Transcription
No government ever, when they have had the printing press, refuses themselves the ability to print money and hand out goodies to the people to win elections. That just doesn't happen. So, I just think it's a structurally long trade. We're all on this sort of fiat debasement boat together, and Bitcoin has been this shining light, which has been the best performing asset in human history since it launched in 2009. I wouldn't say that just because you're coming in at 2025 and Bitcoin's at $12,000 or whatever it is, that you've missed the boat. We still have a long way to go.
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I'm incredibly excited today, uh, because we have a very special guest, a guy by the name of Arthur Hayes. And so Arthur has a long, storied history. Um, he's one of the serious OGs. Um, came from a traditional finance background. We actually were just talking, we're both at Citigroup together. Um, and he went on to to to really start one of the most innovative exchanges in the world. Um, and really made famous this thing we call perpetual swaps, which I can't wait for him to talk about. But long story short, he's one of the most thoughtful, um, macro thinkers, investors in the space. You know, many of us follow him religiously, and uh, it's just an absolute pleasure. Welcome, Arthur, to to the stage.
Thanks for having me.
>> No problem. We talked a little bit about your background. Would love for you to unpack it a little bit, uh, for the audience. Um, and maybe we can start right there.
>> Yeah, sure. So, I grew up in the States, was born in Buffalo, New York. Went to university at University of Pennsylvania in Philadelphia. Went undergrad at Wharton Business School and took Chinese in school and decided that I wanted to move to China. Moved out to Hong Kong when I graduated and started working at Deutsche Bank in Hong Kong. Then I went on to Citi. I lasted five years in in TradFi in the ETF and Delta 1 sort of like futures and arbitrage trading space. And then I caught the crypto bug after I got fired from Citi in 2013. And sort of like, you know, the rest is history. And I've been doing this crypto thing for, you know, 12 years now.
>> Yeah. Yeah, I think we had the same boss at one point in time, and I don't think it's working out for him either. That's another story for another time. Um, but I think right now we're seeing an absolute mainstreaming of the space. Like, a lot of people who are probably listening right now are like, "Hey, I'm starting to get into it." But could you really, like, explain your, the your big thesis? Like, what caused you to just say, "Screw it. I'm going all in on this. I'm going to make it my life." What was that? What was that moment? What was that light bulb?
>> So, I've always been a gold guy. I started buying my, you know, small amount of gold back in like 2011 when it spiked to like $1,600 or whatever it was. And I've always been quite critical of all of the, you know, the money printing that's going on. And, you know, as somebody who is trained in a traditional western business capitalistic framework, when you enter the space in 2008 and every single bank is getting a government bailout, and you're taught that that's kind of a bad thing, but actually it was a great thing for asset holders. Uh, and, you know, we kept our jobs, which we all probably should have been fired, um, at all these institutions. And so, you know, I entered the space sort of, uh, jaded already, and this is complete [ __ ]. And so when I read the white paper about Bitcoin, it sort of aligned with me philosophically back in 2013. I started trading it. I saw how immature the markets were. I saw that my value add was trading derivatives and sort of started BitMEX trying to build up that space. And then as I got more into more of the, you know, buying and holding because, you know, obviously have a business that does trading and whatnot. My main thesis, and this is basically all that I write about, is money printing, right? And the different ways in which the authorities around the world try to hide it from people and try to gaslight you about why it's not happening, and you know, trying to make it seem like it's okay that, you know, a house costs 75% of your disposable income and all these sorts of things all around the world. And so I think it's a a global phenomenon. Unless you're extremely wealthy, you feel the effects of this inflation that every single government, regardless of whether they're, you know, completely communist on one side or a capitalist on the other, everybody does the same thing. We're all on this sort of fiat debasement boat together. And Bitcoin has been this shining light, which has been the best performing asset in human history since it launched in 2009. And so I think that this has been a great ride, and obviously it's still early, you know, for people to get involved in this industry. I I wouldn't say that just because you're coming in at 2025 and Bitcoin's at $120,000 or whatever it is, that you've missed the boat. We still have a long way to go.
>> I I couldn't agree more. I I think we're just getting started. The story, uh, just continues, right? I'm actually in Jackson Hole, Wyoming right now. We're waiting on the Fed. Uh, do you have any thoughts, you know, around the the current, I think your your long-term thesis is such a no-brainer, and I think many people agree with you. What about in the near term? Uh, how are you thinking about the macro situation here and now?
