Strategy Sells $216M in Bitcoin. Is Saylor a Buyer or a Seller Now?

Transcript

Hey everyone, welcome to Bits and Bips, where we explore how crypto and macro collide one basis point at a time. We're here to discuss the latest stories in the worlds of crypto and macro and possibly soccer. Uh but before we begin, a quick commercial break. >> This episode is brought to you by Cape, America's privacy-first mobile carrier. Same premium service you'd expect from any other carrier, but designed so your number, your location, and your data actually stay yours. Get 33% off 6 months at cape.co/unchained.

>> All right, so as always, I'm your host Austin Campbell, high scholar of Zero Knowledge Group, here with my co-hosts Raoul Paluwalia, meister of wealth, leader of Lumina, Chris Perkins, the Conan, we'll let you decide which one of Franklin Crypto. Um and a quick programming note, I want to remind everybody the full Bits and Bips interviews are now on our dedicated channels X YouTube Spotify Apple Podcasts, or wherever you get your podcasts. But before we get into the main story of today, I want to start with something that I was just saying to Chris during the ad break, which is that Belgium, to be honest, is not a real country. And as I've been watching, they're complaining that they have to

play the US soccer team at full strength is going to be the key unlock for soccer in America. And what I mean by that is this. My observation as an American is that there's only two things right now that are consistently enraging the Europeans, soccer and air conditioning. And I'm just going to warn the entire continent, if you continue down this path, you will have our full attention. >> And Leica. >> And Leica. Yes. >> We'll get to that later. >> We will. All right, so all joking aside, let's start with the real first which is strategy sells Bitcoin again. This time in size. So, strategy sold 3,588 Bitcoin as disclosed uh for $216 million

in cash, roughly. That's its biggest tranche yet capping some previous selling to fund the preferred dividends. So, one of the things that we're looking at is with the MNAV premium gone, the question becomes is selling Bitcoin to cover the dividends the routine? Is it still an accumulator or is this now a recurring seller in the current Bitcoin environment? So, the facts, as we've said were they broke their multi-year no sell streak uh with the 32 Bitcoin sale and now have followed on a month later with a much larger sale.

The holdings as of July 5th are 843,775 Bitcoin in reserves, $2.55 billion of US dollar reserves, and a cost basis of $75,700 a coin, significantly above the 60k range where coins are currently trading. Uh MNAV fell below one for the first time on June 27th to 99 cents. It has since recovered some. That is per CoinDesk and mnav.com.

Those numbers vary a little depending on how you compute them, directionally correct. STRC had traded as low as 74.57. I saw it back up around the 90s today before the show started. The dividend was raised 50 basis points to 12%. So, certainly it has improved. It is not fully back to the $100 of par. And the new framework is authorizing selling of up to 1.25 billion of Bitcoin. The monetization program plus a repurchase program STRC first. So, I want to start here before we get into like deeper bull and bear cases.

Chris, I know you're like an investment banking guy. Rom, you've done a lot of investing. What do you think of the structural mechanics here? Like Saylor clearly has now pivoted to selling Bitcoin off the balance sheet versus issuing even more MSTR. What is that telling you as a starting point? >> I'll go for it, man. >> Well, there are like two ways to fund the debt obligations. They can either issue common stock, which is diluted and would hurt MSTR. That would send MSTR going down. Or they can sell Bitcoin. And if they do sell Bitcoin, then they get this narrative violation.

Um we mentioned last week that MSTR could be prone to a short covering rally. You're seeing that on the news. What's more constructive is you're seeing STRC and STRF start to close the gap versus par in the last few days. That's notable. They need to get that to par value. That's critical. If they can do that, then they can take a deep breath. They still have a challenges ahead. But if they can't close that gap, that's that's going to be an issue. I still view this as like a trading asset prone to these violent short covering rallies. I think it's in the midst of one uh right now. I'd also want to look at the dates of their uh sales of Bitcoin versus the announcement

date. Um because if they were able to sell Bitcoin and Bitcoin supported the sale and digested it, and also rallied in the last few days, that's pretty encouraging. >> Yes. >> I don't know if anyone's looked at that data. >> I mean, you're sort of piling into what the bull case is, right? Which is to say So, Dan Crypto, MicroStrategy with NAV at 1.09 and STRC on its way back, people will see everything around 1M NAV as a good value buy. BTC actually went up during selling this week. A couple of others have noted the same thing, right?

Like Josh Mandel, Pete Rizzo, that they have sold at behaves like you know, essentially a buyback of these things. The bear read on the converse part though, Ram, is that the premium is dead and Bitcoin is still not going up. It is now a Bitcoin seller. Uh Rowland and Peter Schiff both said that. So, like this kind of cuts both ways without Bitcoin going significantly up, right? Like I mean, my understanding, and correct me if I'm wrong, they have significant diverge dividend coverage right now.

Saylor can sit on his hands for a decent amount of time and do nothing. But the problem is when you get to the point where that cash runs out paying the preferreds, even if the preferreds have recovered a decent amount, if Bitcoin's not moving, aren't we right back where we started just a year later? >> I Yeah, my guess is that you had fast-moving traders step in to buy the dip uh when you saw that volume capitulation and a lot of puking last week. That's fast money. I don't think that's enduring long-term buying. They probably will sell that and get a quick flip.

