Does The Bitcoin Halving Still Matter?

Jonah

From the perspective of an oil trader, I'm just so bullish. Bitcoin, based on the fact that, like, if you were to tell me the world pumps 103 million barrels of oil every single day, starting next week, that number is going to be 51.5 million barrels, I would be like, out of my mind, like, begging to buy every oil future off of anybody that would sell it to me, doing everything I could to get long. Bitcoin people like, eh, you know, like, bitcoin tends to go up after havings. Like, what the fuck? It fucking goes up ten x after every having.

Like, this is, to me, this is setting up for a crazy, crazy rally. The question is, has already happened, right? With, with the having. So no, yes, yes, people. Yes, people get, should probably get bullish because of the supply reduction.

Avi

But the question is, has that already been front run? This episode is brought to you by perennial finance, the on chain defi primitive, redesigning derivatives for the defi native. You'll hear more about perennial later in the show.

Okay, welcome back to another thousand X podcast. We've had a lot happen in the last two weeks, and I do have to say that it's. Sorry.

Okay.

Jonah

Did you just get told to move? Yeah.

So for those who don't know, we're recording this thousand X podcast. Well, I'm in my usual location, the studio in London. Avi is in San Tropez in a restaurant, because there's no wifi anywhere in France. Correct. Or 09:00 a.m.

Except hotels. We should, we should honestly leave that part in just because it was so funny. I think he told me to get my feet off the table. He didn't tell me to move. Oh, dude, come on.

Have some respect for the French. Anyway, it's like, it's like a little. It's like a little small foot table. It's not a big table. It's a table for handbags.

It's like where women place their handbags, not where you put your feet. What can I say? You know, there are a few times where being older actually, like, helps. And this is one of them. I could have coached you on that.

Avi

Yeah, you definitely could have coached me on that. That's okay. Look, I needed to get comfortable so I could talk to the people about everything that they need to be talked to about, you know? So, I mean, bitcoin's nuked. ETF flows have stopped.

Jonah

We're in a pretty dicey place geopolitically. Yeah. I mean, ETH is nuke and too, I mean, basically ever since the. So people like to always ascribe price action to news. Now, my view, which has been consistent, I think, over the last few podcasts, even when we were trading 70k, is that it's very rare for bitcoin to go sideways for this period of time in a bull market and not have broken through.

Avi

Remember the last time we were trading around seventy k? I was saying, guys, very rare that this type of price action happens. And then what immediately happened is we sold off 10% and then we went straight back up. And then I think people got a little bit more bullish based on that price action. But the reality is that that 70k level, 72k level, has proven to be a very strong one.

There's proven to be a lot of supply activation. And whenever you see a pattern like this after a two x run up, I mean, come on, you got to. We saw it last summer during the. During the first phase of the bull market, where prices kind of just stabilized for, what was it, four months in the middle of the bull market, we were trading. Fuck, wait, let me pull it up here.

Jonah

We were trading. What was the level? It was like twenty nine k. Thirty K for the best better part of half a year. And then we rocketed.

And I think something similar is going on here, right? You used a great phrase, activation of supply. So we hit all time highs or thereabouts, and long term bitcoin holders, including the US government, start sending their coin to exchanges to sell. Great. Take profit level.

Everybody's in the money now. We're getting hit with geopolitical headlines that I think are creating headwinds which wouldn't have been there otherwise. Like, I think we would have broken through seventy k. I think we'd be trading 80k right now if it weren't for this Israel Iran stuff. And as an oil trader, I have some opinions on all of that.

But I think what we can't ignore about bitcoin is that during crazy, crazy times where uncertainty is high and the world is going into uncharted waters, like with the Russia Ukraine war, as bullish as I like to be, bitcoin objectively nukes first, right down with other risk. Assets like the s and P. This is my just simple take, which differs a little bit. Ever since 2021, every time we've reached an all time high, we've actually puked. Shortly thereafter, we only make a five, 6% gain on the previous all time high.

Avi

And then we nuke. So if you look at March and April of 2021, we got up to 60k. Then November of 21, we get up to 69. Now we get up to 74. I mean, basically because of the type of market participant in this market, all time highs tend to be a very good thing to sell, as opposed to previously, all time highs are a very good thing to buy.