>> It's going to be very interesting to see what Powell comes out with because everybody's saying the Fed should cut. You have Trump chirping on him. You have these shadow wannabe Fed governors, some of them are on the board, some of them are proposed nominees. And supposedly Powell is this, um, Volcker 2.0 type figure who's supposed to inject some credibility back into the Fed of this, you know, non-partisan, which is [ __ ], uh, non-money printing organization. And so he's got this situation, and on one side, there's an argument saying, okay, there's a labor market, there's all these sort of statistics you can roll out saying this is why the Fed is being too restrictive. But on the other hand, and this is what I, not that I have an probability waiting between the two, you have human nature, right? And you basically have this person who's been vilified for good and bad reasons in the press by his ultimate boss, the the president of supposedly an independent organization. Does he get up there on Friday and say, "Oh, yeah, sure. I cave. We're going to cut 50 basis points on September, was it 17th or 18th?" Like, as a human being, as a man, how does that feel to just be completely bitched out and then you have to capitulate on the biggest stage in the world? So I think there's a high probability that while, you know, probably ultimately the Fed will cut at some point, whether it's Powell or whoever else replaces him or whatever, maybe Trump fires him or whatever it happens over the next, um, year, but I think there's a high likelihood that Powell sticks it out and just says, "[ __ ] you" to Trump and doesn't cut, just because he's a human, and human beings don't like to be put in these sort of situations. And I've been having this argument with a lot of, um, very senior and prominent macro, um, writers who, you know, point all these reasons why Powell has to cut and, you know, why his job is so, you know, uncomfortable being sort of the the foil at which Trump launches all these tirades against. But at the same time, what a better way to prove that you are an independent monetary, um, actor than to say, "No, I'm sticking with my guns. I think that 4.25, 25 to 4.5% Fed Funds is neutral," and "[ __ ] you, Trump," and because I'm Jerome Powell, I'm an independent head of the Fed. So I I think there's that continuum. I don't know where it's going to come out ultimately. Doesn't matter, but I guess if you're a trader, then obviously this is a very important speech he'll give on Friday.
>> Yeah. So it's the pride thing that that's, uh, nipping at him. Um, that, yeah, we try to say that we're not prideful. I think many, that's just generally human nature. So does that mean, does that mean you're risk off right now?
No, I'm still pretty much fully invested, just because again, I don't have a monthly P&L target to make or yearly P&L target to make. I don't want to overtrade. Obviously, you know, everyone falls victim to that of sometime trying to like, you know, take 5 or 10% off the markets. I'm going to buy back in D, but you guys end up paying more fees to your to your brokers, and I'm just going to sit sit back and, you know, Powell comes out and says, "I'm not raising or doesn't talk about cuts at all," and market tanks 15, 20%. I've got some extra cash, and I'll, you know, be going shopping on some things that I think are are cheap, just because I think that Trump and Besson are just setting up such a perfect, uh, situation for how money is going to be printed post 2026 in May. And I guess listen to a CNBC interview with, uh, Zervos, um, one of the the Fed chair hopefuls, and like, if that guy gets in, you know, Bitcoin will be at like $15 million because he's just going to do yield curve control, you know, printing money, immediate 300 basis point cuts, all sorts of things. So I I think, you know, Trump and Besson have laid out exactly what they want to do. Run it hot, inflationary, all these sorts of things. Powell is the only thing standing in their way. And, you know, come hell or high water, Trump will get what he wants. The question is, you know, how difficult is it, whether he has to fire Powell or, you know, there's just ways to do it.
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>> So then we have the Genius Act, right? That that gets passed, and like Besson was out there today saying how he's going to, you know, this is going to be the greatest thing ever. We're going to export the dollar even more. We're going to have everyone around the world buying treasuries. Uh, it it sounds like your thesis, like how do you think about that? I mean, what's going to be the impact of the Genius Bill, and how long is it going to take? Are we just going to see an absolute proliferation in stablecoins? And then how's that going to impact macro? Because you, my personal belief is that stablecoins are an incredible store of value if you're in the developing world. Um, they don't want Bitcoin, they want dollars, but they want yielding dollars. So they're going to end up going into DeFi and they're going to try to regenerate that yield, and then all of a sudden they're going to be like, I'll just have an agent do it for me. But my thesis is that dollar, we're going to see the dollarization of the world. Um, am I am I on the right track? How do you think about the impact, the near-term and the longer-term impact on the Genius Bill? And of course, like Besson saying, I'm going to just issue these things to keep short-term Treasury yields down.
