Why Crypto Has 'a Good Setup' for the Long Term Right Now: Bits + Bips

Transcript

Hi everyone, welcome to another episode of Bits and Bips the interview. My name is Steve Erlic, head of research at Sharplink and also your host. And I'm here today with Rob Hadock, uh, general partner at Dragonfly to discuss everything happening in Iran, its ramifications for crypto and the broader trify markets, as well as a few other key topics impacting crypto today. So, welcome Rob. >> Hey, Steve. 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 has [music] its dedicated feed. We're spinning up from the Unchained feed and moving to a new podcast and YouTube [music] channel. So, if you want to keep up with our weekly live streams and macro meets crypto breakdown, make sure to subscribe to Bits and Bips directly. We won't [music] publish there until March, but subscribe 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/bits andbbits. And uh now with Rob, with all that out of the way, let's kind of like

just dive right into it. uh markets today. I mean, it's the the usual turmoil when there's some big um source of ajida 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. Uh 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 within 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 Hexath 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 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 expected this to go at least 4 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 our muse and uh 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. And 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 and 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 Walsh coming in office, right? And he should take office at the Fed uh like you know, call it like midmay, right? And so I think like May 15th that's 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 know how does he you know think about his you know personal views and how he might think about monetary policy relative to you know what should the administration would want him to do and how does he react to like political pressure and I think people are very confused by that uh and I think the marketer 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 going to give in to more political pressure We 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 u 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 u 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. I think 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 fear 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 Jinpiro's investigation of of Jerome Pal and and everything like that. Uh but yeah, it 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, 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 that 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. Absolutely. We're a little bit different than you know probably some of your listeners and the fact that like we take very long views on the market right and we uh invest with the idea that like we will 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 and the macroeconomic backdrop over some long period of time and I think there's there's a there's two kind of answers to your 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 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 a bad correlation are 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 perspectives >> right uh and so I think that's a good

setup for you know being in crypto over some period of time now that doesn't mean anything for like the long tale of 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 u 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 Satrini article came out like a bunch of stuff traded down right away and like you know Satrinian 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 is 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 of panic if >> 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 still 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% uh 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 the FT 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.

>> I think it's important to note just to, you know, and I because I want to really uh 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 are are not day traders. They're more long-term investors much uh much like you guys are. Uh but I mean I was actually looking around Derit this morning at some of like the options positioning here and I think it speaks to a lot of what you just discussed. 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 it completely switches like there's very very very bare 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 conflict migrations 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've 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 4 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 there, 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 Kuwait 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 mean 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 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's like leaks coming out of the CIA that potentially um you know we weren't

prepared for you know the the aerials 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 this war can be. >> Yeah. Yeah, I mean it's 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. A 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 Garabit, 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 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 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 in near-term downside or 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 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 in the market if it does, right? And that's a longer term risk, but it's, you know, that sign people are trying to outpric 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 Iran 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 are 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 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, it's rocket. I mean, I think I think hype is up. I was going to ask you about hype. I think it's up like 12% since the uh since the uh the attacks began. So maybe maybe >> Yeah, it traded channels was 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 ps and uh etc. They uh we've seen significant significant uptick in volume on the commodity side uh and on the um on you know some of the rates and like

at 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-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 per 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's 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 uh 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 has a 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 to date. 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 refuted 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 getting 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, which should theoretically also be bad for,

you know, any risk asset, including 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 we had a few over the weekend um you know things around you know continuing to increase the amount of bombing etc. I think 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 sponsors. >> 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, [music] 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. We won't start publishing until March, but getting set up now means you'll be ready on day one.

