How Microsoft Won the OpenAI Fight as Markets Rally on Iran: Bits + Bips

Transcript

Hello everyone, welcome to Bits and Bips where we explore how crypto and macro collide one basis point at a time. We're here to discuss the latest stories in the worlds of crypto and macro. With that, we're going to take our first break. Bitcoin changed how money works. Satraia changes how Bitcoin scales. With a trust minimized BTC and a native stablecoin CTUSD, >> [music] >> Satraia enables Bitcoin capital markets with lending, privacy, Bitcoin yield, and more. Get started at satraia.xyz/unchained. Etherfi is giving Unchained listeners 15% cash back on food and ride apps. And that's on top of the 3% you get on everything else. Your bank is charging you to use your own money. I switched.

Go to ether.fi/unchained to claim your discount. I'm your host Chris Perkins, the golden hand of 250 Digital Asset Management. And today the good professor Austin is off teaching and doing what he does, so I'm going to sub in as the host. And I'm here with my co-host Ram Ahluwalia, meister of wealth, leader of Lumina. How are you, sir? >> to see you. Doing well, how are you? I'm doing well. Lots going on, lots going on. You were you were telling me before on the pre-call you're super bullish.

Uh but what's on your mind? I think there's a lot to be bullish about, a lot to be optimistic about. You know, we have some news around uh the Strait of Hormuz where the IRGC is proposing a path to de-escalation. We've got earnings estimates You got a a lot of names that look like they have bottomed. So we can take it where you where you want. Uh uh but that's what's on my mind. All right. And yeah, let's let's start off with uh Iran. We'll just go through that quickly because I think that that's really been in the driver's seat, right?

We we haven't reached I don't know. It it feels like we're reaching that stasis finally where the markets are just like, "Yeah, it's in the background. It's like Ukraine. It's not like impacting our day-to-day." Certainly something could come out of the woodwork and and change things. But it feels like we're kind of in the we're we're we're we're leaning forward. I don't want to say to the end because I've been in that position before where you wake up and you're in Iraq a decade later. Um but it does feel like we're starting to reach stasis. Um Anyway, lots going on there. We're we're we're seeing that the blockade is having its intended effect. It's putting a lot of pressure on the regime. But but what are your what are you observing?

Well, here's some news that came out of the Wall Street Journal about 20 minutes ago. It's titled, "Iran wants deal to lift Hormuz blockade that postpones nuclear talks." So they've presented an offer. Uh and that offer includes stopping attacks on ships in the strait in exchange for a full end to the war, which is what Trump was looking for. Uh and it includes a lifting of US blockade on Iranian ports and a postponement of nuclear negotiations. So saying, "Hey, look, we'll kick the can on that."

It doesn't look like the proposal includes any lifting of sanctions other than allowing Iran to move through the strait. So like their economy needs cash flow. The blockade's been successful. You know, we talked about this a few weeks ago where CENTCOM made a move and they they ran the I am the captain meme against Keyser Söze. I am the captain meme one. But overall looks good. You know, the bear case is that there is still a significant buildup that is taking place. As you know, there's a lot of airless moving heavy equipment into the area.

Uh Overall though, I would still be constructive. You know, we've got a a meeting between Trump and Xi Jinping taking place soon. Uh I think he wants to have some clarity going into that and have some reality around the current situation. And you've got the American bicentennial coming up on July 4th also. So Trump needs wins on the board. He needs to bring chaos down and it looks awfully similar to a replay of what we saw last year almost to the week.

Yeah, so we've got um we've got the midterms coming as well, which is going to be very you know, Trump needs something. Um but as we're looking at the the timing, right? He is facing in um incremental pressure. But at the same time uh on on domestic front, but at the same time um we are also uh the Iranians are under pressure because because if they're they're they're actually sending old oil rigs in to fill up because if if they overflow their own wells, it's going to hurt them for a very long time. So it feels like this is coming to a head.

You nailed it. You nailed it, right? So Iran needs to use these these old oil tankers, otherwise they're forced to shut in the wells. And when you shut in a well, you're taking what was once productive and you've got to put it on the back burner. And just the nature of Iran's oil and how they use uh water and natural pressure to bring up the oil, uh they are not in a good position to do that. It will cause significant damage if they're forced to shut in the wells. It'll be hard for them to recover from that. So uh overall I would say the response of CENTCOM and and Besson two here for the last few weeks has been brilliant. Uh we talked also about how look, if you're in the IRGC, they've got

families too. They've enjoyed a few weeks of respite from from bombs and attacks. Like they they want that to continue and they want to focus on a local political struggle. And they've got to vie for that kind of position. That seems to be what they're focused on here. So overall this is good. Yeah, I agree. This is receding into the rearview mirror like uh Ukraine did as well. And the economy can handle higher oil prices. You know, uh so you know, the world is is less energy dependent. At least certainly the United States is than it has been in the past.

All right, did you see the news about Tether? So Tether and US government uh Besson's talked about the pivot to Operation Economic Fury. And the US government actually worked with Tether to seize over 300 million dollars of stablecoins. And like we've been talking about this all along. Like, "Hey, if you want to get paid in stablecoins, uh good luck to you because these are centralized assets and that's exactly what's going to happen. Uh you're going to get seized." So I think the added incremental economic pressure, it feels like we're actually stabilizing. It feels like um as this lifts, provided there's not too much damage done to oil and and it impacts inflation, etc., it feels like this is a good setup for markets. Do you agree?

