Transcription
There's a lot of people trying to figure out what went wrong with Bitcoin. Are people just looking for excuses or is there really fire behind that smoke?
And it's not that everyone loses their job because of AI. It's we only need a small percentage of people to lose their job and cause a financial panic.
It's almost like this fiat-based debt-based monetary system is incompatible with the growth of technology that we need.
You need to get to the bailout, but to get to the bailout, you need the crisis. Things need to go down in price pretty quickly. And that's what Bitcoin is telling us. They're not printing enough money. In the next 4 years, they expect agent to agent commerce to be up to $5 trillion.
People go on Polymarket to have an idea of what the politics are. Regardless of what your view is, you're getting lied to. So, how do I get truth out there? Well, where are people putting their money?
A lot of people are saying maybe the war is an excuse to print money. I don't know if governments need excuses to print money. So, what would you say is the tipping point then that things start to really go haywire?
All right, Arthur. So, uh, man, I read a lot of your newsletters. I've been watching a bunch of your videos. I I love your takes that you have. I want to talk a lot about the markets, but before we dip dip into that, I've heard some of your background. I think you started in like institutional finance. You were sort of like in the trenches there a little bit. Give us a little bit of the background that you have there just so that can sort of help us understand more about your views in the future.
Yeah. So, I got a traditional business school education, a business school as an undergrad in um Philadelphia in the US and I also took a minor in Chinese. So I wanted always obviously to get out to Asia. I was fortunate enough to go on a study abroad program to Hong Kong back in 2006 and then got a job in the summer and then came back as a full-time uh person back in 2008. So my my first day on the trading desk in Hong Kong was the Monday after Lehman filed for bankruptcy. And so you can imagine the type of uh trajectory your financial service career is on when the first day you join a bunch of you know people that you intern with and no longer have a job and the entire financial ecosystem is melting down before your eyes. So that was my first day welcome to the fire as a trifire. Yeah.
Got prepared for crypto and then I did that for 5 years. I worked at Deutsche Bank at City Bank in Hong Kong doing uh ETF market making.
Okay. uh I thankfully lost my job in 2013 and then I read the Bitcoin white paper and kind of the rest is history in terms of my involvement in the space. I've been doing crypto-related things for you know almost 12 years now.
Yeah.
For over 12 years.
Yeah. So then that led you to Bitcoin and then that led you to founding or or founding BitMEX.
Correct.
Which so you sort of used sort of the derivatives trading background Bitcoin trading to to launch that platform.
Exactly. And we're most famous for the invention of the perpetual swap. It's probably our our biggest achievement as a company. And obviously I'm sure all your users use these products today. So it was uh it's been a great ride and now I'm focused on trading my own money and investing in early stage crypto companies through my family office Melstrom.
Okay. Okay. So investing your own money and investing into back into the space into the crypto space in general.
Correct.
Got it. So, understanding that, I'm curious. You know, there's a lot of people trying to figure out what went wrong with Bitcoin. Um, it's down about 50% at the time of this recording. There's been a lot of uh people pointing fingers and smoking guns. One of the latest pieces that came out is uh some ETF funds maybe blowing up. Um, I think people were pointing fingers over to some Hong Kong funds originally. Um, now they're thinking maybe there's some manipulation here in the United States, some of the funds here. What's your take on that? Are people just looking for excuses or is there really fire behind that smoke?
Yeah, every I've been doing this for a long time as I mentioned and anytime a lot of traders lose money on what they believe is the surefire thing meaning like oh I was told that Bitcoin is a safe haven best performing asset in human history again all those things are true if you bought it in like 2010 but just because you bought it like 6 months ago and you're whining that it's down 50% and it's a very volatile asset because you know the world changes uh then you start blaming other people and you know every cycle lets a new boogeyman and so I guess the cycle lets the let's say it was the market makers.
Yeah.
It was these these no-name faceless market makers who always manipulate the price down. They never manipulate it up um because you're usually long on leverage and you know they point out all these stories. Oh, this person was doing this trading strategy or that trading strategy. You know, maybe some trading firm got reprimanded for some something. But like to be able to like control a you know multi-trillion dollar market Bitcoin with one shop and and put it put the price anywhere you want I think is a bit ludicrous. And so yeah I I don't think there's anything there. It's just traders whining that they didn't make money when they thought they should have and they're trying to find somebody other than themselves to blame for their losses.
Yeah. Explain to us uh the market making. So obviously as you said you you had a background in that. Um, a lot of people do think that the market makers, as you said, they only suppress the price down, not up. Uh, explain to us what market making is and and maybe how much influence they really have over the over the price of Bitcoin.
Market makers are trend followers and liquidity providers. And so, if you're a market maker, your job is to buy low and sell high and do it, you know, millions of times because you're putting in orders every second or obviously milliseconds, nanoseconds, that that sort of thing. And so, their job isn't to go long or short Bitcoin. Yes, there might be a trader at the same firm who has a mandate to take directional risk, but the market maker, the person that's providing liquidity that would allow you to get in and out of position with low slippage. That person or firm is literally just trying to make the spread. And they're not trying to take a view on the price of Bitcoin or say, "Okay, I'm just going to like slam the price down and and bring it back up." It's just not Bitcoin is way too liquid of a market to do that. Yes, and definitely there are some shenanigans on, you know, some shitcoins, but most of the shitcoins deserve to be zeros anyways. And so they're just being propped up with artificial liquidity because there's actually no real buyers. And I guess a lot of people experience that after the 1010 issues on Binance and a lot of other altcoin and shitcoin trading platforms. If you want to talk about Bitcoin, you know, the, you know, multi-trillion market cap market, there is no one market maker that is taking a massive big enough directional position to influence the price, you know, causing it to go down 50% in, you know, 6 months or whatever it has been from the highs in October till today.
