The Return of Arthur Hayes, Original Crypto King

25:39So I do not believe this notion that a 5.5 % rate is restrictive. It is not because of all the different ways they have to pay people to make them not lend, right? Why do they pay interest on excess reserves? Why is it a reverse repo? Because the Fed wants to fix the price of money. The only way they can do that is they have to pay the banks and money market funds not to release this liquidity back into the markets. And so again, as they raise rates, it actually is not, it's stimulative and not restrictive like they would want you to believe. And I mean, we're seeing that. We're seeing AI, crypto, like, okay, the Fed's raised rates fastest pace since 1981, and we're off to the races.

26:26So obviously, what they say on the tin is not what's actually happening. And also, my view on this is like, nobody gives a fuck about 5.5 % hurdle rate when the asset goes up 100 % or 200 % a year, right? It's just, it's irrelevant. You know, if it's a secular trend like crypto or tech, interest rates don't really matter. Well, crypto and tech companies don't need banks. So who gives a fuck what their interest rate is? Apple can fund its CapEx, Google can fund its CapEx, Microsoft can fund its CapEx from retained earnings. The price of money doesn't matter. But if you're some widget company in Ohio, well, fuck, you're not getting any loans, especially not from a regional bank that's not too big to fail.

27:07No loans for you, you're fucking suffering. but you're not going to see that because no one cares about the S &P other than the seven companies that power all the returns, which are all tech stocks that don't need banks. And obviously, crypto, the whole point of crypto is to disintermediate the TradFi banking system. Of course, we don't care if there's no credit from TradFi coming to crypto. There never was. So again, this whole notion that the 5.5 % on Fed funds is restrictive is fugazi. Yeah, I totally agree. The other thing I think through is the Europeans as well. They are shit scared of the energy issue that they've got.

27:41And they want to get to cheaper cost of energy through green energy. And you've talked about energy is the key input into productivity, for example. I think the Europeans are going to end up stimulating on that side yet again, to keep paying these bills to get them off Russian gas and other stuff. And that's another big net stimulus, something people are even looking at. But you're starting to hear the Europeans making noises about this again, about starting to stimulate on that side. Yeah, I think Europe's kind of just like bitch boys of the US and kind of irrelevant. It's not irrelevant in the fact that their nominal GDP growth is just not enough to cover the debt payments.

28:23So the US kind of can do that, but Europe really can't. And so that becomes a bigger issue. And China's destroying their auto markets. Germany no longer is the largest auto exporter. Obviously, they're caught in the middle. No cheap energy and no final markets for their stuff. What are you going to do? I don't know. That's why I use the one we have at GMI, the global weekly liquidity. Sometimes, like 2016, 15, that was the US was still flat you know the balance sheet wasn't growing liquidity wasn't growing but Japan and Europe were and so there's different parts it can be any one of the central banks you know the debasement comes from everywhere because they're all using a dollar-based system essentially yeah and they're all running the same theories and economics they all believe the same stuff they all went to the same schools regardless of what their federal government preaches about communism and socialism and capitalism, whatever.

29:28They all do the same thing. So yeah, what's true for one is true for the all. It's in different flavor. My opinion on this is they actually know what they're doing. They know they're debasing the currency and they've all kind of agreed it. It seems... How do you think through that? Because we all say the central bankers are dumb. I'm not sure that's true. I think they know exactly what's going on. I don't think they're dumb. And I think more so the politicians, right? If I'm a politician in any system and I have the ability to print money, what do I do? I give away free shit to people for their support, whether it's a one-man-one-vote democratic system or it's some sort of like fascist communist system.

30:08It doesn't really matter. At the end of the day, the people in charge promise the majority of the people who aren't that wealthy, like, hey, I'm going to do something for you. Now, if they don't tell them I'm just going to print money to base your currency to pay for it. But again, it's all the same game. There's nobody in the world, however many elections are happening this year, except for maybe Argentina, which are like, hey, we've spent too much. We need to cut back on government services. We shouldn't be doing all these things. We're going to balance the budget. It's going to be tough, but we take our knocks now and the future is bright.

30:39No one's campaigning on that anywhere in the world. And so if that's not going to happen, then why would you stop? Yeah, my view on that is they don't want to blow up the baby boomer complex. The great baby boomer complex is where all the savings are. They are baby boomers themselves. They don't want the equity market to go down because that's the collateral of the system. So they protect that lot and sacrifice everybody else in the entire system. Because a retiree, it's fine. You debase the currency, your equity, your share portfolio goes up. You've got higher interest payments right now. They're all fine.