>> So, uh I'll chime in. I was in London last week. Quite a week, by the way. Went to uh I was at the Robinhood event, which we should talk about, that which was pretty pretty amazing. Uh but prior to that, I went to the Goldman event, then I went to a second event I'm not supposed to talk about. Uh but I had a chance to to see Saylor speak twice. And, you know, he got up on stage, and he was very very focused on defending and protecting the dividend on the preferreds. Uh he tried to imbue uh the listeners with confidence in his commitment to Bitcoin.

And so he's trying to navigate this three-body problem. Um and I think his actions today made it very clear that he's protecting uh the dividend and hope hoping that that brings confidence back into the system. The The unfortunate thing for me is that we're stuck. Like the the the crypto narrative right now seems to be stuck on this MicroStrategy like thing. And unfortunately for many of us strategy is not crypto, crypto is not strategy, but we're all stuck there because it feels like to move forward we have to navigate this until we move on to the next opportunity or challenge. It reminds me of back in the day guys, I think we have talked about this when we

like every day you turn on the Bloomberg and all they talked about was pigs like every single day. And eventually the market worked through that um when when there were sovereign challenges in in uh in Europe. So I'm ready for us to move past this. Now I'm hopefully encouraged because to your point, maybe it was some short covering, but like Bitcoin has shown a a nice degree of resiliency um today and as this announcement broke, it's been relatively resilient. We've had some other maybe positive tailwinds. I don't know if this had anything to do with it, but the announcement of um you know, Trump saying that he likes crypto on the launch of the the Trump accounts today. So I'm just looking forward to the point where we stop focusing on the three-body problem. I would love to not talk about this

anymore. We have to uh because the market's stuck on it. Yeah. Bitcoin is still a huge amount of of crypto and it's to many people we still forget crypto is Bitcoin and and Bitcoin is is crypto and therefore strategy is crypto. I'm ready for us to break that and and get back focusing on fundamentals and all the other like nuances of the various projects that were that we're seeing. But you know, one other thing, Ross, before I shut up, uh there's ongoing now debates. Like, one of the debates that's coming to the forefront right now, and it's kind of correlated to this three-body problem, is the debate the the ongoing debate between value accrued to tokens versus value accrued to equity. Uh you see this in the private equity side, you're seeing in the public equity side. Um

we're at the beginning of this conversation. It's It's a very nuanced conversation. And, you know, you love it when people are just like dismissive of tokens and say, "Oh, all the value's in equity cuz, you know, that's where all the shareholders have rights, everything else is BS." I I think it's much more nuanced than that, and I think there are instances where you could have a lot of value accrue to accrual to uh to a token. But, that's the other debate that's coming to the forefront that I'm seeing. So, I kind of have two reactions to that, right? Like, putting myself back in the shoes of a trader, because as Rob was saying, I think there's some validity to the trading asset part, which is if you're thinking about what does the market think about this asset right now,

you're essentially asking the question of do I think people are going to step back and wait for the Michael Saylor thing to resolve itself, or do I think that people will look at this and say, he raised, you know, a ton of money, the dividends are covered for a while, this is a dead story for now, and by the time he circles back around to it, there's much less pressure on him. One of those would tell you stay away, it's going down from here. The other one would tell you it probably has some upside reflexivity as a catch-up trade compared to where a lot of other things have gone. That's a very interesting setup, cuz whoever's wrong is going to be in a lot of pain if you take positions based on that. That feels to me like the balance point that you're

talking about with this three-body problem, Chris. It's like, step one is, how big of a problem do we even think it is? Because if Sailor just falls out of the news, honestly, that's probably the best thing that could happen to them right now. It takes a lot of the pressure off. Two, on your ongoing debate, I feel like this has been a door that was opened in 2025 and people are only figuring out how open it is is the tokens versus equity and tokens and equity structure. My suspicion and Ram, I want to hear your view and Chris, I'd be curious to hear yours.

I think both tokens and equity can work. I think the thing that will be hard is having both tokens and equity if you are not very careful about defining the rights of both. >> I 100% agree. Uh we we've had Delaware law and corporations for hundreds of years and we've been able to carve up cash flows and our basic understanding is that you can carve up cash flows into different kinds of debt and the residual after you pay off your employees and your debt holders is something called equity.

There's no third category called token that you can fit into this stack. What you can do with a token is make it equity or you can make it debt. Making it some other kind of concept that coexists with debt and equity um is uh difficult. Now, to what Austin said is right idea. It's like what what are the rights that it attaches to and where does it fit in the capital stack? That'd be the way to think about it. Overall, just to simplify things, I would say it's challenging to have both equity and tokens together.

>> Yeah, I I think it's a little more nuanced. Um and again, I think you're you're talking Ram through a very centralized lens and for sure if you have a centralized company that introduces a centralized token, the laws do apply. I think it's maybe a different story when you have a decentralized technology where you know, you could pop up front ends with equity all over the place. So, there's a little nuance there. And then within the company, you know, many people are like, "Well, you know, what are the rights uh like what if somebody just arbitrarily changes and decides to send this cash flow and how do they act in the interest of the shareholders by doing so?"