Yes. No, I mean I think the setup for markets is is very attractive. You know, you're getting me excited, Chris, now. Let me start on markets. Look, here the headlines. Number one, the S&P bottoms up analyst estimates for year-over-year earnings growth is 19%. This is bananas. These numbers are absurd. Last year year-over-year earnings growth was clocking around 12%. That was strong, too. We're seeing an acceleration in earnings growth.

So every element of the GDP equation is moving in the right direction. The government is spending like a drunken sailor, unfortunately. So bringing bringing to the present spending. That's bullish. Obviously defense tech is a big part of that, industrials, data center. Second, CapEx spending is going up on AI. The AI story has flipped from AI apocalypse to we need more compute yesterday, claws doing the rate limiting. Everyone needs data center. And CapEx spend from the hyperscalers is there. And you're about to see more CapEx spend from the Pentagon. So they're the new customer on the block. They're just getting started.

So and then the consumer is healthy. We saw that from bank reported earnings from the large banks, the credit card issuers, or the regional banks. Banks are lending. When banks lend, the borrowers use those funds to make investments. Jobless claims are low. Inflation remains higher for longer, but the war is the new incoming guy. He's not going to want to raise rates. So owning real assets and owning market assets seems like a very compelling opportunity. Plus a lot of people have cash. They got scared out of the market.

They're trying to get back in the market. They're buying dips. I expect they will be buying dips. Uh and this week we have tech earning season. Yep. 45% >> Yeah, I I was going to ask you about that next. Yeah, what do you expect to see out of that? What are you looking for? What are you not looking for? Yeah, they So uh it's yeah, what I would look for is uh ROI on CapEx spend. And it's going to be there. It was there last quarter. It was the quarter before that. Like the overhang was really around sustainability of CapEx. But Microsoft, Google, Meta, and Amazon report this Wednesday after the close.

Apple Thursday after the close. Uh I think the the the technology sector is still reasonably valued and they've got strong earnings growth. Uh so the reaction matters more than anything else. I think it's going to be constructive. I think it's going to be uh positive, you know, uh each company has their own unique story. Microsoft has a lot of CapEx spending on cloud. They're going through a divorce process with OpenAI. It looks like they contracted that. We can come back to that later.

Uh we want to see uh these other companies report too. But overall though, like the the world shifted from AI apocalypse to the the world needs more AI compute yesterday. That's generally bullish for these cloud providers. Yeah, let's talk about this. Yeah. No, I I think it feels like a constructive setup across the board. I want to unpack a little bit what's going on with Open AI. This news just recently broke. So, Microsoft is going to remain Open AI's primary cloud partner.

And Open AI I was going to is going to products will ship first on Azure. Um Microsoft is going to going to continue to have a license to uh to Open AI IP for models and products through 2032. But Microsoft's license is no longer going to be non-exclusive. Microsoft will no longer pay a revenue share to Open AI. Uh and the revenue share payments from Open AI to Microsoft will continue to 2030 independent of Open AI's uh technical progress. So, this this seems like, you know, what's your take on all this? Is this friend friendly like, "Hey, we're both grow like we agree to disagree.

We're uh you know, how how do you think about it? I'm just a couple of whatever you call it?" Yeah. >> Yeah, this let's do winners and losers on this. Like, overall, Microsoft's a winner here. Yeah, you know, as you as you know, like when a startup cuts a deal with a big corporate, the corporate's bring their M&A and corp dev team and they ink a paper-tight contract that protects them many ways to Sunday. And Microsoft was the the purse funding Open AI for such a long time and they had uh wins because the Microsoft cloud would benefit from all of Open AI's development. Now, here here's a couple of things. So, one is Microsoft doesn't have to spend money and do a rev share back to Open AI. So,

their expenses linked to Open AI are going to drop. Number two, they're going to enjoy revenue from Open AI through 2030. So, they have the upside on that. And third, they have rights to the Open AI IP through then as well. The R&D for these LLMs is significant. You're going to spend tens and tens of billions of dollars to do model training runs. Microsoft gets a free call option on all of that. So, you know, the context was they talked about it I think maybe a month ago. Open AI had a deal with Amazon.

And Amazon invested in Open AI. Open AI needed the capital to keep up with Claude. Open AI saying, "Hey, we are growth constrained because we don't have compute." Amazon as a result got Open AI to do a deal. Those are reported in the Wall Street Journal that Open AI violated their agreement with Microsoft. And we all wanted to see how this would play out. It looks like Sam cut a deal that was illegal under contract law and was going to play figure it out later. Well, the later just happened. And they reworked with Microsoft. But, you know, if you're in breach in a contract, if you're the breaching party, you don't have the negotiating leverage because the party that claims breach can allege damages. So, Microsoft, it seems to me, ironed out a great deal. They're

going to get more revenue, less expense, and a call option on the IP. So, I think it's a big win for Microsoft. It's one of my top three positions right now, too. I think >> Interesting. it's mispriced. Got it. And then you see Open AI Like, did you see the rumors about the phone? They're launching a phone. They They're right. They they're putting together a um They're teaming up with two semiconductor companies. We'll see. You know, they brought in Johnny Ive from from Apple to go design this. No, remember like when Meta launched the Ray-Ban glasses?

Mhm. Like, they sold a lot, but it wasn't really material. Like, Meta's got distribution on its apps, but it's hard to sell a physical product without Yeah, that's what that's what we're looking at. So, it we we've heard this rumor for a long time. Um and then today if I think earlier this morning it was tweeted out that yes, they're working on a phone. Uh you saw Qualcomm respond quite favorably. But like I I was looking at, you know, Worldcoin and and um it it really didn't respond. And you know, to your point, it's very it you know, we've seen other projects in the crypto space like Solana Anatoly.

