The One Catalyst That Could Send Crypto Soaring Is Happening Now w/ Alex Thorn

Added: 2026-05-13

[00:00:00]Morgan Stanley may be the best example just of recent of many recent ones, but the fact that not only are they recommending a 2 to 4% Bitcoin allocation for their clients, they're also launching their own Bitcoin ETF, and I don't know if people realize this, I think Morgan Stanley directly only manages like 20 to 30 ETFs total.

[00:00:16]Obviously, they think this is bullish. A draft of the Clarity Act has dropped and is scheduled to be marked up in the Senate this week. It seems like this might actually happen, but did the banks win? What's in the bill? And what do investors need to know about this? Hello and welcome to the Milk Road Show, the podcast that knows that the real Clarity Act is hodling your Bitcoin, even when Michael Sailor sells his. I'm your host, John Gill, and today is Tuesday, May 12th, and today we are joined by Alex Thorne. Alex is the managing director and head of firmwide research at Galaxy Digital, where he leads a team of researchers analyzing and reporting on the digital asset and blockchain industry. Alex is going to give us a ton of alpha and insight on the Clarity Act today as much as anyone can. He's been following this very closely. He's really informed about all these things. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it.

[00:01:01]Today's episode is brought to you by Cape, the privacy first mobile carrier, Feros, the layer 1 built for Real Fi, and Nexo, earn interest, borrow, and trade crypto. Without further ado, welcome to the Milk Road Show, Alex Thorne. How are you?

[00:01:13]>> Hey, John. I'm well, thanks for having me.

[00:01:16]>> I'm really excited to talk to you today.

[00:01:17]As I said at the beginning, Alex, uh you have been personally closer to the process than I think anyone I've interviewed uh on this podcast about the Clarity Act. Can you just give me your perspective as to where things stand today on this bill and how we got to here?

[00:01:30]>> Yeah, I many people have been working on this inside the government and on the Capitol Hill in in the industry for a long time now. It's very important bill.

[00:01:38]Um but I would say where we are um the House passed clarity last July with all Republicans voting for it and 78 Democrats uh joining them, almost half the caucus. Uh so very bipartisan passage last summer. Then uh in August, Senate Banking and Senate Agriculture started working on their versions. In uh the fall, Senate Banking released its own uh draft. And then uh ultimately did hold a markup uh in January. Senate, sorry, Senate Agriculture did. And then in early January, Senate Banking released a draft and people will recall probably if they've been following this, was going to hold a markup in sort of the third week of January, which got derailed and indefinitely delayed at the time. uh be primarily because Coinbase publicly pulled their support uh over disagreements over the treatment of stable coin yield in the bill. Um, and then for the last four months, uh, the industry and the crypto industry and the banking industry, uh, Capitol Hill and the White House, the Republicans and Democrats have been all negotiating, uh, to try again, uh, with new text, not just on stable coin yield or rewards as it's called, um, but also on other issues. And just uh as we record this on Tuesday, May 12th, just last night, actually after midnight, so early this morning at like 12:30 a.m., the Senate Banking Committee finally released their updated amendment in the nature of a substitute ANS, which is just a new draft of the bill. Um, and there's some changes between this version and January's. So now it's it's this week uh in two days on May 14th, Thursday, Senate Banking is scheduled to try again uh to mark up the bill, which is the process of moving the bill from the jurisdictional committee, in this case the Senate Banking Committee uh onto the floor of the Senate. So I think this is a crucial crucial vote. Um it is possible that um the outcome of the the vote is not completely consequential.

[00:03:38]the outcome of the hearing, sorry, the markup, which is not even a hearing, the markup vote, the committee vote, is not consequential for the ultimate prospects of the bill, but it's also quite likely that it is. If you're not seeing this, you're trading blind right now. There are real moves happening behind the scenes that most people don't see until it's way too late. Inside Milkro Pro, you can track exactly what our analysts are buying, selling, and what's on their watch list before it moves. You can try it out for just a dollar for 7 days. The link is in the description.

[00:04:05]>> Gotcha. Okay. So, I really appreciate you kind of framing how we got here. As you said, a lot of different participants both in and out of government have been part of drafting this legislation. And as you noted last night, I haven't had a chance to read it yet, but somehow Elizabeth Warren did. A new draft of the bill has dropped. Any initial reaction to you from this current language that we see in the bill and just what stands out to you from the draft that that just came out? Yeah, we just released a report which I worked all morning on summarizing the differences between this uh version and the January version and also talking about some of the key stakeholders on the Senate Bank Committee and what they want and what their equities are and what the likelihoods are. Um I would say it's a very very good bill. It was a good bill in January. It's still a good bill. Um in some cases it's a better bill. Um both just from a technical standpoint, but also it's quite favorable in in many ways to both crypto and things like investor protection broadly. a lot of the stuff that was directionally uh supportive of investor protections and innovations in the January draft has been improved, right?

