What's up, everyone? This is Anthony papiano. Most of you know me as pomp you're listening to the podcast simply the best podcast out there. Let's kick this thing off build bar height is the founder of Opera a simple to use crypto currency investment platform after working for the CIA NASA and Goldman Sachs Bill decided to join Netscape working on Telecom and internet banking deals mostly in Europe after the AOL acquisition of Netscape Bill found.
Web-centric the technology for web-centric exists today in sap s online portal service in this conversation. We discuss macroeconomics the Federal Reserve monetary policy Bitcoin as a reserve asset in corporate treasuries decentralization and a number of new products and features that Abra has launched recently. I really enjoyed this conversation with Bill and I hope you do as well before we get into the episode though. I want to quickly talk about our sponsors.
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You can subscribe at pump letter.com again pomp letter.com. All right, let's get this episode with Bill. I hope you guys enjoy this one.
Anthony pump Leon. Oh is a partner at Morgan Creek digital all opinions expressed by pomp or his guests on this podcast for solely their opinions and do not reflect the opinions of more Creek digital or Morgan Creek Capital Management. You should not treat any opinion expressed by pomp as a specific inducement to make a particular investment or follow a particular strategy. But only as an expression of his opinion this podcast is for informational purposes only. All right guys, bang bang bill is back.
What is this round two round three that's this is 3300 man. I think that you may be the only one with three. All right. I don't know. Maybe there's somebody else. I can't remember but what's up man? How are you
by popular demand crazy times man. I don't know. You know, I know I know a lot of people have it a lot worse, but I really can't wait to get back out into the world and hug, some people I haven't seen in months. But you know, if you have to if you have to be sheltered up, I guess.
If it's working in the crazy crypto world is is a good way to go. But yeah, it's been a it's been I haven't seen my employees in person in 5 months now so or four and a half months whatever it is, but you know, we're all do what we have to do and you know, I call my mom every day and she's good. And I thank my lucky stars for that. You know, what else? Could I say?
Yeah, I think that's the right way to look at the world. Give us an
update or actually before we do that. Give us like the 60s.
Seconds. What is Opera
before if you have noticed do an episode sure. So Abra is a cryptocurrency wallet Bank trading platform allows you to hold and by trade Bitcoin Theory mm X RP about a hundred different cryptocurrencies allows you to use your bank accounts to ACH or wire funds to to buy crypto sell crypto. We we just announced last week a new feature to earn interest you can
Sir, nine percent interest on stable coins u.s. Dollars and four percent interest on bitcoin and etherium. We also launched launched an Institutional trading desk, which I'm sure we'll talk about hired a new CIO Chief investment officer who's managing a large investment book already for the company to generate yield for our consumers and we've got a lot of other stuff coming down the pike, but you know, basically our goal is to be a crypto Bank to make it really easy for any consumer.
Mirror to get involved in cryptocurrency invest trade hold now earn interest.
Yeah, and so as you kind of think about the macro environment, obviously, there's the public health care side. Maybe let's just talk start with what's going on in the economy. It seems like everything has changed. We've seen the government step in and create just a massive trillions of dollars in quantitative easing and response. They've basically stuffed money in every exotic.
Owner of the financial system and are looking for more and it doesn't look like they're over either and now we're getting
talk about
weight. We actually met optimized for higher levels of inflation than we previously have. So kind of what's your take just on like what's been happening from a macro? Economic standpoint? Yeah.
I wrote about this last week. I think that this is a pivotal moment for for Bitcoin as a new asset class for a couple of reasons, right? We've never had the government come out and say hours stated a
Is to create inflation above 3% and now you know, we're looking at potentially 4% I don't think they've actually said it yet. But I believe they're the rumor is they're going to they more or less said it's the discussion. They're going to set a name for 4% inflation. I think that they feel they have no choice except to basically reflect the economy in order to create growth whether we like that idea whether we think it's a good idea or bad. I don't think it really matters. That's what they're going to do. And so their stated aim,
Has never been and never will be to protect the value of your money or your wealth right by definition. They are willing to erode the value of your money in order to create movement in the system, which is what creates growth movement means moving money borrowing money paying back money loans, whatever but that liquidity is what ultimately creates growth and what they've said is that we're okay and history has proven this because a dollar today is worth 99 percent less than it was a hundred.
Years ago they've proven that they're willing to inflate the value of money to the point where your money is worthless in order to do that. It's just that we've never had a government the US government come out with the stated aim to create inflation so high price inflation, but that's also going to basically only be caused by currency inflation. Right? And so we don't understand a lot of people the difference between currency inflation and price inflation everybody focuses on price inflation.
Somebody used to collect baseball cards as a kid. I understand also currency inflation, right? I mean if you have the only Mickey Mantle rookie card in existence at all of a sudden you find out there's two of them. It stands to reason that the one that you had should be worth less than it was before but we print money without ends and don't think the same way about the fact that we keep adding more of this artificial paper into into circulation. And so my point is that this is never been a we've never had
Better time for Bitcoin to stake its claim not that it needs our help but for Bitcoin to stake its claim as the de facto hard digital assets that I think it's going to go in to become and I'm not sure it needed a nudge from our government but it's getting one
nonetheless. Yeah, it's almost as belief of if you didn't understand money sound money inflation all that kind of stuff. They're literally running a multitrillion-dollar market.
