Bits + Bips: Is Crypto the Only Asset That Works When Geopolitics Breaks Down?

0:00America leads the world in medicine development. It matters. We get new medicines first, nearly three years faster. Five million Americans go to work because we make medicines here at home, and not relying on other countries keeps us safe. But China is racing to overtake us. Will we let them? Or will we choose to stay ahead? When America leads, America cures. Let's tell Washington to keep us in the lead. Learn how at AmericaCures.com. Pay for by Farma. Hey everybody, welcome to Bits and Bips, where we explore how crypto and macro collide one basis pointed at time. As always, I'm your host Austin Campbell, high scholar of zero knowledge consulting here with my co-hosts, Ramal Awalia, baster of wealth, leader of Luevita, and Chris Perkins, the golden hand of coin funds. We're here to discuss the latest stories in the worlds of crypto and macro. And boy, do we have a few stories today? But before we start, remember that nothing we say here is investment advice. Please check UnchainedCrypto.com,

1:03slash bits and bips for more disclosures. And before we begin, a quick commercial break. Introducing Nexo, the premier digital wealth platform, receive interest on your digital assets. Borrow against them without selling. Trade a variety of cryptocurrencies, all in one platform. Now available in the U.S. Get started today at nexo.com slash Unchained. Quick note, before we get into today's episode, Bits and Bips now has its dedicated feed. We're spinning off from the Unchained feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meets, crypto breakdowns, make sure to subscribe to Bits and Bips directly. You won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds at UnchainedCrypto.com slash bits and bips. All right. Welcome back and I guess right at the top, we've got to start with the biggest

2:05thing in the market right now, which is Iran. So over the weekend, there were U.S. Strikes on a Iran. All right, there we go. In an operation dubbed epic theory, the United States and Israel launched a coordinated military campaign against Iran. Early reports indicated widespread air strikes on strategic targets across Tehran and the country. Perhaps the biggest news is that Supreme Leader Ayatollah Khmeri would rule the Iran since 89 was confirmed killed in the strikes now by both Iranian state media and originally Israel. One could say that is the most significant escalation in U.S. Iran tensions at decades. The fallout of that led to immediate regional escalation. Iran is retaliated with missile strikes on U.S. bases, allied facilities, and commercial targets across the Gulf region. Multiple Arab countries have now been struck

3:08by Iran. Multiple impacts, for instance, in the UAE. Casualties and damages have been reported on both sides, really. The Iranian morning and declared 40-day period of national bereavement for Khmeri, headlining that. So in terms of market impact before we get to some of the items that have happened inside of this, oil prices originally surged as traders are pricing heightened geopolitical risk of potential disruptions to Middle East supply routes, Bitcoin and risk assets down slightly at the start, but rebounded quickly, tapped 70,000 today, gold reached 5,400 an ounce again today, and Polly Barket attracted record trading volumes as U.S. Iran bets topped 529 million at risk, and in terms of actual reporting, hyper-liquid oil prices were used by Bloomberg over the weekend in terms of keeping track of what was going on with

4:13the situation. So I want to start, Ram, from the economic perspective with your view of war is typically seen as both a risk event and a supply chain disruption event. What are you seeing in terms of market impact here as a result of what's happening over the weekend? Yeah, it knows a great introduction. So as you pointed out, oil prices are up, and so industries that rely on oil are down, consumer discretionary, for example, airlines traveling leisure are down, and then energy leading sector in the market. So all sorts of sub-industrial groups within energy also like oil field services have done really well. We talked to I think last Monday, we said the likelihood of Iran may be inversely proportional to Trump's polling in the wake of Epstein, and here we are one week later. I'm not saying those calls in effect, but there's a consideration, at the very least there's a consideration, like a little tiebreaker perhaps.

5:14At the same time, this Iran news has been discussed for so long that it's been telegraphed. Into markets, and you saw that with a 10 year coming down to 4% from 4.25%. You saw that with energy leading QQQ, XLE, energy ETF is a top performer a year-to-date. So people did position around it, and the VIX index was in the low 20s for most of the last week, and is there now. I find it remarkable that essentially markets are flat, and the volatility index is actually up. That's actually bullish. It's actually a good sign. So that's constructive. But I don't think there's really much of a long-term impact. The amount of kinetic energy, I'm sure Chris will go into this, is just massive. There's no credible counter-threat that the IRGC has. I want to be careful and use the word IRGC not Iran, because the IRGC is not

6:15representative of the Iranian people, far from it. And the three casualties were friendly fire. So, you know, Pete Hegseth this morning, and Trump or the weekend suggested there might be like a four week and perhaps five week time frame. I think they managed expectations pretty well, and low, and that helped the market. The market didn't have that. As soon as Pete Hegseth came out, this morning, and offered that guidance, the market started to rally. He also just injected a lot of confidence in his remarks. You listen to it, and it's like listening to an Iranian's report from Palantir, something to see, like American dominance coming through the screen there. And I think expectations will be beat. I think that four to five weeks is actually too low. I think it'll come. I think resolution, debate what resolution is defined as, but in terms of the ending of kinetics will happen much faster than people think. Chris, to take.

