00:00That's where I want to start off here with this idea of how much of some of these moves that
00:05we've seen over the last couple of weeks in crypto is directly correlated to some of the concerns regarding what's
00:12happening at the Treasury and the current fiscal situation in Washington.
00:17Well, what I would say is Bitcoin had been, for most of its history, uncorrelated to gold, really uncorrelated to
00:28any traded asset, S&P 500 and so forth.
00:31Recently, it's gotten as high as 0.71 to gold, so it's starting to look a little bit more like
00:40a gold-type hedge against Treasury, U.S. government inflation sort of a play.
00:48I don't have a lot of conviction it'll maintain that close association, but that's what's probably driven it up from
00:57its June lows of, let's say, 58,000.
01:01It's up about 35 percent since then.
01:04A lot of that has come in the last week or so, but Bitcoin people all around are certainly happy
01:11about that.
01:12I am curious about how stablecoins factor in, particularly given Scott Besson's focus on issuing more shorter-term debt, shorter
01:20-term debt in terms of T-bills, that a lot of these stablecoin issues want to get their hands on.
01:25This is a relatively new buyer to the market relative to what we would have had a few years ago.
01:30Is that going to be material?
01:32I think so.
01:33I mean, look, the way stablecoin issuers make money is they invest their collateral, which is usually U.S. dollars,
01:43into very short-term and very liquid assets, U.S. government bonds being an obvious one.
01:50Feather has $115 billion in government bonds.
01:55So any movement, a few basis points movement, when you're talking about those huge numbers, have a very sizable effect
02:06on the profitability of these companies.
02:08A public company like Circle, the vast majority of its profit comes strictly from earning money on the balances of
02:17its stablecoin that it's investing.
02:19So, yeah, they're very much sensitive to whatever the Treasury is doing.
02:25So, Bill, when you think about just kind of where the digital asset market is headed, if so much of
02:33the recent rally kind of has been around the so-called debasement trade,
02:37do you see a point where fundamentals come back into play, where all of those institutional investors that maybe exited
02:44earlier in the year finally do come back?
02:49Possibly.
02:49Having said that, when we look at what would drive prices of Bitcoin and other cryptos higher, you've got to
02:58look at just where the big piles of money sit.
03:01So things like the big wealth management companies on Wall Street, how much are they telling their customers to hold
03:10a certain percent of Bitcoin?
03:11That's actually pulled back a bit from what it was a year ago or even more when ETFs became available
03:18for crypto.
03:20So I would say right now the market is sort of sitting tight.
03:26The giant sources of capital, 401k inflows, those things are not moving as much as what I would like to
03:34see.
03:35There's been a lot more money in the last year that's gone into gold ETFs versus Bitcoin.
03:41I suppose you can take some comfort in that if you're a Bitcoin holder and say, well, there's a lot
03:47of dry powder that hasn't yet been deployed.
03:49So when that does happen, Bitcoin should go up by a great amount.
03:54But the market sort of got to its hundred billion of Bitcoin AUM in the ETFs and then paused.
04:02And so now it's a matter of probably processing through what the market thinks about Bitcoin and the other cryptos
04:11and the effect of the Clarity Act,
04:13the big legislation that's been put forth in Congress that's going to cause a lot more people and a lot
04:20more companies to be involved in the crypto space.
04:22Right. Well, speaking of people involved in the crypto space, I mean, Bill, I know you've been in stable coins
04:27from some time.
04:29The meeting at Jackson Hole of central bankers this week, the topic is financial innovation, implications for payments and policy.
04:36Any thoughts or expectations on what we'll hear out of the central bankers?
04:41I don't think we'll get any real news, though.
04:43Well, I would say the U.S. has become much more clear with stable coin issuers and with all tokenized
04:51assets with respect to the Clarity Act.
04:55And if we had the Genius Act last year that laid out what the rules are for launching a stable
05:02coin,
05:02the Clarity Act provides a massive amount of market infrastructure policy work towards other things,
05:09all tokenization of other assets globally.
05:12So these people at Jackson Hole, they have to be thinking about this.
05:19The estimates are that today we have about 20 trillion of tokenized assets.
05:24And by 2030, I think Citicorp thought it would be about 5 trillion.
05:28So they have to get their arms around this.
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