31:11It's everybody else is totally screwed in this. Yeah. But again, thankfully, we have crypto. So there is a way out. So let's talk about that. So this crypto life raft, the regulators are kind of struggling still with letting it happen. They want to throttle it. How are you seeing the big picture play out of the regulation, the adoption, and how governments allow it to happen and that kind of phasing? So there was a paper written by this guy at Columbia, Colomerus, I can't pronounce his name. And it was about fiscal dominance. Basically, The federal government has issued so much debt, the spending is so high versus the tax receipts, that any sort of notion of independent central banking goes out the window and the central bank becomes a tool of the federal government to pay the bills, right?

31:59And if you think about what the problem is for the banking system is, okay, we know all this inflation is coming. We know that we're going to be forced to buy these bonds and we know that's going to ding our profitability. But there's this escape raft called crypto. And if people really latch on to this and they say, hey, why do I have these dollars, euros, yen, yuan, whatever, let me go buy an asset that's outside of this whole system. And then I'll just sit back and watch the fireworks. That's not good for the banks. They're not going to make you money on that. So, you know, what do they do starting in 2023?

32:38All of a sudden, the Winkle Clowns, they try to get an ETF approved for 10 years. Did the Lord's work for 10 years trying to get this ETF approved in the US? Still don't have one, by the way. And Larry Fink, within six months, gets an ETF. And so TradFi says, okay, this crypto thing works. There's obviously this zeitgeist of too much federal spending. I mean, Jamie Dimon rages on about it. Every fucking quarterly report, oh, yeah, the US is spending too much money. Well, instead of them getting fucked by them being forced to buy bonds that are negative real yielding, well, let's have a product that we can throw our clients into and make fees that's still within the system.

33:19And that's why I think these ETFs are now being embraced, which is, hey, here's this crypto derivative. You don't actually get to use Bitcoin because you can't withdraw it. You can't even redeem it. You want to redeem, you get dollars back in these ETFs, not Bitcoin. And so it's just a way to put all these people who want to get into this crypto life raft, but don't want to put in the real work and deal with private keys and OPSEC and all the things. I mean, it's annoying, but again, freedom isn't free. And here's this ETF. You can subscribe through your retirement account, your pension fund. You can buy it on a stock exchange.

33:59You've got all these respectable looking folks selling this to you now saying, this is a way to diversify against inflation. And the banking system reaps fees. And we've seen how successful this becomes. So I think there's going to be a Bitcoin ETF, an Ethereum ETF, a Solana ETF. Regardless of what any politician says, the banks know this is their way to stave off the effects of being forced to buy these bonds that are bad deals for them. And also, the government quite likes it. because the money's actually not leaving the system. It's not you and I opening, having a ledger and taking our money outside of the system, which is what I saw the European mess back in 2012, that's what got me into Bitcoin because I just wanted to be outside the system.

34:44But these people aren't. So they're just renting the performance of it without leaving the system. And that's a nice way for the government to say, well, guys, you play in this, but it's going to stop them opening the Coinbase account and at least starting the journey. And it's better to do it this way than to ban something. Because when you ban something, then people are like, oh, well, why are you banning it? Maybe I want to have some of it. Look at the illegal narcotics trade around the world. You tell people I can't have something, they say, no, I'm going to have it.

35:17So why not just say, oh yeah, you want crypto? Oh, here's a BlackRock Fidelity, blah, blah, blah. ETF, it's safe, it's custodied, and your bank that you know and trust, blah, blah, blah. come on in. So I think that is, for some people, their crypto thing. They want to take their fiat, trade crypto, and earn more fiat, which again, is fine. It's a choice that people get to make. But if you want to take your fiat and save it in something that's outside of the system, then you have to go and buy physical Bitcoin and deal with the issues that come with owning physical Bitcoin. And for me, I know the government's probably thinking, great, we've got everybody contained.

35:54I actually think of it reverse. It's a Trojan horse. Because once you start to learn about this space, as you know, you go down a very, very deep and long rabbit hole, and you realize why you're doing it. And before you know it, then the ETF doesn't make sense for you anymore, because you want to diversify. So my mental model for these ETFs is we've got Cryptoland and Fiat World. And this is just a trade deal between the two. So hot money flows. If you think of VC as FDI, and you think of this as hot money flows, it's just a trade deal. For me, it's like, this is as big a deal to me as China opening up after the WTO agreement, because we've got now a free trade agreement essentially between them.

