Key Takeaways

Trump’s public theatrics against the Fed, including pressuring Powell, targeting governors, and appointing Stephen Myron, show how monetary policy is now fully political. With U.S. interest costs surpassing $1 trillion and deficits at $2 trillion, the idea of an independent Fed is collapsing into a Treasury-Fed merger resembling a wartime economy. In this environment, Bitcoin stands alone as the only independent monetary policy, immune to political coercion, while institutions like Harvard signal its growing legitimacy by allocating to ETFs. At the same time, private innovation continues, Block’s new modular mining rig challenges the hardware duopoly and shows how Bitcoin infrastructure can advance regardless of state theatrics.

Best Quotes

“The global monetary system should not be beholden to the whims of theatrics between a sitting president and the Fed chair.”

“Bitcoin is the only truly independent monetary policy in the world right now, governed by math and physics, not politics.”

“Trump’s clearing house at the Fed shows us: meet the new boss, same as the old boss, different context, same consolidation of power.”

“There’s no Bitcoin CEO for the White House to bully. The U.S. government has to pay the market price like everyone else.”

“Harvard’s $100M ETF buy is a seismic signal. In the endowment world, Harvard is the BlackRock of higher education.”

“If Proto’s rigs really last 10 years with modular upgrades, that saves miners 20% on fleet refresh. That’s massive.”

Conclusion

The U.S. is drifting toward empire-style finance, where deficits, consolidation of power, and politicized Fed decisions undermine any pretense of independence. Bitcoin remains the only monetary system resistant to manipulation, offering certainty in contrast to political chaos. Institutional adoption and hardware innovation show that while governments tighten control, Bitcoin continues to grow outside their grasp, positioning itself as the neutral anchor for the future.

Transcript

(00:00) The following is forformational and entertainment purposes only and should not be construed as financial advice. This discussion is a presentation by 1031, the leading institutional investor focused on the Bitcoin ecosystem. 1031 has over 10 years of experience in Bitcoin and has deployed nearly $150 million into the leading opportunities in the space. To learn more, visit 1031.vc.
(00:25) And uh it looks like it's about 3.1 billion. went up a little bit or a lot. Uh, so the 2.7 is now 3.1. I'm not aware of that. Yeah, it just came out. Yeah, I haven't heard that from anybody. Yeah, it just came out. Our about 3.1 as well. 31 3.2. This came from us. Yes. I don't know who does that. You're including the Martin renovation. You just added entire capital. Yeah, you just you just added in a third building is what that is.
(01:02) That's a third building. No, but it's it's a building that's being built. No, it's been it was built five years ago. We finished Martin 5 years ago. It's part of the overall work. It's not new. So, we're going to take a look. We're going to see what's happening. Uh, and it's got a long way.
(01:23) Do you expect any more additional costs? Don't expect them. Uh we're we're ready for them, but we we have a little bit of a reserve that we'll we may use, but no, we don't expect to be finished in 2027. Um I must admit, I saw a bunch of the clips on X and other parts of the internet. Never saw that part of the conversation. Didn't realize he was calling out line items of the renovation to him in person.
(01:48) Yeah. I I uh I gotta say some of the best whatever you think of Trump um and there there's a lot that can be said about Trump, the man has delivered some of the most iconic political moments of certainly this century. And I think that's that's a top fiverr for me without a doubt. It's so entertaining.
(02:12) I mean, I've I said before uh that I would have paid to see like big brother White House or something like when Joe Biden was in the the the White House just to like see what he was doing on a dayto-day basis. But I would probably pay more to see like big brother White House and just watch Trump all day. Brought in Tim Scott as the muscle to be like, "No, no, it's 3.1." Yeah. Right.
(02:37) who by the way doesn't have a hard hat on. Like the hard hats really make the whole thing that they're standing there in these hard hats and Tim Scott's right next to them with no hard hat. What's the what's the wardrobe choices? Like I mean the the theatrics behind it is uh you know it's something to behold. This is the setup for that.
(02:54) Like they're like okay we're going to we're going to put you on TV and just humiliate you in front of TV. So like get ready here here it comes. And we skip the part where he slaps his back at the end and says, "This guy's this guy's about to go lower interest rates." Um, some some really, you know, some some middle school uh hallway bully power games uh going on here.
(03:17) Well, it reminds me of the one there was one where he was in the was it was it the White House lawn where there was a lot of uh I think they were construction workers hanging around the background and uh they were going after Pal again or was that a different was that someone else? Yeah, we got uh I got lamb I think I talked about this I forget if it was here or RHR but I brought it up.
(03:41) We had cold opened with it on RHR and I made the uncou statement of why is uh why is Donald Trump asking construction workers about interest rate policy? It's probably not their core focus and had a bunch of construction workers on the YouTube comments saying, "Hey, I'm in construction and I understand interest rates." But yeah, that was a that was a scene as well.
(04:06) The fact that the fact that we can't even fully remember all the details of all the different times Trump has publicly uh limbasted or tried to humiliate or otherwise uh viciously critique the Fed chair. I think shows uh is a good indication of where we are right now with uh monetary policy in the US and its relationship to uh the rest of the government, the Treasury Department, etc.
(04:26) Yeah, it's a and just the news cycle, right? Because like when was this? This was It feels like forever ago. We put out our artisal alpha, you know, once every few weeks or once every month or we'll just see. But this seems like it was forever ago. I know it was it occurred since the last time we did Bitcoin Alpha. It was like, you know, a few a few days or maybe a week after the last episode of this.
(04:57) And I I remember um being very frustrated because I knew as soon as I saw it like that's the ultimate cold open and we just missed the chance to do it on the last one. So uh here we are back again and uh even though it's a few weeks old I think it's still it stands the test of time. It does and John I think you used the perfect word earlier theatrics.
(05:15) Uh and I think it's an incredible juosition of the world that we operate in and why we operate in this world. Many don't realize the global monetary system should not be beholden to the whims of the theatrics between a sitting president and sitting chairman of the Federal Reserve. That is essentially what we just witnessed was bullying tactics.
(05:39) For those who don't recall, they were there at the construction site as the government was trying to find a roundabout way to fire pal. Um, and I think at one point they were trying to pull the technicality of the Federal Reserve wasting money, taxpayer money with that that renovation they were doing on the reserve building in DC.
(05:58) Uh, theatrics, it's been happening between Powell and Trump since before Trump was even elected. And we're in the middle or tail end of the summer doldrums. I think this is like really the peak summer doldrums, but it ends next week. We've got Jerome Pal and others in Jackson Hole, Wyoming for their annual event.
(06:24) There will be no interest rate policy decisions made this month outside of some very extreme market volatility which doesn't look like it's going to materialize, but it's it's a pretty boring week. I think markets are down, Bitcoin's down, and I think it's just due to the overall uncertainty of the result of the theatrics that we've been seeing play out over the last 16 months.
(06:44) Yeah, I mean it's the theatrics word, you know, to stick with that. Um, I I do think is relevant to just kind of consider, you know, the the nature of where we are with the system. I think it's in some ways like instructive um for, you know, you could say Trump is violating norms and many people have made that um that case both in this in this term and his prior term.
(07:11) um and he's not, you know, respecting the the system and the way it's set up. Um, but I think it's it's interesting and notable that we this pulls back the curtain a little bit on the fact that this is a system where you know I think we have a it's easy to have a view especially coming from say mainstream academia from your college classroom um from working whether it's on Wall Street or corporate America a bunch of different kind of white collar jobs it's it's kind of very easy to imagine that the the men behind the curtain have uh
(07:42) have it all figured out And um you know they have all the dials properly calibrated and um you know they're they're sitting up there on uh you know Mount uh whatever Mount Olympus or Mount Marin Mariner Eckles building as the case may be in this in this situation and you know dispassionately evaluating every all the data flow that they're getting um and just making the the right decision at all the time or as right as possible based on the data they have with no kind of personal dynamics getting in the way no politics nothing
(08:13) like at and uh it's it's helpful in some ways and instructive to have like the bull in the china shop of Trump come in and just show like this is a system that's you know based on a few people and their interpersonal dynamics making kind of flying by the seat of their pants and uh having to jockey for position and negotiate between many many different dynamics very few of which actually relate to being data dependent um and kind of dispassionately evaluating what's going on in the economy Um, so the theatrics are are new
(08:45) and and different. We haven't seen them from a lot of presidents, but I think it it it probably should help people understand um some of the Marty, as you referenced, the potential pitfalls and frailties and downfalls of a system that's governed by, you know, a few lawyers and and bankers and politicians arguing with each other and trying to intimidate each other and um you know, uh being reactive to many dynamics that are not actually directly related to what's happening in the the everyday the lives of everyday Americans.
