Transcription
We think the return on invested capital is going to go up in the US generally. Uh, and we think that the [music] crypto revolution, we were at risk of losing it. Yeah.
Uh, and yes, we do think USAT has a shot because remember the crypto industry is dying. Majority of the projects and coins, they're just not going to make it. >> But those that end up surviving, they're going to become important parts of the legacy financial system. In my opinion, most of the crypto industry as we know it is dead. I personally believe that there are four major areas that are going to accrue value moving forward. The first is Bitcoin. The second is stable coins. The third is infrastructure and the fourth is tokenization. Not everything is going to die. Those four areas are likely to end up accruing value, surviving and thriving.
Kathy Wood and Anthony Pompiano agree on one thing. The crypto era as a niche sandbox is over. While Wood sees a new financial world order fueled by US deregulation and the vertical integration of giants like Tesla and SpaceX, Pompiano warns that most of the industry is already dead. To them, Bitcoin isn't just a coin anymore. It's the foundation of a converging institutionalized global economy where only the useful survive.
Before we go on, please take a moment to like this video, subscribe to the channel, and turn on post notifications for more content like this. Every action helps with the YouTube algorithm and greatly supports the channel's growth. Thanks for your support and enjoy the video. >> I want to ask you about stable coins, um, Tether and and their potential. Do you think it has a chance to become big in the US under the Genius Act? And you've also invested in Circle. Are you looking at other stable coin related players beyond that crypto bill? Tell me, there's a lot going on right now. >> There is a lot going on. >> There's a big meeting at Mara Lago. Like I know a lot of crypto folks like tell us >> well and you know in the uh last election I do think the crypto community was very um was part of the swing factor because they knew deregulation would take place under this administration. That's absolutely true. So yes uh uh we're seeing the deregulation. Um, you know, this is this is creating a a new financial world order. Many people think uh the dollar should be going down uh because of our deficit and debt and all of that. And what we're seeing here in the United States is deregulation, tax cuts uh and a very business-friendly, very business-friendly uh administration. We think the return on invested capital is going to go up in the US generally. Uh, and we think that the crypto revolution, we were at risk of losing it. Yeah. Uh, and yes, we do think USAT has a shot now.
Everybody is so excited about the SpaceX IPO. We see increasingly how he's kind of melding his universe together. Tell us about kind of that bet and and even today we have that he's building um a chip factory at least 55 billion in investment maybe as much as almost 120 um and he's doing this chip factory SpaceX with Tesla. How are you looking at Elon right now and what his next era is?
So this is why I founded Arc Invest. Uh, we knew that the seeds that were planted in the 20 years that ended in the bubble, they've been germinating for 20, 25 years and now they're flourishing. And uh, what we're seeing is 15 different technologies evolving and they're all converging. And Elon about six months ago uh and we've been using the word convergence for a long time. He said, "You know what? I think my companies are converging more than even I understood." Uh, and so we're seeing, of course, SpaceX, XAI, rumors about Tesla and really he believes uh that in the new world or to create the new world uh a company has to be vertically integrated. Uh, and so that's what's happening here. He is moving into incredible uh vertical integration as he as he moves data centers into space.
Is it all about our blueber intelligence George Ferguson covers space covers defense but he said it's all about Elon controlling the supply chain Kathy but I do feel like globally we're seeing countries companies really thinking about their supply chain. Is that part of his strategy? >> Absolutely. Absolutely. And also when uh a company is breaking new ground >> um literally in this case uh and and really inventing something the supply chain doesn't exist very often or not all parts of it exist >> and I think also as he's discussing you know where he's going and how he's going to do it he is getting the supply chain ready you know he always sets the time frame you know much sooner than most people to expect, but it's to get his employees and the supply chain focused. U because when he moves, he moves fast. >> You've really helped to define people's perception uh of Elon Musk and and the company Tesla largely as one that is not about making cars, but one that's about autonomy and robotics. When you walk out the Hilton here, different than where I live in Washington DC, driverless Whimos are picking people up and driving away with them all day long. The mainstreaming of autonomous vehicles is just about here. I'd like to know if you see that actually fulfilling itself in the next year and if this is a zero sum game or you're going to have Uber, Whimo, Tesla all involved.
>> Okay, this is where vertical integration comes back into the conversation. Um, in the robo taxi world uh Tesla's vertically integrated and has created the platform upon which others will build their companies. Uh, so uh I credit our team so Tasha Daniel Brett Winton uh we have been focused on this from day one uh 2014 when I founded ARC uh and yes slowly slowly then all at once. So vertical integration for Tesla means it will have the lowest cost structure by far. Now it's going to use Uber's umbrella here, $3 plus per mile. Um, but if our analysis is correct, those costs as robo taxis scale are going to drop to 25 cents per mile. Think about it. The cost of transportation is going to collapse here. uh and no one Whimo's cost structure uh according to our estimates in 2030 will be 50% higher than Tesla's because uh they're dependent on other auto manufacturers uh and others in the supply chain that Tesla is not.
