Trump’s New Tariffs: Genius Move or Risky Political Gamble?

Bank Nation, welcome to the weekly rollup. This week, I have the pleasure of being joined one last time with Hib Keshi, GP over at Dragonfly. Hib, once again, happy Friday.

It's an honor to have you.

Thanks for having me, man. I know you're just waking up and uh, processing what has happened in the world over the last 12 hours or so. You're you're on the other side of the world at the moment, in in Singapore. So we we got the world surrounded. Uh, how are you feeling?

It was a long week, dude. Dude, how are you? How are you doing?

I am I am exhausted. Not just from traveling here, but just like the the sheer volume of whipssawing happening in traditional markets. It kind of feels like everything trades like crypto now. It's just total total insanity in the traditional world. Let me run through—we'll just speedrun through the last seven days of events, starting with Liberation Day. Tariffs that were announced last week on Wednesday evening. This implemented a 10% baseline tariff on the whole planet and additionally, 86 countries that had much higher reciprocal trade tariffs in the 30 to 80% range. Staggering tariffs levels never before seen before, which immediately sent the stock market plummeting, uh, because the market really believed that Trump was serious about these tariffs. So from Liberation Day, peaked to trough, the S&P 500 declined 16%, setting a record for one of the fastest, quickest stock market declines in history.

Meanwhile, the next day, on uh, on Monday, excuse me, April 7th, Scott Besson, the uh, Treasury Secretary, uh, said that 70 countries have rushed to the negotiation table with the United States, showing that the world was indeed ready to negotiate with the United States on resetting their trade arrangements, uh, all except for China. After Trump imposed a 34% reciprocal tariff on China, China announced its own 30% uh, tariff on all United States imports that would go live in the coming days. And this really kicked off the trade war. Uh, a few days later, President Trump threatened an additional 50% tariff on Chinese goods unless China withdrew its retaliatory measures by April 8th. April 9th came, China did not back down and proceeded with its planned 34% tariff increase, which actually stacked on top of previous tariffs. So total net new tariffs that China had placed on the United States came to 84%. That 84% number came into effect on Wednesday, uh, April 9th, Wednesday of this week. Uh, once it did, President Trump immediately increased tariffs on China to 125%, and at the same time, simultaneously, he announced a 90-day pause on all tariff hikes for the rest of the world, going back to the general import tariff at 10%. He posted on a—So to clarify, China is actually at 145% because it's stacked on top of the previous 20%. So 145% for China and then 10% for the rest of the world on it with a 90-day pause. Uh, this was posted on Truth Social, which gave huge relief to the to the to the whole market. The market immediately started rallying. Uh, he posted uh, on Truth, based on the lack of respect that China had shown to the world's market, "I am hereby raising the tariff charged to China by the United States, effective immediately." Uh, it was also later revealed that Secretary Besson had actually written this post to be posted by Donald Trump. And this is kind of the the art of the deal that people are crediting Donald Trump with. This strategy specifically left China in an escalating trade war with the United States, while the rest of the world is currently at the negotiating table with the United States, presumably ready to give favorable terms while China is alone, stuck inside of a trade war with the United States. So that's where we are left to with today. Yesterday, we had the biggest stock market increase in a one-day event. It was like up 10%. Uh, we have today, uh, the day of recording, the 10th, uh, let a lot of those gains go.

So as we wrap all this up, Hib, netting everything together, summing it all up, how do you think—how successful do you think Donald Trump's maneuver has been? Was he playing 3D chess or like 1D checkers? So on that spectrum, where do you think he is?

Um, I I'm definitely more on the checker side than the chess side. And I think, you know, if you just if you just go through the overview of like the series of events you you laid out, you might have thought that like, aha, this was a very clever gambit to try to selectively enter into a trade war with China. Um, now if you actually unwind a little bit and you go look at the play-by-play of what he did and how he did it, it suddenly becomes very clear that a lot of the moves individually that Trump was making did not make sense. Okay, so let me let me let me elaborate because I think last time I was on the show I was also talking a lot of [__] about Trump's trade policy and I I for the most part I think for the most part I think for the most part my views have been vindicated. Okay, so the first and foremost thing—he repeatedly he described these tariffs as reciprocal tariffs, and what the market assumed that meant was that if you have a tariff rate of 30%, we give you a tariff rate of 30%, except, you know, divided by two, right? That's not what the quote-unquote reciprocal tariffs were. The reciprocal tariffs, instead of being a measure of tariffs and trade barriers, which is what he explicitly said is what he was doing, that is not how the numbers were calculated. Okay, so for example, we have a we we were placing a 70% plus tariff rate on Vietnam. Okay, we do not have—Vietnam does not have 70% tariffs on the US. Like that that no, that's absolutely incorrect. Go look up the tariff rates in Vietnam. Nobody could possibly come up with that number. Now, why is that number so high? Where where is it? Why is it there? For example, Australia. Um, we have a trade surplus with Australia, uh, like the so what what ended up happening was that the the policy that Trump used was that he he looked at a measure of the trade deficit, not tariffs. Tariffs are a tax on trade, right? That's like, okay, when you want to give me something, I'm going to artificially increase your price of you trading that thing with me. That's what a tariff is. Um, what Trump was measuring was not tariffs, but what was measuring is the imbalance of trade. Basically, they're buying fewer things from us than we're buying from them; that is what he based his tariff policy on. Okay, that does not make sense. Why does that not make sense? It doesn't make sense because first of all, it's not an indication that they're doing anything bad to you. They may have no agency at all. Such as, for example, take Vietnam. Vietnam is a very poor country. There is no way that they could possibly buy more things from us than we could buy from them because they do not have a consumer economy. They don't have a middle class with which to buy our stuff. We we build high-value items and services, and that's what we export as a country. Uh, Vietnam is too poor to be able to afford those things, but we can buy cheap goods from Vietnam. So what you ended up seeing was that very poor countries were overwhelmingly slapped with very high tariffs because of the way in which Trump calculated this thing. He applied the tariffs to every single country, regardless of whether or not they even had a trade deficit. So for example, uh, Australia was was uh, despite the fact that we are a net exporter to Australia, Australia was was hit with uh, the the tariffs, and the the weirdest part was that Trump just started accusing countries of just doing random things. So for example, he he said that Japan was a currency manipulator, Um, which, if you know anything about the monetary policy of Japan, makes absolutely no sense. So Trump clearly just doesn't—he he didn't really understand what he was saying. Um, he he didn't really have a strong grasp of who exactly do we even have tariff disputes with. Um, and so what ended up happening was that he obviously had these extremely high tariffs set across the entire globe. And Trump was just not backing down. The the the communication he was giving to the market was that this is pain we have to undergo. This is going to bring jobs back to America. This is good for manufacturing. It's good for investment. And what you saw was that over the period of time between Liberation Day and when Trump backed off the tariffs, you saw measures of investment in the US plummeting. You saw all sorts of companies saying we are we we're going to pause all investment in the US. Why were they saying that? They were saying that because there they had no idea what was going to happen with these tariffs, and they were correct to think that that they could not trust the word of the US government because the US government, as we've seen, backed off their word within a week. So we went from the biggest tax hike in history, which is this massive imposition of tariffs on almost every country in the world that trades with the US, with the exception of Russia and Belarus, which is like, okay, interesting, um, to then having those tariffs completely unwound within a week, which tells you, okay, you cannot trust the word coming out of the Trump administration. Ultimately, businesses need predictability. It's okay to raise taxes—a tax hike is is is manageable by by companies—but what they cannot handle is just—I I I'm going to decide one thing tomorrow, the it's another thing the next week, uh, and there's no clear communication going on from the administration. You saw, you know, what Besson was saying, what Mnuchin was saying, what uh, Greer was saying—all of them were diverging. None of them were telling you the same story as what Trump is saying. Trump was contradicting his own trade people within the same day. All this stuff was sending markets into a tailspin. Okay. So then cut to a few days ago—you had at at at a certain point you basically had a revolt within the financial class, which largely had been staying quiet, uh, within uh, Congress, which now suddenly you had Republicans going on the other side of the fence and saying these tariffs are bad. These this is nonsensical policy, and this is going to tank Republicans in the midterms, right? We like we just do not—there's no popular support for these things. If you look at the polling that's been done in the last week, overwhelmingly negative on Trump's tariffs, even among Republicans—nobody thinks this is a good idea. Okay. So then you said you see Bill Aman, who was a big supporter of Trump and a big donor to Trump's campaign. Bill Aman came out and said, "Mr. Trump, I think you've made a great mistake. I think I made a mistake in backing this administration and believing that they understood what they were doing on trade policy. Clearly, what's happening is a total, you know, own goal. Um, but here's how he could salvage it: Trump could announce that he's walking everything back and taking a 90-day pause, and he I think his his his words were, you know, markets would see the wisdom of Trump's strategy and it would all be great in the—" And and what ends up happening a couple days later, boom, Trump announces with the exact same terms that Bill Aman had advocated for—a 90-day pause. And what you see in the in the storytelling by the Wall Street Journal, which reported very well on this, is that apparently Besson flew down to Mar-a-Lago, where Trump was, and basically just locked him in a room and convinced him at basically like, "Look, if if you don't if you don't do this, the country is going to fall apart, and we're going to completely lose our economic mandate." Um, and that was what led Trump to ultimately publicly backpedal. And then again, you see this this story that oh, you know, Trump was uh, supposedly he keeps saying he wasn't paying attention to markets. He doesn't really care what's happening in markets. And yet the reporting is that he absolutely was paying attention to markets. He was he really cared what Jamie Diamond and what Bill Aman said. Um, and then yesterday he said, "Oh, yeah, did you see what happened to the market? You know, our trade policy is amazing." And then today he said, "Oh," he was asked by a reporter, "Oh, the market's down. You know, what do you think about it?" He said, "Oh, I haven't even looked. I've been so busy today. I don't know what the market's doing."