Getting campaign for learning about this stuff. And now what people are starting to realize is wait a second. What are my options? I got like people that I've talked with basically go through kind of a a journey. So they start with I know nothing. Oh, wait a second if the government going to print a bunch of money. All I know is that my government usually screws me some ways like how they screwing me, right? Okay, they're going to devalue this currency thing. I don't really understand what that means. Let me learn about it.
Okay. Now I understand it. What are all of
the options I have to protect myself and this is I mean literally stocks getting
Inflated to real estate precious metals to bitcoin to you know, whatever you want. And I think that what people are starting to understand is the provable scarcity, right? That's why I keep hammering on this point that like, we don't know how much gold exist in the world. We don't know what the total addressable market of gold or so the total Supply now that doesn't mean that all of a sudden gold is going to fall from the sky and the, you know the cap that we think or the circling supplies going to double overnight. It's just a fact you can't prove it and so it feels very kind of antiquated.
Waited only when compared to this new system, which is provably scarce, right? And so it's like it was the best we had now, we have a new system the new system in comparison looks way better but it's going to take time for people to kind of understand those differences. Right?
Absolutely. And by the way, the government never had a stated goal to protect the value of your money. I mean that is never been on the table, right? They've never said hey the role of the central bank or its role the treasury is to protect your wealth there.
Roll ultimately is to manage a house of cards, right? And I don't know and I don't mean that necessarily the derogatory way. It is what it is. Right? We've had this system for a hundred years. It's created more wealth than any other system in history. And in 2008. We saw what happens when you don't manage the House of Cards correctly. It starts to buckle under its own weight people get overly greedy. We do we need a certain amount of let's call it greed. But but whenever the system basically gets overly greedy it buckles under its own weight and the government can no longer.
Our managed the House of Cards correctly, but that's its writ from its perspective from a financial perspective is to manage the house of cards not to preserve Anthony's or bills wealth.
Yeah well and it also feels like you'll love this. I wrote a piece called The Wizard of are the Wizards of the Federal Reserve. It was based on The Wizard of Oz which is
you know, they forget it stalled the all-knowing all whatever powerful
person and then it just turns out to be like a regular guy and I think that's kind of what we're seeing with the Federal Reserve which is
Get there's really really smart intelligent people who mean well and they're doing the best they can it's just we're basically giving them an impossible task which is hey manage this highly complex intricate system called an economy which that is their job is to manage the economy not to manage the currency. And so when we asked them to do that, even if they were successful, which they usually do not have kind of true control. They kind of just directly can push it one way or the other even if they did their task is to
to manage the economy not to your point manage the currency and the way that they manage that economy is by manipulating the value of the currency that you sit with in your bank account
right to think about the end of your Matrix fan. But if you're if you watch the second Matrix movie when the architect says this is the umpteenth incarnation of the Matrix, right and we're getting exceedingly good at it. Well, I feel like you know because every government issued currency has so far has failed and is and it appears that that trend has
He has no reason to stop and will continue unabated and that we're basically gonna have to recreate our analog Matrix again with the government trying to print more money from scratch and we've seen it with other countries and Argentina, where were those poor people have watched their currency fail over and over again and it but but on the other hand up until now it's been the best system for managing an economy and what I don't know yet is how we go from Bitcoin preserving wealth to bitcoin.
Coin and crypto helping to manage an economy that would be something but at a minimum we know that it's phenomenal for preserving wealth and we'll have a bigger role in that in that you know in that world. But I also think that over time you're going to see crypto and I think we're gonna start with stable coins, but eventually moved to to even you know, provably scarce cryptocurrencies, like you said having a key role in in even managing the
economy so recently there was
One of the the inevitable first which is there's a publicly listed company called microstrategy a gentleman. Mr. Seiler decides that he's going to take it looks like about 20 percent of his balance sheet and he's going to move it from cash or US Dollars into Bitcoin, but it's not doing it as a what I think many would refer to as kind of a speculative uninformed gamble, right he basically
Lee clearly articulates concerns with the macro economy with inflation with the idea that that cash is likely to drastically be devalued in the coming months and years and so he is using this as a hedge and they literally at one point says I'm going to use Bitcoin as a reserve asset and so it's kind of a currency play more than it is like a speculative. I think you know because going to drastically increase in value in the future or anything like that. What's your general take on kind of seeing this?
Is yeah, I mean, you know plant be kind of has become kind of the Nostradamus of crypto lately or the person we want to be the Nostradamus of crypto. I'll say because we all want his his model to come true actually predicted that at some point Bitcoin will become a an asset class Beyond just digital gold where it is actually used for these purposes and it's fascinating to see that granted a small cap company, but I would I would suspect it would start with small cap company and not
With with apple treasury would Embrace cryptocurrency as an inflation hedge, whether its currency inflation and price inflation or both and clearly now now first of all, this is let's let's be clear the small cap company. He mentioned this in past. I would say almost in passing in a quarterly report, maybe two or three weeks ago realized he was getting a shit ton of press by doing this and is now taking advantage of that press. I'm not saying that that's a good thing or bad thing you just is that's what is definitely doing.
