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MARKET SELLOFF ABOUT TO GET WORSE?! w/ @BitwiseInvest @dgt10011
Recorded: April 9, 2025 Duration: 1:22:58Space Recording
Full Transcription
With Coinage, we're building something that's never been built before in media.
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Not just subscribe, not just smash that like button, but actually co-own and reap the rewards
as it grows an audience.
With Coinage, we're building something that's never been built before in media.
I love what you're doing.
It's a new business model.
You get to mint a free NFT and then you get access to the platform.
Why are more projects not doing this model?
Coinage is the first community-owned show, answering crypto's biggest questions
and getting to the heart of why they matter.
What you're doing here is actually bring journalism,
like legitimate, actual, real, quality journalism
to this space.
We're relying on a community, not just
to cone the show and share in its success, which it will,
but also to help us make it via a legally registered
cooperative.
We're dropping our digital membership passes as your ticket into the coinage co-op,
and our community will steer the co-op in all of its funds. What the show chooses to cover is voted on, half by our caucus members and half by our network members. By being a legal
cooperative steered by you, we'll also split net proceeds 50-50 with active members in both tiers
and our production company as our show makes it to prime time or attract sponsor
dollars so buying a pass into our co-op isn't just taking down a paywall or
making a donation it's giving you real control unique benefits and if the show
does well real upside if season one was what we could do by ourselves imagine
what we could do with you so grab a pass while you can and come build season two with us.
Welcome, everybody, into another episode of Coinage here today as we are watching all kinds of things play out before our eyes,
including where Bitcoin's trading as developments are happening literally minute by minute on the terrafront.
Macro markets showing signs of weakness. Crypto markets showing signs of weakness.
So very excited to have on the show today someone who's been inside the room where all these things have been going on.
Just a few weeks ago he was standing next to that FIFA World Cup trophy and sandwiched by the Winklevoss twins at the Crypto White House Summit.
Very happy to have back on the show with us the CEO of BitGo, Mike Belshi on Coinage.
Mike, good to see you, man.
Always good to see you, Zach. How are you?
I'm doing, I wish I could say I was doing better, but crazy things are going on now.
And so I think there are a lot of questions in the market, and perhaps understandably so.
So first, I just kind of want to check in with you, Mike, in terms of what your expectations
are with where we're at.
You know, it's not that crazy.
You step back to kind of where we were at the White House Summit.
I think we were like 86 on Bitcoin.
Now we're at like, what, 77?
So it's not that crazy.
But how does Mike feel?
Well, I mean, overall, I feel pretty good about the crypto markets.
I think, you know, where we are today versus where we were, you know, five months ago,
we finally have regulators that are engaging, that are ready to move the ball down the field
in terms of figuring out what's the right way to deal with digital assets, whether you're talking
about, you know, what's a security, what's not a security, how do stable coins play into it?
How do you trade it? How do you build market structure?
I mean, these are conversations that were just all stalled out.
So the fact that they're not stalled out anymore, I mean, is phenomenal.
And then, you know, the markets being where they're at, I think it's mostly not related to crypto, right?
Obviously, there's tremendous volatility.
Volatility. VIX has been, you know, the volatility index has been up and down quite a bit
in the last week. I think nobody really knows what to make of that. It doesn't happen very
often that we see this kind of volatility in the markets. But that's going to happen regardless of
where crypto's at. So, look, I think crypto's in a good place to springboard. Obviously, we've got to work through some of these issues that are happening on the global economic stage.
As that happens, though, I guess, and you're right.
I mean, for me, too, watching everything that just played out last week or the week before on the stablecoin front,
which we'll get into because you guys are also working on USD1 and some of that.
I think it is interesting to kind of think about where we are
in terms of catalyst versus risk, right? And kind of perhaps if you think so, Mike, I mean,
you've been in this space for a really long time. And there are a lot of people saying at some
point there might come a day where Bitcoin breaks from being a risk asset and really does start to
play its role as kind of this hedge against risk. And historically, that hasn't necessarily played out because as stocks decline, Bitcoin's price also goes down. But now increasingly,
you know, even yesterday, last night, I don't know if you were watching it, but as the 10-year
was, like the yield on the 10-year was surging as markets were getting crushed, which normally
doesn't happen, there's a lot of weird things happening right now. So when you think about
the evolution of where crypto is at now, how real are some of those
changes to you in terms of the evolution of Bitcoin and maybe to a lesser extent, the
rest of crypto?
Well, look, I think there's a couple of competing things that are going on right now.
People are trying to read it towards how it's going to impact Bitcoin and digital assets.
Bitcoin and digital assets. One is that eventually, you know, the US fails to really contain the
spending. And then at that point, you know, we end up with another version of QE. And, you know,
maybe then Bitcoin kind of takes off. So that's all on this prescribed theory that, you know,
where Bitcoin really sees growth is when cash is flowing very well in our ecosystem.
And whether that will happen exactly or not, there's a lot of people kind of watching that.
Now, there's this new thing that's happening, which is due to tariffs.
What's going on with the long-term bonds?
And all of a sudden, we're wondering, is there a glut of excess bonds being put onto the market by somebody or not?
We're not really exactly sure what's going on there yet.
Is it just fears over tariffs?
Is it the basis trade on treasuries that's starting to unwind?
I've seen all of these theories, and those are not really related to crypto.
But if we are in that process of having a lot of bonds move on to the market, it's not
clear that you're going to see a Fed rate cut, which some of the other folks looking for Bitcoin
to just go up are looking for. From my view, look, we've been in this for 12 years, I guess,
or so now. And digital assets just continue to make progress. It's slow. The biggest inhibitor over the last five years has absolutely been that the regulators just
weren't engaging in conversation.
The beginning of that five-year period, if they had just started the process of figuring
out how digital assets are going to play in markets, it would have been fine.
It's okay that it takes a few years to sort out.
But in the more recent years, where it's just completely stalled and they're working negatively against us, it causes everybody to put the brakes on digital assets.
Those brakes are off now. Everybody's working on it. So what's going to happen in the macro market
will happen no matter what. But we're now making progress on everything digital. So, you know,
look, I start with the belief and a lot of people are increasingly believing this, that
everything moves to digital assets.
You know, equities, bonds.
Of course, we've got the digital assets themselves.
Of course, we've got the DeFi products.
We've got the stablecoin products.
I start with that thesis, and I think we get there.
Now, whether we get there in 2025, 2030, 2035, actually that I don't care about as much.
So the long-term perspective is super bright.
And the fact that these conversations are happening in the U.S. was a pivotal thing
that had to happen in order for us to get to the next level.
Yeah, I mean, I would agree. I think I understand kind of where the crypto industry and you've
been a loud voice in terms of kind of representing people saying that, look, this needs to change.
And you were there probably ahead of a lot of people, if I'm remembering correctly, maybe even ahead of where Brian Armstrong was in terms of getting on board with, hey, look, this needs to change. And you were there probably ahead of a lot of people,
if I'm remembering correctly, maybe even ahead of where Brian Armstrong was in terms of getting on board with, hey, look, this is kind of a binary outcome in Washington, D.C., this election cycle
is crypto's got to show up. And so you were there. I do wonder, and I mean, we can get into
kind of those catalysts, but before we kind of fully shift into the positive that I hope comes
later in the year, we're still dealing with this chop right now. And we just heard from Secretary of
the Treasury, Scott Besant, talking this morning about what you just hinted at in terms of what's
really going on. Is it China dumping treasuries? Is it hedge fund that might have blown up? Well,
what's what's happening there? And kind of this this like negotiation tactics that's happening
from Trump. And I know you know him. So I just want to play what we heard from Treasury Secretary Besant this morning on Fox Business
and then get your take on the other side to kind of think about what levers are still there.
Here's what we heard this morning. Take a listen.
Maria, I think it's unfortunate that the Chinese actually don't want to come and negotiate
because they are the worst offenders in the international trading
system. They have the most imbalanced economy in the history of the modern world. And I can tell
you that this escalation is a loser for them, that they have some very smart economists,
the academicians, technocrats within their bureaucracy, and they would be telling the leadership that we do
not have the edge here. They are the surplus country. Their exports to the U.S. are five times
our exports to China. So they can raise their tariffs, but so what?
