Bits + Bips: How Wall Street Could Get Rich off the Next Crypto Slump
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Key Quotes
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Topics
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Insights
🎯 Summary
Podcast Summary: Bits + Bips: How Wall Street Could Get Rich off the Next Crypto Slump
Crypto Focus Area: The episode primarily delves into the intersection of macroeconomic factors and the crypto market, particularly focusing on how traditional financial institutions might capitalize on downturns in the crypto space. Discussions also touch on tokenization of stocks, real-time financial data, and the implications of these developments on market dynamics.
Key Technical Insights:
- Tokenization of Stocks: The podcast explores the potential and challenges of tokenizing stocks, highlighting issues like insider trading risks and the need for regulatory frameworks to manage tokenized securities.
- Real-Time Financial Data: There is a discussion on the feasibility of companies providing real-time financial data via blockchain, which could revolutionize transparency and trading but also poses significant regulatory and operational challenges.
Market/Investment Angle:
- Market Volatility and Liquidations: The episode highlights recent spikes in liquidations, particularly in Ethereum, and discusses how these events can create buying opportunities for savvy investors.
- Macro Trends and Investment Strategies: The hosts and guests discuss macroeconomic indicators, such as corporate earnings and Federal Reserve actions, and their implications for crypto investments. They emphasize the importance of understanding these trends to navigate the market effectively.
Notable Crypto Projects/People:
- Vinny Lingham: A prominent figure in the crypto space, known for his early investments in projects like Solana and Filecoin. He discusses his experiences and insights into the crypto market.
- Austin Campbell: Provides expert analysis on the regulatory and technical aspects of blockchain and crypto investments.
Regulatory/Policy Discussion: The episode touches on the complexities of regulatory compliance in the context of tokenized stocks and real-time financial reporting. The potential for insider trading and the need for robust KYC systems in a global trading environment are highlighted as significant concerns.
Future Implications: The conversation suggests a future where real-time data and tokenized assets could transform trading and investment strategies. However, the success of these innovations hinges on overcoming regulatory hurdles and ensuring data accuracy and security.
Target Audience: This episode is particularly valuable for investors and traders interested in understanding the macroeconomic factors influencing the crypto market. It also offers insights for developers and policymakers interested in the technical and regulatory challenges of tokenization and real-time data systems.
Main Narrative Arc and Key Discussion Points: The episode begins with a discussion on the potential for Wall Street to profit from a crypto downturn, emphasizing the cyclical nature of the market. It then transitions into a broader discussion on macroeconomic factors, such as the Federal Reserve’s interest rate decisions and their impact on crypto prices. The conversation also covers the potential for tokenized stocks and real-time financial data to disrupt traditional trading practices.
Technical Concepts and Methodologies: The podcast explores the concept of tokenizing stocks and the technical challenges associated with implementing real-time financial reporting on blockchain. The discussion highlights the need for secure and accurate data feeds (oracles) and the potential for decentralized systems to offer greater transparency.
Business Implications and Strategic Insights: The episode provides strategic insights into how investors can position themselves to benefit from market volatility and macroeconomic trends. It also discusses the potential for new business models in the crypto space, driven by innovations in data transparency and asset tokenization.
Key Personalities and Thought Leaders: Vinny Lingham and Austin Campbell are highlighted as key figures offering valuable insights into the crypto market’s future. Their experiences and perspectives provide a nuanced understanding of the challenges and opportunities in the space.
Predictions and Future-Looking Statements: The episode predicts that tokenization and real-time data systems could become more prevalent, potentially leading to a more transparent and efficient market. However, it also warns of the regulatory and technical challenges that must be addressed to realize this vision.
Practical Applications and Real-World Examples: The podcast discusses real-world examples of companies exploring tokenization and real-time data, emphasizing the potential benefits and risks associated with these innovations.
Controversies and Challenges: The episode highlights the controversy surrounding insider trading risks in a tokenized market and the challenges of implementing real-time financial reporting. It also discusses the broader regulatory environment and its impact on crypto innovation.
Solutions and Recommendations: The hosts and guests recommend a cautious approach to investing in the current market, emphasizing the importance of understanding macroeconomic trends and regulatory developments. They also suggest that companies explore ways to provide more frequent and transparent financial data to investors.
Industry Context: This conversation is crucial for understanding the evolving landscape of crypto and traditional finance, particularly as they become increasingly intertwined. The insights offered in this episode are valuable for professionals seeking to navigate the complexities of the crypto market and capitalize on emerging opportunities.
