How Microsoft Won the OpenAI Fight as Markets Rally on Iran

Welcome to Bits and Bips, where we explore how crypto and macro collide one basis point at a time. We're here to discuss the latest stories in the worlds of crypto and macro. With that, we're going to take our first break. Bitcoin changed how money works. Citraea changes how Bitcoin scales. With a trust-minimized BTC and a native stablecoin, CTUSD, Citraea enables Bitcoin capital markets with lending, privacy, Bitcoin yield, and more. Get started at citraea.xyz slash unchained. Unchained. EtherFi is giving Unchained listeners 15% cash back on food and ride apps. And that's on top of the 3% you get on everything else. Your bank is charging you to use your own money. I switched. Go to ether.fi slash Unchained to claim your discount. I'm your host, Chris Perkins, the golden hand of 250 Digital Asset Management. And today, the good professor, Austin, is off teaching and doing what he does. So I'm going to sub in as the host. And I'm here with my co-host, Ram Alawalia, Maester of Wealth, leader of Lumina. How are you, sir? Doing well. How are you? I'm doing well. Lots going on. Lots going on. You were telling me before on the pre-call you're super bullish. But what's on your mind? I think there's a lot to be bullish about, a lot to be optimistic about. We have some news around the Strait of Hormuz, where the IRGC is proposing a path at the escalation. We've got earnings estimates that are going up. We've got a lot of names that look like they have bottomed. So we can take it where you want, but that's what's on my mind. All right. And yeah, let's start off with Iran. We'll just go through that quickly because I think that that's really been in the driver's seat, right? We haven't reached, I don't know, it feels like we're reaching that stasis finally where the markets are just like, yeah, it's in the background. It's like Ukraine. It's not like impacting our day-to-day. Certainly something could come out of the woodwork and change things, but it feels like we're leaning forward. I don't want to say to the end because I've been in that position before where you wake up and you're in Iraq a decade later, but it does feel like we're starting to reach stasis. Anyway, lots going on there. We're seeing that the blockade is having its intended effect. It's putting a lot of pressure on the regime. But what are you observing? Well, here's some news that came out of the Wall Street Journal about 20 minutes ago. It's titled, Iran Wants Deal to Lift Hormuz Blockade That Postpones Nuclear Talks. So they've presented an offer, and that offer includes stopping attacks on ships in the strait in exchange for a full end to the war, which is what Trump was looking for. And it includes a lifting of US blackade on Iranian ports and a postponement of nuclear negotiations. They say, hey, we'll kick the can on that. It doesn't look like the proposal includes a lifting of sanctions other than allowing Iran to move to the strait. So their economy needs cash flow. The blockade has been successful. We talked about this a few weeks ago where CENTCOM made a move and they ran the I am the captain meme against Kaiser Sosek. I am the captain meme. One, but overall looks good. You know, the bear case is that there is still a significant buildup that is taking place. As you know, a lot of airless moving heavy equipment into the area. Overall, though, I would still be constructive. You know, we've got a meeting between Trump and Xi Jinping taking place soon. I think he wants to have some clarity going into that and have some quality around the current situation. And you've got the American bicentennial coming up on July 4th also. So Trump needs wins on the board. He needs to bring chaos down. And it looks awfully similar to a replay that we saw last year, almost to the week. Yeah, so we've got the midterms coming as well, which is going to be very, you know, Trump needs something. But as we're looking at the timing, right, he is facing incremental pressure. But at the same time, on the domestic front, but at the same time, we're also – the Iranians are under pressure because they're actually sending old oil rigs in to fill up because if they overflow with oil wells, it's going to hurt them for a very long time. So it feels like this is coming to a head. You nailed it. You nailed it, right. So Iran needs to use these old oil tankers. Otherwise, they're forced to shut in the wells. And when you shut in a well, you're taking it when I was once productive, and you've got to put it on the back burner. And just the nature of Iran's oil and how they use water at natural pressure to bring up the oil, they are not in a good position to do that. It will cause significant damage if they're forced to shut in wells. It'll be hard for them to recover from that. So overall, I would say the response of CENTCOM and BESSEN2 here for the last few weeks has been brilliant. We talk also about how, look, if you're in the IRGC, they've got families too. They've enjoyed a few weeks of respite from bombs and attacks. They want that to continue and they want to focus on a local political struggle. And they've got to vie for that kind of position. And that seems to be what they're focused on here. So overall, this is good. Yeah, I agree. This is receding into the rearview mirror like Ukraine did as well. And the economy can handle higher oil prices, you know, so, you know, that world is less energy dependent. We certainly, the United States has had in the past. I don't know. Did you see the news about Tether? So Tether, the U.S. government, Bess has talked about the pivot to Operation Economic Fury. And the U.S. government actually worked with Tether to seize over $300 million of stablecoins. And we've been talking about this all along. Like, hey, if you want to get paid in stablecoins, good luck to you because these are centralized assets. And that's exactly what's going to happen. You're going to get seized. So I think the added incremental economic pressure, it feels like we're actually stabilizing. destabilizing. It feels like as this lifts, provided there's not too much damage done to oil and it impacts inflation, et cetera, it feels like it's a good setup for markets. Do you agree? Yes. No, I mean, I think the setup for markets is very attractive. You know, you're getting me excited, Chris, now. Let me start on markets. Look, here are the headlines. Number one, the S&P bottoms up analyst estimates for year of earnings growth is 19%. This is bananas. These numbers are absurd. Last year, year of year earnings growth was clocking around 12%. That was strong too. We're seeing an acceleration in earnings