Iran Escalates, AI Arms Up, and Markets Reprice Risk

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Hey, hey, hey. Hey everybody, welcome to Bits and Bips,

where we explore how crypto and macro collide one basis point at a time. As always, I'm your host Austin Campbell, high scholar of Zero Knowledge Consulting. Here with my co-hosts, Rahm Alawalia, Master of Wealth, leader of Luma, and Chris Perkins, the golden hand of Coin Funds. We're here to discuss the latest stories in the worlds of crypto and macro. And boy, do we have a few stories today. But before we start, remember that nothing we say here is investment advice. Please check unchainedcrypto.com/bitsandbbits for more disclosures. And before we begin, a quick commercial break.

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>> All right. Um, welcome back. And I guess right at the top, we've got to start with the biggest thing in the market right now, which is Iran. So over the weekend, there were US strikes on Iran. All right, there we go. Uh in an operation dubbed Epic Fury, the United States and Israel launched a coordinated military campaign against Iran. Early reports indicated widespread air strikes on strategic targets across tyrron and the country. Uh perhaps the biggest news is that Supreme Leader Ayatollah Kamani who had ruled Iran since 89 was confirmed

killed in the strikes now by both Iranian state media and originally Israel. Uh one could say that is the most significant escalation in US Iran tensions in decades. The fallout of that led to immediate regional escalation. Iran has retaliated with missile strikes on US bases, allied facilities, and commercial targets across the Gulf region. Uh multiple Arab countries have now been struck by Iran. Uh multiple impacts, for instance, in the UAE. Casualties and damages have been reported um on both sides really.

uh the Iranian morning and declared 40-day period of national bereavement for Kamei headlining that. So in terms of market impact before we get to some of the items that have happened inside of this oil prices originally surged as traders are pricing heightened geopolitical risk at potential disruptions to Middle East supply routes. Um, Bitcoin and risk assets down slightly at the start but rebounded quickly, tapped 70,000 today. Gold reached 5,400 an ounce again today.

And excuse me, Poly Market attracted record uh trading volumes as US Iran bets topped 529 million at risk. And in terms of actual reporting, uh, hyperlquid oil prices were used by Bloomberg over the weekend in terms of keeping track of what was going on with the situation. So I want to start, Rahm, from the economic perspective with your view of war is typically seen as both a risk event and a supply chain disruption event. What are you seeing in terms of market impact here as a result of what's happening over the weekend?

>> Yeah, no. a great uh introduction. So you know as you pointed out oil prices are up and so industries that rely on oil are down. Consumer discretionary for example airlines travel and leisure are down. Uh and then energy leading sector in the market. Uh so all sorts of subindustry groups within energy also like oil fuel services have done really well. Um, you know, we talked, I think last Monday, we said the likelihood of Iran may be inversely proportional to Trump's polling in the wake of Epstein, and here we are one week later. I'm not I'm not saying there's cause and effect, but there's a consideration at the very least there's a consideration, you know, like a little tiebreaker perhaps. uh you know at the same time this Iran news has

been discussed for so long that it's been telegraphed into markets and you saw that with the tenure coming down to 4% from [snorts] 4.25% 25%. You saw that with an energy leading QQQ. XLE energy ETF is the top performer year to date. Uh so people did position around it and the the VIX index was in the low 20s for most of last week and is there now. I find it remarkable that essentially markets are flat and the volatility index is actually up. That's actually bullish. It's actually a good sign. So that's that's constructive. Uh but uh I don't think there's really much of a long-term impact. You know, the

amount of commitment kinetic energy, I'm sure Chris will go into this, is just massive. There's no credible counter threat that the IRGC has. I want to be careful use the word IRGC, not Iran, because the RGC is not representative of the Iranian people. Far from it. Um and the three casualties were friendly fire. So, you know, Pete Hexath this morning, uh, and and Trump over the weekend suggested there might be like a four-week and perhaps fiveweek time frame. I think they managed expectations pretty well and and low and that helped the market. The market didn't have that.

As soon as Pete Hexath came out this morning and offered that guidance, the market started to rally. He also just injected a lot of confidence in his remarks. I mean, you listen to it and it's it's like listening to uh an earnings report from Palanteer or something. You just see like American dominance like coming through the screen there, right? Um and I think I think expectations will be beat. I think that four to five weeks is actually too low. I think it'll come I think resolution you can debate what resolution is defined as, but in terms of uh the ending of kinetics will happen much faster than people think.

Chris to take. >> Yeah. So, uh, first off, I'll say that war has come to crypto's doorstep. I mean, how many times have we been in Dubai, guys, or Abu Dhabi, um, with one of the global centers of crypto and, you know, here we are seeing bombs drop. Um, again, from an through an idealistic lens, you know, this is why we're here. Um, crypto is very resilient. It's it's decentralized and you can't just take off like it's not like cutting off the head of the snake from a crypto perspective. We're decentralized. We've got validators. So in case one center gets hit, the networks will perpetuate.

Now let's talk about the war a little bit. To your point, this has been telegraphed, you know, not for a week or two weeks, but for 47 years, right? Like like this had to come to a head at one point. I think there were some surprises um we can get into but the strategic importance of this is pretty material. Um the straight of Hormuse controls 20% of the world's oil. 80% or so I think goes to Asia. Uh China is very dependent on oil. They were dependent on Venezuelan oil. They're dependent on Iranian oil. And now the US is positioned to have perhaps control over both of those streams. So this is also part of a greater I think China containment strategy. Um, and you know

what surprised me about this was the Iranian response. Yes, they did target um, US bases, but they also went after every single Arab country that, you know, previously said, you know what, maybe we don't want you guys to use our airspace guys. Now they're like, okay, we've had enough. And and there was a lot of historic resentment, you know, between the Saudis and and and the Iranians as an example. So I think if anything that will probably build bring this to an end and the question is what is the end and what does this mean for markets. So when I was in Iraq a long time ago we were there to encourage democracy. Our mission was hey you know we're going to turn this into a dem democratic you know friend just like like us the Trump the and I think that

was part of the policy for failure um you know because we tried to force our ideals on a country that maybe had different ideals at the time. Um I think what we're seeing with Trump and if you're going to see um anything that comes out of like how does legacy look at the Trump foreign policy it's about um certain cases looks like take the head off the snake and I think what he's going to prioritize is stability over ideals right so at some point somebody's going to pop up and say I'm the strong man probably and Venezuela was the woman um you know he didn't go with the democratic you know opposition he went with the regime because he wanted stability. I think he's going to look for somebody to assert uh strength and power and stability. Uh and I think

that's how the war probably comes to an end is that there I don't see us moving boots in the ground which would be bloody protracted and be very bad I think long term for the economy. Um but then pivoting to to crypto prices I think Bitcoin showed a lot of strength as did crypto. I think we were already part of that bottoming. I know I get accused to be the of being the bull on this program but like I think we were hitting we were bottoming and now we see liquidity you know all roads are leading to liquidity coming into the markets and [clears throat] the fact that yeah risk assets Bitcoin hit came down it showed a ton of resiliency it feels like a very good setup for me and um you know last thing I'll say is um you know I've got friends out there who are who are on the

watch who are like my classmates are now the commodors of of the fleet out there uh you know all of my thoughts and prayers to the people who are you know in the UAE and and the surrounding countries are friends service members deployed and their families I know how it is it's not easy so thinking about you guys always so picking up on a couple of threads there Chris one that I think has been I think what's the right way to say this maybe misunderstood in the United States is the position of Iran versus the rest of the Gulf, right?

There is this tendency when you're not like an expert to regard things as sort of a monolith, right? Like see the whole argument around clarity where people are like, "Oh, the banks and let me assure you all the banks don't agree." It's a similar problem here. And one of the things that really did surprise me as well, and I actually think is driving part of the market reaction is it's like Iran went out of their way to alienate all of their potential sympathetic countries around them as quickly as humanly possible by firing missiles and drones at all of them, right? Like if you're in like Qatar and you're suddenly catching missiles from the Iranians, you're like, "What the hell is this?"

Like what did we do to you? You know, the UAE obviously has not had a great diplomatic relationship with them, but it's a very different thing to have missiles fired at literally your hotels, right? Like, let us not make any pretense that these were military targets here. I believe in Saudi Arabia, uh, there was an attempt to disrupt oil refining as well. So like these are significant sort of economic attacks and it's branching out far beyond just US military bases in Israel which were the typical sort of shots in previous you know altercations.

two, being very realistic here and looking at like capabilities across the map, there hasn't been too much of an effective response, right? Like the United States lost three three fighter jets to friendly fire and currently zero to Iran. Um, Israel like obviously has sported a similarly positive record here. One of the things that I'm also watching is is the market reacting to the fact that it may be that Iran was mostly talk from a military capacity standpoint versus like operational capacity to really hit back at scale.

Like we have not seen hypersonic missiles into US carrier groups or anything of that sort that people were worried about. We have not seen mass casualties among civilians in other places. We haven't seen major disruptions to infrastructure yet. So, as part of what the market is pricing, just call it the kinetic superiority of the Americans so far. >> Two quick reactions. First off, the the head is gone, right? So, the leaders assembled Saturday morning, all 40 of them in a compound, an incredible act of cell phone stupidity. They're gone. Now, of course, they did that because they probably believe their electronic communications are compromised, which they are. So, they had to meet in person. So, it's like, you're damned if

you do, damned if you don't there. The other thing I read is that they delegated decision- making to the uh to on the ground troops. So that's why I believe you're seeing them strike their neighbors. I don't think it's top down. I think they've lost that because it's it makes no sense what they're doing. It shows you just how ineffectual and incompetent autocratic leadership is. They have only two levers. Fire a missile or issue a menacing threat. Those are the only things they know how to do. They have no other kind of maneuverability.

The interesting thing going forward is that US allies will now control the straight of Hormuz, which is a nerve point to Chris's point for China. So, the long-term strategic benefits for the United States go up quite a bit. It's it's a it's a very interesting juncture in history here. One last point. One last point. And I'd love to get your take on this. Which MSAD agent is going to run Iran at this point. I mean, you know, IR the IRGC hired a guy to smoke out MSAD because they're so heavily infiltrated.