(09:16) I think it's it's instructive to see it kind of play out this way. Yeah. But be careful what you wish for. You may uh want to replace the interpersonal relationships and decision-m that that is incumbent in the system right now with Pal and his cronies with Trump and whoever he decides uh will succeed u pal.
(09:43) I think it's meet the new boss, same as the old boss, different context. And I mean that's what you have next on the list. There was a an abrupt resigning on the Federal Reserve Board of Governors by Adriana Cougler last month and Steven Mirren uh has been nominated by Trump to replace her. And what I I saw a bunch of tweets about Steven Mirren specifically as it pertains to Bitcoin.
(10:08) And apparently he has some tweets out there saying that Bitcoin fixes this and he seemed positive, but I couldn't tell tell if they were positive or if he was trolling Bitcoiners. I I think so. I I don't think he was explicitly trolling Bitcoiners. I think he may just be aware of the meme.
(10:27) I don't think you know his his if you look up Steven Myron Bitcoin fixes this um you know you'll find a couple of these examples where he's responded. Uh, but I think usually in situations where it's I can't remember the exact details of each one, but like Bitcoin presumably did not fix the thing that he was responding to, so it's a bit of a joke.
(10:43) Um, but you know, otherwise I don't think he's had a lot of public opinions about Bitcoin specifically. So that he's even aware of that meme and you know felt it appropriate or or humorous to kind of go out on Twitter and respond to random tweets with it for very little fanfare to me doesn't suggest that he's a you know an outright Bitcoin hater certainly and and maybe is paying attention to some extent to the culture.
(11:01) The more interesting thing about him, I think, is people may recognize his name as um one of the authors or the co-authors of a Hudson Bay Capital paper uh that came out last year about it's called I think it's called a users's guide to rearchitecting the global trade system or something to that effect.
(11:18) But basically uh Myron's one of the chief kind of architects of many of the policies that Trump appears to be following or trying to put into place with reordering global trade flows and capital flows. He's been Myron's been an advocate of certain targeted tariffs. I think maybe not as uh as much of a blunt instrument as as Trump has kind of used them.
(11:37) Um not to the same degree, but targeted tariffs, targeted capital controls. Um basically making the the rest of the world in his view kind of pay their fair share for the broader kind of defense umbrella burden that the US has provided pay for the privilege. you know, he's uh suggested a user fee on um treasury holdings to make people pay for the privilege of holding treasuries as their reserve assets.
(12:00) Um and notably at the end of that paper, uh he did make one one reference right at the end to a reordering of that system being uh positive for neutral reserve assets like gold and in his words cryptocurrencies. So he doesn't say Bitcoin, but um you know Bitcoin I think is as we all know increasingly the only cryptocurrency quote unquote that really matters from a geopolitical perspective.
(12:20) Um so interesting notable that that's the guy that Trump appointed to replace uh Adriana Cougler, the Fed governor who randomly uh resigned without any clear explanation a couple weeks ago. Um, so another yet another interesting piece in the overall Trump Fed mosaic that continues to evolve and I think is taking us in in one particular direction. Yeah.
(12:50) And building on the theme, it seems like Trump is really trying to clear house and the board of governors. Uh, apparently I'm just being made aware of this due to the list that you put together, John, but President Donald Trump on Wednesday called on the top policy maker at the Federal Reserve to resign after one of his allies alleged that she committed mortgage fraud. In a letter, oh, I did see this.
(13:09) In a letter dated August 15, Federal Housing Finance Agency director, Bill Py, urged the Justice Department investigate a pair of mortgages taken out in recent years by Fed Governor Lisa Cook. Yeah. Um, so yeah, this just to hit uh shortly before this episode, uh, a truth social tweet. Uh, Trump demands that Lisa Cook quote must resign now exclamation point exclamation point exclamation point in classic uh, emphatic Trump fashion.
(13:40) Um, and it's similar to, you know, the what we referenced up on the top of the top of this episode. Um, Trump's attack on Powell for the the renovation of the Mariner Eckles building, which is apparently overbudget, which, you know, very likely is over budget. But in both cases, like, you know, maybe that's over budget, maybe Lisa Cook, I have no opinion on this, obviously. this just came out.
(14:03) Not don't know the facts of the case, but maybe had some sort of like impropriy related to a mortgage he took out a few years ago. But in both cases, like clearly looking for any excuse at all to on the margin point to wrongdoing or or something that um you know, you could use to to get Powell or Lisa Cook or anybody else to to resign.
(14:30) I think just you know shows you it's on on the same theme of Trump's I think this is Grant be curious to hear your thoughts but it seems to me there are all sorts of you know in politics you'd call them dirty tricks right and all s both sides always pull dirty tricks of different kinds there are all sorts of dirty tricks and levers you can turn to kind of get the leverage that you want and it seems like we're driving to a world where for better or worse as Marty referenced Trump's going to get his way on this you one way or another and he's going to get the the Fed board that he that he wants and needs to pull off his agenda.
(15:03) Yeah, I don't have much to add to that. I mean, it seems like the tactics are becoming like more out in the open than they have been in the past and they're escalating more than what we've seen. Like first it was uh jabs with um you know competing press releases about Trump calling for um actions from PAL and then you know another press release that was sort of a response from Pal and now they're just putting it on video of them in the same uh in the same place and trying to intimidate him that way and uh you know there either way is this is just showing
(15:48) how political the system is. Um I think it's inevitable that uh that when you see these tactics that um it has some type of influence one way or another. It either influences the people who are charged with making these types of decisions to do so more in line with what Trump is wanting or they're digging in their heels for their own political reasons and it's having an impact uh for that reason.
(16:21) And I think it just highlights that like it's it's kind of insane that it comes down to politics in the end anyway that that that there should be someone or some group that can have influence or some group that can uh have the power to resist influence. Um you know it's a double-edged sword. Yeah. And actually reminds me of a a great conversation on the Tucker Carlson podcast, funnily enough, that I listened to yesterday with Aaron McIntyre.
(16:50) And I think it um it really highlights one of the key issues that he was pointing out during that conversation, which is when in when you have a a country, a nation, state, whatever it may be, like it only works at a certain scale. Um, the American Constitutional Republic as it was designed was supposed to be extremely distributed, limit the federal government and states were were tasked to lead the way, make their own decisions.
(17:19) But as time has gone on, 250 years have passed since the Declaration of Independence, we've developed this massive empire. And when you have empire, history has taught us that the the only way to garner control and keep control is to consolidate power. Um, and as it pertains to the Trump administration and what they're trying to achieve with this economic reordering, particularly using the Treasury, they have to consolidate power within the Treasury.
(17:50) And I think this is a theme we've been talking about the last few episodes. It seems very clear it's moved from somewhat implicit to overtly explicit. They're trying to merge the Fed and the Treasury um to to make sure that they can achieve their economic goals. And I think this is a very important fact to realize just the scale of the US federal government.
(18:17) And if it's going to continue operating at this scale, it needs to consolidate power more and more. Um, not only on the financial side, but in the bureaucratic sort of administration side as well. I think that's the big question of our time is like do we want to keep going down the path of empire or work backwards towards a more distributed um system that that is probably advantageous for the average American at the end of the day? Yeah.
(18:52) I mean, look, like um I fully echo all that. Um, and I think we're prepared to talk about a few topics today that may be more of a white pill on on that front. And um, certainly we're all here for uh, the reason that uh, we we think we in have found in in Bitcoin and other distributed technologies the the ability to maybe help move uh, the US back more in that direction.
(19:19) Um but yeah, I mean I would I would just say too it's like you know there was a there was a great chart that was going around um this week on Marty to your point on kind of the Fed Treasury relationship of US interest expense this year broke year-to- date uh um trillion dollars for uh the first time at this point in the fiscal year. We got a couple uh months left in the fiscal year, but um even with um the you know the surplus that we had uh in June thanks to some tariff bump, you know, we're still tracking to um $2 trillion um deficit for the year.
