Video source: Unchained
Compiled by: Peyton (7UPDAO Analyst)
host:
James Seyffart, Research Analyst, Bloomberg Intelligence
Alex Kruger, Founder of Asgard
Joe McCann, Founder, CEO and Chief Investment Officer, Asymmetric
Guest: Nic Carter, General Partner, Castle Island Ventures
Since its launch in 2016, Unchained has become one of the most popular cryptocurrency podcasts. Every Tuesday, host Laura Shin, author of The Cryptopians, hosts an hour-long interview or discussion with major figures in the crypto space. Every Friday, Laura dives into the week's hottest news and summarizes the week's major headlines. Among them, the Bits + Bips show is hosted by James Seyffart, Alex Kruger, and Joe McCann.
In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger, and Joe McCann join Nic Carter to dive into Trump’s game-changing promises to the crypto community, Kamala Harris’ unexpected policy shift, and Solana’s explosive rise. Plus, Nic tackles pressing questions surrounding an Ethereum ETF and what ecosystem he’s been working to get more money for lately.
Nic Carter
Nick Carter is a general partner at Castle Island Ventures, focusing on investments in crypto-financial infrastructure and internet property rights. He is the co-host of the On The Brink podcast and writes a column for CoinDesk. Carter holds a bachelor's degree in philosophy from the University of St. Andrews and a master's degree in finance from the University of Edinburgh. He has previous experience working at Fidelity Investments and has written for a number of publications, including Harvard Business Review, Fortune, and Bitcoin Magazine. Carter has appeared on Bloomberg, CNBC, and BBC News, among others.
He is known for his advocacy of anti-authoritarian technology and freedom. Although not a Bitcoin supremacist, Carter supports principles such as Lockean property rights and monetary competition. He believes that the Bank Secrecy Act is unconstitutional and advocates for the restoration of private currency issuance and the establishment of a true digital cash standard. He is also involved in the Bitcoin Clean Energy Initiative and serves as an advisor to several crypto-sphere organizations. In addition, Carter is a 1-0 amateur MMA fighter and has personal investments in multiple technology and crypto companies.
Nic's reaction to Trump mentioning dismantling "Chokepoint 2.0"
Nic: expressed surprise that his blog post had become part of the political discourse, saying, "It's amazing, it's shocking that my blog post has become part of the political discourse in this country."
He described Chokepoint 2.0 as a strategy similar to Chokepoint 1.0, which “was an official program under the Obama administration to marginalize certain businesses they didn’t like, using unconstitutional means.” He explained that Chokepoint 2.0 was restored after the FTX debacle, and federal regulators began targeting the cryptocurrency industry, making it “extremely difficult and expensive to get banking services,” which Trump mentioned was “hugely significant” for the entire industry.
Joe asked Nic to explain Chokepoint 2.0 for the audience, mentioning that the term has been discussed before and emphasizing the impact of the Biden administration’s attitude towards cryptocurrencies since May. He acknowledged the difficulty of obtaining banking services for digital asset companies and reflected on the importance of Chokepoint 2.0 becoming part of the political discourse.
Joe mentioned Nic's tweet, which included a topless photo, touching on key points including Chokepoint 2.0. Joe asked Nic to discuss the spirit of the tweet and the points he made, suggesting digging into the details of the karate match mentioned in the tweet.
Bitcoin Strategic Reserve Act
Nic: believes that Trump's proposal to retain the seized Bitcoin is more politically pragmatic because it avoids the controversy of buying Bitcoin in the market and possible attacks from the Democratic Party. He pointed out that the seized Bitcoin mainly came from the Bitfinex hacking incident and technically did not belong to the US government, which complicated the situation.
Nic expressed doubts that the Lummis Act would pass, calling it more of a statement to appeal to the Bitcoin community than a serious legislative effort. He appreciated Trump’s idea of holding seized Bitcoins, but stressed the need to address the issue of legal ownership.