You know, he's Qualcomm guy. He's been trying to push out his phone very very hard to find product market fit. You know, if they do though, it could be a pretty nice unlock across the crypto space as well, particularly as you're trying to figure out proof of humanity. If it's if it's if if if it's an agentic friendly phone, like I don't know what the next iteration of interface with the internet's going to be, right? Like, is it really natural for humans to be like this all day long? I I kind of don't I don't think that's our natural state. And so, I do think eventually we're going to evolve beyond that.

I don't know what if this phone is a phone or if it's a new type of UI that we haven't thought of, you know, rather than just, you know, Right. But at some point, someone's going to go head-to-head with Apple and say, "There's this new um human to computer interface." And I don't think it's going to take this shape. I think it's going to look like something else. And Johnny Ive's he understands UI. Um so, I'm I would be interested to see. And then of course, if it's a an AI-first phone, an agentic friendly phone, this whole idea of proof of humanity comes in. I was in there I was at their Lift Off conference um this week or so ago.

Really interesting stuff going on. And And as we've said, you know, we've been big supporters of that project over the years. Um So, I think it's worth noting, but I'll do also say like product market fit, disrupting the incumbents. You know, let's talk about Apple a little bit. You know, they've faced incredible criticism for not being AI-first. But this is a company that tends not to be first, right? But when they come to market with the iPhone, they crush everybody else. Um as you're watching Apple earnings as well, like what are they going to be doing in this space because it looks like Sam is coming after them on the phone side or some iteration of it. Yeah, I I I wouldn't be worried if you're Apple or Google about disruption from Open AI.

The lock-in and the ecosystem around these platforms is significant. The switching cost to get out of the Apple ecosystem is so high. Uh Open AI doesn't really even have like an app store. Now, they're they're trying, but it's not a real credible offering. Um you know, those platforms can be agentic AI-friendly. They will be, right? They can do anything they want to go do. If there's a customer need, they'll they'll fit they'll fill and fit the need. So, I'd be skeptical. It's just a lack of focus. Open AI is not focused. The best form factor, the most intuitive one, is how we're communicating. It's audio.

Uh when I'm uh driving, I talk to AI regularly. When I'm going for a walk, I'll talk to AI. Uh and that just requires a mobile phone with a GPS, some local compute, and headphones. So, that might be the the form factor up until we get the R2-D2 projection of Ben Kenobi. Maybe the holograms come 5 years from now. I don't know if we have that technology yet. But uh I think the form factor really simple, audio, mobile together. Uh So, we'll we'll see. Like you said, it's hard. Like Solana is trying to develop a phone. It's extremely hard to get customers >> Customers to to switch.

Yeah, maybe it doesn't have to be a phone. It has to be something different or definitely something innovative. And we've seen Sam do that before. I think um one of these episodes you're going to say something positive about Sam Altman. Uh like we should put we should start a prediction market on it. >> That happens, you should call like the 911 and they should check that I'm not being held against my will here because it's it's really I I find that hard to >> what? It'll be it'll be a deep fake, right? But you know what? We have to get you Worldcoin. You know, I was at this Worldcoin event. They have like this new technology, right? Where um you can use your proof of humanity ID. They can do some social uh graphing and you can prove that you're a real person and and

not a deep fake. So, it'll probably be the deep fake Rom that that shows up. >> It will absolutely be the deep fake Rom or it'll be April 1st. You know, I mean, it's kind of an incredible individual, right? He's being sued by his first shareholder Elon Musk. Oh, Elon is going crazy today. Did you see that? No, but it looks like that the legal battle that he's pursuing here is going to be more uphill. But go ahead. What happened there? No, he was just going off on how, you know, he was saying a lot of disparaging things about your buddy Sam Altman.

On Twitter. On his own on his own platform. I got to dig in more, but it looks like that the the legal suit that uh the complaint that Elon filed is going to be more uphill. I mean, you know, Anthropic, which now in the secondary market has a bid around a trillion dollars amongst retail investors, right? >> Yep. So, it's ahead of Open AI now. It's got more growth. Open AI is saying, "We are growth constrained." They're saying, "Oh, we need more money to grow. Can you give us some money? Can you raise some money?" Claude Anthropic had less resources, less compute. They started later.

And they're ahead of the pack. And the CEO of of Anthropic, Dario, came out from Open AI. And Open AI has spawned so many competitors. Now, many of them aren't seeing traction yet. The CTO went somewhere, started thinking machines, and there have been other spin-outs like Yo Yeah, but uh like [snorts] Sam has dropped the ball 10 ways to Sunday. He's birthed his own competition. Got it. So, as you're looking at tech earnings going into this week, um you said you're you're super long Microsoft.

Uh how do you think about the others? Anyone that you're >> the others will be fine. You know, they'll probably fine. I mean, it's like Yeah, Meta we just got to see are they spending on capex like a drunken sailor or not. Their core business does really well though. They can fund it cuz they keep growing earnings, you know. We like that, too. Then Google will do really well in the cloud business. They showed a 30% cloud growth. They're benefiting more from their uh their chipset as an alternative to Nvidia, but they don't have enough capacity on that because Nvidia locked down all the capacity from TSMC and the semiconductor ecosystem, right?