>> Yeah. Yeah. So, I mean, I'm actually writing an essay, not specifically on the Genius Act, but on sort of a stablecoin thesis right now, and I'll be presenting this, uh, in Japan, and I'll I'll publish it afterwards, uh, next Monday. And so, basically, I lead with sort of a a a meme from Silence of the Lambs. If you remember, there's a serial killer, Buffalo Bill, and he's, uh, standing over the pit where I don't, there's a woman or a man, whoever who's down there. And he says, "It puts the lotion on its skin, or it gets the hose again." And so I changed it. I changed the meme. I'm going to put Besson's face up there, and it's going to say, "It gets, you know, it puts the dollars on its skin, or it gets the sanctions again." And so, um, I think essentially there's two pools, and you mentioned one of them, sort of these foreign retail deposits. These two pools of money, which I think Besson, via monetary policy and, um, aggressive use of terrorizing sanctions, can make people, uh, onboard into stablecoins. The first is the Eurodollar market, right? So, you know, 1950s and '60s, the Eurodollar market was created because of all the regulations and prohibitions around interest payments and trade flows that the US, uh, monetary authorities were putting on commercial banks. And so you have these foreign branches of US banks and foreign banks saying, "Hey, I'll take your dollars outside of US control." And so we have this $10 to $13 trillion market which nobody has any control over. Oftentimes influences Fed and Treasury policy in terms of when dollars become expensive and cheap in the Eurodollar market. And you can probably trace almost every financial crisis outside of the United States to Eurodollar market flows. And, you know, these these flows are not doing what Besson wants them to do. He can't control them. He doesn't know where they are, and he can't make them buy what he wants, which is Treasury bills. So my idea, and, you know, maybe he'll do this or maybe he won't, I don't know, is right now, why do you feel comfortable in a Eurodollar? Because every time your banking institution has gotten into trouble, the Fed, the Treasury bails you out, even if technically they shouldn't be doing it, so because you're not a member, um, of the discount window, don't follow US regulations. But, you know, we can point to many, many ch, even 2008, the Fed secretly bailed out all these foreign branches of banks for all their bad, uh, trading policies to make sure the Eurodollar depositor was sweet. So the first thing Besson should do is say, "Hey, guess what? If you don't have your money in a US branch of a bank or a US bank inside of America, you do not have a guarantee any longer. We will not come and save you anymore." So all of a sudden these dollars like, "Oh, okay. Well, there isn't this blanket government guarantee from the Fed and the Treasury for these trillions of dollars that I have deposited on these banks." But I could put my money into a, uh, a stablecoin. And the stablecoin means that the dollars are either a deposit at a US branch of a bank in America, or they're holding Treasury bills. So, if you don't feel safe in your Deutsche Bank account, uh, in Switzerland or wherever, just talk to your authorized participant and move these deposits over to a stablecoin. And now you have access to your dollars. You have the blanket guarantee of the US government. And guess what? You might earn a bit of a yield on on your money because you probably don't get much of a yield in a Eurodollar deposit outside of America because the banks don't actually need your money, and they have to pay capital charges because they Basel, right? All the all the bad things about why banks don't like large, uh, deposits. And so now you have, you know, a $10 to $13 trillion TAM of money that could flow into stablecoins from abroad. And once you're in a stablecoin, Besson has full control. He knows where you are, knows which bank, he, you know, he knows where you're clearing your treasuries. And the best part is, uh, he can offer you a yield that's lower than Fed Funds. So if Fed Funds is four and a half, um, he can say, "Oh, guess what? I'll give you two on a six-month, uh, T-bill." And you say, "Well, I can't really do anything about that because I'm not going to go into a US bank, um, bank deposit. The banks don't even pay you anywhere close to Fed Funds. So, [ __ ], I'll just buy the 2% that Besson offers." So Besson can, in one fell swoop, completely neuter the Fed, and no longer does the Fed have any control over Fed Funds because Besson can offer the Treasury bill at whatever price he wants, unconstrained by what, you know, Powell or whoever his successor does. That's the first pillar. And the second is what you mentioned, right? You have a lot of retail around the world, um, in developed and developing countries. I live in Asia, and, you know, basically the entire investment game out here in Asia is how do we get local currency into dollars so that they can buy higher