Kind of the so what there, Mike, being that, look, this was what we were
going to get. We were going to get Trump v. Powell in this kind of war versus China. And, you know,
Trump doesn't control interest rates directly, but there are certainly things he can do to get
Powell to move. And we're kind of seeing that play out right now. And like you said, generally,
if interest rates go down, very positive for the crypto, for the crypto world. However, in all this is the risk that, and you've seen them before, you could have somewhat of a market blow up that was unforeseen.
And maybe that's still part of Trump's playbook.
But kind of has your confidence at all shaken in terms of being an early supporter to push Trump into the White House?
How are you feeling as someone who's been there in the White House as
this goes on? Well, look, I mean, I don't think very many people are revisiting the decision that
we had. We had a decision of did you want Harris or did you want Trump? And it's completely clear.
Of course, Trump is still better. Now, we're in this tariff land that I don't, you know, I'm not
an expert enough
to know exactly how this is going to sort out. It's definitely something you look at and you
wonder what's going to shake out of it. Overall, in terms of the crypto markets, I still think
we're way better off. And that was my number one goal kind of over the last year. You mentioned
that, you know, I got into this, I think, a little bit before some of the other leaders did.
You know, I got into this, I think, a little bit before some of the other leaders did.
You know, really where BitGo's vantage point is on the crypto markets is seeing that it wasn't just Gary Gensler at the SEC, but it was OCC as well.
And it was FDIC as well. And it was, you know, IRS and FTC also.
So there was a clear need where we needed a president that would think differently about digital assets.
And we got that. Now, I think there's one thing that hasn't been fully priced in for crypto about this
new administration.
The previous administration, I think, really wasn't thinking about how do you export dollars
on a global scale?
This isn't directly related to crypto, but it turns out that crypto has a big overlapping
But it turns out that crypto has a big overlapping component of it, which is the stablecoin.
component of it, which is the stablecoin.
So if you look at the use cases that we have in digital assets, obviously we've got Bitcoin
in store of value.
I think everybody would say stablecoins are the number two beneficial use case coming
out of digital assets right now.
It's going to replace all of payments.
It's the bank that you wish you had, but you never had.
And we have a president who's thinking, how do we keep the dollar strong?
Look, the dollar, the U.S. markets, still the best capital markets in the world,
still the strongest economy in the world.
How do you get more dollars out to more people?
And people definitely want it, right?
So you look at all of the citizens of countries that have weaker currencies
and they're clamoring for dollars.
Heck, you know, half of the, I shouldn't say half, but a large number of external fiat currencies are based on the dollar,
either as direct stable coins like the Hong Kong dollar or algorithmically backed stable coins like the Singapore dollar or the AE dollar.
Singapore dollar or the, you know, the AE dollar. So anyway, all of a sudden, I think we've got a
president that's actually looking for how to get dollars out to the world. And I think he's going
to find stable coins. So this is going to be tremendously positive for crypto, digital assets,
et cetera. Yeah, there are a lot of people who, you know, before we took office, we're talking
about this Mar-a-Lago accord and the idea of like, look, you need to trigger something here to get
people to the negotiating table. We'll be chatting with Jeff Park from
Bitwise in a minute here, kind of on what he predicted would play out, which looks very
similar to kind of what we're seeing play out here. But on the stablecoin front, this is also
something that we've been covering closely at CoinEdge because, you know, we just chatted with
Tether's CEO, Paolo Ordurino, about kind of what this means if you do have a president who's trying
to get the dollar influence around the world. Look what's happening in Panama now. Look at what's
happening, you know, with battles with China around the world. And the idea of getting people
on the ground using dollars, Trump's a populist. And so the idea of people using dollars versus
whatever China might be trying to launch is a very interesting question. I guess one thing that
even some of our readers pointed out to me, Mike, is that there's a big difference between kind of
the short-term treasuries or bills that are backing some of these stablecoins, which, as I said off
the top, you guys are going to be helping with USD1, World Liberty Financial stablecoin as well.
But there's a difference between those short-term things
and longer-term bonds, like the 30-year or the 10-year. And so I wonder if there's like
other plumbing, financial plumbing that you've kind of seen as you work through stablecoins now
as you guys are about to work with World Liberty Financial on USD1 that maybe comes to mind
in that battle to have the dollar used by people around the world, but also what it means for traditional markets.
If you're talking about the backing of like what goes into stable coins, I mean, stable coins are intended to be one to one backed by dollars.
And, you know, you want to be ready for a complete run on the stable coin at any point in time.
So you're using short term duration, you know, T-bills and equivalents, treasury equivalents.
And stable coins are going to turn out to be a fantastic thing there. So you're using short term duration, T-bills and equivalents, Treasury equivalents.
And stable coins are going to turn out to be a fantastic thing there.
Now because of tinkering with the US dollar and the markets over the last decade, we had
this yield curve inversion where short term bonds were getting a much larger rate than
the longer term bonds.
And this is what led to crisis that SVB and others that mismanaged this process.
And banks have a special, which is that they're allowed to have these hold to maturity assets
on their balance sheet, which are pseudo liquid, right?
That is, it could be a long-term T-bill that's not going to come due for 10 years,
and you're stuck at a 1.5%
interest rate. And if everybody comes asking for their money, you're going to have to sell that at
a discount because nobody wants a 30-year T-bill at a 1.5% interest rate anymore. And, you know,
the banking sector has a massive amount of these. I think Bank of America has got something in excess of $100 billion of technically underwater T-bills that they're using as part of their assets. And they don't have to
really deal with the fact that it's underwater because banks have this escape hatch on their
financials, which is hold to maturity bonds. So look, I think stable coins are going to
circumvent that problem. They are designed
for payments. They are designed for fast liquidity. And they're just better than the banks that we've
had in the past that are fractional reserve and then oftentimes stuck in long-term duration
products that if they actually need to get access to that money is going to damage the bank severely.
Well, let's talk about what that does for crypto too,
because I've been trying to work through this, like I said, as we've been chatting to leaders
and excited to have you on to get your kind of take on what it means for prices, because
there's a couple different ways to look at it. Like you said, people don't want to see play out
what happened in, I think it was 23, right? When we had this Silicon Valley bank problem in the run
and USDC de-pegging. And that's kind of
why people are talking about, you know, needing to have laws that come through. We just put out
a piece where Democrats and Republicans were going through the markup on the Stable Act in the House
talking about exactly what you're talking about, where how do we prevent another stablecoin depeg?
And Democrats are making the point that, look, the rules are going to be the same as what kind
of happened with SVB is that potentially you could have problems and so I guess in terms of that
again the problem there was they had their money in a bank in the bank almost exactly the problem
is the banks the problem isn't that's my point yes so the stable coin has to keep one to one dollars
and they can do that in a couple of forms you You can do it with bank deposits, you can do it with repo markets and you can do it with T-bills. Those are the three
things that you can do. The banks are fractional reserves. So when you have dollars at a bank,
that means you don't actually have access to that liquidity when you need it and you are dependent
upon the good management of that bank. It turns out those banks aren't that great at managing
money. They fail from time to time. So this is
where I said earlier, like the stable coin is the bank you wish you had, but never had. The stable
coin is the bank that actually keeps one-to-one all of your money. And it gives you a risk-free
rate, which is somewhere near 4%, whereas your bank is giving you like 0.2%. Why is it that a
bank is allowed to give you 0.2%
when the risk-free rate itself is near four?
This is crazy.
What I think is interesting about the stable coins
is because we saw the pushback in terms of eliminating yield
and the idea of yield being something
that stable coin issuers could offer.
And it seems like that's probably where the stable coin...
Are you hearing differently
in terms of like maybe potentially that not being...
Oh, this is going to be a big fight.
This is going to be a big, big fight.
Look, this is where I think what we got from this new administration is so much better
than what we had hoped for.
We really just wanted to get level-handed regulators that would give us a fair shake
and start building the right regulation to manage digital assets in a number of ways.
But not only did we get that, we got regulators across the board. You know, Paul Atkins is just
getting confirmed now. Jonathan Gold for the OCC. You know, down the line, like everybody's
understanding and trying to figure out how to bring digital assets into regulation in a good way.