[00:05:03]So, not just that it's better for crypto, but it's just better legislation. Um, some key items obviously the stable coin rewards question, right? The debate had been uh whether or not a stable coin issuer or a third party could pass through the interest that the issuer earns on on the underlying treasury collateral that collateralizes stable coin. Could they pass that interest on to holders of the stable coin, effectively creating a yieldbearing payment instrument? The Genius Act, which was signed into law by President Trump last July, July 25, expressly prohibits the stable coin issuer from doing that, but it doesn't quite prohibit a third party from doing it like a crypto exchange. Um, that's where a lot of that debate has been. Um the uh Senator Tom Tillis from North Carolina and Senator an Angela Ulsbrooks from Maryland uh famously if you follow this space uh hammered out a compromise over these four months which uh restricts the payment of such yield by those third parties like a crypto exchange uh to only those activities that are activity based or those instances which are activity based. they may not pay that yield on the stable coin um it is solely in connection uh with holding with holding the crypto. So they can't just pay passive yield to stable coin depositors. That was something banks are very upset about.

[00:06:25]They thought it looked too much like a yield bearing bank account that could threaten a banking system. So that compromise that they released two weeks ago that's in the bill. Um that seems like a pretty reasonable compromise I think to everyone except for the American Bankers Association uh which is still quite mad even after having negotiated for months and you know according to Patrick Wit uh in the White House uh is skipping some of the meetings that he hosted to help negotiate such a compromise. Um other important things protections for non-custodial developers are in this bill. The blockchain regulatory certainty act is in the bill uh almost completely intact in fact in completely intact with only a tiny narrow carveout for uh developers who have specific intent and knowledge uh of crime. So they mean to facilitate crime and they know it's occurring. Um which I think frankly we can all believe is crime. I mean if you knowingly help someone commit a crime that's a crime. That's not what the BRCA is meant to exempt, right? Like where no one's trying to say criminals shouldn't uh be tried for crime. It's the instance of like say a Bitcoin core developer or the Bitcoin core developers release open source software. It may be used by criminals.

[00:07:34]In fact, it almost certainly is. It's also used by millions of other people who aren't criminals. They don't have specific intent or knowledge of any criminal use of it. Right? It's not their fault if DPRK uses runs Bitcoin core and uses Bitcoin, right? So, it should protect they should be protected from liability. uh in the case that the government uh is mad about a criminal use of the non-custodial software, it also extends to things like uh you know certain protocols, layer 1 blockchains, certain applications on blockchains, right? Um key key uh piece of the legislation is the BRCA. As of now, it's intact. This is a this is one of the trickier issues. I mean there are uh senators and and also uh equities like law enforcement, states attorneys general who want it weakened. Um it hasn't been weakened and I I don't think it will be. So that's that's a huge positive. Other interesting stuff in there as well uh that matters. Um clarification of the where the line is between DeFi and centralized exchanges.

[00:08:35]Um some movement there, but again mostly like thoughtful, not so so I think the bill's really good. Um the big question is how many Democrats in the Senate Banking Committee are going to vote to send it to the floor. I think if it's none and now it of course can advance.

[00:08:51]The Republicans have a majority on that committee. So it can advance to the floor with a purely partisan vote. I think the view is that if it does in just a partisan vote, then the ultimate odds of passage are severely diminished.

[00:09:03]So, we're hoping that some of the Democrat champions of innovation and and open-source software and blockchain will vote yes on Thursday. Uh, Mark Warner, Angela Alsbrooks, Ruben Ggo perhaps. Um, and so, uh, that's that's that's what everyone's working on right now is, you know, seeing if those Democrats will join here. And if they do, I think that this is when I say it may or may not be consequential. I think if there's about five, I think, who could vote for it, Democrats. If they do, if all five vote for this, I think the odds are very high that it will ultimately pass. If none vote for it, the odds are pretty low that it'll ultimately pass. It's very possible we'll get somewhere in the middle where two or three vote for it, and that's what that's when it may not be consequential, but um still that would be a pretty good sign. I think it still would pass, but I think most people uh think that it really does need to be bipartisan on Thursday uh in order for the chances to be very high. It wouldn't be dead if it if it's purely partisan, of course. It would literally not be dead. It would still have progressed to the floor, I think. But as a directional indicator, that's what everyone's working on and thinking about. Alex, this has been really helpful already. I want to take some of these things you laid out here, uh, just like one at a time. Um, starting with the the biggest sticking point which you talked about was this compromise on stable coin yield. As you pointed out, the American Bankers Association, among others, uh, are still not happy with this compromise, which, you know, Coinbase and the crypto industry seems to be very happy with. Um, do you think that this, like, you know, continuing objection from the bankers association might derail this, uh, at some point this week, or do you think that, you know, despite their objections, this is still going to go through and move forward here?

[00:10:38]>> I mean, it's very possible it could still derail it. I mean, there this is not a done deal at all. I think, you know, I'm I'm saying maybe 55% chance that this becomes law this year, which some that I work with, both the Galaxy and in the industry, think I'm being very I'm very low, but I'm like, this is a very complicated bill. You know, 55% chance for an extremely complicated bill with this number of competing equities and stakeholders. I think those are pretty good odds. I mean, legislation's really hard. Um, I think that co, you know, Coinbase is probably not as happy as uh they may be saying, right? they are being meaningfully restricted here.

[00:11:16]Um I think rightly they recognize that this is still an incredibly important bill and that they're getting plenty on the rewards in the scheme of things, right? You know, you open a bank account at your local, you know, Bank of East dog patch and they'll maybe give you a toaster, right? Like you can't really prevent that. Um and so that would be like an activity- based reward, right?