Yeah. I mean, certainly there's funds that are piling on massive shorts and might try to potentially make it uh maybe some news break and take advantage of some short-term prices, right? Certainly there's some of that. say that the market makers are literally responsible for the reason why Bitcoin has underperformed a lot of other assets. I think that's just nonsensical.
Yeah. So, I know you've talked a lot about global liquidity, which I definitely want to get into. Um, and I think you've even called sort of uh Bitcoin sort of like the smoke alarm or the fire alarm in the global liquidity cycle. So, talking about maybe some of the real reasons why we've seen Bitcoin's drawdown from 50%. Would you point more towards not since it's not the boogeyman of the market makers, it's more about the global liquidity that we see receding?
Yes. And I and I've written, you know, an essay about four weeks ago about my read on the reason why Bitcoin has underperformed sort of, you know, big tech, NASDAQ, and and gold. and it's pointing to a liquidity destruction or credit event that's going to be sponsored by in my opinion the displacement of knowledge workers especially in western economies due to AI.
So you see a massive job displacement meaning people get get displaced and then they have to find a new job but there's sort of like that in between spot and that creates a what massive unemployment to spike uh tax receipts uh plunge and then the government has to come in with a massive stimulus. I I mean I think it's more akin to yeah we have a small increase maybe it's well I don't know if small is the right number but a an increase say it's like 10 to 20% of people who lose their jobs because of AI automation and they have credit to service yeah mortgages credit cards auto loans.
um especially in the United States where it's a very flexible labor market and consumer spending is something like 70% of economic activity and most of it's leveraged then when you take take the highest earning income group, knowledge workers, people who had university education who are doing some sort of like knowledge work, you know, computers, lawyers, accountants, what have you, and you're taking out sort of the least productive members of that class, and you're saying, "Well, there's nothing here for you right now. Maybe they will have been retrained. Call me in 3 to 5 years, but that credit card payment is due next month or in 10 days." And where's the bank going to get those funds from to service that debt? That's that asset on their balance sheet. And I think that's the issue. And it's not that everyone loses their job because of AI. It's we only need a small percentage of people to lose their job for the leverage embedded in the system to take over and cause a financial panic. And that's the point that I'm trying to make.
Yeah. So I think some people are already kind of pointing to that some of these credit funds are already having some some risk show up there. But I think some would say that maybe it's too early to blame that on AI. Maybe some of that is just like a delayed hangover from COVID and too much spending there. So some of the weakness that we're already seeing in some of these credit funds, these private credit funds, do you think that's distributed to AI or not yet?
Absolutely. I think it's it's people freaking out about software as a service. That's the main culprit here. And so these are,
you know, people who make tax software, accounting software. If you have AI that does it better for like, you know, 10 bucks a month, now you can basically do not not need all these tools. And so these people have users and these users are no longer spending money on uh memberships or however you want to call it um annual recurring revenue and all of a sudden these companies that were the darlings of tech for the last 15 years are zeros. Now again not everyone is going to replace every single tool with AI. That's not the point. The point is you have leverage in your balance sheet and therefore people like, well, how are you going to service this loan if you're down 30 50% in terms of signups? Yeah. Because there's a tool that does it better at like one 1% the cost.
Yeah.
I'd love to just pull on that just a little bit with you. I mean, as you're an entrepreneur and you're an investor, um I I wrote an article about a week ago and I was just saying that I think there's a difference from an entrepreneur to the analyst obviously, right? Entrepreneurs take risk. They see they see value where others don't. They see solutions to problems that nobody else sees. They create uh solutions for those problems. So like the goal of an entrepreneur is to go take territory, right? I want to go solve problems. I want to grow as fast I can. I want to go claim the mountain. And so the entrepreneur is different than the analyst. The analyst is the bean counter, right? It's the Keynesian economist who wants to put everybody into like a spreadsheet and doesn't take into consideration like human uh action if you will. And so I think from an entrepreneurial lens, I'm certainly an entrepreneur. I invest into uh businesses as well. Like I'm using AI to try to expand my business as fast as I can. Like, oh, I just freed up four hours from this person's time. Now he can do these other three projects that has been on my back order list that I haven't gotten to in a long time. And I think like a business is the goal of a business is to grow. I'm trying to grow my profits and grow my revenue every single year. So why would I as a business owner want to fire half my team when I could just increase my product line or my business by 50%. And it seems like the number one job that's at risk right now today is like AI uh software engineers, but yet it's like one of the most in demand jobs right now. So, I don't know. I'm cur as you're an entrepreneur and investor and you studied this. I'm just curious if you think there's maybe something in there.