But then there's one other thing we got, which is we got a president that's actually thinking about like, hmm, can I use digital assets to help export
dollars in a way that benefits America? And that's a big difference. So the banking lobby
is worried that stablecoins returning interest back to retail would disrupt their business.
And if you dial back the clock to the beginning of
money market funds, like early 1970s-ish, the same type of fear existed then. People said,
oh, if we allow these money market funds, which look kind of like a bank deposit,
but they're not, and they're returning interest rates that are far in excess of what the banks do,
then there's going to be a run on the bank and everybody moves to money market funds. Look, that didn't happen. You know, people
don't just move all their money overnight in a tragic way. But the banks are very worried about
getting less deposits due to stable coins. But I think the bank should be a little bit more worried
about stable coins than they were about money markets because stable coins are not only 100% reserved, can potentially give you 4% instead of
just 0.2%. On top of that, there are 24-7 payment systems that work globally better than the banks
have ever been able to do it. And if you look at the payment apps that the banks are working with,
banks are just too damn slow. They don't work very well. And this is why we have Cash App. It's why we have Venmo. It's why we have PayPal. It's
why we have- I'll give you, I'll concede all those points. I think it's all, they're all,
and specifically for people outside the U.S., I think that that's something that's kind of been
lost and something we've covered is that like stable coins outside the U.S. matter a lot to
people who are suffering in countries that have capital controls and can't access dollars.
So I think that that's been a huge unlock for people in Argentina and other countries. But
when it comes to you, I mean, I guess we'll put the fears of a bank because like you said,
if stablecoin issuers are holding this money in a bank, and of course, that's maybe not always the
case in terms of kind of how this goes. And I'm sure we'll hear from you about USD1. If the bank
goes down, stablecoin issuers, like we saw with Circle, potentially run into problems. But it sounds like you're saying that, and this has been my big question, is that like, you are right.
The stablecoin bill has never been, it hasn't gotten this close before.
We're actually probably going to see it happen in a few weeks.
But like, it's been something that people have been wanting for years.
And now finally getting done, I think is a good sign.
But it's not everything that crypto wanted.
And so how do you see that playing out? Is it going to be incremental passage and then bring it up and get it done? Or how do
you see those things playing out throughout the year? Because it doesn't sound like interest
bearing stable coins are on the table. But what do you know? What does Mike Belshi know that I don't?
The stable coin bill, I don't think is going to get approval for interest bearing all the way back down to retail.
But we're on the right side of history here, man.
It's your money.
You deserve the interest back on your money.
So it's going to happen.
And it's just a matter of time.
And if it doesn't happen directly in the U.S., it'll happen through other means or other vehicles.
It's coming.
So I think, look, you have happen through other means or other vehicles. It's coming. So I think,
look, you have to start with getting regulation in play. And we didn't have that before. So there are questions about whether you can use this. Now that question's eliminated, right? So all of the
major players can start to get comfort around how do they use these, and they can now go to the next
level of diligence, which is like, do I like the way the treasury behind the stablecoin is being managed? Is it something I can have built confidence for my business around
at large, large scale? And those answers are going to increasingly get answered and solved.
So it's just a necessary step along the way. But I personally believe there's no stopping
interest on stablecoins back to retail. It's just a matter of time.
Well, I think the other interesting thing playing out now in DC and kind of in crypto and obviously
including companies like BitGo is an appreciation for kind of if this industry can exist in the US,
then what are the opportunities on the public market side? And it seems like this IPO window
is opening up and we don't need to get into details for BitGo's plans around that. But
I am kind of interested in your take, Mike, in terms of what you're excited about as BitGo scales.
And this partnership with World Liberty Financial around USD1 looks pretty intriguing. Mostly I say
that because we got details around Circle's IPO as they filed their own S1 with the SEC
and kind of got an inside look at kind of how they make money on USD1, what the trade-offs are
between working with Coinbase and the distribution and fees they pay to Coinbase for USD1.
What's kind of the goal with, sorry, with USDC, I should say, with USD1 and the World
Liberty Financial stablecoin, what's kind of the goal and how do you see that playing
out as BitGo steps up to kind of be the custody provider for all of that?
And how do you see it scaling?
Well, let's see, a couple of things you mentioned in there.
The volatility in the markets is so bad right now, it's very difficult for companies to
go public today.
So not trying to criticize Circle in any way here, but I think they're going to struggle
to go public in the short term.
And typically when they flip public like they did, I guess, last week,
it means that their plans had been imminent.
But I suspect the VIX is probably going to nix that plan,
at least for the short term.
And they'll probably have to cycle back.
For the medium and longer terms, I think, look, the markets come back.
The capital markets in the U.S. are still going to be strong.
And we will see more digital asset companies going public, you know, in the not
too distant future. So overall, still bullish on that. And then the second part of your question
was, let's see, what's going on with stablecoins? The world's trying to sort this out right now.
Like actually, a lot of companies are waking up and saying, I want to run a stablecoin. They're
looking at the business model that Tether and Circle have right now.
And they're like, that looks great.
Circle financials are just out and they're having to share a tremendous amount with Coinbase.
And I think people are looking at that and they're going like, huh, I was expecting to see what Tether is reporting.
And instead, I'm seeing something very different.
And instead I'm seeing something very different.
So inside the industry, having an exchange receive half of the revenue off of USDC puts USDC in a pretty precarious place.
Every new project that starts, every L1, every L2, the first things that they need is to get the ecosystem on their blockchains started.
And what do they need for that? Well, they need like a wrapped Bitcoin and they need a stablecoin.
Those are like the two things they need first. And they're increasingly saying like, well,
wait a minute, if I empower USDC on my blockchain, half of the revenue of that goes back to Coinbase
and Coinbase is turning around and competing with me on the layer two base, which they run.
So like, why would I want my success to fuel my competitors success?
So I think Circle and Coinbase have got a real issue to figure out there.
Now, the other part of what's going on with stable coins is not related to just the crypto world, but banks.
Banks are also thinking like they need to get in
on this. And there's some people that believe that we're going to see just this proliferation
of stablecoins of all kinds, from all different banks all over the planet.
And I do think we're going to go through a phase of quite a bit of this. So we're entering a period
where there's a lot of possibilities. So BitGo has a couple of things brewing in the stablecoin
arena. First, we're a full service financial services company for digital assets.
We do, of course, we do custody.
We do staking.
We do trading.
We do many things.
We've also got our own stablecoin that's coming called GoUSD.
But then on top of that, we've also always been an infrastructure provider and a service
provider to others.
So we have stablecoin as a service capabilities, and that's what we're doing with USD1. So we are providing technology, which helps them with the security around the mints and
burns and capabilities there. And secondarily, we are helping manage the treasury behind it.
We've already built the capabilities of doing that in an audit capacity, all underneath a fiduciary
wrapper that we have through Bitco Trust Company. So that's what we're doing with USD1.
I think USD1 has tremendous reach and potential in terms of building up their stablecoin.
And it's pretty exciting.
The people that they're bringing to the table are first class and really opening up the space.
And perhaps more as we see, like you said, as more people try and replicate what Tether's
$13 billion year last year looked like.
I'm sure there will probably be more that I'm sure BitGo will be able to work with.
But you mentioned two things there, and we really only have time, I suppose, before you got to jump for two questions.
And you kind of mentioned the public windows there.
I do wonder, and I'd be curious again, as someone who kind of backed this before a lot of other people,
if there is maybe amongst the group that was there at the White
House summit, and I don't know if there's group chat or not, maybe signal chat, if there is one,
is there kind of like a, hey, what the hell? We had pushed so hard and we got this done.
Now that you're hearing Secretary Besant kind of talk about like, look, the markets have been there,
they've enjoyed a hell of a run, but now it's Main Street's time. I do wonder if there's fears
that maybe the Trump administration is underestimating the amount of main, like the amount of crypto that Main Street holds. Like
I know a lot of people who are like, the stock market didn't work out for me. These are like
blue collar people. Stock market didn't work out for me. I'm in crypto and crypto is where it's at.
Do you get the sense that maybe, you know, in this Trump second administration that he's looking
at crypto markets as kind of the market to watch
rather than stocks? Like, how do you see that playing out since these markets have historically
moved in tandem? Well, look, as much as we love crypto, as much as we love Bitcoin and all that,
remember, the economy is much, much bigger than crypto and digital assets. So these are growing.
