Byron Gilliam

Nathaniel Whittemore

The Breakdown

Today’s Breakdown digs into a dramatic week for markets and politics as President Trump fires Fed Governor Lisa Cook, raising alarms about central bank independence, and floats equity stakes in private companies starting with Intel. From fears of emerging-market style governance to debates over whether Fed credibility still matters, we explore the mounting concerns about America’s economic order and what they could mean for investors heading into Labor Day weekend.
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Brazilification Risk and the Fight for Fed Independence

Bitcoin’s post–Jackson Hole rally was short-lived, with prices plunging below $110,000 after a massive whale liquidation sent shockwaves through the market. Today NLW unpacks how 24,000 BTC moved for the first time in six years, the rotation into Ethereum, and the $640 million in liquidations that followed. Plus, what whale selling means for this cycle, how traders are framing the correction, and whether we’re nearing a late-stage top—or just another round of growing pains.
 
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Whales Unload Billions As Bitcoin Plunges To Six-Week Low

At last week’s Jackson Hole gathering, Jerome Powell delivered his final speech as Fed Chair. On the surface it was dry and technical, but markets read it as a dovish signal—and risk assets surged. In today’s Breakdown, NLW digs into what Powell actually said, why markets reacted so strongly, and what the revisions to the Fed’s monetary policy framework mean for inflation, employment, and the future of central bank independence.
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A Nothingburger Speech that Moved Markets 

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<hr class="wp-block-separator has-alpha-channel-opacity"/>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“People who are smart love my licensing deals because you don’t have any risk [and] you make tremendous amounts of cash.”&nbsp;



— Donald Trump
</blockquote>



World Liberty Financial’s WLFI token became transferable for the first time on Monday, making the Trump family roughly $5 billion wealthier.&nbsp;



On paper, at least.&nbsp;



The 22.5 billion tokens that World Liberty granted to the Trump family’s DT Marks DEFI LLC are restricted, so they can’t be sold for the time being.&nbsp;



But the Trumps don’t need to: When World Liberty sells the WLFI tokens it created, 75% of the proceeds go to DT Marks DEFI LLC.



This is…unusual.&nbsp;



WLFI is the governance token for World Liberty Financial, which makes it a kind of pseudo-equity in the DeFi project.&nbsp;



If so, the arrangement between World Liberty and the Trump family is not just unusual, but a historic first — as if Steve Jobs personally pocketed 75% of the proceeds when Apple sold shares to investors.



In another sense, however, it’s only the scale of the profit-sharing that’s historic — because the arrangement between World Liberty and the Trump family is perhaps best understood as a licensing deal.



WLFI tokens have no claim on revenue or assets, which makes them look less like equity in World Liberty and more like a product World Liberty sells.



From that perspective, it looks like World Liberty is paying a 75% licensing fee to sell Trump-branded crypto tokens.&nbsp;



This has been the Trump family’s primary business strategy for some time now.



Long gone are the days when private citizen Donald Trump was in the business of developing real estate projects himself, like the Grand Hyatt in 1978 and Trump Tower in 1983.



After his Atlantic City casinos had failed and the Plaza Hotel had been surrendered to his lenders, Trump no longer had access to the capital required to build and then sell or operate large-scale developments.



So he pivoted to building and selling his brand instead.



In the 2000s, the Trump Organization became a global licensing empire, with the then not-yet president lending his name to projects like Trump SoHo (NYC), Trump Ocean Club (Panama) and Trump Tower Manila — all of which were financed and built by others.



This is a much better business than building things: No capital is required, there are no bank loans to worry about, there’s no operational risk and the profit margins are near 100%.



Investors love these kinds of asset-light businesses. It’s why Marriott International (which mostly licenses its brand) trades on 30x P/E, and Host Hotels &amp; Resorts (which owns Marriott-branded hotels) trades on 17x P/E.



The president loves them, too. In 2016, Trump told <a href="https://fortune.com/2016/04/21/donald-trump-q-and-a/">Fortune</a> he had “over 121 deals worldwide for licensing,” with “no investment” required.



I’m guessing that most of these, like Trump Steaks and Trump bottled water, probably did not work out.



(Trump-branded <a href="https://godblesstheusabible.com/products/god-bless-the-usa-bible-inauguration-day-edition">bibles</a> appear to be a winner, though.)