(19:56) Interest expense is all-time high, you know, year after year after year. Um we are, I think, on a um interest as a percentage of total receipts. last month was like 130%, something in that range and we've been tracking 100% plus for many months. Um so you know at the end of the day um if we're in a situation where the fiscal uh backdrop is getting more and more stretched, more and more challenging even with um you know we're not in a recession, we're not in a declared war, an explicit war. Um unemployment nominally is reasonably low. Um the
(20:35) economy is from you know the basic metrics that you would look at on a macro scale reasonably healthy like this isn't a you know crisis moment and yet here we are with this massive and parabolically growing interest bill. At the end of the day it's going to get paid like the sovereign is is going to fund itself like one way or the other.
(21:01) And I think the market has not fully digested yet that reality that for the last 50 plus years we haven't or really since World War II, we haven't had we've been able to have the Fed Treasury accord that we've had. We've been effectively an economic peace time, you know, most of the time between the Fed and the Treasury with a few blips. You know, you could argue maybe not so much in the 70s.
(21:19) Um, but in general, like certainly since the Reagan era, we've had this happy equilibrium where the Fed could kind of do its own independent monetary policy thing. Treasury could do what it was going to do. Um, debt to GDP was much lower and manageable. Uh, US treasuries were the de facto reserve um, asset of the world. World couldn't get enough of them as it was global, as we were globalizing, as China etc.
(21:43) were growing. Um, and I I don't know that most people have yet considered um what the world looks like when when that's no longer the case, when you don't have that headroom and that flexibility for Treasury and Fed to kind of happily coexist and do do whatever they both want.
(22:03) Um, and at the end of the day, I just don't think you end up with in this highly political um, monetary system that we're talking about, I don't think you can sustain independent monetary policy uh, in a world where the sovereign is coming up on, you know, a funding crunch. Um, one one of those two things is going to ultimately get sacrificed.
(22:27) And I just, you know, no no government in history has decided to lay down and let itself uh default or radically retrench its obligations um and get its fiscal house in order until it was absolutely, you know, essentially required to by, you know, a change of of form of government or the change of state. Um and so I don't think this time is going to be any different.
(22:45) Uh the political system that we have, I think, suggests um anyone who's still banking on independent monetary policy needs to uh ask themselves what time it is. Yeah, the only true independent mon monetary policy in the world right now is Bitcoin's monetary policy. Um, yeah, absolutely. Math, physics, um, it certainly seems Yeah, what a time to be alive.
(23:15) So, what do we think is going to happen? We've got Trump calling for rates, thinks they should be 1%. Scott Percent, a bit more uh bit more hawkish, saying he thinks they should come down 150 or 175 bips, which be what in the 175 to 225 range. Yeah, I think we I think he'd be what I would like sub sub three like two and a half um off of current FFR. So like call it 3%.
(23:47) Um, so, you know, comparatively restrictive versus Trump. But yeah, I mean I think uh that's you know there are a lot of people who you know on on Wall Street or in corporate America that just based on um how long we've kind of been in this uh this Goldilock zone, I think most people and myself included, everyone on this call included, um a lot of our listeners probably like don't really remember a time when anything that I'm describing like prevailed. Like you could have had a full career like if you came into the workforce in like the
(24:22) early ' 80s like you like a lot of our our parents did let's say um you know you could have had a full career and be maybe you're on the point of retirement now and all you've seen really in your working life is is the the Goldilock zone that we've been in. And I still think there's a lot of, you know, um, uh, resistance to the idea that that's not something that, uh, it can last forever or is going to last forever.
(24:49) Um, but as you said, fortunately, we have, uh, we have immutable monetary policy that can't be that can't be pushed around, um, and can't be shoved in a you a basement and forced to wear a hard hat and play the stoogge on television. Yeah.
(25:09) Yeah, I mean and just building on this theme moving from like the fiscal side and the Fed treasury side to industrial policy like it seems like there is some desire to consolidate influence on the industrial side of things too. I mean that was the headline earlier this week. The US is considering up to a 10% stake in chip giant Intel, which has been uh how would I how do I say this as politely as possible? It has not been fairing as well as it was when Andy Grove was alive and at the helm.
(25:41) Yeah, it's uh it's it's been a rough one. It's been a rough what 20 years. Pull up an INTC chart. Um yeah, it's it's not been super pretty. uh there was a glimmer of hope maybe 10 years ago but uh especially in the last you know 5 years with the the ramping of um competitors AMD and then Intel's kind of failure to participate in um the massive kind of AI surge uh in the last few years certainly not a not a great situation for the company to be in got rid of the CEO last year but you know whatever your view on the Intel Intel as
(26:18) a stock Intel as a company Um, you know, I feel like this headline is kind of like, you know, it's been on CNBC. Um, if you've watched, you know, it's been on, you know, the Wall Street Journal, there's some headlines about it. But I I feel like the from my perspective, like mainstream news is still kind of underrating what a notable shift this is and shift this would be.
(26:43) Like we talked last week about or uh last episode, you know, a month ago about the Pentagon becoming the largest shareholder in NP materials, which is the one of the leaders in kind of rare earth production in in the US. Um given the the constraints on the the China rare earth side.
(27:00) Um and I think you could maybe brush that one under the rug and say, well, that's still kind of a small company. Like that's this one like niche area of the economy. Yeah. It's like it's this strategically important asset and especially with the the choke point of kind of Chinese materials like yeah maybe there is some you know one-off case you could make that the defense department should have more like a heavier hand in in a company like that and securing those supply lines like okay you know one one example of something doesn't make a trend um but Intel's like you know it's it's a fallen angel but it's like one of the great American companies of the last hundred
(27:32) years um one of the you know exemplars of ostensibly, right? Like um you know, free market capitalism, the free market system of you know uh the original effectively like Silicon Valley company um and you know despite its recent status like a a real industrial giant of um this nation's history in the last 100 years and the government is talking like fairly casually about taking a 10% stake in the company and becoming its biggest shareholder.
(28:07) Um, you know, again, like that's that seems uh extremely noteworthy and I think as to our conversation on the prior topic, like you know, a sign that you need to check what time it is. Um, it this feels increasingly like, you know, the wartime economy playbook um is is alive and well. And um we can talk all day about, you know, whether that's a good thing or a bad thing and how the the government's questionable track record, not just the US government, but all governments questionable track record on um you know, running companies or or being kind
(28:39) of uh having a hand in the direction of industrial capacity and the means of production. Um, but I I think it's the these these two topics tied together to me to say like uh maybe we're we're not really in Kansas anymore. Yeah, that I mean those are all really good points. The the one thing I've been thinking about just like the interesting dichotomy between this situation and a topic I know we're going to get to in a second on um the strategic Bitcoin reserve and is the US government going to continue to um pursue that? How how might they fund
(29:22) uh acquisitions of Bitcoin? But the the comparison that I think is really interesting is, you know, they can uh make these announcements about, you know, potential intentions to take a stake like this in Intel and it doesn't necessarily um have the same type of consequences as perhaps it does in the case of Bitcoin.
(29:51) like uh I think with Bitcoin uh they need to be very careful about what they say they're going to do, how they go about executing a purchase of Bitcoin um because it directly influences like the price that they get. Whereas like with Intel, you know, they could make an announcement like this and sure like the stock could run.
(30:17) Like I I tried to look at the stock price and there was a bump at one point and I don't know if it's come down since then, but but theoretically, right, there's a there is a central party here and the White House could do whatever deal it wants to. They could even force a deal that maybe doesn't look economical for Intel in Intel shareholders just out of national interest.
(30:44) Um, compare that to Bitcoin where, you know, they start making certain announcements or some of their plans start becoming public, like they can't bully their way into a Bitcoin position. There's no Bitcoin CEO. There's no Bitcoin uh board to go talk to and say, you know what, well, you know, the US government really needs this position and this is the price we're willing to pay. Like, it's not going to work that way.
(31:09) like they have to pay the market price that some seller is going to be willing to um you know transact with them. Um so I just think that's kind of an interesting um dichotomy between those two. I know. I know what Marty's thinking. Well, if we're if we're we're going to be nationalizing uh the Fed industrial policy, there's a there's a company out there with a a large chunk of Bitcoin on their balance sheet.
(31:41) And if they were going to continue down the trend of nationalizing uh industries and they wanted to acquire a strategic reserve in a advantageous way that doesn't really lead the rest of global markets to understand that the US government has to accumulate Bitcoin actively. they could uh print a bunch of money and just nationalize micro strategy, pay out shareholders, pay out all their prep stock and say this 700,000 Bitcoin is the US government's now wild theory.