7:20Yeah, so first up, I'll say that wars come to crypto's doorstep. I mean, how many times have we been into by guys or Abu Dhabi? One of the global centers of crypto, and you know, here we are seeing bombs drop. Again, from an, through an idealistic lens, you know, this is why we're here. Crypto is very resilient. It's decentralized, and you can't just take off, like it's not only cutting off the head of the snake from a crypto perspective, we're decentralized, we've got validators, so in case one center gets hit, the networks will perpetuate. Now let's talk about the war a little bit. To your point, this has been telegraphed, you know, not for a week or two weeks, but for 47 years. Right, like this had to come to a head at one point. I think there were some surprises we can get into, but the strategic importance of this is pretty material. The straightforward moves controls 20% of the world's oil, 80% or so, I think goes to Asia. China is very dependent on oil.

8:22They were dependent on Venezuelan oil. They're dependent on Iranian oil, and now the US is positioned to have perhaps control over both of those streams. So this is also part of a greater I think China containment strategy. And you know, what surprised me about this was the Iranian response. Yes, they did target US bases, but they also went after every single Arab country that, you know, previously say, you know what, maybe we don't want to, you guys use our air space guys, now they're like, okay, we've had enough. And there was a lot of historic resentment, you know, between the Saudis and the Iranians as an example. So I think if anything that will probably bring this to an end. And the question is, what is the end? And what does this mean for markets? So when I was in Iraq a long time ago, we were there to encourage democracy. Our mission was, hey, you know, we're going to turn this into a democratic, you know, friend, just like it like us. The Trump, and I think that was part of the policy for failure, you know, because we tried

9:24to force our ideals on a country that maybe had different ideals at the time. I think what we're seeing with Trump, and if you're going to see anything that comes out of like, how does legacy look at the Trump foreign policy? It's about certain cases looks like take the head off the snake. And I think what he's going to prioritize is stability over ideals, right? So at some point, somebody's going to pop up and say, I'm the strong man probably in Venezuela was the woman. You know, he didn't go with the democratic, you know, opposition, he went with the regime because he wanted stability. I think he's going to look for somebody to assert strength and power and stability. And I think that's how the war probably comes to an end is that they're, I don't see us moving boots on the ground, which would be bloody protracted and be very bad, I think long-term for the economy. But then pivoting to crypto prices, I think Bitcoin showed a lot of strength as did crypto. I think we were already part of that bottoming. I know I get accused to be the being the bull in this program, but I think we were hitting we were bottoming. And now we see liquidity,

10:29you know, all roads are leading to liquidity coming into the markets. And the fact that, yeah, risk assets Bitcoin came down. It showed a ton of resiliency. It feels like a very good setup for me. And the last thing I'll say is, you know, I've got friends out there who are on the watch, or like my classmates are now the comedors of the fleets out there, you know, all of my thoughts and prayers to the people who are, you know, in the UAE and the surrounding countries are friends, service members to Floyd and their families. I know how it is. It's not easy. So thinking about you guys always. So picking up on a couple of threads there, Chris, one that I think has been, I think what's the right way to say this, maybe misunderstood in the United States is the position of Iran versus the rest of the Gulf, right? There is this tendency when you're not like an expert to regard things as sort of a model with, right? Like see the whole argument around

11:30clarity where people are like, oh, the banks, and let me assure you all the banks don't agree. It's a similar problem here. And one of the things that really did surprise me as well, and I actually think it's driving part of the market reaction, is it's like Iran went out of their way to alienate all of their potential sympathetic countries around them as quickly as humanly possible by firing missiles and drones at all of them, right? Like if you're in like Qatar, and you're suddenly catching missiles from the Iranians, you're like, what the hell is this? Like what did we do to you? You know, the UAE obviously has not had a great diplomatic relationship with them, but it's a very different thing to have missiles fired at literally your hotels, right? Like let us not make any pretense that these were military targets here. I believe in Saudi Arabia, there was an attempt to disrupt oil refining as well. So like these are significant sort of economic attacks, and it's branching out far beyond just US military bases in Israel,

12:30which were the typical sort of shots in previous, you know, altercations. To being very realistic here and looking at like capabilities across the map, there hasn't been too much of an effective response, right? Like the United States lost three fighter jets to friendly fire and currently zero to Iran. Israel like obviously has sported a similarly positive record here. One of the things that I'm also watching is is the market reacting to the fact that it may be that Iran was mostly talked from a military capacity standpoint versus like operational capacity to really hit back at scale. Like we have not seen hypersonic missiles in the US carrier groups or anything of that sort that people were worried about. We have not seen mass casualties among civilians in other places. We haven't seen major disruptions to infrastructure yet. So as part of what the market is pricing, just call it the kinetic superiority of the

13:33Americans so far. Two quick reactions. First off, the head is gone, right? So the leaders assembled Saturday morning, old 40 of them in a compound, an incredible act of cell phones stupidity. They're gone. Not of course they did that because they probably believe their electronic communications are compromised, which they are. So they had to be in person. So it's like you're damned if you do damage or don't there. The other thing I read is that they delegated decision-making to the on the ground troops. So that's why I believe you're seeing them strike their neighbors. I don't think it's top down. I think they've lost that because it makes no sense what they're doing. It shows you just how ineffectual and incompetent autocratic leadership is. They have only two levers. Fire missile or issue a menacing threat. Those are the only things they know how to do. They have no other kind of maneuverability. The interesting thing going forward is that U.S. allies will now control the