So when you have a lot of retail in the market, those people tend to buy all time highs. When you have a lot of slower money, more institutional money, those people tend to sell all time highs. So I think what's happening is that we're just getting a dampening effect, which makes me think we're probably due for a pullback to this point. Let's take geopolitics out of it. I think if the Israel Iran issue weren't present in our lives, I'd probably start bidding here.

But it is. And so that adds a little bit more worry. I mean, we dont know what escalation could look like. What were seeing right now is if there are reasonable reasons to believe that escalation will occur. And I know the oil market disagrees, but at least based on the information thats being reported in the press and based on what I know about israeli politics, its going to be very hard for there not to be a response.

Its going to be very hard for for Israel to just take this line down. So from my perspective, thats a huge risk to the market. And I do think that its good for bitcoin on a six month time period, but its not so great for bitcoin on a shorter time period, just purely because youve already had so much allocation and were not really tracking gold anymore. Gold used to track bitcoin, bitcoin used to track gold, and now you dont really see that anymore. Yeah, theyve disconnected.

Jonah

For those who arent paying attention, gold is rocketing to all time highs. It just well through them at this point, it's just up only. So here is, yeah, so here's my take on all of this. Risk assets. And apparently bitcoin and crypto is a risk asset now.

Risk assets like the s and P, crypto, they're telegraphing a big economic shock coming out of the Middle east, right. Going down pretty quickly right now because of fears of escalation in this Israel Iran conflict. Oil, on the other hand, is also going down, which is very unusual. Right. Normally, when geopolitical risk kicks off the risk, especially in the Middle east, where an enormous percentage of the world's oil is pumped out of the ground, normally, you would expect that a shortage of supply or projected shortage of supply leads to higher oil.

Oil is going down quite a lot. Everybody in the oil market is consensus max long and getting rinsed right now. Why is that? Well, let's talk about, it's easy to say, Israel. Iran could create an economic shock that hurts risk assets and spikes the price of raw inputs like oil.

But let's dig into just a layer below what could actually create that shock. So let's say that Israel does something really extreme. Let's say they bomb Tehran, right? Let's say they just indiscriminately carpet bomb and level entire neighborhoods and diplomatic and government buildings in the capital city. What then?

What does that actually do? Well, Iran, like, nothing, right? Iran's economy in and of itself is not a contributor to the world economy. It's not a factor in global GDP. No one's going to say, oh, shit, I can't do business with Iran anymore.

They're already sanctioned up the wazoo. That doesn't actually hurt earnings or anything. What that triggers is a fear of an iranian response that will hurt the global economy. And Iran can do only one thing to hurt the global economy. They can shut the Strait of Hormuz, which is a choke point in the Arabian Gulf.

Well, they call it the Persian Gulf because they're Persians, but the Saudis call it the Arabian Gulf anyway. 30% of the world's oil comes out of the Arabian Gulf into open waters via this relatively narrow strait called the Strait of Hormuz. 30, 35%. Iran could shut that, right? They could just launch a bunch of cruise missiles at cargo ships that are going through there.

And then suddenly you're looking at four dollar 500 oil and the entire economy shuts down. Their lever to shut down the world is oil. And oil is telling you they're not going to do that. Because if they were to do that, if they were to even take out a single cargo with a cruise missile, every single major western country would start a kinetic war against Iran. That is not something that any country can stomach, is a quintupling or a ten xing of the price of the most important transportation fuel in the world, to quote Dune, right?

The people who lead Iran, their plans are measured in centuries. I've read books about this. They're really. They're playing the long game. They don't want to force themselves into hiding or regime change or getting dragged out of a hole in the ground and hung in public like Saddam Hussein was over this, right?

So I think Israel will respond. I think that Iran will probably try to avoid escalation because they want to stay in power and they're weaker than their nuclear opponents. And frankly, the oil market is telling you just that.

Avi

Is there a world, though, in which Israel and Iran do end up in a wider scale conflict, but oil prices don't, aren't massively affected? Right. Iran just keeps pumping. Israel obviously doesn't have access to really any oil or doesn't have impact on the market. So is there a world in which, yes, there's a broader escalation.

Let's say there is hits on bases, there's hits on direct territory in Iran, but Iran production doesn't go down. For example, if Israel is just hitting nuclear facilities or hitting military bases and Iran is retaliating against Israel, and this goes on for a few months, but they don't close the straits of Hormuz. Right? Is that, is that a possibility? I mean, if you see, like, it, like Israel, the thing that all the security people are talking about is that Israel is going to take out Fordo, which is their nuclear facility, like, like drop some crazy bunker busters and get through.

