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Ten31 Timestamp: You Say Ceasefire, and I Say Escalation · TFTC: A Bitcoin Podcast

• 0:00
  Mr. Arnold. Happy to be here, as always. Coming off another great Masters weekend. As we were
• 0:07
  discussing in the pre-year, you know, if we get into World War III, as it looks more and more
• 0:12
  likely every day, we know what we're fighting for as Americans, which is for the right to sit around
• 0:17
  on a sunny Sunday afternoon and watch an Irish guy win our most important golf tournament.
• 0:22
  Two years in a row, shot to Rory. Hard-fought victory. Thought he was going to give it up.
• 0:27
  It was. It got interesting there. I thought Rance was going to make a push. I thought
• 0:31
  Scotty was going to make a push. Not without drama. Never without drama with Rory, but he pulled it
• 0:36
  out. He did. He did. But alas, we're not a golf podcast for Bitcoin slash. I think we're macro
• 0:42
  podcast now. I think I've gotten some feedback. Some of the brightest minds in macroeconomics
• 0:47
  globally have been listening week in, week out just to come and get your thoughts, John, because
• 0:52
  they're good thoughts, as you alluded to. Things are chaotic. I was away from keyboard.
• 0:59
  I had my phone at my birthday celebration over the weekend, not mine, but somebody in my family's,
• 1:05
  and I kept my phone away from me all day Saturday. Obviously, yesterday was the Masters,
• 1:10
  so I was in bed last night, like, okay, what happened this weekend? Looks like it was a bit
• 1:13
  chaotic. Ceasefire on, off, on, off. We'll pull up the first slide that you put together today,
• 1:20
  which is a reference to the game show Deal or No Deal.
• 1:24
  Yeah, this was the most concise way that I knew how to summarize the events of the weekend.
• 1:29
  I feel really good that in what could be an emerging energy crisis for the world,
• 1:33
  that I lit a graphics card on fire, a GPU on fire to create this totally high value ad, Jim.
• 1:40
  But yeah, here's what we're looking at.
• 1:43
  Interestingly, my projection for SPY does not look to have proven correct,
• 1:46
  as we're basically flattish this morning, despite oil ripping on news of a decision to blockade
• 1:52
  Iranian ports with the Navy, the U.S. Navy in the Strait of Hormuz in response to talks that lasted,
• 1:59
  I think, less than 24 hours between Vice President J.D. Vance and some faction of the Iranian
• 2:05
  contingency. And we can get into maybe who they were talking to and what that means. But in any
• 2:10
  case that fell through. And so now we are definitively escalating and not only is the
• 2:16
  straight not going to be open, but we are going to make it even more closed than it was before.
• 2:21
  So an interesting, you know, reverse card being played here as always, you know, it's a bold
• 2:25
  strategy cotton. We'll see how it plays out, but yeah, big, big implications this week after the
• 2:29
  market decided last week with the ceasefire announcement that everything was, was Gucci
• 2:33
  and we were heading back to all time highs. Yeah. But as we mentioned last week too,
• 2:38
  let's not get immersed and succumb to the 24-hour news cycle and the changing of headlines and the
• 2:45
  ping-ponging of ceasefire, no ceasefire, deal, no deal. Let's look at what's actually happening
• 2:50
  on the ground. And one thing you highlighted this week is that it seems that the oil,
• 2:54
  the balance of power in oil markets is definitely shifting towards the US. And I saw this
• 2:59
  map floating around over the weekend and we see a bunch of ships going around the horn of Africa.
• 3:04
  Yeah. So this is a map from, I call it on the bottom, Rory Johnson, which is a great kind of oil data analyst that everyone should follow on Twitter. The president is now apparently following him as he retweeted or quote tweeted or something on untruth social, this, this map and as evidence that, you know, the U S is, is winning bigly.
• 3:21
  Um, but I do think it's an interesting data point showing a bunch of large tankers headed
• 3:28
  to the U S to the, the, I was going to say the Gulf of Mexico, but it's now, I guess
• 3:32
  the Gulf of America kind of on, on the way in this caravan to these are empty tankers
• 3:36
  largely.
• 3:37
  Um, you can see that cause there, there's no outline in most of them, or it's, it's,
• 3:40
  it's an outline with nothing filled in and, you know, showing them coming to, uh, empty
• 3:44
  tankers coming to the U S to, to refuel.
• 3:46
  And I think it's a combination.
• 3:47
  I think this includes everything from LNG tankers to other types of crude tankers.