But be that as it may they're still doing it and I think that sends an incredible message because if you've got the cash it's way easier to just sit on the cash make two percent one and a half percent. Whatever it is. If you've got a good Treasury and call it a day, right? Nobody's going to get fired for doing that. No one right you now you can get fired for basically putting money in in Bitcoin on one of those 40 days.
Are you put it in and it happens to go down? You know now if you've got a long-term perspective and you don't care right now the last 11 years if history is a guide say, okay, you've got a more than reasonable chance that in dollar terms, which are investing is going to be worth more than what you put in. So anyway, we'll see where this goes, but it was almost inevitable. It's just fascinating to see how the first the first really interesting opportunity here it with the treasury embracing.
Coin happen to come about he's definitely milking it. I have no problem with that. But you know, I think what's going to be more interesting to see does anyone else
follows suit does a
company in like, you know, the the fortune 1000 Embrace a certain amount of crypto has it already happened and we don't know about it. They don't have to I don't think they have to disclose to investors how they manage treasury unless it's a meaningful percentage of their their book. So so I think what
and next is is even more important but this is fascinating and my Twitter crypto Twitter has exploded in the last few hours everybody talking about this and so like I said, what comes next that's what I want to see
ya part of to me that is so interesting is this isn't like a random company on this like obscure Exchange in some foreign country. This is an American company that's got a market Capital over a billion dollars. It's not like they took one.
Bright skin looks like 20% 250 million dollars bottom about 22,000 Bitcoin give or take and trade on the NASDAQ like it. I think that you know, when people first start thinking about this is kind of like government like the nefarious government's always do the the weird stuff first and then it becomes mainstream right not saying that there's companies that are necessary nefarious, but just the ones that are On The Fringe usually do some of this stuff first. This is a NASDAQ traded business as a billion dollar plus market cap and the move was with hundreds of millions of dollars.
Dollars, I think that that ends up being just as important as it actually happening, right? It's kind of like who does it and when does it happen and at the start of kind of these bull markets seeing something like this? You start looking around the room you say hey, you know what company what size or what type of company if they pursue this and they go ahead and do it is the like Paul Tudor Jones moment. We're now also in the career risk is removed because
oh Apple did it
or you know you maybe this
Be that big of a cupboard maybe it can be a ten billion dollar company or you know, whatever it is. There's some level where the Tipping Point happens. People say, I no longer have career risk to do this because so-and-so did it and I still know where that that kind of barometer is
here, but we've had these islets in the mid 90s. We were having discussions about the internet where we would have conversations. Well, nobody gets fired for you know, integrating with some conglomerate CDI system for Supply Chain management, right? And most of your audience doesn't even know what the hell I just said so so my point is
Is that there was a transition to the internet where
it wasn't necessarily a safe
bet because the internet was porn and gambling from 93 to 96 in most people's minds and then all of a sudden it exploded and it was mainstream and why the hell don't you have an internet strategy and I think the time is coming where Finance departments are going to need to have a crypto big coin. Maybe defy strategy. I'm a little skeptical, but we'll see what happens, you know, and so some some
Nation on that with its own terminology that's going to unfold over the next 10 years is going to change corporate finance right people, you know treasures and others within the company are going to are going to look at you know, collateralized lending in crypto for for corporate growth and it's a topic that didn't exist in traditional Finance five years ago, right? So so the whole lexicon the strategies that enables it's all going to change and this is this is just a very, you know, obviously buying
And holding a small and relatively even if it's 20% of your cash it in the grand scheme of things in the United States. It's a relatively small amount of money, but it still sends a message right the same way that the first company moved their supply chain onto the internet in 1997 sent a
message. Yeah, it also feels like there's multiple Trends or patterns all converging for this like perfect storm. Right? So last year, I wrote a piece saying rocket fuel for Bitcoin - I think maybe at the Bitcoin twenty20 competitions
or 2019 conference you and I also had this conversation where it was like look you're going to get the rates drawn down you're gonna get massive money Printing and that's all going to coincide, you know relatively at the same time as the Bitcoin habit and this like quantitative tightening mechanism is wildly misunderstood it and frankly most people don't even realize it's happening and in many cases, especially if you're not in the Bitcoin world, so you get those three
So you get rates down money up and Bitcoin having should be Rocket Fuel alone. But then you start to add in Paul Tudor Jones. You should add in, you know, large public companies like all of these things are happening within we're still what 90 days from the the having like, you know, you're you're basically plus or minus three months on either side of the having all of this is occurring. You just got to look towards, you know, the next year and say like how does it not happen right right and it and
That's
what I spend a lot of time thinking about but I also think that Bitcoins place was inevitable the fact that we happen to be in the late stages of a multi-decade debt cycle is
just the perfect storm.
That doesn't mean that Bitcoin wouldn't have worked otherwise, right? I mean, there's a fourth factor which which goes into being late stage dead cycle and that's populist. The rise of populism actually is not a it's not an accident. It wasn't caused by Trump
that the late stage debt cycle.
