Uh, do you think that, you know, there's anything particularly interesting in the, uh, crypto equity space?

Well, I think the universe of crypto equities has expanded much more beyond what the limited scope of what historically we would've called crypto players, because the reality is the TradFi business and the crypto business is merging.

So when you hear traditional firms like Morgan Stanley or even Robinhood, that are not what you would've called typically, uh, crypto names, come into, uh, the lanes of what crypto represents, I think the universe is, is, is far bigger than people expect.

In other words, you know, crypto sometimes can pigeonhole itself into this sandbox of being this plaything on DeFi and on-chain finance, but if you really, like, reinterpret the other side of that coin, crypto is just a frontier of finance in many ways about unlocking new financial primitives that people can find capital efficiency, or solving asset liability mismatches, or bringing different kinds of retail distribution.

And so all of those constructs are just becoming more viable in the age of hyper-financialization.

If you look at prediction markets as a category, for example, most people don't really think about that as a crypto company in the sense that there isn't a natural, like, asset or role that crypto necessarily plays into what consumers want.

Uh, now, if you look under the hood, there could be for some companies, uh, but the reality is most people don't care.

[laughs]

Mm.

We have a lot of houses, but there aren't isn't enough.

So do we build 10,000 houses, or do we build high-rise dense apartment where it's more efficient in terms of energy, and also you can, you know, deploy much scalable? So it's almost like-You look at existing data centres, but you gotta apply a very different logic.

You mentioned about the energy.

You, uh, people are conscious about scalability, but they also want to make sure they're using the inf- uh, reusing the legacy infrastructure as well.

So not building whole thing new, but utilizing the, uh, utilizing what we have already invested in the five, 10 years is also a critical area that people need to consider.

I'm really interested.

Yeah, so the concept of storing information on a dis- a moving disc, uh, was started 50, 60 years ago.

where we

were.

I think for many businesses, they were able to afford to have this kind of data centers on-premises and manage their own with IT managers.

Now, as the business grows, as the demand grows, they're looking at ways to optimize and provide scalable options with the data centers.

So I almost look at data center demand as... our housing problem in Australia.

We have a lot of houses, but there isn't enough.

So do we build 10,000 houses or do we build high rise dense apartment where it's more efficient in terms of energy and also you can deploy much scalable.

And that's the sort of gist of what you're saying.

And so just, uh, le- can, can we just state the obvious thing of, like, how that impacts financial markets if we have a top-heavy population that has to consume its capital?

Yeah, absolutely.

So at a very high level, all human beings throughout their lifespan are on a mission to acquire assets through their productivity gains that hopefully in their retirement, that they return to the system to consume what would, uh, ultimately lead to their meeting of Father Time.

And so some of macro asset price action is entirely reflected by demographics.

If there are more people that need to buy more things, that they're producing more things, that in itself is a demographics flow.

And the same flows can reverse in a different direction once that consumption period has to be met, and there isn't enough people on the other side to potentially reabsorb the productivity gains that need to happen to offset some of that liquidity needs.

And I think the point here to mention that is sometimes underappreciated is that we live in a very fortunate world where great miraculous things are happening at the scientific frontier.

Uh, why are you certain about this being an, an inevitable problem that we can't really deal with?

And sticking on the demographic time bomb that we have, we could find ourselves in a situation where a lot of these boomers are going to retire, and, uh, some of these private credit funds took some of their retire-retirement annuities and pushed them into some, some risky private credit deals that, that could potentially be blowing up right now.

Yeah.

Yeah.

It's a big shame.

The big shame here is ultimately an agency issue, which is that the administrators of these investment programs are not necessarily the principal, uh, risk takers of their own, um, value creation.

So, you know, as I've had now a long career in finance and in asset management, the big difference between institutional investors and you and me and family offices is that you and me and family offices invest for principal risk.

It's our money.

Uh, Goldman's estimating that three hundred million jobs are exposed to automation, um, and data and intent are becoming the new capital, and we are transitioning into, uh, this era where the cost of labor is, is being compressed towards zero, and we need to figure out how to allocate money, uh, as that happens.

Um, is that because muted volatility to the upside also means muted volatility to the downside? Or how are you thinking about, you know, was that a true bottom to a bear market, uh, when we kind of puked down to, you know, fifty-eight, sixty K, or could there still be some downside risk? And, and kind of talk through, you know, your current thought process.

Yeah.

Most dislocations in all financial markets, and this is not exclusive to just Bitcoin, it exclusive to almost all asset classes, is that those types of dislocations tend to happen when there's a gap in liquidity and an asset liability mismatching issue.

That's usually the case for what has happened bit- to Bitcoin historically when things like FTX imploded or Luna imploded, or it also in the traditional markets when we had the global financial crisis with RMBS and ABS and mortgage-backed securities, but also maybe now with private credit and all the ways that in itself is a liquidity transformation mismatch.

So I think that's the key.

When there's a drawdown, there's two kinds of drawdown.

There's one that is driven by sentiment in which people are rotating capital for cost and opportunities, but then there's the other version, which is a forced liquidation.

Um, as we see these cracks in private credit, does that have any spillover into Bitcoin?

What do you think Warsh's impact or having Warsh as the Fed chair next, is that good or bad for Bitcoin or agnostic?

Yeah, so for sure what Warsh has shown is Bitcoin's correlation to risk assets in general are at an all-time high.

Because I think what happened with the Warsh announcement wasn't necessarily a Bitcoin sell-off, but it was actually a risk sell-off.

And that correlation has increased pretty dramatically, I would say, since last summer and got accentuated even with the news flow today.

So I think there's two versions of the story, right? Because on one hand, There is this hawkish version of balance reduction as a journey that we have not ventured into beyond what the sample reserve system could look like.

And there's a lot of uncertainty about this, which is why I think you can see risk assets generally being sold off.

And Bitcoin just is now correlated to that dynamic because it's owned by the same portfolio managers in a multi-asset framework where they're underwriting that to be a risk asset.

Jeff, maybe we'll start with you in terms of your thoughts on the rise of digital credit and where there's opportunity versus where maybe people should be careful.

Jeff, is there a Rubicon that if once we cross it, we can't come back?

Oh, absolutely.

We talk about this in the reality check that you can definitely have either a vicious cycle or a virtuous cycle that can quickly feel like it's inescapable for municipal decision makers.

where you're making the city either a less attractive or a more attractive place to live based on the affordability.

And so sometimes these decisions, you know, the councilors aren't entirely wrong when they say that their decisions feel locked in, but it's often by decisions of previous councils.

And there is a way off the spiral in either direction.

We've seen fortunately and unfortunately, that cities can bring their spending back into, because again, most cities, their actual mill rate increases increase by a formula based on what they spend.

Is that what you think could happen?