• 3:53
  But in any case, if you scroll to the next slide, you'll see this is this is anomalous, right?
• 3:58
  Like it's this is not at least relative to prior few months that you are seeing in the data.
• 4:02
  That's not just like a snapshot of something that's always happening.
• 4:05
  There does appear to be a large redirection of VLCCs, which are very large crude carriers to the Gulf here in the U.S.
• 4:12
  and that's in response to one of the main oil arteries and LNG arteries in the world,
• 4:19
  as we've discussed for the last month, getting closed off. So yeah, I think it's an interesting
• 4:24
  kind of illustration of something that we've been talking about a lot over the past few weeks,
• 4:28
  which is just this all is a game of relative leverage and it very much remains to be seen
• 4:36
  you know, how durably kind of the U.S. can benefit from this situation that we're highlighting right
• 4:42
  here. This is going to have, you know, to the extent that this continues, like it's not going
• 4:47
  to be free domestically, right? Like we are a net exporter of most refined petroleum products.
• 4:53
  I believe we're about neutral, maybe a slight net importer on crude, but, you know, we have,
• 4:58
  we do have levers we can pull and ways that we can benefit from the situation that other net
• 5:02
  energy importers, especially Europe, and to some extent China, you know, don't have. So this is,
• 5:08
  if you were, if you were Trump, if you were the Trump team looking for ways to respond to,
• 5:12
  you know, being, being down pretty bad in the fourth quarter, right. On industrial capacity,
• 5:16
  where over the last 25 years, China has kind of eaten your lunch on all these critical industries
• 5:21
  and they have kind of a chokehold on rare earth minerals, you know, this is kind of a button you
• 5:25
  have to push, right. Or you, you hope you have to hope that you can push this button in some way,
• 5:29
  you know, whether, whether all of this was kind of intentional from day one and we should trust
• 5:34
  the plan or whether Trump is kind of just bumbling and stumbling into the situation.
• 5:38
  And this is just the natural course of events. You know, I'll let listeners decide on that. But
• 5:42
  yeah, I think it, you know, this, this highlights what we've been talking about that the U S isn't
• 5:47
  totally out of cards to play. And this is kind of the main card that you would think we'd have to
• 5:51
  play. And so, yeah, it's this, this'll be a key, I think driver in deciding basically kind of who,
• 5:56
  who blinks first here in the broad, you know, east-west chessboard that has been set up.
• 6:01
  Yeah. And it looks like China is reacting to this leverage or some form of leverage shifting
• 6:07
  towards the U.S. and they're beginning to press the, pull the levers that they have access to,
• 6:12
  particularly in the realm of sulfuric acid exports, which now we're sulfuric acid
• 6:18
  exports now, but China is apparently curbing exports to sulfuric acid. This is the LNG chart,
• 6:26
  so obviously Europe's very dependent on our LNG, but China seeing what's happening here,
• 6:31
  saying, okay, we're going to ban sulfuric acid exports as the Iran war hits supply.
• 6:36
  As you can see on the right side of this chart, sulfuric acid is a critical input for a lot of
• 6:42
  critical sort of inputs for metal processing, phosphate fertilizers, phosphates, fibers.
• 6:48
  And so you could see a strain on those critical materials that could lead to more inflation,
• 6:54
  particularly in food prices. Yeah, absolutely. And I think it's even more than just kind of
• 6:59
  the inflation impact. As you know, the figure I show here is 50% of sulfuric acid exports are
• 7:05
  used for phosphate fertilizers. And it's important because the first market and the
• 7:11
  the downstream kind of agricultural markets that globally that it depends on, that depend on it,
• 7:15
  are already very disrupted from everything that's gone on thus far out of the Gulf.
• 7:19
  There are a lot of byproducts that come out of that region that flow into the first market.