It takes time to build. And I think he's got a lot of issues that he's dealing with that simply are not related to crypto. So I think he's done exactly what he needs to do, which is,
you know, crypto and digital assets are the innovation edge of money. We are going to change
everything in the financial system. We are living on legacy systems that were designed before we
even had computers. And we can completely upend this in a way that's positive for all kinds of
finance, not just in America, but globally. We can figure out how to connect the global financial
system in a way that's actually efficient, unlike the current system, which try connecting
money between America and pick your favorite country from China to the UK. It's very difficult.
So he's laid the possibility for us to go figure out
those problems now because we have open regulators that are going to work on this with us. Now, at
the same time, there's a lot going on. In the broader markets, will Bitcoin decouple from
the stock market and start to be an uncorrelated asset class. This is something that
many people hope we start to see. The primary theory behind this has been like, hey, the US is
going to keep printing too much money. And because they keep printing too much money, these things
will decouple. There's another part of what the administration is doing, which is DOGE, which is
all about saving money. So they're saying that they're going to cut a trillion dollars in spend. They're going to add a trillion dollars
of revenue by way of tariffs and balance the budget through that. Look, there's a lot of
speculation as to how well that's going to work or not. You can't argue with the logic of trying
to accomplish that. Whether they've got a viable plan for it, we don't quite know. But if they do
achieve it, it does mean that they're going to show that the U.S. is capable of starting to turn the tide the other way in terms of our overall money printer.
And that makes it so that we don't get as much kind of cash coming in, which is the easy, quick path.
That's what I've always kind of wondered about, too, though, because it's almost like, and I've heard conflicting takes on this from people in crypto.
It's kind of like, and Arthur Hayes might be the perfect example of this,
in terms of like, we want Money Printer because when Money Printer happens,
Bitcoin go up because that's like why we're in crypto and why Bitcoin matters. But then it's also like, well, I don't know, because how does that fit into everything else?
So if we have massive runaway inflation on the US dollar,
then of course the price of everything goes up., then of course the price of everything goes up.
And then of course the price of Bitcoin goes up relative to the dollar.
But if it costs a million dollars to buy a loaf of bread, and so your Bitcoin is now trading at, I don't know, $10 billion per coin or something.
Did you really win here?
Right?
If all it is is that Bitcoin went up with inflation, then that is not by itself a win.
Where Bitcoin becomes a win is when people start to use it as a store value
that they actually use for international components and other things.
And this is happening as well. But this is always going to be slower.
It's going to take more time.
And it's the it's the way to win that you want it to win,
because that's where you start to see like there's real value.
There's real accumulation of the coin because it's useful in some way rather than the price just went up because inflation went through the roof.
That's a very good point.
And I guess we'll end with this, Mike, because we have you on.
And like I said, you've been a calm voice throughout my years of doing this.
You've been a coinage NFT holder, by the way, so thank you.
And just the idea of what's it like, by the way,
to go from one administration to the next,
to be in the room, to be at the White House,
to go through all that.
What was it like for Mike Belchi himself
as you're sitting there being like,
oh man, this industry almost died, now here we are.
Like, what has it been like for you?
Well, first off, I never thought the industry almost died,
so I wouldn't take that one.
They can't kill us.
They can't kill us.
Yeah. Look, it's an honor and it's exciting to be out at the White House and having these
discussions and having an administration that's saying, yes, you guys were unfairly targeted
and we're not going to have that happen anymore. So that's pretty exciting. I think it was Howard
Letnick that in the room, he said to everybody, you guys should take a moment and celebrate and like really think about the accomplishment that's here.
And I think to some degree, the people in the room are like, yeah, we appreciate that.
It's a good statement.
I like Howard a lot.
He's always, you know, really energetic and provides a really positive vibe.
But at the same time, you know what?
I guess those of us that are building in the space, it's like great milestone achieved.
We now have the ability to work with regulators and make this be a success.
But on to the next thing.
Let's keep going.
We got a lot more road to hoe here before we're done.
And now we get to go to that next phase.
So I think most people in the room are like, let's keep building.
Let's keep going.
Well, it's been exciting to watch from afar. And, you know, we'll be heading
down to DC ourselves to talk about being a DAO co-op registered here in the US as coinage. And so
I don't know, man, it's a very interesting time for our industry. And obviously, again,
you guys at BitGo have been kind of leading the way for a really long time when it comes to the
infrastructure pieces needed to even have this industry be here. So our thanks to you for joining us today, Mike.
And it's good to see you again.
Hope to have you back again soon.
Congrats on everything, Zach.
Thanks, Mike. Appreciate that, man.
And thank you again for the time.
Very interesting to be in this window.
We are here now as we watch everything play out again.
I almost hold my breath every time I refresh the page
because you never really know what the chart's going to look like.
But now Bitcoin at 76 here.
And, you know, you can look at these things minute by minute.
You can look at these things tick by tick.
Not necessarily going to help you too much, I don't think.
And perhaps a worthy reminder to really think about that as we step back and think about where we are at on all of this.
And as the trade war
develops with China, I'm excited for our next guest, as I'm sure he's set to join us soon.
But I want to play a little bit more about what we heard here this morning from Secretary Besant
in that interview, because there was a little bit of this when it comes to this back and forth between the U.S. and China.
And now, increasingly, again, other trading partners, including the EU, the EU announcing this morning that they would also be adding their own retaliatory tariffs, which people have been saying, hey, wonder if that's going to happen from the EU.
What does that mean now for them, by the way?
Because a lot of this is game theory playing out in terms of who can take the most pain over what period of time.
And so we are seeing the EU approving their first set of retaliatory tariffs on the US,
25% duties on steel and aluminum, which are also impacting markets today, because a lot of people
had hoped that Trump would take the exit,
that we'd be off this. And right now, markets are kind of fluctuating between red and green.
So I don't think we have the answer necessarily for today yet either. But do you want to play a
little bit of what we heard from Secretary Besant? Because as we just heard from Mike Belshi,
there's a lot of questions right now among people in the market in terms of where Trump wants to go,
There's a lot of questions right now among people in the market in terms of where Trump wants to go, who he's really advocating for and making decisions for here.
Is it Main Street? Is it Wall Street?
Are these two different worlds really or do they overlap a little bit?
Here's what Secretary Besant said this morning talking about Main Street and Wall Street.
Take a listen.
For too long, financial policy has served large financial institutions at the expense of smaller ones.
No more. No more.
This administration aims to give all banks the chance to succeed,
whether it's J.P. Morgan or your local mortgage and loan.
It aims to get capital to Americans who need it by getting bureaucracy
out of the way. For the last four decades, basically since I began my career in Wall Street,
Wall Street has grown wealthier than ever before, and it can continue to grow and do well.
But for the next four years, the Trump agenda is focused on Main Street. It's Main Street's turn. It's Main Street's turn
to hire workers. It's Main Street's turn to drive investment. And it's Main Street's turn to restore
the American dream. Main Street's turn to restore the American dream. And really, I mean, when you
think about this, it is interesting considering that, you know, it hasn't been that long that we've really kind of come through this back and forth, tit for tat.
And again, a lot of questions in terms of what levers are still to be pulled on whose side and where this goes from here.
from here. And we're going to be chatting in a second here with Jeff Park from Bitwise,
the man who saw a lot of this coming when it comes to what Trump's goals have been,
what that means in his battle with Fed Chair Jerome Powell, who historically has never done
what Trump has wanted him to do, particularly on the interest rates front. And again,
how Trump is going to get him
to bend in terms of causing some short-term market pain to have the Fed step in and rethink these
things. That had not been the case up until this week, I think is fair to say, because we hadn't
seen some of the decouplings or some of the credit spreads that historically come with
not just pain, but panic and potentially something breaking within the market.
And that is usually where the Fed does get forced into intervening.
And that's something that, you know, if you play this out from a game theory perspective,
something that would have had to have happened, I think, to force the Fed's hand.
So we're just waiting for Jeff to join us.
And I think now he is in here.
And so we've set the stage in terms of where we're at today.