>> Turns out that guy worked for MSAD. And if you if you don't work for MSAD, you're going to get bombed, >> right? So, it's almost like, okay, who which institution steps up? Which are you with MSAD? No. Okay, you're going to get bombed. Isn't that how this plays out? >> I mean, arguably the best possible outcome for peace is that the new Ayatollah is also a facade agent, right? [laughter] >> I mean, it's it's it's going to be a complete u rewiring of the Middle East in many senses. And there are some age-old rivalries in that region between Shia and Sunni that go well back over thousand years, right? And I think it's an incredible as as the geopolitical

starts I guess reshifting. I think the economies are also simultaneously shifting. Uh what are the Middle East governments looking to do? They're looking to get into data centers, right? And data centers, why is UAE positioning itself as a head of crypto? You know, there's a lot of interest in emerging technologies. I think as things settle, it's going to be very bullish for for crypto. It's gonna be bullshi and tech. The Saudis as well like you know the NBS like him or not he's very focused on a pro tech agenda and you know as things settle and they have to invest less in kinetic warfare. I think that they're going to be pouring more and more into tech. I hope that's the case. I I really hope we get out of the violence game and

back into you know tech innovation investment. And I I I think that's where we're heading if we can get this right. You know the hard part is what's next. Nobody knows, right? And I hate it when they're like interviewing military people. What What have you planned next? Like it's almost impossible to do. But, you know, to your point, Rahm, they have incredible intelligence. We saw that with the complete dismantling of Hezbollah. Um, you know, and and they had we saw it again over the weekend. So, you know, how do they work closely back channel with somebody who can assert stability and control? I'm not sure it's going to be democratic. I would like for it to be, but I think the priorization because remember, we're in a real politic age. It's all about real

politic. And like it or not, Trump is moving in this interests. If this thing settles as he wants and he's got a strong strong stable um non-confrontational Iran, that makes the region better. You know, China is now, you know, we're they're they're much more dependent. we we're controlling a lot of the oil that that they used to get below uh sanctioned prices like but below market. So, it's a it's a it's a move of strength if you can pull it off. And mind you, like we talked about earlier, it's March Madness, right? We're starting to kick off the midterm season and so this all plays into the narrative. So, he's moved on the chessboard. Um interesting to see what comes next.

>> So, Trump incited the population to take over the government. So that's a call for popularled uh leadership, right? So that's a possibility. Absent that, the clerics would have to get together and nominate a new leader. So those are the two paths. We'll have to see how it plays out. I hope a a popularled approach would work. I think the difference, back to your point on Iraq, I don't think it was so much about ideals. I think it was more around a lack of institutions.

That's it. Lack of habits and routines around how democracy is conducted. It's a lot more than just an election. You have to have parties and primaries and discussion and a debate and free press in the fifth column. Um Iran has a better shot I I believe at that. um because you had protests from uh a very thoughtful, highly educated uh population. It was coming from the from the ground up.

>> So one can be hopeful. >> Yeah. So so democracy in its best form is is is bottoms up, not tops down. And to your point, what makes our democracy so robust in this country is state and local government. you know, even down to city councils, it gets this very well organized and democratic. That was not my experience in in Iraq. And my experience in Iraq was, "Hey, we're here. You know, the guy in Baghdad, you know, he's your new elected leader. Deal with it." And the chic's like, "No, man. I've been in charge for a thousand years. That's not how it works around here." And so, it's just much more complex. I guess my point is that I I I think the administration wants stability first and foremost. They want control of the oil. Um, and I hope I hope that I I I I earnestly hope that the that a dem a

grounds up democratic regime emerges. The Iranian people are very smart, very thoughtful, very educated. Um, and I think they want it. I hope they get there. >> There was a guy on Twitter, um, his handle is Roman helmet guy who was joking a little while back that actually we should just rename it Persia, right, as part of this. But Chris to go to what you were saying is there is actually a long right and deep history in this region that I think the Iran name in the recent regime kind of obscures. Like Persia does have a very long history of like education and contribution to both the world and the region that sort of the best case is that that is rediscovered in some way and sort of

brought back >> in that part of the world. And then by the way they're sitting on a ton of oil. So, as much as we're seeing like an oil supply like disruption move of prices upwards right now, if you end up with a stable like call it globally aware cooperative government, and I just I don't mean cooperative in like bowing down to anyone group. I just mean in the sense of like not constantly attacking and antagonizing your neighbors, you could actually very quickly have a much stronger Iranian economy, right? and it becoming the gateway between Europe and Asia once more. So to me, there is a very positive case. But I'll also remind everybody, we had OM on here last week

talking about how sort of the opposition in Iran is quite weak, right? There is not really an organized sort of, you know, group pushing back, of charge. Correct. >> Partially because of that, partially because many already left the country if we're being totally honest. And then I think the other problem you have and Chris you're familiar with this from Iraq is there are factions in this country who would probably rather be their own country right like what are you doing with the Kurds for instance I think the potential pathways one that maybe is under discussed is neither the current regime staying in charge nor

like Iran just flips back but rather call it Yugoslavia which is to say does this thing break apart into several factions that eventually become their own countries. >> Yeah. I mean, the people need to be involved, right? The the suppression of the people was driven in part by the IRGC, but also local law enforcement. It I don't know that the US government is going to take out local law enforcement. I don't know how you do that. So, that has to be done by the people. Uh think you can be cautiously optimistic though. It's hard to see what the left tail risk is though. It's hard to see what the left tail risk is from this.

The left tail risk is the conflict lasts longer than expected. There are fewer uh transports through the straight of hormuse ma mainly because those ships don't have the right insuranceances. >> Yep. >> But that's temporary phenomena. You know, we we had this in 2022 with COVID and you know, delays in in shipping. You know, this is a temporary phenomena. So markets look should look past this. >> I think they have. I mean, look look at the resiliency of of crypto, right?

>> I don't I don't think just crypto. Equities have been pretty resilient today as well. Like as you look down the list, I I think this to me, >> right, like having seen >> market regimes before, this is being priced right now as though it is a regional conflict is the way I would describe it. That is to say, we don't see major global spillover. Honestly, like Russia and Ukraine was more disruptive to markets than this was. >> Yeah. Yeah. And again, what has it shown? Uh Venezuela happened on a Friday night. Hyperlid was price discovery. Uh this happened on Saturday night. Everyone looked at Hyperlid. Now Bloomberg's even quoting it. Um what we're wondering is like, okay, so

Hyperlid has an edge. Now it it seems to be the 247 uh global commodities indicator. Like we kind of knew how oil was going to trade as soon as it happened and into the week. We didn't have to wait for uh Sunday night, whatever, for markets to wake up. But we're also seeing the big exchanges now um moving towards 247. So the question is is can Hyperliquid keep that edge? Because like you know we've been around long enough like liquidity is very very hard to achieve. They got it. And once you got it, it's very hard to to get rid of it or lose it. And so as the big guys come in, what is that going to mean for liquidity once their mode of 247 is is is reduced? So like that's what we've been looking at. But again, another another gold stamp for the crypto

markets. They work 24/7 and they gave the markets what they need uh on the weekends. >> One of the fascinating parts of this too is that a counterargument against 247 trading and Chris, I'm sure you've heard this as well is that it will be risk increasing because we'll get all these jumpy moves when people are not awake, etc., etc. And actually in this event it appears maybe to have been somewhat risk reducing potentially because instead of just uncertainty like nobody knows what the price is going to open at we've got these proxy indicators sort of showing us in a market of people like even if it's not the full market like let us accept that hyperlid is a small subset

of markets currently it is at least not a completely uninformed and idiotic subset. So you could look at that and say there's some information value in here and it gives us sort of a boundary on what the open is going to be. I you know I know you and I were at an event earlier today and we'll get to that. But I think one of the things that this is revealing is that the 24/7 news cycle might speed up the information discovery, but that may be risk decreasing in many cases as opposed to risk increasing because you don't have the giant jump risk that people are trying to manage over weekends anymore.

>> Yeah. Which should lower your collateral everywhere, right? I because you're collateralizing in real time. That should result in additional liquidity coming back into the system as people because because you used to have to hold collateral from like Friday till Tuesday if it's a three-day weekend and there's a stress, god forbid. That's one of the beauties of 247 markets. You get to lower that collateral and and increases liquidity. The other data point that we had, frankly, was prediction markets which had their own little uh challenges over the weekend, you know, and debates. Um, yeah, I think there's plenty to talk about there as well. I mean, I'm going to say right now the main thing I'm coming around to on prediction markets is that they're learning in a way that crypto has been learning some of the lessons of

financial markets. Prediction markets are in the process of learning many of the lessons of insurance markets right now. Which is to say, if you're familiar with insurance and reinsurance, some of the biggest fist fights in the history of those markets are around do I owe you money or not? And that's always the edge cases on terms and conditions and like how were events defined. Maybe the classic one is does hurricane insurance cover flooding, right? And like a giant debate that is like ripped through the Florida court system and was worth tens of billions of dollars. And these sorts of things I'm watching in prediction markets now where the number one thing I would advise everybody is if you're

looking at prediction markets, pay special attention to the wording of the terms of each of these markets. Like that is going to be a space that will need to be standardized over time with much better call it neutral arbitration in the same way that insurance and reinsurance markets work right now. Because you can't have a market where most people thought it would resolve to yes and it resolves to no or vice versa become the standard because then people just back away and stop using it. >> Yeah, I I think you know this this Iran event has refocused market attention.

Uh however, there are still larger issues that are out there and brewing under the surface, right? Like QQQ is down 7% year to date. Nvidia reported blockbuster earnings and it sold off. Uh markets were strong today, but it was driven by energy. Most sectors were down, including consumer discretionary. Staples rallied year to date, but you've got now stocks like Walmart at 45 times earnings and Costco. That's not sustainable. That's going to have to give back. Um and so where's the leadership going to come from? I was just looking at Amazon's free cash flow yield. It's 3%.