(32:07) But if this trend continues, I mean they're showing the uh they are showing the willingness to be bold. Yeah. I mean, I think so to take the one side of the point, I I think it's a a very good point as it relates to like um one of the beautiful things about Bitcoin is when you think about nationalization attempts or let's just, you know, if we're running back the FDR playbook in general with industrial policy and the wartime playbook, you know, a 6102 type order, um it's fundamentally a lot easier to get that off with the, you know, analog gold, the original gold. And even in that case, in
(32:47) the case of FDR's 6102 attempt, um you know, uh outlying and and confisc outlying private gold ownership, confiscating um private gold owners holdings. Um even that didn't really work like that well, right? They didn't get all the gold. They didn't really eliminate it from circulation. Um even though despite the fact that relative to Bitcoin, it's much harder to uh custody meaningful amounts of gold by yourself. You certainly can't, you know, distribute it geographically in like a you know multi-ig quorum or using
(33:19) miniscript or something to uh have different conditionality on on its spending, right? So it's analog, it's physical, it's got to be somewhere, it's heavy, bulky, hard to transport that tends towards centralization and thus much easier 6102 type attacks.
(33:36) So I think it's a it's a fair point like Bitcoin is in a much different position than gold or any other asset as it relates to individual holders being, you know, attacked in that way. And certainly I think with the administration that we have right now, I I don't think that's super likely and would undoubtedly alienate a meaningful voting block that arguably kind of got this administration into, you know, the position they're in.
(34:01) Um, so I think that those are all great points, but yeah, Marty, the flip side is the much much easier thing to do as it relates to not pissing anyone off nearly as much uh any of your voters, not creating a true like, you know, constitutional nightmare. um and not creating a massive like enforcement nightmare of having to go knock down doors of every you know person in the world to see if they have you know 24 words written down on a piece of paper.
(34:25) Um the much easier path if you wanted to do something like that is you know walk down the road not not not too far outside of DC and uh you know knock on the door and see if uh you know the the company is interested in selling um at a at a nice premium to the underlying by the way you know the shareholders if they got if they got paid out right if you woke up on your Vanguard and Fidelity accounts you know you had a cash settled um you know swap for your your MSTR shares you know you'd be you'd be up right now today relative to the underlying bitcoin that the government would be getting. Right? So
(34:56) you could even make an argument that uh the the imminent domain would um you know end up uh in a positive result for those who are on the receiving end of it which is usually not the case. Um but these are just wild conspiracy theories that you know I don't think have any uh merit to to consider.
(35:15) But it's a it's it's certainly an interesting scenario if you're looking at a government that's getting a lot more um uh handsy with uh company property. Yeah. No, it's just a theory. It's just a theory. Not even It's just a theory. It's not even a conspiracy theory. I'm not saying that there's any conspiring going on.
(35:36) I'm just saying if you wanted to do it the painless way, you just print the money, pay out the shareholders, they'd be happy. the the meme this is mine now and uh and boom US I don't know that they would be happy but uh and I don't know that it would be a good outcome John to your point it depends depends in that in that theoretical scenario in the theoretical scenario yeah I uh in the theoretical scenario I'm just making the argument that someone on the other side of of writing that order to make that happen might make the argument that if you're getting bought out at a premium to underlying,
(36:12) you should be quote unquote happy. But well, yeah, but that's I mean, you're already assuming that in this theoretical scenario, they would be getting bought out at a premium to underlying. Maybe maybe they would not. Maybe it would be at a discount. Uh maybe it would be at a discount to MNAV. Yeah, that's that's certainly possible.
(36:31) That's another discussion we can we can maybe go there too or we can stop the uh we can stop the inflammatory MSTR discussion here. Yeah, this isn't a TFTC uh conspiracy. we can get back on track. But Intel to tie the knot there. It just doesn't m like it seems like it would be a bad investment by the government like why go make buy a 10% stake in a belleaguered sort of dying institution like I mean I think this is an important conversation for us to have too like just the life cycle of businesses generally um generational businesses too at that like Intel crushed it 70s 80s 90s early 2000s
(37:10) but have not been able to compete with AMD TSMC, Samsung, it's pretty obvious um that they they got complacent, lazy, and I don't think a 10% equity injection um from the government and some sort of quasi arms length control over the direction that Intel goes in in the future by the federal government is going to make it a better company. Yeah.
(37:41) I mean, it's an interesting question, right? like and I I like your point about the life cycle of companies and we should talk about that more but and I think with the Intel deal you know everything's very vague and TBD like what how it would actually look I think uh commerce secretary Howard Lutnik has suggested that it the way it would work would be the chips act funding that they've gotten would be basically like that would convert to equity versus like some incremental cash infusion though who knows how it would ultimately shape up. Um, but it's a fair point that like if if the government's going to get more
(38:14) heavy-handed, they don't really need like a top, you know, they don't need to be like the top shareholder on the cap table or on the owner on the shareholder register, right? Like they can kind of, you know, the there's a lot of Intel industrial capacity here, the executives live here, employees live here, a lot of assets live here.
(38:36) Um, I don't know that they need equity in the business to, you know, dramatically control kind of its its direction if if they wanted to get a lot more heavy-handed. So, that's that's fair. Um, but yeah, I mean, it's it's it's definitely an interesting point on, you know, the the long-term life cycle of of companies. Um and you know how how we as investors think about um the the innovator's dilemma and the inherent headwinds that exist for incumbents over after some amount of time um whether it's because of you know what Buffett called the institutional imperative or many other factors but it it does uh
(39:14) Intel's a good case study and um perhaps you know the businesses that ultimately kind of reach their their natural endpoint. Um, and you know that history is littered with with examples of those and examples of companies then kind of coming in smaller you know more nimble intrepid companies kind of coming in to um backfill the market opportunity that was left behind.
(39:37) Certainly we see a lot of those in our portfolio but um yeah a lot of interesting themes there broadly um across these different situations. Yeah, I'm just looking up the data now. Intel has total cash including short-term investments on their balance sheet 21.21 billion. Interesting. Um you go to Apple, they're sitting on how much cash including marketable securities 55.37 billion. So you have these large incumbents.
(40:12) I'm picking on Apple too because I think with the AI trend um really taking hold and Apple really not participating in any meaningful degree up to this point. Siri is a terrible product compared to Chat GBT and Claude and others. And you would think that Apple being the innovative consumer focused company that has been for for decades would would lead.
(40:41) they seem to be on the sidelines deciding to buy back stock instead of leaning into research and development that could catapult them to a category leader uh in the world of AI and I think that's another company that many would suspect considering that um half the world has some of their devices I'm using two of them right now um like are they in an innovator's limit too like are we are we watching sort of the the back end of Apple's life cycle. Yeah, I don't know. It's It's tough.
(41:14) I mean, I I'm still not ready to fully ride off Apple and Google um the two kind of lagards in in the Mag 7 that you'd think would have had um some opening to to benefit um much more from u the you know, dramatic wave of new AI products over the last 24 years and kind of be be leading that charge. Um, so I'm not I'm not ready to call it on either of those either of those yet.
(41:39) Certainly, I don't think either of them are in anything like Intel's position. And I'm not even ready to say that they're, you know, headed there in the next 5 10 years. Um, I can see I can see the bare case uh to to some extent. Um, but definitely, uh, I'm not ready to put them in the same camp yet, but certainly there are a lot of companies, uh, you know, every a lot of older companies every every year, every decade that are going to fall ultimately into that bucket.
(42:06) Um, but that's one of the reasons that we're, you know, so bullish on, you know, what we're focusing on here and why we do what we do to, um, catch the the next generation, uh, of companies that we think can come and back fill some of the some of those gaps. Yeah. Yeah, it's very very uh again interesting times.
(42:30) May may all your times be interesting just as interesting as the times that we find ourselves in now. Um but moving on from the nationalization of different industries and the wartime e economy playbook that seems to be taking hold here in the United States. SPR, we got some news between the last time we recorded and our recording today.
(42:53) Uh Scott Passent, I believe he was on CNBC last week, um I think gave the first sort of official recognition of an amount of Bitcoin that the US government has. Uh I believe he said it was between 125 and 150 billion, which would put the amount of Bitcoin between uh 50 to 160,000 Bitcoin that they're holding. I think that's right. I don't have the headline in front of me. I'm going to take your word for it in that case.
(43:24) Um, it was a really broad interview with a lot of topics covered. I'd have to go back and find the exact headline, but it's it's something to that effect. I pulled up this decrypt article. Uh, current Bitcoin holding Oh, between 15 billion and 20 billion, which is uh between 131,75. I mixed it up there.