Nic also compared Lummis’ proposal (which aims to buy 5% of Bitcoin) to the fact that the United States owns about 3.4% of above-ground gold reserves, noting that Lummis’ proposal is more radical. He concluded that the bill is unlikely to succeed, especially with the upcoming presidential election, and viewed the proposal as a narrative-driven effort with significant implications for global Bitcoin policy but uncertain outcomes.
The Importance of Trump’s Bitcoin Conference Promise
Alex: pointed out that although the Lummis Act has a slim chance of passing, its significance lies in sparking discussion and media attention. He mentioned Trump's statements at the meeting, such as "Bitcoin is the new steel industry", "Bitcoin will surpass gold", and "Bitcoin users are highly intelligent people". Trump also promised to fire Gary Gensler on the first day, abolish Choke Point 2.0, oppose central bank digital currencies (CBDCs), support self-custody and freedom of exchange, transform the United States into a Bitcoin mining powerhouse, and never sell Bitcoin. Alex emphasized that these statements reflect the transformation of cryptocurrencies from being seen as a threat to being accepted at present.
Joe: I think the key takeaway is the discussion and media attention that Trump’s promises have generated. He acknowledges that while many of Trump’s statements may be politically motivated and unlikely to be fully realized, it is important that they are included in the discussion. This has led to mainstream media coverage of the topic and has attracted the attention of international leaders.
Nic: Pointed out that Trump made very specific promises, such as firing Gary Gensler, repealing Choke Point 2.0, establishing a cryptocurrency advisory committee, and passing legislation within 100 days. He mentioned that these promises would be difficult to retract, and while some argue that Trump technically cannot fire Gensler, there may be ways around it. Nic also mentioned that Trump supports stablecoins, which expands the scope of the Republican platform and reflects the growing trend in the crypto space.
James: I observed that the audience reacted most strongly to Trump's promise to fire Gary Gensler. While Trump technically cannot fire Gensler immediately, Gensler's position may change after the new president takes office. Even if Trump cannot fire Gensler directly, he can make Gensler's tenure challenging.
Alex: added that Trump can fire the SEC chairman, but cannot remove him from the SEC entirely, meaning Gensler will still have a vote. He further noted that Nic has made important contributions to the stablecoin discussion. Alex stressed that if Circle is allowed to issue interest-bearing stablecoins, this will strengthen its dollar reserves. He contrasted this with the use of Tether, which is used by international users to avoid currency devaluation.
Tether’s similarities to the Eurodollar system
Joe: Asked Nic if he could expand a little bit on how Tether compares to the Eurodollar and mentioned that this might be useful for the audience.
Nic: Noted that he was not sure Trump fully understood the concept, though Vance might. He mentioned Vance’s view that dollar hegemony could be bad for middle America, in contrast to the view of extending the dollar’s influence through stablecoins. Nic explained that the Eurodollar emerged due to the limitations of the U.S. banking system and the need to circumvent those limitations. Similarly, stablecoins such as Tether were created to provide a way to transact in dollars outside of the traditional banking system. Stablecoins were originally used for settlement and collateral, but have evolved into a global digital dollar access tool for those who do not have access to dollar banking. This is similar to the role of the Eurodollar.
Alex: Adding that Eurodollar deposits currently total around $13 trillion, underscoring the massive size of the market.
James: mentioned that when he and Nic first started covering cryptocurrencies, they called stablecoins “cryptodollars,” noting that 98% of stablecoins are denominated in U.S. dollars. He observed that despite this dominance, the term “cryptodollar” has not gained widespread acceptance.
Potential impact of Fed meeting language
Joe: Mentioned that since there is a Fed meeting this week, it is worth discussing the macroeconomic impact. He acknowledged Alex's expectations for the meeting and noted that there is no rate cut expected this week, but he still sticks with his forecast of a 50 basis point rate cut in September, rather than the 25 basis point cut Alex expected.