36:37Well, relatively free. Yeah, I guess we'll see. We'll see how free it is, how much what the price impact is. Are people actually going to hold this stuff? If market's down on 10%, 15 % over the last two days, how is that going to affect the flows? How secular is this trend of cash coming into these ETFs? How much do people actually believe in this negative correlation thing? And can they actually deal with the volatility? I don't know. We're going to find all this out about this new segment of the market and how they behave when they start seeing the real volatility that's been suppressed in TradFi for the last 40 years.

37:13So I think the jury's too loud on the positive, how big the positive impact with you, I definitely believe that the banks love fees and this is a fee bonanza. It's an opaque illiquid market where the end customer, they don't care if they're paying a 2 % spread if the thing goes up 30 % in a quarter. It could give two fucks. But the bank trading desk is loving it. BlackRock is shilling them all sorts of stuff. So I think there'll be as many ETS as they can get out in this market as quickly as possible just to ramp up AUM and get those fees. Also, I think they're praying that they're not allowed to give ETH yield because if they get the ETH ETF out and they keep the yield themselves, I mean, that's a huge fucking bonanza because they keep the 5 % yield.

38:01It'd be great. And, you know, they're greedy. They will take it. Any opportunity. I know Fidelity's just filed today to offer the yield, staking yields, but let's see. My guess is the SEC says, oh, it's too complicated. And Larry and everybody else will start printing cash in this kind of stuff. And people will realize. So as that money flows into crypto, into our world, into Cryptoland itself, what does it do to the risk curve? We've already started to see some sort of bananas price action as money starts getting recycled. So let's talk through how the risk curve flows. We're going to take another quick break to hear a word from our partners.

38:45We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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40:28hat. It's fun. It's just humans experimenting and playing games with each other that have monetary payouts on the internet. And I think it's a lot of fun, you know, obviously, trade with responsibility and all that kind of stuff. But it's pure emotion. It's no central authority telling you what you can and what you can't do. Whatever someone wants to list, they can do it and it either succeeds or fails instantly. And I think that's super powerful. And for the first time in a long time, people are having fun doing this thing called trading. And some of it is tasteless memes, but whatever. But you've been on this whole thing about the memes and the power of memes and what actually means to crypto for quite a long time.

41:14I think you and Meltem have probably been really early in identifying that this is a real thing. And it's tokenized culture. And some of it might be fleeting. Like Slurp might last a day or may last 10 years. Who knows? I mean, Doge. I mean, who the fuck thought Doge would survive? But it's still worth multi-billions of dollars. Yeah. And the chains that can support this culture are going to be the chains that have value. So Solana, and I'm a bit of an ETH maxi in terms of who has the best decentralized internet computer. But at the end of the day, if the Solana price is going up because people are launching these meme coins on it and a new developer to this space says, oh, this is interesting.

41:58I want to develop on Solana because I know I have users. Why does Solana have users? Well, it was a very easy platform, good UI UX to launch these dog money coins. And so it brought attention. So yes, you can poo-poo these things as stupid and valueless, but if it brings attention, if it brings more engineers to the space, then it's positive value for the chain itself. And also, look, the attention economy, we know we live in it. We're all on Twitter as part of the attention economy. Somebody else gets to monetize us. Here's a different way of monetizing the attention economy. I mean, Dog Whiff Hat has got all the attention.

42:36They're going to put it on the fucking sphere in Vegas, right? It's ridiculous and hilarious. But as you say, people get to write their own rules. They're not told by some bloke in a suit that they shouldn't be doing this. They know that everybody knows that this is ridiculous. It's not like, oh, I got caught out by this mean coin thing. I thought they had value. Everyone knows they got no value and it's a game of chance, but it's fun. Yeah, exactly. I mean, is gaming mentality writ large? Because if you think about the younger crowd, I mean, they grew up on gaming. This is the same thing, but just gaming with money.

43:13Yeah, trading. I love it. I think it's just pure expression of human emotion. And if you're a big technical analysis person, this is probably the best place to deploy those strategies because there is an essential bank manipulating things. It's literally just a bunch of humans trading with each other and that emotion is expressed in a candlestick chart. It's beautiful as a trader. Although most of them don't have much price history, right? Because they launch and then you're down to one minute time horizon. I think some people even trade on the one second. People are crazy in crypto. So how are you thinking allocation-wise of navigating the space?

43:53So you're mainly ETH-orientated right now. We'll talk about the DGEN stuff in a sec. But just as a general kind of, when I tell people, as the t-shirt says, don't fuck this up, it's part of it. Just don't use leverage. Have a core portfolio. It'll work. And then you can do whatever you want with the rest. What's your core positioning? The core position, obviously, vast amounts of Bitcoin relative to everything else. Next is ETH, because I want to own the decentralized internet computer, and I believe ETH, Ethereum is the best one at the current time. It's hilarious to see the negative narratives on ETH right now.