Jonah

It's, it's a hundred meters underground, but they're like modern bombs that could do it. It's crazy. Like, if that were to happen, if Israel were to take out Iran's nuclear capabilities and set them back ten years, um, Iran would probably strike back at israeli military bases and fail. So if Iran wants to just like, like, if they, if these two countries want to go tit for tat against each other's, like, military installations, Israel will dominate. Iran will not really be able to do much.

And if Iran does manage to take out Israel's military capabilities, in some respect, Israel will go back ten x because we know how they operate. Right. And it's impossible to see a scenario where this just remains somewhat contained. It either fizzles or it explodes. And if it explodes and these two countries are going after each other's population centers, then it's hard to see how oil doesn't get involved in the equation.

I mean, even if, even if Iran doesn't shut the Straits of Hormuz, right, they pump 3.1 million barrels a day out of the ground every single day. They consume 1.8 of those domestically. So that leaves 1.3 million barrels per day that they're like, you know, I use air quotes here illegally exporting to the world. It really is just India and China buying them outside of the US sanctions regime, which the Biden administration is effectively, like, allowing to happen. They're turning their back on it because they don't want gas prices to go up too much during an election year.

So like that could come off the market. There's no, there's no. Unless the actual capabilities, unless the whatever the refineries are struck or the oil fields are struck, which may or may not occur, I would assume that the US would be very against Israel. Israel hitting those and doesn't really make too much sense for Israel to hit those in context. Yeah, Israel wouldn't want to hit their production because that would hurt.

Israel's a consumer of hydrocarbons. They wouldn't want. Exactly. So they wouldn't want to actually encourage that. So they want, basically they want Iran to pump oil and not make nuclear weapons.

So they would hit the nuclear stuff. Exactly. So basically the way that I'm thinking about this is that that market of China and India isn't going to go away. Right. There's no reason for that demand to go away.

Avi

And so if we think that the supply is going to stay the same and the demand is going to stay the same, even if a war breaks out, then the only way that they're going to actually hurt or have the price of oil impacted by this specific war is one a gut reaction by the market to any attack by people that don't necessarily understand what's going on, which is kind of what happened with Russia, if you remember. Yeah. Like oil ripped and then nothing happened. Well, that was real. That was real.

Jonah

Russia's like in a top three oil producer and oil exporter because basically black. You know, black market shipping took over the entire market. And yeah, it took a few months though. Like the world legit lost, you know, millions of barrels per day of export oil off and that's why everything nuked. But like longer term, these fears and basically what's going on between Iran and Israel accentuate the need for alternative payment rails and alternative value movement rails as sanctions kick off.

So long term, this geopolitical stuff I think is bullish bitcoin, it could be bearish alts and other speculative, like web three tech.

Avi

It's definitely for speculative tech. It's not good because it's just a risk off market at that point. Yeah. And you don't want to risk off market. No, you don't.

If you want things like Solana or link to go up, you can't really have a risk off market and even Ethereum. Right. But bitcoin can. And it's possible that if sanctions get stepped up, so the EU is threatening even more sanctions against Iran, it's possible that we actually weaponize our financial system, even at an even greater way over the coming six, seven months. And that would be a very big boon for BTC.

I mean, that would be as two people that don't necessarily support Iran, you know, our bullishness on bitcoin is probably helpful for Iran, but at the, at the end of the day, it's, it's attack and you can't control it. This episode is brought to you by perennial finance. Perennial is quickly becoming one of the go to derivatives platforms and liquidity layers for all of DeFi. So let me tell you a little bit about them. There are kind of three things you need right when you're thinking about a place and a platform to trade on.

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You're going to love them. All right, let's get back to the show. Yeah, exactly. I mean, I think that geopolitical strife and increasing sort of like division in global trade, increasing barriers and problems and sanctions, all that's very long term bullish bitcoin, which is stateless Internet money that can't be really hacked. I think the other thing, while we're talking about oil that's so bullish bitcoin for the second half of this year is like everyone's ignoring the having.

Jonah

It happens in what, a couple of days, hours? I forget exactly. But as of this recording, it's imminent and one thing that I want to say about that is from the perspective of an oil trader, I'm just so bullish. Bitcoin based on the fact that if you were to tell me, hey, jonah, the world pumps 103 million barrels of oil every single day to keep the human race moving. Starting next week, that number is going to be 51.5 million barrels.