But uh Google has all sorts of ways to win here, too. Amazon rallied ahead of earnings on uh news uh including around Claude and OpenAI. So, you know, that's more on the expensive side. So is Apple. So, I'd be interested in some of the other names like Meta, Microsoft. Uh but overall though, like hey, this is a you know, the max seven names were were sold off. Many of them haven't fully recovered. So, uh I think uh you know, there's there's still opportunity in that bucket, especially if they have a cloud business.

Yep. All right. So, let's uh let's pivot to the crypto space. I think we both I'm generally constructive. Sometimes you're constructive, sometimes you're not so constructive. This week you sound like you're constructive. What are you looking at? I'm constructive. Yeah. I mean, last week we're constructive. We talked about hype. I'm so constructive actually when I was like, let's talk about what to buy. We said hype. I think it's a I think that there's a rally. I think it's a good opportunity set. Like I I I I might want to wait a day or two. Things are a little kind of softer uh tactically right here, but you know, if you if you look at 20 to 30 to 50 charts in digital assets, the very you see these long bases, you

see these uh quiet rallies in certain areas and you're seeing uh Bitcoin do well. We still want to see the STRC issuance, of course, but you know, it's doing well. Uh Uh uh other assets, Ethereum doing well, hype. I mean, so uh it it look and sentiment has been so bombed out, washed out, reset uh that it might not take much to get this going.

So, is it a trade or is it a new trend? We'll have to see, right? We haven't finished the whole four-year cycle. Right? Uh it it could be a rally now through say July along with QQQ and software. Of course, crypto's been highly correlated to software. Software in general's holding up, too, right? We had a kind of one and done drop with ServiceNow. But overall software has been recovering. So, if that happens, maybe you get an April to July rally, some softness, and then a recovery towards the end of the year. So, a broad outline, you know, subject to revision, but Yeah. I think from my perspective >> there are opportunities out there. Yeah.

Go ahead. Yeah. When when you look at the crypto space, you got to start with Bitcoin. It's the most dominant asset. It's maybe not the most exciting, sexy asset. It is what it is and it's not what it's not. But the one chart to look at right now, I think is Bitcoin gold. And if you look at you know, look at it in the past month, beautiful chart. Um and as those fundamentals continue to improve, you know, we talked about the macroeconomic stress of Iran. We talked about its utility. I see Bitcoin and ETH differentiating themselves through this trustless, permissionless capability, right? That's their edge. That's their differentiation. Everyone else is trying to catch up to it. So, Bitcoin gold looks very constructive. You know, we're

seeing uh Bitcoin DOM continuing to to drive out. And and you can expect that to lead, but like we've been waiting for years for that pivot into alts, and maybe you're not going to see that in the future as institutions take hold. It's going to be a pivot into fundamentals, not a pivot into alts. I think that's that's an important paradigm for investors to have. Um as you step down into Ethereum, some really, really interesting things going on, and that brings us to the KelpDAO story that we talked about last week. Um what you're seeing is you're seeing market-driven solutions to big problems.

And I will argue that KelpDAO, LayerZero hack is a really, really big problem. It demonstrated the interconnectedness of DeFi. And frankly, something we've been talking about for a very long time, the security issues across crypto and DeFi. Like these things have to get addressed. Um you know, every time there's a hack that we get a little bit harder and do we learn from it? Yes, but it's this cat and mouse game. Some people think that, you know, hacks are going to be a thing of the past because once we get our hands on on mythos and other AI technologies, we're going to really, really harden them. Um I don't know. I think it's always going to be cat and mouse, cat and mouse.

You're going to see big hacks, and it's scary. Like how can you bring the $127 trillion equities market on chain if you have these massive security issues? And like I said, a transfer agent isn't going to protect you because once you get out of dodge, you flip it into Bitcoin, you're gone, and someone's going to be left with the bag. And we're dealing with a bag right now. There's a big bag of in Ave. And what's been in a way beautiful to see is DeFi United coming together. And so, we're seeing competitors, so Avalanche, Solana, and others participating in the recovery efforts. Um why? Because they're being smart. They're being thoughtful. They're

being strategic, and they're realizing that now is not the time to um blow, you know, burn everything to the ground. Now is the time for the market to find market-driven solutions, which is very, very core to to why many of us are in crypto in the first place. And what you're seeing, we're seeing like, you know, these we don't know all the details yet, and I'm very excited, and I'm going to tease that I think we're going to do something really special with the details here in the future. Um don't know them personally, but I know that they're coming together. But you're going to see a market-driven solution here, and it's going to repair for the time being what's been the damage that's been done.

Um I think there will be some pain in certain places, but you know, if you're long-term, you think that that's good we're going to navigate through that. Um and that leads us to like the bigger question. Why are we letting, you know, state actors ravage, you know, this ecosystem, this this young ecosystem? Um I've been very annoyed with some of the people who are like, hey, this is a you know, it's an environment that you have to be prepared for, and you know, it's um it's not permiss- it's brutal, and like, you know, you have you you know, shame on you if if you get hacked. I don't know, man. I I think that that these these sophist- the sophistication these hacks gets more intense every single time. Um it's almost it it's very, very difficult right now as a human. We're

all flawed um in many cases to not be socially engineered. You know, but my my point is is that we need a policy response, and I'll continue to say it till I'm blue in the face. What would that look like? What would the outline of the policy response be? Well, what I've said for years, well, I guess more than a year now, is um we need to increase our security surface area, our surface area of security. We need to empower the private sector to go out on the offense against those that are hacking us. We need to hack them back. We need to make it very painful >> let's do it. Yeah. Yeah. So, we need to go on offense. I talked to Democrats about it. They're like, I like offense.