yielding assets and equities? That's literally all of finance in Asia. And then every so often the regulators come after people, and they basically put the young guy in jail, and the boss stays stays sweet, as they do. And that is the game. So Besson could say, "Okay, guess what? We're going to deputize Elon Musk and Mark Zuckerberg and give them protection to go and offer a stablecoin bank account through their WhatsApp, your Instagram, your X account." And we don't care if a foreign regulator, whether you're banking or internet regulator says, "We don't like this. We don't like that you're basically giving a dollar bank account to our entire, you know, underclass or anyone who's not a wealthy, uh, individual." And, you know, they don't care because they're sitting in Hawaii and Austin, Texas, and Trump is protecting them. And if you go and you try to remove access to Facebook or X, guess what? Sanctions, just like what he what Trump, uh, threatened with Europe when they had their their digital information act or whatever it is. And then furthermore, Besson finally has a sanctions weapon, right? So if you're in Asia or a lot of developing world, all the elites essentially steal from their people and put their money in US banks, uh, in some way, shape, or form. And so guess what, president or prime minister or parliamentarian, if you don't allow Western social media companies to bank all of your people with dollars, I'm going to sanction you, and you're going to lose access to the billions of dollars that you stole from your people. And so guess what's going to happen? Nothing. And so I think that is how you're going to get, you know, sort of like $20, $25 trillion TAM of money that could flow into dollar stablecoins. And I think they're hinting at this already in terms of, uh, you know, you have the major social media companies saying, "Oh, we're we're investigating stablecoins," and this that and the other thing. And, you know, Besson's very pro on them. And then basically, what does a stablecoin do? They're going to buy Treasury bills, and they'll buy at whatever yield Besson offers. He can completely destroy the Fed. He can put, you know, short-term rates wherever he wants, and now he's got a sink of tens of trillions of dollars that he can essentially fund the US government with until they do some sort of yield curve control to bring down the long end. So, I I think that's that's what I would do if I was investing. Now, I think they're on the path. Whether or not they get there, who knows?
>> Totally, totally hear you on that one. I mean, in that scenario you're describing, it's got to be very bullish for crypto. Would you agree?
>> Yeah, of course. Because when when I have an on-chain dollar deposit, and I'm earning 2%, well, you know, okay, Athena offers me 5 to 10%. And they're just doing sort of a cash and carry basis yield, and probably the safest endogenous yield within crypto. Or, hey, I want to spend my money at the the local 7-Eleven. Well, there's EtherFi, and I have a cash card. I just deposit my my stablecoin, and they give me, uh, a virtual card on my mobile phone, or they send me a physical card. I just tap and pay, and now I can spend my stablecoins in an offline manner as if I had a credit card. And then, you know, finally, I can trade it, right? Now I have this collateral that can trade any type of crypto asset on any decentralized exchange, um, within a few clicks, and now I'm in the system. I understand how this works because I have this massive savings deposit that is earning me some yield, and I'm going to trade it. I'm going to collateralize it. I'm going to lend it. I'm going to borrow against it. So I think it's massively positive for DeFi and TVL, you know, should go into the tens of trillions pretty quickly if, you know, the US monetary authorities follow through on this national policy of pro-stablecoin and let's shove dollars to all these places in the world which otherwise we couldn't access before, and this and the analog TradFi system.
>> Yeah. So, so bullish Bitcoin earlier. Uh, you mentioned Athena, and I'll be honest, the one thing I've been in crypto for full-time for about four years, got into it earlier, and the one thing that I continue to struggle with personally is unlearning, right? And so, like when the Athena guys came to me the first time, I'm like, I was like, this is wrong. You're not a stablecoin. And I missed it completely because what they did was they were tokenizing a basis trade, which has been a ubiquitous strategy for years and years and years. I couldn't get over my own self. Um, but in what they did was brilliant because they took a narrative and they packaged it, and they were able to issue something that was available to the masses. But, you know, Athena is going to be good. Bitcoin is going to be good. We haven't got to some of the other projects. You just said DeFi is going to be in a good shape. Are there particular DeFi protocols or tokens that you like, uh, against this backdrop?