44:29It's like, I mean, that's great. You want attention. At the end of the day, talk about it. Great. If you're not talking about it, then you're Cardano and you get zero.

44:40you talk about it but it just doesn't do anything yeah exactly and then um i hold positions in some dexes that pay good yields right because again you gotta clip some coupons and make some money for the trading fees that are happening in this ecosystem so i would say that's my core position and then you know i'll fuck around with you know throwing some some nickels at this and that because as like a short-term trading position, but I don't do a whole lot of trading, which thankfully I can do that because again, I think that's a better fit for my lifestyle. I rarely ever trade. I love looking at the charts, but it's - I've got the hourly charts next to me on Bloomberg.

45:21I don't trade any hourly charts, but I look at them all the time. And occasionally when I'm really, really hitting FOMO, I'll start punting around in WIF or something like that, just to be part of it. Exactly. And what about on the VC side? Because you're doing that, are you mainly doing pre-token launch stuff or equity or a combo? So fuck equity, tokens only. We don't fuck with equity. I have a very high liquidity preference and I want money back as soon as possible. It's great. That's why tokens are great. So I don't do any of the direct selection of the things that go in the portfolio. The person who runs that book does that.

46:01My role is more of the cycle perspective. Like, where are we in a cycle? So we started really ramping up allocations in like late 22 and early 23. And my thesis is it's a bear market. Valuations have come down for projects. We need to be allocating as much as we can now because if we believe that the peak of the sys cycle is 25, 26, that's when we'll unlock our tokens and we're able to liquidate into a rising price or maybe at the crest of the market. So we should be allocating as much as we can now. Now we've moved into the everyone believes in crypto again phase and all the funds that were sitting on the sidelines waiting are now deploying and therefore prices for, you know, pre-product, pre-protocol revenue projects are getting back to the frothy levels.

46:54And so I don't want to participate in that. I don't want to lock my money up for three years, miss the cycle and overpay. If it's a good project and it launches during this cycle, I'll trade it on a liquid basis, but I don't need to lock my money up for three years. And so now we're switching more to doing a lot more advisory stuff, working with projects that we think are very capable. We may put a small check in, but the focus right now is not on writing checks. We'll be back writing checks in 26, 27 when the market was now 95%. Yeah, we do the same. I've got an asset management firm that's a fund of hedge funds, so just crypto hedge funds.

47:30Just use the same thing. Use the top-down macro framework. Give us where we are in the macro asset allocation, and then let the guys build the portfolio from the bottoms up. So right now, we're like 10 out of 10 risk-seeking because that's where we are on the cycle. You get the portfolio that way, and it kind of works. And you just have to navigate these cycles. You get it right. As you said, the worst thing is to have all your token unlocks happen in late 2026, and you're like, really? so but again it's different obviously i have a different incentive structure than a a fund which is a seven to ten year life cycle they have lps they want to charge them two percent management fees they don't care if any of this shit unlocks it'd be great if they have no marks because then nobody knows how shitty they are at outperforming that's right but one thing is really interesting about the uh the token side of of vc is this idea of these very short cycles you It releases capital super fast, you allocate capital fast.

48:28And I've been thinking through where AI is going. I just want to run this by you. So if you're looking at like Sam Oldman disrupts everybody every three months and kind of nukes every AI business by introducing get something and mate, right? And I'm seeing, I actually think that the open AI using AGI to build their own business. So there are only 500 people. How the hell can they iterate across 10 different products at that speed, right? It's not normal. So anyway, whether it is or not, but everyone's going to start using AI to build AI to build businesses so that the business cycle gets faster and faster.

49:07And many of these businesses will get disrupted. And this feels to me like the ICO market where some stuff sticks, some stuff lasts a bit and then gets disrupted or disappears. years, and I'm just thinking that the capital cycle is going to change. And I'm starting to think, how are these VCs and private equity going to capture any value at all in the equity space over time because of what's about to happen? I guess you can see that on Nvidia. Well, this could be tokenized. Why even try to be smart about it? Buy Nvidia, buy AWS, walk away. Buy crypto. stuff. I mean, why try to pick, why, why try to go to, why go to Y Combinator to pick a startup that's going to be a zero in six months once, you know, some other person disintermediates them with a new product.