Yeah, exactly. So what what you see is just—they're clearly playing from behind. This looks 100% to me like, you know, Herbert Hoover just kind of, you know, vibes-based economics. Uh, massive massive just just indigestion from everything that he's doing in the market. And the problem is that look, the market rewarded him so much yesterday for being able to claim, "Aha, I knew it all along. This is all big grand strategy. Of course, we're not going to a world of massive tariffs on everybody in the world. That would be so stupid. You guys fell for it. This was all just a ploy." Okay, if that's what you're saying, then why is it today that he's saying, "Well, we know the tariffs might come back, you know, oh, you know, we still are going to do these massive tariffs. Oh, I'm still going to add tariffs on pharmaceuticals, which the markets [__] hate because they're like, oh, no, you're not done. You're not done, you you you got your temporary win, but you still have not backed off from the fact that the whole world is telling you this is an enormously stupid policy, and you yourself don't even clearly articulate what your goals are." They're still not saying—is the goal to have zero tariffs and free trade agreements with other countries? Is that the goal, or is the goal to raise revenue and punish people for being unfair to America? Right? And at different times they've said two different things, which are, to be clear, opposite policy goals. If the goal is we're abolishing the IRS and we're going to make all of our money from tariffs, then these tariffs are going to be high forever. If, on the other hand, the goal is we are going to have free trade and zero trade policy or or zero tariffs with all these countries and have beautiful trade deals, Okay, then say that. Say that clearly—that that's the goal—and then there's not going to be an IRS. There's not going to be this long-term reliance on tariffs. But the market doesn't know. It doesn't know what tra what Trump fundamentally wants. And to be clear, it's not clear that he knows. There's already been plenty of signals from people around uh, just executive leadership across countries, uh, companies in the United States about everyone saying like, we cannot make plans in the United States. We cannot make investment in the United States just because uh, this administration wants us to bring manufacturing home. We have no long-term assurances that we can actually build these factories, these manufacturing centers in the United States because we don't know what four years is going to be like because we don't even know what what four days is going to be like with Donald Trump. And I'm definitely partial to that. It takes years to build a factory, right? This is not something like, oh, you know, Trump raised tariffs, so therefore let's go do like a six, seven-year investment uh, plan on the basis of these tariffs, right? If the next administration—I mean, if Trump can create these tariffs, then clearly the next administration can remove them, right? I mean, that goes without saying, given that he's trying to do all this through executive order, which, by the way, is also potentially uh, you know, legally dubious. But if if that if that is the story, then nobody's going to make a 4-year investment on the basis of that. Well, obviously, we're now going to be able to move all of our factories from Mexico or from, you know, uh, uh, from Latin America or from uh, Vietnam. No, no company's going to do that. They're just going to sit it out, and they're going to wait until they get clarity because it's such a massive decision and such a huge investment timeline to actually get your payback on a factory that might become totally worthless if tariff policy reverses in four years.

So I'm I'm hearing this from you, and I'm I'm partial to your point of view. At the same time, on Twitter, there's a bit of a tale of two cities right now because there are plenty of people out there who are like, "No, man. This was this was the art of the deal." Uh, look look at what he did. Like China's just misaligned versus the rest of the world. This was all a part of the plan. It was masterfully masterfully executed. Uh, Mr. Besson, uh, why why is there such a gap between—I I mean, I guess it's just partisan lines, so I'm not sure what I should expect, but that there is just a huge difference in interpretation—totally okay, so the first thing is that we've seen how many mistakes they have made in this process, right? So how many unforced errors there were with respect to diplomacy, with respect to how they've spooked markets, with respect to how they've failed to really rally excitement around investment, right? What what what companies need to see—it could well be that, and I think it's actually a very reasonable thing to do for the US to say, Look, we have we have let go of too much of our strategically important manufacturing capacity. We need to bring some back home. And to be clear, that was also the justification for the CHIPS Act under the Biden administration—it was also industrial policy on the basis of, hey, we need to make sure that we can actually build semiconductors here in case something happens to Taiwan and relations with China sour, right? That very very sensible, very strategic—I think that's absolutely the right thing to do—to create more uh, energy production domestically. Absolutely the right thing to do. Um, now, how you do it—there are many different ways to get there. One way to get there could be through tariff policy. Another way to get there can be through stimulation and, you know, basically uh, you know, creating a lot of grants for companies to do this domestically in the US. They're two sides of the same coin effectively. But the worst way to do it is to make your allies very angry and think that you're an unreliable partner. Okay. What that's going to do is one, it's going to push them into the arms of China because China can show them—So you know, we saw for the first time um, this uh, this this claim that there's going to be coordination now increasingly between China, Japan, and Korea. Okay, these are your—history—Yes. Um, if if you don't know your history, these are three countries that [__] hate each other's guts, right? This should not be happening—that China and Japan are working together. But the only one way that you could possibly make that happen and potentially introduce the possibility that the US dollar might might further weaken in its global hegemony is by pushing people into the arms of the R&B and by China being able to take the position, you know, what—we are the reliable free trade partner. We're not going to freak out. We're not going to have tantrums. We're not going to claim everything is the the fault of, you know, foreigners and globalists taking advantage of us, um, and that kind of stability in a trading partner, regardless of whether or not you agree with the policies of the of the of, you know, the the CCP—other countries, they need reliable trading partners because, of course, they cannot manufacture everything themselves; they have to import from somebody, and if they're not going to import from the US, they're going to import more from China, and so you're already seeing that starting to happen. Um, the other thing is that you know, we've learned from Trump's commentary, and there there's been a lot of reporting now on trying to understand why does Trump believe this so strongly. Um, there was there was some—a lot of people were posting this stuff from Gary Cohn, who was um, you know, leading trade in the first Trump administration, and Gary Cohn was trying to understand why does Trump believe so strongly that we're getting ripped off by everybody in the world. So he's said things like this basically since the 80s. He's he's constantly said that he thinks that other countries are scamming the US. They're ripping us off. That trade is somehow intrinsically bad. And what is specifically bad about trade? In his answer, the answer is trade deficits. He thinks a trade deficit means that another country is ripping you off. Right? A trade deficit—just just to reiterate, what does that mean? That means that you are buying more from another country than you are selling to them. He thinks when you're doing that, you are getting ripped off. He thinks the person who is selling more things is making more money. Okay. This is this is like—this is like a a seventh grader's understanding of economics.