14:35straight of hormones, which is a nerve point to Chris's point for China. So the long-term strategic benefits for the United States go up quite a bit. It's a very interesting juncture in history here. One last point. One last point. And I'd love to get your take on this. Which Mossad agent is going to run around at this point? I mean, the IRGC hired a guy to smoke out Mossad because they're so heavily infiltrated. Turns out that guy worked for Mossad. And if you don't work for Mossad, you're going to get bombed. It says almost like, okay, which institution steps up? Are you with Mossad? No, okay, you're going to get bombed. Isn't that how this plays out? I mean, arguably the best possible outcome for peace is that the new Ayatollah is also a Mossad agent, right? I mean, it's going to be a complete

15:37rewiring of the Middle East in many senses. And there are some age-old rivalries in that region between Shia and Suni that go well back over a thousand years, right? And I think it's an incredible, as the geopolitical starts, I guess, re-shifting, I think the economies are also simultaneously shifting. What are the Middle East governments looking to do? They're looking to get into data centers, right? And data centers, why is UAE positioning itself as ahead of crypto? You know, there's a lot of interest in emerging technologies. I think it's things settle. It's going to be very bullish for crypto. It's going to be bullish for AI. And tech, the Saudis as well, like, you know, NBS, like them or not, he's very focused on a pro tech agenda. And, you know, as things settle, and they have to invest less in kinetic warfare, I think that they're going to be pouring more and more into tech. I hope that's the case. I really hope we get out of the violence game and back into, you know, tech, innovation, investment. And I think that's where we're heading if we can get

16:42this right. You know, the hard part is what's next. Nobody knows, right? And I hate it when they're like interviewing military people. What have you planned next? Like, it's almost impossible to do, but, you know, to your point, Ron, they have incredible intelligence. We saw that with the complete dismantling of his bullet. You know, and they had, we saw it again over the weekend. So, you know, how do they work closely back channel with somebody who can assert stability and control? I'm not sure it's going to be democratic. I would like for it to be, but I think the prioritization, because remember, we're in a real politic age. It's all about real politic. And like it or not, Trump is moving in his interests. If this thing settles as he wants and he's got a strong, strong, stable, non-confrontational Iran, that makes the region better. You know, it's China is now, you know, they're much more dependent. We're controlling a lot of the oil that they used to get below sanctioned prices, like the low market. So it's a move of strength if

17:47you can pull it off. And mind you, like we talked about earlier, it's March of Madness, right? We're starting to kick off the midterm season. And so this all plays into the narrative. So he's moved on the chess board. Interesting to see what comes next. So Trump incited the population to take over the government. So that's a call for popular led leadership, right? So that's a possibility. Absent that the clerics would have to get together and nominate a new leader. So those are the two paths. Love to see how it plays out. I hope a popular led approach would work. I think the difference back to your point on Iraq. I don't think it was so much about ideals. I think it was more around a lack of institutions. That's it. Lack of habits and routines around how democracy is conducted. It's a lot more than just an election. You have to have parties and primaries and discussion and debate and free press in the

18:47fifth column. Iran has a better shot, I believe at that, because you had protests from very thoughtful, highly educated population. It was coming from the ground up. So it's a great one. Can be hopeful. Yeah. So it's a democracy in its best form is bottoms up, not tops down. And to your point, what makes our democracy so robust in this country is state and local government, you know, even down to city councils. It gets this very well-eorganized and democratic. That was not my experience in Iraq. In my experience in Iraq was, hey, we're here, you know, the guy in Baghdad, you know, he's your new elected leader deal with it and the sheaks like, no, man, I've been in charge for a thousand years. That's not how it works around here. And so it's just much more complex. I guess my point is that I think the administration wants stability first and foremost. They want control of the oil. And I hope that I earnestly

19:50hope that the ground's up to democratic regime emerges. The Iranian people are very smart, very thoughtful, very educated. And I think they want it. I hope they get there. There was a guy on Twitter, his handle is Roman Helmut guy who was joking a little while back that actually we should just rename it Persia. Right, as part of this, but Chris, to go to what you were saying is there is actually a long, right, and deep history in this region that I think the Iran name and the recent regime kind of obscures. Like Persia does have a very long history of like education and contribution to both the world and the region, that sort of the best case is that that is rediscovered in some way. It's sort of pouring back in that part to the world. And then by the way, they're sitting on a ton of oil. So as much as we're seeing like an oil supply, like disruption move of prices upwards right now, if you end up with a stable, like call it globally aware cooperative government. Now I just, I don't mean cooperative

20:55in like bowing down to anyone group. I just mean in the sense of like not constantly attacking and antagonizing your neighbors. You could actually very quickly have a much stronger Iranian economy. Right. And it becoming the gateway between Europe and the Asia once more. So to be there is a very positive case. But I'll also remind everybody we had a meet on here last week talking about how sort of the opposition in Iran is quite weak. Right. There is not really an organized sort of, you know, group pushing back. Correct. Partially because of that, partially because many already left the country if we're being totally honest. And then I think the other problem you have and Chris, you're familiar with this from Iraq is there are factions in this country who would probably rather be their own country. Right. Like what are you doing with the Kurds? For instance, I think the potential pathways one that maybe is under discussed is neither the

21:55current regime staying in charge nor like Iran just flips back, but rather call it Yugoslavia, which is to say does this break apart into several factions that eventually become their own countries? Yeah. I mean, the people will need to be involved. Right. The suppression of the people was driven in part by the IRGC, but also local law enforcement. I don't know that the US government is going to take out local law enforcement. I don't know how you do that. So that has to be done by the people. I think you can be cautiously optimistic though. It's hard to see what the left-tail risk is though. It's hard to see what the left-tail risk is from this. The left-tail risk is the conflict lasts longer than expected. There are fewer transports through this rate of home use mainly because those ships don't have the right insurances. Yep, but that's temporary phenomena. We had this in 2022 with COVID and delays in shipping. This is a temporary phenomena.