Rishi Torres is like, hell yeah. Um I've I've talked to senators about it. They they like it. We just got to bring enough attention to folks to understand it's security that's that's hurting our next evolution, that's hurting the institutional adoption. Institutions want to come in right now. They're begging to come in. But they want control. Uh I don't know if they're going to avail themselves. We talked about this in the past. Like, decentralization is fine in certain levels. Uh I think and that's okay. You can have a centralized front end, a decentralized back end, but they do want control. But if if they're entering a system um where they're taking like they're happy to take uh market risk, many investors.

Take market risk all day long. But if I'm going into an environment where my my assets may get stolen, and I'm not so sure, we got to figure it out. Um it's like the Wild West back in the day. Like, you know, we need law enforcement. We we you know, Jesse James got has to get thrown into into jail. We we can't have this this anymore. Uh that's that's what's required next. So, anyway, Bitcoin constructive Yeah. The thing I love about Ethereum is that, you know, time and time again the community has come together, whether it's moved from proof of work to proof of stake, um or in this case or even in the DAO that came together. Like, they they're coming together once again to work through this as as an industry, uh which I think is very, very positive long-term. Um near-term it's a little

bit painful. Uh and then as you go down the stack, again, it's about fundamentals, you know, fundamentals, fundamentals. No one has time anymore for the fluff. I think you're seeing as every day goes on, less fuss, more fundamentals, you know, and that's that's what happens when professional investors continue to enter the space. Yeah. I guess a few quick reactions. Like, one is you know, in this past cycle, digital assets failed to hit all-time highs, unlike many other asset classes. >> Yeah. A lot of expectations were missed.

There's still basic issues around security and these hacks with these established protocols. So, you know, my view is that uh one should trade and not hoddle, and look for trends. So, you know, the these assets still compete with other attention assets that are out there too. Including AI names, which can do well, you know, and semis can do well over the next year or so, notwithstanding the next few weeks after an incredible run. So, it's important to just keep all of that in perspective, and the quantum risks on Bitcoin are legitimate, too.

So, there's Yeah. I'm I'm constructive, you know, but it uh I'm not uh hey go max long max maxi this maxi that like Like you know it's it's an asset. It's got a role. It's got an opportunity around it. Go ahead, yeah. You're talking like a meme coin trader. I don't know about that. I mean I would look for value. I'd look for real opportunity. Look for differentiation. Look for a story. Yeah, I don't I don't think the meme coin thing is a move at all actually. I think people >> but if you say you know you're trading based on on the meme, right? And I think that's a big part of it, the attention, right? And so like like that's my There's part of the attention that you need and you can like empirically

evaluate that attention. We have plenty of tools to do that. Um and and you know what that has informed a lot of price action in crypto to date. Why? Because it's a it's a retail driven market. Now retail has been distracted as you say. They're going after the next shiny toy. The difference with crypto and I think there's been this gap, right? Where retail has gone after new shiny toys, gold, whatever. Um but these institutions are slowly coming in. The pace of their entry I think is also a function of some of these things they're trying to get their head around like security and other things. You know, I think there's a good angle here for and again you said you're not a hoddler, but like I don't know. My take in this space fundamentals and long-term focus because it's going to be volatile,

right? It's going to be volatile in in this emerging asset class. So find good fundamentals, go long-term and then make sure you're secure as hell. And and I think that's why you're seeing in this phase you're seeing some of the big institutions coming in and saying hey listen Bitcoin awesome long-term asset. Don't worry. I'm you're going to outsource the security to me. Put in an ETF. I'm going to make it operationally easy for you. That's why you're seeing you know these big institutions come in right now, whether it's you know name name your >> to see traditional institution of choice. I want So Trump over the weekend said we have to do more for crypto to do things for crypto. He said that like yesterday.

I want to see what they have in store and the right tail surprise outcome, which is where things are more That's where I would try to focus. Like what's the right tail story that we haven't seen yet would be does Trump negotiate a deal with IRGC where there's some settlement involved? There's a I don't think that's outside the realm of possibility. I think it's more probable than people think. I don't think it's a 50% plus probability, but is it a 40% chance? Is it a 40 to 50?

Is it a 40 to 45% odds? I would say it probably is. So you have two choices, right? What are the two things they've been looking to I guess you have three choices. You have Bitcoin. You got stable coins or you get Yuan, right? Those are the three ways that you can transact going forward. Bitcoin trustless permissionless. Obviously you don't want to see you know the Iranians buying this asset as an illicit you know whatever, but that's but it has that utility trustless permissionless um and it's kind of like gold, right? If you mine gold in your backyard, who's to stop you?

You got stable coins, which again best instrument for national security. You you couldn't invent something better on a whiteboard. We just saw you know and they seized the tether assets. And then Yuan, which brings in additional challenges if you're you know any country around. Do you really trust it? Um and how does that you know how stable of a store of value is it? So I don't know. What do you think? How does this play out? Well, if you're Trump like there's a there's a cynical way to take it and there's another way to take it. If you say that if you say if there's self-dealing then it touches Wolfie token in some way, right? [laughter] Not if you're Justin Sun. Not if you're Justin Sun. He's done with it.

>> that's another angle. Right. So there let's go through it. So or it touches Tron network because USDT would be likely the mechanism not Circle cuz you're not KYC'ing the Iranian regime. So I don't I don't think that it's Circle um or it's it's Bitcoin. I think those are the expressions, right? I don't I don't not like placing a a bet on this kind I just think it's it's an interesting thing to consider though. It's an interesting thing to consider.