3%. It's incredibly low. That number should be 2 to 3%. You know, you've got uh the Department of Defense having a a public dispute with uh Anthropic now awarding a contract to OpenAI. So, there are these issues under the surface, right? Valuations are elevated versus free cash flow. The positioning uh is still crowded. Um, and we're seeing technical weakness in the leading themes in the market. I see people buying the dip on like everything, even things that are just down 40%. It's like really, it's a bare market and you're just buying the dip. Like I So, I I I do think that after we get through maybe a

a bit of a rally here, through some of the VIX decay and a faster resolution than people think around Iran, there are still larger issues that the market's trying to address. and and obviously midterm elections are there too. >> I mean let I was going to say let's go down one of the rabbit holes that you brought up there which is the AI component because this is something we've been talking about for a while. So currently um there was a little bit of a brewhaha uh between Anthropic and the Pentagon where Anthropic CEO you know and Anthropic for those listening kind of positioned itself as the safety AI.

um Claude had guard rails against certain military and surveillance uses and tensions escalated pretty quickly with the Department of War as they both sought broader contractual language allowing use of anthropics models but also were alleging that some of the things that anthropic had call it implicitly or explicitly permitted before they were backing away on. I think to be honest like both sides are telling the story most favorable to themselves but the core of the debate is who gets to use this thing and for what and on what terms. This escalated pretty quickly. Donald Trump criticized them on social media anthropic has done a bunch of PR around this. It framed them as

hostile and unreliable for national security needs. And unsurprisingly, uh, somebody else in the market, as happens in competitive marketplaces, stepped in and took advantage. So Sam Alman shows up and signs a contract with the Department of War where it's now OpenAI that will be essentially [clears throat] filling that gap and working with them. There are again guard rails around that, but not the same sort of categorical refusals. So to me before we get to the operational realities for the military Rahm I want to come back to a point that you have raised previously on this show which is where is the value capture going to be in AI because to me this is maybe the best example of

somebody just hot swapping one model for another and moving on with their life. So like what is the difference? >> Yeah. No I agree I agree. you know, we uh I instructed our team at Luma to switch over to uh Anthropic and their enterprise use cases. They work really well. Uh I give credit to to Daario for a principal stand. I don't think he would do that. I think I still don't think deep down aside I still I think they will bend the knee eventually out of economic necessity and I I I'm concerned that Sam Alman now is playing a some role is it critical or not? I hope not with US Department of [laughter] Defense.

This is a guy that was fired by his board uh where a developer uh died or was killed on his watch and where he made misrepresentations to early investors like Elon Musk that where where's the integrity in any of that? It's not a one-off, it's a three-off. [snorts] That's a pattern. So, it's a bit it's a bit of a concern that Open AI is in there. Like, can couldn't we have found someone else, please? Right. But yeah, no, I agree. There's there's limited value capture and all this. You know, the uh the open- source models like hugging face. Um, you know, they're 10 they're a tenth of the cost of these models. They're one year behind, but they catch up.

So, it's just like the cost of storage, right? We saw this with the hard drives and the memory, right? It just drops over time. That's going to happen. So, I don't I don't see the value capture. Look, look at like Palunteer stock. Like I think that's a bubble deflating, but hey, they've got value capture. They got the multiple. I don't I don't see it for these uh LLMs, which are in in a brutal uh war of attrition with each other. >> Let me just chime in. I mean, as somebody who's been in war, been shot at, lost a lot of friends, um this debate is really hard for me because obviously, you know, you want to do the the great thing about the US military is you always want to do the right thing on the battlefield. You don't swear allegiance to the president or to a

king. You swear to the constitution. As an officer, you have to follow the lawful orders and and uphold the constitution. And that's wonderful. This is actually very similar to crypto. This debate that's going on. Now, what Dario said is he there's two things two two conditions he had. Uh one was like lethal autonomous decision-making and the second one was mass surveillance. Um, what I've come to know whether it's crypto or AI is that it's not the technology that is evil or not evil. Maybe it is in the case of AI, but but generally it's technology. It's the behavior um that people employ it to do, right? And the thing is is like technology, we have laws. Just because you have new technology doesn't mean that you ignore the old laws. And as

you're thinking about um mass surveillance, well, if there's laws that prevent mass surveillance, it's a policy issue and then the government tries to conduct mass surveillance, like put it to bed, you know, throw people in jail, like hold them accountable because it's illegal. Um and that's why it's important to have that policy. I think the lethality piece is a little bit more complex for me because if there is a technology that saves like one marine on the battlefield uh or one of your you know provided it's done legally why would you suppress its development um if it can be done ethically. So like I'm almost of the acceleration camp like you you can't restrict it you need to

study it because like let's go back to Iran. The Iranians are really good at at drones. They have the Shahed drone which is a low cost I mean they've had effect with it on the battlefield just through sheer size like I've come from the from a place I'm sorry but like you you got to give the guys and the ladies in the ground the best tools possible and like but but law should apply and I think Dario's point is like well wait a second the laws haven't cut up caught up to this technology well we got to hold then our our our Congress um accountable and you know we have to use the democracy that we talked about. So, it's tricky.

Um, but I just hate anything that deprivives, you know, our men and women on the ground who are v who are sacrificing their lives. Um, anything that that protects them. >> I think another important point there, you know, I I understand this is unpleasant to a lot of people, call it in the theoretical ethics camp, but in war, people play to win, right? And what I mean by that is if you're not willing to do something with an AI model and the other side is that thing works, then they just win. So one of the things that I think we I'll just be transparent and say we don't know from the outside exactly where the lines were drawn. But if you're in the department of war and

anthropic is telling you we want them drawn here and it's going to impede operational capabilities and OpenAI is telling you no, no, over here and it's not, that's a trivial decision for them to make, right? Because like you know it's back to the whole god what was that quote from unforgiven deserve ain't got nothing to do with it right like both sides are playing to win and ultimately Chris to your point if the United States is handicapping ourselves in a way that's causing us to lose conflicts or get our people killed >> then that is a bad decision just strictly speaking in that regard >> so there's a case we made that anthropic may have been held captive by its own employees so the US DoD agreed that the AI

technology would only be used for lawful purposes. In fact, there's a post from the under secretary of defense going through the contract language and from their point of view, it looks completely reasonable. And also, David Saxs and Elon both stated that there are a number of holdovers from the Biden administration that went to Anthropic. And if you look outside Anthropics HQ, there's a lot of chalk and you know rainbows and quasi protest or support this and that. So I wouldn't be surprised if that decision was made because of talent people. They were trying to find a way not to do a deal that in fact would be lawful and address the concerns of Anthropic. After

all, that's in the contract. They weren't making the claim that the DoD wouldn't abide by it. That's not what they said. I mean, so back to what we've been saying about AI, too. Is the future that we're seeing here going to be employees losing a lot of the pull to do that over time? because, you know, one, Claude just got swapped out for OpenAI [laughter] piece, but two, like one of the other big AI related news items was Jack Dorsey cutting nearly half the staff at Square, Block, XYZ, whatever we're calling the thing now, right? And he was saying essentially, we're preparing for an AI future. Now, in fairness, they had probably massively overhired in the

pandemic. So I have a feeling there's some element of pointing at AI to justify right sizing the staff in general. But it is also a statement that you can be like well of the 10,000 people we have 4,000 of you peace because of AI and that will also send a message to remaining employees like if you're not sort of on the team you're going to be much more easily replaceable. Are you guys seeing that same dynamic in employment overall like just zooming out from the DoD? >> Yeah, I think they're in a bubble. I think Silicon Valley AI engineers are in a bubble. They're not in reality.

They're getting lavish pay packages. They're getting poached. They're turning down $100 million pay packages right from Zuck. You know, startups go through these cycles where they they have the foosball table and the free everything and the retreat uh and they are in kind of peak mode of this kind of lavishness and they're in a bubble. But uh yeah, reality is going to come home to us. Jack Dorsey ran Twitter with thousands and thousands of employees. >> Yeah. >> And Elon runs it with 35.

He's not a lean mean operator. Now Jack Dorsey is many wonderful and amazing and brilliant things. By the way, I have an incredible amount of respect for Jack Dorsey and how he conducts his life. Uh not just his entrepreneurial business building skills, but he likes to think. He likes to contemplate. He's like a kind of a philosopher entrepreneur. He's not a great costefficient operator. And so you're seeing a lot of these startups justify headcount reductions based on AI. You know, Clara did the same thing. They cut out work done and they say, "Oh, we did with AI. Come on. You're just cutting cost. Take your numbers for the IPO.

>> A lot of uncertainty, isn't it?" But to your point, like, hey, if uh if Jack's doing it, I should do it, too. And it's it's a really good opportunity to optimize. Now, you know, let's not even talk about there's there's legal things, too. Like, hey, you're restructuring. You know, sometimes when you fire people, you get sued. Well, here everyone's restructuring because of AI. It kind of lowers your liability in certain cases. So, I do think it's going to be a trend that you're going to see that that companies will will use to optimize. And let's not forget like AI should be massively deflationary for this reason. >> Yeah. I mean, wait till thinking machines blows up. Remember that one?

That was the CTO from OpenAI Start raised a couple billion dollars. Ilia created like safe AI. This is like insanity. This is insane stuff. You're not supposed to get billion dollar valuations on a not even a PowerPoint just because you were around the OpenAI hoop. This we're going to look back at this and say what craziness was done in Silicon Valley. >> Yeah. And I think what's interesting to me, Rahm, that you were saying there is exactly the Silicon Valley component of this because if you look across like some of call it the more people focused or hands-on industries. We're not seeing this same trend everywhere. You know, a

good example is my wife works for Memorial Sloan Ketering, the cancer hospital. We are not seeing tons of doctors and nurses being replaced by AI in this context, right? Is it going to be integrated? Is it going to improve productivity? Is AI going to be a powerful diagnostic tool for patients? 100% over time. Is it going to lead to massive headcount reductions in the healthcare industry? Almost certainly no. Right. And it is kind of funny that there are these subsets of industries that I think are both living in a bubble but then also disproportionately driving the discourse. Like the idea, you know, you saw that Catrini paper that we were talking about of like, oh, everything's

been destroyed by AI. I'm like, that is a very software developerentric. >> Yeah. Software rallied since then. that marked the bottom potentially. But like look at private equity and private credit. It's getting absolutely destroyed in the markets right now and they're lending to software. They're subject to mark tomarket. That's they live in reality land, right? Open AAI and these software these uh AI LLM. This is story time. That's why Daario is on the podcast. No one knew who Daario was six months ago. Now he's making the podcast circuit because they have to go public and his thesis for how they get to a trillion dollars in revenue. Here's an interesting story in the first two years around enterprise adoption which I

believe I'm actually signed up as a customer but after year two is like oh we'll have a data center full of geniuses that's we'll solve 950 billion dollars somehow from that insanity. No, I think I think that trend will play out over time and people will find out. Yeah, I mean this, you know. Okay, so one final point before we go to ads. Um because then we have one more thing we want to talk about before Chris has to leave. But you've seen this sort of misidentification of where the value is before in other industries. We saw it in the tech bubble. We've also seen it in crypto with fat protocol thesis that right now appears to be slowly falling

apart as well. It may be that the AI companies themselves are not the value accreator right in this space. That is not a reputation of the value of AI. It is a reputation of the specific conduit of value transmission going through the bottle companies. Rahm I believe >> our water companies highly val. >> Does anyone know the name of their local water company? Is Khan Edison a trillion dollar? They all need electricity >> and intelligence will be a utility on demand at lowcost serviced competitively.