You can find the new Bits andBips channels at unchaincrypto.com/bitsands [music] andbips. You can also find us by searching Bits and Bips on YouTube, Apple Podcast, 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. 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 purposefully 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 how 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 Wash Po 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 up. >> But we'll 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 and 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 are reaching out and I'm

supposed to go and speak there uh in in you know 8 weeks or so and that 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 going to 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 past. 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 um developer protections and making sure that developers can't be treated as criminals if their uh software is used 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 uh 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 the blah or like what the you know the industry had hoped 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 canceled or did they both end up happening >> so what happened is the ad committee mark 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 there 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 doing 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 programs 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 on 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 this is the this is the main main issue >> yeah I I mean I do wonder I mean 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%. So 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 but too um you said that the odds ticked up from 50 to 70% on poly market. I'm 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 off. Yeah, I think on the pulling 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, all 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 Saxs 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 door and to say okay we just need though. >> Yeah. So, but I think that got people excited which is that like the like David Sax is out tweeting about it right now and um and a few others the the you know to your original question. Okay. Well, what gets people what can the big the banking lobbies live with? I think I I think they should be able to live with whether or not they can. You know, I'm not close to, you know, Brian Winn or Jamie Diamond, but but I think they should be able to live with is an agreement that the issuers can't programmatically directly send yield to an end holder, right? Because their perspective is that, oh, if you want to do that, then you are a money market

fund. You are a security and you are operating like a bank. So, you should be a fully regulated bank to be able to do that, not just a charter bank. And you should be able and you should be decent directly as securities, right? So, uh, okay. Well, so if we take that off the table, that's fine. But in my mind, now it's not fine for everybody, but in my mind, that's fine. But they should be able to live with an idea that, okay, well, companies make revenue from this. Companies should be able to do revenue share agreements with this the way like Circle and Coinbase has today. And then Coinbase should be able to do with their revenue whatever they want in terms of loyalty and rewards and cash back and anything else to their end customer.

Like that feels to me like a very logical solution that everybody should be able to live with because that already happens in a lot of ways, right? And so there's a there if we get in the situation where we literally try to carve out the revenue from a stable coin issuer and say that can't be used for a loyalty or reward program for passing back cash back to an end consumer. That's regressive. That's not just like like it's not just like oh we're protecting the status quo. It's actually hurting current fintech more broadly and that's crazy to me and like anyone would accept that is uh like nobody should accept that. It's it's and the OCC putting out that that guidance uh last week as well like that uh I think put a lot of people on alert as well because the there's okay well what happens in

clarity is one point but even if let's say this we get to an agreement in clarity but then the OC says hey well in our rulem ability relative to genius we are putting this in there u that it then doesn't matter it's a moot question right and so we have to now fight the the fight on both you know kind of both sides both on the rulem side with the OCC and also on the uh on the legislation side here at Clarity. >> Yeah, it's it's really tough. I mean, and I I try to have sympathy for both sides. I mean, I've been in crypto for over a decade. I also used to work at City Bank and I mean, I could just I mean, the banks I mean, their deposits are insured. They they pay into that insurance. They have like orders of magnitude more regulatory overhead than

than crypto exchanges. And it's a whole it's a whole mess. I mean, I think he distilled it pretty pretty nicely like at some point bank should or anyone should be able to pay share rewards with customers if like if if they want to. I mean that that's the competitive environment. Um so so I don't know. We'll see. Um I have one more topic I want to discuss but before I 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 aligned 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 develop veloper 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 a 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 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 Sachs 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 I'm being told by people on the ground and um and so so Patrick Hoy 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 this conversation. >> 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 a 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 >> 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. 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 you're a 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 >> we'll call that 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'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 fundraises 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 3, 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 we're large investors in 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 talked about this earlier but there are so many structural tailwinds behind our space right now when it comes to stable coin adoption when it comes to tokenization when it comes to real world businesses building 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 hyperlquid 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'll certainly see some you know call it uh innovation or at least some experimentation around you know crypto AI and we we'll see what happens there right and so it's a I think it's a 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 and 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 talk 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 did we do that? But 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 where where you become of every venture capitalist's life where you become either an asset manager and you solve for the 2% management fees or you say a venture capitalist and you focus 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 trees and horiz right 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 ation. 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 inside the world. >> There's just not enough places to put all that money that uh >> correct.

>> Yeah. 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 the kind of the intersection of the two, the financialization of new market rails, right? Um, and and and kind of the digitization of those rails, uh, you know, 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 going completely different

verticals that have nothing. >> Yeah. >> 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 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.