>> So but when you ask what what he could be doing more for crypto, I think there's a couple of tricks still up the sleeve. We got to get clarity passed. Well and I'm I'm actually increasingly worried about that right now. I don't know if you saw, but uh Senator Tillis said wait a second, ethics. He had you know he had issues around yield on stable coin. Got through that. Um haven't had a chance >> a concern around ethics, what? That's that's the headline. That's breaking news right there. What? Exactly. So it's been so frustrating to me. I talked to policy makers. I marched down to DC and they're like particularly when you talk to Democrats, they're like Chris you know what? My constituents, they will not fly for this because unless ethics are addressed, that's it.

And I'm like come on, man. Like we have ethical problems with trading throughout Congress on both sides. You know this. And they're like we know, but politics I you know Trump crypto crypto Trump. >> Well, the Dems really want this too. I mean they are going to executives at Coinbase and saying hey you guys supported this and look at Trump coin. Look at what happened. Look at the money lost. So I I think they are uh serious about that requirement. What that looks like, I'm not sure. Yeah, it's going to come to a pass and they're going to go after his personal holdings and he's going to say I got real estate too. You want to get that?

And like it's and but like we've talked about this in the past. In the State of the Union address, he's he actually talked about the Stop Insider Trading Act twice. And that's the right way to do it would be to punt this into a greater you know cross asset class ethics policy. That's the way to do it. And again, I would never be up here arguing that ethics aren't important. They're probably the most important. Why? Because our capital markets are based on clear transparent rules of engagement that that are not full of graft or insider trading or anything like that.

>> and integrity. Right. Yeah. Exactly. Trust, integrity, transparency, etc. So if you undermine that, you've got a problem. Um but we continue to have issues. Speaking of which, did you see the uh that prediction market? Um so they arrested a special operations individual for betting on the the success of the Madera raid. Did you see that? Yeah, he made what? $400,000? Yeah. Yeah. What do you think about that? Well, he's one of many. Yeah. Happens all the time. Yeah, he's one of many.

>> right? Yeah, what do you think about that? Well, I'm glad they did it. I'm glad they you know uh like found the guy cuz we had seen a reporting a month ago about how there were resignations from uh the SEC enforcement division due to failure to follow through and prosecute people that uh allegedly were engaging in insider trades and we've seen a number of unusually timed large futures trades like within 30 minutes of Trump giving a press conference. So there's more of it. Like if you're the politically connected person in the White House they don't come after you. If you're the guy doing the special op operations raid, you don't have the political clout then it looks like they come after you.

Uh so it's not doesn't seem like even-handed justice to me. Uh it's complicated. Look, people follow the examples of their leaders. That's it. You got to lead by example. If you're not leading by example, then people don't know how to interpret the rules of the road or they they make up reasons why they can engage in that behavior. Uh so and hopefully this creates a bit more clarity for people on what's permissible and not permissible. You know, there's a lot of these hedge funds that are starting that are just betting on prediction markets.

Which I think is nuts by the way cuz I think the bid ask spread and all this stuff. Like you Did you hear about the guy with the hair dryer who put the hair dryer outside? Right? Yep. Well, this is here here's my my take. I've been in futures markets futures markets for really long time. Post post Dodd-Frank they were became regulated. And fraud manipulation and abuse is illegal full stop. Like and sometimes when new technology comes out people like or or new innovations come out, they like think that the rules don't apply. Derivatives do. They're fully regulated. That that that's illegal.

I disagree with you that the guy the special operator who bet on a military operation should be treated the same as others because as a military guy like people could die because they tipped off the enemy and they were on hyper vigilance and they shot down whatever. Like so like the consequences of that are incredibly profound. If you're betting on military operations, if you're if if you're listing markets on on when a land invasion is going to occur. Um yeah, free market's wonderful, but when it leads to people's deaths, it's a problem. And like I've had plenty of friends that have died in combat. Don't need it. Don't like it. So I I do think the consequences are different. Um

so to the extent that one of these markets is >> the consequences are more severe. You're saying more severe. For sure. Yeah, yeah. If you put people's lives at risk, the consequences are more >> law has to be enforced everywhere, right? But the consequences are much more profound, you know, like you can kill people if you tip off operations. So I think like that that will be regulated away. For the unregulated businesses you know, how do you have accountability? I don't know. That's an interesting model because there's still a lot of centralization out there and I think you probably could find ways to hold those folks accountable.

And again, I love decentralization, but not when my friends get killed. So, I don't know. That's that's something to think about. Cool. Why don't we take an ad break here and we'll come back and there's plenty of plenty more to chew on, Mr. Ron. >> Bitcoin changed how money works. Citrea changes how Bitcoin scales. Citrea uses Bitcoin as both the settlement and data availability layer. As Bitcoin's application layer, Citrea enables the first trust-minimized BTC on a fully programmable platform and a native stablecoin for Bitcoin, CTUSD.

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to get 20% off the first year of your annual plan today. Offers valid until May 31st. Terms apply. Coinbase One card is offered through Coinbase Inc. and Cardless Inc. Cards issued by First Electronic Bank. Bitcoin back rates are based on cardholders' assets on Coinbase. All right, Ron. We're back. We started talking about prediction markets and uh you know, I think we've agreed. I wish we could find someone who disagrees with us so we can have a a nice debate. Um but but look, these are for the regulated ones, you can't manipulate them. For the unregulated ones, there's probably there needs to be some kind of accountability.