Enabled Trump because it's creating Haves and Have Nots at a predictable way at a very large scale. All of this is exacerbating in a positive way, you know the the onslaught in the interest in Bitcoin crypto and the technology and everything else defy now, whatever
it's not going to stop it, you
know, the Bulls are out of the gate. They're marching down, you know the the Alleyways and they're not stop and the question now is is
Okay, like I said with with Paul Tudor Jones, I had the same reaction. You know, what's next, you know, you saw Goldman actually move a full partner now to run crypto and you know, you mentioned Tudor Jones, but then you got micro. Anyway, all of these pieces are coming into play in a way that basically looks to me like an accelerant for what was going to happen anyway, right and that's really exciting because you know last year it was all about the ETF and now and
And a bunch of other, you know waiting for the government to do stuff and I think now there's this Groundswell of realizing. Hey, I don't think we have to wait. I don't think that the occ's announcement changed anything. I don't think that Tudor Jones cared about the OCC announcement. I don't think that the guy that you the CEO microstrategy whatever the company's called even knows about the OCC announcement or or or cares about the scc's opinion and I see oh they just look at this in a common-sense way printers going with the
Dean berber and and and you know money is going to 0 and this is a this is a better way to look at money. Right? And so like I said, the timing could not be better. Right and I think that the we will look back on the announcement of the FED creating a four percent Target as the pivotal moment for Bitcoin going from technology enabling provably scarce digital money, too.
This is necessary for having a real internet digital. I don't know what the right phrases internet provably scarce digital asset for the globe. Right that is not governable by any central government. Right? And and I think that announcement is the pivotal moment will be the pivotal moment in history for
Bitcoin. What do you think 4%
I don't even think of it 4% is the key number. I think it's the fact that the government is saying that significantly higher inflation is our stated goal and that combined with the fact that the way quantitative easing is working is likely to end up losing money for the FED at scale because at some point these iou's have to be paid back. I don't see how this
this ends up being only 4% Somebody's got to pay those ious back and I think it ends up being treasury its scale. Right? And so that can only be done by basically borrowing more and printing more which creates even wider class, you know, bigger class Warfare problems,
etc. Etc. So so
the 4% is not necessarily the key the key is is that we are acknowledging that we basically created a big problem and we don't have any way out except to massively reflect it.
Enemy because of the fact that we're it again, most of the public like you point about The Wizard of Oz behind the curtain doesn't understand the fact that this is a managed House of Cards. And the only way out of this
is in the late stage that cycle is to reflect the
economy or we end up in a Great
Depression. So,
you know from their perspective, I'm not saying that's true. I'm just saying pick your poison from their perspective and they pick their poison, which is massive
inflation. The other part that shocks me is how many people believe inflation is evenly distributed. That's right.
It's mine.
glowing like the amount of income disparity created and wealth disparity created by government initiated inflation is just it's just mind-blowing and I've given up on this idea that the masses will ever get it if you know even people in Argentina and other places where they've tried to they just don't get it and
It's something it's not about behavioral economics.
I think that part of it is is that people still believe in the dream? Like I if I work hard if I'm an entrepreneur I can get my share of that pie. And and that's great. I I've always believed in that as well. But but now we've got this accelerating because of where we are and instead cycle and and you can't stop it now.
It's can't be stopped.
And and so I think that that's a freight train that people just don't see don't see coming in man.
As itself, like I said in populism and other things but but I think that that is going to get significantly worse before it gets better.
Yeah, what's interesting to me is not only one on a geographic basis, but even inside single economies, right? There's a study in Europe and I wish somebody would do it in the United States or maybe somebody has haven't found the study yet, but they basically looked at coming out of the 2008-2009 crisis. They said well does everyone experience the same inflation like CPI numbers?
Never one above 2% Yeah, yeah, whatever and they realized that like know if you break down a society and kind of 20% buckets. You got the top 20% the next twenty percent you all the way down to the bottom 20% of on the socio-economic Spectrum the bottom 20% of the socio-economic ladder end up experiencing. They believe some between six to ten percent inflation coming out of the 08009 crisis and it makes sense, theoretically, right? Like, of course you're devaluing the currency. So the people who hold only currency are going to get way more.
Inflation impact than the people who have investable assets all the way up to the people who majority of their net worth is investable assets and they kind of experience lowest inflation, but that's not like a well-documented nor like highly talked about component here. Alright, so four percent inflation Target could actually legitimately and this is going to sound crazy to people that could be 15 to 20 percent inflation
from now on. I'm afraid at all. I think it would be poor is always been incredibly expensive. You know, I've been fortunate
financially and I'm always getting Banks and other hey take this free loan, you know, or they want my deposits whatever it is, right? It's basically all these free services being thrown at me where somebody who probably needs that money thousand times more than I do. We pay 50 x and fees
for the same services and
that's going to get worse and I think you're right. I think that the four percent average is going to have a kind of standard deviation across the it.