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Well, I think let's let's take it look at it this way. Maybe as an entrepreneur, you're losing using a lot of services firms. You need to do a lot of back office work, accounting, um, you know, bill management, legal services, right? And if you as a customer can say, "Okay, I know I need to have a certified CPA, whatever, a senior person sign up on these these accounts, but guess what? I can do everything up until this person signs this with a cloud bot or you know some instance of an an LLM that's been trained on this type of work. I can do it perfectly. So no longer am I spending hundreds of thousands of dollars on junior level accountants basically doing ledger entries. Now I'm just going to the senior person saying, "Hey, here are these books. It's already done exactly how you want them done. You know, check it and and sign off." And so all of a sudden, I'm no longer spending all this money on all this friction that's embedded in the economy. Yeah, sure. Of course, entrepreneurs are going to hire, grow, give more work to people because of AI, maybe be able to do more with their business, but there's all these friction services that we use as business people that we no longer need if we have an AI who's very capable.
Yeah.
And so I think that's the issue. And it's not that, you know, again, 100% of people are not going to lose their job because of AI. We're talking about people who are manipulate structured symbols.
There's a legal system. It's just
precedent. Yeah. And co and you know and laws that's easily digestible by an LLM or accounting. There are rules. These are what you have to do. Give me the data. I'll hook into your data um systems and I'll compile your reports in real time faster than you going to some big four accountant and spinning your wheels for months on end. Spending I'm teen uh hundreds of thousands, millions of dollars on accounting. That's what's at risk right now.
Yeah. Yeah. No, I see it. And and to the point that you're making, it doesn't have to be a big chunk. It just has to be a little bit to really start to move things sideways. And I'm an edge case, I suppose. Uh I just think about my own company. Uh I have a couple companies, but the one that I mainly run about 24 employees. I have like a bookkeeper controller, but I've been needing to bring a CFO in, but I've been delaying. And I've built up these like AI agents that are like intelligent experts in all these different areas of my business. And I built up a CFO agent. And so I take the reports and I feed it into the CFO, and then I give it back to her. But I found myself to be this middleman where it's like now I'm just shuffling reports back and forth between my controller, my bookkeeper, and my CFO. I'm like, screw this. I'm just going to hire a CFO. That's not my best use of time. But maybe what she's doing could be automated, right? So then there's a blip there, right? So okay, I'll get the CFO, but then maybe I'll get rid of her. And so to the point that I think you're making, which is warranted, there is a disruption coming. People are going to lose their jobs. So what would you say is the tipping point then that things start to really go haywire?
When people start recognizing that these people getting fired from companies like Block and Amazon have debt that they need to service whether that's a house credit card loan whatever and so there's going to be an aha moment and the market's like oh whether it's delinquencies rise some very overleveraged lender goes it's always the worst
players you go bankrupt or something happens and then people look at oh what was a theme that made them go bankrupt and extrapolate that higher up into the competency competency stack in terms of the companies that are affected and then oh no all the all the credit that's on the bank's balance sheets that's related to this income bracket is all of a sudden questionable do I really want to be exposed to a bank that has you know a lot of consumer loans or a lot of auto loans or this type of mortgage right that was what subprime was all about it was again not everybody lost money on their house or you know was delinquent it was we're talking like 10% 10 15% and that was enough to literally cause a global financial crisis. So again, it's not about a massive number of people. It's we only need it's just the start of this this trend
and it's really going to impact the banking system.
So what do you think the domino effect of that? Obviously 2008 we saw the domino effect. It brought down basically the whole uh banking system took back then it was it was so much money I couldn't believe it was like 700 billion for the TARP package. It's like no, you can't spend that much. Now it's like a drop in the bucket. But you know in 2023 we saw three banks go down and they had a bailout package in six days right. So from from Bear Stearns collapsing it was like uh was it almost a year before the bailout package right? Yeah.
And then in 2023 three banks went down we had six days. So I'm curious what you think sort of that domino effect is. Do the banks pull a 2023 step in put the you know
put the bonds on their own books paper over that or kind of how you think that cascades through the system. So again, I don't know what the trigger will be. I think it's going to be in sort of these smaller banks that will have more exposure to these uh types of loans and who don't have the government guarantee. But to your point, there is no appetite for any whiff of of deflation uh or or a credit event. And so if we even start to see a few banks wobble, you are going to see an immediate response from the Fed and the US Treasury and other regulators around the world to sort of ring fence this problem because they don't want to suffer anything like 2008 again. Which is why this can happen a lot faster than than people think because the response is almost immediate, right?
Yeah. a few days and then oh here is a a blanket you know sort of bailout for the banking system and that's going to happen except in this case this is a structural problem with you have on one hand every single major government saying AI AI AI we have to win the war against AI we have to upgrade these the capability of AI and the first casualty are your workers who have the highest propensity to spend and this is government policy that's supporting the build up of all those capex to make these LLMs faster and cheaper and all these things so It's and again and you could go back to 2008 as well. It was government policy to get as many people in homes as possible and loosen the underwriting standards and force banks to get into this business. It's government policy for us to underwrite AI at the national level regardless of where you live and therefore the consequences are going to be massive. And again, it's a government pushing this as well. It's not just entrepreneurs who say
we have to have to do AI. It's almost like this fiat-based debt-based monetary system is incompatible with the growth of technology that we need.
What do you know? Yeah.