Um and by the way, you can also tokenize that equity and kind of bring it all together, which is kind of another weird nuance. And maybe in certain cases you don't want to tokenize that equity because you want your LPs to stay with you, which is another debate that we continue to have. Um but I think think it's nuanced. It depends on the project, it depends on what disclosures are being made, um and the degree of decentralization. Um and and we're seeing that with some decentralized some perp DEXes that you know, we could talk about or not talk about where value accrual's clearly going into into the token. Uh equity's kind of a shell. Um it does get complex, I think. You know, it's going to be interesting to see what Circle does with with with their token. Um but like I'm

really interested to see some of these public companies as they start issuing tokens uh how that's going to play out. It's complex cuz the law hasn't caught up with the technology. And we see this all over the place where law regulation technology moves forward law and regulations kind of in the past. Uh but we'll have to figure it out. >> Is is there a case study where we can look at and say, "Well, here's where it worked well to accomplish this goal via token and equity?" Or is it more of, "Hey, this is complicated because you can tokenize anything and everything is a case-by-case analysis?"

>> It's interesting to watch what a lot of venture folks do. Um in cer- certain cases we saw a raise earlier this week um where they went long into the equity. And everyone's like, "Well, what about the token?" A lot of They got some warrants in in the um in the token. A lot of venture folks will just like cast a big net and just be like, "Okay, I'm getting token and equity. Whatever you guys like where the value accrues, I'm going to catch it." Um and again, you got to think years out. Um but as far as case studies go where there is a a a functional token and a and and a functioning equity where there's like stasis between the two in value, I have to think about it. You guys know any?

>> So, I'll pile in and say I think part of the problem we have here is we've called so many damn things tokens, it's hard to have a formalistic discussion about that because when I say token, I'm talking about everything from Bitcoin to stable coins to literal tokenized equities to protocol tokens to project tokens to meme coins to NFTs to like tokenized ownership of like real objects. And I think Ram is correct that there's not going to be anything functionally new within a capital stack. Like a token is not a new form of capital instrument.

It's just an approximation of other forms, sometimes a very well-done one, sometimes a very poorly done one. And to me, if we're going to have tokens that are meaningful, it probably to coexist like zooming out from crypto and this is a lesson people are only now starting to unpack. If you have regular equity, the token probably needs to function like a pref or debt for it to have independent meaning. If it just tries to be another form of equity, you should just tokenize your equity.

You can also tokenize things that are like products, services, goods cuz like good example, Pokemon cards, right? There's a big difference between the company that is issuing the Pokemon cards and the card itself and you could easily be tokenizing the product without tokenizing the equity. Right? And so, I think there's a lot of what's the right way to say this, nuance wrapped up in what we think we mean by tokens and one of my big critiques of both the regulators in the United States from 2020 to 2024 and now the crypto industry is people just say token like it has a meaning without like writing down what they mean.

>> Yeah, you know, just to build on that analogy a little bit, Austin. Um, there's plenty of companies that give birth and produce commodities. >> Yes. >> And there's value in those commodities. And so that that that that's totally congruent and totally in keeping with today. Now, does that car factory that spits out the cars, that car on the cap stack? Well, I guess maybe they keep it on the balance sheet, but um, it's almost you you got to think of it through a security versus commodity lens. >> Isn't there a possibility we look back in 5 years time and say gee, this whole experiment with tokens was just a COVID $3 trillion stimulus and zero interest rate easy money phenomenon that created 20,000 tokens.

We didn't know what the hell they were. We thought they were governance rights and economic rights. And we just go back to good old-fashioned capitalism. It's how many times has crypto just speed run hundreds of years of what's worked. It's a found a lesson and we we go back to the core. >> Oh, we learn our lessons over and over again in crypto. I I'll tell you that. Having gone through Lehman and gosh, FTX and everything else, for sure. >> I think you're right in that COVID was a time of experimentation where people were in front of their computers all day and they got to play with things and and it really accelerated a few things. It accelerated some innovation, it accelerated exuberance

um, and other things. However, when you step back and you look at some of the stats that we're starting to see now, like with real utility, you can't deny it. It's it's not like, "Hey, guys, it was fun while it was here." but like cuz you we can now have these assets that are 24/7 globally accessible in instant time, like instantaneously settle. Like look at the growth in stable coins. I think they're approaching all-time highs. Austin, correct me if I'm wrong. Um look what's going on in the perp market with with pre-IPO perps. Like we're seeing innovation perps, prediction markets. We're seeing uh innovation around real-world assets, tokenized equities. So I I I think out of the ashes, uh we are starting to see some of these phoenixes emerge in a much

more thoughtful, sophisticated way with a focus on fundamentals and utility. Like the market is growing up. And to your point, you can't have that kind of exuberance that we experienced in '21 uh in the in that post-COVID bubble, but it feels like the market's changing. We're in the institutional cycle now. Um I was at this Goldman uh conference I mentioned earlier. Packed. Oversubscribed year over year. The amount of institutional building going on is undeniable. Um I was at the Robinhood event. Do you guys see what they did with DeFi? Like So what's the problem with DeFi right now, guys? It's um a lot of issues around security.

Um it's it's almost like people are nervous to go directly into DeFi themselves because of all the incremental risks they're not used to taking around cyber, everything else. So what does Robinhood do? Creates an app store. Um and then they are they have I think they announced 12 partners. I heard there's many, many more to come. And they insure everything with Lloyd's and uh and and Realm. And so behind the scenes, they're really abstracting, doing what intermediaries do, which is provide that added-on service. So again, I'm not telling anyone, you know, love the Robinhood guys. That's like this is not investment advice, but what I'm saying is like the market, DeFi, it's maturing.