23:03So markets should look past this. I think they have. I mean, look at the resiliency of crypto. I don't think just crypto equities have been pretty resilient today as well. Like as you look down the list, I think this to me, right, like having seen market regimes before, this is being priced right now as though it is a regional conflict is the way I would describe it. That is to say, we don't see major global spillover. Honestly, like Russian Ukraine was more disruptive to markets than this was. Yeah, and again, what has it shown? Venezuela happened on a Friday night. Hyper-liquid was price discovery. This happened on Saturday night. Everyone looked at hyper-liquid. Now Bloomberg's even quoting it. What we're wondering is like, okay, so hyper-liquid has an edge now. It seems to be the 24-7 global commodities indicator. Like we kind of knew how oil was going to

24:04trade as soon as it happened and into the week. We didn't have to wait for a Sunday night, whatever for markets to wake up. But we're also seeing the big exchanges now moving towards 24-7. So the question is, is can hyper-liquid keep that edge? Because like, you know, we've been around long enough. Like liquidity is very, very hard to achieve. They got it. And once you got it, it's very hard to get rid of it or lose it. And so as the big guys come in, what does that get a mean for liquidity once their mode of 24-7 is reduced? So like, that's what we've been looking at. But again, another gold stamp for the crypto markets. They work 24-7 and they gave the markets what they need on the weekends. One of the fascinating parts of this too is that a counter-argument against 24-7 trading and Chris, I'm sure you've heard this as well, is that it will be risk increasing because we'll get all these jumpy moves when people are not awake, et cetera, et cetera. And actually in this event, it appears maybe to have been somewhat risk-reducing,

25:07potentially because instead of just uncertainty, like nobody knows what the price is going to open at, we've got these proxy indicators sort of showing us in a market of people, like even if it's not the full market, like let us accept that hyper-liquid is a small subset of markets currently. It is at least not a completely uninformed and idiotic subset. So you can look at that and say, there's some information value in here. And it gives us sort of a boundary on what the open is going to be. I know you and I were in an event earlier today and we'll get to that. But I think one of the things that this is revealing is that the 24-7 news cycle might speed up the information discovery, but that may be risk-decreasing, in many cases, as opposed to risk-increasing, because you don't have the giant jump risk that people are trying to manage over weekends anymore. Yeah, which should lower your collateral everywhere, right? Because you're collateralizing in real time, that should result in additional liquidity coming back into the system as people, because you used

26:09to have to hold the collateral from Friday till Tuesday, if it's a three-day weekend, and there's a stress god forbid. That's one of the beauties of 24-7 markets. You get to lower that collateral and increases liquidity. The other data point that we had, frankly, was prediction markets, which had their own little challenges over the weekend and debates. Yeah, I think there's plenty to talk about there as well. I mean, I'm going to say right now the main thing I'm coming around to on prediction markets is that they're learning in a way that crypto has been learning some of the lessons of financial markets. Prediction markets are in the process of learning many of the lessons of insurance markets right now, which is to say, if you're familiar with insurance and reinsurance, some of the biggest fist fights in the history of those markets are around do I owe you money or not. That's always the edge cases on terms and conditions, and how we're events defined. Maybe the classic one is does hurricane insurance cover flooding.

27:11Right, and like a giant debate that is like ripped through the floor in a court system and was worth tens of billions of dollars. And these sorts of things I'm watching in prediction markets now, where the number one thing I would advise everybody is if you're looking at prediction markets, pay special attention to the wording of the terms of each of these markets. Like that is going to be a space that will need to be standardized over time with much better call it neutral arbitration and the same way that insurance and reinsurance markets work right now, because you can't have a market where most people thought it would resolve to yes, that it resolves to know or vice versa become the standard, because then people just back away and stop using it. Yeah, I think, you know, this this Iran event has refocused market attention. However, there are still larger issues that are out there. I'm going under the surface, like QQQ's down 7% year to date. NVIDIA reported blockbuster earnings and it sold off.

28:15Markets were strong today, but was driven by energy. Most sectors were down, including consumer discretionary. Staples rallied year to date, but you've got now stocks like Walmart at 45 times earnings in Costco. That's not sustainable. That's going to have to get back. And so where is the leadership going to come from? I was just looking at Amazon's free cash yield. It's 0.3%, 0.3%, it's incredibly low. That number should be 2% to 3%. You know, you've got the Department of Defense having a public dispute with Anthropic now working to contract to open AI. So there are these issues under the surface. Sorry, valuations are elevated versus free cash flow. The positioning is still crowded. And we're seeing technical weakness in the leading themes in the market. I see people buying the dip on like everything, even things that are just down 40%. It's like, really? It's a bare market and you're just buying the dip.

29:20So I do think that after we get through maybe a bit of a rally here through some of the VIX decay and a fast resolution, then people think around around. There are still larger issues that the market is trying to address. And obviously mid-term elections are there too. I mean, I was going to say, let's go down one of the rabbit holes that you brought up there, which is the AI component, because this is something we've been talking about for a while. So currently there was a little bit of a bruja between Anthropic and the Pentagon, where Anthropic CEO, you know, and Anthropic for those listening kind of positioned itself as the safety AI clawed and had guardrails against certain military and surveillance uses, intentions escalated pretty quickly with the Department of War, as they both sought broader contractual language allowing use of Anthropic models, but also we're alleging that some of the things that Anthropic can call it implicitly or explicitly permitted before they were backing away on.