Yeah. Do you think it's as simple as, oh, I'm giving them money, I'm getting less money in return, therefore that's bad? And it's like that like left-curve 70-IQ businessman understanding of, oh, money is leaving the United States, and we're not getting any money in return. And that's the complete calculus. Look, I'm I'm not reading his mind. This is literally what he said. He said, "I want these trade deficits reversed." He said, "Look, I'm only willing to drop the tariffs on China if they can get us a trade surplus." Wh why why do you want—Why Why is it important to have trade surpluses with every country, right? Like the the what is the inverse of a of a of a trade deficit? It's a capital surplus. It means they're sending you money, right? You're you're getting in more investment into your country. Uh, that's good. We like that. That's a that's a big part of the reason why, you know, America takes the world savings—in all the all the countries in the world, they want to send money into the US stock market, into the US economy—that's wonderful. This was the institution since 2008 is like, we would print money, we we would buy goods from the world, the goods would come into America, it would subsidize our way of living, the money would flow out to the countries, and then they would buy our bonds. Totally totally. Now what you're seeing again as a result of Trump's brilliant trade policy—So what many people were saying was that aha, what he's really doing—what he's really doing—this is the best master plan—is that they're pushing down the ten-year because they have all this debt to refinance. They're pushing down the ten-year, and that's going to make it so that, oh my god, look at this brilliant move—ten years all the way down to below 4%. It it crested or it peaked at uh uh 3.9 something—86.

Yeah, 3.86. Yeah. Okay. So they was like, wow, this is the master plan. They're using this to refinance the debt. Trump was even retweeting this.

Mhm. He was retweeting this to make people believe that he's intentionally crashing the stock market in order to refinance the debt at a better rate. Okay, that was the that was the claim. All right. Well, what happened when they actually did the Treasury auctions—you can see the second part of that chart right there—is that everything legged way back up, and so you had both stocks going down and yields on treasuries going up, meaning that there's fewer demands—fewer demand on uh, treasuries. This was in large part because apparently the basis trade was unwinding in a really really brutal way. Um, and so all of this ended up worse. Yields are now higher—yields are higher—and the stock market is lower than Liberation Day. So Liberation Day net—I think we're down about 10% on the stock market.

Um, that's right. And and yields and yields are worse. So somehow we have the worst of both worlds. Yeah, this is a—what this tweet says from Mike Bird—"The miserable trippy triple whammy begins again: Stocks down, 10-year bond yields up, like you said, also the dollar down." And so what I'm seeing from this is the capital center of the world, the United States—Wall Street—where again, just like I said, money flows out to the world because we get the world's goods, and then the world reinvests in our stock market, our businesses, our bonds—That is going out in two ways. The stocks are down, so it's going out in that way. Uh, the 10-year yield is up, means bonds are being sold. And so the capital center, which is United States strength, is gone. And then also and also the dollar is down. And so I think like the big question that everyone is asking is like…

Okay, well, even if we just look at the S&P 500, uh, the the the stock price, it, we gave a lot of the gains that we got back yesterday, uh, we just gave it back away. So we're down 4% from yesterday; we're up about 10% off of the bottom. But you know, even before liberation day, we are just like you said, we are down eight or nine percent.

And so there's there's scar scarring. There are wounds in the current American economy and the stock market and trust in America. And I think that's what people are currently contending with, like when the stock market opens up tomorrow and then next week. This is the dust needs to settle. And it's not, this is a before and after moment, I think, for the United States economy and its center as a trust, trustful place to do trade and commerce and invest. And we're going to have to contend with that now.

Just as you said, like there's a new equilibrium of a capital center, and I don't think it's as strongly in the United States anymore because Donald Trump is just so goddamn chaotic.

Yeah, completely agreed. I mean, this is this is the fiscal policy of a third-world country, right? Of like, in a single week, whipssawing on, oh, we're going to do this, we're going to do that, we're going to make all of our money through tariffs, never mind, we're going back to normal. Um, and you know, if if if liberation day, like remember when initially in liberation day, uh, when Trump unveiled the tariffs, there was initial reporting by the Wall Street Journal that he was doing a 10% universal tariff, and markets jumped, markets jumped like 3, 4%.

When this is this is uh, in after-hours trading, so it's not necessarily going to show up here. Um, and that was the best-case scenario; that was like, oh wow, these are less than we thought it was going to be; Trump is being reasonable. Like that's where we should be right now. We should, we like what you're seeing in this market of why we're down 10% and more than 10% relative to where we were the moment that the market thought that what Trump was doing was imposing universal 10% tariffs is that this is the cost of instability. This is the cost of being an unreliable partner. This is the cost of people saying, I can't trust what comes out of this government until things stabilize. And who knows when they're going to stabilize.

Being a financial center means having good rule of law, being very predictable, and being very stable. That is the strength of the US government. We, we're one of the, we're one of the longest continuously running governments in the world, and we've been the financial superpower for coming on a hundred years now. But the way that you lose that status is by doing stuff like this.

Mhm. It's it's it's hard to lose. But this is, if if you wanted to do it, this is how you do it, right? Like if what you really cared about was bringing manufacturing back to America, and that's the thing that ultimately is most lamentable about this is that what Trump is doing clearly is not accomplishing that goal, right? So one, if you want, like, you know, Trump is saying, oh, you know, foreigners are going to pay these taxes, they're not. I guarantee you that they're not. The reason why they are not is that the US doesn't have the manufacturing capacity to produce all the things that it imports, right? We, we just, we just don't. Even with 10% tariffs across the board, you will buy things foreign because the America just will not be able to get them uh, produced in time to be able to out-compete even foreign producers with a 10% 10% search charge.