But like I'm also seeing new ETFs that are coming out that include prediction markets. How are you using prediction markets to inform your investment thesis? Like I think in time, personally, you're going to be able to to use them for all different types of things. Uh particularly as you evaluate a company, you evaluate aspects of a company. Um are you starting to include that into your discipline as you're looking at underwriting? You know, we we've had yes. So, we've had prediction markets like the Fed funds futures contract for interest rates. Like that's worth taking a look at. But now you have prediction markets on events like such as the outcome of congressional elections. So, that's something that

we're looking at. Right? If you know whether the House and Senate go one way or another, then that can tell you whether say health care stocks linked to Medicare Advantage or solar stocks are worth owning. Those would benefit if Congress were to flip. Right? So, uh we're incorporating that in our AI and our app. I think you're going to focus on the right markets though. Like there's a lot of noise out there. Like find the things that are actually matter. So, you know, policy decisions, rate decisions. Uh yeah. I think there's small opportunities now and then that come up.

You know, I saw that the prediction markets were predicting that Kamala Harris has a high likelihood of being the DNC nominee. Really? I would take the other side of that all day long. That seems totally offsides to me. Someone that didn't go through a competitive process and lost an election. I don't think I don't think they're going to back that horse again. Cool. Yeah, I I think we're I think we're barely touching the surface of what these prediction markets are going to give us.

Um most of them, you know, are are are quasi-permissioned at this point. I think with HIP 3, I'm sorry, HIP 4, you're going to see all different types of new markets coming out. Ultimately, you're going to be able to dissect um you know, organizations that you've never been able to dissect before. Like are you betting on a certain part of growth within a company, a certain region in a certain part of the company? How does that inform the valuation? Ultimately, how do you hedge um if you're a commodities investor on weather? And like you said, all this data is going to feed into um into the AI models to really help you project and risk manage. So, I think it's still early.

Um do you have a view Polymarket versus Kalshi? I mean, clearly these guys love each other. >> I'm not close enough to it, but I I am uh I'm expressing through public markets, for example. Like I think uh on the one hand, I don't think sports betting and prediction markets are good for most investors cuz they will lose money. Like the bid-ask spreads are thick. They're trading against Citadel who's got better edge, better information. I think just the rise of betting in general is just not a good thing. Like people should be focused on investing. And like you said, taking signals from what those prediction markets tell us, which can be incredibly informative.

Yeah. Um but like I'm I'm expressing like through Genie in public markets, you know, for example. But I don't know who's It's totally to say who's going to be the winner between these >> [snorts] >> companies. And they're they're expensive. They're pricey, you know, versus other names out there in the public markets. So, Yeah, I think going to be the winner I know them both. I consider both friends. I I I don't know if that's possible, but but I've got I've got great contacts at both organizations. I love what they're building.

I think it's going to be a Pepsi versus Coke kind of regime. I think um the natural state of markets is is probably a duopoly. Um Now, it's going to be interesting to see how other folks with massive distribution try to leg into this and they are. Um but I I do think right now you've got liquidity concentrating in those two the two exchanges. And like as a guy who's been in derivatives for a while, like nobody knows how to move and shift liquidity. Like once you have it, like it can be sticky. Um but like if I had a magic wand to say how to get liquidity, I I wouldn't be here. Um but these guys have liquidity. Um I do think you're going to see a lot of pressure on the sports markets to your to your point. Um there is some there's

a lot of of political um headwinds, I think. Well, the CFTC has been very bullish and and Chairman Behnam God bless him has been saying federal preemption. That makes total sense where you have one set of rules, not 50 set of rules. But there are plenty of politicians in various states that are saying on both sides of the aisle saying, "Wait a second. You know, this is very good for my state. I don't want to make it federal and available. You know, it's killing, you know, my industry or my casino or whatever." So, I do think sports is going to probably face some turbulence in the future.

Um obviously Kalshi's got better liquidity there, so they've got more of a fight in front of them, perhaps. Um but honestly, I think we're so early and you're going to see these things become so massive that it doesn't really matter. Um the challenge is going to be like how do you create enough liquidity in these really nuanced markets to to to make the signal valid? And and like and and particularly the other thing is they're very those signals can be easily manipulated. To your point with the guy with the hair the the hair dryer in in France, like you know, these things will now people will be held should be held accountable for that. But but for these these light markets, these are hard to do, but like if you have

Yeah, to the extent they fragment, yeah, that signal could be super valuable, but if it's if there's not a lot of liquidity, it's not going to be tough. So, I think the challenge for these guys is to say, "Where do we find liquidity? Is it financial markets? Okay. Let's list all the rates and get after it. Or is it, you know, is it We know there's liquidity in gaming. We know there's liquidity in in elections. What's next? Um and how do you make sure you know, cuz they they get they make money through liquidity. I I agree. I don't think they need that many contracts. Like I'm curious to see like what contracts are you looking at?

Policy, big events like straight-up moves, interest rates, is the market going to go up or down 100 points? Like those things matter. But you don't need a thousand subcontracts. Like I I I expect we'll get the thousand sub contracts anyway. But I don't think we need that. The unlock is in a few categories, create liquidity around those categories. So that's the value for the exchanges because that's where they're going to make all their money, their ticket fees. By the way, they're going to be having their own stable coins. It's going to make So it's like it's actually a traditional exchange model where you make ticket fees, you have make that interesting income it's called stable coins now, and then you're selling your data.