30:22I think to be honest, like both sides are telling the story most favorable to themselves, but the core of the debate is who gets to use this thing and for what and on what terms. This escalated pretty quickly. Donald Trump criticized them on social media and Anthropic has done a bunch of PR around this. It framed them as hostile and unreliable for national security needs and unsurprisingly, somebody else in the market as happens in competitive marketplaces stepped it into a advantage. So Sam Altman shows up in sides of contract with the Department of War where it's now open AI that will be essentially filling that gap and working with them. There are, again, guardrails around that, but not the same sort of categorical refusal. So to me, before we get to the operational realities for the military, Ram, I want to come back to a point that you have raised previously on this show, which is where is the value capture going to be at AI? Because to me, this is maybe the best

31:25example of somebody just hot swapping one model for another and moving on with life. So like, what is the difference? Yeah, I agree. I agree. You know, I instructed our team to luminous switch over to Anthropic in their enterprise use cases. They worked really well. I give credit to Dario for a principle. Stan, I don't think he would do that. I think, I still don't think he'd keep that aside. Still, I think they will bend the knee eventually out of economic necessity. And I'm concerned that Sam Altman now is playing a, some role is a critical or not. I hope not, with the US Department of Defense. This is a guy that was fired by his board, where a developer died or is killed on his watch and where he made misrepresentations to early investors like Elon Musk. Where is the integrity in any of that? It's not a one off. It's a three off. That's a pattern. So it's a bit of a concern that open

32:26a eyes in there. Couldn't we have found someone else? But yeah, no, I agree. There's limited value capture and all this. The open source models like Hugging Face, they're 10th of the cost of these models. They're one year behind, but they catch up. So it's just like the cost of storage. We saw this with the hard drives and the memory. It just drops over time. That's going to happen. So I don't, I don't see the value capture. Look at like Palantir's stock. Look, I think that's a bubble deflating. But hey, they've got value capture. It got the multiple. I don't see it for these LLNs, which are in a brutal war of attrition with each other. Let me just chime in. I mean, as somebody who's been in war, been shot at, lost a lot of friends, this debate is really hard for me because obviously, you know, you want to do the great thing about the US military is you always want to do the right thing on the battlefield. You don't swear

33:27allegiance to the president or to a king. You swear to the constitution as an officer, you have to follow the lawful orders and uphold the constitution. And that's wonderful. This is actually very similar to crypto, this debate that's going on. Now, what Dario said is he, there's two things, two, two conditions he had. One was like lethal autonomous decision making and the second one was mass surveillance. What I've come to know, whether it's crypto or AI, is that it's not the technology that is evil or not evil. Maybe it is in the case of AI, but generally, it's technology. It's the behavior that people employ it to do, right? And the thing is, is like technology, we have laws. Just because you have new technology doesn't mean that you ignore the old laws. And as you're thinking about mass surveillance, well, if there's laws that prevent mass surveillance, it's a policy issue. And then the government tries to conduct mass surveillance, like put it to bed, you know, throw people in jail, like hold them accountable because it's illegal. And that's why it's important to have that policy. I think the lethality piece is a little bit more complex for me because

34:33if there is a technology that saves like one marine on the battlefield or one of your, you know, provided it's done legally, why would you suppress its development if it can be done ethically? So like, I am almost of the acceleration camp. Like, you can't restrict it. You need to study it because like, let's go back to Iran. The Iranians are really good at drones. They have the Shahed drone, which is at low cost. I mean, they've had effect with it on the battlefield just through sheer size. Like, I've come from the from a place. I'm sorry, but like, you got to give the guys and the ladies and the ground the best tools possible. And like, but, but law should apply. And I think Daria's point is like, well, wait a second. The laws haven't cut up, cut up to this technology. Well, we got to hold then our, our, our Congress accountable. And, you know, we have to use the democracy that we talked about. This is tricky. But I just hate anything that deprives, you know, our men and women on the ground who are involved, who are sacrificing their lives,

35:34anything that that protects them. I think another important point there, you know, I, I understand this is unpleasant to a lot of people call it the theoretical ethics camp. But in war, people play to win, right? And what I mean by that is if you're not willing to do something with an AI model of the other side is that that thing works that they just win. So one of the things that I think we, I'll just be transparent and say we don't know from the outside exactly where the lines were drawn. But if you're in the Department of War and anthropic is telling you we want them drawn here and it's going to impede operational capabilities and open AI is telling you no, no, over here and it's not. That's a trivial decision for them to make, right? Because like, you know, it's back to the whole God, what was that quote from unforgiving, deserving, got nothing to do with it, right? Like both sides are playing to win. And ultimately, Chris, to your point, if the United States has had any cap of ourselves in a way that's causing us to lose conflicts or get

36:36our people killed, that that is a bad decision. Just strictly speaking of that regard. So there's a case we made that anthropic may have been held captive by its own employees. So the US DOD agreed that the AI technology would only be used for lawful purposes. In fact, there's a post from the undersecretary defense going through the contract language. And from their point of view, it looks completely reasonable. And also, David Sacks and Elon both stated that there are a number of holdovers in the Biden administration that went to anthropic. And if you look outside onthropics HQ, there's a lot of chalk and, you know, rainbows and quasi-protests or support this and that. So I wouldn't be surprised if that decision was made because of talent. People, they were trying to find a way not to do a deal that in fact would be lawful and address the concerns of anthropic. After all, that's in the contract. They weren't making the claim that