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today at nexo.com/unge. Quick note before we continue with today's episode. Bits and Bips 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 live [music] streams 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. [music] You can find the new Bits andB channels at unchaincrypto.com/bitsandbips.

You can also find us by searching Bits and Bips on YouTube, Apple Podcasts, Spotify, or wherever you listen. >> All right, everybody. Welcome back. Um, so earlier today, Chris and I were at the Economic Club of New York with former podcast guest Patrick Wit, uh, talking about the current situation with clarity and what is going on in Washington DC. Chris actually was the one interviewing Patrick on stage. So Chris, I'm just going to lob this one over to you. What was the conversation about? What was the overall tone? What were your takeaways first?

>> Yeah, we've been talking about crypto markets for a long time and like what's next for crypto? We know that's an institutional error and for it to accomplish its true potential. I think a lot of us think that this thing called clarity has to pass. Um right now the White House, uh according to Patrick, they've been really focused on obviously getting it over the line. They're they're implementing genius right now because genius you just don't pass the bill and go away. there's a lot of different regulations and rulemaking. They're navigating the OC rule making that again reaffirmed no interest on uh stable coins from issuers. So, he's navigating all of that. And then like when it comes to clarity, the irony continues to be that what's holding up clarity? Well, it's the stable coin stuff that we thought we already

litigated. It feels like there's progress. Um my sense is that clarity could go either way. Uh the irony is is if if you look at uh poly market today, there was like it shot up recently to about a 70% chance. Pretty uh you know thin markets, you're looking at about 300k uh in the pool, but um somebody thinks that this is going to happen or at least thought a lot more so than the past. It feels like just what I'm hearing through the grapevine is that um the coin bases of the world have come a long way. Uh they're at the you know 45 50 yard line. the banks really haven't moved and continue to dig in and that's fine and and like people are like well

how come these people get to decide what the bill is like that's for the senators to decide that's for and and that's exactly what they're trying to do is because a lot of the senators will sit back and say I want to hear your story banks tell me I want to hear your story Coinbase crypto tell me and then they then they figure out which direction that they're going to vote it's a lot easier for a senator to say Okay, good. You know, both you guys figured it out. I'm good now. You're cool. I'm cool. We're all cool. This makes good policy. So, it's not it's, you know, a lot of people like, it's not fair. The industry is just, you know, doing it in a bubble.

Not so fast because those senators are thinking about getting reelected as well. So, it's just sausage making and it's hard. And, you know, I personally still think it's going to happen. It's coin flip. Um, but you know, the other thing that I think the crypto industry hasn't endeared itself to members of Congress is that there's still a lot of wackos out there and and and they need to see more utility, more grown-ups, uh, more focus on, you know, actually delivering real use value to people. That's what we need to do a better job of showing and telling and explaining.

So, that was my takeaway. What about yours, Austin? You you heard it from the audience. >> Yeah. So to one to pile on to a point that you're making there. I think a lot of people in crypto are in denial about how bad the reputation of crypto is after call it 2022 and present like with call it the average two-legged human on the street. I tweeted recently that crypto was ranked probably one to two slots below slime mold in most people's preference lists and everybody got mad with me. But I'm like I'm just repeating what I hear. And I think Chris, you're right. It makes it easy for people to make bad faith arguments that are anti-crypto and get away with them because the reputation of the industry is so poor. But what I was hearing from

the audience too is that one of the things we're going to see over the next 5 to 10 years, and this will be unwelcome to some varieties of crypton natives, is a much greater convergence between blockchain technology and traditional financial firms. Right? That is to say, the idea that we're going to tear down the entire system and replace it with decentralized permissionless money is on the way out, but the idea that we can actually take the current system and massively upgrade it in ways that improve people's lives and financial access and fairness is on the way in. And so one of the things that was interesting to me because this is very like DC and real politic is a pathway where clarity can happen and

where the sort of like punching match from genius can be resolved is how do we make sure that the entities that are call it the most both politically, socially and maybe economically favorable get something out of this aka are winners. And so one of the big takeaways is I genuinely don't think the interests of the big banks and the community banks are the same here. And people have been treating that side like a monolith for a long time. But the reality is, you know, thought experiment here that I've discussed with a couple of friends before. If all of the stable coin issuers were to be told, hey, you guys can pay yield, but only if you keep X percentage of your reserve at deposits

at banks under, say, $10 billion balance sheet size. Who's the loser there? Except for the giant banks to begin with. >> Yeah. >> And so I think as we start sort of like making the sausage in Washington DC, if you're outside of that framework, you need to understand a couple of things that are important. One, Chris said something really powerful like now twice in this episode about how the United States operates, which is we have our Constitution. We have elected representatives, and they do genuinely serve at the behest of the people. You can vote these people out if you don't like them. So, number one, if you're listening to this and you're an American citizen and you have a strong view about

this, go look up who your house representative and your senators are and just like call them, write them, email them. You can go visit their office in Washington DC. Like, it's shocking, but you can check into the building and just go walk right in there. Tell them what you believe. It will move the needle. And that two, >> finding a compromise between the people in this space who I would say have the biggest political acts here will get things done. And to me, that is the call it legitimate people in the crypto industry trying to face US persons. Like Coinbase is a good example. They never fled the US. Whatever you think about them, they've been willing to be regulated. They'll argue about the

terms, but they're not fleeing the US. They're not fleeing reporting. And then the community banks, right? Like those are the two groups who people really care about here. The big banks kind of hide behind the community banks as a shield. But the answer is if the community banks are happy and the big banks are not, I like our odds. >> I like that too. >> Yeah. He uh yeah, speaking to Patrick uh talked a little bit about quantum didn't seem to be keeping him awake at night like our friend Nick Carter. Uh and then getting back to like what people want to see is they want to see better utility and user experience. And to me that's g I think AI is going to play a huge role in that. Like AI doesn't care about the downstream you know wallet interfaces

and all the brain damage that we deal with every single day on on chain. Uh so I think those are some things. The other thing that's frankly fascinating is that when you talk to normies uh you know in events like that what was their biggest concern? Security. Isn't this a crappy product because no one can trace it? Actually everyone can trace it. And we oftentimes forget in our little bubble just how unaware most people are. They just don't care. They've got more important things to care about. >> One I was gonna say one of the things that you run into there is, you know, it's it's a well-known problem in economics like the streetlight effect, which is to say because crypto is so transparent, you can observe the crime

and therefore people think it's bad. But there's probably way more crime that we're simply not detecting in the traditional system. And then people think it's better because they don't see it. [clears throat] >> Yeah. Something I I'll share just anecdotally. Um we I still receive reverse inquiry from call it like baby boomer conservative profile types that are asking about specifically Bitcoin unp unprompted. I find that interesting. I do think and they approach it with curiosity like should I have allocation to Bitcoin with an open mind.

So you know I I do think Bitcoin has crossed the Rubicon >> in terms of broader public consciousness and understanding which is a major accomplishment. I have yet to see that with other digital assets thus far. It's not a comment on the price potentials of their assets. I'm just sharing what I see on the ground. I see there's a lot of potential in like what Ethereum has done and other like Salana those too like and hyperlquid but I the inquiry I do get is is around Bitcoin. It's kind of kind of interesting.

>> Yeah. And bit Bitcoin is crypto, right? There's no difference. [clears throat] >> I will also hop in there and say the other one that I get and I see why you're not getting it from the investor side is stable coins. >> Yeah. >> Right. Like when I talk to a lot of companies that are doing things like payroll, international wire business, like how do we just manage our like money, stable coins are genuinely a topic of conversation from a curiosity standpoint now as well. I if we're looking at the two things in crypto that so far to me definitely have product market fit, it's Bitcoin and stable coins. Everything else I think is very TBD, Rob, as you're saying, which is not a reputation, but just a statement of not yet, right? Maybe it will be in the

future, but it's not certain that it will be. I would be shocked if Bitcoin and stable coins are gone from the playing field like 10, 20, 30. >> Agree. I agree. I think I think there's a lot bringing it back to Iran is like >> does does Bitcoin play a role in whatever institutions that form coming out of this? You know, we talked about social media, access to information and technology and you know the Iranians do have these deep technical skills and knowhow. One one can dream that there might be a role for decentralized money as a check on unchecked executive authority.

>> They're going to open up Mr. Beast wallets with Tom Lee. [laughter] >> I mean, that is not in the realm of impossible. >> I I would like to point out to everybody uh as as a topic I just covered in my newsletter, Mr. Beast bought a fintech app that does handle crypto. It's called Step, right? Like everybody is joking about that, but that may be a very real thing. I will also remind everybody Mr. Beast has more YouTube subscribers than people who exist in the United States of America. So that that is not a small distribution conduit.

>> I think I think Iran and crypto hold strong promise. It's a young educated demographic. Um I think they're going to come out of this after being suppressed uh thinking very forward being very forward being focused on innovation. Uh and I think it does the the conditions are very ripe. We heard >> can make it happen, right? >> Yeah. >> What is the item talked about it how like he was an early adopter largely because of you know his background in in Iran growing up and his ability to seamlessly exchange value with people that he needed to. So I do think the conditions are sound. See what happens guys.

I would also point out, Chris, we talked about this today at the event too, like Patrick was on stage on the topic of security and observability, making the point of it depends what end of that you're on, right? Like there is the bad of like the North Koreans and what they're doing on chain, but there's also the good of if you've been an extractive system that essentially steals your money either through inflation or just straight up corruption and evil. Now you have the ability and importantly voluntary ability to opt into the dollar system through stable coins, right? Like nobody, we're not holding a gun to anybody's head saying you must use Tether, right? Like that's not how this works. But when you give people options, they are able to take advantage of them

and it fundamentally creates competition that delivers essentially the end value to consumers. >> Yes, sir. >> All right. So on that note, Chris today has a hard stop and we have some upcoming programming. So I'm going to go ahead and take us out here, which is thanks for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. But next up here, Stephen Erlick will be with Rob Haddock, general partner of Dragonfly on the Bips and Bips interview. So until then, that is enough from all of us everyone and enjoy the next show.

>> Cheers. Have a good one. Hey, hey hey.

Hey, hey hey. Perfect. Hey hey hey.

Come on. Hey. Hey, black hey.