growth. So every element of the GDP equation is moving in the right direction. The government is spending like a drunken sailor, unfortunately. So bringing to the present spending, that's bullish. Obviously, defense tech is a big part of that, industrials, data center. Second, capex spending is going up on AI. The AI stories flipped from AI apocalypse to we need more compute yesterday, clause doing the rate limiting. Everyone needs data center and capex spend from hyperscalers there. And you're about to see more capex spend from the Pentagon. They're the new customer on the block. They're just getting started. And then the consumer is healthy. We saw that from bank-reported earnings, from the large banks, the credit card issuers, to the regional banks. Banks are lending. When banks lend, the borrowers use those funds to make investments. Jobless claims are low. Inflation remains higher for longer. But Warsh is a new incoming guy. He's not going to want to raise rates. So owning real assets and owning market assets seems like a very compelling opportunity. Plus, a lot of people have cash. They got scared out of the market. They're trying to get back in the market. They're buying dips. I expect they will be buying dips. And this week, we have tech earnings season. Yeah. 45% more for it. Yeah. It's a big week. Yeah. What do you expect to see out of that? What are you looking for? What are you not looking for? Yeah, what I would look for is ROI on CapEx spend. And it's going to be there. It was there last quarter. It was the quarter before that. The overhang was really around sustainability of CapEx. But Microsoft, Google, NetA, and Amazon report this Wednesday after the close, Apple Thursday after the close. I think the technology sector is still reasonably valued, and they've got strong earnings growth. So the reaction matters more than anything else. I think it's going to be constructive. I think it's going to be positive. Each company has their own unique story. Microsoft has a lot of capex spending on cloud. They're going through a divorce process with OpenAI. It looks like they've contracted that out. We can come back to that later. We want to see these other companies report too. But overall, though, like the world shifted from AI apocalypse to the world needs more AI compute yesterday. That's generally bullish for these cloud providers. Yeah. Let's talk about this. Yeah. No, I think it feels like a constructive setup across the board. I want to unpack a little bit what's going on with OpenAI. This news just recently broke. So Microsoft is going to remain OpenAI's primary cloud partner. and OpenAI is going to ship, products will ship first on Azure. Microsoft is going to continue to have a license to OpenAI IP for models and products through 2032. But Microsoft's license is no longer going to be non-exclusive. Microsoft will no longer pay a revenue share to OpenAI. And the revenue share payments from OpenAI to Microsoft will continue to 2030, independent of OpenAI's technical progress. so this this seems like you know what's your take on all this is this friendly like hey we're both like we agree to disagree we're uh you know how do you think about it yeah yeah this let's do winners and losers on this like overall microsoft's a winner here yeah you know as you as you know when a startup cuts a deal with a big corporate the corporates bring their m&a and corp dev team and they ink a paper-tight contract that protects them many ways to Sunday. And Microsoft was the purse funding OpenAI for such a long time, and they had wins because the Microsoft Cloud would benefit from all of OpenAI's development. Now, here's a couple things. So one is Microsoft doesn't have to spend money and do a register back to OpenAI, so their expenses linked to OpenAI are going to drop. Number two, they're going to enjoy revenue from OpenAI through 2030. So they have the upside on that. And third, they have rights to the OpenAI IP through then as well. The R&D for these LLMs is significant. You're going to spend tens and tens of billions of dollars to do model training runs. Microsoft gets a free call option on all of that. So, you know, the context was we talked about, I think maybe a month ago, OpenAI cut a deal with Amazon and Amazon invested in OpenAI. OpenAI needed the capital to keep up with Claude. OpenAI is saying, hey, we are growth constraints. We don't have to compute. Amazon, as a result, got OpenAI to do a deal. There was a report in the Wall Street Journal that OpenAI violated their agreement with Microsoft. We all want to see how this would play out. play out. It looks like Sam cut a deal that was illegal under contract law and was going to play figured out later. Well, the later just happened and they reworked terms with Microsoft. But if you're in breach in a contract, if you're the breaching party, you don't have the negotiating leverage because the party that claims breach can allege damages. So Microsoft, it seems to me, ironed out a great deal and get more revenue, less expense, and a call option in the IP. So I think it's a big win for Microsoft. It's one of my top three positions right now, too, I think. Interesting. Yeah, it's mispriced. Got it. And then you see OpenAI. Do you see the rumors about the phone? They're launching a phone. They're putting together a – they're teaming up with two semiconductor companies. We'll see. You know, they brought in Johnny Ivey from Apple to go design this. Now, remember when Meta launched the Ray-Ban glasses? they sold a lot but it wasn't really material like meta's got distribution on its apps but it's hard to sell a physical product without yeah that's who that's what we're looking at so it we we've heard this rumor for a long time um and then today it was i think earlier this morning it was tweeted out that yes they're working on a phone uh you saw qualcomm respond quite favorably but like i was looking at world price and it really didn't respond. And to your point, we've seen other projects in the crypto space like Solana, Anatoly, he's a Qualcomm guy. He's been trying to push out his phone very, very hard to find product market fit. If they do though, it could be a pretty nice unlock across the crypto space as well, particularly as you're trying to figure out proof of humanity, if it's an agentic friendly phone. Like I don't know what the next iteration of interface with the internet's gonna be, right? Like, is it really natural for humans to be like this all day long? I kind of don I don think that our natural state And so I do think eventually we gonna evolve beyond that I don know if this phone is a phone or if it a new type of UI that we haven thought