49:58It's tough. It's a really tough game. Of course, there will be the standout successes and hats off if you're able to know those. But I mean, I think I would love to see someone do the analysis. If you had a portfolio of Facebook and Google from like 2010 to 2020, how many Web2VC funds did you outperform with just those two stocks? Because literally all you do when you raise money in Web2 is hand up in advertising to Facebook and Google and maybe like landlords in fucking the Bay Area and San Francisco. Like Aree, Google, Facebook, you probably beat almost 95 % of VC funds. So in this cycle, is it AWS and NVIDIA?

50:34If you're in the sort of you know, Treadfice donk game, were you probably going to outperform any of these like up and coming AI funds? Probably. I would imagine so. And so I also wonder whether just owning Bitcoin has outperformed all of the crypto VCs. except well the early stage token guys for sure have done really well because there's been some really good things but it's actually pretty easy because crypto itself is like being an early stage vc or mid-stage now i guess yeah and this is what i tell the guys at the fun all the time is our goal is you guys got to beat bitcoin and eith like if why why do you work here if you're going to underperform that i can just buy that and hold it and go to the beach so again that's that's what we have to do.

51:17And you should always ask yourself if you're evaluating an opportunity like, oh, it's really complicated crypto thing. And the founder is doing this and that. Well, if you just bought Bitcoin or ETH, would you do better? At least ask yourself the question. So here's another thing I've been thinking through that I want to run by you is I was at Beeple Studio in January. And like everybody was anybody of all of the NFT artists were there, plus like MoMA, plus Sotheby's, Christie's, TradFi. It was a really interesting group. It was like 30 of us. And it made me suddenly have this lightning bolt moment.

51:59And you'll probably go through this as well. It's like, okay, end of this cycle, what the fuck do I do? Where do I put savings, long-term savings, right? In the TradFi economy? Well, I'm worried about AI. I mean, tech stocks have been fine, but I'm worried about AI and the disruption. So I'm not really sure that they'll hold value over time. We don't know, or just accrues to some super companies. You know, crypto winters, I've gone through enough of them to not to want to keep going through it with all of my life savings, which is what I've been doing. And that's fine. I've been comfortable with that.

52:31But, you know, I'm starting to think about this. And I think a lot of people go through this, which is like, okay, I've made some real money out of this. How do I think about it? And once you've got a few houses, there's not much more you can do there. And it dawned on me that it's going to be the high end of NFTs. For some. Yeah. I just see that recycling of capital because it happens in the TradFi space. As soon as Stevie Cohen gets rich enough or Noam Goddard's mobile boss gets rich enough, all of them, they all end up buying art because they don't need any more fucking$100 million houses because they've got enough of them.

53:08So they end up buying art and it becomes their big storage of wealth. And I'm just thinking, I think we're likely to see that play through again. And it's really, so I've actually just been buying just high-end NFTs, kind of ex-copy, because I think he's like, that's the culture. He was very early, him and Beeple were like really early with internet culture, tokenized. So I'm just thinking through that. Are you an NFT person at all? I mean, I have a few punks. I've got NAEP, some of the major projects. I think I have the same question to myself as well. I've come to a bit of a different conclusion, which is what's the goal of all this, what we're doing, right?

53:49We want to grow our energy purchasing power over time. We have a lifestyle. We like it. We want to continue to have that lifestyle over time, right? So what is money? It's just energy in an abstracted form. So if the unit of money gets to such a ridiculous value versus the underlying energy, which it's supposed to represent, then shouldn't I just buy the underlying energy assets? Maybe I should buy a power plant or ExxonMobil or something like that. Because at the end of the day, if I own the primary way that powers the computers, that power the data centers, that the AI is on, that power the foundries that make the chips, that power the miners, that upkeep the network, and I own that primary energy source and I've got it at a cheap price relative to the monetary asset that it's supposed to represent, then that's a great opportunity.

54:41And so that's what I'm thinking about is how do I own some primary energy assets? That's a lot harder to do than buying a Beeple and stick it in my wallet. Yeah, but no one said having the greatest returns are easy. Fuck that shit. Got to do the hard work. So Elon actually said something that's interesting about this energy thing because I'm a big believer that energy costs are going to collapse over time just from technology. And because everybody's focused on it, and if you lower energy cost, productivity goes up. It's a multiplier. And so that solves a lot of the problems of what we're doing.