[00:11:37]You did something. you didn't just park your money there and earn yield like and you know while I'm sure crypto exchanges or stable coin issuers might like to be able to do that I think most realize the stakes are a lot bigger than that um and because this bill you know you can imagine the crypto industry is probably good for the next two and a half years uh during this administration we're getting a lot of what we want and the innovation exemptions and stuff from market regulators like the SEC and CFTC um but these genius and clarity back to back. It's kind of like the 33 and 34 act which set the stage for US capital markets. Two and a half years is good, but two and a half decades would be better. And that's I think what you can get that type of long-term integration and clarity out of this legislation. And I think people realize that. Um I I think the banks could still derail it. I mean I frankly I think they're being disingenuous. I think they're playing a cynical game. I think that they are the evidence that they cite for this fear which they quote repeatedly deposit flight right they're worried I think the evidence is very thin um they're worried right what if you take them at their word what they're saying is that if stable coins are too good they're too good they're too good of a consumer product no one's going to want to use their product the bank and by the way their product it's so important to America that if people don't use our product the American economy will collapse that's basically their argument the reality is that you know we we just published last week what I think is the most comprehensive model on the impact of yield pass through on stable coins.

[00:13:07]So like a Genius Act compliant stable coins that paid yield. Um and and we found that the net inflows foreign inflows into the US banking system would vastly exceed any interbank domestic deposit migration. So 2:1 it would also increase credit availability in the US.

[00:13:24]I think we came out around 32 or 39 cents I can't remember the number per dollar of stable coin issued. So it will also create a massive new buyer of US Treasury debt. So it's great for I don't know the national debt which is pretty high right um and it is a major tool for US geopolitical and monetary uh maintenance and dominance. So this is a very good stable coins are phenomenal and I just don't trust uh I don't believe this this argument that they're making. I think that they're the underlying facts are incorrect and I think they know that. So I think they're being a little bit disingenuous.

[00:13:59]>> All right. There are a lot of other people who still have some outstanding objections to this bill. Um, obviously Elizabeth Warren echoed this this morning, but Senator Gillibrand, who has worked closely on on this legislation as well, also said at Consensus, I I think recently that without an ethics provision that basically prevents people in government from, you know, enriching themselves from crypto activities of some kind, uh, that a lot of Democrats may not support this bill. This seems directly targeted at Trump and therefore, you know, a very big sticking point for ultimately getting the bill signed. uh talk to me about this in terms of your analysis for the likelihood of this passing because like you said like a lot of Democrats you would hope need to come along to get this through or just walk me through that as a as a as a next hurdle here.

[00:14:40]>> Yeah. So the ethics issue as it's called ethics in in congressional uh parliament uh and as it relates to this bill. I so that that will likely not come up in the markup this week because it's not seen to it's it's would be under the jurisdiction of the ethics committee is my understanding in the Senate. So, it's not jurisdictionally appropriate for the Senate Banking Committee to add that text to the bill. Um, it will almost certainly someone will probably m make the amendment in this markup process, but it wouldn't it won't succeed there.

[00:15:10]Um, or or really probably have much debate on it in the because of the jurisdictional issue. It will absolutely come up on the floor of the Senate if and when the bill gets there. Um, I think it, you know, I I I understand the, you know, worry about this. I think it government officials um you know doing things in industry is uh you know can be a tricky thing and it and it can be a very bad thing sometimes. What I would say is that this bill has tons of things outside of an explicit prohibition on certain officials activities that would materially make the market more safe, less manipulatable uh and more durable. Right? So disclosure requirements, regulate regulatory oversight, compliance regimes, this bill is loaded with that stuff, right? So if you whether it's the Trumps or somebody else, if you have fears about uh you know manipulation or whatever else it is, like the bill is a material material step forward across the whole spectrum of that issue set. So to to actually kill that bill over the lack of some explicit prohibition, uh you know what would happen is well you'd have the status quo. So like to me this is also political. It's more political than real I think when it comes to like you know an intellectual argument about how these markets function and what the market structure of them is. Um that will be an issue. Um and and so luckily I think a lot of senators on both sides of the aisle while even if they have big uh equities or cares about this ethics issue, they also recognize that the bill is better than nothing. The way we build wealth is changing. Stocks, savings accounts, real estate, that playbook is getting rewritten in real time. Nexo is the platform built for what's next. It's an all-in-one digital wealth platform where you can earn interest on your crypto, borrow against it without selling, and trade a wide range of assets all in one place with 247 support and institutional grade security. Oh, and by the way, Nexo is back in the US with new US clients getting 30 days of Wealth Club premier access. That means elevated interest rates, lower borrowing costs, and crypto cash back on trades.

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[00:17:56]Plus, SIM swap protection that puts you in control of your number, so no one, not even Cape, can hijack it. Use code milkroad at milkroad.com/cape for 33% off your first 6 months. Some critics of this bill on the crypto side have actually pointed out that just a lot of the things you just outlined there, all the the the compliance requirements and all these structures and specifics that are are given in terms of regulatory um structure around the digital asset industry could be used as a weapon to bog down and to you know hinder the crypto industry if we get an anti-crypto army representatives coming back in. And you know it would be different from the Ginsler era where he was relying on the lack of a law or lack of you know all this ambiguity whereas now they would have like a weapon to be able to create bureaucracy to bog down the digital asset space. What do you think of those objections? Do you think that there are any any credit credence to that or do you think that's missing the the the point here?