of you know rather than just you know, but at some point someone's going to go head to head with Apple and say, there's this new human to computer interface. And I don't think it's going to take the shape. I think it's going to look like something else. And Johnny Ives, he understands UI. So I would be interested to see. And then, of course, if it's an AI first phone, an agentic friendly phone, this whole idea of proof of humanity comes in. I was in there as at their liftoff conference this week or so ago. Really interesting stuff going on. And as we said, you know, we've been big supporters of that project over the years. so i think it's worth noting but i'll also say like product market fit disrupting the incumbents you know let's talk about apple a little bit you know they've faced incredible criticism for not being ai first but this is a company that tends not to be first right but when they come to market with the iphone they crush everybody else as you're watching apple earnings as well like what are they going to be doing in this space because it looks like sam is coming after them on the phone side or some iteration of it. Yeah, I wouldn't be worried if you're Apple or Google about disruption from open AI. The lock-in and the ecosystem around these platforms is significant. The switching cost to get out of the Apple ecosystem is so high. Open AI doesn't really even have like apps right now. They're trying, but it's not a real credible offering. You know, those platforms can be agentic AI friendly. They will be, right? They can do anything they want to go do. If there's a customer need, they'll fill and fit the need. So I'd be skeptical. It's just a lack of focus. OpenAI is not focused. The best form factor, the most intuitive one, is how we're communicating. It's just audio. When I'm driving, I talk to AI regularly. When I'm going for a walk, I'll talk to AI. And that just requires a mobile phone with a GPS, some local compute, and headphones. So that might be the form factor up until we get the R2D2 projection of Ben Kenobi. Maybe the holograms come five years from now. I don't know if we have that technology yet. But I think the form factor, really simple, audio, mobile, together. So we'll see. Like you said, it's hard. Solana is trying to develop a phone. It's extremely hard to get customers to switch. Yeah, maybe it doesn't have to be a phone. It has to be something different or definitely something innovative. We've seen Sam do that before i think um one of these episodes you're going to say something positive about sam allman like we should put we should start a prediction market on it happens you should call like the 9-1-1 and they should check that i'm not being held against my will here because it's really i find that you know what it'll be it'll be a deep fake right but you know what we have to get you uh world you know i was at this world lip off event they have like this new technology right where you can use your proof of humanity ID. They can do some social graphing and you can prove that you're a real person and not a deepfake. So it'll probably be the deepfake rom that shows up. It will absolutely be the deepfake rom. It'll be April 1st. It's kind of an incredible individual. He's being sued by his first shareholder, Elon Musk. Elon was going crazy today. Did you see that? No, but it looks like that the legal battle that he's pursuing here is going to be more uphill. But go ahead. What happened there? No, he was just going off on how, you know, he was saying a lot of disparaging things about your buddy Sam Altman on Twitter, on his own platform. I got to dig in more, but it looks like that the legal suit, that the complaint that Elon filed is going to be more. I mean, you know, Anthropic, which now in the secondary market has a bid around a trillion dollars amongst retail investors, right? Yep. So it's ahead of OpenAI now. It's got more growth. OpenAI is saying we are growth constrained. They're saying, oh, we need more money to grow. Can you give us some money? Can you raise some money? Claude Anthropic had less resources, less compute. They started later and they're ahead of the pack. And the CEO of Anthropic, Dario, came out from OpenAI. And OpenAI has spawned so many competitors. Now, many of them aren't seeing traction yet. The CTO went somewhere, started thinking machines, and there have been other spinouts like Ilya. But Sam has dropped the ball 10 ways to Sunday. He's birthed his own competition. Got it. So as you're looking at tech earnings going into this week, you said you're super long, Microsoft. How do you think about the others? I think the others will do probably fine. I mean, it's like meta, we just got to see are they spending CapEx like a drunken sailor or not. The core business does really well, though. They can fund it because they keep growing earnings. We like that, too. I think Google will do really well in their cloud business. They showed a 30% cloud growth. they're benefiting more from their chipset as an alternative to NVIDIA, but they don't have enough capacity on that because NVIDIA locked down all the capacity from TSM and the semiconductor ecosystem, right? But Google has all sorts of ways to win here too. Amazon rallied ahead of earnings on news, including around Claude and OpenAI. so that's more on the expensive side so is Apple so I'd be interested in some of the other names like Meta, Microsoft but overall though the Mac 7 names were sold off many of them haven't fully recovered so I think there's still opportunity in that bucket especially if they have a cloud business Alright, so let's pivot to the crypto space I think we both, I'm generally constructive. Sometimes you're constructive. Sometimes you're not so constructive. This week you sound like you're constructive. What are you looking at? I'm constructive. Yeah. I mean, last week we were constructive. We talked about hype. I was so constructive actually when I said, let's talk about what to buy. We said hype. I think it's a, I think that there's a rally. I think it's a good opportunity set. Like I might want to wait a day or two. Things that will come a softer tactically right here. But, you know, if you look at 20 to 30 to 50 charts in digital assets, you see these long bases, you see these quiet rallies in certain areas, and you're seeing Bitcoin do well. We still want to see the STRC issuance, of course, but, you know, it's doing well. Other assets, Ethereum, doing well, hype. I mean, so, and sentiment has been so bombed out, washed out, reset, that it might not take much to get this going. So, is it a trade or is it a new trend? We'll have to see, right? We haven't finished the