Because the other 51.5 million barrels are just like. They just disappeared. I would be out of my mind begging to buy every oil future off of anybody that would sell it to me. I would be going crazy. I would be maxing out my VAR, doing everything I could to get longer.

Bitcoin people like, eh, you know, like, bitcoin tends to go up after having like, what the fuck? It fuck. It goes up ten x after every having. Like this is, to me, this is setting up for a crazy, crazy rally. The question is.

Avi

The question is, has already happened, right? With, with the having. So no, yes. Yes, people. Yes, people get.

Should probably get bullish because of the supply reduction. But the question is, has that already been front run? And the bitcoin having is the most telegraphed event in the entire world for you to tell me that people are going to start buying the day after, there has to be some level that the market is able to price in the fact that they know exactly four years in advance when the supply is going to come offline. Right.

There has to be some acknowledgement that the market is at least moderately efficient. The real question is, what does this look like? Because what you have now is you have a slightly different dynamic. You have the outflows from the miners that are basically going to be cut in half, but you also have these offsetting inflows. Inflows from the ETF.

If at the same time you have this supply reduction for the miners, but the inflows from the ETF are now down by 50%, then it doesn't actually. You've netted out to nothing. Yeah. So my view is that inflows into this asset class are what's going to drive it more than anything else. And the supply reduction, while helpful, doesn't matter unless we continue to get these large inflows.

And these inflows seem to have stopped. Supply reduction is an so. Okay, let's be clear about two things here. I agree with you on the fact that flows matter. I think that a supply reduction is a form of inflow and the ETF flows have stopped.

Jonah

You are right about that. I agree there.

Avi

It depends. Supply reduction is a partial inflow. How is it a partial inflow. Well, miners don't sell 100% of every BTC that they mine. So let's say they get their income cut by half.

That doesn't necessarily equate to that level of inflow. What it equates to is whatever percent of bitcoin that they sell every time they get that income, that counts as inflow. Right? Yeah. So if they sell only 50%, then you're actually getting a 25%.

Jonah

Okay, so let's assume they only sell half their bitcoin. It's three and an 8th of is the new BTC reward per block. So three and an 8th BTC per block times four blocks an hour, times 24 hours a day, times the price of bitcoin, which is $60,000. That gets us to something like 18, 20,000,015, $20 million a day worth of bitcoin mined. So let's just say that seven to ten a day gets sold.

Okay, so you're right, like $10 million a day. It's not really a meaningful flow for now, but into perpetuity, it adds up. Meanwhile, the ETF flows have stopped for now, but they have not stopped into perpetuity. Right. So in the short run, it's.

It's not helpful. So maybe, maybe the conclusion is that the having isn't going to create a short term rip, but over the long run. Like, there isn't enough capital in bitcoin right now or in the space to front run that amount of supply loss forever. Yeah. Look, my, my view on this is that the numbers that you mentioned are just too small to matter further for the hat.

Avi

So, yes, over the long run, what it does is it makes bitcoin a more attractive asset to buy, but it doesn't necessarily mean we're going to 80k anytime soon. It doesn't mean we're going to 100k anytime soon because it's not going to be a main driver of this. Now, what I think the way to make money on this specific narrative, I think, is that it brings attention to bitcoin and the bitcoin ecosystem. And so you have all these different things that are building on bitcoin now that I think people should start to start to pay attention to. Basically, any of the NFTs that are built on BTC, any projects that are being built on BTC, those are probably going to get an increased amount of attention because of the having, and therefore are probably good buys.

You know, the bitcoin monkey nfts probably. Do well, ups the meme coin. Yeah. I mean, I don't necessarily know if I agree with that because, and again, I don't have a nuanced take on this. I just.

Jonah

I don't think that bitcoin is an l. One that's designed or optimized for, like, a good user experience for anything except bitcoin. Right. So I'm not sure that there will be this, like, vibrant ecosystem of stuff that thrives on bitcoin because it's a narrative. Just to be explicitly clear, I don't think that this is going to be a long term play.

Avi

This is a. You get in it, two weeks later, you're out. Okay. No, no. That I agree with.

Jonah

That I completely agree with. So we agree there. I guess you did mention attention, which is an important segue into kind of like, we've taken some heat on the podcast for basically focusing on bitcoin and on meme coins, which is this Barbell trade, because, in effect, that ignores a lot of the innovation and technology development that's going on in the middle of the barbell with web, three apps, and decentralized finance, deep in all this other stuff. However, attention is really on bitcoin and memes. That's where the returns are right now.