[00:18:50]>> I mean America is a great country. This is of course the of course that's possible right? I mean the the OC and the FDIC and the Fed, they could use existing bank laws to go after banks right now. And in fact, they did during Operation Chokepoint 2.0. That wasn't the lack of rules, right? It was the utilization of their existing power. So, yes, that that theoretically is a risk, but you know what's a lot easier to do is say, "Hey, there's no law that says you can do this. So, you're breaking the law, right?" And that's what they did during the prior uh administration. I think that's not a good reason to oppose the bill. I think enshrining uh the right for example for a digital commodity broker to get a CFTC license and buy and sell spot crypto with their clients in federal statute. It's not that easy to get a regulator to just over uh do uh overrule federal statute especially since the looperbrite supreme court ruling which severely limits the regulators um you know straying from what's written in the statute. this statute uh these statutes uh that are amended or written here in clarity are very specific many of them there's not that much gray area and so I I think you know codifying these uh rules compliance requirements uh uh and innovation capabilities in federal law will provide a lot more safety to the innovative companies trying to build in the space than risk in the future >> Alex we've seen a lot of moves from this administration and from Wall Street to adopt and to integrate digital assets.

[00:20:18]How strong is the anti-crypto army still to this day? Is this more of like a a shrinking movement or do you think that there's still a real contingent in the government or in in industry that wants to try to push digital assets out of America?

[00:20:31]>> I think there uh it does exist. I think it's certainly been on its back foot the last year or two, but I I you know, part of the um energy around pushing a really harsh version of some ethics provision into the bill, which I don't know exactly where Senator Kirstston Gillibrand stands, but I do know she's been a big proponent of innovative and investor protecting uh rules for crypto.

[00:20:53]So, but but those who might want the worst uh the the harshest possible language so much so that it would kill the bill, they're they're very clearly part of the uh cryp anti-crypto army that still exists. I saw Senator Warren uh tweeted just shortly after that bill came out that it would turbocharge the Trump family corruption. And you know, if you're in the crypto, if you're in if the general of your army says that your enemy is going to be turbocharged, that sounds very scary. So, they're obviously trying to whip up, right, the anti-crypto sentiment. Uh Ben McKenzie's been back out on podcasts reiterating Gensler and Warren Talking Points.

[00:21:31]They're clearly active, right? Let alone the former Gensler officials at the Consumer Federation of America or at Better Markets, uh who I won't name, but you know, I I I have a weak spot. I love to read their stuff. Um they're active, right? So, it exists. Um, I think the big question that Democrats who are wondering about this issue should ask themselves, do they really think they're going to be driving people to the polls on on a negative issue like this, I personally don't, especially when you see how powerful uh the crypto voter coalition was in 2024. I think you're much more likely to see pro- crypto voters outweigh anti-crypto voters. So, if it's a purely political um consideration, I would think twice about it.

[00:22:12]Alex, let's say it's July 4th. The president gets the Clarity Act. He signs it into law. What happens next? Who are the big beneficiaries from this? What has this changed in terms of digital assets in America? Talk to me about a postclarity world and what that's like >> there. Well, there's a lot. I mean, this bill is very comprehensive, right? It has rules for big OTC firms, crypto exchanges, DeFi protocols, uh developer protections, right? Uh stable coin issuers. It it covers a huge gamut.

[00:22:40]commodity side, security side, tokenized securities are in here. Uh there there's so much, but I would say at the core, what you're really doing is normalizing and creating similar regulatory frameworks as those that govern the current US capital markets. That's why I referenced the 1933 act uh and the 1934 act, which the first one is for primary issuance. The second one governs secondary trading of securities. The entire US capital markets are built on those two statutes and and others of course that later came but like that is the core and those that was almost 100 years ago right and and by the way that regulations those regulations that those statutes established are what propelled America's capital markets to become the deepest and most liquid and safest and fairest in the world. So I I think you know I don't think right after we're not going to immediately it's going to I mean that in defense has taken what 90 you know 92 years 93 years to get to where we are today from those bills but the these are similarly formative and foundational laws that will help uh blockchain technology crypto assets digital assets however you want to talk about it integrate directly into our capital markets which are the safest and deepest and most liquid in the world and that's going to have a lot of beneficiaries and disruption, positive disruption. Um, both on the traditional side and the crypto side. I think one of the things we we call it the great convergence. It's already happening. All the big banks and brokerages are working on a bunch of stuff, frankly, most of them ranging from pure custody to private blockchain tokenization, but also like ETFs of crypto assets like Bitcoin, right? And and other much more cryptonative things in DeFi. They're all already building that stuff. So, the great convergence is happening. These bills would codify it. And I think the exciting question for what happens in a postclarity world over the next, you know, 1 to 5 years after it becomes law is where does that line between decentralization and centralization end up, right? Because both sides are tugging at the other. I'm of a believer that not only should it uh be pulled more towards decentralization, I think it will.

[00:24:45]>> Alex, this is a great segue because this is the next thing I wanted to ask you about here. U for those who don't know, Alex hosts a podcast called Galaxy Brains. Um, and you did a recent episode, I believe, on this exact topic of the great convergence of crypto and tradi. And you know, you spoke a little bit about this, but I I'm curious your thoughts about who is winning that right now. I is crypto pulling Wall Street towards decentralization or is Wall Street co-opting crypto to just extend and expand their control and their power?