whole four-year cycle, right? It could be a rally now through, say, July along with QQQ and software. Of course, crypto has been highly correlated to software. Software in general is holding up too, right? We had a kind of one and done drop with ServiceNow, but overall software has been recovering. So if that happens, maybe you get an April to July rally, some softness, and then a recovery towards the end of the year. So a broad outline, you know, subject to revision, but. Yeah, I think from my perspective. I think there are opportunities out there. Yeah, go ahead. Yeah, when you look at the crypto space, you got to start with Bitcoin. It's the most dominant asset. It's maybe not the most exciting, sexy asset. It is what it is, and it's not what it's not. But the one chart to look at right now, I think, is Bitcoin gold. And if you look at it in the past month, beautiful chart. And as those fundamentals continue to improve, you know, we talked about the macro economic stress of Iran. We talked about its utility. I see Bitcoin and ETH differentiating themselves through this trustless, permissionless capability. Right. That's their edge. That's their differentiation. Everyone else is trying to catch up to it. So Bitcoin gold looks very constructive. You know, we're seeing Bitcoin DOM continuing to drive out. And you can expect that to lead. But like we've been waiting for years for that pivot into alts. And maybe you're not going to see that in the future as institutions take hold. It's going to be a pivot into fundamentals, not a pivot into alts. I think that's that's an important paradigm for investors to have. As you step down into Ethereum, some really, really interesting things going on. And that brings us to the Kelp Dow story that we talked about last week. what you're seeing is you're seeing market driven solutions to big problems and i will argue that kelp dow layer zero hack is a really really big problem it demonstrated the interconnectedness of defy and frankly something we've been talking about for a very long time the security issues across crypto and defy like these things have to get addressed um you know every time there's a hack that we get a little bit harder and that we learn from it yes but it's this cat and mouse game some people think that you know hacks are going to be a thing of the past because once we get our hands on mythos and other ai technologies we're going to really really harden them um i don't know i think it's always going to be cat and mouse cat and mouse you can see big hacks and it's scary like how can you bring the 127 trillion dollar equities market on chain if you have these massive security issues. And like I said, a transfer agent isn't going to protect you because once you get out of Dodge, you flip it into Bitcoin, you're gone and someone's going to be left with a bag. And we're dealing with a bag right now. There's a big bag of Inave. And what's been in a way beautiful to see is DeFi United coming together. And so we're seeing competitors, Avalanche, solana and others participating in the recovery efforts why because they're being smart they're being thoughtful they're being strategic and they're realizing that now is not the time to blow you know burn everything to the ground now's the time for the market to find market-driven solutions which is very very core to to why many of us are in crypto in the first place And what you're seeing, we're seeing like, you know, these, we don't know all the details yet. And I'm very excited. And I'm going to tease that I think we're going to do something really special with the details here in the future. Don't know them personally, but I know that they're coming together. But you're going to see a market-driven solution here. And it's going to repair for the time being what's been the damage that's been done. I think there will be some pain in certain places. But, you know, if you're long-term, you think that we're going to navigate through that. um and that leads us to like the bigger question why are we letting you know state actors ravage you know this ecosystem this is young ecosystem um i've been very annoyed with some of the people who are like hey this is a you know it's an environment that you have to be prepared for and you know it's um it's not permissive it's brutal and like you know yeah you know shame on you if you get hacked i don't know man i i think that these these sophisticated sophistication of these hacks gets more intense every single time. It's almost, it's very, very difficult right now. As a human, we're all flawed in many cases to not be socially engineered, you know, but my, my point is is that we need a policy response and I'll continue to say it till I'm blue in the face. What would that look like? What would the outcome of the policy response be? Well, what I've said for years, I guess more than a year now is we need to increase our security service area of security. We need to empower the private sector to go out on the offense against those that are hacking us. We need to hack them back. And we need to make it very painful. Yeah, let's do it. Yeah. So we need to go on offense. I've talked to Democrats about it. They're like, I like offense. Richie Torres is like, hell yeah. I've talked to senators about it. They like it. We just got to bring enough attention to folks to understand it's security that's hurting our next evolution that's hurting the institutional adoption institutions want to come in right now they're begging to come in but they want control uh i don't know if they're going to avail themselves we talked about this in the past like decentralization is fine in certain levels i think and that's okay you can have a centralized front end a decentralized back end but they do want control but if they're entering a system um where they're taking like they're happy to take market risk. Many investors take market risk all day long. But if I'm going into an environment where my assets may get stolen and I'm not so sure, we got to figure it out. It's like the Wild West back in the day. We need law enforcement. Jesse James has to get thrown into jail. We can't have this anymore. That's what's required next. So anyway, Bitcoin constructive. The thing I love about Ethereum is that, you know, time and time again, the communities come together, whether it's moved from proof of work to proof of stake or in this case, or even in the DAO that came together. Like they're coming together once again to work through this as an industry, which I think is very, very positive long term. Near term, it's a little bit painful. And then as you go down the stack again, it's about fundamentals, you