But for the user, as you start thinking about, you know, if you truly want to hedge unique markets, maybe some of those thinner bespoke markets get really interesting for you if you can trust them, if there's enough liquidity. Yeah. So it is super interesting. I mean, I I really like I'm saying I'm on one of these sites right now and it is just fascinating. It's like, okay, how high will oil get by December 31st, 2026? You know, that's informative. Will Americans receive tariff stimulus checks in May? It is it adds color to what's happening with asset prices that you can't really get anywhere else.

Sometimes you have to guess like what is on the mind of Mr. Market. You can see you can see what the market is is discounting. So you know, I I think I think they're phenomenal. I just don't know that we need a thousand. I get your point. Yeah, I got to make money on these other contracts but All right. So as we end the session, sir, um you're seeming pretty constructive on Mr. Market. You're you're looking forward to uh earnings coming up this week. Anything else on your minds uh as you're navigating the markets this week?

>> I would just say this. Like I think people might be feeling like they missed the bottom, they missed the rally. The S&P is at all-time highs. Uh there are so many incredible businesses on sale. There are many opportunities out there. They're not in the areas that you might have historically owned or maybe they have been. There's still a lot of names that are down 20 to 30% because of this AI apocalypse meme. But the businesses have strong fundamentals, earnings, and revenue growth. I don't only I don't mean even software names. Like maybe you think software is dead. I think it's a mixed story, right? There are opportunities there. But there are many names out there that have a lot of value. Like Berkshire's an example of that. That's

not going to be a fast mover per se, but that's an example. But there there many many other names. It's not even like it's hard to find these opportunities. Like you know, you know Broadridge Financial, I'm sure. Like Yeah. It's an institutional capital markets service provider providing technology with 40% ROE and technology or recurring revenue. Okay, that's that's down double-digit percentage because it's in an industry group that was associated with AI disruption. That's it.

So there are opportunities there, folks. You got to go do your homework, go find them. Uh they there are a plenty. There are a plenty opportunities out there. It's funny the Broadridge team, they provide financial infrastructure um like very robust enterprise financial infrastructure throughout all of Wall Street and beyond. They've been very pro-blockchain as well. They've been really integrating um you know, across Canton and other other chains pretty pretty aggressively. Yeah. So I don't know I I don't know about that. But I'm looking at it. It's That's an example. Go ahead. Yeah. Yeah, but again companies that embrace technologies like a lot of these SAS companies are going to embrace AI. They're going to embrace

blockchain. Maybe they'll even get, you know, get their head around quantum at some point. Um these are opportunities. So so uh which uh industry is Anthropic going to disrupt this week? I know, right? Well, you know, it'll be interesting to see when they drop a new product Yeah. and the markets in that category don't tank. That that might have already happened by the way. But we are at all-time highs now and even software's making higher lows now. Uh you know, the the cost of renting a GPU is close to all-time highs. They can't get enough GPU.

Yeah. So Nvidia is going to be again uh they'll report next month. So I think it's you got to be constructive. You know, I saw this article in the New York Times this weekend. It said 40% of Americans believe the apocalypse is coming. I was like, how do I buy here? It's like, let me buy some more tomorrow. Like, let me take the other side of that. I I think the world might keep spinning here. You know, I think the world might actually go on. That's how despondent people feel. Like the University of Michigan consumer sentiment survey Yeah. is still plumbing the lows. It's bad.

>> It is awful. But that tends to be an amazing setup. I I agree. We had we had a three to four-week extraordinarily powerful rally, something of which you see in 0.6% of market history. And yet like the bull-bear sentiment surveys haven't changed. They haven't moved. I'm willing to clock into those and just say, oh, it ticked up. Nope, not at all. No change. People have post market depression syndrome. And they have fear.

Uh and I think I think people are offsides. And markets aren't going to give them a chance to re-enter. You know, the fact that the market only dropped 9% the S&P despite the blocking of the Strait of Hormuz, probably one of the most significant geopolitical events one could imagine cuz it actually does cause real economic damage and you can get a regional conflict and all this, right? Yeah. That's that's telling. That's powerful. Yeah. So underlying >> economy So Brazilian global economy and there's a lot of investment. The other thing is that like this decoupling that we're seeing, this global decoupling, and and we can argue

if that's really the case. Like as I've said, stable coins are going to actually prevent that. But you are seeing decoupling. And what does decoupling require? You got to be resilient, man. And you're going to have to invest materially in your own stack, whether you're Europe or anything else. And so there's a lot that has to be done. I think that's going to be very that'll result in a lot of stimulus across the economies as people focus on securing their own economies. Maybe long-term that's not so great. Then we'll come back together again and be happy. So >> is going up all around the world. Now Europe's going to spend more.

The US is going to spend more. We were at wartime deficits. Now we're really ramping it up. Like it long-term not healthy, but it's bullish. It's bullish. Bullish for crypto. Bullish for earnings. Bullish for a lot of things. That's right. Bullish for a lot of things. The issue now is trading off what horse do you want to own? See, a lot of horses are going to go up. So like which horse do you want to get on? That's right. Cool, man. Well, uh unless you got anything else, let's leave it there. We'll leave it there. Perfect. Always a pleasure.

>> Good to see you, brother. All right, everyone. We'll see you back next week on uh Bits and Bips and maybe we'll have the good professor back. Thanks for joining. Good. Thank you for watching and hope [music] you enjoyed this episode of Bits and Bips. Just remember, nothing we say here is investment advice and please check unchainedcrypto.com/bitsandbips for