🏢 Companies Mentioned
Interactive Strength
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institution
ETHE
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institution
Similar
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institution
Strive
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institution
Lumida
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infrastructure
Render
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infrastructure
Sui
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layer1
Luke Roman
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unknown
Austin Vinnie
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unknown
Bitcoin Ethereum Salana
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unknown
I Austin
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unknown
Bitcoin Ethereum
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unknown
Wall Street
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unknown
Andrew Kees I
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unknown
Berkshire Hathaway
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💬 Key Insights
"With the ETF listing standards we're going to have staking inside of the ETFs now... you're going to start seeing things like liquid staking tokens inside ETFs to get the best of both worlds"
"If Bitcoin goes to 50 or 60, Microstrategy starts to look extremely vulnerable... at some point it could blow up"
"I've got some liquidity concerns with what I'm seeing in the debt space... what's happening is over-leveraging Microstrategy by bringing out all these additional instruments on top of MSTR"
"Gold is like the debt trade on China buying gold - what you're really doing is just front running China because China has shifted from buying US treasuries to buying gold, and India as well"
"Once you start tokenizing stock to trade them globally, you have a problem because you can't really have enforcement actions against people in foreign countries for insider trading"
"I'm always happy to debate my point of view but a lot of its terms are just being born in South Africa living through a part-time building companies along the way and i just i'm just a big big big big believe in utility over narratives"
📊 Topics
#cryptocurrency
62
#trading
27
#defi
16
#investment
9
#web3
2
🧠 Key Takeaways
shift topics but there's one one concluding thought on this is you can pay for data like real time retail spend on visa mastercard networks and hedge funds like two sigma pay for that to get an early read on which retailers are going to perform or underperform you think about like what stable coins mean and being really maybe tag that to different merchant IDs things start to get pretty interesting in terms of you know democratizing access to that information compilianly there's more so sort out there yeah uh or good I was just gonna say I'm before we move on and I have to take a quick break for ads I just want to to tie bill in this discussion because we were talking about markets I mean maybe um for for ramen and Vinny just quickly what do you think the next week looks like uh this this Bitcoin and market to need to go down are we're gonna see a slight bump like what are what are you seeing especially given that this is a bit of a holiday week for I've got a bunch of put positions in place um Bitcoin theory in particular uh I'm a bit bearish right now I mean I was bearish basically going into the FOMC because I don't think they should have cut and I think that cutting has signaled weakness and I think it causes problems with with um Japan in particular and we're seeing you know if we saw immediately what happened afterwards within the K and I think I mean this is again the macro situation is is a very complex one so I'm trying to discuss it in a short session like this doesn't make any sense um but I think that we're we're um we're gonna see a lot of liquidity unwind from the system and I think that even though we're seeing stocks go up right now um yeah I have I have virtually zero stocks in my portfolio of public stocks I like I'm basically in Treasury short term um and some gold positions you're always in Treasury's and gold uh come on sorry you're always in Treasury's and gold right you know you you know recently yeah yeah yeah yeah I mean I'm run a big fan of stocks I think stocks are really over about it I think the Buffett indicators you know no I'll take the other side of that all day long yeah I just want to find out I recently invested in some gold too for people who can't see this is an Eagles championship super following nice just to be clear it is not actually a real one made of gold my wife would divorce me but I think like on Bitcoin I think if you ever guess to 107 the next week or two you're supposed to be a buyer so at 110 you get to be a buyer to somewhere around those levels right now it's kind of in a lukewarm uh position you know I I go back to some of those negative seasonal uh issues we've talked about a few minutes ago but I I wouldn't be as bearish I think you should have a run up through November uh but you got to be day to day on this if you're timing the entry at that level you got to be day to day on it you got to sit on it like I can't tell you now it's kind of in Thursday but if you tell me what happens on Wednesday I'll give you a view if that makes sense yeah I I would also hop in here and say I think for people who are more concerned about real returns which is probably where Vinnie is as opposed to purely nominal or maybe you're not dollar denominated as well I think one of the few assets in the current market that you could buy and just fire and forget for a while probably is gold right rom to your point of like I don't think you need to tactically trade gold because that's one where if we continue spending this amount of money on a long enough time frame that thing is definitely going up I agree the gold is uh I'd say a primary position for me right now um because I think it's all about protecting privacy and power and I think that the the the US is running a twin deficit the federal deficit is going to keep rising I mean we're going to be 2