Here made in anyone geography that is very significant. I think if you look at the cities in particular, there's going to be like a huge standard deviation like between the meat on on the Haves and Have Nots from a socio-economic perspective
the part that's crazy to me is imagined in the United States having twenty percent of the population experience 20 percent inflation like that. Like that is just absolutely mind-blowing to the point where we do not have the government or social programs in
Place to deal with that we don't have the kind of mainstream Media or Legacy Media that is prepared to have that conversation. Right? I mean, it's just you can almost see it on the horizon and I think part of the Bitcoin story very quickly is going to turn into look buying a house or buying a bunch of stocks or you know, all this kind of stuff that all requires you to be an investor right to some in some form or fashion Bitcoin I think is going to take this Narrative of kind of the savings technology right it is
The that the protection which I think would be very interesting and you see it obviously the corporations now, but you could see that happening at the
individual level as well. Yeah, but I mean this what's interesting about that perspective is I mean Von mises Hayek others, they wrote about this before Bitcoin existed right that the idea that a deflation your that what would happen with deflationary asset if one truly existed is exactly what we're seeing with, you know, these these stock flow models. They intuitively understood.
good what a stock and flow model would like for a hard asset like like gold if it actually ever became money again, and we're seeing that play out and it's basically claimed that Playbook to the letter the challenge with that is that it's still being held by a very small number of people and it apart of my stated aim is to with a burr is solve that problem by getting bit coin and crypto in the hands of more people and then ultimately making it utilitarian not just
Just could not just a little sore value in an investment to present as it were a hedge against future. But until that happens it hasn't happened in right now, you know, there's a very small number of people that are holding the vast majority of Bitcoin out there and I think as a community we should all be doing our part to to kind of Spread spread the wealth as they say and incentivize people not to give away its centralized people to want to invest in it because it's in there. It's in there.
Best interest to have a small percentage at a minimum of their of their net worth and the good news is I'm getting droves of people online, you know coming to me now saying Hey, I want to get into this. How do I start and it comes in Cycles? Right? I need it. We had a lot of this happening is that we're at 18 but it's it feels different this time. It doesn't feel like hey, I just need to get in and out quick like like before it felt like like I'm missing the boat on a get-rich-quick thing now.
Feels like hey, I need to be exposed to this. I need to understand how this works. Not just I want to buy some now. Can you get help me get started? I want to educate myself right? Where can I go to read stuff? And so so I'm seeing way more of that now than I did when we had the kind of let's call it, you know, January 18 pump and that's that's very encouraging to me, but it's we're just scratching the surface and keeping in mind that, you know a billion people out there probably so
Opening have never heard of Bitcoin which is hard to believe but it's and that maybe that's probably too small in number or if they've heard of a day of nobody did it currency or whatever, right? So so, you know, especially in Silicon Valley. I mean I've gone from Bubble to bubble bubble over the last 25 years. And so so we need to basically get this outside of that bubble
for sure. What have you guys done differently a table row or anything in terms of even else wants to do products and features and things like that, but help us understand kind of how you
Or thinking about
navigating all this chaos and I think what many of us believe will be a pretty big influx of new users to the space of next 18 months or so.
Yeah, you have to be first of all, you have to be mission-driven as a company because and the mission when it comes to something like this has to involve a very long-term view any investor in a bird who's basically in this for, you know, a two to three-year turnaround is going to be very disappointed that that we're not making money.
But if our goal is to get to a hundred million and billion retail consumers not just trading for retail consumers don't tree using this stuff. It's a lot of content, right we produce a ton of content as a company from onboarding to training to macroeconomic discussions like this. I host an AMA every single Friday, which we have to put a lot of prep work into it as you know hosting this and
And so and because we go very deep like on certain topics that it does involve a tremendous amount of prep work, but that's what we signed up for. And so so if you look at our site and we have a beginner overview of every single major cryptocurrency, like from market cap perspective like in the top 50 and people read it and they send us questions, you know and support like I understand this what I'm saying that work or in the AMA and so
and so you have to basically be willing to go one to one like like like almost like grass lower Grass Roots campaign Grassroots campaign door to door to knock on door saying, you know, here's my can write so so we're doing that for Bitcoin and for crypto and it's a slog but the the reward comes in the fact that we have, you know hundreds of thousands of while it's processing billions of dollars and transact volume, and it's all good. But but but ultimately it's still
Bitcoin is still being held by a relatively small number of people after all those efforts. So so I believe that by turning this into a real crypto bank with earn interest borrow against your Holdings trade against a hundred different cryptocurrencies, eventually with hundreds of thousands of all to reaches a Tipping Point and that's what we're fully committed to and whether it takes another five years another 10 years. Honestly don't care because I know we want to know we can build a profitable sustainable.
A business along the way and whenever that something Point happens that just means you know, we have more income to invest more and more products and to reach more places and my goal is to start at the top of the pyramid and work my way down to the bottom of here. I spent a lot of time launching mobile money systems in Haiti, for example, and this is you know, Bitcoin is not going to solve the problems of the people in Haiti in the short term. But in the long term, I think it can make a big difference when they don't have to basically deal with corrupt governments.
To manage their currency. That's a big problem. Right? You know, I would say by and large the people working in government of the United States are not corrupt their misguided miseducated misinformed but not overtly fraudulently corrupt on the other hand a lot of governments in places that are dirt poor are overtly corrupt and that manifests itself in terms of worthless currencies worthless economies, etc. Etc. In the long term long term Bitcoin solves that
It's also today Theory, but it's not going to happen. So I want to basically get Bitcoin from here down here. And if it takes 20 years 25 years, so be it
and so help me understand. How do you guys think about like your treasury management right and specifically around like if we see public companies doing this obviously crypto companies have tons and tons of crypto kind of called flying around right you're having to finalize transactions, right? There's you got to
Vendors some vendors aren't being paid in cash someone to be paid in Bitcoin. Like there's all these moving Parts. Like how does a crypto company like the one you run? Think about treasury management today given kind of the macro environment and also the crypto environment.