It's it's almost like that. But you're you're damned if you do, damned if you don't where it's like, well, if you don't take on the AI and push to dominate AI, then you're going to fall behind and you're doomed that way. But if you do push it and it wipes out all your workers, you're doomed that way as well. So, it's sort of like uh there's there's like a no-win scenario there. I I've seen a lot of talk about I mean I think Sam Altman said that they have way more advanced models they could produce but they don't even have the energy for it. Uh we have a massive commodity crisis energy crisis. Uh they can't build the data centers fast enough. Of course we'll jump over to what's going on in the Middle East but data centers are at risk over there. It seems like already currently our ability to create energy in data centers is slowing down the rate of AI growth. Could that be enough of a break to to slow roll this a little bit so it's not as catastrophic as maybe we think it would be?
But again, we'll see what sort of especially we're talking obviously in the United States and China, there's plenty of energy because of decisions that the government has made over there in terms of how they're going to electrify their economy. But if you're talking about the United States and I guess parts of Western Europe, yes, they have this issue of like there's a lot of demand to build data centers. There's not enough energy supply. I think we're going to see more instances where you have these hyperscalers are going to go straight to the source and start owning power plants, buying utilities, buying stranded energy resources and basically it's putting up a data center off the grid. That's already starting. It's only going to intensify now that you know data centers in the Middle East are getting droned and you really don't have any security over there. So yes, it'll slow it'll pay it'll half the rate at which that grows, but the cure for high prices is high prices in the commodity space. And so the they're going to find these resources and provision them to building out of of AI. So, I'm not Yeah, it it could slow down. But again, the price differential between a properly trained agent to do accounting and, you know, a junior level, mid-level, you know, CPA, it's still, you know, like 99.99% more cheaper to use AI if you can get it to do the things you wanted to do.
Yeah.
You're talking about a per month cost. So yes, the cost could go up and you could see people spending massive amounts of money on inference on these AI models, but you have to pair that against, well, what would I spend for a team of humans to do the same work? And I think it still comes out to be much cheaper in certain very specific use cases to use these AI models.
Yeah. So in that in in that situation, I mean, that's bad for any number of reasons. Situations can be good and bad at the same time. It almost seems like from a investing standpoint and from like a global liquidity standpoint, the bad news is good news. Meaning uh people are going to lose their jobs, credit funds are going to blow up, but the Fed's going to pump in a bunch of liquidity.
But it's path dependent, meaning that sure you need to get to the bailout, but to get to the bailout, you need the crisis. And so we need things need to go down and and price pretty quickly. And that's what Bitcoin is telling us. There's not enough money being created. the the authorities still believe that AI is this productivity tool and will help them escape the debt that they have to pay back because productivity is going to elevate so so fast per worker but they didn't they don't believe that there's going to be mass layoffs or enough to cause an issue in the banking system and so there's the economy there and that's what Bitcoin is telling us they're not printing enough money
to to counter what is going to happen in the near future until they get to that realization oh no I need to print money, then Bitcoin is going to be, you know, at these levels or maybe even a bit lower. We we'll see.
Yeah. Now, as somebody who's been in Bitcoin for a long time, since since almost the beginning here, uh you've been through multiple of these like four-year cycles, as we call them, and there's so much talk about the four-year cycle being dead. Um and we're past that. The when we cut the new supply in half, it doesn't really have enough effect on on the supply demand equilibrium to really shift it. But here we are exactly 18 months after the halving and we got our peak in October, not November this year. uh and the price is down about 50%. The thing is that like each one of these cycles has their own reasoning and so like in this case I'm guessing are you saying it's not really about the four-year cycle it just so happens to coincide with the global liquidity cycle and that's what liquidity is telling us. Hey look, you've you've worked hard to build your Bitcoin stack but if it's still sitting on an exchange it's not really yours. You see the exchange holds the keys to your Bitcoin. Now if they freeze withdrawals, if they get hacked, they go under your Bitcoin. It could disappear overnight. Even if you've moved it into a single cold wallet, you're still exposed. Now, that would be one device, one point of failure. If anything bad were to happen, you could lose your Bitcoin. Now, that's why I use Unchained. Their collaborative custody vault gives me the best of both worlds. I hold my keys, but my security doesn't depend on just one of them. Now, this is where security and sovereignty actually meet. You see, Unchained's collaborative custody Bitcoin vaults use a two of three multi-sig model, which means that you hold two keys and Unchained holds one. That means that you own your Bitcoin, but if you ever need help, like their team is there to assist you without ever having control over your funds. And here's what I really like. Unchained isn't some offshore exchange or anonymous company. They're based in Austin, Texas. And when you call, you're not stuck with bots or scripts. you talk to a real Bitcoiner who genuinely cares about helping you get it right. Now, they've been at it since 2016 and now secure over 12 billion in Bitcoin for people just like you and I. Now, that kind of trust doesn't happen overnight. So, if you're serious about long-term security and ownership, head over to unchained.com/markmoss and use code moss 10 to get 10% off of your first vault. Because if you don't hold your keys, you don't hold your future.