• 7:25
  And so that's already seen disruption even before this China announcement. So that these
• 7:29
  export curbs are outright and start in May. China is currently the largest net global exporter of
• 7:36
  these things. And so that's just going to make that market even worse, potentially, if this
• 7:40
  continues and ramps up. So then it becomes maybe a question of the oil impact is maybe a little more
• 7:47
  near term and obvious. And the FERT's market impact probably takes a little longer to play out
• 7:53
  just because of planting cycles and the way that crop yields work and the way that agriculture
• 7:58
  markets work. So maybe you don't see the impact of this immediately, but there will be early pull
• 8:03
  forward impacts. And you will see to your point, inflation and a lot of different food
• 8:07
  prices and also probably curbing of supply in, you know, more marginal regions that, you
• 8:12
  know outside the U S outside Western Europe that are a little more kind of on the cusp and on a knife edge with food supply Um so this is you know this is uh again if you flip it to China
• 8:23
  perspective, this is exactly what you would expect to, to, to hit back, right. You play the cards
• 8:27
  that you have. And I think it just comes back to the same question we've been pointing people to
• 8:32
  over the last month of it's all a game of, of relative leverage and who's going to blink first
• 8:36
  when you, when you play these different types of very sensitive cards that are going to affect
• 8:40
  pretty much every market around the world. Yeah, we'll get some feedback. It's probably the most
• 8:45
  uncertain time. I'm just thinking like COVID was very uncertain. But no, I think the scale of this,
• 8:51
  because COVID was, we're comparing the supply chain disruptions to COVID. COVID was obviously
• 8:56
  a black swan and the world basically shut down to try to prevent the virus from spreading. But now
• 9:04
  the existential threat is World War III and you have all these levers being pulled that
• 9:10
  But really sitting back as an observer, it's like, why are we doing this?
• 9:14
  Why are we thrusting the world into this type of disruption right now?
• 9:19
  And it is incredibly uncertain.
• 9:21
  And I think what has been interesting to watch throughout all this, the pull in Bitcoin, is Bitcoin's relative strength in this environment.
• 9:29
  And it pumped to 73,000 over the weekend, I believe on Saturday, came off of those highs yesterday, but currently floating, I believe, around $71,800.
• 9:38
  So Bitcoin throughout all this has been reacting in a way which is actually, for lack of a better term, a pleasant surprise because it's not selling off the way it has in cycles past when a potential liquidity crisis arises in markets.
• 9:55
  It's actually acting as a risk-off asset right now.
• 9:58
  Yeah, look, it's extremely interesting. And I think, you know, this is still primarily, despite our, to your point, becoming sulfuric acid and BLCC experts, this is still, you know, primarily a Bitcoin oriented show, a show with a kind of a Bitcoin lens.
• 10:12
  But I think all of the stuff, all of these headlines we've pointed out today and in prior weeks around the situation flow into and are inputs into that ultimate view about Bitcoin.
• 10:22
  And to that point, as we see a progressively more fractured, perhaps multipolar, perhaps just kind of disconnected global order where just in time, inventory and supply chains just are a thing of the past and nations no longer implicitly trust one another.
• 10:38
  And, you know, the U.S. Treasury market ceases to be kind of the default store of value for sovereign reserves.
• 10:47
  And in general, counterparties grow to trust one another less and less, especially between these different kind of emerging trade blocks.
• 10:54
  Right. Like that is the environment where something like a neutral, sovereign store of value without a counterparty that can be moved in arbitrarily large size, essentially instantly around the world.
• 11:04
  whose supply cannot be arbitrarily diluted by any counterparty, corporate or government or otherwise.
• 11:11
  This is the environment where you would eventually expect something like Bitcoin to thrive.
• 11:15
  It's still a baby, like an infant, a zygote relative to gold,
• 11:18
  which is the other kind of main theoretical beneficiary of an environment like that.
• 11:23
  And so I expect to see gold certainly continue to be the default way that sovereigns and corporations,
• 11:28
  big international corporations, express an awareness of that view as it becomes more and more consensus.
• 11:33
  But I think we talked about on the show before, I think that only further and further paves the pathway for Bitcoin to gain a progressively larger percentage share of global wealth and global sovereign store value balances over time as that thesis gets more and more obvious and more clear.
• 11:50
  And yeah, I mean, I think we might've said it in prior episodes as well, but like, this is the kind of price action that you look for, for like bottom formation in any asset, not calling a bottom, because like, if we wake up tomorrow and Trump decides, you know, we're actually just going to unload the nukes on, on Tehran, like who knows what's going to happen.
• 12:07
  And certainly pray that that does not happen. There are a lot, but you know, there are a lot of fat left tails here now that have to be considered. So who knows what's going to happen week to week, month to month. But in general, when you see something price on something, get absolutely nuked.
• 12:19
  everyone's puking, running away from it, it gets out of favor. And then like really bad headlines
• 12:25
  start to hit. That should be really scary. And, you know, the thing kind of does nothing or even
• 12:30
  goes up a little bit. Like that's what you want to see for bottom formation. So I, you know,
• 12:35
  I definitely think if you're looking just at the Bitcoin lens, this is, this has been, I think,
• 12:39
  a very constructive environment for Bitcoin's fundamentals. And I don't think that's lost on,
• 12:44
  you know, big banks, big corporations, and importantly, you know, sovereigns who are
• 12:47
  kind of dealing with this. Yeah. And we'll bring it back to Bitcoin, particularly in this environment,
• 12:53
  because there's some speculation about how it's being used in the straighter moves by the IRGC.