Yes. Oh, so we have sort of two parts that there's customer funds and then there's our own balance sheet. So let's talk about customer funds first. I think that's more interesting part of the question. So we custody funds in two ways. Actually three ways that ever write the first is for the trade of you.
Counts, and those are basically custody on an exchange and we go deep with them on their security practices. And you know how they meant Cold Storage versus warm storage and then how we effectively can access those accounts and behalf of our consumers via Superior pi and execute rates. Okay, so that's that's that's pure crypto. And you know, we don't we don't make any incremental money on that. It's usually a small spread on the movement between as a classic there's no
Replication of that and you can't because you have money transmitter licensing regulations and things like that where the stated purpose has to be very very clear. Then we have our interest-bearing accounts which are both crypto a crypto in the sense of Bitcoin theory of as well as though in the sense of stable coins are dollar deposits and the stated aim of those accounts is to generate interest on behalf of for our consumers via our partner in this case Prime for us. They us chartered.
Is complete and we run a institutional lending desk, which is the third part of this which then manages a lending book and reports to an investment committee that I'm part of that then determines who the the best lending or what the best lending opportunities are to generates a field in the crypto Sphere for for those assets and that's a combination of balance sheet risk versus collateralization etcetera Etc. And so so there's also treasury then for collateral management and
And a certain amount of qualification Don collateral. So so all of that factors into how we how we manage consumer funds now on the average treasury, it's different because the vast majority of our supplies or our money goes to paying people that's like by far in their own expense and the vast majority people still want to be paid in dollars few people would like to be able to be paid in Bitcoin and that's fine, but we are not at a point yet.
Where we can manage average treasury in Bitcoin, I would love to to get to that point. We don't we were always holding a certain amount of Bitcoins a company not just combat consumers, but again our own Bitcoin as well, but it's not a majority or anything like that, but I would like to get there eventually and part of that is even though we have a lot of investors who are crypto first like, you know, like blockchain capital and that others who only invest in stuff. We also have other
Investors like American Express, for example, or you know a fun back by Fidelity who if we told them that we were holding 65% the money in Bitcoin. I be having a board meeting tomorrow. I can promise you that that they would stop me but they would certainly have a lot of questions right? Anyway long answer your question, but you know, so there's two parts there the consumer and the company part
and then you guys just hired a new CIO
right? Tell me about that guy. So Jung Cho Joy
Joined us. He was at Celsius earlier and it before that he worked in traditional lending. I was at a company called lending was at City sees it back room both equal ready crypto and before that traditional lending and he has very quietly over the past several months along with others in my team built this new institutional ending desk with his already gone very deep and building Partnerships all over the crypto sphere if people are institutional to the Traders or other funds.
Have a need to to either borrow or lend they can approach Abra in will dig into what their needs are and usually will be able to help so weird is already gotten out on the street that we're doing this and so we have a lot of people approaching us, but for those who didn't know they can certainly approach me or the company, but young is it fantastic background in this we have taken a relatively conservative approach. We don't put a lot of eggs in one basket weave create a good Diversified portfolio.
That's part of the challenge here because we did get we're getting a large influx of deposits already. We kind of expected it because the rates are so high right now and we hope they stay there but the challenge is to make sure that we continue to build a widely Diversified portfolio and not just, you know, put all of our eggs in one basket where you know, some investor does something silly where we're in trouble and so I do worry a little bit about what I see in some of the other kind of see fi plays out there that you know, there's there's a lot of
translation in some of the Investments were seeing and I hope that people will take a hard look at that and start to diversify more but it's something it's one of the reasons we hired him and started this team long before we before we announce the consumer product was to make sure that we can build a well-diversified portfolio
and I want to end up on this idea of a crypto bank, which is something that you've mentioned any multiple times and in past episodes we've talked about but like
like what does that look like today and kind of how do you view the path to building it? Because those are two words historically I think in some weird way have been like antithetical to each other right where crypto wants to you know, literally long Bitcoin short the bankers type of thought process, but to want to build a crypto bank I think is not necessarily like let's go build, you know, the next Traditional Bank and just hold crypto. It looks like something different maybe talk about that a little
bit. Yeah sure. So
Six years ago if she said crypto bags me that was probably drop box or what, you know taking Dropbox and making it into bit go love bit go. I think they provide fantastic Services figure out their original service, which was you know, really just the multisig storage capability and and I would say just because they really evolved tremendously even though the original service had to our values. But but what I mean when I say Kirko bank now is an evolving analogous stack to the
Additional banking system that's specific to crypto. So the ability to earn the ability to trade the ability to hold securely if you don't want to do those things the ability to borrow the ability to pay and spend but all based on crypto rails in some cases. The consumer will know they're using crypto because I'm you know, holding Bitcoin or excerpt here, whatever whatever Theory whatever I want to do in some cases. I may be holding what looks like dollars but using crypto rails like in the form of a stable coin.