It's maturing into much more palatable, I guess safer, more thoughtful, sophisticated realm. >> I guess I'll go one step further and propose sort of a hypothesis on this one. I'm going to build on Chris what you're saying and what Ram is saying, which is if we look 10 years forward at call it all of the tokens that exist in the top 500 right now, how many of those still exist in any material form? But also, importantly, is that a reputation of tokenizing things, right?

So, to refine the question, to go back to that COVID era experiment thing, I think some of it is certainly everybody's trapped at home in front of their computer and looking at things, you know, to do while everybody is inside. But is some of that also not back to learning lessons like an end run around Sarbanes-Oxley and making it too hard to issue public equity in the United States and people trying to find alternate ways around it cuz like crypto learns lessons over and over, but relatedly doesn't finance learn lessons over and over? So, I guess here's my question.

If 90%ish of the current top 500 tokens die over the next 10 years, is that a failure, or could it be a form of success? >> Well, if you're if you put money in that, it's a failure. >> Yes. >> [laughter] >> So, I mean, there's a some civilization level learning. It reminds me when Druckenmiller was asked about his lesson from the dot-com bubble when he had successfully de-risked in December prior to the top. And he got back in when he saw his junior analysts were making too much money. And he said, "I already knew the lesson. I don't need to learn the lesson again."

Similarly here, like there's no value accrual. I think the number of these tokens is going to be more than 90% worthless or even 95. I think it'll be like 99 percent. Like I think it's the lessons haven't changed. Uh you know, the Sarbanes-Oxley is a good point. You know, Sarbanes-Oxley though applies to companies that are that want access to public capital markets. These were de novo startups raising money and getting liquidity quickly and there's no alignment of incentives between the shareholders and the operators. They had liquidity too quick.

Uh and then they have no reason to stay and grow and steward the project. And we we saw that, too. People respond to incentives. >> So I'll respond to your number of tokens question and like sure, a lot of them are are zero, but like it makes me crazy when people say, "Oh, there's just too many tokens." because let me tell you my how my whole thought process. I first got into crypto because of the blockchain. I was running a clearing business. I was dealing with billions of dollars moving around the system. It was awesome It was awful. It was risky. The tech was awful. And I'm like, "Oh my god, I can just like eliminate all my risk overnight with this technology. This is amazing." It was like this blockchain is

great. I haven't quite figured out the Bitcoin thing, but like the blockchain is pretty cool. And then I completely changed my paradigm. Because I realized that it's actually the crypto. It's actually the tokens that really matter. The blockchains are the rails. And why does it matter? It's because I could take anything. I can program it. I can create um you know, certain value accrual mechanisms. But what I can fundamentally do is put private property into the internet for the very first time. And I was like, "That is the unlock. It's the private property."

Now, when you think about value, er a lot of that private property is not going to have value. But to the extent that you you're able to program something with the appropriate level of value accrual, utility, the opportunities for value accrual are immeasurable. >> So I fully agree with what Chris is saying here in the technology and use case. Like, what's the unlock that a token can achieve that's difficult in the real world? Here's some very quick examples. Streaming music royalty rights. You should be able to distribute returns from the broadcasting of a show or song on Spotify to that value chain in accordance with a contract. And you should be able to eliminate a bunch of

intermediaries for for doing that. Another would be medical care reimbursement. But, it's not happening today. Like, but that's these are ideal use case. Another would be asset-backed securitization and the governing of the cash flows and having transparency on chain. Like, none of these three are happening. They're ideally suited for tokens. >> Yeah, or even like mortgage titles. Do you know how many million projects have been pitched on like, "Hey, I'm going to tokenize like Why do we have title insurance? It's dumb. I'll just put it on the blockchain."

Everyone who's told me that is 100% right, but we haven't been able to figure it out. We haven't been able to figure it out. music royalties. I don't know why. >> Is it the we or is it the we or is it the gatekeepers that stand to lose the benefits of centralized control? Like, who in Hollywood wants that? You know, I've a a client who's a music producer and he's shown me the ins and outs. He explored building a startup against this and you know, studios will routinely withhold compensation from an artist. They'll assume the artist hasn't done the math, that they don't know what they're owed. They have to have their own accounting firm and they have to petition for payment.

You know, doctors have to do the same thing also, right? Are they being appropriately compensated for reimbursement coding under Medicare or Medicaid? So, you know, I think the the centralized powers that be don't have an interest in this adoption. Investment banks that make markets and securities they issue, they benefit from opacity also. It's a tough problem because I also don't want the heavy hand of the federal government to come and say do this and adopt that. That's not going to lead to a good outcome, either. We've had situations where standards have been established, and you've seen from that rise firms like Visa and MasterCard. Like, this has been done before. These collective coordination problems have been solved.

TCP/IP, uh we just haven't seen it in these prime areas where tokens should lend a lot of value and unlock a lot of economic gain. >> Well, I I want to push back on the federal government problem, which is to say as somebody who's pretty skeptical of a lot of regulators doing a good job all the time based on our past 4 years. The area where government does the best is exactly what Ram just said, which is setting standards and an even playing field, right? Like, don't pick winners technologically. Don't pick winners with specific methods. But, Ram, for instance, if the government said, "If you're in a business with asymmetric information and payouts, you have to make your books and records like open and verifiable to the people you're

paying, so they can track everything. Do it however the hell you want, but you're liable if you don't." That would probably push a lot of people to adopt these kinds of things, right? >> That is an excellent explanation. You're right. Yes. >> It's also a timing thing. Like, like you need you need a little bit of patience. Um we haven't seen those projects emerge that that makes total sense on paper. Uh but look what's going on in the derivatives industry right now. Like, disruption everywhere. First time since Dodd-Frank prediction markets perps coming onshore, totally disrupting our derivatives markets.