But licensing deals don’t even have to work to be profitable.&nbsp;



In 2012, for example, Trump collected $2.5 million in licensing fees for <a href="https://www.washingtonpost.com/politics/for-a-president-trump-global-real-estate-deals-present-unprecedented-gray-areas/2016/05/30/beac0038-15fa-11e6-aa55-670cabef46e0_story.html">a real-estate development in Azerbaijan</a> that was never completed.



In 2017, <a href="https://www.pacermonitor.com/pricing">The Washington Post</a> tallied up his licensing deals and estimated the president had earned at least $59 million by monetizing his name — while noting that it raised “ethical questions around Trump’s involvement with his businesses while in office.”



(Such innocent times, the 2010s, when just $59 million could prompt questions about ethics.)



But nothing has monetized the Trump name quite like crypto: The family has made roughly $500 million from its licensing deal with World Liberty Financial.



“It’s one of the more successful things we’ve ever done,” Eric Trump <a href="https://www.nytimes.com/2025/04/29/us/politics/trump-crypto-world-liberty-financial.html">told</a> The New York Times.



It’s easy to see why: The licensing fee the family receives on Trump-branded tokens is multiples greater than what they receive on Trump-branded real estate.



In return for lending their name to the never-completed Trump Tower in Batumi, Georgia, for example, the Trump Organization would have received 12% of condo sales — far below the 75% they receive when World Liberty sells its WLFI token.



Similarly, in return for lending his name to the Trump SoHo hotel, Trump received an 18% ownership share — less than half the 40% share of World Liberty Financial the Trump family was granted for its participation.



And the 22.5 billion WLFI tokens the Trumps additionally received have no equivalent outside of crypto.



Why so much?



I suspect even President Trump would say it’s because he’s president.&nbsp;



Before becoming president, Trump explained that foreign developers paid for his name in part because it helped get their projects approved: “I help them a lot,” he told <a href="https://www.vanityfair.com/news/2016/06/the-great-trump-tax-mysteries?utm_source=chatgpt.com">Vanity Fair</a>. “If they need zoning, and they say they are doing a Trump job, every single time they get their zoning because the government wants Trump.”



This presumably works on the SEC, as well — and maybe even the DOJ.



As of today, WLFI has a fully diluted value of $23 billion, and a cynic might say that is a measure of the value of being in the good graces of the president of the United States.



World Liberty would dispute that, of course — I’m sure it’d <a href="https://worldlibertyfinancial.com/about">say</a> instead it’s because it’s “upgrading finance for the digital era.”



But a business that gives up 75% of the money it raises just to license a name can’t think very highly of its own abilities.



Either way, WLFI’s immense valuation suggests it’s been money well spent.



When the president said during his 2016 campaign that the Trump brand was worth $3.3 billion, no one took it seriously.



But licensing it to crypto has made it worth much, much more.



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The Breakdown Newsletter

WLFI: The token is the product

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<hr class="wp-block-separator has-alpha-channel-opacity"/>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“If you want to know the real secret of Walt’s success, it’s that he never tried to make money.”



— Ward Kimball, Disney animator
</blockquote>



Andrew Keys is an Ethereum OG whose credentials include attending the first-ever Ethereum meetup in 2014 and making ETH worth more than a dollar.



“The first time Ethereum crossed $1 was because I put a permissioned version of the Java client of Ethereum on top of Azure,” he said on the <a href="https://youtu.be/KHGEZf0TnzY?si=gAPhDSRdZcyTTx6u&amp;t=3326">Empire</a> podcast, “and we put out a 100-word press release in the Wall Street Journal with Paul Vigna creating a concept of blockchain-as-a-service.”



Reading Vigna’s <a href="https://www.wsj.com/articles/BL-MBB-42980">write-up</a> from 2015 is a reminder of how little has changed in the 10 years since.



The narrative justifying $1 ETH was that Microsoft’s Azure would use Ethereum to “improve operations from accounting to logistics to cross-border payments and settlement.”



It never really happened, but we’re now racing toward $5,000 ETH largely on the same idea that Ethereum will be the corporate blockchain of choice.&nbsp;&nbsp;



This remains speculative.