know, fundamentals, fundamentals. no one has time anymore for the fluff. I think you're seeing as every day goes on, less fuss more fundamentals you know and that what happens when professional investors continue to enter the space Yeah I guess a few quick reactions One is you know in this past cycle digital assets failed hit all highs unlike many other asset classes Yeah. A lot of expectations were missed. There's still basic issues around security and these hacks with these established protocols. So my view is that one should trade and not hodl and look for trends. So these assets still compete with other attention assets that are out there too, including AI names, which can do well. And semis can do well over the next year or so, notwithstanding the next few weeks after an incredible run. So it's important to just keep all of that in perspective. and the quantum risks on Bitcoin are legitimate too. So there's, yeah, I'm constructive, you know, but I'm not a, hey, go max long, maxi this, maxi that. Like, you know, it's an asset. It's got a role. It's got an opportunity around it. Go ahead, yeah. You're talking like a meme coin trader. I don't know about that. I mean, I would look for value. I'd look for real opportunities, look for differentiation, look for a story. you know i don't think the meme coin thing is a move at all actually i think i know if you say you know you're trading based on on the meme right and i think that's a big part of it the attention right and so like like that's my point and like there's part of the attention that you need and you can like empirically evaluate that attention we have plenty of tools to do that um and and you know what that has informed a lot of price action in crypto to date why because it's a retail-driven market. Now retail has been distracted, as you say. They're going after the next shiny toy. The difference with crypto, and I think there's been this gap, right, where retail's gone after new shiny toys, gold, whatever. But these institutions are slowly coming in. The pace of their entry, I think, is also a function of some of these things who try to get their head around, like security and other things. I think there's a good angle here for – and again, you said you're not a hodler, But like, I don't know, my take in this space, fundamentals and long term focus, because it's going to be volatile, right? It's going to be volatile in this emerging asset class. So find good fundamentals, go long term, and then make sure you're secure as hell. And I think that's why you're seeing in this phase, you're seeing some of the big institutions coming in and saying, hey, listen, Bitcoin, awesome long term asset. Don't worry, you're going to outsource the security to me, put in an ETF. I'm going to make it operationally easy for you. That's why you're seeing these big institutions come in right now, whether it's name your initial institution of choice. So Trump over the weekend said we have to do more for crypto, to do things for crypto. He just said that yesterday. I want to see what they have in store. And the right tail of surprise outcome, which is where things are more, that's where I would try to focus. What's the right tail story that we haven't seen yet? would be, does Trump negotiate a deal with IRGC where there's some settlement involved? I don't think that's outside the realm of possibility. I think it's more probable than people think. I don't think it's a 50% plus probability, but is it a 40% chance? Is it a 40 to 50? Is it a 40 to 45% odds? I would say it probably is. So you have two choices, right? What are the two things they've been looking to? I guess you have three choices. You have Bitcoin, you got stable coins, or you get yuan, right? Those are the three ways that you can transact going forward. Bitcoin, trustless, permissionless. obviously you don't want to see you know the iranians buying this asset as an illicit you know whatever but that's but it has that utility trustless permissionless um it's kind of like gold right if you mine gold in your backyard who's to stop you you got stable coins which again best instrument for national security you couldn't invent something better on a white board we just saw you know they seized the tether assets and then the yuan which brings in additional challenges if you're you know any country around do you really trust it um and how does that you know how stable of a store value is it so i don't know what do you think how does this play out well if you're trump like there's there's a cynical way to take it and there's another way to take it if you say that if you if they're self-dealing then it touches wolfie token in some way right not if you're justin's son not if you're justin's son right so that's another angle Right. So let's go through it. So or it touches Tron network because USDT would be likely the mechanism, not circle, because you're not KYC the Iranian regime. So I don't think that it's circle or it's it's Bitcoin. I think those are the expressions. Right. I don't I don't not like placing a debt on this. I just think it's an interesting thing to consider, though. It's an interesting thing to consider. So when you ask what he could be doing more for crypto, I think there's a couple of trips still up the sleeve. We got to get clarity passed. And I'm actually increasingly worried about that right now. I don't know if you saw, but Senator Attilis said, wait a second, ethics. He had issues around yield on stablecoin, got through that. Congress had a concern around ethics? What? That's the headline. That's breaking news right there. What? exactly so it's been so frustrating to me i talked to policymakers i marched down to dc and they're like particularly when you talk to democrats they're like chris you know what my constituents they will not fly for this because unless ethics are addressed that's it and i'm like come on man like we have ethical problems with trading throughout congress on both sides you know this they're like we know but politics i you know trump crypto crypto trump The Chinese really want this too. I mean, they are going to executives at Coinbase and saying, hey, you guys supported this and look at Trumpcoin, look at what happened, look at the money lost. So I think they are serious about that requirement. What that looks like, I'm not sure. yeah it's going to come to a pass and they're going to go after his personal holdings and he's going to say i got real estate too you want to get that and like it's and but like we've talked about this in the past in the state of the union address he's he actually talked about the stop insider trading act twice and that's the right way to do it would