Um so, it's it's it could be timing as well. Um I don't know out there. >> All right. Well, before we talk about another thing that's being heavily disrupted, we are at the halfway point here. So, before we continue, let's take a quick commercial break. >> If you hold crypto on your phone, your biggest vulnerability isn't your wallet. It's your carrier. AT&T, Verizon, and T-Mobile have been breached again and again. And SIM swaps are still one of the easiest ways for attackers to drain accounts.

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>> All right, everybody. Welcome back to Bits and Bips. Uh our next segment we're calling Stablecoin Wars Heat Up. Um Chris, earlier in the episode, you laid out well what was happening with Robinhood, which is they launched Robinhood Earn. Uh they pay about a 7% APY using USDG, which is Global Dollar Network, of which Robinhood is a participant. The yield mechanics are that this is happening on chain. It's happening in DeFi. Goes into Morpho vaults curated by Steakhouse. It's structurally a DeFi lending position. So, you're lending money, you get paid interest. This is not FDIC-insured. As Chris said, they

bought insurance from Realm to Lloyd's of London program as well. Uh but that covers cyber incidents and smart contract implants, and explicitly does not cover lending losses. And with the vault currently at 16 million TVL, a 7.1% APY, with the amount of incentives allocated per year, there's an implied ceiling somewhere in the very low single digit billions. We need them confirmed. All we've got right now is tweets on that, but more will come out.

As that is happening, MiCA is also redrawing Europe. Tether was blocked by Revolut as of July 6th. Uh MiCA's transition ended July 1st. Tether never sought e-money authorization. And other people are going to be stepping into this gap. We have Open Standard launching OUSD on June 30th. That was announced, I believe, a fully reserved dollar coin governed by a whole list of firms including named Visa Mastercard Amex Stripe Blackrock. However, it appears that many of the firms named were not officially partners or consulted. This has become

specifically clear in Korea, where firms like Samsung, Upbit, Shinhan, K Bank, etc. have essentially said they were not officially involved. My guess is what was happening was they were being asked questions by their securities regulator and had not specifically said things. So, this obviously was seen by the market as a broadside to Circle. We saw the stock take a significant dip on the back of this announcement, but also a consortium of 140 people is hard to govern. Chris, I want to start with you. You've been an investor in this space. You've thought a lot about these things. You're now at Franklin, which obviously has its own products in the government money

market space. What do you make of this set of announcements? Like Robinhood plus Tether plus OUSD all coming at once and then any one of them you want to talk about. >> Yeah, saw this coming uh I guess for a really long time. I know you did too, Austin. I published a paper on this. Um the quest for yield is insatiable amongst institutions. If you're an exchange, you make money in a couple of ways. You make money in data kind of you make money in trading fees and you make money in net interest income. Stable coins are the new new net interest income.

The problem with stable coins is that typically if you're a holder, somebody else is getting the interest. And so what they'll do is they'll find ways to incentivize people to to to buy that stable coin, maybe not get all the interest to kind of build that product market fit. The big challenge with all these stable coins right now is frankly utility. Yes, you can move it. But what can you really do with a stable coin? Can you buy a cup of coffee with it yet? And that's that that still remains an issue. And so for now it's kind of like pass the buck. You know, I'm going to get rid of your stable coin. I'm going to give you mine and then you're going to sit on it.

You're going to pay me interest. Um And so the stable coin wars are here. Everybody wants to capture that interest. Tether Everyone's looking at Tether and they're saying, "Wow, these guys are making a lot of money for the most basic product ever. How do I do that?" And how do I get that interest back? Um Tether to their credit saying, "No, no, no. Like how is Tether differentiating?" Well, it's it's that utility that you're finding in places like Argentina or in in DeFi where you can generate that yield. Um so everyone is seeking now to to grow market share. It's such a no-brainer because everybody wants that interest. I think it's going to get worse before it gets better. Ultimately, I think you'll see some kind of consolidation.

And it kind of is funny now that if you look back at Clarity Act and there's all this brain damage over trying to like fix the interest loophole. Well, I'm not sure if Clarity's going to happen or not, but like we're left with genius and like these loopholes are going to remain either way. So maybe the banks should get behind Clarity and push it over the line. Um It's love your take off. You're the stable coin guy in the show. >> So I think part one is it shows that stable coins are often spoken of as a monolithic product, right? As though they are one thing and that is very much not true, right? Just like banks do not do one thing.

If you look at all the news that's coming out, Robinhood is trying to attract deposits in a form and then deploy them into DeFi because of the search for yield. This is a classic investment product problem. I've got people, they want to do things with their money. What are things I can give them to do with their money that differentiate myself? Because if your platform in the United States today is like, I can buy stocks for you, it's like there's infinity of those things. You have no differentiation whatsoever. So, that feels like an investment product and retail product play.