>> Yes. So, um, disclaimer, I own a lot of this [ __ ], right? I'm a professional. So please, uh, please be cognizant of that fact. Uh, so in terms of the trading space, I think Hyperliquid is probably my number one bet there for decentralized exchange. Decentralized exchanges have been around for a very long time. There's been various projects, um, that have done been successful over the years, but Hyperliquid has been the best so far with a small team. Uh, Jeff has been able to, you know, I think they hit like $30 billion of trading volume over a day, a few days ago.
>> And the best part about Hyperliquid is they've rolled out this permissionless ability for developers to launch their own central limit order book perpetual swap markets. So now, as long as you want to operate a front end, it's almost like, um, the per, the online gambling thing, right? There's one company that basically creates all the games. Every other thing you see on the internet is basically a marketing company. You know, they change the colors, you know, they've got top of the funnel analysis, blah, blah, blah. They all sell the same games that's that are owned by the same company. I think that's going to be like Hyperliquid. Everyone's going to have sort of a front end to appeal to their particular market that they know how to market to, and they might offer a certain sort of incentives, but at the back end is going to be this high-performant decentralized central limit order book that's literally just tech. That's the holy grail. Many people have been working on it. I think that the, uh, the Hyperliquid team is probably the closest to actualizing that. And then they're also getting into the the new issue market. So, you know, the big thing in crypto where exchanges make a lot of money is offering new tokens. And it's a pretty [ __ ] up process because, you know, me as an advisor to token projects, I have all these projects, and they're handing off 5, 10, 15% of their token supply to the large centralized exchanges to get access to their clients. And it's a bad deal for the rest of the token holders because there's less tokens left to incentivize people to use the applications. And so I've been on my, you know, high horse trying to tell projects, why, why, why are you paying this exchange all this money? But now there's Hyperliquid, and they showed how potent their offering was with the Pump.fun launch. They launched a pre-market perpetual swap which traded, which was the largest trading per, pretty quickly. Um, they allowed people to receive their, I believe their Pump, uh, allocations through Hyperliquid, and then all, uh, subsequently launched the spot market, which was, I believe, the most liquid spot market or is the most liquid spot market for, um, Pump.fun. So I think, and it didn't cost projects 10% of their circulating supply to get access to this. So we're going to see a democratization of the new issue market. We're going to move back towards of a 2017 more free-flowing, uh, ICO situation powered by Hyperliquid, and I'm sure they're going to have some copycats, uh, doing this as well. So, it just reduces the fees and the friction in the ecosystem. So, that's the exchange to beat. And the best part about Hyperliquid is they take 95% of their their, uh, P&L and they buy back their token. And so you basically have this, um, billions of dollars of money that's going to flow back into the Hyperliquid token, and it's going to help make the the traders who are trading, uh, wealthy on this platform. So I think that's a, that's a good one. Ether, as I mentioned, sort of this neo-bank, a cash card, how do you spend your crypto offline? If you've got all these stablecoins now, what do I do with them? I think they're they're going to help with that.
>> Uh, so those are the three main things, and but obviously, like default, the TVL is going to go massive. There's going to be all sorts of different, uh, projects that are going to do well, but I think that people need to make sure that if the project's doing well, make sure that they're that P&L, that profit is making its way back into the token holder. So, I think there's a lot of projects out there who are great projects, have good product market fit, have users spending real money, but then they're stingy with the token. They don't take the money that they're making and pass it back to us, the token holders. And I think that the market's going to start really punishing these projects. It's like, okay, you do well, but your token is not going anywhere until you start buying it back or paying out some sort of continuous yield if I stake your token, which I think is great because that's the whole point. Us, the users need to get wealthy as we make these product protocols, um, uh, very well used. So, I I think that's my sort of mental map for this sort of DeFi explosion over the next two to three years. If you have any questions on how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free.
>> Yeah, those those are great projects. I I totally agree. Jeff's a great guy. Um, full disclosure, we're we're in many of these projects as well. In fact, in EtherFi, we we, uh, we led their their Series A. Mike and the team are just are just lights out. Um, you're a derivatives guy. I have a derivatives background. Um, derivatives are are the most lucrative, um, instrument when you have an exchange. I mean, there's a reason why ICE bought NYSE, right? Um, as we pivot towards, uh, Solana, which was supposed to be and is is attempting to be the decentralized NASDAQ, where does that leave that ecosystem in your mind?