Hey, hey hey. Hey,

hey hey hey hey hey hey hey. >> [music] >> Hi everyone, welcome to another episode of Bits and Bips the interview. My name is Steve Erlick, head of research at Sharplink and also your host. And I'm

here today with Rob Hedick, uh, general partner at Dragonfly to discuss everything happening in Iran, its ramifications for crypto and the broader Trafy markets, as well as a few other key topics impacting crypto today. So, welcome Rob. >> Hey Stephen, thanks for having me. >> Yeah, absolutely. So, a lot to dive into today, but before we start, let's just take a brief moment to hear from some of the sponsors who make the show possible. >> Quick note before we get into today's episode. Bits and Bits now [music] has its dedicated feed. We're spinning off from the Unchained feed and moving to a new podcast and YouTube channel. So, if you want to keep up with our weekly live streams and macro meets, crypto breakdowns, [music] make sure to subscribe to Bits and Bips directly. We won't publish there until March, but

subscribe [music] today so you can be ready for launch. Be sure to subscribe to the new feeds at unchainedcrypto.com/bitsandips. >> Okay, so um one quick thing before we begin again. Um nothing on the show is financial or investment advice. For full disclosures, please see unchained.com/bitsandbbits. And uh now with Rob, with all that out of the way, let's kind of like just dive right into it. uh market is today. I mean, it's the the usual term oil when there's some big um source of aida in the world, the uh Israeli and US attacks on Iran. Oil is up, I believe, over $80 a barrel. Gold is up, the dollar is up.

U Bitcoin is actually kind of holding steady even though it's not kind of keeping pace with some of the other safe havens. So, just kind of lay out for us like what have the last 48 hours been like for you? What are you seeing? Yeah. So, it's an interesting time obviously for crypto and the more like macro environment and this was true before uh the you know kind of escalation in Iran. I I think actually I've been stopping or I have not been calling it a war but I think Pete Hathth and Trump both called it a war uh in the last 24 hours as well and so I think we can start calling it a war in Iran. Um, you know, over the weekend we actually saw I think crypto hold up pretty well surprisingly. Uh, and despite the fact

that, you know, global equity markets were all down overnight. I think the, uh, I think we opened the S&P opened down like a maybe a point and a quarter so or so. uh you know obviously you mentioned that you know oil's up and it it does sort of seem like we're in a situation here where there the market is fragile it's cautiously it's very cautious right now but it's not you know kind of falling off a cliff yet people want to see what's going to happen in the you know over the next few weeks you know the original story outside of Iran or at least kind of like you know the first day was hey we we've cut off a lot of the leadership and you know we expect this to be over quickly that now seems to be I think maybe not true. Um where I

mean I think he meant uh President Trump yesterday said that he expects this to go at least four weeks. Uh which if it goes if he's saying at least four weeks there's probably likelihood that the time frame is actually longer than that which means that there's a much higher chance of kind of sustained economic risk. Um obviously there was already a conversation around you know are we in a stagflationary period or are we going into one and it's very clear that you know if we have sustained disruption in kind of oil production in in the Middle East and you know depending on what happens in the straight of Hermuse and u and you know on on the tanker side like it I think that risk of stagflation is even higher right and so uh from a macroeconomic perspective I think we're

in a very precarious time at a when the markets are, you know, themselves very fragile as we saw like, you know, what happened after the Citrine report. So, I think positive for Bitcoin and crypto in so much that, you know, we didn't uh they've kind of held up and rallied it a little bit. Uh, and it doesn't seem like there's the crypto markets are as fragile as maybe the equity markets are right now. But, you know, I don't know if the crypto markets will hold up to if we have like a real correction uh in the equity markets. >> Yeah. And it's I I think a really good sort of illustration of of the turmoil that you're talking about is what hap is what's happening with the rates on the US 10 years because they're they're continuing to to go down and um it it

sort of seems a little like counter orthodox in a world where the where the dollar is going up. So what what do you make of that? Yeah, I think what's like very clear is that there's the the market is concerned about accelerating inflation, right? And like I I don't think there's any doubt in that. I think there's also the market is concerned about, you know, the fact that growth might slow and we might have um a you know, in this stagflationary period could could come. But at the same time, you look at um you know, Kevin Worsh coming in office, right? and he should take office uh at the Fed uh like you know call it like midmay right and

so I think like May 15th and you know the the question that the markets are trying to figure out about Wars has been is he you know he he's been uh you know he's been a hawk at times right and his public statements but there's also a perspective that you know maybe he's somebody who's like very close to the administration and clearly you know um President Trump wants him to cut rates and if that's the case you you know, how does he, you know, think about his, you know, personal views and how he might think about, uh, monetary policy relative to, you know, what should the administration would want him to do and how does he react to like political pressure? I think people are very confused by that. Uh, and I think the market initially reacted in a way that

said, hey, we think, you know, we're thinking about future monetary policy based on how um, you know, things that he has said in the past. And now it seems like people are coming around to this idea that maybe potentially uh he's just gonna give in to more political pressure. We'll see. I I think there's there's also the story we haven't talked about here, which is the the AIPA ruling over at um in the Supreme Court, which uh you know, obviously deemed that the way that we had you know, kind of put forth tariffs was illegal uh and was kind of an expansion of of you know, executive power. And then obviously uh you know, President Trump came out right away and said, "Well, we're going to use this different legal justification to be able

to put on tariffs for at least uh I think it's about 180 days he's allowed to um up to 15%, first he said it was 10%, then they're saying they're going to go and up to 15%. What happens after that? Uh I we don't know." And so it's it's very clear to me right now that there's just more confusion in the market than ever. And you actually have different people who trade these different markets who are coming to different conclusions in a way that we haven't seen before. >> Yeah, I think so too. And I I believe I actually briefly misspoke with the way I phrased the first question because uh yields are actually going up right now which is sort of what you would not expect like bonds obviously they move inversely with bond prices and you would think bonds would be going up along with

the dollar but they're going in opposite directions which is really epitomizes that source of confusion that you were talking about with Kevin Worsh coming in the expectation of lowering rates especially with inflation that seems to sort of be uh I mean it's not quite 2% but but it's not increasing like some feared as a result of of the tariffs, but with oil and everything else happening here, that could just permeate through the entire global economy and then and challenge any efforts at at cutting rates. Um, if and when Kevin Worsh is even confirmed as as Fed chair, because who knows what's going to happen with um Jin Impiro's investigation of of Jerome Pal and and everything like that.

Uh but yeah, it is really kind of um it's a it's a tough justosition and I I want to kind of broaden the conversation a little bit to just kind of get a sense of what's going to happen over the like the I guess the the near to to midterm because I mean as you as you mentioned and and plenty of other commentators around the world have been discussing over the last 48 hours or so. Um the timeline on when this may or may not end is is fluid and it seems like President Trump is once again trying to thread the needle that he he did in Venezuela when he was able to extract Nicholas Maduro.

Um his um the vice president essentially agreed to play ball and follow US guidance. Uh guidance I guess is um interesting term for for I think what the US is dictating to her to do. Um, but it's not quite I'm not sure what is going to happen in Iran. I mean, as you I think you mentioned, like they've talked about regime change or or not regime change like um would they find someone within the IRGC or or like clerical leadership that would be willing to work with the US or because if it's going to be true regime change that can be a lot bloodier, a lot messier and I don't see that happening in four weeks, especially if the US wants to rely solely on air power as a way to sort of eliminate casualties, which um just I find again I find it

very hard to accomplish your mission in a country of 93 million people. So that's kind of my long pream preamble to the question of like how are you positioning? How are some of the people you're talking about positioning in this environment, especially like looking at recent history like like the liberation day tariffs or even the the bombing of Iran last summer or like where we have these like V-shaped recoveries that are pretty quickly know maybe this is a different situation. >> Yeah. So >> we're a little bit different than you know probably some of your listeners in the fact that like we take very long views on the market right and we uh invest with the idea that like we won't be in positions for you know uh you know at a at a minimum like you know call it

a year right so or years right and so you know we try to be opportunistic sometimes on like the entry point but um mostly it's around okay well what do we think are the like the global the global backdrop the macroeconomic backdrop over some long period of time and I I think there's there's a there's two kind of answers to your question. I think the first is well, I actually think it's quite positive that crypto and and Bitcoin held up quite well over the weekend, right? Even at a time when you knew that, you know, equity futures were going to open up down or or trade down. Uh and there's, you know, there's some conversation say, okay, well, you know, Bitcoin is a store of value and so like, you know, commodities are up, Bitcoin be up. But Bitcoin hasn't traded that way obviously for, you know, for months

right now. And so um I think it's positive that maybe it did you know have have that correlation or it traded that way and and I think it looks like you know the type of trading you've seen you know around these events recently and around the Satrini article when equities sold down etc implies to you that there like aren't necessarily like a lot of sellers left right um you know most of the people are holding now are have much more like long-term u perspectives >> right uh and so I think that's a good setup for you know being in crypto though over some period of time. Now that doesn't mean anything for like the long tale of alt tokens because like you know there's other structural issues there around what happens with market structure and you know uh you know whether or not these things should be

worth what they're worth and you know revenue and and and you know fundamental uh value and things like that. So I I think there's there's that base. So that's really constructive. Now I think in the short term though you know to your point right there's so many things happening that are real risk right so like the equity market kind of rallied after Nvidia really beat our mains and they gave you know good guidance in the future and then like it faded that rally super quickly right the equity market also when the catrini article came out like a bunch of stuff traded down right away and like you know catrini I I I really like the the rating that they do but this isn't like a household name.

This isn't somebody that everybody looks at and it's like, "Okay, well, like I I definitely should be trading off of, you know, what they think." And there was a lot in that article that was like just science fiction, right? And I >> reminded me a lot of like George Orwell's 1984 type of type panic. >> Yeah. No, 100%. Right. And so I think it's it's very obvious that there's a lot of fragility in the market too, right? Um and I do expect that you know kind of the long-term setup for you know crypto is so very good with potential for market structure with the how many you know kind of institutions are adopting um but it you just it's very hard I think to bet on crypto if you think that the equity market might take a kind of a real bath here. I think

there was a couple articles out over the weekend or some sellside reports which were trying to figure out okay well if you fundamental there's some fundamental value loss around you know a increase in inflation and a slowdown in growth because of the rise in oil prices uh and depending on how long this goes on like you know maybe we're looking at something like a 10 to 15% u correction in the in the S&P and if that happens like it's hard to see Bitcoin holding up right even you know considering all the the really good like fundamental value that or or fundamental backdrop that we're that we're talking about at a time when there's just all of these other things that are unclear when it comes to tariffs and when it comes to um the anything to do with, you know, AI risk and uh etc.