Correct. And obviously I was one of the people banging the drum saying there is no four-year cycle this time and obviously you know shit's down 50% since I was talking about that. Oops. Whatever. I don't use leverage so it's whatever. But um at the end of the day yes it's always a liquidity issue. There's no the technology works to the to the use cases that it has presented itself right now. But it's all it's always been a liquidity story. The reason why Bitcoin has risen so fast is because the central banks led by the Fed starting in in China in 2008 and post 2008 have been printing lots of money and we have an asset with a fixed supply that has risen markedly in price. So it's always a liquidity story. The liquidity situation that I believe we're in right now is one that is this AI deflationary event that needs to be underwritten by printed money. And until we get that sort of realization by the central bankers that the alternative is way worse than continuing the game of printing lots of fiat money, then we're going to be at these levels. But again, I'm fully I have full confidence that central bankers want to maintain the status quo and don't want to allow a 1930s style deflationary um collapse.
Yeah. So, let's jump over to maybe another catalyst on the other side of the ocean of maybe what could lead to that. Um, you talked about in your essay the iOS warfare uh about direct ties between the Iran war, the Fed easing. Um, a lot of people are saying maybe the war is an excuse to print money. I don't know if governments need excuses to print money. They're always going to find a way to do it. Um, but how do you think about this iOS warfare and what are you paying attention to in this war in regards to global liquidity?
So, obviously this is an oil story. Uh and the question is how long will the Straits of Hormuz be closed or how long will it take to restart energy production in a lot of these Persian Gulf um producing states once the war gets to a level where they feel comfortable going back and rebuilding things. Right? That's all that is the question that we need to answer as investors. Again, it's very difficult to understand how that plays out. But the longer that the hostilities remain between the United States and Iran, the more disruption there will be to the energy flows. And at some point, because of the negative economic effects of that, I believe that the Federal Reserve is going to be forced to start printing money. And now it won't be like you'll have an excuse whether it's the US needs to build more refining capacity, needs to build more drones, needs to mine more stuff, whatever it is that the United States needs to do more of to um not have another similar situation where you have the desire to win a war very quickly, but the abilities don't match that desire. And so you still have this standoff and what do you do about rebuilding this region which supplies 20% of the world's um oil or something to that number? I think that's the question and we can basically just watch the oil price and how that interacts with the US Treasury 10-year Treasury to understand when there's going to be a policy response. So if we start getting oil at like $150 and the 10-year Treasury yield is moving towards 5%. There's going to be some sort of money printing activity and I don't know how it's going to what what it's going to look like but again the the system can't handle those two things happening at the same time. It seems like and I'm not an oil expert. It's something I definitely pay attention to. Sounds like you do as well but it seems like the US is a major energy producer exporter. we don't really depend on any oil from the straits. Um it seems like China is most at risk from oil not coming through the straits. So it almost seems like in a sense and and and also I mean oil still seems like the market is still pricing that this maybe ends sooner than later maybe over optimistic there. Um and if you look at oil in inflation-adjusted terms it's not really even that high not compared to where we saw it just you know four or five years ago. So it seems like the US could maybe withstand higher oil prices maybe longer than some of the other countries that are more dependent on that oil there. So how do you think about this stalemate or if if the energy prices go up on Asia, China, etc. Does that put too much pressure back onto the US?
Well, so the issue is not the oil price per se for the United States. As you pointed out, US is the largest um I think largest oil producing nation. I'm not sure.
Wouldn't that benefit us?
Top three. Um the problem is that everyone who is a US ally let's talk let's take a look at the stock market performance over the last few days of what post sort of this war lasting longer than the two or three days that was initially sold to the world by Trump and his um lieutenants Japan Korea US allies their stock markets have been absolutely crushed right why they are massive manufacturing nations that import all their energy lots of it comes through um the Middle East, China, HC hasn't been harmed that much since its markets have down a bit. Why? Electrification, right? It's entire it's its fleet of vehicles is an increasing percentage of our all EVs. They can burn a lot of coal which they produce domestically. So they can provide enough electricity um at least to their auto fleet from just coal.
And they have a few months a few months of oil sitting at sea for them as a buffer as well. And you know there's been some reports that if you're a flagged Chinese tanker that you can get through uh the straits right and so put it all together China's economy is not exposed to energy prices as say US allied manufacturing countries like Taiwan, South Korea, Japan. And what do these countries have that they need to now sell to buy oil at these elevated prices to make sure their population is not affected? They own US treasuries. And so the higher the oil price goes, these nations that are short oil but long dollars in terms of long treasuries have to now to make sure that their population doesn't feel the effects of this war to acutely sell down these dollar assets to now buy energy. Sell your savings to buy energy to make sure that your population doesn't face you know 50% rise in in prices or certain things or your industry could continue to produce these goods at an affordable price. you have to sell something and that's that's what the treasury market is telling us. it bottomed I think what 380 or something yield right afterwards as you know sort of the move to safe haven US treasury and then I was like hold on a minute there's all these people that are short oil long dollars and now need to sell their dollar assets and they're going to have to buy things to essentially hand out subsidies to people in their own countries and now you're seeing the the yield start tick back up and the dollar is strengthening against uh a lot of a lot of currencies because of this effect of I need to get oil I I don't have it. I need to pay whatever the clearing price is with this disruption and that's going to hurt my national finances. Therefore, I need to sell something. That something is US treasuries. And that's how this gets back to the US even though the US um a lot of oil producers probably happy that the oil price is higher, right? Because they're frackers or whatever and they need a higher, you know, break-even oil price to be profitable. So, I think that's how that's the fulcrum in which, you know, Buffalo Bill Bessant gets involved and does something. It's oh everyone who is short dollar short oil now needs to buy elevated oil and they have to sell the one thing that they own treasuries and [ __ ] more on the sovereign level and that's going to negatively impact our our uh our debt markets and that's what brings the volatility in the debt markets up and once the volatility in the debt market goes up evidenced by the move index you get a policy response again, we're not there yet but the trend is not looking good in terms of uh yields for US treasuries and the affordability of debt that the US must refinance and continuously issue.