If you look at what's happening in Europe, that feels more like a regulated payments play with what MiCA has done with stable coins and I find it very interesting that Tether has said, we're going to create USAT, we're going to create a US version of Tether, we're interested in interoperating, we're interested in the US economy, but Europe no bid. Like, Tether is clearly of the opinion it's called soccer not football, so to speak. Like, they have no interest in dealing with the Europeans on their terms and they have entirely walked away from a market. You saw them get boxed out by some of the exchanges there. You're seeing Revolut box them out now and Tether's response seems to be, working

as intended, we're okay with this. Right? That's a pretty direct statement about a market in a way that you don't normally get from, call it, traditional banks that are all regionalized. Like, BNP Paribas can't not deal with France. And so, I find that to be a fascinating collective dynamic. OUSD, I mean, on one hand, is that just a plan to have a plan? Like that's a consortium of 140 people have radically different economic goals. They have not fleshed out a lot of details on how that thing is going to work. Like I, you know, I look at this as both an investor, a potential user, a potential issuer, and

I say, "Well, you've told me issuers keep like the economics, but how is that tracked? Is that like who minted the token? Where the token sits on a platform? Cuz then what happens with it in DeFi? If it's who minted it, do I not immediately create a trading team to redeem other people's OUSD and issue it as my own? Right? Like to me there's a very complicated governance problem in there, and most of it was just ignored and put out into the world. It feels a little bit to me like some of the previous consortium efforts that punted on the hard part, which was the governance to get tech out there.

I also wonder what's the right way to say this? For a long time in this space, and Ram, I know you have some opinions on this one, the worlds of tech and the worlds of finance working together has been different because of cultural reasons. And what I mean by that is move fast and break things has been a winning formula in a lot of tech businesses, and you see people like Elon Musk who is willing to blow up a huge amount of rockets to get to the current capabilities of SpaceX, and that is a good thing. But on the other hand, move fast and break things with other people's money works very differently. That is your bank is being shut down, you're being thrown into jail like Bernie Madoff if you've done that sort of activity.

Is the OUSD announcement being launched into the world like a torpedo without some of their partners being on board and now catching flak? Evidence of the bad kind of that. >> Can I ask a question before we go on to that? Um what's your Professor, what's your take on Coinbase's involvement there? I mean, Coinbase would be smart not to have all of their eggs in Circle's basket, right? Like unless you think the future world is just USDC, of course if it's low cost, they should participate in every consortium.

And that's part of what told me that maybe this OUSD thing is not fully baked. Because if this was a consortium that said, "No, this needs to be your primary thing. We don't want you having competing other instruments. We're actually going to do a real commercial thing." Coinbase probably wouldn't be in there. Or if they were, it would have a big cost with Circle. So this seems like them both having their cake and eating it. >> Got it. Second question. Can you have a profitable stablecoin with MiCA and its capital requirements? >> I mean, it depends. Are you a bank issuing it?

If you're a bank issuing it, the answer is yes because you can put the deposits on your own balance sheet and pay zero interest on them. If you're a non-bank, I think it's going to be very difficult. >> Got it. Um one last question. OUSD, Tether, Circle, USDT, who wins? >> Okay. I think it's going to be very hard for people to compete in the short to medium term with Tether's advantage in what I'm going to call gray market or less regulated markets. So we're talking Southeast Asia, Middle East, Africa, LatAm, South America. They have a large barrier there. They've served people well. They're getting integrated. They have the best liquidity. Those are not,

shall we say, a quality bias on financial regulation locally. I think it's hard to assail Tether there without a big effort. I think as we look at more regulated markets, quite frankly, none of those are probably the winner in Europe. Like Europe's going to do its own weird stuff and be parochial. I think it damages the euro in the long run. But in the United States, if they could find a workable governance model for OUSD, that's interesting, but I have doubts there. So, I'm going to say something maybe a little bit outside the balance. It might be that the winner is nothing that's been created yet, Chris.

>> And the winner's definitely not going to come out of Belgium. All right. It's cuz we're playing Belgium tonight in the US soccer. Sorry, Rob. I think I think Austin was asking you about the collision of technology and finance. >> No, I think it's great topic. And by the way, when is Tether going public? There's a lot of hype around this like a 9, 12, 15 months ago, then they scaled back the ambitions around their fund raise. >> Securitize just went public. Right? These IPOs are still coming. >> They're still coming. Party tonight. >> So, no. My my question for Rob, sorry Chris, before we went off on a tangent, was Rob is somebody who's kind of dealt with the fintech thing at a professional level yourself. How were you interpreting like the OUSD launch announcement and then the immediate

brushback pitch from Korea? >> I don't have a a strong point of view on this. This is really, you know, your domain, but I think your read is correct. You know, the the winners in this space may not be broadly known yet. You know, the pioneers you can identify because they have the arrows in their back. You know, the the banks are motivated to get involved. They have distribution. They're going to spin up products. Um and they will get involved. So, I wouldn't underestimate the JP Morgans, you know. I I'd prefer that they weren't credible and we didn't have an edge, but they have a significant edge here, right? Like JP Morgan's e-commerce business is quite significant. They have

distribution to these e-com platforms. They can do another version of what Meta attempted to do with the DM and Libra token with their own framework and get multiple banks involved. Uh and if the Dems take the house, they'll have a favorable ear in Elizabeth Warren. So, you're right. It maybe we don't know who the winners are. It's similar to with digital assets. We may not know what the best digital asset yet. It might be quantum. >> [laughter] >> It might not yet exist. >> I I mean, I think that's possible.