So what that means is that the cost of everything is going to go up. Now, if you charge individual countries, right, let's say we only had um, a trade war on particular goods, right, well, then you can have some substitutability, meaning that, okay, well, you know, margin is more expensive, so we're going to buy butter or whatever, you know, this kind of thing. Um, but if you tariff everything 10% universally, then there's no substitutability. Nothing can come in and say, "Oh, we're going to shift consumption from here to here and punish these bad trading partners." Right? So like, even if that's your goal, if your goal is to punish people, a 10% universal tariff does not do that. It is simply a tax on trade. And why do you want to tax trade? Trade is what made the West rich. Trade is why Western Europe ended up becoming the center of the world. Like trade is what, trade is the reason why our world is so wealthy compared to where it was 50 years ago, 100 years ago. So taxing that and saying, you know what, instead of trade, trade is terrible. We should not do trade. We should do other things. Uh, it's just like, why, where did you get this belief?

Mhm. Well, okay. So see, I feel like I'm at a loss for what to do as an investor in in crypto and in like the equities market. I'm just like kind of holding on to my chair and just like kind of going along for the ride. Just like trying to be at peace with it. But like, so when we resume the markets tomorrow on Friday, uh, the day of the day that listeners are going to listen to this, but then also next week, like what are you doing? Like, how, what are you looking for? What signals are you looking at? Like, how, how are you trying to like navigate this over the next like week, weeks and months?

I mean, so look, as I've said before, I'm not a trader. Um, certainly not a macro trader. So for the most part, like, you know, I'm I'm long; I'm riding out this market. Uh, I obviously wish I wasn't because I, I do think that things are, uh, things are things are going to be rocky for a while. Things will remain extremely volatile as long as Trump doesn't make up his mind about what he's doing. And it's very clear the next 90 days, uh, the 90 days is the period of time through which these uh, reciprocal tariffs have been paused in favor of the 10% tariffs that they've said is a floor, meaning that they could be higher than 10%. He's not signaled whether or not there's the opportunity to do 0, which is, of course, what markets really want. Markets really want renegotiated trade that's going to be zero.

Now, to be clear, in the beginning, this wasn't a problem. Markets weren't like, "Oh my god, you know, tariffs are so high. We got to fix that." Um, but okay, maybe some of these non-tariff trade barriers are significant. There's some stuff around IP that I think can be renegotiated more effectively. Um, you know, some of the digital market stuff in Europe, in the EU, I think that's real. That's worth uh, negotiating over. Um, so I'm I, I certainly would not claim that there's no reason in coming to the negotiating table with some of these trading partners. Um, so I think that's what markets are going to be looking out for is are we going to see constructive deals actually being put together?

Now, the reality is that if you remember how long it took, for example, USMCA in Trump term one or TPP or all these like massive trade deals, they're extremely complicated. They take a really long time to create and to uh, you know, put into law and enforce. So the idea that Trump's going to do that for like 50 plus countries in 90 days um, is kind of beggars belief, right? That probably there's going to have to be some really janky kind of fast and loose form of of trade agreements um, in lieu of actually getting like the full, fully fledged uh, you know, idealized forms of these agreements. But um, long story short, I think the next 90 days are going to be really volatile. Um, I do suspect that by the end of this year, things will stabilize; we'll know what the new regime is. Markets will be able to calm down a little, and probably the the better angels within the Republicans, uh, the Republican party are going to push Trump toward more sanity and more stability.

Right. I think Trump realized that he had a small, a short window in which to do this because, of course, he knows that he's very uh, uh, vulnerable in the midterms, and right now, of course, all the stuff that's happening, I mean, the the one thing that he had a mandate for was the economy. If he triggers a recession right now, poly market is is uh, pricing in 50% probability of a recession. Even after the Trump, the tariffs getting walked back before that, it was like 66%. So right now it's still even money that a recession comes on in 2025. It looks like we're up to 60% now.

Um, so yeah, th this this means that things are still very likely to be bad, right? What causes this recession? Companies getting scared, people uh, pausing investment and no longer wanting to hire new people because they don't know whether or not that this tariff environment is going to remain stable. Um, and this is again purely self-imposed. Uh, if if we see this, the Republicans are going to get trounced in the midterms. And so I think when you go into Q4, Q1 of next year, Trump is out of rope. He has to be stimulative. He has to be good to the market in order to make sure that they don't lose the midterms. I think it's I think it's kind of doomed at this point, but of course, they want to hold on to as much as they can. Otherwise, you know, Trump is just going to be basically um, unable to get anything done in the second half of his administration.

There are are a couple optimistic uh, spots in the blue sky that I see that I don't want to get your opinion on. Um, midterms is is one; stimulation going into the midterms, I totally see that. I like that. That's that's a possibility. One another one is that well, once this debt rolls over, then we can forget about it. And I think that that debt rolls over in six months or nine months, which is also leading up to approaching the zone of midterms being very topical. And so once we can get this debt load that they are just super worried about, Scott, Treasury Secretary Scott Bessant is just trying to get the yields down on bonds so that when this debt rolls over, we don't have to pay at that high of a rate. And that that will be a in the rearview mirror in like six to nine months, about that time frame. Uh, and then also maybe just like more loosely, I hope Trump just gets bored and just moves on from and just is done with this subject uh, and just wants to focus on something else. So like maybe, maybe talk about any of those three that that comes to mind for you.

I mean, look, the the Treasury auctions that just took place, which was the first instance of rolling over significant amounts of US government debt, did not go well. It went better than expected because we were basically in the throws of a of a, you know, what was bordering on a financial crisis. Um, so doing that within like, you know, the historic levels of volatility, we had not seen that level of a three-day draw down since co um, or sorry, that day of a one-day draw down since co and not that much of a three-day draw down since I believe 2008. So this is like crazy amounts of volatility, and in that we managed to clear treasury auctions with not too much slippage. But this was at, you know, 4.3, 4.4 um, rates, which are, to be clear, terrible. That was not the goal that like, we we failed. If you wanted to roll over the debt at a lower rate, that did not succeed. Okay. So we have this, we have this uh, debt now at a very high load, very high debt load. Um, and that's going to continue. So anybody who was like, "Yeah, great. We got out of the woods. We rolled over our debt successfully." This was not a success story of of rolling over the debt. So we're going to maintain a very high debt burden in the US. Um, and if if we're going to be lowering Treasury rates, or sorry, if we're going to be lowering yields, it has to be coming from the Fed at this point because fiscal policy is not going to get us there.

Well, that'll bring us to the inflation uh, print that got reported just this uh, just today actually. So uh, the actual inflation was measured at 2.4%, where the estimated was 2.5%. And so we are actually coming in with a cold CPI print, which is good because that means that there is room for the Federal Reserve to cut rates. We all as investors, as as risk asset holders, like the idea of cutting rates. Uh, when this print came in, uh, the bond market yields did not respond. It didn't, they went up actually, uh, which is not great. Uh, this is probably downstream of all the chaos that we've been talking about for the last 30 minutes. Uh, integrate this into this conversation for us as a thing is that of course, this is this is March, right? This is before any of this insanity started, right? So it was before the the tariffs came on, uh, before liberation day, and ultimately what happened in March is a whole [ __ ] universe away from where we're living today, right? Doesn't matter what happened in March; we have no idea what this is going to do to prices, but we already see egg prices are spiking, which has been the center of a lot of controversy so far in this administration. Um, egg prices are spiking again, despite the fact that the bird flu stuff is over. Egg prices were back down. So now egg prices are spiking again. What does that tell you? It's probably tariffs. It's probably import. It's not the birds now.