And as I said, never good to really look at the charts minute by minute. So let's back up and bring on the man who called this back in February.
Very excited to have on with us.
Bitwise is Jeff Park, head of Alpha Strategies here.
Uh, Jeff, it's good to see you again, man.
How you doing?
I don't know if we have his audio just yet.
Hold on a sec.
Now I think we may.
Hold on a sec, Jeff.
That might be on our end.
Now?
Now we got you.
Very cool.
We've figured it out.
Now we just need to figure out what the hell is going on with markets.
Jeff, thank you so much for coming on.
I think I should preface this with people who don't know and are just kind of like tuning in to what's happening is that you called this back in February.
And I almost wish I read it a little closer.
We had you on the show back then.
But I don't think I really understood fully what you were talking about and what it
would mean for the markets. But now here we are. And essentially, everything that you predicted
has come true. Are you kind of basically, where's your head at with what you predicted and kind of
where we are now? Yeah, first of all, I genuinely love the fact that one of the most amazing things
about crypto is that by
being a participant, everyone just levels up their knowledge in the things that they
don't always teach at school in the ways that we have to appreciate that the world that
we live in can be very fluid and dynamic and not very precise in the ways that you grow
up thinking that the economic models work in certain ways.
And so I love that there's a
whole community of crypto investors now learning really what free trade means, what tariffs actually
imply. And that whole journey has been really rewarding for me as well. So thank you for
having me on this show. You know, I penned that piece back in February with two versions of how I imagined the world would play out.
To be honest with you, probabilistically, I had weighed that the outcome would lean in one direction that I think I've also come to terms with.
I might have overweighted as new information has been discovered since the past two months.
But I do think the end game is still very much intact. And this is all
incredibly good fuel for Bitcoin adoption in the long run. The path just looks a little bit more
haphazard than potentially a way that I thought the Trump administration may ultimately navigate.
Here's the bottom line. The idea of free trade itself, in my opinion, is a disservice because of the word choices, right? It's not that I don't believe in free trade. Of course, globalization has been a net positive for most of the world's of the debate that is occurring today, which is about the United States trade deficit.
So, you know, we want to believe that free trade is not a zero sum game.
But I will tell you one equation that is, in fact, zero sum, which is that if you have a trade deficit, by definition, you need to run a capital
account surplus. This is kind of how the current account deficit is offset by the capital account
surplus. And the idea is fairly simple, which is that if you have the ability to import a ton,
you actually then have to have those dollars that are coming into the country as the consumer
in which the investment stays as capital accounts and so the the reality is that the united states
runs an incredible capital account surplus on the other side which is that there's great demand for
u.s stocks u.s fixed income u.s real, of course. And those things have also been like a
net benefit to the way the US navigates global trade. And so at the core, like the idea of
unwinding the trade deficit, it's almost virtually and mathematically impossible unless you also
unwind that current account surplus, capital account surplus. And well, what does that mean?
If we unwind the capital account surplus,
we're in time for a very challenging macro market
for US equities, US bonds, everything,
because the overemphasis that foreign investors
and creditors have felt towards parking their money
in US assets has to unwind.
And this is the unfortunate, like inevitable reality that I think everyone has to
understand and navigate at what cost and how important is, you know, on shoring some of the
capabilities that of course the administration wants to accomplish, but what is the cost that
comes with it? And are we willing to kind of make that trade-off? And also, you know, at the speed
in which it is happening,
which has also taken me a little bit by surprise and how quickly things have escalated and that
there hasn't seemed to been the intention of meticulous planning, which is the one thing
that changed my view on since February. Well, I think that that's perhaps why you're seeing now
cracks within, as we've been covering here at CoinEdge, cracks within the Trump administration between Peter Navarro, Trump's trade expert, if you want to call him that, and
Elon Musk and the like being like, what the hell is going on here? Because you've got people in
his administration who, or advisors, I should say, that are kind of caught on these other ends.
And push comes to shove.
You got to say, hey, look, this isn't good for me.
And Elon's battling a 40% decline in Tesla shares since the year began.
And so it is interesting to see those cracks forming and really where Trump's going to go.
And of course, this is, as I've said, this is not why,
like, poker is not a team sport,
because it's really hard to have everyone bluff in tandem
when they have different interests to pursue.
And the one thing I'll give you, Jeff, that I really enjoyed in terms of how you arrived at the thesis back in February was,
look, you've got a guy here who's telling you what he wants to do.
And he's telling you what he wants to do because his bags depend on it.
And so let's just do some bag analysis.
And that's essentially how you arrived at.
Interest rates are going to go down and the dollar will get weaker. But here's like kind of the difference maker. And that's kind of the window we're in now, which is, all right, Trump's forcing the Fed to blink. And now here we are. I mean, you say you're caught off guard by the speed at which this has moved. But if you really think about it, wasn't that kind of the necessity of it all anyways? Like, didn't Trump need like isn't the size of the crash kind of where trump gets the most leverage to have the fed blink
yeah this is exactly why i think the end game is still very much intact perhaps i underestimated
the severity in which this negotiating table for people to come through require such dramatic
uh volatility but the end game definitely is that
US long-term interest rate has to go down. And you momentarily saw this happen, actually,
with kind of the declaration of Liberation Day, where actually the 10-year did come in,
and momentarily was below 4%. And then, of course, it's now blown out since,
which is showing you that actually
it's not working in the ways that, for instance, I had thought that this could be planned out
if there was a little bit more coordination with our trading partners as to ensuring that outcome.
Here right now, we're essentially seeing a full-on revolt. And it's because I think there has been a
lack of preparation in assuring the international community, our domestic investors, of course, who actually are also investors of U.S. credit.
And the part for me when I noticed a sense of unease was actually the moment when Trump decided to go after Japan.
Japan. You know, it made sense to me at some level that he might go after Canada and Mexico
and do some of these banters in ways that you're exerting dominance, because, you know, they're
meaningful allies to us in the sense that like, we can kind of cover it eventually, right? We're
geographically, we're neighbors, so we'll eventually have to get there. But Japan's a
little different because the security guarantee that was shared with Japan is ultimately at the core of how Japan has therefore then basically invested in all our long term treasury.
And by the way, they hold more than China, which I was looking back through this when we were kind of looking at Trump's gamble with stable coins and what could be happening there.
How does that fit into like exporting the dollar?
But like Japan has a trillion.
China has less than that.
This is absolutely key once upon a time china was the largest holder but over time it has changed the constitution of this pie has changed and it is by far at this
point japan that is subsidizing us consumption our mortgage rates and all these things and so
For Trump to put the tariff on Japan and then actually include them in the list as an FX manipulator alongside China, in my interpretation, was a grave offense.
And I could only imagine how that would have made the Japanese government feel in the ways that then they also have to plan for outcomes that I would imagine if there was one country that should have gotten the inside track,
it really should have been. And that's, I think why you're seeing some of the back covering that's
happening where they said recently, Japan's getting priority access to come talk to the US
to negotiate trade deal and whatnot. So they're doing this, right? But the problem is,
you know, there's collateral damage, right? Like the world is path dependent and you can't just undo things. And what happened actually
in the past two weeks since this happened is China did come out and announce with Korea and
Japan that they are now going to explore a multilateral trade agreement between the three.
And now these three countries, China, Korea, and Japan,
have a very complex, long-dated history.
These are not totally natural allies
that would all come together.
The only reason it happened was because
there was just not enough confidence
being signaled in the U.S.
that the alliance would hold
the way people had anticipated.
Well, that is...
Sorry, I'll let you finish your point.
No, so what I was going to say was, even at this point, if the US backtracks a little
bit and gives Japan the special kiss, the reality is China already probably got some
kind of deal out of the ability to negotiate for having to make that announcement as a
way to escalate the situation.
So Korea and Japan already are now at least at some level going to feel
indebted to China in a way that the US would never have wanted that to be the case. So
what I'm emphasizing is that these are the moments when I'm realizing that there hasn't
been enough care and meticulousness around the plan, which I think all investors internationally
are coming to understand,
which is the tantrum now we're seeing on long-dated bonds.
Yeah, I think that that is a piece of, I don't know,
I saw you were tweeting about kind of this idea of maybe Bitcoin will outlast the dollar.