you know bring on someone that's looked at the entire industry our debt stack and take it right now the argument is it's in five years from now all three years from now so it doesn't matter right now I'm like not I don't think so we go see a lot more your differential crash of crisis general idea is correct like there's this concept called a minsky hypothesis uh developed by high minsky it's an extraordinary framework I see it has not been uh awesome if any of there but I'll add up briefly so the concept is that at the beginning of a of a market run you underwrite assets to free cash flow the unleavored free cash flow is enough to motivate a purchase maybe that's 8% 12% 14% then as the market gets going that assets priced higher the yield is lower to get to your target return use a to use some leverage okay so now you say oh I can get to my 8% bogey 12 or 14% but I've added leverage to the system and obviously we've seen a levering of assets including micro strategy and then what happens in phase three it's comparable based analysis that means you say oh you should buy it because the public compass 60 times earnings therefore it's a bargain because this is at 42 earnings so that's actually a form of greater full theory you're betting that there's some marginal buyer who's a sucker that's going to buy and so Vinnie's point is that some of these assets are transitioning from phase two to phase three because they're kicking out the can to the future and there's going to be some buyer in the future the problem is that it's all reflexive there is a buyer in the future if it keeps going up but if it doesn't keep going up then there's no buyer in the future you can't presume that well I was going to say you've kind of hit on the problem with dats trading and an mdav premium right like this is the sort of tail of the minskite theory is that like if you list without being overly like mean here if you listen to most people like trying to explain why their dachshund traded an mdav premium it's a version of the old joke and mathematics of part one a miracle happens part two right that's like guys right that's you know it's it's like explain to me how using leverage causes your underlying asset to become more valuable over time right like you could buy more of it I get that that's how leverage works total cool totally good but like say more and they just can't so to me part of part of why I've been skeptical of most of the dats and again there's some set like a very handful of dats with things like operating cash flow okay maybe you're going to work but for anybody who's in the asset part that's trading at a premium you're in the final phase of minskie already and we all know high grades I agree you're reminding me of the old joke about the economist on an island with the can of soup and then someone asked the economist how you gonna get off the island well assume a assume a can opener that's what you're saying like assume 10x if we get the 10x we're going to 20x and aren't we going to 10x we'll look at mstl here I like I just want to ask because I know we're going to get some questions the new listing standards from the SEC to sort of standardize cut down the timeline from I think down to as little 75 days to to listen to spot ETFs how does that impact the calculus for all of this especially especially for some of the longer tail assets that maybe don't have dats and I know in some cases dats were formed strictly because of that regulatory arbitrage that I think Austin you were talking about before so Austin maybe just come to you what are your thoughts well my thoughts are that I'm on mute um your your cause like be pain is so I should get a good rum or anything yeah go go to rum I want to think about how I'm gonna focus on it I stumped Austin that doesn't happen very often I like it I'm trying that to be rude I have no views on this all right fast forward okay well I Austin seems like she has something that he wants to say so I mean just for me I mean I think it just for like just the buy-offs a little bit of time it kind of closes off the window to some of these I mean I've seen some dats like I think one was for for Fed the artificial intelligence company that like a company called interactive strength through a hell mirror and try to convert themselves into one of those and I don't see any any interest in like like real liquidity for any of those types of tokens and I don't see much hope of any of this tokens re-emerging from the dead which is but I think a lot of those are doing so unless you catch one of these shooting stars right on the way up at the perfect time be an ETF or a debt I don't see a lot of hope but Austin but let me let me actually go one step like further to explain why I paused there the dad thing fundamentally is like a funding complex trade in general right because the whole idea is like I'm gonna start with some initial amount of money either in a shell company through a SPAC something like that I'm gonna lay around additional money usually in the form of a pipe or something like that and a lot of that is sometimes in kind contributions from people who are doing it for tax reasons and then to be able to borrow against stuff for these so is there an ability to get certain things rolling purely on a tax our basis that will inevitably decay back down to zero like yeah that can totally keep happening like I think you've kind of endlessly throw like ice cubes into the boiling water not increasingly dumb and weird stuff in that regard the separate question is do you have any staying power with any of these I will jokingly give the answer that I was contemplating how to wrap my head around which is actually the thing we should be launching is a debt that unwinds other debts well now I actually think I think I think what actually wants to happening is the debts with the highest M-node multiple will be able to gobble up the smaller ones right so it's basically Pac-Man for debts and so but but that only happens with the debts that are highly the very capital efficient you know it's for example that takes a lot right if you're running