Yeah, which is a big sticking point for the Trump administration. We got to get the interest on the debt down. So, we need the rates to come down, not go up. And so, yeah, all eyes on the move index. And of course, we're whatever uh not even two weeks into this. So, we'll see how long this goes. If it if it stretches out, it could be could be really bad. I think you've put some targets on Bitcoin, maybe up to $250,000 um even higher longer term. Um, do you think this disrupts that like this is sort of breaking news? Does it sort of disrupt those long-term sort of targets or does this cause more short-term disruption but doesn't really affect that long-term outlook of it?
It accelerates the long-term trend. Wars are inflationary and so everyone now has to have their own energy supply. They can't rely on on the global energy markets. They have to have their own food supply. They have to have their own logistic supply chain. Right? This is as we keep disrupting all of these nodes of global commerce by these these wars, everyone now needs to have their just in case inventory. And that's inflationary at a at a secular level.
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The overleveraged system cannot support the amount of debt that's going to need to get issued to finance that. And so it's going to be inflationary. They're going to resort to printing money. And every war the government prints money at some they start doing it at some point. They don't start out that And obviously lots of assets go down in price until that situation happens. But if we're talking about an asset that is very responsive to liquidity, when that liquidity is going to be provided to finance certain aspects of the war or the rebuilding after the war, then that is inflationary and that is what is going to carry Bitcoin to, you know, much higher levels in fiat currency terms.
Yeah. So this goes back to kind of what I said earlier for asset holders, Bitcoin holders, maybe the bad news is good news. It's bad news in the short run, good news in the long run.
But we're definitely definitely think we could get a much lower Bitcoin price as this conflict drags on before you get the realization that yes, the US and all these other countries are just going to print a lot of money to make sure that they can build out whatever they need to build out to fight the next war.
Yeah. So you're so so Bitcoin is sort of this canary in the coal mine. It's it's it's pricing in that there's not enough liquidity to go around. However, we can start to see the potential demand drivers that would cause more liquidity to come in. Either the credit markets breaking apart, the war continuing on, the government has to sort of intervene in the in the bond markets. What would it be? I think you said that you're pretty defensive in your positions right now. You're seeing this kind of play out. What are the signals that you would be looking for to shift your perspective and go, "Okay, I see we're here now. Back to risk on, game on." Like, what what are those what are those indicators you're looking at?
Just wait for the the scheme, whatever it is, whether it's the Fed or the US Treasury, wait for them to tell you, oh, there's there's an issue, you know, whether it's the markets are down or something broken the credit markets and they've responded with something. I don't know if that's something is going to be, but if you peel back and you just look at, you know, at a first principal basis, what are they doing? Are they printing money in some way, shape, or form to sort of smother the impact of the market? That's when you know it's time to to go along.
Yeah. Got it. Wait for the wait for the the potential crash and then the response to that and wait for the response. Um, let's let's jump back to AI for a minute and think if we think longer term. Uh one thing you mentioned obviously how fast AI is growing. I'm sure you're using it every day. I'm using it every day. I want everybody that works for me to be using it every day. Uh the AI agents are like growing so fast. A month ago, a couple weeks ago, we started setting up our Cloudbot here on a Mac Mini and now it's like we don't even need it anymore. how it can all be done online. I'm like I'm telling my guys like we can't even be building on this stuff anymore because by the time we get it figured out it's like already obsolete, you know. Um I saw reports from McKinsey saying that in the next four years they expect agent-to-agent commerce to be up to $5 trillion. Um and there's this if if you sort of think through what this technology does and these agents really are sort of acting as these autonomous agents on our behalf, we can just start to see all the commerce that's being done there. Right? So agent agents intercommerce or an agentic uh economy if you want to call it that when I think about that um
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Certainly on the job side which we've already disco uh we've already covered but when I think about like the problems with the fiat monetary system that we have today working in that agent economy the machine economy and there's just no way that it works uh for a bunch of reasons. I'm just curious how you think or if you're thinking about that, what that means for Bitcoin, um, stablecoins, crypto in general moving forward into that economy. Governments will never stop printing money, so inflation, it's not going away. Now, if your money is not earning at least 10% a year, you're losing purchasing power. Now, that's why I talk about Bitcoin. It's the number one way to beat inflation and secure your future. And the question I get asked almost every day is, "Where do you buy your Bitcoin?" Now, for years, I've personally used River.com, and I only take on sponsors that I use and I trust. And I trust them because River's Bitcoin only. They have 100% reserve, and they keep your Bitcoin safe in cold storage with no middlemen. And you can actually talk to a real person, a US-based support dedicated manager. Now, try getting that peace of mind from Coinbase. Of course, you can't. Now, the perks, if you set up auto buys, you can pay zero fees. Plus, instead of your bank paying you, you know, 0.4% on cash, River pays you 3.75% on cash paid in Bitcoin. So, if you're ready to build your Bitcoin position with confidence, go to river.com/markmoss and get up to $100 in Bitcoin when you sign up because freedom starts when you own your money and your money starts with Bitcoin. I I wrote a series of essays last year, last year, a year before last, um, about how Asians are not going to use fiat currency rails. They're going to use some sort of crypto rails. And I think that Bitcoin is the best currency for Asians, but it could be something I create themselves. We don't know. But what we do know is that it's too slow to use our systems, our legal system, our banking system. If you want to talk about
autonomous agents doing the things that we want them to do and at the at the pace we want them to do it at. Like we don't want to wait, yeah, two minutes now for our agent to do something. Hey, you know, I want that flight booked immediately. I want that hotel. I want you to, I want you to have done whatever. Like AI is supposed to be this revolutionary thing. Why is it not working fast enough? That's how we're going to, that's where we're going to get to in terms of our impatience with AI.