>> Well, it's the same as any other smart contract blockchain. I'm not going to say Layer 1, 2, 3. It doesn't [ __ ] matter what layer you are. Solana had product market fit with memecoins, and that was what drove the, you know, really the the narrative from $7 to was like $280 or whatever it got up to.
>> Now you have, you know, Tom Lee on, you know, western financial media beating the drum, Ether, and, you know, Jupiter.
>> And so I, again, they're all competing for the same thing. We all do the same thing. You could say one's faster than the other, one's more secure than the other. You know, pick, take, pick your pick. If you're very deep in these protocols, you could probably make an argument why yours is the best. For most of them, uh, it's just going to be dependent on where the clients. So, Solana needs to find a standout application that's going to have lots of users who are going to drive transaction flows.
>> Yeah.
>> If memecoins come back, maybe that'll be it. I don't know what that sort of that catalyst is going to be. But I think that's a challenge for Solana or any other, uh, blockchain. Ethereum is a bit different because if we think about it, basically every single major category-defining project in DeFi starts on Ethereum. They don't start on any other pro, um, network. Ethereum has the most developers, has the most commits. Yes, Solana's number two, I believe. Um, but again, they have a mind share that it, everyone else is trying to compete against. And so I think that's just going to be challenging for all these other, um, blockchains, especially, you know, if ETH starts breaking through $5,000 and you get sort of this like massive, uh, ETH bull run, like what is it that they're going to offer to the mind share to get traders to buy their token?
>> Yeah, I mean, you have to tip your hat to ETH the way they've totally, um, restructured the EF. They've launched Etherealized. They're on offense. But I'm dying to ask you this one. You mentioned Tom Lee, Bitmine, this DAT craze. Um, you know, we we we we had an interview with one of my partners recently. We went through DATs, um, digital asset treasury companies. Um, what is your take on on DATs? You know, where are we, where are we going? You know, how does this this story play out?
>> So, I think at the end of the day, this is a, everyone's trading the forward on sort of the MicroStrategy play. So,
>> Yeah.
>> Obviously, Sailor has hit it perfectly out of the park. I think is he in the NASDAQ and S&P 500? Whichever index, I'm not sure which one he's in, but that's the goal, right? It's get the passive indexers to have the set it and forget it flows, right? I think the Capital Group is like one of MicroStrategy's largest holders. Who would have thought Capital, a long-only fund manager, owns like one of the most, you know, leveraged financially engineered equities in the world. But there it is. I think it has some some insane amount of, uh, flows. But why could they have to? They have an index. The index says this. I have to buy these stocks, whatever's in the index. I don't care about any other metrics in the business. And you can say that's a bad thing or a good thing, but that's just passive investing, and that is the ecosystem in which western financial markets are in. And so that is what these DAT companies, at least ones that are going to be successful, who will have an MNAV above one for a long period of time, that's what you're trading. You're saying, "I'm a retail investor. These these things are not in the index yet." But, uh, if this company is able to have a certain amount of average daily trading volume, if the market cap is above a certain level, if their, you know, industry on, uh, Bloomberg is X, then this cohort of fund managers has no choice but to buy this stock, and make it even hate Bitcoin and think it's going to zero, or whatever the the shitcoin is that it's in in the treasury. It doesn't matter. Their job as a fiduciary is to match the index.
>> Yeah.
>> And that is the play, and that's all it is. That is why people are paying $2 for $1 of earnings or or assets. That's it. And so I don't know how successful any of these DATs will be. Obviously, I'm an advisor of EPXI, and, you know, this will be my advice to, uh, that particular company is, understand who it is is your end buyer. And it's not, you know, Robinhood retail muppet. It's, you know, dude in a Brooks Brothers suit in Connecticut at the golf course who doesn't know anything other than like, just buy the index. That's it. Because once you get into that flow, it doesn't matter what your company does.
As long as you're not committing fraud or doing something else, the stock price is just going to go. You're going to get inflows. And so I think that's the the challenge for all of these DAT companies is to get their trading volumes and their market caps high enough so they get included in indices. That's the game.