be to punt this into a greater you know cross asset class ethics policy that's the way to do it and again i would never be up here arguing that ethics aren't important. They're probably the most important. Why? Because our capital markets are based on clear, transparent rules of engagement that are not full of graft or insider trading or anything like that. Right. Trust and integrity. Right. Yeah. Exactly. Trust, integrity, transparency, et cetera. So if you undermine that, you've got a problem, but we continue to have issues. Speaking of which, did you see that prediction market? so they arrested a special operations individual for betting on the success of the maduro raid did you see that yeah he made what four hundred thousand dollars yeah yeah what do you think about that well he's one of many yeah happens all the time yeah yeah is that is that right yeah what do you think about that well i'm glad they did it i'm glad they you know uh like found the guy because we had seen reporting a month ago about how there were resignations from the sec enforcement division due to failure to follow through and prosecute people that allegedly were engaged in insider trades and we've seen a number of unusually timed large futures trades like within 30 minutes of trump giving a press conference so there's more of it like if you're the politically connected person in the white house they don't come after you. If you're the guy doing the special operations raid, you don't have the political clout, then it looks like they come after you. So it doesn't seem like even-handed justice to me. It's complicated. Look, people follow the examples of their leaders. That's it. You've got to lead by example. If you're not leading by example, then people don't know how to interpret the rules of the road or they they make up reasons why they can engage in that behavior. So hopefully this creates a bit more clarity for people on what's permissible and not permissible. There's a lot of these hedge funds that are starting that are just betting on prediction markets, which I think is nuts, by the way, because I think the bid-ass spread and all this stuff. Did you hear about the guy with the hairdryer who took the hairdryer outside? Right? Yep. Well, here's my take. I've been in futures markets, futures markets for a really long time. Post Dodd-Frank, they became regulated. And fraud manipulation and abuse is illegal, full stop. And sometimes when new technology comes out, people like – or new innovations come out, they think that the rules don't apply. Derivatives do. They're fully regulated. That's illegal. I disagree with you that the guy, the special operator who bet on a military operation should be treated the same as others. Because as a military guy, people could die because they tipped off the enemy and they were on hypervigilance and they shot down whatever. So the consequences of that are incredibly profound if you're betting on military operations. if you're if if you're listing markets on on when a land invasion is going to occur um yeah free market's wonderful but when it leads to people's deaths it's a problem and like i've had plenty of friends that have died in combat don't need it don't like it so i do think the consequences are different um so to the extent that one of these markets is on short if you're saying more severe you're saying more severe for sure yeah yeah if you put people's lives The law has to be enforced everywhere, right? But the consequences are much more profound. You know, like you can kill people if you tip off operations. So I think like that, that will be regulated away. For the unregulated businesses, you know, how do you have accountability? I don't, that's an interesting model because there's still a lot of centralization out there. And I think you probably could find ways to hold those folks accountable. And again, I love decentralization, but not when my friends get killed. So I don't know. That's something to think about. Cool. Why don't we take an ad break here and we'll come back and there's plenty more to chew on, Mr. Rom. Bitcoin changed how money works. Citraea changes how Bitcoin scales. Citraea uses Bitcoin as both the settlement and data availability layer. As Bitcoin's application layer, Citraya enables the first trust-minimized BTC on a fully programmable platform and a native stablecoin for Bitcoin, CTUSD. Citraya offers Bitcoin capital markets with lending, privacy, payments, Bitcoin yield, trading, and predictions. Citraya expands Bitcoin's utility without sacrificing its security. Citraya mainnet is live. Get started at citraya.xyz slash unchained. Etherfy is giving unchained listeners 15% cash back on rideshares, groceries, and restaurants right now. Which honestly is kind of wild for a card like this. On top of that, I'm getting 3% cash back on every single transaction using my actual crypto. No conversion fees, no nonsense. My bank never once did that. And it goes beyond just spending. You can borrow against your holdings at 4% or less, which is super useful if you don't want to sell your assets. You can also earn on all major assets, up to 8% APY, just by holding. And moving money is just easy. No hidden transfer fees, no friction. It just works globally. If you want to check it out, go to ether.fi slash unchained to claim your offer. That's ether.fi slash unchained. If you gave me $50 right now, the first thing I'm buying is a pair of espadrilles. Coinbase One member month starts with 20% off your first year of Coinbase One, plus a $50 Bitcoin bonus when you spend $100 with a new Coinbase One card in your first 30 days. It's one month of more, more rewards and prizes all month long. Coinbase One is the ultimate membership to make the most of your money. And I know because I'm a happy Coinbase One member. It gives you zero trading fees on thousands of crypto assets, 3.5% APY on USDC, boosted staking and lending rewards, and up to 4% Bitcoin back with the Coinbase One card. If you trade crypto regularly, the basic annual membership can pay for itself. Enjoy bigger rewards, exclusive drops, and experiences that money can't buy. All with Coinbase One. Sign up now to get a 20% discount on the annual plan and so you're locked in for the weekly rewards drops starting on May 4th. Visit Coinbase.com slash Unchained to get 20% off the first year of your annual plan today. Offers valid until May 31st. Terms apply. Coinbase OneCard is offered through Coinbase Inc. and Cardless Inc. Cards issued by First Electronic Bank. Bitcoin back rates are based on cardholders' assets on Coinbase. All right, Rob, we're back. We started talking about prediction markets. And, you know, I think