(43:50) Um, yeah, somewhere between 130 and 175,000 Bitcoin it's holding, which is less than what people were expecting if we're going with those rough numbers that Bent said. But during that same interview, he mostly iterated that they don't plan on on buying more Bitcoin and then a day later sort of walked it back.
(44:15) So it seems like the typical Trump admin strategy of sort of strategy via confusion and sort of testing the waters by saying something in this case not bombastic but just saying one thing and then walking it back seeing how the market reacts. I think this is what we were seeing here. Yeah, there are a lot of there are a lot of trial balloons in this administration.
(44:39) there are a lot of like just kidding but maybe not really kind of uh moments. Um and yeah, I don't know it's anyone's guess whether so in the interview he said you know it was kind of like a series of comments about um the Bitcoin strategic reserve as well as like the um whatever they're calling it the crypto stockpile.
(44:59) And he said you know we have the Bitcoin that we have now we won't be buying that. Um unclear if he just meant like well that that doesn't need to be bought because it already exists. um or something else. But in any case, it definitely came off as, you know, the there's no incremental addition coming to the to the SPR and then later that day tweeted that tweet that Logan put up.
(45:18) Um and so you wonder if he got some frantic phone calls from uh big donors or, you know, relevant um policy people that want to keep the Bitcoiners happy. But in any case, it seems like maybe uh budget neutral accumulation is is still is still back on the table. Um so we you know we'll see.
(45:43) We also got you know the announcement that um Bohines the special adviser for digital assets or something to that effect. His his title in the White House is is leaving and going to to work at Tether um but on his way out said that the uh the SPR plans will quote continue and accelerate in his absence. So um ultimately talk is cheap and Bitcoin is not. So we'll we'll see what actually happens with that.
(46:05) um unclear if there's you know I think Grant you referred to this earlier but if I'm the government I don't really know that I have any incentive at all to make it clear like what I'm doing until I'm fully sized in my position. Um I don't really know how it helps me to tell anyone like yes over the next year I will be accumulating 100,000 Bitcoin. Um because you're almost definitely going to end up with materially worse prices in doing that.
(46:26) So my sense is if if and when it happens, I I do think like there's all the incentive in the world for the US to want to do it, especially as it, you know, moves to this wartime economy. Um if there's any strategic value at all in Bitcoin, like they're going to want to be involved. But there's also no incentive to to telegraph to Bitcoin Twitter, you know, what their what their plans are really.
(46:48) Yeah. I don't read too much into it. I mean, I think he often is just sort of flying by the seat of his pants and he's he's it it doesn't look like he's re rehearsed certain answers on TV. So, I think he he said some things. Uh he then later was told that he screwed it up and he quickly fixes that.
(47:11) And I don't even take much in the like the comments around the amount of Bitcoin because I mean if you sort of depends on are they counting the the Bitcoin that ultimately is due back to Tether because um if Tether's going to get that Bitcoin back which is very it's over 100,000 Bitcoin.
(47:31) I think those two comment like those two things can't both be true because it implies like what he said implies that they have a pretty significant amount of Bitcoin but that wouldn't be the like it wouldn't be possible based on what we know about or what we've been told about the strategic Bitcoin reserve uh and what they've um what they have under their possession from prior seizures.
(47:54) Um so I I don't take it as any type of audit. I mean, once they reveal addresses and uh post a mempool.space uh uh website address where we can see it. I mean, I don't even I I don't really believe what he said about the Bitcoin position. No. No. Yeah. It seems like it's all pandering to a base that that helped them get elected and they'll string along.
(48:24) And as a Bitcoin, I honestly I've said this. I think we all believe this. Like a Bitcoin strategic reserve at the federal level is a nice to have. It's not a must have for me as an individual, for us as investors. I think if you're looking at the fiscal crisis and the out of control interest expense on the debt and you're trying to think strategically and creatively and boldly about solving that problem in the long term, a strategic Bitcoin reserve. I honestly and earnestly believe that it is a creative, bold, and um worthwhile
(48:59) endeavor to try to solve that if you actually want to solve it. I think that's the bigger question is do they actually want to solve the debt problem or they just want to keep printing and just send this thing on turbo until the currency is completely debased maybe.
(49:18) Um but at the end of the day it really doesn't affect me as an individual Bitcoin or us as investors looking at companies um building out infrastructure for individual Bitcoiners like ourselves. um that is a a government decision and um I think as long as the free market's able to to operate, businesses are able to set up and build what they need to build to facilitate Bitcoin adoption at the individual level, that's all that matters.
(49:43) And it's certainly been more positive than it was in the Biden administration, but um yeah, we shall see. But there have been some interesting conversations around gold revaluation. There was two events that happened almost simultaneously. Uh one was Trump tariffing uh an unexpected tariff on Swiss gold bars. Um there again another one of these what you call trial balloon instances where we sort of threw out we're going to we're going to tariff uh the 1oz Swiss gold bars and then stepped it back and it's still unclear what's going to happen there exactly but around the same time the Fed quietly released a memo that uh about the historical gold
(50:31) revaluations throughout the last century um which is signaling like hey maybe we'll do this again at some point in the near future. Yeah. And I mean like you know it's it's one of those like just um you we mentioned conspiracy theories and we mentioned kind of it's it's very easy to to dive down certain rabbit holes and artificially connect uh you know different disperate events that are happening in the world and think that it you know you have the confirmation bias that it suits the the thesis that you have about how things are going to play
(51:01) out. But, you know, it it was certainly funny to to see both of these things happen in quick succession like that. To be fair, like this memo doesn't say like the Fed is considering doing this or or you know, the Fed and Treasury, whatever, the US government, you know, there's no implication that this is coming.
(51:22) Um, but it is the first ever, you know, official memo that they've put out kind of on this topic. Um there's a footnote at the bottom which I didn't realize at first but if you scroll down there's a footnote at the bottom that says like something like this is one way that uh has been floated by certain parties to um help the US uh accumulate bitcoin in a budget for the US.
(51:46) The idea has come up in the context of helping to establish a strategic bitcoin reserve or sovereign wealth fund and the use of revaluation proceeds was proposed in a recent legislation by Senator Lumis in Belgium. The press reported the governing coalition was considering financing additional spending partly through monetization of some of the National Bank of Belgium's gold reserves with the National Bank of Belgium commenting on the idea in a recent press release.
(52:06) Yeah, exactly. So, it's the kind of thing where like does that mean it's hap any of this is like you know being planned um explicitly? No. Does it mean that this is happening like tomorrow or next month? No. But it's it's interesting because like this is exactly what you would expect to see this kind of like slow subtle like dribbs and drabs of like pieces of information or memos or think pieces, right? To kind of like directionally normalize an idea and like vaguely shift the Overton window and add some veneer of like academic prestige around it. Um you know that you
(52:42) would do that kind of a year in advance, right? you'd slowly like let this stuff leak out um to kind of test the waters and get people maybe a little more comfortable um circulated in certain circles. Um so not that any of this means that it's definitely coming.
(53:03) Um but I think if it were to be coming in like a year or something, 2 years, whatever, this is exactly the kind of stuff that you would expect to kind of see under the hood being uh slowly slowly leaked out to to normalize it. Um, you know, it's kind of predictive programming in some sense. Yeah. Or it's a classic case of nothing ever happens and it's just could be that too. Yeah.
(53:29) Just a info drip to get people running down these speculative uh eerie paths uh and then nothing will ever happen. Yep. That's the base case until proven otherwise. Yeah. Um something is happening though. There are things happening not at the government level. Nothing ever happens in the government. Meet the new boss same as the old boss. Going to print it on Turbo. But we in the private market is actors and do things.
(53:54) Harvard an institution been under a lot of fire in recent years caught up in the woke debacle. You people coming at their president. Uh there's some questions about whether or not they're uh their uh what do you what do you call it their uh their tax exempt status? Tax exempt status. But when kids enroll their enrollment sort of procedures and uh Mhm.
(54:25) the the preferences they may show the uh the illegal preferences they may show for certain demographics over others. But nonetheless, they have a large endowment. It disclosed this first Bitcoin ETF position, uh, pretty material position of over $100 million. Um, which you're describing, I'm looking at the show notes, John, you're describing it as a fairly seismic signaling shift for institutional asset managers and endowments. Seismic.
(54:51) It seems seismic to seismic to me, you know. Um certainly there are other endowments that have either publicly or you know non-publicly taken Bitcoin positions. Um and so you know may not it's it's it's not the first endowment. We've seen Brown and um a few others kind of publicly uh file their their IBET positions.