• 12:58
  But before we get to that, I think another shifting back to the East-West dynamic, the levers that are
• 13:05
  being pulled. And I think it's very clear that at least between the United States and China, this race
• 13:09
  to win the AI war is considered existential by both governments, if you will. And I think
• 13:17
  One of the sub-themes of the last week is Anthropics model mythos, which they have not released.
• 13:25
  They've released it, I guess, to enterprise clients, Google and others, in an attempt to try to make sure that systems are prepared for when it does get unleashed on the public,
• 13:35
  because they're positioning it as something that is more powerful than any LLM that's ever existed.
• 13:40
  There was a report out there that was able to find zero-day bugs in many of the critical software libraries and operating systems that exist out there and that people depend on.
• 13:51
  And so Anthropic sounded the alarm bell last week.
• 13:54
  Like, we think this model is a step function improvement on Opus 4.6, and it's too dangerous to unleash.
• 14:00
  And that has caught the attention of the government.
• 14:04
  And there were many sort of meetings on the Hill last week about this, one of which was Scott Bessent summoning Wall Street leaders for an urgent meeting concerning mythos and how they should be preparing for it.
• 14:17
  And so you can begin to see a narrative, an AI narrative bubbling into the scene as well.
• 14:23
  and it looks like we're getting to a point where the governments are saying,
• 14:29
  these tools are very powerful and we'll get into what could be happening here.
• 14:34
  So what are your thoughts on this?
• 14:36
  Yeah, for sure.
• 14:37
  I mean, I totally think that the basic narrative that you outlined is all legitimate
• 14:42
  and potentially like I think that's how it's been generally received in the media.
• 14:47
  And it's not in any way beyond the realm of reality that everything that Anthropic is saying
• 14:53
  or like leaking out whatever through trusted media sources is correct about mythos.
• 14:57
  You know, I don't doubt that like we see every day is making crazy gains.
• 15:01
  And eventually, if not already, like that will have like meaningful cybersecurity implications.
• 15:06
  And certainly that flows into kind of if you're trying to pull certain strategic levers against,
• 15:12
  you know, a geopolitical adversary right now, you know, pending further distillation.
• 15:17
  We'll see if that can continue.
• 15:19
  But right now, the U.S. does have a lead on the frontier models.
• 15:21
  And so we saw it a month ago or two months ago with the rift between Anthropic and the
• 15:26
  Department of War on how the models could be used.
• 15:29
  But this is becoming more and more of a legitimate national security conversation and a key kind
• 15:34
  of weapon in what Washington, I think, sees as this decoupling, a softer hard decoupling
• 15:40
  is kind of up to you to think about.
• 15:41
  But I think that's all legitimate.
• 15:43
  I found the story really interesting, though, this week because it's like when I just came
• 15:47
  across the wire, it just kind of didn't fully pass the SNF test for me.
• 15:50
  And maybe it's just after years of, you know, being manipulated by every form of being like the most propagandized generation like in history.
• 15:58
  Right. And so maybe I'm just my tinfoil hat's gotten too much use.
• 16:02
  But, you know, for for the Treasury Secretary and the Fed chairman, so Powell and Besson to have a joint meeting that was, you know, allegedly, apparently like an urgent emergency meeting with basically the heads of all the USG subs.
• 16:15
  So the globally systemic important banks, Jamie Dimon, interestingly, was not there.