>> How are you thinking about the SpaceX IPO Kathy? Do you anticipate there's so much enthusiasm going into it? Massive size, massive interest. Um, but do you think there'll be a drop off initially after you know once it makes its its public debut and then ultimately kind of play out um like Tesla did that eventually it goes up again like how do you see the trajectory >> right so this is only at least what we know so far uh $75 billion there is so much demand out there we have in our venture fund so ArkVX SpaceX is the largest position and uh because we're direct to consumer when it comes to venture although the fund has scaled north of 850 million um uh investors had to look for us and how did they find us they were looking for SpaceX so the demand is voracious out there only 75 billion yes it's a a a big IPO uh but just think about how how uh SpaceX has reawakened the dream of space exploration This has captured the imagination not just of investors uh but really everyone.
>> So does that mean you don't think it'll you think the enthusiasm will continue or do you think there will be some settling in? >> I think there'll be supply demand imbalance in the beginning. Uh, you'll see that pop. It will be volatile I would imagine. Uh, but we hope uh to to serve um in terms of providing our research. We've already got a SpaceX model out there on our site arc-invest.com. Uh, we have not added data centers, orbital data centers in. However, our preliminary work suggests that uh that part of the business could take relative to our existing model uh could take Tesla from a revenue generation point of view orders of magnitude higher, 10, 20 times higher.
>> I'm I'm so glad you went there. data centers in space and I mentioned before we got going it came up on a real estate panel where so many of the real estate investors um even like related companies have switched their focus to data centers but we brought up data centers in space what does that mean though then for all of the data center buildout and money that is happening here on earth does that mean a lot of that goes away there's a little bit of a bubble like how how do we reconcile that >> we think and this is and this is the important judgment call is this hype is this 1999. I can tell you unequivocally it is not. As I mentioned, the seeds were planted then. Uh, now we're ready and we think this technology revolution is going to dwarf the industrial revolution by far. So uh I I think that we'll need the orbital data centers. And of course Elon is informed by his experience in Memphis, Tennessee, and now me Mississippi. Memphis uh became not in my backyard. You're increasing my electricity prices and you're you're you're ruining our land. Uh, so he's basically saying I'm not going to have to worry about not in my backyard.
>> But does it make a bubble of the stuff on land? >> I don't think so. I don't think so. We think we're going We need all this. Yep. >> Sorry. I know I'm dominating. I didn't mean to. >> I don't [laughter] I mean you guys should walk away with this. Oh god.
I would love to ask you about something that took place today. You woke up and saw your third largest holding. >> Yes. >> Just go through the roof in AMD. Another blow the doors off quarter. And it's really >> creating this question now about whether we should be paying a lot more attention. The market is to CPUs after GPUs went crazy. We're looking at people take money out of Nvidia now and chase stocks like AMD. Do we need both or is that where you're looking?
>> We think we need both. Um, I do think there is more competition. We want it. We need it. Um, but it was interesting. Uh, Sarah Frier at OpenAI, I'm going to give her a shout out because I heard her speak and she she was saying, you know, people are chasing GPUs. They they they're going to be really shocked at how Aentic AI activates CPUs. Uh, and inference generally activates CPUs. Uh, yesterday Lisa Sue uh provided a stat. we had never heard before. Um, right now for every um for every uh CPU there are four to five GPUs when it comes to enabling AI. Uh, Lisa thinks it's going to go one to one in the future. I think that has been the sleeper and you see Intel has taken off. In fact, we're seeing a lot of stocks that were you know they were very big in the bubble and I just said to our team today I said what's going on? And we're going back to the future. You know, Intel resurrecting. Isn't that right? Yes. And Flexronics, it's now called Flex. Boom. Uh, so I I think we need it all.
>> Not to mention data storage, which has been one of the most remarkable uh examples of of of a shortage creating a monster rally. So you need these old fashioned chips. Yes. >> To get to this new fashion AI. >> All hands on deck.
We want to ask you about a story that came out. Google, Microsoft to give us agency early access to AI models. So basically the White House vetting AI models. Is this good or bad? And uh knowing this administration and David Saxs are uh our AIS are um I don't think we're talking about heavy regulation here. We might be talking more about national security. Uh, national security we heard this with mythos. you know, software that, you know, has not has been in place for 60 years and never been penetrated. >> AI [clears throat] can find these vulnerabilities. So, they're probably trying to tighten up uh a lot of what we do out there and make sure that our industries are safe.