(55:19) So not the first but you know Harvard is say what you want about Harvard and different things that have happened in higher education in the last 20 years. um you know probably the most respected kind of educational brand in in the world. So right now it's you know Harvard, MIT, Yale, you know Stanford maybe um and even more than that uh Harvard and Yale have been um you know pioneers in the endowment investing space and there are a few other big endowments that um have been kind of significant in moving like the the quoteunquote endowment model forward as well. Um but you know this is
(55:49) undoubtedly you know one of the top like few uh that have that pioneered like all of the strategies that go into you know what we now think of as the endowment model which I think frankly has gotten it you know is now very diverse and can mean a lot of different things but all that is to say um you know this is something like I think within the endowment world and I I don't want to speak for them too much given that I'm not uh fully in that world but um having an actor like that take a position like
(56:20) this and granted it's you know it's a tiny piece of the total endowment but it's also a massive slug and makes them one of the bigger holders of IBIT to have them move in that direction is I think you know comparable to black rockck giving the impretor to Bitcoin that you know we're we're the the leading um you know ETF uh administrator in the world with the leading ETF provider and yes we're going to say that a spot Bitcoin ETF is worth fighting for and pushing through and getting through the regulators and and then marketing aggressively and saying this is something that you should have in your
(56:51) portfolios, adding it to our model portfolios. All that the kind of brand cache that BlackRock brings kind of on the general like asset management ETF side I think is you know analogous to what Harvard brings to kind of the endowment investing world, right? So for them to to take this position um I think is is quite significant um particularly given um there still I think are a lot of in academia even probably more so than Wall Street a lot of legacy biases against Bitcoin for various reasons many of which relate to you know energy expenditure um and famously Harvard
(57:30) economist Ken Ken Rogoff uh said that Bitcoin was going to was more likely to go to 100 than 100,000 and has now had to kind of walk that back and talk about all the reasons why that that didn't play out. But I think he's emblematic of the the type of, you know, people that um or the type of viewpoint that you still see a lot in higher education.
(57:50) And so against all that tide for Harvard to put its reputation to some degree in endowment investing behind Bitcoin, yeah, I I' I'd call that fairly seismic. I got I think that's a a pretty significant imperimeter to have uh for Bitcoin. Yeah. Ken Rogoff very buttth hurt.
(58:12) I don't know if this tweet was a response to the endowment of the school that he's the professor at uh taking material position in Bitcoin, but I uh I had the pleasure of watching Safadina Moose debate Ken Rogoff at the Soho forum, I believe in 2018 or 2019, and it was on the legitimacy of negative interest rate policy, which Ken Rogoff is uh a very big advocate of.
(58:40) He actually wrote, I think, the the official paper on negative interest rate policy and how to implement it. And it's just a it's just an incredibly stark juxosition of academic economist, how they think money works and the economy works and their cocking ideas. Um, basically we should have negative interest rate policy bailing governments and institutions in um versus just letting the free market create the hurdle rate and solve things by adopting a Bitcoin standard.
(59:07) Um the other interesting thing I I thought about this announcement was I mean as John said it's a tiny piece of the overall endowment right and we we don't really know the rationale behind why they did it. We can make some assumptions on on why they might be dipping their toes in uh particularly given that they also did so with the gold ETF.
(59:38) But I thought it was interesting that they actually took a bigger position in the Bitcoin ETF or in one of the Bitcoin ETFs than the gold ETF. Um you know some people you know you would think in a legacy traditional minded uh capital allocators particularly based on just market cap like market cap of gold versus market cap of bitcoin you might see an allocation suggested that's you know less than 50% but uh less than 50% to bitcoin relative to gold but this is greater allocation to bitcoin than gold which I just think is an interesting directional perspective given where uh Bitcoin is relative to gold overall today. Yeah. And it's actually ties into the
(1:00:22) newsletter I wrote on Monday. This report from Bank of America came out last week. Zero Hedge wrote an article on it on Sunday. Sat down and read it. But I think um to your point Grant uh Bank of America sent out a survey of um fund to fund managers uh and 75% of the respondents uh responded that they have a zero allocation to to cryptocurrency. We'll just use that as a proxy for Bitcoin.
(1:00:54) Um and here's the stats revealed uh the survey revealed that just 9% of fund managers uh have exposure to crypto with a weighted average allocation of.3% of AUM. 48% of those same respondents have exposure to gold and there is a 2.2% weighted average allocation to gold across the managers that responded to that Bank of America survey.
(1:01:20) And to your point too, I I wrote this in the newsletter, like I think if you're an institution weighing the opportunity cost of allocating to one hard asset or another, particularly between Bitcoin and gold, depending on your risk appetite, I think, and overweing towards Bitcoin makes sense. If you're like risk on, uh, it just makes sense. Gold's been monetized over the course of millennia.
(1:01:45) Bitcoin is still in the very early stages of its monetization phase. And if you want to ride um some relatively high upside, you you got to ride the Bitcoin horse, not gold. Yep. Yeah, for sure. And I think it's a great point, Grant, just the the relative um waitings there. And you know the caveat that I'll throw in here is you never really know like what different investment managers are thinking or doing and what plans they have for their allocations. So you know would it surprise me like we've seen in the past like I think uh Wisconsin's
(1:02:20) biggest state pension fund you know took a big IBET position then a couple quarters later I think they they sold out of all of it. I can't remember if they, you know, likely sold out at a loss or or a gain, but in any case, um, you would have, I think it would have been fair to say like, oh, pension funds taking, you know, making this bet, taking this allocation, that's very likely, you know, chunky capital that they'll, uh, add to over time, and, you know, they have a kind of a long-term view on it, but, you know, they were out within, you know, a couple quarters. So, um, not trying to not trying to suggest
(1:02:49) that, uh, Harvard is about to become, you know, the the biggest Bitcoin bull in the world on a sustained basis. You never really know what anyone's thinking. But, yeah, collectively, I think all those those points are relevant. And it it's it's even more notable against the backdrop that like if you if you Google this like if you Google like Harvard endowment Bitcoin um you're not going to find like a lot of mainstream coverage of this like um you know there's an article in pensions and investments there's like you know the article that we had linked in the Harvard Crimson um and maybe one or two
(1:03:21) others but um it it seems much more meaningful even if it it's not even if there's low duration to it even if it's only a few quarters that they hold it much more meaningful than I think the coverage that it's gotten in in mainstream press. Um so definitely definitely one worth watching. Yeah.
(1:03:42) And I know we've got a call at the top of the hour, so we're going to jump around the list to what I think is probably the most interesting thing, especially as it pertains to what we're doing here um to the crypto IPOs that we've seen. There's been some S1s that have been released um in the last couple of weeks.
(1:04:03) Uh Bullish, which is a large institutional um exchange, announced that they were going public and I believe they did IPO last week uh on the NYC and then Gemini filed an S1. Looks like they're prepping the sales to go public, which is much expected. They've been around for 12 years now at this point.
(1:04:24) So, it makes sense that they would be getting ready to go public. But Grant, you are our resident S1 Sleuth. What uh what did you find that that stuck out to you? Um, a couple things. Well, uh, you know, the bullish Well, first of all, the BLSH as a ticker, I think, is is great for memes because, you know, they're a crypto uh, you know, shitcoin business and their ticker is Um but uh you know they I wasn't very familiar with their business. I'd seen them at conferences.
(1:05:00) Um big sponsor of the conferences like large uh square footage on the floor. So clearly we're throwing a lot of money around trying to build their brand. But it turns out they do quite a bit of institutional volume. Uh I think it was rivaling close to a trillion dollars worth of institutional trading.
(1:05:21) and they were claiming that they do around 30% of spot bitcoin, spot ETH, like they trade all the like the the shitcoin pairs. Um, but they do have quite a sizable Bitcoin position. I think 24,000 Bitcoin on their treasury. Um, and some of that I think probably was was um associated with some of their founders and who seated the capital initially.
(1:05:49) Um, but they have built a business that generates about 50 million of adjusted ibida. So, it's, you know, it's it throws off real profits in cash flow. Uh, but interestingly, the stock just went wild right after it listed. I mean, I think this was last week. Uh, it traded up a couple hundred% I think. now is trading around a 10 billion nine or 10 billion market cap which even if you give them uh some premium to the Bitcoin treasury.