• 16:19
  I don know if that means anything but in any case you know Citi you see here Citi Morgan Stanley Bank of America Wells Fargo all kind of summoned the heads of those banks summoned to and Goldman summoned to DC to have this joint meeting And you see that it about cybersecurity and it like okay maybe right Like it definitely possible that that you know there some zero day in you know the the core elements of like banking tech infrastructure that you know they need to be
• 16:44
  aware of and need to quickly find patches for, and it's going to have this major, you know,
• 16:48
  it's this major systemic risk to the U S and their customers. Um, and, you know, U S financial
• 16:53
  infrastructure, that's definitely possible. But our, our buddy, Matt Dines at build, you know,
• 16:57
  had an interesting tweet that I feel like, you know, really resonated with me over, over the
• 17:02
  weekend. It was aligned with kind of my thinking that if you were, if you were going to, you know,
• 17:07
  perhaps leverage mythos where you have this kind of geopolitical lead right now against your
• 17:12
  adversaries on something like financial infrastructure, um, you know, might you want
• 17:17
  to read in the heads of the biggest banks in your country? And I believe also the bank of Canada was,
• 17:23
  was later kind of briefed on this and brought into, brought into the circle, you know, might
• 17:27
  you want to brief these guys on something that you were about to do or that you wanted them to do,
• 17:31
  right? And I think, and then would you not kind of, you know, allow the narrative to percolate
• 17:37
  that, you know, it was just about kind of informing them about cybersecurity risks,
• 17:41
  you know, as with a lot of things we talk about on the show, maybe that's only a 10% or 20%
• 17:45
  probability. But I think the market was reading it as like a zero, right? Last week, it was pretty
• 17:51
  hook, line and sinker type narrative that exactly what was presented was correct, what was happening.
• 17:55
  And I think it's worth thinking about, again, as we consider where we're going in this world that we're heading into, the assets that you want to be allocated to in a case where something like that were to happen.
• 18:08
  and I think even more generally, like putting a tinfoil hat on even more, if I were looking at,
• 18:16
  as the Fed and Treasury, if I were looking at the systemic breaks that might be coming down the pipe
• 18:20
  from everything that we're seeing, just like generally in energy markets and how that flows
• 18:25
  through to all these other markets, to food, to metals and mining, to AI, to government tax
• 18:30
  receipts, ultimately in government finances, if I saw that coming down the pipe, I might want to
• 18:35
  urgently gather all the heads of the GSIBs and like, you know, read them in on, Hey, here's,
• 18:39
  here's what's going to happen. Here's over the next month, like what we see coming here,
• 18:43
  the new facilities we might want to put in place. We need to have you guys ready to do XYZ thing.
• 18:47
  And inevitably that meeting is going to get leaked, right? If all those guys are there in
• 18:51
  that same room at one time. So I might also just want to float the cybersecurity mythos narrative
• 18:55
  as a complete red herring and redirect from, you know, what, what, what people would otherwise be
• 19:00
  speculating about, you know, this kind of meeting, right? So this is like definitely
• 19:04
  tenfold hat territory. It's definitely speculative territory, but you know, we've seen much crazier
• 19:09
  things. And it's, I think definitely not outside the realm of possibility that we're about to hit
• 19:14
  some sort of like systemically hairy event in, you know, Western financial infrastructure or just
• 19:19
  global financial infrastructure in the next like month. And if so, like this is exactly the type
• 19:24
  of meeting that you would expect to see, right? Well, I mean, I'm picking up what you're putting
• 19:28
  down and picking up what Matt's putting down. The whole
• 19:30
  mythos narrative, it was very
• 19:32
  obvious. I mean, I think the first
• 19:34
  day they released the
• 19:36
  research on the zero days and
• 19:38
  wrote the blog post and said, hey, we have this model.
• 19:40
  We're not releasing it. We actually,
• 19:42
  what do they call it? Operation Glasswing,
• 19:44
  which is giving
• 19:46
  it to all the enterprise clients so they can prepare
• 19:48
  their systems. Like that narrative hit.
• 19:50
  It was scary. But then two days later,
• 19:52
  somebody released another report.
• 19:54
  Well, actually, they could have used Opus 4.6
• 19:56
  to get like 80% of the way there
• 19:58
  and it's actually not that big of an improvement on Opus 4.6.
• 20:01
  And then I was saying, I don't know if you saw this commentary
• 20:03
  from some hardcore white hat hackers.
• 20:07
  They're like, hey, we all know these zero days exist.
• 20:09
  People can find them if they want to,
• 20:12
  but it's legal to actually execute a zero day bug on these critical systems.
• 20:16
  You would go to jail, you'd be found out.
• 20:18
  So people have known that these zero days exist.
• 20:20
  They just don't take advantage of them because it's very illegal.
• 20:23
  And we're talking federal prison.
• 20:24
  So it's not as groundbreaking as Anthropic was making a mythos to be.
• 20:31
  And then another meeting that was on, I don't know if it was a meeting or just a warning,
• 20:36
  but I think the Treasury warned about private equity and private credit exposure to insurance
• 20:42
  companies or vice versa, insurance players' exposure to private credit and private equity,
• 20:48
  which has been bubbling behind the scenes.