Ethereum generated $1.4 million of REV yesterday — more than it did in 2015, of course, but not a lot relative to its $4,400 token price and $531 billion market capitalization.



Keys, however, thinks that valuation is low because Ethereum is underpricing its services.



“At the expense of near-term profitability, the Ethereum Foundation decided to make L1 blob space dirt cheap,” he explained. “I think in time, the Ethereum community is going to say, ‘Well, this is too cheap,’ and you can raise that pricing.”



Consider this the Uber theory of Ethereum’s value: “Once Uber became ubiquitous, they tripled prices,” Keys notes.



He expects Ethereum to do the same: “As blockspace becomes more competitive, you can raise prices.”



Uber is an extreme example of a standard playbook for profit-maximizing corporations, so I see why he cites it.&nbsp;



But layer-one blockchains are not corporations — and I’m not sure they’re meant to be profit-maximizing.



Instead, I thought the idea was to make blockspace as cheap as possible (without sacrificing decentralization), so we can get as much stuff onchain as possible.&nbsp;



If token holders make money in the process because the blocks fill up and transactions get expensive, that’s great.



But making transactions expensive just so token holders make a profit seems…not very crypto?



Layer-one crypto tokens do have to have value, mostly to deter spam and provide security.&nbsp;



But, ideally, any additional value would come from higher usage, not higher prices.&nbsp;



And even if profitability were the primary goal, higher prices might not be the way to achieve it.



As a future source of profits, Keys cites “blobspace” — a cheap, dedicated lane on Ethereum for temporarily making large amounts of data available for anyone to validate.



But does blobspace have a moat?



“Making data available” doesn’t sound like the kind of differentiated service that would have pricing power — how hard can it be to store some data? I’m guessing Keys would argue that Ethereum will have pricing power because of its security guarantees, brand and market capitalization.&nbsp;



But that remains speculative at this point and I’d counter that it’s easier to start a new blockchain than it is a new riding-sharing service.



So I’m not sure Uber’s is the best business model for Ethereum to emulate.&nbsp;



<h2 class="wp-block-heading">The Walt Disney way</h2>



Ward Kimball attributed Walt Disney’s riches to never trying to become rich: “If you want to know the real secret of Walt’s success, it’s that he never tried to make money. He was always trying to make something he could be proud of.”&nbsp;



Disney told his staff never to mention costs to him — if something made a film or his parks better, he wanted it in, whatever the price.



He built a zoo on the studio lot so animators could study animals while making Bambi. He insisted that the gargoyles on Disney World castles, too high up for anyone to see, be sculpted in full detail.



For Disney, animation and theme parks were passion projects that he pursued against all financial advice, often to the brink of bankruptcy.



It worked out in the end, of course — which proves that sometimes, the most profit-maximizing thing is to not maximize profits.



In other cases, the most profit-maximizing thing is to not make profits at all.



Linus Torvalds, for example, made his fortune by offering the Linux operating system for free. Forever.



It’s easy to imagine Torvalds would now be even wealthier if he charged even a few cents for the use of Linux — billions of devices run on the software he invented, from which he collects exactly $0.



But Linux became a global phenomenon precisely because it was free to use and free to build on — a freedom that turned users into contributors.



Torvalds developed Linux with the help of thousands of enthusiasts eager to contribute to the open-source project simply because they believed in it.



With access to the source code, users didn’t just report bugs to Torvalds — they often sent him the fix, too.



In the early days of its development, this allowed Torvalds to release updated Linux kernels as often as every day.&nbsp;



It’s impossible to imagine Microsoft releasing new versions of Windows every day.&nbsp;



It’s equally impossible to imagine that Linux could have been built any other way.&nbsp;&nbsp;



Today, Torvalds is variously estimated to be worth between $50 and $150 million — a big number, for sure. But also a tiny slice of the unmeasurable value Linux has created for the world.&nbsp;



Still, a tiny slice of a giant number is generally better than a giant slice of a small one.&nbsp;



If Torvalds had charged for Linux, his slice might have been 100% of nothing.



Unlike Linux, Ethereum can’t be free — the chain won’t work unless there’s a cost to using it.



But it doesn’t have to maximize profits, either.&nbsp;



And perhaps it shouldn’t?



By pricing their products and services as commodities, companies like Walmart, Costco, Southwest Airlines and Vanguard became giants by prioritizing growth and revenue over profit margins.