You'll see a bird doing some more and more in that area and the coming months but you end up with this kind of and its Global by the way, right? So so and I've layered regulation on top of that yet, but I'm just talking from from a vision perspective a single Global entity that can allow people to learn spends save borrow invest all one platform all globally all taking advantage of Bitcoin.
Krypto rails where it makes sense, you know what I think about supply chain Finance write a lot of American investors are shut out of regions agent supply chain deals, which can be very lucrative because they can't move money around and they don't have access well stable coins actually solve that problem because you can actually move money around very very quickly to fund supply chain Finance has so I predict you're going to see crypto Banks enabling yield making Investments like that. Hi great.
He's in the coming years makes perfect sense, right? Because it's you'll that were simply not getting with massive trillion dollar cash stock pots, right? So so these are the kinds of kind of opportunities that are enabled by the crypto bank. So it's a new stack but it has its analogy in the old stack if that makes sense. And we simply want to be and there's going to be several of them. Right? We simply want to be one that is easy to access transparence.
Highly educational and trustworthy and we talk about it all the time. It drives features and everything. We do even if people don't see it in the short term, right? So it's a slow methodical March in a feature by feature basis towards getting to that to that vision.
And do you think that this will be centralized decentralized? Maybe there's a spectrum between some products or features have to be centralized versus decentralized. How do you think about the centralization in building something like that?
My answer is yes. I think I think the biggest opportunity while the biggest Advantage for decentralisation right now is regulatory Arbitrage clearly, right? And and I don't again I'm not making a judgment on that. It just is what it is, but there is no such thing as true defy yet to me defy means with exception of Bitcoin where the meaning is there an off switch, right? And so all of these early defy systems if a regulator came in and
To a certain group and said shut it down you're going to jail. They would figure out how to send it down. If the government came to you and said pop, you're the Arbiter of all things Bitcoin shut it down you get go out to the community and say, okay. I've been told to shut it down and they go fuck you. We can't shut it down because when we're not going to into there is no oxygen. And so there is that off switch in most of these devices that so for example, as far contract requires information from the outside world that's provided being horrible. Well if the Oracle is talking to the outside world,
It's got a nice which by definition if you shut it off. There's no more smart contract. So it's not very smart. So now these companies trying to create decentralized work to eliminate that and so so the regulatory Arbitrage isn't even really quite there yet. People are actually getting away with certain things. That's not regulatory Arbitrage. It just has woken up the Giant yet because you're not big enough for them to care and I think that's going to change and so I think a lot of the PCS that are pumping money very quickly into D. Fire may be in for a rude.
Tori Awakening and is somebody who spent a lot of time and money having my own Awakenings? I can tell you that they're not fun. And and so I don't know how that plays out over time. But I do think there's value in that I think if you want to run a system, that's truly Global truly accessible doesn't answer to the man default think the theory of D Phi is very interesting and we'll see if the reality of it gets there. And in the meantime the fact that I have a chief investment officer knows what he's doing response to a committee.
Committee reports to the board the board reports to investors to me adds a lot of value to Consumers and you also have the opportunity if you don't want to play in that system to take Bitcoin put it in Hardware wallet and not deal with any of it and that to me is super interesting. I do both I have Bitcoin in a hardware wallet. Nobody can find it and I have Bitcoin in a burning interest and I have cash in the bank and I have cash in a birdie 9% interest. So so there's
different ways that crypto will be used by different people over time and it's up incumbent upon us to add value versus simply, you know, assuming that everybody should just do it in Hard Rock.
It's so fascinating when you start to look at this this idea of some of the early attempts of using kind of the the Bitcoin ethos or the blockchain technology was simply just taking something that already existed and quote-unquote copying it in this new world, but there's no actual like Innovation or breakthrough. I think what we found in the internet was if you just took your business model and put it on the internet, you've got like 10 percent of the value of the internet, right, but it was the people who realize wait. What does the internet?
It and power that I previously couldn't do right and so I always use the example of like media if you just took your newspaper and like turn it into a PDF and put it on the internet like yeah sure maybe some people could could login or whatever but that's not really very valuable compared to what ultimately ended up being the value of you could change headlines. You could do Dynamic updates to the Articles you could have slideshow and I mean like you can do so many different things and I think that's what we're seeing here with a lot of the finance stuff and then on top of that the
Centralization, you know, this is a troll comment and I say I preface it because people was freaked out but like supposedly over 60% of all the etherium nodes in the world, for example run on cloud providers and majority of those are on Amazon's AWS. And so it doesn't mean that a theorem doesn't have value. It just means that it's not nearly as decentralized as I think people want to believe right? And by the way, that's fine. It's not necessarily like a
fatal thing or whatever but to your point people just have to understand like there is the possibility that you know, if the federal government came in and said, hey we want if your cloud provider and you're running a defy application you have to shut it down.
Yeah, you shut down. A lot of all coins could be shut down in hours by a couple of governments with no. I don't know if they know this but they're certainly capable of doing it if they were incentivize or motivated for whatever reason I can imagine it would be right now, but but yes and and shutting down AWS would be a very quick way of getting
a whole bunch of sure
by the way wouldn't help a breather. But but you know Amber's also not running a coin so but yes to your point and what we also claim
to be a decentralized.