Governance tokens and all the complicated stuff in the middle of the barbell. It's not really performing, but this could be a buying opportunity. Both you and I tweeted, hey, crypto, twitter, what should we be talking about? What should we be paying attention to? Maybe we get to that later in the podcast.

But, avi, right now, why is all the attention on the memes, and what memes are you. You focusing on? And why is nothing else performing? So what's kind of interesting is that the memes, the memes that are doing well are just. Are just the low caps right now and the ones that are new and have sort of broken through, like mute.

Avi

I don't know if you guys. You guys have seen, I guess, although mute mu is down 25% today, but it was doing. It was doing well before, I think. I think what's happening is that, obviously, if you had the Barbell strategy, you did very well on the way up, and you do very poorly on the way down, which is why I think it's very important. If you're trading and operating in the meme coin space, you have to just take profits.

When anything crazy happens, you have to take profits. Yes, we've all heard the stories of the people turning the $10 into 30 million, but the reality is it's probably not going to be you. And the best way to do this is to scale out of meme coins. Basically, once if you get into meme coin and it hits 100 million, you just start. I think that's just generally, generally the case, because it's very difficult to actually generate an edge on these things.

I think they're very specific cases where maybe you can. So, for example, I think that, Jonah, you actually did generate some edge on Bowdoin, and you play that very well. But I think in general, what we're trying to do right now is the whole market has just been trying to pump meme coins, pump meme coins left and right. And we're going to find out over the next three months which ones have staying power and which ones don't. And the ones that have staying power are probably the ones that have a lasting brand, the ones that always be willing have to something that will always be appealing to a certain group of people at any moment that are not just flash in the pan type things.

Right? Yeah. I mean, like, the way I see it is that, first of all, let me just say that I am not optimized for meme investing. I've spent 20 years in trad five and to me, I would have never have invested in a meme coin until recently, when it clicked for me with Bowdoin. I think the deal with memes and the reason why they're garnering so much attention and generating such spectacular returns, and frankly, some of them, the benchmark memes of this cycle, are outperforming alts during this sell off quite meaningfully.

Jonah

That deserves attention as well. Not the shitty ones that no one cares about, but your whiffs and bowdens of the world. They're definitely outperforming a lot of altcoins. I think the reason why is that if you're going to invest in a token bitcoin is digital gold. It's Internet money ETH.

There's a real narrative there, Solana. There's a real narrative there. So the l one s like benchmark l one s have their role, but out the risk curve. Why would you want to invest in a governance token that gives you a vote and some dao you don't care about, or that doesn't really accrue earnings of a web three protocol that's kind of a business and kind of not. When you could invest in something that is literally just an attention token at a low valuation, when you think it's going to go up, it's kind of like investing in the Nike swoosh, as if you're one of the first people to discover it.

To me, I think that gambling, the casino meme experience, is so much better than anything that Las Vegas offers that it will eat into that gambling market or create new gambling markets that didn't exist before. And meanwhile, gambling on tokens that are linked very loosely to web three businesses that may be gaining traction. That's less fun to gamble on, and you can't value it with a DCF model, especially during a sell off. So I still believe in the barbell strategy, and I think that you want to wait to buy the middle of the barbell, wait to buy some of these alts, because I think they're going to go a lot lower. However, with memes, not financial advice, nothing crazy here.

Do your own research. This is gambling that we're talking about here. It's not investing. Don't take any of this as a reason to buy something. But I do believe that if you have a reasonable expectation that attention will be directed towards your meme relative to the valuation dependent, it makes sense to buy.

Bowdoin is one of those things. Like, for me, I think that people will increasingly focus on this guy's age and his inability to deliver coherent speeches, which is like, basically job number one of a leader, especially the leader of the free world. I think that it plays into embarrassment about the state of America, embarrassment about the age of global leadership. I think his attention focuses on that meme, which kind of captures the zeitgeist of our era. People will buy the token for a laugh.

Equally. Like there. You know, that that means valued, what, 4500 million, 300 million, something like that. You know, that you can. If you're going to speculate on a meme, it also pays to pay attention to things like under $10 million.

Like, I recently saw dollar sign Jew. You know, you and I are two Jews who podcast about crypto. Crypt. Crypto and Jews are memetic things right now. They get a lot of attention on Twitter.