Yeah, it's probably not the birds. So um, we we don't again, we don't know yet. We don't have a clear picture. But markets are telling me what marketers are telling you here is that I don't care. This is totally irrelevant to what I'm worried about. What I'm worried about is that of course, inflation will increase. The Fed has said this; any financial observer will tell you this is that tariffs are inflationary, and when people stop trading with you, we just put massive, massive tariffs on one of our largest trading partners, China, and China is one of the trading partners for whom it's very difficult to substitute a lot of what we import from China, right? So we're we're now at the point where, you know, with 145% uh, tariffs on China, which basically is very close to a trade embargo, right? Meaning that, you know, if you tariff 1%, okay, that's the same as an embargo. It basically says you are not allowed to import anything from this country because it's uneconomical to do so. Nobody would ever do it. It doesn't make any sense. Even somebody who costs five times as much uh, to produce the same thing, it's better to import it from them than import it from this person. So that's basically a trade embargo. 145% is so high that markets are now telling you that if if Trump continues increasing the rate of tariffs on China, it doesn't matter.

Mhm. Because we're basically at the point where trade with China is shut off at 145% tariffs. So uh, we're now in this very precarious position that is almost certainly going to show up in the inflation numbers. And of course, inflation is very reflexive. So when people expect inflation to increase, that accelerates its increase and makes it stickier. And what we've seen is that consumer inflation expectations have gone up massively in the last couple of weeks, which again, very rational response to what they're seeing in terms of trade policy.

Yeah. Yeah. Is is there any semblance of how this impacts crypto in any unique way, or I mean, are we just along for the ride? Cuz I think more or less crypto is just a long for the ride, and until there's some sort of internal catalyst out of crypto that we have not seen since uh, the Bitcoin ETF uh, or pumpf fun, uh, we are just along for the ride here.

Yeah, very, that's the answer. Like, for the most part, crypto is orthogonal to all of this happening, except maybe Bitcoin. Um, Bitcoin has been behaving very strangely. Sometimes it's acting like gold; sometimes it's acting like a NASDAQ uh, kind of derivative. Uh, other times it's doing something totally uncorrelated to both of them. So Bitcoin has kind of been this very strange dark horse, but Bitcoin has actually held up relatively well. Alts have just been getting decimated alongside the NASDAQ.

Yeah. And so you're just, you're seeing alts basically trading like uh, risk, risk assets or like tech stocks. Um, and I think you should expect that to continue is that that's going to be the story for alts. Um, that being said, you know, the one thing about alts and about crypto is that the the place where you should see these things untethering from each other is that although uh, crypto is very tied to risk appetite, it is not at all tied to corporate earnings. Right? So corporate earnings might go down quite a bit when when this stuff really starts to snake its way through the economy uh, through the real economy. But um, crypto is immune to that. Crypto doesn't really care, right? And of course, a lot of the demand for crypto is international. It's not just in the US. So it has a kind of globalized demand base that doesn't depend as much on the, you know, US consumer uh, having a strong balance sheet. So even if US consumers are hurt, crypto can be somewhat mullified in the impact on it. Uh, and second, the crypto I think is very much tied to global liquidity. And so if you see the Feds start to cut or you start to see some kind of emergency liquidity injection, if we see a financial crisis or some other, some other reason why the Fed suddenly has to step in and create another, you know, four-letter program in order to buoy markets uh, then what you may well see is that crypto ends up rebounding in a really dramatic way, just simply because of the the liquidity dynamics that are introduced by by uh, you know, monetary stimulus.

So there's a lot of ways this can go from here, but I I would guess that there's no way things are going to be sideways. That you can, you can be sure.

Okay. So are you, with all of that summated, are you optimistic, pessimistic? Well, I guess you can't be neutral because you just said it's not going sideways.

Yeah. Yeah. So I'm I'm very optimistic about crypto. I think there's almost no way that things are going to remain this bad by the end of the year. I think both sides, both the the monetary policy side and the fiscal side are probably going to be stimulative going into the end of the year. And I think crypto is going to probably benefit more than the stock market. I think the stock market is going to have a real drag from the effect on the real economy that all this stuff is is is forcing and the lack of investment. Um, but crypto doesn't really require investment, right? And of course, it's not affected by tariffs. Crypto doesn't import or export anything, right? This is all global from the beginning. And so I think crypto is going to be relatively unperturbed by the realities of tariffs, but it's going to be affected by the the risk appetite, the monetary policy, and the fiscal stimulus.

The monetary policy and the fiscal stimulus I think is now garnering a new found attention from everyone in just all investors because now, now I think we're going back down and popping open the hood of the Fed's Fed repo rates. We are, we are looking for cracks in very low levels of the financial uh, side of the economy uh, and I don't, there are a few cracks from the uh, macro commentators who are far smarter than me. There are a few cracks poking up that people are watching without any sort of conviction about anything materially breaking. But to me, that's kind of a sign of the times is like people are looking at the lowest levels of the financial markets, like the Fed overnight funds rates, the repo markets, just to see like, yo, are there cracks showing up, and there are things to be to be noticed without anything breaking. Uh, and so I think that's maybe just kind of a summary of where things are in this present moment.

Yeah, it's it's a good guess that if something breaks, it's going to end up being very bullish for crypto.

Yeah. Because that's what happened in CO.

That's right. That's right. And um, it's it happened many times before, like, you know, previously in the what was called the taper tantrum when um, you know, before COVID when the Fed was trying to raise rates and market uh, it was 18, 19, something around there, um, you saw the same thing was that, okay, Fed immediately brought rates back down to zero and injected a bunch of liquidity. Um, so I I think it's it's not unlikely that we see something like that happen as this instability continues.

Imagine a world where your day-to-day banking runs on a blockchain. That's exactly what Mantle is building. Powered by a $4 billion treasury and poised to become the largest sustainable onchain financial hub. As part of their 2025 expansion, Mantle is introducing three new core innovation pillars that bridge traditional finance with decentralized technology. First is their enhanced index fund, aiming for $1 billion in AUM by Q1. It provides optimized exposure to Bitcoin, ETH, Solana, and USC, complete with built-in yield opportunities. Next, Mantle Banking promises to revolutionize global value transfer through seamless blockchain-powered banking services, bridging crypto into your daily life. Finally, Mantle X blends AI with DeFi to deliver an intelligent, user-friendly experience for everyone. And the best part is that this is all in addition to their already launched products like Mantle Network, me, and FBTC. Ready to step into the future of finance? Follow Mantle on X at Mantle_official and join the onchain revolution today.

Imagine verifying yourself without handing over personal data. No hacked databases, no unnecessary personal exposure for airdrops, and no AI bots ruining community governance. Meet Self, the onchain identity verification protocol built for privacy and control. Self protocol uses zero-knowledge proofs to confirm your identity safely. Users prove key details like age or citizenship without revealing sensitive personal information. Self never stores your data; it only generates cryptographic proofs. Here's how it works in three steps: First, register and verify. Use the Self app to scan your biometric passport's RFID chip. Self verifies authenticity with zero-knowledge proofs. Each passport creates one unique identity. Second, you can share proofs privately. Third-party apps request identity proofs, like confirming you're over 18. You can also link proofs securely to public wallets for airdrops or governance participation. And then last, secure verification apps validate your proofs instantly onchain, like on Cello or offchain. Audited by ZK security. The Self app is live on iOS and Play Store. Visit self.xyz and follow Self Protocol on X.