(1:06:19) It's you know it's about $3 billion worth of Bitcoin on their balance sheet. So even if you assume there's a premium to that it's still implying quite a significant value to this operating business. And I just think given what we've seen over the last couple months with the Circle IPO that it's not just a reflection that the IPO window is open and that the public markets are perhaps more open for business than they've been uh historically, but also that there's an interest in just let's call it the broader crypto story um given how Circle is traded and given how you know where
(1:07:00) bullish or is positioned itself. Um so I think that's an interesting dynamic uh at play. Um and then on the Gemini side, what I found most interesting about that, I mean, we know they've had their issues in the past with um the hypothecation of Bitcoin going underwater on lots of these loans um to the DGEN market makers.
(1:07:26) Uh, and I think they still have quite a bit of outstanding debt that they're trying to deal with in this IPO. I think the IPO they're targeting around 400 million uh raise and some of that may be to pay off debt. I don't know when the listing is expected. I would assume sometime next month. So, there hasn't been any chatter about where this business will price and what the valuation will be.
(1:07:58) Um, I guess it looks like they have a lot less uh bitcoin on their balance sheet than uh Um uh but what what I found was most interesting is that they generate I think it was around 130 million or 140 million of annualized revenue but are operating um at quite a significant loss. uh I think just based on headcount costs they were spending 130 million uh on on just on compensating employees and were operating at something like a hundred or $200 million loss.
(1:08:30) So I found that very fascinating since it it goes really against the philosophy that we have uh at 1031 is backing teams that can build sustainable business models on top of Bitcoin can actually generate profits can operate uh lean and you know don't have to have bloated uh cost structures whether it's through um headcount or otherwise and build bitcoin on their balance sheet. in a sustainable way.
(1:09:06) And so um despite the fact that uh Jim and I is operating what seems like very significant loss, I think it's be going to be really interesting to see how like what is the interest in this business because to me the the bullish trading of uh or the the positive trading dynamics of circle how we've seen bullish trade certainly to me would imply that there's quite a lot of value um that investors will put on businesses that can actually operate profitably or are operating in the Bitcoin space um and benefit from some of the the same tailwinds that the market seems to associate with these businesses. Yeah, it's really astonishing that um a lot of
(1:09:53) the incumbents I mean that was when you brought the SGNA cost or just like the overall administrative cost in terms of salaries uh up in our group chat. It was astonishing to me cuz we see it in the mining industry too. A lot of the mining companies have insane SGNA cost and you'd think that people would recognize that this is something that is going to be a problem if you're looking to grow a profitable business.
(1:10:25) There's way too many publicly traded companies, particularly minors out there with bloated SGNI SGNA um lines on their on their on their financial statements. And it it's crazy to see that that Gemini is spending this much on salaries and not not yet profitable having been 12 years old. And we were saying this, they're one of I believe three operators with a bit license in New York, which is one of the largest markets in the world, not only the US.
(1:10:50) And so they have a somewhat of a competitive advantage and somewhat of a regulatory boat in one of the biggest markets and um they're about to go public and aren't profitable yet. and you juxtapose that to a company like Strike in our portfolio where Jack is very public um even though they're still private.
(1:11:09) He's been sharing some of their financials and um it's a point to him. They've they've built the business that they have with around 75 employees and their core focus as a business is how can we make as much money as quickly as possible as efficiently as possible. it seems like that management mentality is not not being yet widely adopted um not only across the space but broadly speaking I think when you compound the hurdle rate that is Bitcoin with the productivity gains that are entering the market via AI if you are not sort of running a business profitably um and cutting costs as much as possible and being um as efficient as possible on on
(1:11:52) the expense side I think you're going to get start to get dinged materially in public markets. Yeah. I mean, I'd love to I'd love to say that I agree that the public markets will be Yeah. Irrational rational enough to eventually that will be enforced.
(1:12:09) You know, the market is a a weighing machine in the long term voting machine in the short term, right? So, but eventually that will be enforced. But yeah, I think it's, you know, it speaks to in my view like Grant, you said it all really, you guys both said it all really well. Um, I think Strike is a a great example of kind of a counterpoint that, you know, we like to draw and that we like to lean into.
(1:12:28) um at at 10:31 and you know, Jack's been um more public recently about some of their results um and so people can go kind of look that up. But yeah, I think it's it's very notable that when Bitcoin is your north star and your goal is to accumulate as much Bitcoin for yourself and your shareholders as possible and there's a fixed supply and there's demand is only going in one direction and every day that you're not accumulating Bitcoin.
(1:12:53) Every day it gets harder to accumulate more Bitcoin on the margin, right? And so if you have that as your north star as a as an entrepreneur, as an individual, an entrepreneur, and then ultimately as a business, it really just radically shifts your mentality about the way that you want to operate and um how you want to allocate capital, how you want to expend resources and you know your interest in and um emphasis on squeezing you know the max possible uh productivity out of any given employee, any given you know deployment of
(1:13:22) capital. Um, and I think if you, you know, look at the way, for example, Strike has operated, the way that other companies in our portfolio have operated, um, you you get a very different picture, right? And you get a good sense of what it looks like when Bitcoin is, you know, truly your your northstar.
(1:13:39) Um, I think it's it's clear that, you know, whatever you might say about Gemini, um, whatever you might say about Bullish, you know, no no strong opinion on on either of them. Um, but certainly they are broader crypto companies, right? they they've catered to um the the broader crypto ecosystem. They're not exclusively all in on Bitcoin, focused on Bitcoin.
(1:14:02) And it's it's interesting that you kind of you see the divergence, right, in not just the marketing, not just the, you know, product launches, but even the operating results. Um you know, it it bleeds through every part of the organization. And so, yeah, we'll continue to focus on the businesses that that make Bitcoin their northstar.
(1:14:19) and uh you know not just for ideological reasons but because we want we want to accumulate more Bitcoin and uh the the leading businesses that that that feel the same way are are going to be the best way to do that. Yeah. I mean, and this is a good segue to the final topic, which is on the list, and this is probably one of the I mean, they're in the S&P 500.
(1:14:42) Now, Block, uh, I think is one of the few in public markets outside of treasury companies, even though Block does have a Bitcoin treasury. Um, I think they're an incredible example of a company that is focused on Bitcoin and Bitcoin alone, and that is expressed across their different business lines.
(1:15:02) Obviously, Square, they announced um in Vegas earlier this year that they're going to be rolling out the ability for their merchants to accept Bitcoin payments and to um funnel some of their revenues into Bitcoin directly on the back end using uh the Square Stack uh the banking stack there. Cash App, obviously consumer app focused on um getting Bitcoin into the hands of of everyday retail consumers spiral uh open source initiative to support uh open source projects in the space uh most notably LDK.
(1:15:34) Um and now uh BitKey was the hardware wallet to help foster self- custody. And now this has been talked about and sort of teased for the better part of a couple years now. And they had their big sort of unveiling last week, which I was there for Proto, which is their mining division.
(1:15:52) Um, and so they announced the rig, which I think is a pretty massive moment for the Bitcoin mining industry. You had a bunch of X, Apple, Square designers, hardware designers specifically, really dig into the problems that exist on the hardware side in the mining space and try to come up with a product to solve a lot of the pain points that miners have run into just due to the fact that there's really been a duopoly trending more towards monopoly in the Bitcoin mining hardware space with Bitmain and MicroBT being the the big gorillas in the room in that
(1:16:24) industry. And notoriously both companies have had a mindset of, hey, we're going to build these things. You take what you get and we don't really care about your feedback. Um, this has been expressed with uh the inability to really tap into the firmware and sort of customize your your setup. They've made it extremely hard to do that.
(1:16:50) um they don't really take feedback in terms of what the hardware should look like and how it should um be manifested in a physical sort of end product. They sort of say, "Hey, take our shoe box and plug it in and uh you'll have to figure stuff out on the back end." So, looks like the proto team has noticed that there's an opportunity to step into the space and improve in these different areas and they came up with the rig which um is extremely impressive.
(1:17:22) So, it's a modular sort of Bitcoin mining device that uh is designed incredibly well. You can take out the hashboards very easily. You can replace fans and P PSUs very easily. And so, the the launch of of the rig is really a statement by Proto like, hey, we're taking feedback from the mining industry.
(1:17:40) We want to provide you with a product that um will be durable, modular, and sort of enable you to uh easily run your your mining infrastructure um in a way that you want to and need to depending on your particular setup. So, it was incredibly good to see. So, they have the rig, which is a chassis. Again, it's modular. You can sort of put up to nine hashboards in a three chassis uh cube that they're selling.
(1:18:04) uh take the fans off, replace them very easily. On top of that, they have a software stack called Fleet, which allows you to easily manage um your your mining machines as they're running uh in your facilities. Uh and from a competitive perspective on performance, it's not top-of-the-line.