Why not, right? These are all things that. These are all things that I think work. You know, I agree. I agree wholeheartedly, 100%.

Avi

The dollar sign Jew, you know, you know, I'm in that with you. We talked about it earlier. But it's just. It's just funny because I would have expected there to be a much larger jew coin in the past, but the fact that there wasn't kind of. Just.

Kind of just cracked me up, because, like I pointed out, jews are a very memetic force in general. Yeah, I think that throughout human history, they've been a mind virus and people just can't stop thinking about them. It's kind of crazy. Like, at any given moment, people will just blame the Jews for things like stubbing their toe or weather or global world conspiracies or, you know, siphoning off money from the banking system. I mean, it's like, it's.

It's honestly, like, unbelievable. The amount of things like jews are basically a Rorschach test to individuals. So I think that you can see whatever the hell you want to see, which makes it a pretty powerful meme. I don't think this coin is ever going to get listed on an exchange. You know, Joe Bowden might, but it's still a.

Still kind of a funny. A funny little thing that they got going on there. Yeah, I think when it comes. When it comes to meme coins, it's what has everlasting potential. What in.

If you can imagine this thing in ten years, are people still going to care? Which is why, you know, I did sell most of my zin, because I don't know if people are going to care about zin in five years. In fact, they're probably not. But are people going to care about cats and dogs and, you know, are people going to remember the. The days of Joe Bowden?

Yeah, people are going to remember the days of Joe Biden in five years. Yeah, I agree. Especially if he wins again. If he doesn't win. That's a very bullish catalyst for crypto.

Jonah

Crypto is currently trading like he's going to win. It's amazing. Going back to our topic of doing some research on a few projects that are in the middle of the barbell. Just educating ourselves on web three and Defi, I was amazed, when I was browsing through some of these protocols, just how difficult it is to access. If you're a US or a UK user, the regulation is really a massive lid on the price of crypto.

I guess the three coins, three projects that came up the most in our Twitter call out, it was Ondo, Athena and hyper liquid. Like, you just can't touch that stuff if you're in America. It's pretty crazy. Yeah, it's really sad, honestly. I mean, once.

Avi

Once that gets solved, I mean, these types of assets can go up a ton. Because I think one thing that we've proven is that the US bid matters more than anything else. And the only types of people that are really able to use this easily are people. Are people offshore. I mean, obviously, I think people probably probably in the US use VPN's.

Obviously I don't, but I think if you were to dig into it, you'd probably find that's what people are doing. I also think that things like Ondo make a lot of sense in terms of where the future of crypto is going. We all agree that tokenization is a future. We all agree that what we need to have is we need to have more assets represented natively on chain from the beginning. And Ondo is doing that and they genuinely are building some pretty cool financial infrastructure.

I think that they're going to face a lot of pressure out of the United States unless they can get all of the big institutions on board. Because obviously they're very dangerous for these guys. But they are a good product, right? They're a good product. They're going to make money.

It's a very simple way to make money. They just have to start expanding their offerings. I mean, as I browse these three protocols and just dug into the docs and tried to learn about them, I think Ando was the most exciting to me of the Ondo Athena hyper liquid trio that we got recommended to me. Like, so what does Ando do? Basically they turn right now they turn short term us treasury notes into tokenized form, right?

Jonah

And you can't touch that if you're in the United States. But like the silver lining here is if you live in America, you can just go open a brokerage account and buy some t bills and you're good. You don't need this stuff. Meanwhile, if you live in Argentina and you want us stable coin yield, you can't really do that. You can't really buy t bills easily if you're retail in some, you know, developing country.

So Ondo provides that solution. It basically allows you to own a dollar. It's like tether, but with yield, with actual high savings account yield. And I think that's brilliant. And obviously that's just the first step along a long journey.

Eventually it'll be tokenized S and P for people in Africa, or tokenized hedge funds, or tokenized whatever. I think Ondo has tremendous potential. I'm very excited about it. The Ondo token, clearly these guys just did it because they need a way to monetize their efforts. And I don't believe in the Ondo token.

I don't think you need the Ondo token. I think that Ando should make money the way tether makes money by like shaving a few bits off the top. This is why I don't believe in token investing in these projects, because these tokens are meme coins. Effectively, they offer nothing other than attention, and you can do better with other meme coins or probably do better with bitcoin. So I don't believe in the Ondo token.