If blockspace is similarly a commodity product, the best way to maximize profits may be not to.



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Should Ethereum maximize profits?

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“I believe that at the end of the century…one will be able to speak of machines thinking without expecting to be contradicted.”



— Alan Turing, 1947
</blockquote>



Did the AI bubble just have its Burning Up moment? In March 2000, Barron’s published a cover story — <a href="https://www.barrons.com/articles/SB953335580704470544">Burning Up</a> — detailing how quickly internet stocks were going through cash, predicting that investors would be reluctant to give them more.



“When will the Internet Bubble burst?” the article began. “For scores of &#8216;Net upstarts, that unpleasant popping sound is likely to be heard before the end of this year.”



Incredibly, the article was published within 10 days of the Nasdaq’s peak after a five-year, 570% rally — and the start of a 78% crash.



In hindsight, the Barron’s story looks less like coincidence and more like a catalyst: By spotlighting the cash burn, it helped cut off the flow of investor money keeping the bubble inflated.



Now, investors are having similar doubts about keeping the AI bubble inflated after a <a href="https://mlq.ai/media/quarterly_decks/v0.1_State_of_AI_in_Business_2025_Report.pdf">report from MIT</a> concluded that “95% of organizations are getting zero return” on their generative AI spend.



Shares of Palantir fell as much as 20% this week in response, with Nvidia and AMD down 8% and 11%, respectively.&nbsp;



If that turns out to be the beginning of the end of investors’ love affair with those types of AI stocks, the MIT report will surely get the blame.



“These [AI] tools primarily enhance individual productivity, not P&amp;L performance,” the report found, casting doubt on why companies would continue to invest in them.&nbsp;



The problem could be structural, too. Unlike human intelligence, the report finds that “most GenAI systems do not retain feedback, adapt to context or improve over time.”&nbsp;



If that makes companies decide to stop buying AI services from software providers, software providers will stop buying cloud services from the hyperscalers, and the hyperscalers will stop buying GPUs from the chipmakers.



That would be traumatic for investors, of course — and for the whole of the US economy, which has arguably been kept afloat by the hyperscalers’ giant investments in data centers and energy.



But we should remember that this is an investment bubble and not necessarily a bubble in AI itself.



Consider that Alan Turing conceived of artificial intelligence in the 1930s, a decade before the first working computer even existed.



The current investment bubble, if that’s what it is, has dramatically accelerated the realization of Turing’s vision, but his vision is hardly dependent on it.



As the internet before it, AI might do even better after its investment bubble has popped.&nbsp;&nbsp;



If big corporations give up on AI, other more innovative companies will make the most of the infrastructure they leave behind.



When Procter &amp; Gamble <a href="https://www.wsj.com/articles/p-g-slashed-digital-ad-spending-by-another-100-million-1519915621">said</a> in 2018 it was cutting spending on Facebook ads because it wasn’t getting a return on them, many took it as an indictment of Facebook.



In truth, it was an indictment of Procter &amp; Gamble, whose failure to figure out how to use online ads made room for new competitors who did.



The MIT study that so worried investors this week may similarly have surveyed corporations that just don’t know what to do with a new technology.



But it’s not just corporations — the latest iteration of ChatGPT has widely been considered a <a href="https://www.wired.com/story/openai-gpt-5-backlash-sam-altman/">disappointment</a> because it’s not as much of a step-change improvement as previous versions were.



But the new version is also <a href="https://x.com/VraserX/status/1958211800547074548">creating</a> “original research-level mathematics” that human mathematicians could not come up with themselves.



And AI is also designing physics experiments that a human physicist never would: “The outputs that the thing was giving us were really not comprehensible by people,” one researcher told <a href="https://www.wired.com/story/ai-comes-up-with-bizarre-physics-experiments-but-they-work/">Wired</a>. “They were too complicated, and they looked like alien things or AI things. Just nothing that a human being would make.”



If physicists don’t quite know what to make of AI, it’s no wonder that corporations are struggling to.



Even Alan Turing did.



“Machines take me by surprise with great frequency,” Turing<a href="http://www.loebner.net/Prizef/TuringArticle.html"> wrote in 1950</a>, in response to skeptics who said machines will only ever do what we tell them to.&nbsp;



The surprise may not be that the bubble bursts — it presumably will, eventually — but that AI, like the internet, will just be getting started when it does.