[00:25:12]>> That's why it's it really is one of my favorite questions here and and like and qu I don't know the answer, right? In fact, we're all actively playing in this game to find out, right? So I think broadly it's pretty clear that crypto would prefer Tradfi look a little you know be pulled closer to it or said another way that crypto would be able to integrate some of TRDFI into its architecture infrastructure ethos ideology whatever and that of course the banks and the brokerage firms would prefer that well they want to offer these products but they certainly don't want someone else to offer them other than them right so that that is a tension I think there they are overlapping already obviously the Bitcoin ETFs are the first huge successful big example of that. I think both crypto obviously Bitcoin I think benefited certainly in terms of market cap and ownership. Um, but I think you know crypto firms also benefited. Most of those ETFs are also serviced by crypto firms, right? They're custodi or wherever. They're traded by Galaxy and and and who who knows what created and redeemed by, you know, sort of hybrid tradi crypto traders, right? So there there's plenty of of winners from even just that one example. Um, I think, you know, one of the things we're seeing is that the crypto industry there's sort of like let me put it this way. I I have this view that in a way crypto, it's not a monolithic thing, but I'll pretend it is. The crypto ecosystem community kind of gave Bitcoin to Tradfi in exchange for higher prices in the form of the ETF. I mean, we didn't give it really, but we I mean, the Gemini twins were the first to ever file for a Bitcoin ETF.

[00:26:46]So, it's not like it was taken from us, right? Crypto firms wanted and cryp and Bitcoiners wanted the ETFs to be approved. Um, but I think it's kind of like, well, I mean, you've gotten this thing from us and it'd be nice if you gave something to us in reciprocity, like for example, tokenized stocks, which obviously so many people in crypto, including myself, are working on, but they don't want to give them to us, you know, they don't at all. They want to take from us and not give. But we're also having a lot of success, you know, creating new forms of finance and savings technology like Bitcoin, um, yield bearing, you know, instruments and things like stable coins and, by the way, tokenized stocks which already exist. They're in many cases, maybe not all and maybe not all yet, but in many cases, they're a materially better user experience or better back office, better settlement, better trading, better send and receive, better custody, right? So I think um a lot of crypto firms like Galaxy we are competing if we can't uh you know take it from them which in some cases I think pe crypto people are trying to right tokenized equity securities being an interesting one uh with a lot of back and forth in Washington as well between the two sides and by the way a specific section in clarity section 505. Um I think then I think the the next idea is well then they should buy it from us or build or we'll build it for them. So there is a gold rush happening now among the big crypto firms to not only perhaps compete with banks but also maybe build it for them right like and so again that that is the convergence. It's like, well, you know, if we can't take it from him, then we should at least be the ones that build it for him. And and not only build it for him, but also teach them about it, right? People used to ask me if I was worried that the Bitcoin ETFs would harm Bitcoin's ethos, right? Or, you know, the institutionalization of Bitcoin.

[00:28:37]Like, what happens? I mean, it concretely like what happens if a big asset manager proposes a hostile uh hard fork of Bitcoin, right? that doesn't follow or honor the true underlying features of Bitcoin that actually make it valuable. And that's a risk. That's always been a risk. But my I think the best answer is let's make them advocates. Let's bring them on the team.

[00:28:59]Don't ostracize them. Let's make sure that the Black Rocks and Fidelities, you know, Invesco's Morgan Stanley's that they have Bitcoiners there working on those products. Well, and luckily I can tell you they do. Alex, I'm uh really interested to see this convergence between Wall Street and crypto and how that plays out. Another thing that we've been focused on at Milk Road is the convergence of AI and crypto digital assets, which I know Galaxy is is very focused on as well. And it seems like you guys are kind of uniquely situated between these two industries as they start to come together here. And I just wanted to hear from your perspective as head of research, how do you see these two major emerging market players like digital assets and AI coming together?

[00:29:37]What is that looking like from your seat today? What do you think happens there?

[00:29:40]Well, there's such a fun backstory here.

[00:29:42]Like all of a sudden AI finally becomes real. I don't know two or three years ago, three years ago. I mean, consumer demand skyrockets for chat chat bots, right? And and um gener LLMs and the AI industry is looking around saying, gosh, you know, if only there was uh an industry that we could partner with or someone that's been developing stranded energy at low cost where we could build data centers. And of course, Bitcoin mining has been doing that famously for a decade um at scale. I mean truly um and that's how we got into AI because we were a big Bitcoin miner and we were now converting our main giant Bitcoin mining site into an AI data center business and it it has been well the conversion is going to take a long time for a lot of these these are massive infrastructure projects but we're already I think flowing 200 megawatts to Coreweave.