I believe deeply in the Ondo offering. Yeah, look, I can't really say whether I believe in the token or not because I think it really just depends at the end of the day on securities laws and what they're able to do with that token. If this token just ends up being a way to distribute profits among, oh. Then I believe in it. Then obviously, then obviously this thing has value.

I mean, right now it's just a governance token. That's not it today, and therefore it doesn't really make a ton of sense. But in the future, what I'm hopeful for, once we get rid of Mister Gensler, that we find some frameworks where we can take these good products like Ondo and have a token that actually has value associated with it from the cash flows of this platform. I mean, think about it. It doesn't make sense if, let's say, one day Ondo wants to go public, why would they ever go public by issuing actual stock?

Avi

Why wouldn't they just issue a token that they can direct cash flows to? It just makes so much more sense. Based on their whole platform, based on the premise that they're trying to bring in everybody into crypto, at some point they're going to have a token. Let's say they get big enough because they go public. Let's say in a world where they didn't have a token today, at some point in the future, they're going to have, they're going to need to have a token.

So they're going to need to figure out how to generate value for those token holders. And the only answer really is that they need to pass back some of the cash that they generate. I think you hit the nail on the head. If securities laws change and you can issue a token that allows you to pass cash flows from your real business through to token holders, then Ondo is probably the token you want to hold. The Defi tokens will just literally be limit up, but yeah, until then, and that's a long journey.

Jonah

Until then, man, I think you're going to get spectacular outperformance from bitcoin or the memes, because it is like people got excited about a governance vote during the 2021 cycle and then they just immolated value on those tokens. So I don't think people give a fuck this time about governance tokens. The other two projects weren't particularly. Let's put it like this, they weren't particularly exciting to me. I mean, hyper liquid is just an exchange.

Avi

Like, I don't see how it differs from all of the other exchanges that have ever been launched. Yeah, I didn't get it either. I thought it was a really slick user experience. Yeah. By the way, it's good.

I mean, I really like it. It's just not, it doesn't get built. On Cosmos app chain. Yeah, it's like, it's like, why dy DX is already doing that? Like, I don't understand the differentiation.

So hyper liquid was a bit. I mean, even though that was mentioned a ton, maybe somebody in the comments can explain to me why people love this thing. Maybe they have a good referral program and people are trying to refer us to it, but I don't know. And then Athena. Athena is interesting only because it's the first example of a perpetual stable, a perps based stablecoin that's actually managed to take off.

I mean, this idea has been around forever. Back in the BitMex days in 2019, people would just consistently, if they wanted to go to cash, they would just short one expert, they would just short the perpetual future against their bitcoin balance. Because you actually couldn't hold USDC or USDT on Bitmex, you could only hold BTC. They only accepted BTC. So the only way to go to cash would be to actually short the perpetual and you would generate some sort of yield.

So basically, anyone that's been trading in this world for more than a year hopefully knows that they can do this. And there have been a bunch of different projects that came out in the past on Solana, mostly where this was attempted. But Athena seems to be the only one where it's really taken off. And it just seems to be because of the names, the names behind it. I think that the biggest issue with all of these products at the end of the day, is always going to be their collateral management.

And if they can work with exchanges to say, hey, we need a non liquidatable account, then perhaps this can take off. But other than that, it's a centralized product, obviously, because there has to be some. There has to be some access to these perpetual products. Maybe in the future it'll all be decentralized. But, yeah, I mean, I was reading through their docs and I think I came into it very bullish on the project, and after doing my research, I feel very uncomfortable with it for a couple of reasons.

Jonah

The first is that they build themselves as the world's first sort of like fully decentralized, stable coin. That. And that's what Internet money needs, is this. It's very centralized. If you dig into their docs, they're like, we have a 24/7 team of people with experience from places like.

Like Tower, DRW, Jump, Jane, like managing the system and watching for liquidations. Also, they're taking an ass load of exchange risk. Like, if Binance and OKX get in trouble, like, your USDe is just gone right now. Another problem is that they're short gamma, effectively. So, like, yes, in a raging bull market, you earn decent yield on USDE, just like in a raging bull market, you could earn 100% APY loaning out your stables and ETH on FTX when that was a feature that Sam created.

But in a bear market, what happens? The first thing that happens is the collateral, which in this case is steeth staked ETH. Staked ETH will deep versus ETH. I think it got as low as $0.92 on the dollar during the last bear market. So that happens at the same time as perp funding goes wildly negative.

