Bitcoin & Crypto Are Infiltrating Wall Street!

0:00Hello, everyone. The future of finance is going to be known as a DeFi mullet. Treasury Secretary Scott Besant. He explains what's happening in the U.S. economy. Now we have data that suggests the average American family, they're doing way better than previously reported. And I joined Bloomberg yesterday to talk all about my latest views on Bitcoin and gold. We're going to discuss that as well. We are live today from the desk of Anthony Pompliano.

0:32Before we get into today's show, I need your help to get to 1 million subscribers. To get to 1 million, first we got to get to 50 ,000. Right now, today, we are sitting at 34 ,680 subscribers. If you hit the subscribe button right now, you'll help us get to our goal. Let's get into today's show. All right, guys. So yesterday I published a conversation with Coinbase's head of consumer and business products. In the recording, the guy Max Bransberg, he mentioned something called a DeFi mullet. Now, when I asked him what a DeFi mullet was, he described it as an easy Coinbase experience in the front and DeFi in the back.

1:07That comment got me thinking about a lot. One of the big things is what's happening at the intersection of crypto and traditional finance. So first, it's clear that quote unquote crypto is not going to be a thing in a decade. That may surprise you, but let me explain. Everything is going to be finance and you're not going to know the difference between centralized or decentralized infrastructure. This is very similar to what happened with the internet. Remember, there used to be internet companies and non-internet companies. People used to be considered cutting edge if they were using the internet inside their business.

1:36But now, frankly, you'd be deemed an idiot if you didn't use the internet. The same exact thing is happening right now with crypto. We see it with Bitcoin, we see it with stablecoins, and we're going to see it with many other parts of the industry as well. Everyone from the new fintechs like Robinhood or the legacy firms like BlackRock, they are realizing that they have to embrace this new technology in a variety of different ways. No one is calling BlackRock a Bitcoin company, other than me. I think they're a Bitcoin company, but no one else is doing that. And I don't think many investors would consider Robinhood a pure crypto company.

2:06But those details don't change the fact that each company is actually using this new technology to gain an advantage in the marketplace. And they're using the new technology to better serve their customers as well. So this decreasing importance of the quote-unquote crypto industry, it's actually a good sign. It means technology is becoming standard and the consumer is starting to expect it. You can see the convergence happening perfectly with exchanges. There are companies like Coinbase, Kraken, and many other crypto native exchanges. They are all racing to list public equities via tokenized securities.

2:37The fintechs, like the Robinhoods, Publix, eToros, Weebles, and many others, they're quickly adding various crypto assets to their platform. And then, of course, we have ICE, CBOE, NASDAQ, all of those traditional exchanges. They're finding various crypto products or companies to list on their exchanges as well. You're not going to have crypto and non-crypto exchanges in the future, in my opinion. The end game is for exchanges to list public equities, crypto assets, and prediction markets all in one place. This is why Coinbase is publicly saying that they want to be the everything exchange. You know, kind of like what Amazon is, the everything store.

3:12Well, Coinbase wants to be the everything exchange. At the same time, ICE is investing billions of dollars in prediction markets and crypto products. These firms are battling to be the future dominant venue for investors to buy and sell assets, regardless of what the structure of the asset is. And guess what? The winner will capture tens of billions of dollars in profits just in the exchange sector. No wonder these exchanges are acting like they're in an all-out war for market share. But exchanges are not the only place that this is happening. It seems like every day brings new headlines about stablecoins being adopted by the legacy financial system.

3:44Of course, yesterday, we saw Coinbase announce a brand new partnership with Citi. And the whole idea behind this partnership is for Citi and Coinbase to work together to make on - and off-ramping crypto easier for Citi's institutional clients. As part of the announcement, Coinbase CEO Brian Armstrong said the following, It's not a debate anymore. Crypto and stablecoins are the tools that will upgrade the global financial system. Honestly, from my perspective, I think it's pretty hard to argue with his logic at this point. Large financial institutions like Citi are not the only ones trying to create shareholder value by embracing stablecoins in the legacy system though.

4:19Western Union, you know, the company that everyone is always using as the example of who's going to get disrupted? Western Union says that they are piloting stablecoin settlement rails to speed up cross-border payments and also cut reliance on SWIFT. Their CEO, Devin McGranahan, he says that the company sees stablecoins as an opportunity, not as a threat. That seems like a fair perspective to have. That's what I would be saying if I was him. But the real question is whether these legacy companies will actually be able to move quickly enough to avoid disruption. But let's take a look at the stock price for a second.

4:50Based on the fact that Western Union stock is down more than 50 % over the last five years, it's more likely that the market believes Western Union is gonna be one of the carcasses left on the playing field by stable coins and crypto native payment rails. I hope for their sake that's not gonna happen, but markets are speaking and they're not very excited about where Western Union's going. But here's the thing about stablecoins. Right now, you gotta be a crypto native to use these assets. You need to know what a wallet is. You need to know the difference between USDT, USDC, USDE, and many others.