[00:30:27]We've uh we've got 800 megawatts contracted to them and we've got another 800 megawatts approved by Urkott. So 1.6 six gigawatts, which I don't know, I'm not the guy for analogies on energy, but like it's a lot. It's a massive I've been to it. It's just enormous. Um, and so that's how we got into it. I think if we go if we look forward what the overlap looks like, I've got both pragmatic and philosophical. I'll start with the philosophical. If you take AI, it's literally like digital abundance. I can say, you know, uh, Claude, like, you know, um, write me 50 versions of this article so I can pick the best one, right? Or whatever. early. You know what? I I read this article. Can you rewrite it in like, you know, 1980s slang, right? You just have it do anything. Go into image generator and say, make 10,000 versions of this and I'll pick one or or I'll use them all, right? I mean, the the only limit really is compute and energy. And there's a lot. I mean, at least now you're probably going to need a lot more, it seems like. So, in that world of digital abundance, though, and and that has some scary implications. decline of trust, inability to understand provenence, deep faking, uh obviously cyber security, right? You know, used to have to want to find vulnerabilities, you gota have 10 of the best hackers in the world. Well, now you can have one of the best hackers operating like a thousand sub agents, right? And and we've seen fears of that.

[00:31:47]We've we may it's not clear if we've actually seen it used effectively in the wild, but certainly people are worried about that for cyber security. All part of digital abundance. Um, and then you look at something like Bitcoin, it's by definition digital scarcity. And not just Bitcoin, other blockchains too.

[00:32:03]Although I think Bitcoin's digital scarcity uh fundamentals are the most pure and and powerful. But um so you can imagine like just from a philosophical standpoint, you know, things tend to rise as a dichotomy and you're going to have like what's a perfect, you know, counterbalance to the digital abundance of AI. I think scarcity proven on sequential blockchains is a great example and you could imagine that being used for timestamping to prove authenticity or you know digital scarce commodity money in the face of never-ending money printing right which is probably going to go up further because of AI I'm not I haven't done all the work on this but if you ask me what the impact on monetary policy AI will have I'll tell you it's probably going to print money right so I think there's a very philosophical counterweight here between AI and blockchains as a pragmatic answer. Um, there's agentic payments. I mean, that's I would say the first, you know, I wouldn't call it quite a breakout hit yet, but quite a lot of activity on Stripe's platform, on X42, on L42, on the Bitcoin Lightning network. It's quite a lot of activity.

[00:33:11]Agents sometimes need to buy stuff. I mean mostly I think it's right now buying access to APIs paying tiny little micro transactions for per call access to certain APIs. Um but you can imagine of course like the more autonomous these agents get like they're they need digital balances to do stuff. You tell it to go you know book a doctor's appointment for you. Well that's not a good example because we have insurance.

[00:33:32]If you tell it to go like you know you know hire a plumber to come to your house like how does it do that? It doesn't have money right and and and native digital money is makes the most sense. It's not going to open a bank account. I know some people mostly banks are working on our Agentic bank account.

[00:33:48]I struggle to believe that. I think a native digital wallet powered by uh you know digital assets is how that will go.

[00:33:54]It already is happening. So agentic payments is one. There's also you know early experiments in like decentralized compute markets and things like that.

[00:34:01]But um I do fundamentally believe these two technologies will rise together.

[00:34:07]Alex, there's going to be a proliferation of products and services from legacy companies, from tech companies, from finance companies, and from cryptonative companies as you know, we get this Clarity Act through and as all these things start to emerge. I'm curious Galaxy's strategy to continue to differentiate differentiate itself and compete in that space because, you know, if you have a world where Meta and JP Morgan are suddenly coming into your industry and trying to you know what I'm saying, like assert themselves and launch products to compete. How do you think about that? And what's Galaxy's like differentiating uh strategy here?

[00:34:39]>> Yeah, I think um you know those companies are kind of like jacks of all trades and masters of none. I think we're highly specialized at digital assets and and AI. So you know those those are two big categories, no doubt, but you know, we're not trying to do literally everything. No offense to these guys, but let's not forget that Meta renamed their company after the metaverse and then just a month or two ago completely shuttered their entire metaverse business, right? So yeah, they might have more money, you know, than God and can just, you know, try a billion things. That doesn't mean they're going to be good at them. And we're quite good at these two things.

[00:35:13]We've got, you know, almost a decade of experience leading in the digital assets market. That's not a not not in dispute, right? Um, you know, AI, everyone's new to AI really. I mean, but, you know, we and other Bitcoin miners, by the way, have been operating massive supercale data center architecture now for a while. you know, the pure play new data center companies, they didn't have eight years with the harshest, most competitive market in energy in the world, which is Bitcoin mining. Literal race to the bottom, like by design, right? Um, so I think, you know, we have a lot of expertise in both. Um, and I, you know, that's what we rely on, our talent and our and our assets.

[00:35:54]>> You're head of firmwide research at Galaxy. I'm curious what you and your team are most closely focused on right now in terms of research and and where those energies are going.

[00:36:02]>> Yeah, so we've only just really started as a actual segment covering AI. We've done a bunch of work on on energy and agentic stuff so far initially on the direct current overlaps with crypto um increasingly beyond that just into pure AI research. So we're we're and like everyone we're we're following it closely. Um, you we're building with it at work. I think we're all building on my team with it at home. Um, I am building basically a massive like personal research pipeline and assistant in my basement. Um, so we're working with it a lot. We're writing about it.