>> Yeah, it's it's funny. I think I saw an article in EFT over the weekend that that I think there was no better like representation of traders not knowing what to do than seeing the whole market trade down like 3% on a blog report or a blog that was published. So, um I I think that I think that kind of epitomizes things pretty well. Um so, let's talk about ideas. I >> think it's important to note just to, you know, and I because I want to really re, you know, make this point, which is that the long-term outlook for the broader crypto ecosystem right now is probably as good as it's ever been, right? And we continue to have this like dislocation around, okay, well, what are the what's happening to Wall Street in terms of adoption of tokenized assets?

What's happening with stable coin demand? What does that mean for, you know, real economic activity on chain? Like, you know, what, you know, if we get a market structure bill passed now, we can talk a little bit about that, but I think that's Yeah. Uh, a little bit up in the air, but like all of these things are really good over the long run if you have that type of time horizon. >> Yeah. Yeah. And we'll get to all that because those are all really kind of good points and uh I know most of my listeners aren't are not day traders. They're they're more long-term investors much uh much like you guys are. Uh, but I mean I was actually looking around Darabit this morning at some of like the options position you hear and I think it speaks to a lot of what you just

discussed and I mean by far the um the biggest open interest is I think a put at 60,000 um especially like settling over the next couple of days but then once we kind of like span out even to like the end of the month and then we're talking about calls at um like 90 100 I mean it completely switches like there's very very very bearish sentiment or at least people are trying to protect their downside over the next couple days but then then things certainly are are changing and that might also speak to what I was talking about earlier how usually these like big like like acute conflrations resolve themselves pretty quickly be it the tariffs or or the strikes on the Iranian nuclear facilities last year. Um that's one thing I think Trump has actually done that the market's mispricing the risk of some of these these issues that everyone

thought was were big red lines that maybe they weren't. And I guess it just depends on how much of a red line this one was. Well, I I think it's I'm not a expert in the military or or in war or anything of that and I won't won't pretend to be, but it does seem like pricing this like it's June again is probably pretty wrong considering the fact that, you know, that was like very targeted military strikes and obviously this time we we've, you know, eliminated a large part of the leadership. Uh there's been a lot of I think you can already kind of see the news shifting towards negative sentiment this morning, right? Yeah, >> there's been uh I think you know at first you know there was a idea that this would end really quickly then President Trump came out and said okay

well now it's four weeks which probably means longer and then you you haven't actually seen um the US be able to enter Iranian airspace yet which I think has been very uh surprising for people because um they're you know to go and and and eliminate these a lot of these like missile silos and again like this is this is what I'm reading from from experts and some things that I'm getting but I'm not an expert myself but a lot of these missile silos. You need actually like short- range missiles to be able to go find them. So, you need to be able to get the fighter jets uh and the bombers into Iranian airspace. And that hasn't happened yet, which means that we haven't taken down their um their defense systems, right, to allow for that, right? Um and you actually saw today, I guess, like a couple F-15s got

shot down in quite uh >> accidentally seems like. Yeah. >> Yeah. And so there's there's a there's and it seems like, you know, reading between the lines that there might be um some surprise at the ex how expansive the Iranian uh kind of reaction has been right and you know in the entire region and clearly trying to put some pressure on the ally the economic footprint of the allies in the region and what that means for us. And so that type of reaction uh and the longer this goes on before we can really start to you know get you know really take control of the sher muse and and and the Iranian airspace does uh I think project out that this could be a you know kind of a

quite long conflict. Yeah. Especially I think President Trump came out again yesterday I think it was and said that we we wanted to do regime change uh but that the people that we thought would be good leaders we actually actually we killed. So I was it wasn't unclear if that was accidental or not accidental. So it's it's very odd the messaging right now and and it seems like there's and there was like leaks coming out of the CIA that potentially um you know we weren't prepared for you know the the aerial onsaw and we're worried about you know running out of these interceptor missiles in the region and and so that the just reading the tea leaves it seems like there's a shift and you know how we're thinking about the length and and how expansive the this war can be.

>> Yeah. Yeah, I mean it's in I mean I'm not sure if we've ever spoke about this. I actually worked for the US military for five years as a >> Oh, I didn't know that. Okay. Um but but I wasn't I didn't do like combined weapons like uh combat or or that type of that type of analysis. So I'm not an expert in like taking down uh air defenses and that type of stuff either. But one thing I do know from like like helping our war fighters in Afghanistan and Iraq and other places is once the bullets start firing uh anything goes. And when a when a regime like Iran feels that they're um seems quite accurately under facing existential threat, um they're going to empty the chamber one way or another. And it's hard to I mean, even when you have the best laid plans

and very clear objectives, it's hard obviously very hard to um to achieve them, let alone sometimes when there's this type of confusion. But um let's kind of turn things back to the markets. Couple of things I want to discuss before we get into a few other issues that a few other topics not related to Iran. Um, for one, um, it seems I mean I don't know if basically the data I laid out from Darabit, etc. suggests that we're mispricing the market. I mean, you also mentioned too how if the rest of the market tanks, even if Bitcoin is structurally better set up than other assets, it's still going to go down as well. Um, but uh, I mean, I guess maybe do you think that the market is mispricing some of the risk when it comes to Iran because of how messy it could become? And then again in a very

not financial advice way um traders, people listening here might wonder how they can better protect their downside. What what do you think are like one or two ways that they could can do it if they so chose? >> Yeah, I think I think markets probably pretty correctly pricing in risk to be honest. Uh you know the equity market's only been down a little bit over a point. Uh you know I think makes sense, right? Bitcoin is actually up 2% over the weekend, right? And so it's been kind of sideways. Um you know obviously this you know I'm not not an expert and um a lot of what's happening on the on the option side right now but you know it seems very clear that people are trying to protect you know dear like near-term downside but long-term

structurally you know bullish that all makes sense to me right uh because you know this this is happening in real time. I think when you put that in u kind of context of everything else that is happening on the on the rates side on the you know the AI um you know concern side I mean obviously you know we talked about the catrini article but you know one of the things that happened uh maybe it was Friday is that block came out and said they were going to cut 40% of their workforce right that is the largest uh correction or largest layoff um in I think S&P history uh for a company of that size of of of of a public company, right? And like that, you know, it's not clear for sure that that will happen,

you know, across all of these other, you know, all of these other companies, but it is, you know, sort of a canary in the coal mine of maybe there will be actually a lot of layoffs, right? And what does that mean for the economy and the market if it does, right? And that's a longer term risk, but it's, you know, that sign people are trying to now price that in, right? And so I think there's just so many things happening and so many variables that's impossible to you know really isolate oh iron risk versus you know risk of of everything else right and so it seems pretty correct to me at the moment and I think like cautious with the right you know in the near term with the right outlook over the long term makes sense I think there's also we've been uh on the crypto

side we've been trying to price in the likelihood of a market structure bill and if you look at poly market today, I I think it's, you know, 52%ish, right? Um the uh people I talked to on the hill, uh if they're not in crypto, but they, you know, happen to be close to it, um or more bearish than that, you know, call it like, you know, 35 40%. Um if you talk to, you know, a lot of the lobbyists in crypto, they're more bullish than that, but of course, like, you know, that makes sense, right? And so there's just so many variables happening right now that I I think it's really hard to uh make sense of the market and it's moving so quickly, right?

>> Yeah, absolutely. Um, couple more market questions and then we're going to get to clarity and and a few other topics. Um, for for one, I I feel like Bitcoin for the most part, most of the time has been un unfairly punished when bad things happen over the weekends because it's typically the only asset that is trading. Um, but we are now moving into a world where there's tokenized stocks, other tokenized assets that do trade 247, gold, etc. Uh, I know especially for for stocks, it's very very early days for for them, but I'm curious if you've seen anything if you saw anything interesting over the weekend with how any of those assets are are traded. Or if not, like maybe just prognosticate a

little bit on uh how like once those markets become bigger and and more liquid, that could sort of like impact the way that assets trade over over the weekend when incidents like this occur. >> Yeah, I I mean that is a very interesting topic too because if you look at what happened on Hyperlid over the weekend, right, there there was a significant amount of trading volume. What's that? >> Oh, was rocket. I mean, I think I think hype is up. How I was going to ask you about hype. I think it's up like 12% since the uh since the uh the tax began. So maybe maybe >> Yeah, it's a traded general is one, but it was up like Yeah, it was it was up 10 12% over the weekend.

>> Yeah, it might be the safe haven asset in crypto these days. >> Yeah. Well, and and because it's clear and and what has happened, right, is these these hip three markets, which is um you know, trade XYZ, which is where they're doing a lot of the tokenized commodity pers and the tokenized stock pers and uh etc. They uh we've seen significant significant uptick in volume on the commodity side uh and on the um on some of the rates and like uh side as well. The the stock volume hasn't been quite as high. it's been much more around uh commodities. Um I think at one point silver did itself like in a 24-h hour period like a third of all

hyperlquid volume, right? And so uh oil this weekend was like absolutely one of the most the most highly traded asset. But the these these uh markets still do have like some structural issues in terms of allowing people to take risk over the weekend because how are the market makers going to hedge out that risk? like you know how there's still um you you have these uh kind of buffers put in on on trade XYZ where you know they don't want to allow these things to trade more than 10% over the weekend uh one one way or another because of the fact that um you know if you if especially if it's equities if you if you like limit open uh and things move really quickly um you could just you could have like mass liquidations right

even just on that like that that bowl there and so there's there's a lot of structural issues on it as well. But the derivatives and the perp side um or the per side for the for the commodities um have been uh much easier for people to market make because of the fact that these are are markets that you can more easily, you know, rule with the sun and that they are open uh for much longer periods of time than equities. Equities is a harder problem to solve. Um and so I I think we're going to continue to see that grow. Oh, Hyperliquid is doing awesome, but I um I I think there's the long-term outlook uh continues to be better for assets that have um are more highly correlated across global markets versus our you know, call it individual

assets and the US market or you know call it a European market uh etc. Um I also tend to be I think relatively bearish on the current state of um spot equity on markets right uh and on on chain right now. the way spot works today uh for most of the products. So um you know like Kraken bought a thing called um stock >> yeah sorry and uh and there was you know there's and there's a few others and there's uh the way they work right now mostly is that it's some sort of you know SPV that you know somebody had the market maker has to go and like you know put in an order to that SPV and then

that SPV goes through a US broker dealer and that US broker dealer then buys the thing. Um, and you know during like off periods you can't necessarily redeem and so there's these dislocations that happen and it's very clunky and they it's really hard to like scale that product and so I'm I'm much more bullish on the on the derivative side and I think we've we've we've seen that happen today. I think there's a future where uh you know call it natively issued stock on chain where it's its own primary market that I think has a much better chance of growing than the current state of what has happened on these kind of like you know SPV rappers that exist on chain.