And so if an AI agent needs to go and use services about other AI agents across the internet, they cannot use any of these systems, um, that we use today. They need to use something cryptographic that is fast enough for what they need to do and what we expect them to do as people, essentially employing them to do our bidding. And so I definitely believe that there's going to be a massive agentic economy that's going to use crypto rails. And it's going to be an interesting narrative because I'm sure a lot of payments solutions or bridges or stable coin issuers are now going to sort of try to slot themselves in on this narrative of like, how there's going to be all these agents using their stack and therefore they deserve this particular valuation because you assume this many transactions, right? And so I think that's going to be a major narrative that is starting to gain steam now that we see, you know, what these agents can do for us. And now there's this like rush to have your own sort of instance of Clawbot and there's like some like mania in China. People are going and, you know, signing up to to use your open source Clawbot to do stuff, right? So we're creating these agents faster and faster. They're going to use some sort of cryptographic rail. Which one? I don't know. But there's going to be some standout projects at least from a narrative perspective, uh, that are going to attach themselves to this and we're going to say, "Oh, that's going to be the solution to the agent economy." Whether or not it actually happens is not the point, but we're definitely going to see a few tokens really pump on that narrative. I don't know what those are yet.
>> Yeah. Yeah. I mean, it's it's still so early. I mean, to your point, I think Bitcoin is is the best one. Stable coins are sort of maybe going to fill that gap. Couple things I think about that is just like how does the internet work in that day and age, right? Because like the way the internet is built today is based off of data and eyeballs, right? So like if I go to the weather website, weather.com, to see what the weather is, they show me an ad. So they pay for the website based off of an ad. But if my agent goes and checks the weather before it books my plane ticket, they didn't get the revenue from the ad. So now, how do they get paid? So they're probably going to need to charge for an API call, right? So like the whole the way the web is built is completely different, right? So now they have to charge for an API call, but how much is that API call worth? Well, what do they make on one at one banner impression, right? So, a fraction of a penny, right? Um, if you if you start thinking about it like that, but then the problem that I think is that I'm curious if you thought down this level, but like >> you could see how stable coins could do fractions of penny transactions at high frequency. So, it could do an API call 50 times or 100 times, right? >> But the problem that uh I see in our traditional financial system that we have today is KYC AML, which is a problem. But even more problematic than that seems to be, um, fraud detection and liability. So like fraud detection, if they see a lot of small transactions coming in, they'll freeze it. There's fraud detection. But then also credit cards have liability. They want every transaction to have a human authorize it. So then you're liable for it. So then like how does the machine be liable? And that's kind of where I start thinking about we need something permissionless, uh, to get around that. So even if we have stable coins, I don't know if that part could solve it. I don't know if you've thought down to that level.
>> Yeah. I mean, I guess at the end of the day, we're going to see some new standards. I think there's been a few different companies releasing, you know, the the connectivity standard between sort of the the old web, if you want to call it that, and and these agents. We're going to start seeing content obviously made targeting agents and not like SEO in terms of the human looking at it from a search engine. It's now it's like, okay, well, how does this agent crawl my website? How do I make sure that they're not bots spamming me? So maybe, yeah, to your point, there's going to be some sort of micro payment involved. What is that backbone going to be? And you're already starting to see, um, some of the, you know, standard promoters start saying, "Oh, the L1 of of that I represent is definitely suited for the agentic economy because transactions are this cheap. The finality is this. These are sort of the authentication things we can build natively, um, at the protocol level, right?" That's that's the noise we're starting to see to address these problems that you're you're talking about. Who's actually going to be successful? I don't know.
>> Yeah, it's so early. It's so early. Um, I did see Bitcoin Policy Institute came out with a paper that said, uh, all the all the AIs they pulled, uh, preferred to use Bitcoin. So, we'll see where that >> Wow. What do you want? >> Yeah, we'll see where that goes. Um, is your fund invested into these types of projects or what are your, what what is kind of the main sort of deal box for what you're looking at?