37:38the DOD wouldn't abide by it. That's not what they said. I mean, so back to what we've been saying about AI, too, is the future that we're seeing here going to be employees losing a lot of the poll to do that over time? Because, you know, one cloud just got swapped out for open AI piece. But two, like one of the other big AI-related news items was Jack Dorsey cutting nearly half the staff at Square Block, XYZ, whatever we're calling the thing now. Right? And he was saying, essentially, we're preparing for an AI future. Now in fairness, they have probably massively overhired in the pandemic. So I have a feeling there's some element of point to get AI to justify right sizing the staff in general. But it is also a statement that you can be like, well, of the 10,000 people we have, 4,000 of you piece because of AI. And that will also send a message to remaining employees, like if you're not sort of on the team, you're going to be much more easily replaceable.

38:39Are you guys seeing that same dynamic and employment overall, like just assuming out from the DOT? Yeah, I think they're in a bubble. I think Silicon Valley AI engineers are in a bubble. They're not in reality. They're getting lavish pay packages. They're getting poached. They're turning down $100 million pay packages, right, from Zuck. You know, the startups go through these cycles where they have the fuzzball table and the free everything and the retreat. And they're in kind of peak mode of this kind of lavishness and they're in a bubble. But yeah, reality is going to come home to us. Jack Dorsey ran Twitter with thousands and thousands of employees. And Elon runs it with 35. He's not a lean mean operator. Now Jack Dorsey is many wonderful and amazing and brilliant things by the way. I have an incredible amount of respect for Jack Dorsey and how he conducts his life, not just his entrepreneurial business building skills. But he likes to think. He likes to contemplate. He's like a kind of a

39:44philosopher entrepreneur. He's not a great cost-efficient operator. And so you're seeing a lot of these startups justify head count reductions based on AI. You know, Clarnet did the same thing. They cut out work and they said, we do with AI. Come on. You're just cutting costs, take your numbers for the IPO. A lot of uncertainty, isn't it? But to your point, like, hey, if Jack's doing it, I should do it too. And it's a really good opportunity to optimize. Now, you know, let's not even talk about, there's legal things too. Like, hey, you're restructuring. You know, sometimes when you fire people, you get sued. Well, here, everyone's restructuring because of AI. It kind of lowers your liability in certain cases. So I do think it's going to be a trend that you're going to see that the companies will use to optimize. And let's not forget, like, AI should be massively deflationary for this reason. Yeah. Wait till thinking machines blows up. Remember that one? That was a CTO from OpenAI. I started raised a couple billion dollars. Ilya created, like, safe AI. This is like insanity. This is insane stuff. You're not supposed to

40:48get billion dollar valuations on a, not even a PowerPoint, just because you are around the OpenAI. We're going to look back at this and say, what craziness was done in Silicon Valley? Yeah. And I think what's interesting to me, Ram, that you were saying there is exactly the Silicon Valley component of this. Because if you look across, like, some of the more people focused or hands on industries, we're not seeing this same trend everywhere. You know, a good example is my wife works for Memorial Sloan Kettering, the Cancer Hospital. We are not seeing tons of doctors and nurses being replaced by AI in this context, right? Is it going to be integrated? Is it going to improve productivity? Is AI going to be a powerful diagnostic tool for patients? A hundred percent over time. Is it going to lead to massive headcount reductions in the healthcare industry? Almost certainly not. Right. And it is kind of funny that there are these subsets of industries that

41:49I think are both living in a bubble, but that also disproportionately driving the discourse. Like, the idea, you know, you saw that Satrini paper that we were talking about of like, oh, everything's been destroyed by AI. I'm like, that is a very software developer center. Yeah, software rallies since then. That marked the bottom, potentially. But look at private equity and private credit. It's getting absolutely destroyed in the markets right now. And they're lending to software. They're subject to market to market. That's they live in reality land, right? Open AI and the software, these AIL and this is storytelling. That's why Dario is on the pocket. No one knew who Dario was six months ago. Now he's making the podcast circuit because they have to go public and his thesis for how they get to a trillion dollars and whatever. Here's an interesting story in the first two years around enterprise adoption, which I believe I'm actually signed up as a customer. But after your two, he's like, oh, we'll have a day of center full of geniuses. That's they will solve nine point nine hundred fifty billion dollars

42:52somehow from that insanity. Now I think I think that trend will play out over time and people will find out, yeah, I mean, this, you know, okay, so what final point before we go to ads? Because that we have one more thing we want to talk about before Chris has to leave. But you've seen this sort of misidentification of where the value is before in other industries. We saw it in the tech bubble. We've also seen it in crypto with fat protocol thesis that right now appears to be slowly falling apart as well. It may be that the AI companies themselves are not the value of creator, right? In this space that is not a reputation of the value of AI. It is a reputation of the specific conduit of value transmission going through the bottle companies. Yeah. I believe our water company is highly valid. We only need water. Does anyone know the name of their local water company is Con Edison, a truly elegant. We only need electricity. Chris intelligence will be a utility on demand at low cost service competitively.