>> Doesn't that bring a political implication though to what may or may not be available to people if if the White House is choosing which platform we ought to use? >> No. You know what's interesting and this is taking a leaf from open AI in its early days GBT are saying ah we don't think we can release this this is too powerful this it's great marketing it's true that it's very powerful but it's also great marketing a lot of the people at anthropic came from open AAI so uh while they're blazing trails no question about it and they're leaprogging one another which is great competition is great for us here including competition from China. Um uh I think uh I think that uh you know we're we're on our way.
Kathy Wood's worldview is ultimately built around one central conviction. The world is entering a period of exponential technological convergence unlike anything in modern economic history. Pompiano begins by explaining that the crypto industry has fundamentally resisted the normal economic process that governs every other technological sector. Traditionally, innovation follows a recognizable cycle. A breakthrough technology emerges and entrepreneurs rush into the space. Capital floods into startups and eventually competition eliminates weaker businesses.
All right, ladies and gentlemen, I posted the following message on X 2 days ago. I said, "Most of the crypto industry is dead and it's never coming back. Eventually, people will realize it." I'm gonna explain to you why I think this. If we don't acknowledge the truth, we can't improve the future. And so this context may not make you or other people more receptive to the message, but at least I can go into this with a clean conscience as I talk about the many parts of the industry that I think have become delusional.
So the first thing we got to talk about is [music] to understand why so much of the crypto industry is dead already. You got to realize that the natural business cycle is not allowed to play out in crypto. The way that the natural business cycle works is usually an industry will see some sort of technological breakthrough, right? There's some big breakthrough and that's followed by a flood of new companies that are formed. those new companies are leveraging that technology breakthrough. But some small percent of those new companies end up succeeding and then there's a bunch of companies that fail. And for the companies that fail, the companies are shut down and that allows the remaining capital and talent to be reallocated to other ideas and companies. The clearing out of the bad companies is almost as important as the thriving of good companies in that natural business cycle. But crypto doesn't have the business cycle. And there's two reasons why. The first one, blockchains almost never shut down. And the second one is that coins almost never go to zero.
So let's talk about the blockchains for a second. [music] It's nearly impossible to shut down these blockchains because the software can stay operational as long as one or two people continue to run the network. And so if the network's never shut down, then there's this illusion that the blockchain is like default alive or that it's operational and being used. Let's call these ghost chains. And these ghost chains are much more prevalent across the industry than most people want to admit.
Now let's talk about the coins themselves. there's no official way to like declare bankruptcy for the coin or shut down the coin. So, as long as a small handful of people still quote unquote believe, then the coin's not going to go to literal 0 and 0. Instead, what we continue to see is that tokens just lose a lot of value and that makes liquidity evaporate. But the remaining holders are not able to get out of the coin. So, they're just holding a coin that's worth very little and it's essentially a dead coin. And so maybe some exchanges then delist the illiquid coin, but usually the coins just kind of stay stuck in irrelevancy. And so we can call these zombie coins, but these zombie coins are also more prevalent than people want to admit. So ghost chains and zombie coins, those make up a very large percentage of the crypto industry. There are millions of coins and there are thousands of blockchains. Just those two things alone would make my original claim that most of the crypto industry is dead accurate. Because you have to ask yourself, does anyone [music] actually believe that millions of crypto coins are going to thrive in the future? I doubt it. I was on stage yesterday and I asked everyone, "Do you think this?" Literally zero people raised their hand. So whether people like it or not, they just don't want to say the truth out loud and I'm happy to say it for them.
But there's more to this story than just zombie coins and ghost chains. The second major crisis in crypto is what I call a lack of true believers. Now, the industry used to be defined by hardcore missionaries. These missionaries had some very specific views of the world and frankly they would rather see Bitcoin succeed than personally make money if they had to choose between the two options. So the success of the industry, the success of the technology was more important than their personal net worth. But the mission in my opinion when you go back and you look at a lot of these people was much more important than their personal success. But those days are pretty much over from what I can tell. Missionaries are hard to find now and instead the industry is littered with mercenaries. And these mercenaries are willing to go wherever the financial reward is greatest. These mercenaries are purely focused on speculation and that means that they're devoid of standing up for any specific worldview. As the saying goes, if you don't stand for something, you'll fall for anything. And I think that's what's happening across the industry. You can clearly see this mercenary effect in the short-lived meme tokens, in the prevalence of scam coins, in the constant market manipulation, the escalating yield farming rates, or even what I call like the vaporware product launches. These product launches are designed to capture attention rather than actually solve problems for users. And so if you have mercenaries outnumbering the missionaries, the broader crypto industry is now run by people who don't understand or believe in the original vision for the industry.