In the wild west of DeFi, stability and innovation are everything, which is why you should check out FRA Finance, the protocol revolutionizing stablecoins, DeFi, and Rolex. The core of FRA Finance is FRAUSD, which is backed by BlackRock's institutional-bidded FRAUSD for best-in-class yields across DeFi, T-bills, and carry trade returns, all-in-one. Just head to fra.com, then stake it to earn some of the best yields in DeFi. Want even more? Bridge your FRAUSD over to the Fractal layer 2 for the same yield plus Fractal points and explore Fractal's diverse layer 2 ecosystem with protocols like Curve, Convex, and more, all rewarding early adopters. Fractal isn't just a protocol; it's a digital nation powered by the FXS token and governed by its global community. Acquire FXS through frack.com or your go-to DEX, stake it, and help shape FRA Nation's future. Ready to join the forefront of DeFi? Visit fra.com now to start earning with FRAUSD and staked FRAUSD. And for Bankless listeners, you can use fra.com/r/bankless when bridging to Fractal for exclusive Fractal perks and boosted rewards.

Let's get transitioned into some actual crypto-native subjects because some good news came in this week. Uh, crypto pro, Crypto Paul Atkins has now been confirmed as the new SEC chair. So this is the new Gary Gensler. We have a new Gary Gensler. He looks nothing like and talks nothing like the former Gary Gensler. He is very pro-crypto, believed to be expected to be very pro-crypto. Uh, he's this is a Donald Trump appointee, of course. Uh, and I think everyone is very optimistic. He is this, this is not at all like how Gary Gensler came in and everyone's like, oh, he is so aware and informed about crypto. This let's be optimistic about this man, and then he just did a 180 on us. Uh, Paul Atkins uh, is explicitly has given out pro-crypto statements, is very pro-markets. Um, what's your take about uh, Paul Atkins as the individual and what's

Your take about the final this is not a surprise. We saw this coming for months now. He's just finally working his way through Congress, and now he's been approved. Uh, what's your take?

That's right. I mean, I think everybody knew, more or less, that Paul Atkins was going to get confirmed. Very uncontroversial pick, very stalwart guy, obviously served in the Bush administration. Um, he very clearly has his bonafides about crypto specifically. So he was—I believe he was on the board of the digital chamber, which is like a crypto lobbying group. Um, he was an adviser to Reserve Protocol, which, if you're familiar with them, they're like a decentralized stablecoin. So he's he's in the arena. He understands crypto very well. He's a he's a libertarian. Um, I've I've heard him on some podcasts where he's like—he's a valid libertarian. He's he's basically from the Hester Peirce school. Hester Peirce actually worked under him, under his jurisdiction at the SEC in the Bush administration. So this is exactly the guy that you want: very uh smart, capable, open-minded, experienced. I think an excellent pick and just clearly somebody who's going to be, you know, continuing the the the current charge of the SEC under Hester Peirce's leadership in the um—u—what's it called? The crypto a—what's the agency task force? The crypto task force.

Um, I think my my expectation is that probably the the the SEC is likely going to delegate to her and let her drive a lot of the policy stuff, given how deep she's been in the space and how much trust she's garnered with the industry. Um, and given the fact that her and Paul Atkins have such a long working relationship, my assumption is going to be that he's he's going to trust her to to to run point on it. Um, but on the whole, my expectation is that he will be supportive, and the SEC is going to be a much more steady hand in this administration.

Yeah, I think this really just locks in the progress and the current state of the SEC as it stands because I actually don't know how the SEC could be any better than how it is operating with the crypto industry under the leadership of Hester Peirce. It is doing, as an organization, everything that we need it to to elevate our industry, get the regulatory clarity, get everything that we need out of the SEC. So, you know, even though it's great to have like—what is the inverse of Gary Gensler—step into the SEC chair seat, it's actually already in a perfectly fine position. So I—it's not really—it's hard to be any more bullish than we already were. That's at least my take.

Yeah, completely agreed. I mean, this is a big part of the reason why, again, I'm I'm very bullish on crypto going into this year, that the fundamentals of crypto actually look fantastic. You know, like just seeing the complete regulatory reversal, the the positive uh policy noises coming out of the administration. Uh, just seeing the normalization of everything in this industry and more and more companies being able to engage with the space, the growth in stablecoins, the, you know, on-chain adoption looks really strong. Everything kind of looks great. It's just this kind of backdrop of macro craziness that's pulling everything down. And, of course, it's not just crypto. Um, but this is a big part of the reason, seeing what's happening with this new SEC uh, which was really, you know, public enemy number one over the last four years. Uh, they were they were they were sort of the world's most aggressive regulator on crypto, and they were single-handedly pulling the entire industry back, and now it's it's just a complete 180, which is great to see.

Uh, you said everything looks great in crypto. Well, uh, I'm going to pull up uh the ETH/BTC chart, which uh looks like dog [ __ ] uh we are down below 0.02 uh and I want to I want to give a take to you. I want to connect a few points of data. So we have this this ETH/BTC ratio, which everyone knows has just been terribly down, even in an accelerating fashion. I have to actually go out to like one-day candles to really put all of the downness. Uh, we got um almost a thousand days—a thousand days of down in the ETH/BTC ratio. Uh, and a second chart I'm going to pull up is uh this one that Peter Pan tweeted out uh, which is monthly crypto VC funding. And I believe this is funding into crypto VCs. So this is LP investment into VCs and had, of course, a massive, gargantuan spike in 2021. I don't think that's correct. I think this is deals of uh like VCs into portfolio companies into—Yeah, because they they difficult to measure. Okay. That's very easy to measure. It's very—Okay. Well, it's down—is ve—down very bigly. Uh, the investment from VCs into companies is as bad as it was in the middle of 2020, when root crypto really started to just poke its head back out of the 2018-2019 bear market. And the two things that have done very well over the last two years is Bitcoin and stablecoins. And there are now some gargantuan stablecoin deals that everyone will see if they're not already seeing it on their timeline. We'll continue to see massive stablecoin deals in the timeline. And I'm—so I'm connecting those two things: this like barbell of crypto—Bitcoin, digital gold, 21 million units, the the OG of crypto—Uh, and then on one side of the barbell uh, and then we have stablecoins on the other side of the barbell. And we have this ETH/BTC ratio, which to me like represents just a thinning out of the crypto maximalist—the blockchain maximus—where we're going to do everything on-chain. We're going to have all of these on-chain apps. We're going to have a DAP store. Uh, we're going to we're going to live our life—digital identities—and we're going to fill out—we're going to fill out what it means to be in the middle of the crypto economy, and that thesis seems to be just slowly dissipating over the years—over the last two years—and now we are just left with these two very strong thesis, which is Bitcoin and stablecoins, and institutions love stablecoins, and that's why institutions are so hot on crypto right now uh, and then also they also love Bitcoin because it's a non-sovereign store of value. It's a digital gold. It's an alternative investment—decoupled and coupled in these weird ways. It's makes it's fun to to play with. It's fun to sell and package up into ETFs and sell to customers. But the middle of crypto, where VCs invest in and get returns from, is hollowing out. It's thinning out. And you can just see this in sentiment on Crypto Twitter because while Pump Fund has been creating a fantastic casino memecoin uh merry-go-round for those who like to play in that arena, people's jobs come from that middle of the market. It comes from the altcoin market. It comes from startups raising from VCs and launching products that are enjoyed by the market. That part is being hollowed out. So I'm just kind of connecting the decreasing ETH/BTC ratio to the lowered VC funding to this like just terrible sentiment that you see on Crypto Twitter. Uh, am I hallucinating? Do you see what I see? And like what's your take?