>> Okay. No, good explanation and sounds like we could probably have a series of podcasts on that topic then. Um >> yeah. >> So uh one more question and then we'll move on to a few other topics. But I I'm just curious, uh, is there one or or two charts, um, markets that you're really going to be paying attention to over the next, uh, excuse me, couple of days to get a sense of, uh, what's happening. Uh, it could be crypto, commodities, equities anything. >> Yeah. So, I I'm not a I'm not a huge chart guy. Uh, and so I um because of the way we invest. But listen, I think what's happening to your point around >> even just like an indicator just your or like a piece of news that you're >> Yeah. Well, so I I think the most

important thing for the markets right now is what is the likelihood of this thing lasting a long period of time or if it of it be deescalated pretty quickly. And so, you know, you saw President Trump come out, uh, I think it was yesterday morning and say that, hey, the the Iranian new regime wants to wants to talk and potentially there's, you know, possibility for, you know, some sort of deescalation. That was refer rebuted right like right away, right? Um, and so I I I want to see if there's any change in that conversation and what comes out in the media around that. I think you'll see the yield curve react pretty quickly. That'll probably be one of the first things that will react pretty quickly to that. And then oil prices, right? And so I I think

those tell you a lot about what the likelihood is of the uh you know, of a sustained conf that affects a bunch of other parts of the economy, right? So you know, if oil starts rocking up to, you know, people start to think that there's there's going to be you know, huge supply chain issues and oil starts get getting close to $100, which people are talking about, right? that implies to you that there's going to be massive amounts of issues and you know and broader economic uh situation what should theoretically also be bad for you know call any risk asset include crypto and so that that's what I'm most focused on right now is what is the how does the conversation evolve on deescalation and if you start to hear President Trump and the Israeli media talk about um you know

sustained conflict you know uh further you know call it US member deaths unfortunately would We had a few over the weekend. Um you know things around you know continuing to increase the amount of bombing etc. I mean that is all um an indication that we expect this to be a sustained conflict that will have broader macroeconomic effects and will have broader effects on the crypto market itself. >> Great. All right. Um so we're going to switch gears here, but before we do so we're going to take a another quick break to hear from some of our show's sponsors. >> Quick note before we continue with today's episode. Bits [music] and Bips 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 live streams and macro meets crypto breakdowns, make sure you're following bits and bips directly. [music] We won't start publishing until March, but getting set up now means you'll be ready on day one. You [music] can find the new Bits and Bips channels at unchaincrypto.com/bitsandbbits. You can also find us by searching Bits and Bips on YouTube, Apple Podcasts, [music] Spotify, or wherever you listen. >> All right, so I I said we were actually going to move off of Iran, but one quick tangent before we do so. Uh I am I wanted to just briefly talk about Dubai. Um it's it's one part of the world that has really sort of tried to promote itself as a crypto hub. Uh it has uh it hosts a major crypto

conference that I believe is coming up soon and >> end of April. Yeah. Yeah. And um I mean on top of that I mean it has a crypto forward regulator. It put out one of the first regulatory regimes on crypto and has really become a base for a lot of big crypto companies and uh and players just the way the war is right now. Uh I mean there was even it may have been I don't know if it was inadvertent or not where it landed but but a major hotel was hit over the weekend and uh if if like Dubai the UAE is a part of the world that is is not immune to retaliation from from Iran. I'm just curious like what you think that might mean for its future as a crypto hub at least in the short term and and uh and

and yeah I mean what the impact on on crypto could be. I know there's also a lot of investors in in Dubai that companies are trying to court. >> Yeah. I do also think this is sort of a wait and see conversation, right? Which is it seems like the uh what what hit the Fairmont on on the palm was like debris. So there was a uh like a missile that was launched that was that shot down. Some debris ended up hitting the Fairmont. Terrible, right? And I think like you know it's it's quite sad that that that happened. I I also expect um that we will learn a little bit more about like what the actual um or the reason that the the Iranians have been uh they seem to have been shooting

purposely at some other uh hotels. Now what came out of like Iranian state media over the weekend was that the US government had moved like assets and people into hotels and out from out from um some of the bases and so these were you know military operations. Uh that's Iranian state media which is always going to And I feel like I I mean I'm not an expert on international law, but if that's true, I feel like that's a war crime if if you hide things in civilian areas. So >> So yeah, but then I think there was a something that came out of the State Department today that said there were some people in like Bahrain in a uh in a in a hotel, but it's unclear that happened. And so it's like it's all very Yeah. The problem right now is and this is a tangent. Um, X is a great place to

get information, you know, and it and then the the general media is u and it moves much quicker than, you know, call it listening to New York Times or watch or like whoever that person is that you you think about, but there's also so much propaganda uh and so much fake stuff that it's like very very hard to know exactly what's real and what's not. And so the best thing you can do is ingest as much information as possible and then try to figure out what's what's we'll see the the you know there's a lot of smoke that needs to clear. I think on Dubai specifically though, listen, they've it's been a place where we've seen a lot of focus on tokenization.

We've seen a lot of focus on um you know building the startup ecosystem there. Abu Dhabi uh as well, right? Like the Emirates has been you know very forward thinking. We're seeing a lot of new people move to you know ADGM uh regulated entities as well. And um you know I I think if it ends here that probably doesn't stop some of this you know momentum but if this goes on for a while and we continue to see destruction in and uh you know the the surrounding regions u yeah it absolutely is going to be tough because you're not going to have the expat community uh be as robust. People are just not going to necessarily want to move there. And so we it's it's wait and see. now on like token 249 in Dubai um you know I

actually had a lot of our portfolio companies who were reaching out and I'm supposed to go and speak there uh in in you know 8 weeks or so and the our our you know going to you know party line has been let's wait and see what happens but um certainly if this is still going on four weeks from now the uh the likelihood that um that conflict is going or that the the conference is going to happen in Dubai is is very very small. Yeah. um it's gonna be a a huge hit to um you know to to the kind of the ecosystem there at least in the near term.

>> Yeah. Okay. All right. So let let's switch gears um finally and I want to talk about clarity. Uh there was supposed to be I think the White House put a a deadline unofficial deadline of I believe last weekend to come up with some sort of compromise between the the banks and crypto um in particular to um yield on on stable coins. Uh clearly that that has passed. Uh I I don't necessarily think it was just because of what happened with Iran. It seems like this is a bit of an intractable conflict, but you're tracking it closer than I am. So what are you hearing?

Yeah. So, it I talked about a little bit before and I was wrong earlier. We um we did trade back up over the weekend from low 50s to it's uh poly market is now at 70%. That clear day gets passed. So, I I hadn't I uh hadn't checked it in two days. It it really depends on who you ask right now. So, there, you know, kind of for for context, the and I'm sure a lot of your listeners know this, but you know, there was this Clarity Act was passed by the House last last summer. uh the Senate had to mark it up. There was a um Senate Banking Committee markup that came out uh came out, you know, I guess it was about a month or so ago that had this, you know, call it new language around yield, right? Uh for

there's a few other things in it that the industry is very um against around some of the uh conversation around, you know, tokenized assets and how exactly we think about them. also things like developer protections and making sure that developers can't be treated as criminals if their uh software is needed for nefarious activities. Uh and so there's a few things that people are really focused on, but that yield language was kind of this new thing that got certain people and especially Coinbase kind of really up in arms, right? that um you know and then you know uh Brian Armstrong tweeted about the the uh you know that that markup and not being you know very happy with it not being able to support it and that threw the negotiations into a little bit of what I would say kind of overdrive

because they what everyone thought they were kind of like locked in arm moving hand in hand they're that started to you know I think create some division uh in u uh within within Congress u you then got a ad committee markup that was much cleaner much more like clar ity or like what the you know the industry had hope to see but you have to reconcile those two and you have to get it to to the floor. >> Forgive me I I'm sorry I might be wrong. Wasn't one of the markups canled or did they both end up happening? >> So what happened is the ad committee markup was supposed to come out on a Thursday like a couple days after the banking committee uh when u Brian Armstrong came and tweeted and said he couldn't he couldn't uh support the banking committee markup they pushed it

uh and it pushed about two weeks but then it did eventually come in. So yeah, it just got pushed a couple weeks. >> Got it. Thank you. >> And so so that markup's out now as well. Um but the banking committee uh and because the banking lobby is so interested in it, they're the ones that are are driving a lot of this conversation around yield. So now there's been a couple of roundt sessions uh at the White House uh on you know trying to reconcile this language with the industry and with really the banking law. it's the banks this and over the weekend there was um some news or some some conjecture came out that essentially said that you know Coinbase the industry and the White House representatives and they uh the government representatives think that

we're at a good you know kind of middle ground. we're at a we're at a really good resolution point, but the banks are still being, you know, kind of hardlined, right? And so we need to get the bank banking lobby and the banks themselves to say, okay, this resolution works for us. And the main thing in my mind and and you know this is a little bit different depending on the US is it's certainly important that we be able to um still be able to do revenue share and allow people to fund things like reward programs and loyalty program through revenue from the stable coins right that is really really really important. The question then uh that the banking lobby has is they don't want there to be you the uh the issuers to be able to send deal directly

programmatically to call it end consumers. Uh but the you know where we fall in the middle of those two kind of extremes right now is the what we are negotiating and the banking lobby has said okay well like listen we actually don't really care if clarity happens and if we don't really care if clarity happens we're going to take the most hardline stance which is try to uh entrench ourselves an our regulatory moat and say that no revenue whatsoever from stable coins should be allowed to ever pass on to a consumer. And that's also what the OC initial rule said uh last week when the OC put out their first guidance based on you know Genius Act. And so if we if there can be enough political pressure from the administration and you know call it the

you know broader government apparatus to get the banks to get to somewhere in a middle ground here. I think the industry is there and if that happens the rest of everything that's still open there's like five open items or so all of that is solvable. that this is the this is the main main issue. >> Yeah. I I mean I do wonder I mean the the the all everything you said just makes perfect sense. But I do wonder like what is that common ground that you could find a solution to even if it's not making everyone happy find something everyone can live with because I mean banks pay virtually nothing uh to depositors. Uh the yield that gets passed on to stable coin holders is three and a half%. I mean I mean it's I mean that would just eviscerate um bank nims and and that's like economically

unsustainable for them. So this like you could argue that this is sort of existential to the entire banking model. I mean I I'm I'm curious like what the type of situ what they could live with um regardless of how much pressure gets strong armed by by Washington and and obviously this is something that we all want. Uh I mean frankly there's a good chance it is the the and maybe the only uh the biggest maybe the only catalyst that will be bullish for crypto this year. Um but it's just hard to figure out like like everyone's trying to figure out like what that what that might look like. And I I am so if you have any other thoughts on that I mean please share it. But two um you said the odds ticked up from 50 to 70% on poly market. Um, I mean, I know sometimes

markets can be manipulated may not be the right word, but they they can move based on certain traders putting on on positions. I'm uh I'm going to just ask you to speculate wildly here and wonder if you have any idea um what was behind that that like was it uh is it a series of positions? Is it one major position that moved the market? Uh I'd love to kind just given what happened, it would it would seem that the likelihood would go down given that the deadline was missed and we're at war now, but it ticked up. Yeah, I think on the poly market side it looks like there was quite a lot of trading >> okay >> around 7:30 this morning that took it up from you know call it low 60s to 70 uh and then you know over the weekend it from 50s to the 60s over the weekend

that was a little bit of what I talked about which is I think David Sachs and a few others tweeted that like hey we we have an agreement uh or we have a place that we think is acceptable for all parties we just need the banking lobby to kind of walk through the for I had to say okay we just need though >> Hi everyone welcome to another episode of bits