And then lastly, I think that there's a clear divergence between the interest of what I call the investor class and the we hate investors class. You can see the online commentary. It is littered with people claiming that VCs are bad, that the large financial institutions are a net negative for the industry or that regulation shouldn't exist in the industry. In my opinion, these ideas are not only dumb, but they further contribute to the death of a large part of the industry. Take venture capitalist as an example. They literally funded almost every company that helped people buy, store, or send Bitcoin for the first decade of the asset's existence. We would not have the Bitcoin infrastructure we have today without venture capitalists. And the venture capitalists are also responsible for funding most of the largest projects, companies or coins in the space. Then take the large financial institutions. They're pouring capital into many different areas. And that in my opinion may be one of the most important things to watch is where they're putting their money. These are large sophisticated companies and they're quickly eating market share from the crypto native firms. So again, crypto is dying and it's being replaced by the incumbents to a degree. And I don't think every crypton native company is going to end up getting replaced. But the majority of them are coming under immense competition and some of them are even being acquired by the legacy system. As each one of those companies falls or surrenders, another piece of the industry dies with it.
So let's take Morgan Stanley as a good example. They recently announced that they're launching Bitcoin trading on Erade. Why is that a big deal? Erade's got 8.6 million clients and Morgan Stanley is going to launch this Bitcoin trading with cheaper trading fees than Coinbase and Charles Schwab. So, with that context, what percentage of crypto trading volume do you think is going to end up in traditional brokerage venues or ETFs or on the New York Stock Exchange or on NASDAQ compared to the crypto native firms? I don't know the exact number, but it's probably going to be a lot. That's a big narrative violation. At the same time, the crypto native firms are racing to add non-crypto components to their business. They're adding equities, prediction markets, options, commodities, any asset that's going to bring them new customers, new assets under custody, or new revenue. These companies need to grow and they realize they've got to expand outside of crypto in order to be able to do that. Is Robin Hood a crypto company or a traditional brokerage? Is Coinbase a traditional brokerage or a crypto company? This is where you get the melding of the legacy financial system and the crypto industry.
And then lastly, let's use Michael Sailor as another example. He mentioned yesterday on their earnings call that he could potentially sell Bitcoin in the future to fund the stretch dividend payments. Now, what's interesting to me is after Michael said this, Bitcoin's price is higher today. I think that's a major narrative violation for what people thought would happen if Michael said he was going to sell. This commentary from Sailor would have been blasphemy just a few years ago. But now, it's a rational perspective given the state of the industry and the future growth prospects of strategy. Because remember, the crypto industry is dying. Majority of the projects and coins, they're just not going to make it. But those that end up surviving, they're going to become important parts of the legacy financial system. And frankly, I couldn't help myself from noticing this big dichotomy at the consensus conference yesterday. There were serious entrepreneurs and investors that were there. These people are focused on building and funding solutions to real problems. Somebody like Mike Kagny at Figure Technologies. I've been an investor in that company for a while. Mike's a serious guy who's building a real solution to a real problem. But then there's a bunch of people running around doing memecoins and pumpf fun stuff and a bunch of nonsense. these large cast of pretenders, they're running around holding on to a dream from 2018 that is never going to materialize. In my opinion, most of the crypto industry as we know it is dead. I personally believe that there are four major areas that are going to accrue value moving forward. The first is Bitcoin, the second is stable coins, the third is infrastructure, and the fourth is tokenization. Not everything is going to die. Those four areas are likely to end up accruing value, surviving, and thriving. We need that because that's going to upgrade the legacy financial system. But people need to adjust their perspective to incorporate the reality of the current market. Most of the crypto industry is dead and people do not yet realize it. That doesn't mean that a big part is not able to succeed. It just means that if you are working in or investing in the part of the industry that used to be the long tail, I would be very careful right now and I would think about reallocating my time or my money to the parts of the industry where there is actually the opportunity to upgrade the legacy financial system because at the end of the day, crypto is a free market. The best ideas are going to survive. [music] the best projects, the best companies, they're the ones who are going to end up getting adopted into the legacy system. When you hear crypto company or crypto asset, that means that that thing has not yet reached a point where it is able to actually survive in the legacy system. If you go back to the '90s, people used to talk about internet companies. Now we just call them companies. The things that actually have terminal value, the things that have resilience to them in the crypto industry are not going to use the word crypto going forward. Instead, they are just going to be companies or assets, not crypto companies and not crypto assets. Because at the end of the day, crypto is just going to become finance. It's all going to become one big thing. And the things that try to stay crypto only are going to be the things that end up dying.
Anthony Pompiano's message is intentionally uncomfortable because it challenges one of crypto's most deeply held assumptions that endless expansion equals success. In his view, survival, not proliferation, is now the defining question. Most tokens, blockchains, [music] and speculative ecosystems may never recover meaningful relevance. But the technologies that solve real economic problems, integrate into institutional [music] finance, and improve global financial infrastructure could become foundational pillars of the next monetary era.