Joe stressed the importance of the Fed's language in press conferences, especially regarding weak economic data, rising unemployment and negative CPI data. He also mentioned that the Fed could make a policy mistake if it waits too long or cuts too little, and mentioned that language could suggest a "long-term rate cut" scenario, similar to what the ECB did in June.
Additionally, Joe noted that the Bank of Japan’s decision following the FOMC meeting could affect the USD/JPY exchange rate.
Alex: Thinks Wednesday's Fed meeting will be a dull event with no rate cuts and the focus will be on the language Powell uses. He expects Powell to prepare for a possible September rate cut and the language will be designed to reduce volatility and maintain predictability.
Alex stressed the importance of good inflation data and high-frequency economic data, such as the Dallas Economic Index, which show that some parts of the economy are doing well. He worried that if there was only one rate cut this year, it might be seen as a policy mistake and suggested that more rate cuts were needed.
Regarding the Bank of Japan, Alex expects a 25bp rate hike and possible tapering of QE, which could affect the USD/JPY exchange rate. He noted that the recent volatility in USD-JPY is important due to its impact on carry trades and risk-off. Alex concluded that the Trump-Kamala election results will have a greater impact on Bitcoin than the Fed’s actions.
Alex: Expressed concern that if the Fed cuts interest rates twice in September, this might be interpreted as the Fed's concern about a hard landing, thereby sending a pessimistic signal rather than an optimistic signal.
James: This means that the market currently expects about a 10% chance of more than one rate cut, but he personally only expects a 25 basis point cut. He thinks there could be three rate cuts by the end of the year, although he doubts there will be two rate cuts in September.
The potential impact of the Harris campaign’s outreach to crypto companies
James: discussed the Harris campaign's latest move to reset its relationship with the crypto industry at a Bitcoin conference. He believes a less partisan, preferably bipartisan approach would be more ideal. He noted that while some in the crypto community were unhappy with the move, about 15 Democrats signed a letter calling for a reassessment of crypto policy that could be more favorable than the Biden administration's policies. James believes that even if the Democrats win, the impact on the industry could be neutral or potentially positive compared to the current administration.
Nic: Comparing the move to Hillary Clinton's "reset" with Russia in 2012, he believes Kamala Harris's outreach may not lead to real support for cryptocurrencies. He noted that progressives, including Harris, generally do not support cryptocurrencies because they are contrary to their preference for state control of financial activities. Nic doubts whether the left will truly accept cryptocurrencies, and believes that this outreach is just an attempt to regain the ground lost by Trump in the cryptocurrency field, rather than a true endorsement of the industry. He acknowledges that there are some progressive crypto supporters, but they do not represent a broad progressive position.
Joe: Agrees with Nic that the Harris campaign’s outreach is more of a political ploy than a serious attempt to engage with the crypto industry. He noted that the Biden administration’s reversals on crypto-related issues appear politically motivated. Joe is skeptical of the Harris campaign’s intentions to establish a comprehensive crypto regulatory framework, believing it may be more about scoring political points than implementing substantive changes.
James: Emphasized that younger Republican senators are generally more supportive of cryptocurrencies and may gain more influence over time. He also mentioned issues related to regulatory opacity and Bitcoin mining practices, which may still be controversial despite possible regulatory progress in other areas.
Nic: Commenting on Trump’s speech on AI and energy-intensive industries, he suggested that Trump’s platform’s focus on revitalizing America’s heartland is consistent with supporting energy-intensive industries such as Bitcoin mining and AI data centers. Nic believes that Trump’s views are coherent, even though they are not accepted by everyone.
Solana’s Recent Performance
James: Recalling his experience at the Bitcoin conference, mentioned Jan van Eck (VanEck CEO)'s significant personal investment in Bitcoin, and discussed the performance of the Ethereum ETF. He mentioned that the Ethereum ETF experienced net outflows, while the Bitcoin ETF experienced significant outflows in the early days but eventually achieved net inflows. James predicted that the Ethereum ETF would not achieve the level of success of the Bitcoin ETF, in part due to the low acceptance of Ethereum on Wall Street.
