody can save you. And if it By the way, if it breaks repeatedly nobody's going to use it, which is going

to be a big problem. And the other one is that's exactly how you attract the kind of regulatory attention that makes your life absolute hell because you know what will like cause a Biden era overreaction is going to be if Americans lose like hundreds of billions of dollars. Like >> 100% 100% like like rip trillions of dollars coming on chain and these ecosystems become very strategic very fast. >> Yes. So, okay, where are you putting your your real-world assets then, Austin? Now Now you got to answer the tough question. I'm fine with Ethereum. Where are you putting yours? So, >> I'm fine with a bunch of them, by the way. There There are a bunch. So, I'll talk about models that I currently find pretty promising for this sort of activity. So, one I a little bit like my friend Obid, who

although we argue about this topic, let's pick something that we have in common. Private bank chains are a bridge to nowhere. Those are useless. Don't build them. Stop building them because if I have to JP Morgan give the sales pitch to Goldman Sachs of hey guys, take all your trades, your customer info, and all of your technology and put it on something I unilaterally control, that's not even a discussion and vice versa. So, stop with the individual private bank chains. That's stupid. What we should be looking at is one of two things. What I'm going to call public permissioned chains, which is to say open access by default but with way more controls around getting in and out. Some good examples of those Avalanche has done some things with concurrent L1s or

subnets or whatever they're calling them that I think are super interesting. I think Avalanche is super interesting. I think Stellar's one validator set for real world assets is super interesting. And by the way, not enough people look at Stellar and their technology cuz they've been thinking about this for a decade. They are a very interesting one. Things like Canton and Tempo that again, you can have a little bit of a harder boundary and validator coordination. These are ones that I think are more amenable to it's not just where do you put the RWAs, but when can I do complex things with them? Like if I just want to do one-way sends, Ethereum is fine. It's building these piles and piles and piles of interlinked things.

So, those I'm optimistic on. The other thing I would be optimistic on but has not evolved yet, Chris, would be what I'm going to call a global version of DTCC because I know people talk about Ethereum is decentralized, but let me propose this model. If the thousand largest financial institutions globally got together to run a single chain, given how geographically and like philosophically diverse they are, that they would actually be surprisingly decentralized in many ways. Yeah. Um DTCC is working with a number of chains. So, I don't know if they're all public. I know I know who they are.

Um I think the really funny thing is that it's very hard if you're a DTCC or a big institution um to like potentially onboard Ethereum cuz you're like, "Wait, who do I talk to? Who like who who Who's going to build this for me?" >> Who do I sign the SLA with, right? >> Which is like awesome because it kind of proves the point and the value add. And I think that you know, there's a bunch of folks who are like stepping into that void right now, but um it kind of proves the the the differentiator and the use case. So, look, um I think all those projects that you mentioned, you know, Avalanche, Canton, they're all doing great things and that's the beauty of our space. You can the programmable, you can customize, you can you know, you you can overemphasize TPS if you're Solana or you know, even

Suey's out there. They're all doing really interesting stuff. But my point is that Ethereum's big differentiator and the reason why it's number two in crypto is because of that promise of decentralization. Now it's also interesting that was the guiding light for many of the early adopters of crypto. Yes. Now the folks that are coming in, a lot of them don't that they don't follow that same ethos. So it's going to be super interesting to see how it evolves. But I guess we will leave it there. I I was going to say I will actually give a prediction to end the show, which is I think in the future as people go back and look at episodes like this or look at the exact point in time we're at in crypto, we will be perceived by them as about how we perceive the 90s for tech. Which

is to say I am more certain than not that the chain that ultimately most real world assets will go on has probably not been created yet. Or if it is one of the current ones, it will look vastly different by the time we get there that it does right now. But we had great music and clothes back in the 90s so so I guess we got to leave it like that. All right. So if we're going to drop the mic right there, let's actually do that. So we'll call it here. Everybody, thank you again for joining us for this episode of Bits and Bips. Uh we'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. Until then everyone.

Thanks brother. >> Mhm.