I see why you see what you see, but I would I would dispute the story. So first thing is that when you're looking at the ETH/BTC ratio, you have to normalize for BTC dominance because BTC dominance has been going up relative to everything—not just Ethereum. Um, and so if you look at, you know, uh XRP or BNB or um you or Solana uh, that obviously those things are also depreciating relative to Bitcoin, but that's mostly because of what's happening in macro—that like that's a you know risk-riskoff kind of sentiment that's going on right now. Um, but because it's happening for every single asset, the ETH/BTC ratio—it's bad, but everything has that ratio to BTC, and it's not because things aren't working. Um, and and for some of these other networks that are actually doing relatively well. So uh, it's still bad for Ethereum, and I think that requires its own unique set of explanations. There's something idiosyncratically weak about Ethereum. Um, but uh the other thing—looking at the venture chart that you that you showed—um, I believe actually if you scroll down in the the comment section, there's another chart that uh somebody else showed that actually there's a right there with the the DeFi Llama chart that actually shows that uh there's a spike right there on the right side of like—oh, venture funding is is suddenly increasing significantly again—and I think this is actually correct. Um, you can see that after Trump got—so the first thing is that there's a lag with respect to when venture investing gets reported. Right. Exactly. Because you you fund a startup, and then you know they don't want to necessarily announce that the week that they get funded. They wait until they've got some announcement to make. So it's usually like a 3-4 month lag on average of when uh funding happens to when announcement takes place. So Trump got elected about four months ago. And so you're now starting to see all of the optimism and the the increased amount of venture funding that took place right after the Trump bump manifesting itself into uh you companies now announcing their their venture funding rounds. So now I'm not implying that we're back to where we were in 2021. We are probably never going back to where we were in 2021. To be clear, that's also true of regular VC. That's not a crypto thing. That's a ZIRP thing. That's a—oh yeah, there was way too much money sloshing around chasing cheap returns, and there was overinvestment and malinvestment into crypto, and where did that go? That was not—oh, people are funding all these layer ones—that was like metaverse stuff, that was you know Yuga Labs and OpenSea and you know all this stuff—like that's where all the money was going. So, you know, if if if you're worried of like, oh my god, nobody has jobs anymore, how are people going to work, you know, who's who's going to build the next you know Monad or Mega or barachchain or whatever—I I actually don't I don't think that's the problem, and I don't think that's what that's the story that this thing is telling you. It's certainly true that uh crypto assets, especially VC-backed coins, are down a lot. That is true of everything. That is true of, you know, uh of stocks in the stock market, you know, any any kind of tech company—it's down really really bad. You saw a lot of companies drawing down like 20% in a single day in the stock market uh when you saw the really really steep declines uh around tariffs. So all that is to say, um, I agree with you, the picture is bad, but I think what you will see is that this is not really about crypto. None of what's happening right now is about crypto. Crypto is not immune to what's happening in the broader market. But like you said earlier, we're along for the ride, and and in crypto we feel that especially because everybody's in the market. Everybody owns these assets. Um, but go talk to people who work at FAANG companies, and they will tell you the same thing—is that they're feeling really damn bad; their stock value is is significantly down from where it was before. You know, the MAGA 7's gotten killed in everything that's happening in in in recent markets. So uh, I think it's a it's it's it's a more nuanced picture than that, but I hear you that it hurts and and people are feeling the pain.

What about the idea that this crypto—the crypto industry has started to coalesce on Bitcoin and stablecoins as like a barbell of utility? Uh, and I was giving the same take that I I gave you to another prominent investor in the space—one of your one of your uh competitors at Dragonfly—Uh, and he said the industry probably should—competitors, excuse—you know, fellow investors, co-investors in the space—uh, and they said the industry probably should feel somewhat existential about what else of usefulness has been built outside of stablecoins uh and and Bitcoin. So what do you think about that that specific framing about like uh it's really just Bitcoin, stablecoin, maybe DEXes too uh, but that's about it?

Yeah. Okay. If you add DeFi to that list, then I'd say sure. Then I'd say yeah, I agree with that story. Um, if it's like, okay, well, Bitcoin and stablecoins and nothing else of value, then I would I would totally dispute that because, of course, a lot of what's happening right—Where are these stablecoins getting used? The answer is they're getting used on-chain. You know, where is all these people paying each other with Tron? They're paying each other on the blockchain using non-custodial wallets. That's how all this stuff is happening. Um, you look at the growth of on-chain treasuries, right? Like we're now over $5 billion of treasuries, $15 billion of RWAs from a relatively low base at the beginning of 2024. Um, that all of that is happening on-chain. So now to be clear, yes, these two things are the biggest bright spots by far, and I expect they'll continue to grow as being the outside success stories. Um, and I think the the core of it, to my mind, is that crypto is about money and finance. And the the two biggest success stories are, yeah, gold and dollars. Yes, those are the two biggest financial assets in existence, period. Probably number three is treasuries. And so you see the growth of on-chain treasuries on-chain. Yes. Okay. Totally agreed. Um, is it true that there's nothing else of value that's been created? No. Absolutely not. There's much more that's getting created that is that is financially interesting. Is it at the scale of stablecoins or Bitcoin? No, but it doesn't it doesn't need to be. Um, there's probably not any more $3 trillion assets that we're going to create in crypto. Bitcoin is going to be a $3 trillion asset almost certainly. Um, I don't think we're going to create anything else that's three trillion. Um, but are we going to create things that are worth, you know, tens of billions of dollars? Absolutely.

One of the—take from a frequent take that I hear from Ben Cowan is the ETH/BTC ratio is actually an indicator of uh hard money uh and quantitative tightening from the Fed, and everyone who's been clamoring for ETH/BTC to reverse, which is the signal for an altcoin market uh an alt season uh, we actually need the Federal Reserve to stop doing QT and actually start doing QE or at least starting to be much looser on the purse strings with regards to monetary policy. Uh, and once we can get like rates to be cut uh maybe maybe QE if something starts to break in the repo markets that we were talking about earlier uh, then we'll actually see a reversal of liquidity kind of as you alluded to. Uh, and you'll actually see that show up in the ETH/BTC ratio. How does that take land with you?

Well, there's clearly something idiosyncratically weak about ETH/BTC, right? I mean, we—you've been talking about—it's also already been expressed as in like it's it has been weak. It can't be that much more weak for that much longer.

It absolutely can. Okay. It it can because, you know, it's a little bit like the tariffs, right? Like the tariffs came off. Tariff policy did not change yesterday, but yet markets are down massively. Why? The reason why markets are down is that Trump did not nail the landing of—

Yeah. Yeah. Yeah. We're not doing the tariff craziness anymore, right? With with with ETH—what what do people want to hear from Ethereum? They want to hear from Ethereum that we're not on autopilot. We are actually going to change our strategy. We're going to be more muscular in storytelling in DC, in supporting entrepreneurs, in supporting DeFi, and we're going to scale the L1. Right. That's what people want to hear very clearly. Everyone's telling you—it's not even a secret. This is not like me reading the minds of what I think might be somewhere out there in the charts. This is what everybody is saying.