>> good sign >> do is there anything else related to to clarity uh or DC that you wanted to mention before we move on? >> No, I mean I think that's where we are today. The you know you asked me before like what am I hearing? you know that that 70% for clarity on poly market is much higher than I would say uh I'm hearing from people on the ground that are you know maybe um you know less economically you know directly line that are saying hey like realistically I think it's you know maybe a coin flip or maybe slightly less than that and so u that said like listen I I think we're all you know in the industry we all want to get a deal done but it has to preserve certain things it has to preserve developer protections it has to get somewhere that makes sense for for

yield it has to um make sure that these tokenization rappers um do not um you know get treated so differently that they're you know you can't actually use them as like you know performant collateral things like that and so if all that uh gets gets solved I think you know there's the last open point uh is going to be that the Democrats want a some sort of like ethics language in there as well. I am told that that'll get solved and the White House understands that and the administration uh sees a a path forward there and that that won't kill the deal if we get the other stuff solved. And so um that that's a good sign, but I think it has to happen by Memorial Day. I think if

you don't get a vote for by Memorial Day, I think we're we're in a really tough spot. I I'd actually like to just um I don't know if press is the right word, but just maybe explore a little more the ethics thing because because that is a big um that is a very big issue that that's central to to Democrats. And uh I know Patrick Wood um the I guess the I for his exact title, but he's basically the White House's appointment under David Saxs for for all things crypto. >> Um he he gave a comment I think in CoinDesk that an ethics pledge was sort of off the table. Um, but it sounds like there is a little bit of wiggle room.

So, can you expand on that at all? >> Yeah, I my my this is me reading between the lines. I don't know anything, you know, personally. This is all told, but I'm being told by people on the ground and um so so Patrick White uh is the the I think the deputy chief of staff um at the OPM, the the office of personnel management, but to your point, he's working is kind of like the lead man on uh all of this all of this conversation. and he's leading all the negotiations between the >> he's leading all the negotiations for the administration and the white house u when it comes to trying to find a a path to yield and clarity act and the the thing that we have on our side here is that uh getting this passed is a core part is very important to the

administration it's very important to the white house and and typically when something is very important to the white house they something happens because like the you know the the Republican senators who want the support of the white house, they uh want to do what you know their leadership wants them to do which which the president is right that helps them in the future and in the party apparatus etc. And so the fact that it's very important to the White House is a good sign right and uh what I have been told is that you know this hey listen we're not absolutely not going to do any ethics language whatsoever is sort of a opening posture got >> but is not actually where they're at.

there's there's some place to, you know, get something that, you know, Elizabeth Warren probably won't be happy with, but some Democrats will be happy enough with, right? Um, and get uh and and that the the White House can live with as well, but we'll see. I mean, we haven't gotten even to that point. Yeah. That is not going to even be talked about until we get the other stuff solved first. >> Understood. Okay. All right. Great. Well, yeah, thanks for that. Uh, just last last bit here. I'm I'm curious. Uh, congrats. That's I mean your firm raised I believe it's your fourth fund. Uh >> fourth fund. Yeah.

>> Yeah. And $560 million which is which is pretty sizable. >> 650. >> That's what I 650. Um so even more sizable. So congratulations on that. uh like a as you I mean as you very well know I mean back when I was at Forbes especially in the earlier part of this decade I mean it seemed like every week we were getting an announcement about some VC fund raising billions or accelerator fund from one of the foundations behind a blockchain like nine 10 figure things that hasn't happened quite so much but uh NVC funding has sort of I think migrated from a lot of smaller projects that like some like doubling down on some of the bigger plays that have already proven successful but I'd love for you to just spend a minute or two and and sort of

explain the rationale for I mean aside from just your VC fund so you want to keep raising funds like why now the right it was the right time um why 650 million and like what are some of the areas that you're really targeting with this new fund? >> Yeah, absolutely. on the line. Now, I think we've been pretty good at raising in times of um where the market is at a at a place where you want to put money to work, right? And so, I wouldn't say necessarily in bare markets, >> but the way VC should work, and it's it's very odd that it doesn't work this way, is that you should deploy a bunch of capital when markets are bad and you should probably not deploy as much capital when markets are good because prices are higher, right? Uh but you

know what happens is >> call the anti Michael Sailor model. >> Yeah, exactly. What happens is sort of the opposite a lot because you know there's you know more entrepreneurs enter the space uh you know when when um prices are up there's excitement you know LPs want to put more capital to work when you know prices are up there there's just like more excitement right and so when there's fear people don't necessarily want to uh to give you money so the the key is is to raise the money when from the LPS when uh prices are up and then deploy it when uh when when prices are down and we and we try to do that and so you know the the way venture uh fundraisers work and so everybody knows is you know we announced yesterday or sorry uh last month but the uh it

takes some period of time uh and you have to have you know you have first close and you do a couple closes after that took us about you know call it you know uh close to a year um which is very typical right and so in 21 to your point in 22 uh people were closing funds in like three four five months that never happened in the history of venture and it has not happened since um and so you know we were able to raise during this time when there was a lot of excitement about what a new administration would bring what um Genius Act would do for the for the space and then um and things like Poly Market which were large investors and you know got their investment from ICE uh and now uh it strikes us that the time is now for us

to go and actually give a lot of capital to startups who are you know really excited about building during this period where there's not as much distraction and FOMO etc. So, we think it's a perfect time to go to go shopping and go um invest right now. Um to your point around and and I and actually before I even pivot to that, I I talked about this earlier, but there are so many structural tailwinds behind our space right now. comes to stable ground adoption, when it comes to tokenization, when it comes to real world businesses growing on top of blockchain rails, when it comes to um the you know product market fit we're seeing with some of DeFi with things like Hyperlid and a lot of these vault products, it is in my mind uh one of the best times to be building in our space especially around

uh any sort of financial product and then we're starting to see some you know call it innovation or some experimentation around you know crypto AI and we'll see what happens there right and so it's a I think it's perfect time to be building in our space especially um and I think really the only other two spaces that are as exciting would be you know call it AI maybe AI robotics uh and biotech and I think that's it I think those are the only areas that like want to be on the edge of in um in frontier tech right now so I I think it's an awesome time to be putting money to work to be building and I I think on top of that you know you ask well why $650 million well you know we our last one was also 650 we had done

the same exact thing that we did last time, which is we went out with a $500 million target and then we put on uh what we talked about with um our LPS hard cap because the LPs don't want you to get too big. And so we said, "Okay, we'll hard cap it at 650, $500 million target." We filled it all the way to our hard cap. And why' we do that? We did that because the LPS uh were obviously very bullish on wanting to back us and we were lucky enough to have, you know, really convicted uh investors. But but also the reason we're not allowing ourselves to go bigger than that is our perspective is that this space is still not so big that you can you know invest you know call it a billion one and a half two uh billion dollars and you know

protect returns right and so there comes a I like to say this to a lot of people which there comes a time in every asset manager's life or where you become or every venture capitalist's life where you become either an asset manager and you solve for the 2% management fees or you stay a venture capitalist and you focus is on the 20% uh carried interest because you get really good returns, right? >> So you've seen this play out in call it traditional venture 2 where in Dre and Horowitz goes and they raised 15 billion dollars, right? Or or some more than that and you know I think you look at the returns of their funds and I can almost certainly tell you that across every vertical that they're in, they're not the best returning fund, right? But they have this big media organization they do a lot of portfolio support. they

have a um uh you know they have kind of all of these assets under management do so many different things right and then you look at like a benchmark which has continued to raise you know call it you know 400 $500 million for years like 18 funds now and you look at their returns and their returns are consistently better than you know the entries in the world >> there's just not enough places to put all that money that uh >> correct >> and so then so we we so we try to thread that needle of being big enough to do we do uh we have great portfolio support team. We have a, you know, large talent team that does all of this hiring where we've got, you know, teams in, um, and Washington that are, you know, working with our, um, you know, our portfolio

companies and, you know, trying to help them navigate what's happening uh, on in DC. And so we we try to be big enough to have enough management fees to support all of that, right? while also protecting the returns. Um, and not necessarily, I mean, I think, um, you know, there's been, you know, a lot of conversation or there's been some some articles around, you know, other firms raising even more money again right into the billions of dollars. And, um, you know, I I think you probably do have to expand your aperture a little bit if you're going to put one and a half, two, two and a half billion dollars to work today. And we still believe that there's enough opportunity in our space that we should be heavily focused on the thing that we know we do well, which is stable coins, crypto, you know, the the um you

know, the kind of the intersection of the two, the financialization of new market rails, right? Um uh and and and kind of the digitization of those rails uh you coming into tokenized assets and being on blockchains. And so that's what we're we're really excited about. >> Yeah. I I guess raising aperture is sort of a euphemism for lowering standards is a I guess >> well it's either that or you look at you know call it other verticals >> or or just go in completely different verticals that have nothing >> um Okay. All right. Well, I think this is a good place to end it. Um Rob, is there anything uh that we didn't discuss that that you wanted to share?

>> Sure. No, I you know I think you heard it from me uh throughout the podcast and in this interview, but I am very bullish on where we're going over time, but short term, you know, there's a lot of things that we don't know, right? And so, uh I I continue to be, you know, cautiously optimistic uh and very optimistic over the long term. >> Gotcha. All right. Great. Well, thanks so much for for joining. Um we'll obviously have to have you back another time. Uh thank you to everybody for watching and listening. >> Thanks, Dave. Hey hey hey.