• 20:50
  I had Nick Namath, his young analyst, who's diving into this, doing research in parallel
• 20:55
  with Tom Gober, who was on Steve Eisman's podcast about a month ago, ringing the alarm
• 21:01
  bell about insurance's exposure to private credit and the mismatch and liabilities that
• 21:06
  may emerge there and a potential trillion dollar hole.
• 21:10
  And so to your point, maybe there is a liquidity crisis, this private credit, I guess, bubble
• 21:17
  popping.
• 21:18
  There were more redemption gates last week.
• 21:20
  I forget which fund.
• 21:21
  Was it Apollo?
• 21:22
  Yeah, it was Carlisle.
• 21:23
  Carlisle.
• 21:24
  Yeah.
• 21:25
  And so you have this private credit complex.
• 21:26
  It seems to be slowly blowing up.
• 21:29
  And to your point, it would not be shocking at all to learn that Mythos was a red herring
• 21:34
  used to get all the banks in the room to say, hey, this private credit thing is actually
• 21:38
  pretty systemic.
• 21:39
  You guys need to prepare.
• 21:40
  Yeah, absolutely.
• 21:41
  I mean, I forgot to put that in the slides, but yeah, we had it in the newsletter this
• 21:44
  past week.
• 21:44
  But with in addition to everything else going on in global supply chains and all the implications that, you know, can and will have, you know, we've got a trillion dollar kind of what appears increasingly to be like a slow moving train wreck in private credit, especially as it relates to the insurance industry's exposure to it.
• 22:00
  And there was an AMBEST report that was released over the weekend about how basically diagnosing that the annuity selling insurance funds are significantly worse off, in their words, in terms of financial positioning than they were on the eve of the financial crisis because of this private credit exposure.
• 22:17
  So, yeah, look, I don't know if it was that.
• 22:19
  I don't know if it was something we're completely missing or misdiagnosing.
• 22:22
  But, yeah, in general, I think worth asking yourself, like, does the mythos narrative for that meeting really kind of hold water?
• 22:27
  And if not, what might it suggest that, you know, that that was happening last week?
• 22:31
  Yeah, such uncertainty, uncertainty, risk, bad credit exposure, crazy times, crazy times.
• 22:39
  But moving on, moving this back to Bitcoin, like we're saying, relative strength.
• 22:42
  And there is a narrative forming in the Strait of Hormuz about tolls being paid and who's controlling the streets.
• 22:49
  Obviously, Trump over the weekend said we're going to put in a blockade.
• 22:53
  But before that, last week, one of the big narratives was that when the ceasefire was on and you had the list of concessions that each side was making for a period of time of a few days last week, one of the concessions was, OK, the IRGC will have control of the streets and will be able to charge a toll for ships making their way through the streets.
• 23:12
  And one of the narratives that formed was the Financial Times reporting that the IRGC is only accepting Bitcoin for payment in the straight of her moves.
• 23:23
  And many Bitcoiners picked this up.
• 23:25
  We talked about it in one of the Bitcoin briefs last week at TFTC.
• 23:29
  Matt and I covered it extensively on Rabbit Hole Recap last week.
• 23:32
  But I think whether or not it was true, I think this is a good way to sort of just talk about this.
• 23:38
  Because who knows, like we're saying, the headlines are switching every 12 hours at this point.
• 23:42
  And who knows what's actually happening.
• 23:44
  But let's just talk about the theoretical, the idea of Iran having control and then only accepting Bitcoin as payment and why that makes sense.
• 23:54
  Yeah, for sure.
• 23:55
  And yeah, all the caveats like that you guys have talked about, you know, apply.
• 23:58
  Like maybe he misspoke.
• 24:00
  Maybe he meant stable coins.
• 24:02
  Maybe he this guy was just making it up.
• 24:04
  Maybe he's not authorized to speak for it.
• 24:06
  Totally can buy the idea that this would be a really hacky kind of way, like the way they're describing how they would do it.
• 24:11
  Like, could you ever, would that ever sustain?
• 24:13
  Would they have any ability to actually enforce anything like this?
• 24:15
  Like all those questions are legitimate.
• 24:17
  Alex Thorne at Galaxy did a really good article last week about, that I recommend people read about this and answering kind of questions about its validity.
• 24:24
  So, you know, put that aside.
• 24:26
  But I think it was like, it's a very interesting and meaningful little kind of item in Bitcoin's history and growth is it's mainstreaming, right?