(1:18:24) Uh Bitmain's hydro units are around like 9 jewels per terahash. Their aircooled units around 12 1/2 out of the gate. um the rig will be coming with up to 14.1 jewels per terahash in efficiency which is good enough for certain parts of the market. So I think it was a massive day for the Bitcoin mining industry. I've talked very publicly on this show and many others that I think one of the most centralized aspects of the Bitcoin network is the mining layer both at the chip level and the pool level.
(1:18:55) And so I think with Square stepping in, putting their design expertise, their hardware expertise to work and launching the rig, it was a a great day for competition in the mining hardware space which is desperately needed. Yeah, I mean it seemed it seemed massive um you know just from afar. Um and you know massive as well to have just to bust up potentially like a you know decade plus you know old duopoly um or there was even a monopoly going farther back. um especially with you know with increasing geopolitical
(1:19:31) tensions with the uh the country that is the source of the existing supply line for miners to then have you know an option that's uh you know Americanbased um with American service um seems seems notable and meaningful um just from a competition perspective and from a you know geopolitical uh stability perspective.
(1:19:58) Um I'm curious how you how you and um people you talked to there would weigh the you know you mentioned the relative kind of efficiency trade-off against so you have some smaller efficiency trade-off maybe it's like good enough for certain parts of the market. how how much of a um needle mover relative to that is the modularity and you know the ability to have say like let's say higher touch like you know American service that where like if you're operating in America at least at Texas somewhere like you can get on the phone with you know potentially like let's see how it actually works out in practice but
(1:20:30) someone who is in your in your time zone like generally is you know operates with like American business standards relative to someone on the other side of the world who may or may not um you know those kind of factors and the ability to to potentially avoid um or at least minimize downtime.
(1:20:48) Um how do you how do you think miners will weigh those those factors? I think it'll be mass like and again let's just run with the assumption that it works as advertised. You really literally won't know until we know and we won't know uh until these things have been plugged in and running for a certain period of time.
(1:21:07) But if the chassis are really durable for up to 10 years and you really only have to replace fans and hashboards and the fact that you can replace individual hashboards and you don't have to unplug a whole machine and ship it either somewhere in the United States or there's still people shipping machines back to Malaysia or China to get repaired with a 2-month sort of round trip. That's that's uh a lot of time that you're not plugged into and mining.
(1:21:31) So the time cost to capital has to be factored in there. Um, I think it really is going to be dependent. The overall sort of costbenefit analysis is highly contingent on what the pricing turns out to be. I've heard anywhere from $16 $18 a terraash to in the low 20s if they're able to really anchor to that lower dollar per terash number.
(1:21:51) I think they can be really competitive particularly in hotter climates because I think that's one thing that's pretty clear um for Bitain air cooled units in hotter climates. they're not optimal and their hashboards crap out and uh people with air cooled operations in hotter climates tend to use micro BTS cuz they're um juggernauts in that regard.
(1:22:14) They're just beast. That's what I run in northern Tennessee. Um so they can compete in hot climates, they can compete on pricing. I think the efficiency is good enough. And if you can if they do truly the chassis do truly last for 10 years, I think that they were marketing like it's going to save you 20% on having to uh refresh your fleet every 5 to 6 years, which is a material amount.
(1:22:44) And so if that comes true, I think it is a a a legitimate contender to compete with MicroBT and Bitmain. And I think it should be noted this this is only the first tape out of their AS6. There's no reason why. um with the design team that they have that I I would not be shocked if they come out with more efficient AS6 next year, the year after, and they're really able to compete on efficiency at scale.
(1:23:08) And so I think it's just uh I think there is going to be a 12 to 18 month period here where they get their first orders in, get them shipped out, get them plugged in, and people are validating. And if they can get past that hump and reinvest in more efficient A6, it could really set the stage for them to eat into significant market share of Bitmain and MicroBT.
(1:23:30) To me, what I love about this is just like this meme that I I feel like has really gotten some traction this year, which is like you can just do things. Um, like I I uh I posted this on Noster, but like you can just build a new Bitcoin miner and the fact that there's a group out there, you know, spearheaded by Dorsy, but the stuff that Block is doing overall for the space, like I don't think you can understate it.
(1:24:06) um you know they're they're truly um you know breathing new things into existence for the benefit of Bitcoin. Things that um you know a lot of people could just sit and complain about and talk about how um you know there's problems with Bitcoin. There's things that we need to fix and that group out there is is is doing it.
(1:24:32) all the things that you mentioned, Marty, not just mining, but the bit key, the the open- source work they do. I mean, the list goes on and on. Um, Cash App and integrating Bitcoin recently, uh, pay on the payment side. Um, so I just find I find it very inspiring to see groups like that that that don't just look at what others are doing and try to replicate something else that someone already is going after, but they are um trying to push the ecosystem forward.
(1:25:03) Um, that to me is, you know, is one of the greatest things to see about this um, you know, this release. Yeah. especially with a group an organization with like a you know that's very well capitalized with real budget you know strategic vision that's a real organization um member of the S&P 500 or constituent of the S&P 500 um you know a large publicly traded US company like you know we're invested in some fantastic you know smaller up and cominging companies some of which are actually getting pretty big but you know they're they're private they're still in you know first second third inning of of
(1:25:34) really becoming you know breakout successes um and I think we've invested a lot of companies that are similarly, you know, doing a lot to push Bitcoin forward. Um, both on the open source side and the product side and different verticals of, you know, the market and the economy.
(1:25:53) Um, but yeah, to see all of that happening at the scale that, you know, Block can kind of bring to bear as a very large publicly traded company with, you know, real revenues, real cash flow, a huge cash balance, um, and just the resources of of a public the resources and the credibility of a public company. I mean, I think that's that's massive as well.
(1:26:12) So, yeah, very uh very bullish to see um for on a variety of dimensions. Yeah. Very ambitious and it seems like they're executing um at a high level. It was really I I got to spend a lot of time with the Proto team. Um and it's it's cool, too, cuz they have a lot of um sort of cross-pollinating on the different teams.
(1:26:31) So, a lot of the people that worked on the bit key also worked on proto in the rig and they are top-notch hardware engineers and designers and it's really cool to see that level of design expertise coming to Bitcoin at the hardware level specifically. It's desperately needed in mining every minor that I talked to there. Again, we'll see what happens with where the cost comes out for these machines and how efficient they are and how they actually run.
(1:27:03) But every minor was, I think, at the very least, extremely relieved that it seems like there's a hardware manufacturer that is actually listening to them and taking design feedback and implementing it into what they're doing. And it's like an incredible edge that they could have if they can execute because Bitmain and MicroPt simply don't listen. I don't know if it's a west communication issue or they just simply don't care. They're the only game in town.
(1:27:28) It's just like, "All right, we you need our machines. We don't care. We're going to make them the way we we make them and you're just going to have to buy them." Which seems to be the case. But I like that. I like that we've, you know, we started off with the government's going to nationalize every industry. Uh Trump's going to appoint himself as Fed chair.
(1:27:46) Uh your dollar is going to hyperinflate in two years. Um, and they're going to take over Intel. They're going to take over all the strategically relevant companies and, you know, all the the potential, you know, doomer blackpilling piece pieces of uh the episode we got out of the way early.
(1:28:04) And we can we can wrap up here on uh something like this about uh that that shows that um that you indeed can't just do things even against that kind of backdrop and that Bitcoin is uh you know increasingly uh intrepid, intelligent, well capitalized, motivated Bitcoiners are finding ways to make meaningful improvements to the ecosystem on the margins kind of regardless of what the politicians and the the Fed chairs uh decide they do. Yeah, I've noticed that you've been observing how Matt likes to uh design a list.
(1:28:32) You start with the uh the doomer stuff and then you end on here's the actionable advice, the good stuff that's happening. Never do you got to you got to learn from the best. All right, we are uh officially 17 minutes late to this call even though I saw we were pushing it in side messages here. So, I think we should be respectful of the people we're about to meet. And that was the alpha of the week.
(1:28:54) I think we did a good job here, gentlemen. Yeah, another another batch of artisal alpha successfully delivered. Yeah, we'll be next time. See you next time. I I bet we'll be uh around uh September Fed policy decision. It's probably good time to bring some artisal alpha to the table. New new new Fed chair appointed by the time we have the next episode. Yes or no? No. No. No. All right, I'll say no, too.
(1:29:18) All right, we'll see you guys then. See you.

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