And so if you have like 10 billion locked in Athena earning bull market lazy yield, and then funding goes negative at the same time as the collateral DPEGs, for whatever reason, this portfolio just gets liquidated like crazy. Steth is not high quality collateral. ETH is high quality collateral. So ultimately, one thing, I started my career in credit trading. One thing you learn if the yield is too high, there's a catch.

To me, I think that this is just one of those lazy places to earn yield like anchor protocol was before. The music just stops. This is not decentralized. You're taking a tremendous amount of exchange risk. And if you price in, like, the.

Yes, okay, there's a custodian. It's copper, right? But, like, if you price in binance rug risk and the impact on collateral and your ability to get your money out, I don't think that the yields you're collecting compensate you for the risk that you're taking. Yep. I think you nailed everything.

Avi

Actually, I don't really even have any. Anything to add to that. That was. That was effectively my reaction to every one of these projects before. And this one is even worse because it's so large now.

Jonah

Yeah. You know, and the bigger, the bigger it is, the worse it, the worse the problem becomes in time, in times of stress. And so. Yeah. Is this going to be the next Luna probably not, because I don't think it's going to have systemic impact.

Avi

But is it going to blow up? I think given enough time, if they get large enough, the answer is yes. There's actually something interesting about Luna. Right. If Luna hadn't grown as much as it did, it wouldn't have taken down the industry, and it would probably never have blown up.

So if they had just capped themselves at issuing 5 billion of their stable coin, they probably would have never blown up. But 20 billion was just too much. Yeah. And Athena is going to go the same way. If they stay manageably sized, they're going to be fine.

Jonah

But if $20 billion worth of value is in there earning 20%, it's like if lots of people bid up a shitty junk bond, the yield goes down. Right? And if lots of people put their money in this thing, the yield will go down, because that's just more perp selling. So the basis will collapse, stay closer to flat instead of, like, trend, you know, always being a little bit positive, it'll be, you know, kind of, like, marginally negative. The yield will go away, and then there's rug risk when, when.

If Steve deeps during a crazy, you know, crypto rinse, which almost feels inevitable to me at some point. So if I were. If I were looking to earn yield, and I do earn yield, this way, I just stake my ETH on lido. Like, I think that a decentralized solution is better than sort of, like, centralized points of failure. Also, who knows how copper is going to perform during.

During a real stress test? Like, they haven't been through one yet. Yeah, I agree. Agree with all points. Although on copper, the only stress test is just their relationship with finance.

Avi

But everything. Everything is held off exchange on copper, and so copper is just not exposed. They could get into a lawsuit, but there's no actual mechanism to take those assets, as far as I understand it. Well, that's. That's the risk.

Jonah

Is the lawsuit, like, a 2021 style binance, like, FTX style, you know, disappearance of, like, if binance. If binance dies the way FTX died, copper's assets are safe, right? Assets within copper are safe, but no crisis is the same as the previous crisis. I think what could happen is bitcoin runs up to a million dollars a token, and then the United States just says, sorry, copper, that's our bitcoin. Now it's legal risk.

Not your keys, not your crypto. Ultimately, I question this. It's a shame, honestly. So out of the three projects that we looked at, we'll do another three next episode that we'll review. But out of the three projects that we looked at, Ondo definitely the most interesting.

Yeah. Like, Ondo aligns with my sort of like, understanding of web three at this point, which is financial tools and banking and access for developing countries. It is not a US developed market product crypto. So Ondo providing these things, it's okay if us users can't get tokenized 5% yield on Ando. Us users can get that by having USDC on Coinbase and frankly, they don't need it anyway.

It's people literally everywhere else that need this stuff. And I think Ondo is actually doing a great job bringing. Bringing banking and brokerage to the masses of people who JP Morgan and Bank of America and Schwab and Fidelity won't provide it to. Makes sense. Jonah, as always, was a pleasure.

Go have a. Go have a coffee and a croissant at Senequier or Cafe Dior. You're living la dolce Vita out there. Yeah. It's not as sweet as you might think, but it is.

Avi

It ain't bad. Have a blast, man. Great talking to you. Thank you. As always.

Jonah

As always.

Does The Bitcoin Halving Still Matter? | 1000x

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1: The Impact of Bitcoin Halving

2: Geopolitical Influences

3: Market Dynamics and Investor Behavior

4: Future of Cryptocurrency in a Geopolitical Context

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