Mhm. So the longer that Ethereum takes to clearly say we are doing that, the more ETH/BTC is going to be punished, right? I like that—that is my—that is my base case—is that the longer it takes for ETH—Ethereum—to clearly say that, signal it, and credibly show it, the more the asset's going to get punished.

You may have already heard about Infinex. Infinex has, in my opinion, the nicest cross-chain swap and bridge feature that you will find anywhere. It is called Switch—swap and bridge—and we're going to show you what it looks like. First, we're going to log into my Infinex account with a passkey. Now, there's no seed phrases in Infinex. This is a one-click setup with biometric passkeys. But in addition to that, my Infinex account is fully non-custodial. So bam, I just logged in. It was two clicks, and I'm already into my Infinex account. So let's go make a switch. I'm going to go switch my USDC that is on Base, and I'm going to buy Barachchain, which is a completely different chain. Uh, so we're going to switch this. I'm going to press that button, and then Infinex is going to execute this order—this cross-chain order—for me. And now it is done. But actually, I'm not really feeling bearish anymore. So I'm going to go from Barra uh to Penguins. I'm going to buy a Penguin on Solana. So I'm going from the Barra chain to Solana. See, no transaction signing, no gas to worry about. You just switch across whatever chain that you want with Infinex. That was so easy. Go check out Infinex and try your first switch today.

Uniswap is your gateway to a more efficient DeFi experience. With Uniswap, swapping and bridging across 13 chains is simple, fast, and cost-effective, helping you move value wherever, whenever. Thanks to deep liquidity on the Uniswap protocol, you'll enjoy minimal price impact on every trade. And now Uniswap V4 takes it even further. Swappers benefit from gas savings on multihop swaps and ETH trading pairs, while liquidity providers can create new pools at 99% lower costs. The best part: you don't have to do anything extra. Each trade is automatically routed through Uniswap X, V2, V3, and V4. So you get the most efficient swap without even thinking about it. Whether you're swapping, sending, on-ramping, off-ramping, or bridging, Uniswap's web app and wallet gives you the tools to unlock DeFi's full potential on Ethereum, Base, Arbitrum, Uni chain, and more. Use Uniswap's web app and wallet for a more efficient way to use DeFi.

All right, let's turn to uh one of your portfolio companies. One of the projects I think people have the most excitement about, which is the Mega testnet. Uh, public testnet went out uh this week. Uh, so that's—I think everyone's pretty excited about that. There's just a—Shu Yao in Mega ETH with a Mega Mafia—has done an incredible job actually building out some pretty dope applications that people are just waiting to try. Uh, I am not an investor in Mega ETH, so I'm not pumping my bags here. You are—you are an investor in Mega ETH. So congratulations uh uh and and so talk to me about just like the where we are in the arc uh of Mega ETH with this public testnet and just what you're excited about and maybe if there's any cool apps that you're excited to get your hands on, or really anything that that comes to mind about Mega ETH.

Yeah, so Mega ETH—so for those of you who are not familiar, Mega ETH is basically a super high-performance layer 2. Um, the idea is simply just more—more—bigger, faster, stronger—everything—and just jumping as hard as you can on this trend of—we are going to make an extremely high-performance L2 at the expense of—yeah, this thing is not going to be super decentralized, but that's okay because we just want to be pure performance maxis. So that's the—that's the Mega vision. Um, Mega—their their claim to fame is that they have 10-millisecond latency, and it's basically streaming, right? We think about—oh, what's the streaming blockchain? Yeah. A streaming blockchain. Right. Exactly. So the idea is that instead of sitting around and waiting for—okay, 1 second later or 500 milliseconds later—we're going to get a new update of what the state is. As soon as a transaction comes in, there's a new state, which is basically like, you know, that's like a video game, right? That's like a—that's like a—your computer is like that. Um, so they want to create a blockchain that has this property, and that really changes a lot of the way that we think about what blockchains are, the way we think about latency and MEV and, you know, the way that, you know, batch clearing and all this kind of stuff that uh normally ends up becoming a problem in blockchains—you just very very different properties for something like—for like Mega in that regard. So to be clear, this is uh, you know, testnet; it's new; it's—there's almost certainly going to be bugs and things that got to be worked out, but that's why it's there. Um, a lot of applications that people are getting excited about—like gte uh guest.b best. Um, we have a project that we're investing into on Mega ETH as well that that uh is is still under wraps. Um, oh, sorry—Euphoria—Euphoria is the one. Euphoria. That's right. Um, so there's there's a lot of people trying these new kind of consumer applications that uh require very high throughput, low latency, instantaneous feedback type trading applications, which is kind of a perfect use case for something like Mega ETH. Um, so it's—the other thing is that they have really really fast oracles. So I think uh uh what is it—Redstone—that uh just launched on Mega ETH, and Redstone they have um like basically 10-millisecond latency for their oracle because it comes out every single—I think they're called microblocks—on Mega ETH. And so you basically have instantaneous, real-time pricing on on anything that you can get an oracle for, which again—very different than what you see on even on something like Solana, where you have—okay, you know, you have this off-chain uh you have this off-chain oracle that's streaming, but you ultimately have to post the price on-chain with 500-millisecond latency.

I've been uh enjoying Bred's uh tweets about how all of the previously available infrastructure just doesn't make sense on Mega uh because like imagine Etherscan on a blockchain that is streaming. Uh, and it really just changes what an infrastructure provider needs to look like around Mega. Uh, Brett—he was actually going to be on the episode today uh for the weekly rollup, but we bumped it to next week just because uh Brett was like, "Yo, I don't know how to talk about tariffs." And like—much respect. Uh, so we had to tap his—I can just rant—unly appreciate your rants about—I'm sure I'm gonna get a lot of hate for it. So I'm excited for that.

Well, we're we're going to hear from Brett next week, and we're going to peek a little bit more into the Mega ETH testnet because, like you said, there are a bunch of cool apps uh on the scene. Uh, and that's pretty exciting. Mega ETH—it's definitely one of the the hottest projects I think in Ethereum land, and it's kind of going right at the heart of like the crux of Ethereum's issues, which is like—it's actually just so disconnected from Ethereum itself—ex—because it doesn't even consume Ethereum DA. It just settles on Ethereum. Uh, and that's going straight to the heart of like some of the big conversations in Ethereum land. But nonetheless, Mega ETH is exactly what the Rollupcentric Roadmap was trying to produce in the first place. Uh, and so I'm pretty excited to see what happens. So congrats to the Mega ETH team to get the testnet out—just a testnet—um, TBD on when mainnet comes.

Hib, uh, I really appreciate you tapping in. Uh, this is going to be the last time that I bring you in for the rollup uh because, like I said, Bred comes next week, and then after that, I will let the guests uh the listeners uh guess as to who comes back after Bred uh next week uh uh does the weekly rollup. So thank you. You've done it three times. I really appreciate—appreciate all your takes, my man. A wealth of knowledge. Like I said, the amount of knowledge per second that comes out of this man's brain I think is uh the highest there is in crypto. So you make a fantastic guest, and I really really appreciate you coming on to Bankless and helping me go through the news.

Thanks for having me, Bankless. Ancient—you guys know the deal. Crypto is risky. You can lose what you—

Put in, but nonetheless, this is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.