And there's a couple different places to go with questions around that
because some of that could be from a trade perspective,
some of it could be from a U.S. confidence perspective. some of it could be, you know, if you're international holding,
like Japan, holding a bunch of U.S. debt, long-term debt, and you're seeing some of what
Trump's saying and kind of where we're at, you know, if America's going to fail, you don't want
to be holding all that debt anyways. And so, I don't know, it's a very interesting question
now that we're in this.
And I guess to kind of turn it back to what you predicted in February and kind of get Jeff Park's stance now is some of that.
It sounds like some of what you had said has changed.
And the question is, you know, I think this is kind of funny to me in terms of it's not a scientific poll.
There were only there were.
Well, I'll call it scientific.
There's more than 30 people who responded to this, Jeff.
But it's like who's going to blink first? And obviously, the dynamics here were interesting because Powell was like, I'm in no rush on Friday. Markets continue to tank. He might be in more of a
rush now. But Trump is also, as you said, kind of caught in a precarious position. But to go back
to what you said, the asset to own, therefore, is Bitcoin in February. Do you still think that that's the case?
Are you still of the belief that, look, on the other side of this, Bitcoin will be higher if you have so much collateral damage to confidence in markets that things aren't going to get worse?
How do you see it playing out from here?
Yeah, 100%.
100%.
So you're even more confident that
bitcoin is higher yeah yeah the truth is there's two sides to bitcoin story right there is a way
bitcoin benefits because the money printer just goes on steroid and there's continual debasement
and inflation that is being created in which bitcoin is a worthwhile asset that you need as
a store of value. That's the generic
conscription most people have in mind in the ways that there's normalization of the world as the
trend that it was on. But there is this other version, which is kind of like the probability
of this version of the world has increased a little bit, which is that there are going to
be permanent tariffs. There is going to be protectionism. China actually may end up exporting deflation by what you now saw this week, where they lowered
the band for the FX loosening on the yuan. And those things create deflationary measures as well.
And even in that world where every country then becomes motivated by the ability to be competitive from a trade perspective, that creates a run on those global sovereigns too.
And that's actually maybe the most like violent path for Bitcoin because that's a total loss of confidence in the way that the world order has ever existed. So both scenarios are ultimately very good for Bitcoin.
I think one path is a little bit more volatile and less smooth, but the outcome is going
to be an even bigger gap in the jump it realizes.
And the probability of that outcome has increased a little bit more since I had penned that
piece in February, where for some time I had
thought generally these negotiating tactics is to bring everybody to the table and find like a real
solution to how to fund the treasury accounts. Because as you know, the general account is going
to be depleted by the end of the summer. And it was in that construct that I
thought there would be a little bit more like a 3D chest to it. What we're seeing now is that
it could still be. Maybe this still is kind of the level of escalation needed to bring people
to the table. And I can't speak to that. I'm not a politician. I'm not in the room where these
debates are happening. But I also think it's possible that escalation was necessary, specifically with China, to have them be a partner in these negotiations.
Yeah, I mean, to be fair, again, there's a lot of people are saying, look, they have they support the idea of it, but critique the execution of it.
Because as we saw in Trump's first time at this, you know, President Biden kept a lot of the things that Trump had done with China in place.
And so you can't say that, like, let's remove politics from it.
It stayed and it stayed because I assume it would have been beneficial for the U.S. to keep it in there.
And that's why Biden did. But I guess, you know, execution and idea are two very different things.
It doesn't really matter, by the way, if you end up with the same result.
Who's to say? But I guess I think that, know one piece of those jeff is just kind of again to
your point things look like they were working relative to what you penned back in february
up until about 11 p.m last night when shit started to hit the fan on the 10 year and yields blew out
and there's some kind of confusion around okay is it japan is it china who's dumping here is
a hedge fund that's really gone kaput what the the hell's going on? And I suppose we'll find out very soon. Very soon,
people will know. But I mean, what's your sense of that in terms of price action now? And some
people on Twitter are always like, Jeff Park speaks in riddles. And some of that, by the way,
is because Bitwise runs some very good products that you may just want to go with instead of trying to decipher these riddles.
And we can get into those in a sec, Jeff.
But I wish I asked this question more directly
last time we had you on,
because if I did, perhaps I would have sold,
gone to the sidelines, and just chilled for a minute.
Or maybe I would have played things differently.
So very directly, if people are watching this right now,
riddles aside, what the hell should they be doing?
Yeah, what a question.
Look, I always tell people like being long Bitcoin in the long term is the right trade.
And for those who don't have any exposure to Bitcoin, you should always consider allocating when there are drawdowns.
And you will never catch the bottom. It's a challenging thing.
Sometimes you get lucky and you can.
But it is true that there are like these short term movements that can create some alpha
in the liquid trading arena.
And I did make the point about a month and a half ago that it might be time to consider
de-risking specifically kind of after the strategic bitcoin reserve announcement when i thought it fell very short of the things that it
would have to have been part of to continue the energy in the investment post the campaign and
the election and so to me that was a turning point i was very public about that look it doesn't mean
like you have to short bitcoin you should never do that um but i do think
it is a challenging time to be long bitcoin at this exact moment the reason is i've always made
this case that bitcoin's very virtuous uh contribution to your portfolio isn't just like
the right tail of the price action it's the fact that it's very volatile. And if you ask like older people and young people, like why they pick gold to invest
or Bitcoin to invest, because they're both in their minds representations of what it
means to be a store of value, you'll often find 90% of the time, the feature in which
they spread their opinion and disagree is the volatility, meaning some people don't
want the volatility and some people embrace the volatility, right? They see the volatility of Bitcoin itself being
the need and necessity of outperformance for which they want to own it for. If you take that
perspective, what that means is the inverse outcome of Bitcoin's appeal is when non-Bitcoin assets become very volatile,
right? Because in that world, the cost of capital, right? The opportunity cost to hold Bitcoin
just went up because now you actually might own other volatile things. So when the move index goes
to 135 and VIX goes to 40 plus, the trade-off that is happening is, well, now I have other volatile things like Tesla or Nvidia, and maybe actually I can double my money trading those instead.
And therefore, I'm going to sell my Bitcoin and actually rotate into other higher vol assets.
So from this mentality of cost of capital, it is a bearish outcome when other assets become volatile.
We're not talking about up or down price wise.
We're just talking about like the fundamental inherent value of volatility.
And this is why it's a challenging time right now to own Bitcoin, because I see a world
where if the stock market continues to crater and I think we will have more of it.
There are investors just waiting on the sideline to buy the dip of the stock market first before
they actually even consider the ability to buy the dip on Bitcoin because the valuation
framework that most professional investors have ascribed to imagine that stocks trading
at a discount is a more certain discount than a Bitcoin trading at a discount.
But here's the thing. This is why this is such a seismic shift and why the global community of investors are losing their mind. That valuation gap of stocks being cheap fundamentally is
anchored on the basis that risk-free rates in the United States is the global yield curve that
everyone ascribes to and is a permanent
fixture of all financial modeling. It's part of CAPM, it's part of DCF. That whole modeling of
financial assets requires the risk-free rate to be stable and risk-free, backed by the credit
worthiness of the United States. Because this thing is changing, there is a world where we might
think that these equities being at a 50% discount is actually no longer a discount because we might
never go back to a lower rate world where the expectation of that discount rate is now going
to be a lot higher. And if you actually
like re-underwrite that yield curve in this way, you might see a bunch of equities investors
generationally no longer wanting to actually touch equities, right? And this is not crazy,
because if you look at Japan, for example, right, the stock market has basically like underperformed
for decades. And that is like,
it's often called like the lost generation. It happens. And it happens when you have this
instability with a yield curve in ways where people lose faith in the ability to underwrite
future value. And in that world, I think there could be an inflection where people then realize
if I don't put my money in stocks where can i possibly put
money to and then all roads again will point to bitcoin because the phenomenon of global deflation
is going to be fairly universal across the board well i think that that has been pretty interesting
just in terms of kind of bitcoin's performance versus the stock market it's been swift and it's
been historic in terms of the declines uh and swings, the volatility as well in terms of, you know, I think it was 5% days of swings like that.