• 24:35
  like that this would be reported, taken seriously and legitimately considered by a lot of people
• 24:41
  last week, well outside kind of the Bitcoin echo chamber, I think speaks to a growing
• 24:46
  diffusion of awareness of understanding of Bitcoin properties And I think you guys at TFDC did a really good graphic that I put on the next slide about you know what Bitcoin can do as money And you know there a you of course
• 24:59
  got all the reply guys who, you know, wanted to score their, their Twitter likes, you know,
• 25:04
  when this, this headline hit about how Bitcoin's so slow or it's, it's bad for payments or, you
• 25:09
  know, how terrible it would be for the, for Iran to actually try to use it. And I just, I like this,
• 25:13
  this taxonomy that you guys put out of the different ways that Bitcoin either natively
• 25:18
  or with layer two solutions or, you know, layer three or kind of the application layer,
• 25:23
  however you want to think about it for these different use cases.
• 25:26
  Bitcoin can kind of slot into a bunch of different areas on the spectrum between, you know,
• 25:32
  the need for very fast, quick, cheap micropayments to something more like your coffee payments
• 25:38
  to something more on an enterprise level to finally like, you know, providing money for
• 25:42
  enemies, right?
• 25:43
  The classic meme that is becoming less and less of a meme.
• 25:46
  And more and more, I think, obviously acknowledged for what it is, which is, you know, Bitcoin as this neutral asset that is ideally suited for highly sensitive, large settlements between untrusted counterparties, which is to our point from the start of the show today, you know, exactly what we're looking at more and more, you know, whether regardless of what happens with Hormuz, like that seems to be the world that we're heading in.
• 26:08
  And, you know, I think this this week with that headline was a great little kind of test case or dry run for people to think through the properties that would make a story like that plausible, you know, in the first place.
• 26:20
  Yeah. And just to really dig into this is something that I've been saying for probably five or six years now.
• 26:26
  Back when I was working at Great American Mining, it's funny.
• 26:28
  I've got my Great American Mining coffee mug today.
• 26:30
  But for those who are unaware, I helped co-founded a off-grid Bitcoin mining company where we mitigated flare gas using Bitcoin mining in the Bakken company started in 2018, early to the game.
• 26:44
  But back then, like when it was close to that part of the mining industry, it became very obvious to me.
• 26:50
  Like, obviously, you have the function of mining using wasted trend and energy to monetize those assets.
• 26:56
  But then you think about Bitcoin as the monetary good and always like made sense to me.
• 27:00
  We'll know that Bitcoin has made it and it is a sort of well-recognized reserve asset global settlement network when international oil trades are being done in Bitcoin.
• 27:12
  And to your point, like thinking about the scale of that type of transaction, you're not going to want to do that through the Lightning Network or probably using any cashmint.
• 27:21
  You're going to want the assurances of protocol level Bitcoin, on-chain Bitcoin, and the properties that exist at that level.
• 27:28
  And I think the main properties are, number one, final settlement that is basically buried in energy in the form of blocks being produced on top of the block that includes your transaction.
• 27:39
  And then sort of the smart contract capabilities of Bitcoin, particularly multi-sig, where you can envision a future where you have international oil trade.
• 27:49
  You have a buyer who says, OK, I want to buy oil from you.
• 27:53
  and the seller says, okay, I will bring you the oil, but I need some sort of assurance that
• 27:57
  you're actually going to deliver the money at the end of the day. So the buyer puts Bitcoin up in a
• 28:01
  multi-sig escrow, or maybe they hold a key. The seller of the oil holds a key, and the impartial
• 28:07
  third party holds a key, and the oil gets delivered, and the receiver says, okay, I got the oil. You
• 28:13
  can disperse the funds to the seller. The straight-up her moose toll is not that exactly, but it is a
• 28:19
  step in that direction. It's not settling the oil trade. It's enabling it to happen in the first
• 28:24
  place in this war time, in this war footing that we're seeing right now. And I think to your point,
• 28:30
  it is a validation of something that Bitcoiners, myself, yourself, have been talking about for
• 28:35
  many years now. And throughout all the noise, I think that's one signal, the fact that it's even
• 28:39
  being considered or talked about, who knows if it's actually being considered, but the fact that
• 28:43
  It's being talked about and recognized as a mechanism to facilitate this particular toll use case between enemies is a validation of why Bitcoin exists.
• 28:54
  And on that note, I know we're running long here.
• 28:56
  This will probably be a longer episode.
• 28:58
  I think juxtaposing why Bitcoin is perfectly suited for this and something like stable coins is not dovetailing into the piece that you published over the weekend.
• 29:09
  Yeah, for sure.