Another question that like I look at is how seriously are the banks taking this? Like are they aware of their own position? You know, a useful model for me, I'm a business school professor. So, like I try to think in you know, models and comparisons, which maybe that's lazy, maybe it's helpful. But when you look at Amazon bursting onto the scene and the response of like various booksellers, the winners were the ones who either leaned into Amazon, like became distributors, evolved their business models themselves to take advantage of it, or leaned way the hell away from it, like Barnes & Noble really upsized the cafes, changed the mix

you're selling, like actively compete against it in a different way. The losers like Borders were the people who did not much and just stood there. And so, I look at the banks in the US. They're already under siege on the retail side from the FinTechs with young people. We've talked about this before, but for those not paying attention, like SoFi was eating their lunch opening accounts for young people. At the same time, the banks have not done much in the stablecoin space yet. I get I guess >> Also, it's cuz they don't have to. They already have stablecoins. It's called deposits, right? People give you their dollars.

You keep most of the interest and maybe they give you a little bit back. So, like that that's the same business model. >> But less >> to defend. They want to defend that territory though, of course. >> the thing is is it's almost like privatized It's almost like tokenizing a private fund. Like why would anyone want to do that? Because I want like banks want those deposits to stay sticky, right? And there's problems with them you know, forming consortiums post dot Frank for various regulatory reasons. Why would you want to create ubiquity around your deposit? >> I'll I'll tell you why. So, JP Morgan's advantage is that they can borrow at close to 0% on overnight demand deposits. If they can issue a stable coin that has broad circulation, they're

essentially earning free float on this and borrowing extremely cheaply. Uh and it's hard to get liquidity run on that. By the way, JP Morgan may be the first bank to achieve a trillion dollar market cap. So, they're at 900 billion plus. Now, they spend 13 to 16 billion dollars a year on technology. Uh they are sensitive to disruption. All the big banks are by the way. They all they all uh saw what decimalization did to their margins. They saw what online brokerage did, how that impacted their business model. What happened when when Schwab and Robinhood went to zero dollar trading. Um you know, they have these very smart strategy groups. They're looking at this. They you know, that's

the reason why they're at these conferences you mentioned. Waiting to get onboarded. Um they they're looking for their fair share if not more. They're looking to get a get an order and they they want to compete and win. Meanwhile, crypto is kind of disorganized, doesn't have a a focus thesis. Uh there there's a sense of been scattered. >> Another good example there, right back to stable coins versus deposits, is you know who banks don't make any interest income off? People who are not customers of the bank.

And one of the things that I think has been a great lesson of Tether is sort of the third party distribution e.g. making money off the customer of my customer is a very powerful thing. Cuz if you look at the major US like banks, the big four of JP Morgan, Wells Fargo, City, and BofA, the only one with significant international distribution is really City, right Chris, as you know well. >> 100%. It's an international business. >> Exactly. And so is >> It's the network. >> Exactly. And and City, by the way, up in the tier with like the Standard Chartered of the world is a truly international bank. But as you look at a JPM, as you look at a BofA, as you look at a Wells Fargo, they're not making any money on customers all over the world

who are customers of their customers or vendors of their customers. And one of the things I look at with stablecoins, and I think Scott Bason has talked about this a few times and really gotten the punchline, is it is the reshoring of eurodollar markets. Right? So, if there's a JPM or BofA or Wells Fargo stablecoin, they can now make NIM off of like merchants in Thailand or like suppliers in China or Finland, right, that currently they just can't touch at all. >> Yeah.

>> So, where does that leave us, Austin? You guys going to We're going to see all stablecoins come out of the bank soon? >> I think So, in an optimal world, banks will retain deposits for domestic use. There's some advantages there. Lending does matter. It's a real thing. It may be that interest rates you need to pay on deposits go up, but your repo rates go down, and net net your funding is flat. I think you also want a stablecoin because deposits and stablecoins do separate things. They're not the same entity. Right? Just like a stock is not a bond.

Your customers who have deposits, who want to send money seamlessly to somebody who's not a customer of your bank in an international jurisdiction, can take a stablecoin. They cannot take a deposit. They genuinely do two different things. And so, I think we're going to see, call it increasing segmentation as people realize, oh, these are just mechanisms to pass from one form factor to another because like here's the great irony Ron. I think you were pointing this out earlier. Bank of America could issue a stable coin the reserves for which are Bank of America deposits, right? Then you really are kind of having the best of both worlds and ironically they will probably be happy they didn't restrict yield

under clarity in that world. >> Yeah, they're going to get after this and they're going to team up with their customers that have distribution to do this. Look at look at Zell and the success Zell was. Zell advantage of the big banks. You know that this stablecoin framework advantages the two big to fail banks over the regionals and we've yet to see a credible competitive response from the from the regional banks working together with our technology partners like a Fiserv FIS. >> And to pile on to Zell, isn't ZUSD a registered ticker like isn't there an announcement that they are working on a stablecoin as well?

I think you know, the okay, so Chris I'll put it bluntly. I think one of the biggest losers here in the banking space will turn out to be non-US banks that have been offering US dollar deposit accounts. Because if I have to go through my local bank to get a US dollar account usually at egregious FX rates and egregious fees and now I can just buy a stablecoin, that business is obsolete. Right? And by the way, it's now also no longer for just ultra high net worth customers.

So I think if we're really talking about the loser of US dollar stablecoins, it's actually good for the big four in the US. It's probably like UBS. I mean, what do you what do you think? You've been in FX markets. >> I don't know. Uh, I think that any product where you give me your dollars, I give you the dollar back, but I'm clipping interest forever. Pretty good product. >> Can I ask you guys a question? A little bit off topic, but just on the Securitize IPO. We got to spend a minute or two on this.