Let’s check the charts.



Palantir v. Cisco:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfpdC8lZDBfYU2JmKbwdUzXremQB1Bog9t5sZEQHHV-iQhzCuCGe8nL6HbTKPXnSMCYakxzr0WPT11Bztu1Sbxr8h7_vyerIywXO7Q3AQoOy8wcmVlHePj3l8mXdCkFnAIq7F21YA?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



John Authers notes that the run-up in Palantir dwarfs even the historic Cisco move in 1999. Appropriately, Cisco is finally approaching its all-time highs from 2000, thanks to a <a href="https://x.com/TheTranscript_/status/1958665424926908793">booming AI business</a>.&nbsp;



The data center boom:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfM0BP_nL2cgo7x14LBIvFFEeEMjQMk4hpvfWDrzb4pNNtBMrcT8rGccal7W-ezLj5xcWNTEkWXjnGX91_fWrXcr9M8v0mH_MarffmKCOlwag0Mp9npymuEbmabToc-5yjiKvKRmA?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



The US will soon be spending more on data centers than it does on office buildings.



Back to school:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXckLcJse5hiHG9h2SsdUvgSOKNCqRayUXKajDvakK3FtspTPS4exITjRwCcl2VqTrVqhifnRFuEA5Pu2C9Kzr2Z4tZqX3qxCQgb6Hps9Dfx2hJ6pd6y0GvSfbD06iCghoSwWKY4iw?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



<a href="https://awealthofcommonsense.com/2025/08/the-human-toll-of-artificial-intelligence/">Ben Carlson</a> notes that a steep drop in OpenAI usage coincided with the end of the school year. Investors will have to hope that AI finds a better use case than students outsourcing their homework.



The US is exporting government debt and AI investments:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc_B80UyE5BFWpNQG7B45L5JLvSbswLfAqpVXo572gtvKRrnq6VQGeYHBuH80ZswkzVWIVmHZEanxDpvTluEptIPyvWAZv8-ub5EqyufpPXWu_Ft1Q3uZFWnQtVfxckf6NkRIpxTA?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



Brad Setser <a href="https://x.com/TheTranscript_/status/1958665424926908793">explains</a> that the AI bubble is funding the US’s current account deficit. The blue area above is thought to be mostly investment flows into US equities. The green area is mostly government debt.



Generation degen:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfneb0L_4F-MCgmS-cuKvizPgcCbedzmRvgXCxzaq_WdVkVoNEM8kWD1MYOSN_zjTQZaOkpSjAl64dYoawASJMAd30JFouxHq6GjyT-NdxWOqFU7wItdxxcZD86nJM73-PR4EtO?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



This fun chart from BofA (via @MikeZaccardi) suggests millennials are driving the surge in trading volumes on US stock exchanges.



Someone is buying all the debt, too:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdQ167816WkD_62ZgKXjGPUXRSqJbDLOAEcvtVE_tZmec4idAgdpz4NIQSHWsD62DTwD1nOTz62q0XdqckGQk8r_tcQ0P1BITUNMjjm8kvJMqGTK-DYuEaqliSQ0RbI-nCFbb6IFw?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



Despite all the hand-wringing over unsustainable government deficits, investors are pouring more money into bond funds than ever before.



The market is ignoring the indicators:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdlSgvapTTOitDNOmnDu1QDPm_kyyXarTeSIA5MLm0jQk2qK0Xh7yCl_8Uuo9TpuyySd6yqwoNCxtw5IMGbR-CtZjMeYCQj6WFMAxB-KLrpjCm7K5y-yJT-IrfGaMhxowmHbg1yHw?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



The Conference Board’s Index of Leading Economic Indicators (in blue) has turned sharply lower. But stocks (in red) have continued to go higher.



The long view:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeh8Mhat59fzKS3leZkrnleRLsdozphl45yFfVIxj4oKkPDCi2Ux2mEHUWaRiLWVSyPzkROOfDwqu2Yozwz2EwEULO5AtcYeq8ypLOenwhyHz9CUxj-A9Pjxq2vhRcE6vPrizPo?key=Gs_roawT9tnrA5MJOblb4w" alt=""/></figure>



It’s always tempting to try to time the next investing bubble, but here’s a reminder of the opportunity cost: Adjusted for inflation, the S&amp;P 500 is up 5,462% over the past five decades.