we've agreed. I wish we could find someone who disagrees with us so we can have a nice debate. But look, these are the regulated ones. You can't manipulate them. For the unregulated ones there probably needs to be some kind of accountability But like I also seeing new ETFs that are coming out that include prediction markets How are you using prediction markets to inform your investment thesis Like I think in time personally, you're going to be able to use them for all different types of things, particularly as you evaluate a company, you evaluate aspects of a company. Are you starting to include that into your discipline as you're looking at underwriting? you know we we've had yes so we've had prediction markets like the fed fund futures contract for interest rates like that's worth taking a look at but now you have prediction markets on events such as the outcome of congressional elections so that's something that we're looking at right if you know whether the house and senate go one way or another then that can tell you whether let's say healthcare stocks linked to medicare advantage or solar stocks are worth owning those would benefit if Congress were to flip, right? So we're incorporating that in our AI and our app. I think you've got to focus on the right markets, though. Like, there's a lot of noise out there. Like, find the things that actually matter. So, you know, policy decisions, rate decisions. Yeah, I think there's some opportunities now and then that come up. You know, I saw that the prediction markets were predicting that Kamala Harris has a high likelihood of being the DNC nominee. really i'll take the other side of that all day long that seems totally offsides to me someone that didn't go through a competitive process and lost an election i don't think i don't think they're going to back that horse again so yeah i i think we're i think we're barely touching the surface of what these prediction markets are going to give us. Most of them are quasi-permissioned at this point. I think with HIP4, you're going to see all different types of new markets coming out. Ultimately, you're going to be able to dissect organizations that you've never been able to dissect before. Are you betting on a certain part of growth within a company in a certain region in a certain part of the company? How does that form the valuation ultimately? How do you hedge if you're a commodities investor on weather? And like you said, all this data is going to feed into the AI models to really help you project and risk manage. So I think it's still early. Do you have a view of Polymarket versus Calci? I mean, clearly these guys love each other. I'm not close enough to it, but I am expressing through public markets, for example. Like, I think on the one hand, I don't think sports betting and prediction markets are good for most investors because they will lose money. Like, the bid-ass spreads are thick. The training against Citadel has got better edge, better information. I think just the rise of betting in general is just not a good thing. People should be focused on investing. and like you said, taking signals from what those friction markets tell us, which can be incredibly informative. But I'm expressing through Genie in public markets, for example. But I don't know who's – it's totally to say who's going to be the winner between these companies. And they're expensive. They're pricey versus other names out there in the public markets. They are the valuation. Do you want to be the winner? I know them both. I consider both friends. I don't know if that's possible, but I've got great contacts at both organizations. I love what they're building. I think it's going to be a Pepsi versus Coke kind of regime. I think the natural state of markets is probably a duopoly. Now, it's going to be interesting to see how other folks with massive distribution try to leg into this, and they are. Um, but I do think right now I've got liquidity concentrating in those two, right. Those two exchanges. And like, as a guy who's been in derivatives for a while, like nobody knows how to move and shift liquidity. Like once you have it, like it can be sticky. Um, but like if I had a magic wand to say how to get liquidity, I wouldn't be here. Um, but these guys have liquidity. Um, I do think you're going to see a lot of pressure on the sports markets to your, to your point. there is some there's a lot of of political headwinds i think well the cftc has been very bullish and trevin selig god bless him has been saying federal preemption that makes total sense where you have one set of rules not 50 set of rules but there are plenty of politicians in various states that are saying on both sides of the aisle saying wait a second you know this is very good for my state i don't want to make it federal and available you know it's killing you know my industry or my casino or whatever so i do think sports is going to probably face some turbulence in the future um obviously cal she's got better liquidity there so they've got more of a fight in front of them perhaps um but honestly i think we're so early and you're going to see these things become so massive that it doesn't really matter um the challenge is going to be how do you create enough liquidity in these really nuanced markets to make the signal valid? And particularly, the other thing is those signals can be easily manipulated. To your point, with the guy with the hairdryer in France, these things will – and now people should be held accountable for that. But for these light markets, it's hard to do. But if you have – The guy's in France, what are you going to do? Yeah. To the extent they fragment, yeah, that signal could be super valuable. But if there's not a lot of liquidity, it's not going to be tough. So I think the challenge for these guys is to say, where do we find liquidity? Is it financial markets? Okay, let's list all the rates and get after it. Or is it, you know, we know there's liquidity in gaming, know there's liquidity in elections. What's next? And how do you make sure, you know, because they make money through liquidity. I agree. I don't think they need that many contracts. I'm curious to see what contracts are you looking at? Policy, big events like straighter from moves, interest rates, is the market going to go up or down 100 points? Those things matter. You don't need 1,000 subcontracts. I expect we'll get the 1,000 subcontracts anyway, but I don't think we need that. The unlock is in a few categories, create liquidity around those categories. So that's the value for the exchanges because that's where they're going to make all their money, their ticket fees. By the way, they're