>> Let's do it. >> Okay. Just went it Just went public. Let me ask you this. What's the right valuation for a company that did Q1 revenue of 20% year-over-year growth of 39% and 7 million in losses? >> I haven't looked at the market cap. >> It's about It's north of a billion. North of a billion. >> It's for college. >> It's down Yeah, down 12% today, up Yeah, we'll we'll see how this plays out but Uh 1.8 1.8 billion market cap.

>> I mean, let's be honest. Securitize stock currently is trading like a call option. Right? If you look at early-stage companies that are still losing money, but have aspirational growth, you're basically pricing that not on Hey, I think it's worth 1.8 billion spot. You're saying, "Hey, I think there's a 10% chance that it's worth 18 billion dollars at some point in the future and like a 90% chance that this thing is probably worthless and gets acquired at a pretty cheap value by somebody else or just dies."

Right? One of the things that I think people often mistake, and you saw this a lot in the rates markets, where people would be like, "Oh my god, markets are pricing like a 40% chance of a rate hike." And it's like, No, they're pricing like a 20% chance of a rate hike and another 20% chance that something breaks and things get really weird. Maybe even lower than that 20%. They're like a 2% chance, but it's really bad when it happens. I look at Securitize trading at this level of volatility, which is part of the tip-off, and this valuation, and I feel like that's trading like a call option, Ron.

>> I agree. I think that's right. I think that's right. >> So, what would I value it at? I mean, I guess what we're asking is do we think 1.8-ish billion is the right number for a call option there and it doesn't feel grossly wrong to me. >> I mean, I haven't gone through the numbers, but I I'd wait and let it settle. I'd wait and let it settle. Uh Certainly, a lot of competition's coming for tokenization. >> And certainly, like so let's zoom out from Securitize for a moment, look at IPOs in general.

Certainly, the trend of anything above a billion in IPOs has been there's a significant drawdown in year one. Like I think almost all of them have had 50% drawdowns. Maybe not every single one, but most of them. >> Yes. >> So, the real answer is if you want to own Securitize, probably put in some stink bids and just wait would be the correct decision there from a like trading mechanics perspective because if the vol is that high and you intend to be a relatively indifferent long-term holder, just be patient right?

>> Yeah, I mean, to your point, like Circle is almost near its its [snorts] its uh lows and you know, there's and they've got a real moat. They've got a competitive advantage. Uh I'm not saying go buy Circle off tomorrow, but like there there are competing assets out there in the market that are pretty interesting that have sold off quite a bit as memory and Sandisk have gone up into the right that are opening up windows for investors now. >> I mean, speaking of markets that have sold off and moats, you know, going the opposite direction of Tether, Rippa, excuse me, Ripple cleared MiCA in Europe. They have a license with Luxembourg. They've got passporting.

Seems not to have done too much for XRP and AR UL R L USD in the short term. Um I guess what I'm looking at here because I bring that up to touch on something you're saying, Ram. There's a lot of competition for capital right now, especially as the AI race continues. Like, is part of what we're seeing here just the sucking sound of like semiconductors and AI just pulling capital, pulling capital, pulling capital? >> Absolutely. That's exactly what you're saying. I mean, if you look at the last quarter, every sector of the S&P lagged the S&P except semiconductors.

So, yeah. No, there is a there is a a giant sucking sound flowing to semis. But, you're seeing that change, you know, in the last 2 weeks you're seeing a lot of quality stocks start to rally. Things like insurance companies, Progressive Allstate Berkshire Hathaway, S&P Global. Moody's. So, you are seeing kind of the run the the comeback of quality. >> Inversion to fundamentals? >> Yeah, I mean, these are I mean, these are like world-class businesses that went on sale. People throwing money at semis.

>> Yep. Which should be constructive for crypto. >> Certainly the quality. I mean, you know, in fairness, as of the time we're recording this, if we look at things that people have been saying are the best two things in crypto lately, Bitcoin has recovered to 64K. It does continue to inch back up, which I guess is maybe some evidence the market is taking the sailor is no longer a problem stance. But, also hyperliquid is trading at 71.35 as I look at the screen right now. So, the things that seem to have revenue generation inside of them have started to rally again.

>> Go figure. Go figure. Everything goes back to fundamentals and cash flow one one way or another. >> On a long enough time >> [laughter] >> I will note that Ethereum did trade at 1776 on 4th of July. >> Oh, wow. That's special. We should have like special. >> Is that the whole reason that it dipped and then came back up was they were just aiming for >> Who put in the bid? >> Someone had a stick bid at 1776. Who was that? >> That came up. Came up. That's an offer. >> Then we hit the Constitution at 1789. I was tracking it all.

>> Currently Ethereum is at 1817, so we are rapidly approaching the Civil War if we're not careful. >> We're through the War of 1812. >> Yes. We're going to have We got some silver banking crisis >> This is on the way to the Civil War. >> Yeah, yeah. Absolutely. >> All right. Well, on that note, as we've gotten totally ridiculous today, I will remind everybody to close out. We are again on new socials. Please subscribe and follow us there. Belgium is not a real country. That is not up for debate in these parts. And thank you for joining us for this episode of Bits and Bips. We'll be back in 1 week to discuss more about how the worlds of crypto and macro are colliding. Until then, everyone.

Thank you for watching and hope you enjoyed this episode of Bits and Bips. Just remember, nothing we say here is investment advice. And please check unchainedcrypto.com/bitsandbips for more disclosures.