55:18Elon yesterday was just talking about, okay, the next issue is not the chips anymore. It's now the transformers. It's like changing energy from power plants to chip. And for the AI model. He's like, that's the biggest bottleneck in the world that's coming. And then it's electricity itself, which is to your point. It's like the more of this stuff we scale, there's just simply not enough electricity. And so there's going to be a lot of disruption. Really interesting to see that Microsoft went down the path of, well, fuck it, we'll build a nuclear power plant. Yeah. I mean, that's, which is to your point, they're investing in energy.

55:56Who would have thought Microsoft would be thinking about energy, but they are. Yeah, that's why I own CCJ. I love the uranium.

56:06It's the only scalable energy source outside of hydrocarbons that makes any sense from a density perspective that is here today. And obviously, who knows what is invented in our lifetimes. But right now, nuclear, we have not done anything. We have not scratched the surface on how useful nuclear could be to our existence as human civilization. And so I'm super bullish on nuclear and sort of like the feed stuff like uranium and that kind of stuff. Yeah. I mean, I was listening again last night to Lex Friedman interviewing Sam Altman. Same thing. He's like, if we want to win the AI arms race, even as a nation, there's no way of doing it without nuclear energy.

56:46There's literally just no way because it's the densest form of energy that we've got and we just fucked the whole thing up. And if we solve this, we're going to solve a lot of problems. Yeah, for sure. I agree. Problem is Exxon and all the others don't want that to happen. Well, we'll see how all these assets start changing hands and who invests in what. But I mean, at the end of the day, we still don't have a lot of the delivery mechanisms ready. So hydrocarbons still make a lot of sense. You've built this infrastructure over the last century and a half. There's still useful stuff there to build enough nuclear power plants faster.

57:23It's going to take time. It's not like hydrocarbon, you know, oil and gas companies are going out of business anytime soon. They have a long, long way to go in terms of profitability and usefulness. Yeah, absolutely. So what else is, what's really got your attention right now? What do you look at? Is it just the cycle and we're just going into the crazy zones or just strap in and enjoy it? What's cool? Where are you in your head right now? Don't make it too complicated. It's very, very simple, right? We've gotten - Don't fuck this up. we've spent all this time pontificating about dead and demographics and money printing and blah, blah, blah.

57:59And we're at the end of the road. We've, you know, the fourth turning, right? The four generations since World War II, they're all dead. So nobody has any institutional memory of all the fucked up shit we did as a, as a world in World War II and we're doing all again. And so we know what's going to happen. We've, you know, if you've studied enough history, every civilization that can print its own money always abuses it. It doesn't fucking matter what the ism is that they supposedly believe. They all do the same thing. We're at this point. We believe in our minds that this is what we should be doing in the script testing.

58:31So then buy it, hold it, strap in, then stop fucking whining. This is it. That's right. I mean, I say that to people because I see people arguing about the Federal Reserve and blah, blah, blah. I'm like, you've got the fucking answer. Just do that. And it's all solved. You don't need to complain about it. In fact, you can be grateful because it outperforms the balance sheet. I look at the global debasement, it's about 10 % a year, plus the inflation rate, so whatever it is. But crypto on average does about 100 % a year, even if you take into account the down cycles, you get more than compensated.

59:07It's like an alien asset class when it comes to risk reward. It's fucking alien. You've seen that chart, I think I posted it on Twitter, Yuri and Timmer's chart, there's all the risk reward of all of the major asset class. And it's like, NASDAQ looks pretty good, and gold is pretty crappy and whatever. And then there's this white space on the sheet. So they're all clustered down there, white space, white space, white space, Bitcoin. It's like, it's a total alien. We've never had an asset that performs like this in all of history. And the risk adjusted return is like any other asset we've ever been given.

59:40And people want to spend all day complaining on Twitter. I'm like, it's a gift. It's here. It's been given to you. Just take it. Lord Satoshi, as you would say, has given you the gift. Just take it. Yeah. It's very simple. Don't use new leverage. Hold it. I mean, if you want to trade it, trade it. It's fun. And I'm a trader and I really enjoy these markets, but yeah, it's just like constantly reminding yourself, keep it simple. And obviously, because I run my own portfolio, then it's like, okay, well, what other things can we build in this ecosystem to actually build like a parallel financial system.

1:00:13And that's obviously super exciting to see what, you know, younger people are creating of like, how do I reimagine an interest rate swap? Or how do I reimagine how to do this trading? Or how do I reimagine how to do self sovereign identity or whatever it is that you're into in sort of the DeFi space, I think is super cool. Like all these experiments are being run. Of course, it's risky, but it's exciting. It's interesting it's progress hopefully i'm getting really interested and you'll understand this as well when i heard about fire dancer i was like solana great i had a bunch and then i just went kind of all in for this cycle when i learned about fire dancer what's fire dancer i'm not i'm not okay this you'll you'll like this so i'm like i'm at massari main net and firstly colleen from breven is on stage talking she's like oh yeah and then fire dancers coming we think this is a really big deal.