>> So, right now we're raising for a private equity vehicle which we're almost finished with and we're already out there looking at, um, crypto companies that have high profit margins that are suitable for sort of, um, a takeout. That's what really we're focused on. In terms of sort of the AI agentics space, I think we're just going to let it cook, see what sort of bubbles up. And at least for me as a directional trader, I don't really do much on the the venture side. I want to see a a liquid token that's in the secondary market that is sort of picked up this mantle as the L1 for AI agents or at least what everyone thinks it's going to be. And I'll just make a directional bet on that, uh, and take risk. Again, I'm not trying to be early. I'm trying to be like, you know, not late, but like in the middle there when it's an established theme, we've got the champion that everyone thinks and you get to ride the wave of of this particular narrative. So that's where we are right now at at Maelstrom. We're not really looking too deep in sort of the the agentic economy because again, it's so easy to build one of these solutions. Who actually has traction? We don't know yet. And so you're liable to burn a lot of capital. Yes, there's going to be the person who picks the the next 100x performer. That's not going to be us. We'll wait on the sidelines and we'll see who the the community picks up and who can win the narrative battle.
>> Yeah. Not not, uh, betting on.com in 1997. Waiting more towards like 2003, 2004 level when the winners are a little bit more sort of, uh, proven out, but still super early. Still super early. I get it. Um, all right. What are you most, uh, what I think I guess what are you most excited for watching for this year in the space? I love obviously I'm a big Hyperliquid bull. I love the fact that the HIP3, this permissionless listing is now starting to get traction in terms of people trading non-crypto things using the crypto rails. So an example would be people trading the WTI oil futures, um, price over the weekend during all these hostilities when the traditional markets are closed and you now starting to see mainstream threat news outlets outlets like Bloomberg saying, "Oh, if you want to see what the market thinks over the weekend, you need to go to Hyperliquid." And I think that is we're starting to see that shift where, "Oh, this crypto thing makes sense." You see a Polymarket, right? People go on Polymarket to see to have an idea of what the politics are because you they know everyone's lying to.
>> Yeah. >> Regardless of what your view is, you're getting lied to. So, how do I get truth out there in these all those times? Well, where are people putting their money?
>> Yep. >> Um, where are the insiders trying to make a little bit more money because they know the top guy in this department and there's something happening that nobody else knows about? That's where Polymarket is. That's why it's so valuable to have these markets where anyone, even insiders, can place a financial wager based on the information that they have. And this is so critical for us as humans. We're being lied to incessantly across the internet to have one source of truth. And the truth is if you're going to put your money behind a particular view, that's probably what you believe. And so to look at those probabilities of certain events happening is very informative. And that's one of the two things I'm very excited about this year in terms of this penetration of markets where the authorities didn't want us to have information about things. They don't want us to trade when they don't want us to trade. Okay. Well, why? Because, you know, maybe they want to hide something or what have you. Now, we have Hyperliquid offering you the ability to trade anything, anytime, anywhere, right? And that's awesome. And we're starting to see traction there. And then prediction markets. You know, you want to know about what's happening really happening in politics or what's the real probability that, you know, the new Ayatollah in Iran gets taken out by Israel in the US? Well, look at the probability on Polymarket, right? I know it's a bit macabre, but like at the end of the day, these are the things we want to know about. We don't want to read the the CNN or Al Jazeera or RT today piece of propaganda news. We want to see what the people actually believe.
>> Yeah. Back to the Hyperliquid. How does that work? Is that like a like a synthetic asset? Um, sort of like a represent token on that or how does that work exactly?
So basically, um, the protocol works so if anyone can essentially spin up their own product suite as long as they stake, I think it's 500,000 HYPE to make sure that you're, you know, a legit actor there and you create a market using the the Hyperliquid backend. And so this particular one, it's sort of a WTI futures price and then the, um, the person offering that market puts up different terms, but how the leverage is calculated, the underlying index, they set the, um, the limits, the up, uh, limit up, limit down, the open interest limits, and then you basically trade a perpetual swap on any any particular pricing source. And so it's not Hyperliquid themselves listing this market. These are other, um, companies that are putting these markets on Hyperliquid and now we're able to see pricing on these different securities.
>> So I'm creating interest. I'm creating a market almost like an ETF, like a basket of whatever assets I want. I can set the terms and then I let people come in and start trading against that asset which then finds some sort of price discovery off that.
>> Correct.
>> Interesting. How, how's the growth of that going right now?
>> Uh, I mean, it's literally launched, let's call it like six months ago and the trade XYZ, that's the the biggest HIP3, um, firm that's offering things. Their open interest would already put them, I think, in the top five decentralized exchange of any type.
>> Wow.
>> So this has been a standout success and it's something accounting for about, I think, 10% of Hyperliquid's earnings at this point, which I think is going to grow very, very rapidly as people want to trade US tech, oil, gold, whatever it is, and and high leverage, whatever they want to trade it.
>> Wow. All right, we're going to check that out. Uh, I think we'll wrap it up with there. Um, anything else you want to draw attention to your fund? Uh, anything else that, uh, you want to direct people to where they can find you?
>> Uh, on X, cryptohaze and Substack, cryptohaze as well.
>> All right, we're going to link to that down in the show notes down below. Uh, thanks so much for taking the time, uh, for for speaking to us. It was very insightful. Um, so thank you.
>> Thank you.