[00:36:39]We're learning about it. We're sharing our insights on AI. Um, in crypto, I mean, the story, it's like the never- ending saga, right? Like the the the interesting narratives have evolved so many times. I think fundamentally a few core ones that we continue to follow. I think the great convergence in a different way is one really the overlap of tradi um the institutionalization the normalization of decentralized finance um you know vaults yield yield onchain lending. I I mean I'm kind of the view that you know DeFi is really there's really like three core uh product market fits that have been established in crypto. Bitcoin. People love to own Bitcoin for whatever reason.

[00:37:24]We we don't have to go into all the great reasons to own Bitcoin in my view.

[00:37:28]Um but all around the world, people love to own Bitcoin. I mean, like if you know, so I think most people would agree that's probably a product market fit.

[00:37:35]You know, stable coins, you know, increasingly I think everybody realizes they're great for payments. Everyone wants to use them. The Genius Act codifies them in the US. you're about to have a probably a wave of new issuers and other integrations because of the Genius Act and the OC granting a bunch of new trust charters, some of which are to stable coin issuers. Um, and then DeFi. But in DeFi, I'm really talking about two primary metas. Um, trading and lending, right? You know, or swaps and lending. And these things are pretty time-tested at this point. They're used widely by institutions, including us.

[00:38:11]Um, and you know, there's still learnings I think for a lot of people that use them at our scale. We've done a lot of that work. We've published a giant risk framework that we use to assess onchain credit risk and and counterparty risk as it relates to protocols and stuff. So, I think others need to do a lot more of that work as well, but um, they're widely used. The big problem for DeFi has been that the assets in them aren't very good, right?

[00:38:36]You know, you've got native layer 1 blockchain tokens like ETH or Salana or something like that. They're okay, right? I mean, if you want to be long a specific blockchain, um, you know, they're not like, but then, you know, memecoins, NFTTS, like a bunch of junk also in there, right? I think this is one of the big reasons why, um, everyone is pushing so hard for, you know, real world assets and in particular why I've focused on tokenized securities because I think there's real benefit. I think we've sort of dog fooded um these DeFi protocols with our own tokens. Some of which are great and that's fine, but like a lot of us are like, "Well, gosh, this thing's working great. I'd love to put my stocks in it or buy and sell stocks there or occasionally lend and borrow stocks there." Again, maybe not always, but like we see the value every day, those of us who use these tools, and we'd like to expand the universe of assets that can be part of them. Um, so I I think that's a that's a key thing that we look at in general, that trend, um, and all the things around it.

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[00:40:21]>> Gotcha. So, we're seeing exponential growth in stable coins, tokenization, onchain finance, DeFi, and the third thing, which I think was the first thing you listed was Bitcoin. I want to ask you about uh Alex, has Bitcoin bottomed here? Is this bare market over? And uh where do we go from here?

[00:40:35]>> Yeah, I don't know. I I think it is. You know, we're at what 81K as we >> How could you not know? You're the head of firmwide research at G. You're supposed to be omnicient. Yeah, we're 80,000 right now.

[00:40:44]>> That's the beautiful thing about Bitcoin, you know. It's not a monolith.

[00:40:47]you know, I know I might know I might have more uh deeply informed ideas than the next guy, but I certainly don't know. And I would say um look at 80K, you know, we're up uh you know, 25 30% from the 58k February 5th wick there.

[00:41:03]That's pretty durable feeling right now.

[00:41:05]No doubt. I think Bitcoin trades pretty well right now. It looks pretty good. I think if we look back, if later, this is a conditional hypothetical. If later we look back at February 5th and it was the bottom, I think that could make a lot of sense. It was a capitulation day. Tons of fear. We went from like 75K to 60K in like 3 days. Um I, you know, I I will say the reason I'm hesitant to say that it was the bottom. Um I'd like to see Bitcoin retake some key levels, the you know, the 100 day moving average, the 50week moving average. Um, and I'd also like to I think just 100K as a psychological level. You know, below 100K, people sort of like, well, when we went below 100K, you know, at the end of last year didn't take that long to go a lot lower, right? So, um, I think people want to see that before it's like sort of we're not in a bare market anymore.

[00:41:55]It doesn't have to retake a new all-time high just to not be in a bare market.

[00:41:58]And then the other thing I would say is just the macro environment. Very uncertain. Uh at the beginning of the year, we put out our predictions and I declined to make a price prediction for the end of this year. I said that um the investing environment is too volatile and that um I think I made a prediction of 250 by the end of next year. Some people gave me crap and said that was a copout. I said that the volatility markets at the time were pricing an equally equal likelihood of 150k or 50k by the end of this year. I don't have the the V markets and the options markets in front of me now to say what they're pricing at this moment, but I think that's been largely panned out like we went a lot lower after we said that and you know so I I I think you know with um I think with oil markets uh unfortunately even if you know snap our fingers and the entire straight of Hormuz issue literally wraps up in whatever the best version of it you can imagine is tomorrow still could take six to 18 months to unfreeze these unstick these oil markets.

[00:42:57]restart or rebuild damaged refineries and and and production. So, I think that's a clear question mark. I think you're also that is leading to significantly higher uh inflation expectations. That also could play take a while to play out. Most other economies are hiking rates right now. Um you've got Kevin Wars who I think he's set to be voted on in on Thursday also.

[00:43:22]I think likely to to become the next Fed chair.