Any right but what I think I think that's the piece right is like I think that's in some weird way like centralization has also become like the enemy right in people like want to plan it and be like, oh, that's so bad like your centralized and it's like yeah. Well the things you think are decentralized probably aren't as decentralization. And also it's not that centralization is always bad. It's just a trade-off right there's pros and cons to centralization versus decentralization. And so depending on what you're trying to build you shouldn't make a decision as to what you want to do, right?
Absolutely. I mean
See that's that's the beauty of what was brand service for file sharing Victorian, right? You know BitTorrent doesn't have that problem. There's no AWS to shut down for BitTorrent. What I want is I want to Twitter. I want to Facebook and I want services that run on that model not on a corporate AWS month, but that's for me personally, right? And so, you know, the company started in my guess is the first versions would probably be running on AWS and
the same the same concert.
Assist your point. Yeah, it'll it will be very interesting to see and by the way, one of the things that is pushing people. I think in this direction is like The Tick-Tock
Saga. Yeah, I mean if Tick Tock was
decentralized then you wouldn't have this
conversation. That's exactly what I want decentralized versions of those services that there's no Chinese firewall against there's no Trump executive order against it's just out there just like you can't shut up it towards the music industry tried for years to
BitTorrent and they gave up now, they'll Sue certain users which is crazy. But they proven that they can find users but that's the users problem. They don't want to be PN sort or whatever. I'm not and I'm not saying people should be legally share files your music. I'm simply saying that those decentralized tools exist and if they're used correctly, we could actually recreate a lot of these services today. It's just a question of people's incentives for doing
absolutely.
Wild two questions for you to wrap up first being what do you think plays out over the next 18 months and crypto like what are the Milestones or events that you're paying attention to and and specifically looking for?
Yeah. I'm looking for number of wallets. You know, I look at how many unique we try to decipher it in terms of Unique Individuals. It's very hard because a lot of it is, you know, it's not reported. It's unclear. Anybody can create a crypto address.
But for us the key stats, I'll tell you the average stats and then the macro stats. So so we want to see you know, a couple of hundred million people actively using holding Bitcoin over the next 18 months. And I think that's going to be the biggest advantage of the next run up in price to me is going to be just a massive explosion into the into the mid nine figures of the number of Bitcoin wallets. It's gonna happen fashion and people think that's number one.
And then I also think we're going to have this mining fee Network feed problem again Network congestion that we had with. Oh and by the way, I loved your talk with Roger on this but the problem didn't go away. Right? We just punted via the you ASF. And so so that's going to be that's going to come around again. I don't know if it's going to be ugly. If we're just going to accept the fact that we're paying hundred dollar transaction fees and is what it is, but I don't it's not clear to me how we're going to address that.
Where if we just don't and it's it is what it is and everything is just a net settlement because for people who want to do pawn chain transactions lighting by definition doesn't help lightning helps if you want to do small dollar transactions and don't mind a semi semi centralized solution, which is totally fine. That's what it's meant to be. So
that's
that's what I'm look that's the other piece that I'm looking for is to say how our core developers going to address what's likely to happen when Bitcoin does
does start to get the 25,000 and does this actually become an artificial limiting factor in that plan B model of Bitcoins Runner. I would hate to see that happen artificially. I don't know if it will I haven't really thought it through but I kind of in the back of my mind. It's one fear I have I think that we need to look out for and then from a bird's perspective. We think about assets under management, right? So it's very simple right how much money is in the system when we announced the interest accounts. We literally grew assets under management.
Like 15% in a few days which for us just doesn't normally happen. That's usually a good steady growth. And so
that's we're really excited about
that. I think you're going to see just a big big influx of cash sitting on the sidelines in the West in particular into Bitcoin secondarily and etherium and defy the smaller piece. But the vast majority going to bitcoin over the next 18 months to answer your question. So that's what we're looking for.
You want to do a price Target?
You know, I'll be honest. I keep looking for holes in that in that stock to flow model and I have a hard time coming up with holes it is so so part of me wants to say, you know, because I think that the logic is Sound a hundred thousand by the end of next year makes sense, you know, the current price doesn't necessarily reflect that but it's it would be no less crazy than what's happening with
Tesla shares since March for sure.
And so I have no problem saying a hundred thousand by the end of 21.
I'm there with you man. I think I think there's a higher likelihood of it happening than not this kind of how I think about it. Right? So if you had to kind of think of probabilities
the in the same timeframe that I'm talking about.
Yeah, and and to 2021, so we'll see where can we send people to find you on the internet and find out Albert.
So I'm on a break Bill bar Heights Bill barh ydt. My first lesson name on Twitter Abra Global on Twitter or a bird.com.
To download the app or get more information on how how we work get even learn about Bitcoin. If you have I don't have a lot of people here are techies who are new to this. They want to learn get the basics. We have a fantastic 10-day getting started guide delivered daily via email and then Weekly Newsletter that really digs into the basics. I think it's a good complement to what you're doing, which really kind of is a little bit more advanced in macroeconomic issues as well. And so the number of people we now hundreds of thousands of people actually
In that content fairly regularly,
it's always something we'll listen keep it up. We need as many people building as possible. You were definitely one of the people leading the charge. So we're cheering for you and they'll have to do this again Watch the new episode number for some video.
I think I'm going to start paying rent. That's his. It's a human Zoo always pleasure, man.