43:57Well, on that note, I believe we have a couple more sponsors that we need to hear from. And then Chris and I will talk about something we were at earlier today. Step into a new era of wealth. Discover Nexo, the premier digital wealth platform. Manage your crypto portfolio with confidence and control. Receive interest on your digital assets. Barrow against them without selling. Trade a wide range of cryptocurrencies. All in one platform. Now available in the US with 30 days of exclusive privileges for new clients. Experience wealth club premiere. Access enhanced interest rates. Reduced borrowing costs. And crypto cash back on swaps. Get started today at nexo.com slash unchained. Good note before we continue with today's episode. Bits and Bips now has its own dedicated home. We're spinning off from unchained and launching a standalone podcast and YouTube channel focused on the Fed, macro, AI, and how it all collides with crypto. If you want to keep up with our weekly live streams and macro meets crypto breakdowns,

45:00make sure you're following Bits and Bips directly. We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new Bits and Bips channels at unchainedcrypto.com slash Bits and Bips. You can also find us by searching Bits and Bips on YouTube, Apple Podcasts, Spotify, or wherever you listen. All right, everybody. Welcome back. So earlier today, Chris and I were at the economic club of New York with former podcast guest, Patrick Whit talking about the current situation with clarity and what is going on in Washington, DC. Chris actually was the one interviewing Patrick on stage. So Chris, I'm just going to lob this one over to you. What was the conversation about? What was the overall tone? What were your takeaways first? Yeah, we've been talking about crypto markets for a long time. And like, what's next for crypto? We know that it's an institutional error. And for it to accomplish its true potential, I think a lot of us think that this thing called clarity has to pass. Right now, the White House,

46:03according to Patrick, they've been really focused on obviously getting it over the line. They're implementing genius right now because genius, you just don't pass the bill and go away. There's a lot of different regulations and rulemaking. They're navigating the OCC rulemaking that, again, reaffirmed no interest on stable coins from issuers. So he's navigating all of that. And then when it comes to clarity, the irony continues to be that what's holding up clarity? Well, it's this stable coin stuff that we thought we already litigated. It feels like there's progress. My sense is that clarity could go either way. The irony is, if you look at Polymarket today, there was a shot up recently, about a 70% chance. Pretty thin markets. You're looking at about 300K in the pool. But somebody thinks that this is going to happen, or at least, thought a lot more so than the past. It feels like just what I'm hearing through the great fine is that the coin bases of the world have come a long way. They're at the 45-50 yard line.

47:07The banks really haven't moved and continue to dig in. And that's fine. And people are like, well, how come these people get to decide what the bill is? That's for the senators to decide. That's for, and that's exactly what they're trying to do is because a lot of the senators will sit back and say, I want to hear your story, banks, tell me. I want to hear your story, Coinbase, crypto, tell me. And then they figure out which direction that they're going to vote. It's a lot easier for a senator to say, okay, good. You know, both of you guys figured it out. I'm good now. You're cool. I'm cool. We're all cool. This makes good policy. So it's not, it's a lot of people like it's not fair. The industry is just doing it in a bubble. Not so fast because those senators are thinking about getting reelected as well. So it's just sausage making. And it's hard. And I personally still think it's going to happen. It's coin flip. But the other thing that I think the crypto industry hasn't endeared itself to members of Congress is that there's still a lot of wackos out there. And they need to see more

48:10utility, more grown ups, more focus on, you know, actually delivering real-use value to people. That's what we need to do a better job of showing and telling and explaining. So that was my takeaway. What about yours, Austin? You heard it from the audience. Yeah. So to one, to pile on to a point that you're making there, I think a lot of people in crypto earn denial about how bad the reputation of crypto is after call it 2022 and the present, like with call it the average two-legged human on the street. I tweeted recently that crypto was ranked probably one to two slots below slime mold. And most people's reference lists and everybody got mad with me. But I'm like, I'm just repeating what I hear. And I think Chris, you're right. It makes it easy for people to make bad faith arguments that are anti-crypto and get away with them because the reputation of the industry is so poor. But what I was hearing from the audience too is that one of the things we're going to see over the next five to 10 years, and this will be unwelcome to some varieties of crypto natives is a much greater convergence

49:16between blockchain technology and traditional financial firms, right? And that is to say the idea that we're going to tear down the entire system and replace it with decentralized permissionless money is out the way out. But the idea that we can actually take the current system of massively upgraded in ways that improve people's lives and financial access and fairness is on the way in. And so one of the things that was interesting to me because this is very like DC and real politics is a pathway where clarity can happen and where the sort of like punching match from genius can be resolved is how do we make sure that the entities that are call it the most both politically, socially and maybe economically favorable get something out of this aka winners. And so one of the big takeaways is I genuinely don't think the interests of the big bags of the community bags are the same here. And people have been treating that side like a monolith

50:16for a long time. But the reality is you know thought experiment here that I've discussed with a couple of friends before. If all of the stablecoin issuers were to be told hey you guys can pay yield. But only if you keep x percentage of your reserve at deposits at bags under say 10 billion dollars balance sheet size. Who's the loser there except for the giant bags to begin with. And so I think as we start sort of like making the sausage in Washington DC, if you're outside of that framework you need to understand a couple of things that are important. One, Chris said something really powerful like now twice in this episode about how the United States operates, which is we have our constitution, we have elected representatives and they do genuinely serve at the behest of the people. You can vote these people out if you don't like them. So number one, if you're listening to this and you're an American citizen and you have a strong view about this, go look up who your house representative and your senators are and just