Yeah. I I think they have some structural advantages though over like ETFs, as an example, because, you know, some of these assets, you mentioned ETH, even Solana, or whatever, they have natural organic yield, right? Which you really can't take advantage of in pure form currently in the ETF. Maybe in the future, if you launched an ETF on an LST or something, you could do it. So, so it seems like their natural stasis is above an M, um, would would be would be superior to the spot asset. Um, you know, many things being considered, you know, cost of management, compliance, etc. Um, so going forward, do you think there's going to be, you know, there's this race to being in in the indices, as as you're suggesting? Is there going to be one or two per token? Like, how far out on the curve are we going to go? How should people think about as as they're doing their own research and thinking about investing these things? Where does it stop? Like, can you just develop that a little bit further?
I mean, it stops when you can't get into the index selection criteria, and I haven't really done a lot of deep dive on like,
>> Obviously, you have passive indices, you know, specific indices like Russell or whatever, then you have all these these like pseudo active managed thematic funds like, you know, Vanguard X, whatever, some technology thing or whatever, right? So like,
>> If I was a retail investor putting a lot of money in this for long term, and not just a momentum trading thing, I'd be okay, well, let me identify the, um, pools of money where I think that one of these could be included into. Okay, what are the rules? What are the dates? Um, understand like what companies come in, what companies go out. Like, it's, you know, I mean, I I didn't trade this, uh, well, I was at Citi or Deutsche, but it's like rebalance trades, right? Yeah.
>> What's going in the index? What's going out? What are the flows? Um, let me make a prediction on that. Okay, I'm willing to pay this premium for this particular stock. Obviously, you know, as we're humans, we want to trade the most liquid thing. So it's going to be, you know, a power law distribution in terms of who's going to be successful. So we might have one or two successful DATs per, um, uh, security, you know, per per crypto. And so then it's obviously comes down to a, you know, marketing game, who's shouting the loudest, who's on TV the most. And that's why obviously everyone is showering money on Bitmine because, you know, Tom Lee is the main character right now in in the ETH space. And and that's what has to happen because, you know, if I'm going to trade an ETH DAT, there's multiples to choose from. Which one do I know? Oh, I know Bitbank, or that's Auto TV. Okay, I'll buy that one. Right? Uh, that's the the simplistic sort of thinking that an investor is going to happen. But again, we're all literally trading this forward of, okay, when the index inclusion comes up in 6, 12 months or whatever it is, okay, does Bitmine get included in Russell 2000 or, you know, technology fund, whatever X? That's that's the goal.
Yeah, one of the biggest gaps I think in market structure, uh, to date has been futures and derivatives. Like it's a, in the US, because of lack of certainty, um, there are very few futures that trade. It's essentially Bitcoin and ETH. But my sense is that the new administration, um, is is going to allow, uh, the futures market to proliferate. We have some problems right now with the CFTC. There's nobody home right now. Um, you know, because that unlocks the basis trade. One of the things that when I talk to to folks out there, they're like, "Hey, TradFi can't go long a lot of this stuff because they can't hedge, and there's no basis trade." Um, and and you need futures or you need swaps to come on board so that they can take advantage of the basis and really scale it as these hedge funds leg in before you probably get to that state that you're suggesting. What are your thoughts? I mean, you're, you know, you built, you know, one of the first and most impressive derivatives exchanges. How do you think the derivatives markets are going to to develop here in the States in the coming months and years, even?
>> I mean, I'm not sort of in the weeds on sort of what the, how is Coinbase doing with their launch of their pers? I know it's not technically a per, it's some sort of like, uh, thing.
>> Yeah.