going to be having their own stable coins. So it's actually a traditional exchange model where you make ticket fees. That interest income is called stable coins now, and then you're selling your data. But for the user, as you start thinking about if you truly want to hedge unique markets, maybe some of those thinner bespoke markets get really interesting for you. If you can trust them, if there's enough liquidity. Yeah. It is super interesting. I mean, I agree. I'm just like, I'm on one of these sites right now. And it is just fascinating. It's like, okay, how high will oil get by December 31st, 2026? You know, that's informative. Will Americans receive tariff stimulus checks? I mean, it adds color to what's happening with asset prices that you can't really get anywhere else. Sometimes you have to guess like what is on the mind of Mr. Market. You can see, you can see what the market is, is discounting. So, you know, I think, I think they're phenomenal. I just don't know that we need a thousand. I get your point. I got to make money on these other contracts, but. All right. So as we end the session, sir, you seem pretty constructive on Mr. Market. You're looking forward to earnings coming up this week. anything else in your minds uh as you're navigating the markets this week oh i would just say this like i think people might be feeling like they missed the bottom they missed the rally the s&p is at all-time highs uh there are so many incredible businesses on sale there are many opportunities out there they're not in the areas that you might have historically owned or maybe they have been there's still a lot of names that are down 20 to 30 percent because of this ai apocalypse mean but the businesses have strong fundamentals earnings and revenue growth and i don't mean even software names like maybe you think software is dead i think it's a mixed story right the opportunities there but there are many names out there that have a lot of value like berkshire is an example of that it's not going to be a fast mover per se but that's an example but there are many many other names it's not even like it's hard to find these opportunities like you know you know broad rich financial i'm sure like yeah it's an institutional capital market service provider providing technology with 40 roe and technology or recurring revenue okay that's that's down double digit percentage because it's in an industry group that was associated with ai disruption that's it so there are opportunities there folks you got to Go do your homework. Go find them. There are a plenty. There are a plenty opportunities out there. It's funny. The Broadridge team, they provide financial infrastructure, like very robust enterprise financial infrastructure throughout all of Wall Street and beyond. They've been very pro-blockchain as well. They've been really integrating across Canton and other chains pretty aggressively. Yeah. I don't own that, by the way, but I'm looking at it. That's an example. Go ahead. Yeah. Yeah. But again, companies that embrace technologies like a lot of these SaaS companies are going to embrace AI. They're going to embrace blockchain. Maybe they'll even get, you know, get their head around quantum at some point. These are opportunities. So which industry is Anthropoc going to disrupt this week? I know. Right. Well, you know, it'll be interesting to see when they drop a new product and the markets in that category don't tank. that might have already happened by the way we are at all-time highs now and even software is making higher lows now uh you know the the cost of renting a gpu is close to all-time highs they can't get enough gpu yeah so the video is going to be again uh the report next month so i think it's you got to be constructive you know i saw this article the new york times this weekend it said 40 of americans believe the apocalypse is coming i was like how do i buy here It's like, let me take the other side of that. I think the world might keep spinning here. I think the world might actually go on. That's how despondent people feel. The University of Michigan Consumer Assignment Survey is still calming the lows. It's bad. It is bad. It is awful. But that tends to be an amazing setup. I agree. We had a three to four week extraordinarily powerful rally, something of which you see in 0.6% of market history. And yet, like the bull bear sentiment surveys haven't changed. They haven't moved. I'm willing to clock into those and just say, oh, it ticked up. Nope, not at all. No change. People have post-market depression syndrome. And they have fear. and I think people are off sides and markets aren't going to give them a chance to reenter. The fact that the market only dropped 9%, the S&P, despite the blocking of the Strait of Hormuz, probably one of the most significant geopolitical events one could imagine because it actually does cause real economic damage and you could get a regional conflict and all this, right? That's telling. That's powerful. yeah so underlying economy it's a resilient global economy and there's a lot of investment the other thing is that like this decoupling that we're seeing this global decoupling and we can argue if that's really the case like i've said stable coins are going to actually prevent that but you are seeing decoupling and what does decoupling require you got to be resilient man and you're going to have to invest materially in your own stack whether you're europe or anything else and so there's a lot that has to be done i think that's going to be very that'll result in a lot of stimulus across economies um as people focus on securing their own economies maybe long term that's not so great then we'll come back together again and sovereign spending is going up all around the world now europe's going to spend more the u.s is going to spend more we were at wartime deficits now we're really ramping it up like it long term not healthy but it's bullish it's bullish short for earnings bullish for a lot of things that's right bullish for a lot of things the issue now is trading off what horse do you want to own see a lot of horses are going to go up it's like which horse do you want to get on that's right cool man well uh unless you got anything else, let's leave it there. Let's leave it there. Perfect. All right. Good to see you, brother. All right, everyone. We'll see you back next week on Bits and Bits, and maybe we'll have the good professor back. Thanks for joining. Thank you for watching and hope you enjoyed this episode of Bits and Bips. Just remember, nothing we say here is investment advice, and please check UnchainedCrypto.com slash Bits and Bips for more disclosures. Thank you.