1:01:06We know the Jump trading team really well. I'm like, I don't know, but Colleen's smart, so I'll listen to her. Then Tolly was on talking about Fire Dancer, and he's dropped the line. Well, theoretically, Solana's 65 ,000 TPS, but Jump trading have developed a validator that is 1.2 million TPS. It's just a version of Solana, so it's not a different token or anything else. It's just one of the validator nodes of Solana. Now, so Jump, they got this guy, and I went down the rabbit hole. The guy's like a fucking nuclear physicist or whatever. And he's just like, well, we're a high-frequency trading firm.

1:01:47So the only thing we solve for is speed of light. Because it's all fiber optic cables. It's how close can you get to the exchange and how fast is the cable? That's their entire game. So he's like, well, we want crypto rails. so we've just built something fast enough. So they rebuilt it. And even Tolly's like, okay, this is exactly what we should have done. So it's a complete step change. So it's in testnet right now. It goes to mainnet sometime this year, later on Q3. But I think this is finally the ability to build exchanges on blockchain rails in a way that you can have market making, high frequency trading, all of the things that you need to create massive pools of liquidity.

1:02:29That got me really interested because that's a complete step change. Yeah, that's interesting. I mean, I love the opinion that order books are nice, but I do like the AMM model because it's very simple. And if you're trying to onboard a few billion people who even when they look at a stock app in traditional financial, like, what the fuck is this? I don't understand this bid and ask. And what is it? Here, here, just buy and sell it. There's no order books. There's a pool of magic liquidity and all that it spits out a price. I think I like that. I like that's very native to our space. It's easy to use, can onboard the long tail of people onto trading whatever it is they want to trade.

1:03:07And adding liquidity is just adding A and B asset to a pool. So I actually like the AMM model. I know it's simple. I know it doesn't require a lot of TPS speed to execute, but I think it fits with the type of person who is drawn into this, who doesn't have the access to a Robin Hood or one of these graphs. Yeah, but I'm more thinking about onboarding TradFi. You know, that other use case is we need to get rid of these old crappy rails and put it onto new rails. Just feels like, okay, this is an interesting potential way forward because it's being built for that purpose. So, okay, that's interesting to me.

1:03:45And let's see what applications that could be built from it. So that's the one thing that really got my focus. I think they'll become a much bigger narrative later this year. Let's see whether anybody builds enough on it this cycle or whether it's the next cycle thing, right? Because it's early stage technology. Yeah, so I guess the key message from both of us is not to fuck this up, is just keep it simple, stupid. How do you stop yourself FOMOing? or you just keep yourself a degen bag and allow yourself to get carried away? If I want to FOMO, the size of the position that I'm trading is so small relative to my overall stack that even if I lose 100 % of the money, I don't care.

1:04:26And so I think that's how you do it. So if you want to FOMO in and your day job is not being on these messaging boards, knowing what the hot thing is, like if you're buying Dogwood Hat two weeks after the fact, you heard about it, then don't be a full-time DGN crypto trader because you're not in the know. You need to discover that shit, you know, when it was like 1 % of the value that it is today because you were in the rooms, you knew the developers, you were in that community. If that's your game, then yeah, trade it away. But if you heard about Darkwood head on Bloomberg and then you wouldn't have bought it and finally you lost 50 % in the next tick, well, that should tell you all you need to know.

1:05:07yeah i think you know i tell people yeah your dgem bag should be kind of no more really than 10 of your overall but i don't think i even get there because i you know there's so much value i mean if you if you get a raid then you know the thing goes up 100x why do you need to put that much chips on the table you're not trying to change your life with any of these coins it's like it's fun it can make a little bit of money but man you'd be real pissed at yourself if you You fucking nuked your whole stack on some like slurfs token. And now you can't invest in any of the, what you consider the high quality cryptos that are going to be around for the next centuries.

1:05:45But there is a mentality from people, right? They're not, you know, not as lucky as you and I, we both, you know, came from finance where you got paid and then you built a great business and all of this stuff where they think they can only see the hundred X as their opportunity. They think I've got five grand. I might as well go for the hundred X because what's the point of holding Bitcoin and making five X? And I kind of get that point, right? They feel fucked over anyway. So what do they do? I mean, and that's kind of the pernicious effects of inflation is you become a speculator. You become a gambler because that's the only way that you feel light at the end of the tunnel to change your situation in a timeframe that's palatable to you.