5:19You have to understand how wallet addresses work. And you also have to make technical decisions, like which blockchain you're going to use for any single transaction that you make. It's all really confusing. And frankly, I don't think that normal people are going to do any of that. They don't want to be bothered by technical aspects. They want to simply send, receive, and hold U.S. dollars. And this is where that DeFi mullet comes into play. The interface has to be familiar and trusted, but also the infrastructure and the plumbing can be completely upgraded on the back end without anyone knowing.

5:50Victor Yaw has a great way to frame this. He wrote the following. Stablecoins will disappear into the plumbing of finance. Money will move across borders the way that data moves across networks, instantly, programmatically, and without intermediaries noticing. I agree with Victor there. That sounds magical, actually. Users are going to get a better experience and they're going to avoid any requirement to learn new technologies. They're not going to know what a stablecoin is or what a wallet is. And then if you add in the fact that large organizations like BlackRock, JP Morgan, Citi, Venmo, and PayPal, they're all going to be offering these services and you can see why adoption is only going to become more pervasive over time.

6:29We've already seen Bitcoin find success in the legacy system. They did it by having companies in the legacy system put the digital currency in traditional wrappers like ETFs or inside of these public treasury companies. But now we have a very similar thing happening with stablecoins. It's not going to be ETFs and public companies, but rather it's going to be payment services and exchange platforms. Those companies and those products, they're going to bring the stablecoin technology to users in a familiar interface. The DeFi mullet is coming. The question is who's going to be the biggest winner.

7:01And to be honest, there's a trillion dollar reward waiting for whoever captures that opportunity. There have been a ton of people who've been critical of the current administration, of their economic policies, and frankly, of everyone from the Federal Reserve Chairman, to the Treasury Secretary, to the Commerce Secretary, and everyone in between. Now, of course, no one's perfect. No administration is perfect. And this one seems to still be spending a lot of money, just like every other administration. But I do think that this administration is not getting enough credit for some of the things that they've actually been able to improve.

7:34Treasury Secretary Scott Bessett went on television this weekend, and he described how the affordability crisis that we are experiencing is actually improving a little bit. Take a listen to how Bessett describes this. Well, Christian, you know, it's unfortunate. As much as I like you, you like to cherry pick. So, you know, when we came in, it was eggflation, eggflation, eggflation. You know, egg prices are down, gasoline prices are down. Overall, the inflation since President Trump has come in, has come down. We inherited this terrible affordability crisis from the Biden administration. The first thing we had to do was get it under control.

8:11And this month's inflation number was actually below the consensus number. If we look at core inflation, it was 0.2%, which was the lowest it's been in a long time. Rents are coming down. So, you know, Kristen, you don't get to cherry pick. Inflation is a composite number. And I am confident that in the coming months, inflation is going to come down. Inflation is down, gas is down, and rent is easing. That's not three things that a lot of people were expecting from the current administration's economic policies. Now, I'm not saying everyone's going to like the administration. And frankly, politics is always going to be a dirty game.

8:49Some people are going to like the administration. Some people aren't. But what we do know is that inflation is down coming off in January. We know gas prices are down. Rent in many parts of the country actually is easy. Doesn't mean that everyone has a great experience. Doesn't mean that we can't make more progress. But sometimes it's important to understand all those critiques, all those bears, all the people who are predicting market downturns, recessions, depressions, empty shelves, and a complete collapse of the U.S. economy, they all sound ridiculous now because ultimately these economic policies, they are working in many cases.

9:23And hopefully the administration, they can continue to improve because as Americans, regardless of whether you're a Republican, Democrat or Independent, we should want to see our government officials be successful and we should want to see the everyday American have a better experience in the economy. Inflation being down is good. Gas being down is good. Rent easing is good as well. We just hope that we can continue to see this progress. And regardless of what the critics say, this administration's economic policies, they seem to be working. Everyone knows that I love to find an amazing narrative violation.

9:56And the latest one I found comes from Innovate Economy's Connor O 'Brien. He published a great chart and he said, the median American family's net worth is at an all-time high of$192 ,000. Now that's the median. He also published another one. It says the average America family's net worth is now over$1 million. It's wild. Now, remember, that's the average, but whether you look at the median or the average, we are still at all-time highs. Now, of course, these charts aren't perfect. They're measured in$2022, but these are directional data points that show us things may be better than people realize for a subset of the population.

10:31See, here's the thing about a K-shaped economy is that there are some people in the economy, they think that everything is going amazing. Their net worth is hitting all-time highs. Their investment portfolios continue to go up. They turn on the news or they read the newspaper and they're all smiles. But if you go right down the street, you can talk to somebody else and they'll tell you that the system isn't working for them. They're actually losing money. They can't seem to keep up. All they feel is financial pain. But the thing in that K-shaped economy is that both people are right. Some people are winning and some people are losing.