51:20like call them, write them, email them. You can go visit their office in Washington DC like it's shocking, but you can check it in the building and just go walk right in there, tell them what you believe it will move the needle and that too finding a compromise between the people in this space who I would say have the biggest political acts here will get things done. To me that is the call it legitimate people in the crypto industry trying to face US persons like Coinbase is a good example. They never fled the US, whatever you think about them, they've been willing to be regulated, well argue about the terms, but they're not fleeing the US, they're not fleeing reporting and then the community bags, right? Like those are the two groups who people really care about here. The big bags kind of hide behind the community bags as a shield, but the answer is if the community bags are happy and the big bags are not, I like our odds. I like that too. Yeah, speaking to Patrick, talk a little bit about quantum, didn't seem to be keeping him awake at

52:22night like our friend Nick Carter. And then getting back to like what people want to see is they want to see better utility and user experience. And to me, I think AI is going to play a huge role in that. AI doesn't care about the downstream wallet interfaces and all the brain damage that we deal with every single day on chain. So I think those are some things. The other thing that's frankly fascinating is that when you talk to normies in events like that, what was their biggest concern? Security isn't just a crappy product because no one can trace it. Actually, everyone can trace it. And we will sometimes forget our little bubble just how unaware most people are. They just don't care. They've got more important things to care about. One I was going to say one of the things that you run into there is you know, it's a well-known problem in economics like the street light effect, which is to say because crypto is so transparent, you can observe the crime and therefore people think it's bad, but there's probably way more crime

53:25that are simply not detecting in the traditional system and then people think it's better because they don't see it. Yeah, something I'll share anecdotally. I still receive reverse inquiry from call it like baby boomer, conservative profile types that are asking about specifically Bitcoin. Unprompted. I find that interesting. I do think and they approach it with curiosity. Like should I have allocation to Bitcoin with an open mind? So yeah, I do think Bitcoin has crossed the Rubicon in terms of broader public consciousness and understanding, which is a major accomplishment. I have yet to see that with other digital assets as far. It's not a common on the price potentials of their assets. I'm just sharing what I see on the ground. I see there's a lot of potential and like what Ethereum has done and other like salon others too, like hyper liquid, but the inquiry do get is around Bitcoin. It's kind of

54:32kind of interesting. Yeah, and Bitcoin is crypto, right? There's no difference. I will also hop in there and say the other one that I get and I see why you're not getting it from the investor side is stable coins. Yeah, right. Like when I talk to a lot of companies that are doing things like payroll, international wire business, like how do we just manage our like money, stable coins are genuinely a topic of conversation from a curiosity standpoint that as well. If we're looking at the two things in crypto that so far to me definitely have product market fit, it's Bitcoin and stable coins. Everything else I think is very TBD, Rob, as you're saying, which is not a reputation, but just a statement of not yet, right? Maybe it will be in the future, but it's not certain that it will be I would be shocked if Bitcoin and stable coins are gone from the play field like 10, 23rd. I think there's a lot bringing it back to Iran is like does Bitcoin play a role in whatever institutions of form coming out of this? You know, we talked about social media

55:39access to information and technology and the Iranians do have these deep technical skills and know how one can dream that there might be a role for decentralized money as a check on unchecked executive authority. They're going to open up Mr. Beast Wallace with Tom Lee. I mean, that is not in the realm of impossible. I would like to point out to everybody as a topic I just covered in my newsletter, Mr. Beast bought a FinTech app that does handle crypto. It's called step, right? Like everybody is joking about that, but that may be a very real thing. I will also remind everybody Mr. Beast has more YouTube subscribers that people who exist in the United States of America. So that is not a small distribution. I think I think I ran and crypto hold strong promise. It's a young educated demographic. I think they're going to come out of this after being suppressed, thinking very

56:42forward, being very forward, being focused on innovation. And I think the conditions are very ripe. We heard of can only make a happen, right? Yeah. What is the it going? Oh, we talked about it. How he was an early adopter, largely because of his background and Iran growing up and his ability to seamlessly exchange value with people that he needed to. So I do think the conditions are sound. See what happens, guys. I would also point out, Chris, we talked about this today at the event too. Like Patrick was on stage on the topic of security and observability, making the point of it depends what end of that Iran, right? Like there is the bad. It's like the North Koreans and what they're doing on chain. But there's also the good of if you've been an extractive system that essentially steals your money either through inflation or just straight up corruption and evil. Now you have the ability and importantly, voluntary ability to opt into the dollar system through stablecoins, right? Like nobody, we're not holding a gun to anybody's head and saying you

57:43must use tether, right? Like that's not how this works. But when you give people options, they are able to take advantage of them. And it fundamentally creates competition that delivers essentially the end value to consumers. Yes, sir. All right. So on that note, Chris today has a hard stop and we have some upcoming programming. So I'm going to go ahead and take us out here, which is thanks for joining us for this episode of bits and dips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. But next up here, Stephen Araleck will be with Rob Hattick, general partner of Dragonfly on the Bips and Bips interviews. So until then, that is enough for all of us, everyone, and enjoy the next show. Cheers. Good one. Rince knows that greatness takes time, but so does laundry. So Rince will take your laundry and hand-deliver it to your door, expertly cleaned. And you can take the time pursuing your passions. Time one spent sorting and waiting, folding and queuing, now spent challenging and innovating

58:47and pushing your way to greatness. So pick up the Irish flute or those calligraphy pens or that daunting beef Wellington recipe card and leave the laundry to us. Rince, it's time to be great.