Past performance is no guarantee of future performance, of course, and the AI investment bubble may well be due to pop. But Alan Turing might advise you to let yourself be surprised.



Have a great weekend, naturally intelligent readers.



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Friday charts: Bubbles then, and now

<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Investing is about beliefs in the future, and what to do when they’re wrong.”&nbsp; — Rohit Krishnan
</blockquote>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<a href="https://dba.xyz/fundamentals-vs-flows/">Fundamentals vs. flows</a>



The crypto investor Jon Charbonneau explains that crypto investing is just investing.



Whatever the asset class, he argues, there are only two basic ways to approach investing: forecasting fundamentals or predicting flows.



Fundamental investors form beliefs about future cash flows: “The whole point of fundamental investing is that you don’t need other people to agree with you” (aka the Warren Buffett way).



Flow investors form beliefs about future trading flows: “You’re just hoping someone else will buy it from you at an even higher multiple” (aka the greater fool theory).



These are familiar concepts, but it’s helpful to see them framed so thoughtfully in the context of crypto.



Either approach can work, Charbonneau says, but things get muddled if you don’t know which one you’re taking.



For example, is ETH a fundamental investment or a flows one?&nbsp;



It seems to be a little of both, which makes the investment case more complex: “It requires taking more leaps of faith around human behavior and market psychology.” That sounds difficult.&nbsp;



The simplicity of Bitcoin’s flows-based investment thesis, by contrast, has been so successful that it “can straddle the line of ‘fundamental investing’ and ‘greater fool investing’ depending on how you quantify monetary utility.”



I personally think “monetary utility” is mostly fake news, but I also think bitcoin has probably hit escape velocity and can now be considered a fundamental investment, like gold.&nbsp;



Crypto investing more generally may be at a similar inflection point.&nbsp;



“Historically, it has paid off to be primarily flows-driven as a crypto investor,” Charbonneau notes. “Looking forward though, I believe that focusing more on fundamentals&#8230;could finally produce more alpha as the industry matures.”



That would be good news because, as Charbonneau adds, “narrative trading” is a zero-sum game (I’d call it negative sum), while “allocating capital to projects capable of generating cashflows can be a positive-sum game.”&nbsp;



Charbonneau highlights digital asset treasury companies as flows-based investments, so it’s perhaps ironic that they’re catching on with TradFi investors at the same time that fundamentals are catching on in crypto.



“Crypto investing is becoming relatively more fundamentals-driven,” he says, while “TradFi investing is becoming relatively more flows-driven.”



“Someday they’ll converge, and we’ll just be talking about investing.”



Let’s hope they meet somewhere on the fundamentals side of center.



<a href="https://ritholtz.com/2024/02/transcript-david-einhorn/">Rethinking the value game</a>



To Charbonneau’s take on fundamental investing, I would add that people who think they are investing on fundamentals are often investing on flows.&nbsp;



Last year, David Einhorn declared that &#8220;markets are fundamentally broken,&#8221; because his standard playbook of buying a stock at, say, 10x earnings and then selling it at 15x earnings was no longer working.



&#8220;The competitors have effectively left the field,&#8221; he explained.



That sounds like good news — it’s always good to have less competition, right? But fewer competitors gave Einhorn fewer opportunities to play his preferred game of &#8220;anticipating the anticipations of others.&#8221;&nbsp;



So he was forced to find a new game: “We can’t count on other long-only investors to buy our things after us,” he <a href="https://www.bloomberg.com/news/newsletters/2024-02-09/uk-house-prices-perk-up-but-stresses-remain">explained</a>. “We’re going to have to get paid by the company.”



Charbonneau and Buffett would approve.



<a href="https://youtu.be/n02QEe2AHnY?si=GpAeUlAvcGPWZKXn&amp;t=355">The revenue meta</a>



Luca Netz is also hopeful that crypto investing will become more fundamentals-driven: “The days of no revenue being worth billions of dollars has to be over,” he told Laura Shin. “I think this is going to be the era of result-driven success and less speculative success.”