Nic: believes that Ethereum has a narrative problem and is not as established as Bitcoin on Wall Street. He attributes the poor performance of the Ethereum ETF to the fact that Ethereum's role is not as clear as Bitcoin's "digital gold" identity. Nic believes that new platforms like Solana are benefiting from the ongoing debate over Ethereum and are seen as more innovative and high-performance options.
Joe: commented on the Ethereum ETF and its challenges, noting that despite predictions, ETH-E has seen severe outflows compared to other ETFs due to its high fee structure.
He contrasted this with Solana’s recent performance, noting that Solana’s metrics, including transaction volume, have surpassed Ethereum, despite Solana’s lower market value.
Joe believes that it is reasonable to compare Solana directly to Ethereum as a first-layer blockchain because Solana does not outsource its execution to a second-layer blockchain like Ethereum does.
He also recalled Kyle Samani’s (Managing Partner at Multicoin Capital) prediction that Solana will surpass Ethereum in key metrics, which affects the relative value trade between the two.
Regarding the Solana ETF, Joe admitted that while it is uncertain whether it will be launched soon, indicators show that Solana is a strong candidate. He also discussed his bet with Steven Mcclurg (from CoinShares Valkyrie Fund) on Ethereum ETF flows, noting that the current flows are negative and he is at a disadvantage in the bet.
James: shared insights from the discussion on the possibility of a Solana ETF, noting that while VanEck believes this could happen within a year, BlackRock is currently focused on Bitcoin and Ethereum, with no immediate plans to launch a Solana ETF. He mentioned that the final deadline for ETF applications is the end of March, and while it is uncertain how potential policy changes under Trump will affect the timeline, Solana appears to be a strong candidate for future ETF consideration.
Alex: Joe, could you please respond to the criticism of Firedancer developed by Jump and whether you think this could be a way for Jump to extract value from retail investors.
Joe: responded by saying that this criticism is a classic Crypto Twitter problem. He emphasized his friendship with the Jump team but clarified that he is not an investor. Joe appreciated Jump's involvement in advanced global state synchronization technology and believed that these innovations are beneficial to retail investors. He acknowledged that Jump is a for-profit business and may use hardware customized for Firedancer to gain a competitive advantage, but insisted that this does not mean that retail investors will be harmed. Joe pointed out that Firedancer is an open source client that allows anyone to fork and modify it, and pointed out that if Jump tried to take advantage of retail investors, they would probably do it in a closed source manner.
Comparison between ETH and SOL
Nic: As a venture capitalist, Nic noted that his firm is currently more active on Solana than Ethereum. They do not impose a preference for a specific chain on entrepreneurs, but allow them to choose based on the needs of the project. However, Nic has observed that more founders are currently approaching them with projects on Solana. They generally maintain a hands-off attitude towards ecosystem concerns.
Alex: shared his thoughts on the Solana vs Ethereum debate, expressing a preference for a combination of Bitcoin and Solana, believing it will outperform Ethereum. He admitted that while the ETF’s volume was as expected, the rapid outflow was unexpected. He emphasized that the ETF could bring positive inflows in the medium to long term.
Alex also mentioned that incorporating the second layer into Ethereum’s metrics makes the comparison more complicated, and suggested that the valuation and market capitalization of the second layer should also be considered. He used an analogy to illustrate that Bitcoin is digital gold, Ethereum is AWS (Amazon Web Services), and Solana is the App Store, which he thinks is a good analogy.
James: Added that Robert Mitchnick (Head of Digital Assets at BlackRock) sees Ethereum and Solana as complementary to Bitcoin, rather than in direct competition. He agreed with that view, noting that Bitcoin serves as a store of value, while Ethereum and Solana compete for a different, potentially larger, share of the market.