• 29:10
  You heard a lot about when this headline hit.
• 29:13
  There was this debate, like I was referring to, between whether it was, what did he mean?
• 29:17
  Did he mean stable coins?
• 29:18
  Did he actually mean to include Bitcoin?
• 29:20
  And I think that whether he did or he didn't, I think it brings up an interesting differentiation,
• 29:25
  an important differentiation, which is if Iran truly wanted to take some form of digital
• 29:31
  currency for this hypothetical toll booth that I think we all agree probably isn't going
• 29:35
  to exist at scale.
• 29:36
  If any country wanted to do that in an untrusted environment, particularly if they were an
• 29:39
  adversary of the U.S., they really wouldn't want to do it with stablecoins, which are basically
• 29:44
  wrappers for the U.S. bank system. And I wrote a piece digging into that at great length. You can
• 29:50
  find it at 1031timestamp.com slash stablecoins. Most of it is definitively not about Iran or the
• 29:56
  situation, but just kind of going over a taxonomy of where we sit with stablecoins and some of the
• 30:00
  consensus narratives that have emerged around them. I think the piece and we at 1031 are
• 30:06
  directionally aligned with the idea that there will be a future for and probably a thriving future
• 30:10
  for some form of a digital dollar. But I think there's been a belief that that's going to mean
• 30:16
  significant benefits for public blockchains on which these stablecoins currently ride.
• 30:21
  And I think the essence of the piece, you can kind of see roughly distilled in this very
• 30:25
  complicated table that we don't have to get into. But basically, the thesis is blockchains are not
• 30:30
  really purpose-built for facilitating high volume, especially sensitive dollar-denominated
• 30:35
  commerce or fiat denominated commerce. Um, if you, the things that people want out of stable coin
• 30:39
  payments are, you know, better suited for just being run on a database, you know, centralized,
• 30:45
  very fast, highly optimized database, which because blockchains don't scale natively,
• 30:49
  you're going to end up with some form of significant intermediation and, you know,
• 30:54
  trusted third parties kind of regardless of what you do. Like that's, that's where the incentive
• 30:57
  skew. That's where the, the, the technical details can ultimately skew and push you.
• 31:01
  And so in that case, you know, if you're just going to use a database for which for sensitive dollar denominated commerce, the future, I think, is going to look very different for what we think of as stable coins today.
• 31:11
  And, you know, the whatever benefit they might see is not going to flow through to public blockchains.
• 31:17
  And so there's a lot that we're not going to get into today, but recommend people go check that out as they think through, especially like what is the future of international exchange look like?
• 31:25
  You know, is the oil trade going to run on USD denominated stable coins on Ethereum?
• 31:31
  as you think through questions like that.
• 31:33
  With everything we're seeing today,
• 31:35
  hopefully that piece is helpful
• 31:36
  and maybe answering why some of those instincts are misplaced.
• 31:40
  Yeah, everybody go read it.
• 31:42
  And on that note too, I don't know if you saw,
• 31:44
  but I think a headline hit the tape this morning
• 31:47
  that the Trump administration
• 31:48
  is floating a 1% remittance tax as well.
• 31:51
  And so that's like just another example of like,
• 31:53
  okay, if they do that remittance tax
• 31:55
  and people are choosing to do that via stable coins
• 31:57
  or the traditional banking system,
• 31:59
  the likelihood of them having to pay that tax
• 32:01
  is far higher than if they were to use something like Bitcoin, which can be sent and received
• 32:06
  relatively pseudo-anonymously.
• 32:07
  So if you want to route around that, Bitcoin is better suited than stable coins or the traditional
• 32:12
  banking system.
• 32:13
  Which, to be clear, we're not promoting or endorsing anyone trying to get around US laws
• 32:17
  and regulations, just identifying the likely laws.
• 32:19
  No, just describing the landscape that exists.
• 32:22
  Agreed.
• 32:23
  John, this was great.
• 32:24
  Almost 40 minutes, our longest one yet, but I think it was important to go as deep as we
• 32:29
  did today considering everything going on and really ending on your piece which again everybody
• 32:33
  should go read i think i said this over a year ago was my pinned tweet for the better part of the
• 32:39
  last year which is i think the noise of this cycle within bitcoin and broader cryptos stable coins
• 32:44
  real world assets this the signal is going to be bitcoin um its integration to the energy sector
• 32:50
  and its emergence in international commerce i said that i believe in july of 25 um and it seems to be
• 32:57
  playing out June of 25, I think. So here we are until next week. See you guys.