>> Um, and I guess to some extent, it doesn't really matter, but like, I think the problem is going to be, what's why do people trade these things, right? Retail investors trade these things, and then the, you know, the jumps, the Virtuous Citadels, they get involved because they want to basically take the money from bad traders. That's literally all it is, right? So, if all the bad traders are, "Hey, I got this new thing called DeFi, and now I'm used to it. I've been doing it for four or five years. I I don't necessarily need to always trade on Robinhood or Coinbase or whatever. I'm perfectly happy trading on, uh, Hyperliquid or some other, uh, platform around the world." Do I really want to trade on on these other platforms? I think that's really the question. How sticky is the retail flow in the US when even if you have, you know, feature parity across the ecosystem, are they going to be around, um, anymore if, uh, I don't know, I don't know the answer to that question because if you see a lot of US retail, which literally is the profit engine for all of these, um, hedge funds who are going to then provide liquidity to all these derivatives that help you know other people hedge, if they're not there, then the market dies over time. And I think it's going to be a lot harder story to sequester this capital within the United States when you have the entire internet that's open to doing other different things. And I don't think we're there yet or anywhere close. But that's the the major question I would have for the the micro structure of of the market is where the retail, are they going to stick around in these centralized platforms? If not, then I think the the assumption of, you know, all these like, you know, CME having 50,000 pers isn't really going to matter because, you know, Virtue doesn't want to trade against Citadel. Just isn't what the the game is about.
That's not how they do it. So, you think the per market's going to be the the driving derivatives market here in the States, not not listed?
>> I mean, I I don't know the the list, the volume of listed futures on CME versus pers on Coinbase. I I don't know the ratio.
>> Yeah. Interesting. And I mean, the margin, the right now, the margin rules are all are all kind of [ __ ] up as well, right? It's just too expensive to trade these things, and you have to re basically, um, redo the entire, uh, is it do market, whatever the the clearing market in the United States, because right now the clearing market cannot support a socialized loss, automatic auto deleveraging model, which all of us use outside of the United States, which is way more capital efficient for the retail trader than the analog model. So, if they're not willing to go all the way down to the bedrock of what it is, what is a derivatives market? How do you clear a derivative? Why is it that I pass a [ __ ] PDF around on Friday night and it opens on Monday morning, right? And I have this like jump risk in my in my risk metrics when I have an asset, you know, 100 asset. It just doesn't work, right? And so I think that unless the CFTC or Trump or whoever is willing to really go and completely change everything from clearing all the way up to, you know, the broker level, good luck. It's just going to be some Frankenstein product. It'll do well. I mean, people are going to make money. No, no doubt. But it's not going to impinge on, you know, the globally significant flows that will be happening outside of the US in a market that has built itself around a bare asset, um, that TWWs 24/7, that's highly volatile, and the the real customer wants the high leverage, but they're willing to give up this sort of guaranteed settlement sort of situation.
Cool, man. So, we touched on a lot of stuff today. Um, sounds like you think the money printer is going to keep printing. Super bullish. Um, despite some maybe macro noise, super bullish across the projects you've discussed. Um, what are you looking at in the future? You know, what what are you paying attention to? You have the you have the stablecoin piece dropping next week. What are you looking out for, uh, in the next few months, uh, that'll change your approach to to to how you trade?
Well, I mean, at the end of the day, it's it comes down to a question of sort of what is, how badly do Trump and Besson want to keep the Republicans in office in 2028? Yeah.
>> Um, I think if he had an election today, I think he'd be 50/50 in whether they'd stay in power. Um, it's, you know, it's a pretty evenly split country. I think Trump knows what he has to do.
>> He's got to print the money. He's got to hand out the goodies. And so the question is, how quickly is he going to hand out the goodies? What is the the method in which they're going to do it? It sounds like, you know, Besson and him are on board with doing it. Question is, how quickly is it going to happen? It's going to happen whether it's today or a year and a half from now. You know, the desire is there. And, you know, no government ever, when they have the printing press, refuses themselves the ability to print money and hand out goodies to the people to win elections. That just doesn't happen. So, I just think it's a a structurally long trade. I know people are worried about sort of the four-year cycle in crypto like, oh no, like, you know, because of things historically, but we're in a different situation. We have US versus China economically, hopefully not militarily, um, combating, um, you have two different systems, but this, but at the same underlying impetus, which is credit creation. China is very adept at creating credit to hand it to whoever does what Xi Jinping and the Communist Party wants. Trump is going to do the same thing. Who does what I say they're going to do? Okay, well, I'll hand you some credit. Whether it's through the banking system, whether it's through Fanny and Freddy, whether it's through yield control, whether it's through central bank swaps, like there's so many tools that they have at their disposal. And I think, you know, they're just getting started in the ways in which they're going to, um, hand out credit to those who do what they want them to do.
Awesome, man. Really, really appreciate you coming on. Uh, incredible interview, and I I really appreciate your time, man. Thank you.
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