You know, I think it was three in a row or whatever it was.
It was it's historic in the sense of that with over the last few trading days.
And when you consider that, I suppose there could be that happening under the water in terms of people just being like, look, we don't know what the hell's going on on the equity side and where Trump's going to land on this.
And so therefore, it's a better bet.
And perhaps, by the way, Jeff, could explain why Fartcoin's been up as you people think about what the even further piece is.
I don't necessarily buy into that.
I don't trust anything beyond some of this stuff because these markets, as we've seen, maybe don't trust them.
I don't trust anything beyond some of this stuff because these markets, as we've seen, maybe don't trust them.
But I think in general, how do you see kind of things shaping up now?
Because I do think it was really interesting, and I think we have the chart, just in terms of expectations around even the May meeting and going back to this idea of Trump v. Powell, how do you think that calculus has now also changed, given where we're at?
Yeah, yeah, yeah.
Has he backed him into a corner the way that he wanted to, I guess, is the main question.
Well, I don't know.
I mean, the Fed fund futures would imply that we are in the zone now for a cut.
I think it's over 55% as of last night.
It could be higher today that we'll get a cut on May 7th.
But the thing is, I actually am not sure if it matters.
The market knows at this point, deep down, that the Fed can really only control the short end of
the curve and that the long end of the curve has always been determined by our foreign and domestic
creditors. And there's actually very little the Fed can do about that shape of the curve. This is actually kind of why you saw yield curve control as measures that
Japan at once upon a time had enacted the US in different ways as well, where you actually have
to get like secondary market participation to control. And it's not really going to come from
just like anchoring, you know, the short term model rates. And so I think Trump to kind of knows this,
which is why you also see him flip flop sometimes where he, you know, actually does praise Powell
from time to time and says, you know, you can do whatever you want. He's doing the right thing.
And then he'll go on his, you know, rant and say, actually, you know, you should cut rates. And,
you know, you see him flip flop a bit, but the danger here being that we might get the rate cut that we think is the catalyst and the long end of the curve actually will not reflect it and just becomes a steeper curve.
And I think there's a real good chance that could happen. And that would be like incredibly terrible.
Right. That'd be so bad because part of like what Bessett needs to accomplish at this point is that all of the T-bill issuances that has been over anchored to how we fund the treasury eventually needs to get termed out again.
And you can't term it out at the cost of capital if the long-term rates don't come in.
And so this is actually like a U.S. funding crisis at some level in which some folks would share the view that was the biggest blunder of the Janet Yellen era.
And so all of this points in a situation where people are focused on the Fed, but I worry,
actually, it won't matter that deeply as much as stock market valuations in themselves, because
stock market valuation actually does come from long- rates, right? It's not coming from
like the three month rates. And in that case, there is going to be like more of your typical
collateral issue and kind of the asset leverage in the system type issues. And that's why I think
the bigger catalyst for Bitcoin is actually not a rate cut, it's going to be some coordinated
for Bitcoin is actually not a rate cut. It's going to be some coordinated treasury plus
Fed action on some new program, some new, like I call it the Fed Scrabble, like acronym
of random words they put together to make it sound official, but it's all the same thing.
We all know the tricks and it's basically to roll out the ability to finance our long-term debt.
You actually kind of saw this back in March
where the Fed actually did change
like the pace of the runoff on US treasuries
where they were going to ease off a little bit
on the QT process, on the monthly caps.
And that was really good.
And that was actually a pretty powerful
kind of signal to the market.
I think they care more about that stuff because those are the things that have like more long-term implications.
And you're going to have to see a world where like the Fed again, like steps in as part of being the buyer of like the Treasury's new issuance curve.
I actually have a hard time imagining how the U.S. can affect the long term rates without the Fed stepping in.
And that is the sign I think everyone's looking for.
If you see that sign, like that's when, you know, you got to go all in on Bitcoin.
And I think that's and that's been the main bet for a lot of people for a very long time is that just in game theory wise that you know again more pain forces people in power to to do this i think what is interesting though is that
we are seeing to add to the politics piece and this is kind of again what you mentioned in terms
of your note back in february is that like people can't model statecraft and and the idea of
politicians now breaking with trump is also interesting. Last night, Fox News had like a who's who of senators, including Tim Scott and Ted Cruz sitting together, basically being like, what's your take on this?
How screwed are we? And they're like, we're kind of screwed and midterms are gonna be a bloodbath.
Like Trump may be thinking in four terms or in four years, but maybe even longer.
I have this joke with my friends that like, wouldn't it be funny if like all of this craziness is that Trump as like an elderly wish, you know, now contemplating his long life and his legacy, just wants a photo with all of the world's leaders at Mar-a-Lago and post it up on a gallery wall in his dining room.
Senators don't.
and post it up on a gallery wall in his dining room and just like that's the end game like that's
what Trump wants to have all these world leaders come over and take pictures with him and once
that's done like he's actually like that that was that was his goal right like I know it sounds
silly but like that well doesn't sound that silly considering that the alternative is hey we're
gonna have a bunch of people by the way that we're deporting a lot of people in the country
that could be low-wage workers we're gonna have a huge manufacturing boom, by the way, that we're deporting a lot of people in the country that could be low wage workers.
We're going to have a huge manufacturing boom here in the U.S.
And so I think there are also people calling that out now, even on the right, as less less crazy than what you just described in terms of, again, take take who you know him to be at face value.
And economically speaking, I don't know.
We see these these I keep watching these interviews and it, it is hard to believe that if you're so, and I see it as nearshoring, by the way, Jeff Park, in terms of like what he's really going after.
And maybe this could be wrong too, but I think this just speaks to like, I don't know, I would consider ourselves on this call to be smart people.
And there are a lot of other smart people who are trying to figure out what the hell is the real end game here. And that is perhaps some of the reason as to why no one
really knows and markets are acting the way they do. But I see it as more of maybe potentially a
realistic goal of maybe trying to shift some of these jobs to Latin America, because at least
that would match with some of his like, anti like you have a stronger latin america then fewer people
try and migrate up here and that could still fit what he's wanting to do um and that might be able
to you might be able to squint and kind of see everything working together and some of the allies
that he has in latin america i don't know yeah yeah no look i I think the number one kind of misconception of this idea of free trade is that like free trade works because at the core, the floating effects in which the dollar is facing the foreign currency itself is the arbitrage, right?
Like when we say Chinese labor is cheap, like what does that mean?
Well, it's cheap because there's a value to the yuan
versus the dollar. And so the whole thing is actually going back to this idea of like trade
deficit versus capital account surplus. And, and so one way you might actually try to bring some
clarity is to, is to lessen the gap of these disparities. Maybe part of the way that this works
is actually through a total global deflational phenomenon, which is the antithesis of the way
the US capital system works. The idea of credit creation and inflation at 2% being a normal thing,
at 2% being like a normal thing. It very much attacks the core of this principle.
But, you know, I said something the other day that I think actually kind of took off on a
firestorm with a lot of opinions and it got pretty passionate. And, you know, I believe I'm a
capitalist and I believe in free markets. But, you know, the reality is like, it is true that like 90% of like US stock
wealth is held by 10% of this country's population. Right. So people will say like, Oh, Jeff, like,
you're not being thoughtful about the fact that everyone actually owns stock, like 80% of Americans
own stock. So like, it hurts them too. And I'm like, No, no, no, I get that. I'm saying the totality of the
stock market wealth is concentrated. So the relative destruction that can happen is much
more heavier to one part of the population than the other. And then people will say like, well,
this is going to hurt like everyone in their retirement account and all that. I'm like, no,
no, no, I agree. Like, I'm not saying that this is not a net negative but think about why like the american
middle class or median class as i call it are suffering because the asset inflation in general
has gotten out of control right so think about how long your dollars can go further if actually
home prices just went down by half right or? Or if colleges didn't cost so much,
like colleges now cost per year
the actual net worth of an American household
as a median for one year.
Like that's a crazy number.
And so this asset inflation I'm talking about
is fundamentally happening
because of this imbalance of like the wealth
amongst the population.
So yes, it will suck for all. But imagine if all the other important prices of things came down
and relatively your gap then felt it was not as wide as it was for most of the medias.