1:06:29The unfortunate fact is you're just going to have to suffer. The only way to get success is to suffer. And so if suffering means you go for the safer option, but your stack keeps building versus you did what I have to do to get that little bit of money, you blew it on trying to go for the 1 ,000x when you could have gone for the safer option, yes, you wouldn't have been able to quit your job if you were hit it right on the safer whatever it is, but at least you're in the game to play again versus starting way back at zero again. still in debt, still have a job that doesn't keep up with inflation in terms of your wage.

1:07:04That's the message that people need to hear. I know it's not a very sexy message. There is no easy button. The person you saw on TikTok and Twitter who was working at McDonald's and now has a Lamborghini, that's great for that person. That ain't you. Don't believe that that's going to happen to you. Yeah. And you also see it a lot. We've seen it a lot with Mean Coin Season is that of all of the thousands of people you may see in your Twitter feed, you'll see one person who got whiff rights and one person who got bonk right. And you think, oh my God, they're all making money. No, no. Net net, most people aren't making a lot of money out of this.

1:07:39It's not fucking easy. Yeah, exactly. So if you want to be a full-time trader, then you need to be a full-time trader. It's not, I get home from work tired and I'm going to sit on the computer for an hour or two with you. I'm going to make some money. No, You're asked to be staring at that screen all day long and become an expert in whatever it is that you're trading. So I think that's the message that people need to hear. It's not a very sexy message. Most people don't want to hear that, but that's the truth. Any of the traders you lionize in the books and all that kind of stuff, they put in a lot of hours and a lot of hard work.

1:08:08And if you ask them very minute things about the markets they trade, they know everything about it. Yeah. There is, as you said before, making money is not easy. If it is, you're likely to lose it just as quick. It takes time, takes a lot of hard work. Arthur, as ever, fantastic to chat to you. And we'll get together in Dubai. Yeah, see you in Dubai. Yeah, it's going to be a rocking party. Oh, yeah, it's going to be a lot of fun. A lot of fun. Don't wait. Thank you. Anyway, good to see you. And we'll talk soon. Cheers. Arthur preaching the don't fuck this up idea, which I thought was really powerful and very useful.

1:08:44even though Arthur may appear like a degen often on Twitter. He saw the meme economy rising. He's got his pulse on this. But when you hear how he manages his own money, he's much more cautious. Well, cautious, we're in a very risky asset class. Well, risky meaning risk-sinking asset class. But he doesn't really mess around. He doesn't want to lose his money. Now, I understand most people don't have as much money as Arthur. Arthur's done very well in this business. But he is right. It is the right route, thinking about how you allocate in this mother of all macro trends, the greatest macro opportunity of all time.

1:09:26So do your best not to fuck this up. So don't use leverage.

1:09:32Allocate 90 % of your portfolio, 80 or 90 % of your portfolio to just the stable, high quality stuff. That's Bitcoin, ETH, Solana. Those are really the three you need right now. I understand some of you might like different crypto, but they don't have the network effects. These are the three proven ones with network effects of that scale. And then keep everything else smaller. Don't FOMO into stuff. Don't just follow it because somebody else has made money in it. Now expect that 10 % bucket to go to zero because most people are shit at this and I'm shits of it too. So I do it for a bit of fun just because if not, you're just doing literally absolutely nothing.

1:10:13And that is the magic, the compounding of doing nothing in crypto means extraordinary returns. Anyway, I hope you enjoyed the interview. Go to realvision.com. I mentioned it before because as Arthur said, making money is not easy. You have to do your homework. And we built Real Vision for people like you who are trying to figure this out. However advanced you are, there is a community, there's the knowledge and the tools there for you. So go to realvision.com. Also, as I mentioned before, I'd appreciate it if you subscribe to the channel, because that helps me and the YouTube algorithm. Obviously, comments and stuff like that really helps as well.

1:10:54So listen, appreciate your time as ever, and I'll bring you somebody amazing next week. See you then. Kraken Pro is the powerful crypto platform for experienced traders who demand the best. With advanced charts, real-time market analytics, and lightning-fast trade execution, Kraken Pro empowers you to trade your way. Customize your setup and make every pixel count by rearranging and stacking trading modules in a way that makes sense to you. On Kraken Pro, you have the freedom to put your favorite market analytics and execution tools exactly where you need them. And whether you're a seasoned pro or just starting out, Kraken Pro has everything you need to navigate over 210-plus assets with confidence.

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