11:02And ultimately, if you're looking for a storyline, you can twist the data to say whatever you want. Just because some people are winning doesn't mean that we should tear down the system. But at the same time, we shouldn't abandon the people who are not winning. And so ultimately, that is what's hard about economics, about monetary policy. It's what makes politics such a dirty game is that people want to just look at a certain subset of the population and they want to attach that to their narrative. The end of the day, what we're watching right now is we're watching a capitalistic system that continues to work for some people.

11:35But I think that it's really important for us to understand the people who feel like affordability is getting worse, that they can't keep up and they're being left behind, we still have to make sure that the system works for them. And my guess is the best way to do that is help them learn to invest, to get a stake in the capitalistic system. And if they see their net worth go up and their investment portfolio grow, all of a sudden, they're going to feel a lot differently about the US economy. Yesterday, I had the opportunity to join Romain Bostic and Katie Greifeld on Bloomberg, and we talked about my latest views on Bitcoin and gold.

12:06I even threw a little bit of a football reference there for all of you football fans. Here's what I had to say. So let's start broad here and just what is going on with the price of Bitcoin right now? Because it seems like a few weeks ago, the debasement narrative had really taken off, especially when you paired that with the twin rally that we were seeing with gold. It seems like some of the shine is coming off of gold now, crypto continuing to regain some momentum here. And I just wonder what you think currently is the driver. Well, for years now, I always look at gold. Gold's the foldback. It goes through the hole, it blocks somebody and allows the running back to go score the touchdown.

12:40And Bitcoin is going to do exactly that, which is what it always does. It's about 100 days or so after gold runs, usually you see Bitcoin take off. And this rotation from gold into Bitcoin really is whenever investors feel like, hey, there's some uncertainty, there's some sort of issue that I need to pay attention to, they run to gold. That's what they've been trained to do for a very long period of time. But then once they realize, hey, wait a second, the world is not going to end. I actually want to drive outperformance. I want to drive a return. They rotate from gold into digital gold and Bitcoin usually tends to outperform.

13:09And so gold's had a great year this year. I think the gold bug should get a lot of credit for investing in gold, holding gold. But I think that Bitcoin's still going to do what Bitcoin does, best performing asset over the last year or so. And I don't think that's going to slow down anytime soon. Well, that gets kind of just something I wonder about when you take a look at these twin rallies, the fact that you have gold and Bitcoin, not only the price appreciation, but you take a look at the ETF flows as well. There are billions of dollars that have flown into both types of vehicles. And I just wonder if those two assets can live in harmony or if Bitcoin really continues this rally, whether it's going to take some of that demand that would have been going into gold.

13:43Well, I definitely think that gold has probably had its run for this year. My expectation is gold will probably go sideways or sell off into the end of the year. And Bitcoin will likely take some of those flows and kind of go up. You know, one of the things I've changed my mind over the years is I used to think that Bitcoin was going to surpass gold, but it was going to do it somewhere sub$10 trillion market cap. And a big reason was it was going to demonetize gold. Instead, the exact opposite has happened. Gold has thrived, as has Bitcoin. And I think that we're going to continue to see that.

14:09I still think the digital version of these sound money principles will be a bigger market cap than the analog version. It'll just take some time to get there. I am curious, too. I mean, going back to this idea of the debasement trade, and I know there's a lot of sort of speculation for why Bitcoin goes higher, but sort of the genesis of really the crypto industry overall was obviously a lot of concerns about our fiscal situation here in the United States and really around the world. Have you seen any potential that that changes, meaning the fiscal situation gets better or you think it's going to continue to get worse?

14:38And does that benefit crypto? Well, you know, what's interesting is people will say that Bitcoin has no ceiling because the dollar has no bottom, right? And I think that there's kind of this belief that they're never going to stop printing money. Now, when Donald Trump came into office, I think there was a lot of talk and people got very excited, including myself, about, hey, could we actually get to a balanced budget? You know, it's been two decades since we had one of those. And could we get there? Doge was kind of a valiant effort. I think there's a lot of other things. What you start to realize is, one, we're addicted to the cheap money, we're addicted to the money printing.

15:06But also, there are a lot of incentives at play that are not actually trying to get to a balanced budget. And so I think that people now kind of pivoted in their viewpoint. They believe that we're going to run the economy hot. We're going to try to grow our way out of it. And therefore, the dollar is going to continue to have this accelerated debasement. And that's why you see gold and Bitcoin both doing pretty well. I hope that you enjoyed that appearance. I had a lot of fun joining them on Bloomberg. That's it for today's show. Thank you guys so much for watching. Please remember that we've got 34 ,680 subscribers on YouTube.

15:34Got it right there off the top of my head. Hit the subscribe button and I'll see you guys live tomorrow from the desk of Anthony Pompliano.