Like that's the crux of the issue. And I think this is partially why Trump is doubling down
on the stock market crashing, because of course he doesn't want that. And I think this is partially why Trump is doubling down on the stock market crashing,
because of course he doesn't want that.
And I think he too knows in the end, like that cannot be the solution for like US capitalism
to work, but it is incredibly popular.
It's a popular-
I get it.
I mean, it's a very tricky thing because again, if you're taking a populist to face value, it's going to be one of those things that, yes, even when I was at Yahoo, it always struck me to be like, hey, look, we focus so much on this, but half of America doesn't even touch the stock market. a very tricky plane to land because if you if you get any of that calculus wrong it does spill over
into as as people know if you're dealing with recessions and you lose your job you're you're
also in a worse spot uh and so i get it i get it and i understand kind of like the risks but i guess
to wrap this up jeff when we come down to like what people should be watching for and i wish i
asked this question last time too in terms of checkpointing things, because like, it's one thing to talk about,
hey, this year is going to look great. But it's another thing to be like, hey, look,
you should really be focusing on this by this date. Because I think if we went back to that
in February, it probably would have looked at a little bit of like the decision making process
and known that Liberation Day was going to matter much more than it did. So what is what are you
looking at in terms of the checkpoints to check in on how these things are going? Totally. There's two dimensions. One is
macro, one is micro. On the micro side, I always make the case that Bitcoin moves because of
marginal demand and supply. Like at the end of the day, it moves based on the flows. So if you see
idiosyncratic actors coming into the arena and actually are making moves,
that is worth something, right? It actually was meaningful that MicroStrategy was buying Bitcoin
last year. And it will be meaningful if another corporate does that. If, for instance, GameStop
comes in and actually starts to lever their balance sheet more to buy $5 billion of Bitcoin,
those things matter. So on the idiosyncratic side, you always have
to pay attention to the narratives that are developing about who is actually stepping in
and affecting the price discovery day to day at the marginal level. I still think that is
the most important kind of thing that will provide room for an inflection.
So pay attention to the corporates. It's one of the reasons why we are
really excited that Bitwise have launched the Bitcoin Standard Corporations ETF, where we're
essentially providing access to public equities that are buying Bitcoin on their balance sheet,
as there are now over close to 100 companies that are doing this at a global scale. And I believe
that trend will continue. So we have to keep an eye on that. This is the next kind of ready and actionable
capital on the sideline that you might see come into play. So that's the micro lens.
The macro lens for me is that I think this is probably going to drag a lot longer than people
now have anticipated because it has gone to the point where people truly are
questioning if this is going to be a re underwriting of the global social order, like contract of the
dollar hegemony. And once that genie is out of the bottle, it's kind of hard to put it back.
And I think it's kind of, unfortunately now, like a little bit more out. Um, so the catalyst I'm
paying attention to is, uh, is two things., I shared with you already, if there is a new program that is jointly enacted with the Treasury and the Fed in which they will try to affect the long end of the curve in some format of QE plus YCC, that I think is an important catalyst. That will be one of those Mario
Draghi, we'll do whatever it takes kind of moment and it'll be a big signal in the market.
The second thing is, and this is the timing question, if they do that, when are they going
to do it? And I think the timing is anchored to the actual TGA, the Treasury General account, where there is going to be
a run on sometime between like July and October. And at that point, there's actually going
to be a debt ceiling issue. And there won't be any ability to navigate unless we go back
to the drawing board about raising the debt ceiling. So that to me is like a little bit
of a soft catalyst sometime in July and August for people to really just get together in the room and try to figure
things out. You know, that's only four months away at this point. And it wouldn't surprise me
if like we were just in this meddling period until like those two things might be able to be solved
together. Yeah, I think I guess I guess one question too on that,
and this will be my last as we wrap up here.
And again, purely hypothetically speaking,
if there was someone out there
who may have read your note back in February
and been like, okay, this sounds good for crypto in general,
and then revisited it on April 9th
and was like, hey, I guess directionally,
things were good in terms of maybe potentially selling earlier if you had or moved to stables, as some of our guests have mentioned in the weeks and months prior.
But now to be here, after everything that's happened, like you said, the speed of which way faster than a lot of people expected.
And now you're here.
Would Jeff Park think that things risk reward if you hadn't sold because i think a lot of our
viewers and we're getting some questions in terms of you didn't see this happening so quick
do you get the sense of like okay things can't get much worse or are you in the camp that nah
they still could because it might need to look i am in the camp camp that the rule of thumb for crypto and Bitcoin in particular is you never want to be catching falling knives in general.
Yeah.
That the most important thing in trading crypto is actually capital preservation because it's the drawdowns where people get killed.
The upside is easy because that's actually like a thing you can constantly underwrite
as an inevitable outcome, but it's the drawdown that really kills you. And so,
you know, the general kind of adage in investing is you want to buy low and sell high. And that's
kind of what you're told. I think in crypto, the rule is different. the rule is you actually want to buy high and then sell higher meaning you
want to buy it not at the bottom but the moment you start to see consolidation from the bottom
where it is running up and it means you won't get the floor but the probabilistic outcome of you
getting slightly above the floor is a much more better like Bayesian outcome than trying to
buy like a head and then actually finding that that was not the floor, which is more likely to
happen. So the risk minded approach, as I have shared is it's okay if you miss out on the first
inning with Bitcoin. It's even okay if you miss out on the second inning but you want to be there for the third and on and and the ability to action quickly when that could be um is more important than um trying to
preemptively buy for the first inning uh because it's very hard to know uh with bitcoin what that
downside volatility could look like such good advice. And I guess the main point being that we're not in the ninth
inning in your estimation here. It's not, it ain't over. Yeah. Yeah. Like for instance, you have to
imagine like there is going to be real blood on the street. Like I actually think there isn't
enough blood yet. And if you zoom out actually for the second, the S&P is down, but it's like
down 20% relative to like what incredible growth we've had for like five years. So actually there's not that much blood on the street. This is, this is the thing. Like we can,
we can be a little bit myopic as financial professionals where we pay tick to tick,
but the long-term trend is like, this isn't really hurting that many people. Now you have
to watch the credit spread, right? And that's where like the health of the economy really comes
out. The one thing I want to say in March that was really amazing to see
was there was a moment when like the credit spread was widening from like 300 bips to 350 bips. And
people were like, oh, it's finally happening. There's going to be a credit deterioration and
maybe a liquidity crisis. We should all get on hold. But in that same period, you actually saw
the U S rates come in. So the total rate actually saw the U.S. rates come in.
So the total rate actually did not change that much.
This is really important because it's the total rate that actually matters at some level as to how people think about that cost of capital.
Like, yes, if credit spread goes up, but U.S. rates go down, it nets itself out.
What we saw the last two weeks is finally both of them blowing out.
So we saw, of course, the 10-year blowing out.
The credit spread is now at 500.
That's bad.
Like now we're talking real credit issues.
And so this is the other thing that I feel could be like a catalyst for Fed intervention
at some level.
But yeah, things can get a lot worse in my opinion still.
Yeah, that's why it's important to keep our eyes on all this
and have great guests like you.
I can't thank you enough for coming on here.
Jeff Park, head of Alpha Strategies over at Bitwise.
Thanks again, man.
And we'd love to have you back as these things develop
because this shit's moving quick.
And I just think back to February when we had you on.
At least we had you on then because smarter people than me could have read
the tea leaves and been like all right i'm out and uh and maybe they'd be in a better position
now look i i generally um am in the priority of trying to share what i know in case it helps
people think about their own trading decisions but the reality is we're all long bitcoin right
i love bitcoin i'm long bitcoin um but at the end of the day you know these these tactical in case it helps people think about their own trading decisions. But the reality is we're all long Bitcoin, right? I love Bitcoin.
I'm long Bitcoin.
But at the end of the day, you know, these,
these tactical windows can be important.
And at the end of the day, we're all learning together here.
It's an important thing.
Missed opportunities.
You always tell yourself one Bitcoin equals one Bitcoin. And then you go from there and it is true.
Yeah.
Thanks again.
There you go. Thanks again. There you go.
Thanks again, man, for coming on.
Appreciate the time.
Always good to see you.
Same, same.
Take care.
All right.
Likewise.
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