a slotted debt and you can manage the amount of capital you have cash on hand a amount of soul that you have this you stake this all appropriately you use the soul in the way that you know within defy that makes sense and you can generate an above market return on that and then you have a soul debt that has no idea what they're doing and they're just maybe they're just staking bluntly and they're they're highly leveraged and they borrowed soul instead of whatever else and market shanks all of a sudden that one's heavily undervalued and the one that's responsibly managed isn't and because they're more efficient with the capital they can gobble up the smaller one so I don't think I mean I think if we look at the capital markets within crypto for the highly liquid stuff the Solana is a theorem Bitcoin etc as long as the capital is managed correctly I think you you do get this other trash up of uni however however I will say that the stuff is still priced in dollars right everything trades to the dollar and so any down draft in the prices will create pressure on these assets I feel like that's still the minskie problem though right like assume a debt that trades at an MNAM premium and I'm just like again I I remain skeptical then in the long run any of the debts traded at MNAM you should only be trading at a premium to your assets if you have cash flow generation above and beyond right what would be expected and I will also remind everybody in fact I'm working on a paper about this that with the ETF listing standards we're going to have staking inside of the ETFs now so this whole problem of oh my ETF is a melting ice cube and the data is not as also about to go away and in fact I think you're going to start seeing things like liquid staking tokens inside ETFs to get the best of both worlds in it suddenly becomes very hard for me to figure out how if a dad's not going to be buying real cash flowing businesses what the hell it's doing existing it's a great question so well also I would I would say this I would disagree here I would say I think you can have debts that are higher beta to the underlying spot and if you're in a bull market then they'll have an MNAMV ratio greater than one if you're in a bear market will be less than one because to Vinnie's point they've got some debt outstanding but I don't think there's anything same that they can't have a premium then if you get if you've got cheap debt well I agree with Austin yeah I think that some of these debts will have to buy operating companies like you know if you're doing a Salana debt you want to maybe buy a you know a validate or set one up or you know that's the thing so there's businesses that these debts can all own to help juice their returns it just depends on how vibrant and how stable the ecosystem is for that for that particular crypto so that's why I'm pretty bearish on the long tail of cryptos out there because most of them are very illiquid very small market cap don't have established sort of economies that have been functioned there but it's very clear Bitcoin Ethereum Salana has yes I agree with that yeah so we have about a little less than five minutes ROM is you know and Austin Vinnie used to you I like to end by just asking everyone to share just one kind of contrarian thought or just something from this discussion that was left on the cutting board so so final thoughts ROM why don't we go to you first yeah so like the total return the S&P crushes gold that's one so I could actually check that with GROC if you do equal weight it's different but why are you doing equal weight you gotta do market cap weight all right all right equal weight is you know equal weight is not a market basket right but you know you're adding to winners trimming losers and market weight two is by the way my last call on the show I think is last week and I also rated six weeks ago is better mortgage that's up 57% today up 300% of the last few months but that's been phenomenal not financial advice entertainment only I think no wage and cruise lines is quite interesting here it's got strong EPS growth or Trenekuides 90% plus they've got debt but the bulk of that is customer advances those are customers saying here's my money that's called a negative cash conversion cycle by like here's my money so I can pay can I use your cruise in the future that's what you want so I like I like that concept betting on boomers betting on travel travel and leisure betting on consumer discretionary boomers want to stretch more and more retiring past peak employment and it comes favorably to their peer group in terms of valuation like royal crib and then carnival cruise lines so that's my Norwegian cruise lines nice I'll hop in here because mine actually piles on in a different direction from what Rama is saying which is I would tell you if we are going to have a breakdown in the economy I don't think it's going to be driven in the traditional way that people in the United States are used to and what I mean by that is the US experience if you look at financial data in this country over the past I don't know 50 years more what we've had is a growing young population relative to the elderly population are at least stable with a growing working age population is more and more people piled into the workforce and we are now on the reversal of the trend of that so if we're going to start seeing sort of unwinds in these sorts of things it's going to look more like the experience in Asia of the past few decades not as extreme but go look at somewhere like Japan because his economy essentially becomes older and older and older over time you start to have a total reallocation of where efforts go and one you would expect things like cruise lines nursing homes like funeral homes to outperform because essentially you're going to be delivering more services to a greater population share but two you start to have in a place like the US intergenerational warfare and to me if we're going to have a breakdown my point to people is it's not going to look the way you think so also please please please stop overfitting with past models from the United States