[00:43:26]you know, obviously had been widely thought to be dovish. Um, you know, markets now in the US are pricing like not even quite one cut between now and the end of the year. So, you know, no matter how a Fed chair's personal monetary proclivities uh are, you know, markets can force that. And so, like inflation is is a risk here. Not to mention, you know, a fracturing geopolitical world order into an recent history, uh, unprecedented multipolar type of order. Like there there's just a lot of uncertainty. I like to think that in the face of uncertainty, Bitcoin should should, uh, perform very well. It it it hasn't. It has sometimes on sort of spikier events, but, you know, in long-term risk asset downturns, it hasn't done that well. I do think eventually it will. I really believe that. I believe it is fundamentally similar to gold in that way and and should um but you know gold doesn't just like wake up every day and perform like a hedge asset like it trades that way because people trade it that way right and Bitcoin at 1.5 trillion market cap it's pretty big as a standalone asset if you believe the stories I've seen out of private markets it's worth one anthropic um but like you know it's an important and and big asset it's on the screens of every macro trader not everyone is trading it. Um I think it'll reach a point one day when um it doesn't need everyone to own it, but everyone needs to have decided how they want to trade it. And it's just it's still only a 17-year-old thing. And so I think I don't know if we're there. So I I I just caution we we could be in for tumultuous times. I'm not really predicting that.

[00:45:06]But I think you have to be very wary of the the uncertainty in markets today and you know be realistic about how Bitcoin might perform if markets you know take a turn for the worst.

[00:45:18]>> I appreciate that sober outlook and yeah I think uh I think that read of saying like I'm not sure it's the bottom but if it turns out it was the bottom I get it.

[00:45:26]Um I also think that the the price range of 50k to 150k it would be crazy if we ended up getting near both of those in this year but it seems like >> it is possible. By the way, I agree with that. I'm not I'm not trying to be bearish. I I think it absolutely is possible. Um you know, we're up a lot uh from the from the bottom. Um and we could go higher. And by the way, like there are catalysts that could specific even to Bitcoin that could take us higher, right? We're waiting on the Clarity Act. I think that could be a big positive catalyst for Bitcoin and crypto markets. Also, Patrick Wit has been teasing some forthcoming announcement about the strategic Bitcoin reserve. I I doubt highly that it will be that they've bought or are about to buy Bitcoin, but I think it would more likely be a formal declaration that the US government and thus the people of the United States collectively hold this much Bitcoin, which I think as a affirmative statement would be quite powerful and and you know, maybe they'll propose legislation to try to buy more Bitcoin. I don't know, but that could be a big one. And then um you know just the tide of corporate and institutional adoption. It is it is real. I think Morgan Stanley may be the best example just of recent of many recent ones but the biggest wirehouse in the world right warehouse like a platform for registered investment advisors obviously a big bank and a GIB as they say globally systemic important uh bank. So that's important.

[00:46:46]But they the fact that not only are they recommending a 2 to 4% Bitcoin allocation for their clients. I don't know for all of them yet, but it's clearly coming. They're also launching their own Bitcoin ETF. And I don't know if people realize this. I think Morgan Stanley directly only manages like 20 to 30 ETFs total. Obviously, they think this is bullish. Bitcoin is bullish.

[00:47:05]They think their clients are going to own a lot of it. And smartly, I think they'd rather just own the whole stack of the, you know, the fee stack there to the extent. I think they also applied for a an OC charter so they might self- custody it. You know, the only other one that does that is Fidelity and Fidelity is among uh first of all dear to my heart since I worked there for 12 years, but they're among the absolute most Chadlike Bitcoiners in institutional finance. And so, you know, this is Morgan Stanley. This isn't, you know, it's not Galaxy. I mean, it's not it's not a a small little Bitcoin company.

[00:47:39]This is the largest investor investment advisor platform in the world. And I know people have been saying this, but it's still early in that game. They haven't, you know, think about if it's like a gold. All right, not everyone owns gold, but like what percentage do you think like a Morgan Stanley portfolio owns gold? I I don't know. And I'm sure I probably could get this answer of research. I probably should have brought it with me, but I bet it's like 20 plus% of every portfolio.

[00:48:04]Bitcoin, it can't I would be shocked if it's in more than 1% still. I did an interview with Rick Edelman, which is dropping on my Milk Road Macro channel today, and he said he pointed out that a two two to 4% recommendation of an allocation from a $7 trillion asset manager is a lot of capital. So, yeah, a lot of alpha in that answer, Alex. I really appreciate you coming on the Milk Road Show, sharing so much uh so much insight and alpha and wisdom and being circumspect, keeping people's feet on the ground and their eyes clear at this very, like you said, volatile time in the markets macro-wise and digital asset wise. Where can we send people to find more of you and your work online?

[00:48:39]>> Yeah, thank you, John. Great to be here.

[00:48:41]You can follow me at Intangiblecoins onx. Uh my team, GLXY research onx, or go to galaxy.com/ressearch to read all of our public research content. Uh an enormous amount. I mean, the team has been absolutely cooking, by the way. So, go look at our latest reports and listen to Galaxy Brains. It's a good pod. John listens.

[00:48:59]>> All right. Well, thank you, Alex, for join. Thank you all for being here and listening. We hope you all learned a lot today. So until next time, stay stay bullish and we will see you all on the next episode of the Milk Road Show.

[00:49:08]Thanks for being here everyone. Bye.

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[00:49:20]This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.