This, he says, will help crypto build “disruptive technologies that change the world&#8221; and not just “pseudo-disruptive technologies that you tell a story around.”



Let’s hope so.



Note: Netz runs a cartoon-penguin business based on an NFT collection and an affiliated memecoin.



<a href="https://blockworks.co/analytics/treasury-companies/bitcoin-treasury-companies">Chanos is winning</a>



MSTR is down 21% over the past month, vs. bitcoin down just 2.5%.



That has taken MSTR’s all-important “mNAV” metric to just 1.34x (i.e., the stock is worth 34% more than the bitcoin it holds).



The falling mNAV represents a profit for short-seller Jim Chanos and a problem for Michael Saylor.



Saylor has said that Chanos doesn’t understand Strategy’s business model, but his <a href="https://x.com/saylor/status/1957413273122287738">decision</a> to continue selling stock at current levels seems like a tacit admission that the investment case for MSTR remains circularly dependent on the premium investors are willing to pay for it.



I’m not sure how investors should think about this.



The Ethereum DAT BTCS, for example, now trades at 0.65x NAV — does that make it a better or worse investment than, say, the Ethereum DAT BMNR at 1.35x NAV?



You usually want to pay as little for a stock as possible, but if the value of that stock is a function of people paying more for it, maybe you want to pay more?



I really don’t know. But falling multiples are certainly not good for existing shareholders.



Metaplanet (the Japanese version of Strategy) now trades on <a href="https://metaplanet.jp/en/analytics">1.95x NAV</a>, down from 8x just two months ago.



What’s the math on breaking even if you bought the stock at 8x NAV and you’re getting diluted by new sales at 1.95x?



Flows-based investing is hard.



<a href="https://reducibleerrors.com/prediction-markets/">The case against prediction markets</a>



Trader-philosopher <a href="https://x.com/AgustinLebron3">Agustin Lebron</a> says prediction markets are 1) bad at being markets and 2) bad for society.



They fail as markets, he explains, because every participant is trying to do the same thing: to make money trading.



This is different from financial markets, which work because “different participants have different risk preferences.”&nbsp;



Differing preferences means that both sides of a trade can benefit — like an airline buying a futures contract from an oil company, for example.



In prediction markets, where the buyer and seller have the same motivation, trades are zero-sum (just like the flows-based investing).



Supporters of prediction markets say they provide a service by giving people better information.&nbsp;



But Lebron (who, no, does not play for the Lakers) argues that “most or all of the supposed value of [prediction markets] for hedging evaporates under closer inspection.”



In short, he argues there’s no risk that can be effectively hedged by betting on something like a presidential election.



And since there’s no benefit from hedging, “prediction markets only work when there is a steady supply of dumb money.”



Casinos, sports betting and memecoins have proved there is a steady supply of dumb money, so I’d note that prediction markets might well be a successful market.&nbsp;



Lebron hopes they don’t, though, because “the very existence of the prediction market influences and hence distorts the underlying event that&#8217;s being predicted.”



He cites the example of someone who claims to have bet on Zoran Mamdani to win the New York City mayoral race and then funded Mamdani’s campaign to win the bet.&nbsp;



I’m not sure how likely or repeatable that is, but it illustrates the feedback loops that might amplify the kind of chaotic events that people like to bet on.



As a result, Lebron warns that, if prediction markets get big enough, “they might just kill our society.”



Let’s hope everyone does some fundamental investing instead.



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Thursday links: Investing, revenue meta, DATs, prediction markets

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Civilization advances by extending the number of important operations which we can perform without thinking of them.”



— Alfred North Whitehead
</blockquote>



Investors love the pricing power of “last mile” businesses.&nbsp;



Comcast charges $75 a month for internet access because it buried the cable outside your house that connects you to the world wide web.&nbsp;



Walmart is the last mile of consumer goods because its shelves are where supply meets demand, and brands pay dearly (in discounts and promotions) to win a place on them.



Amazon charges third-party sellers as much as 45% of their sale price for access to its virtual shelf space and last-mile network of warehouses and delivery trucks.



Is this how the stablecoin business will work as well?



Last week, we learned that both Stripe and Circle are building stablecoin-optimized blockchains, and the timing (on the same day, even) inevitably frames this as a competition: “Circle and Stripe now appear to be converging on the same goal: building rival financial networks for digital money,” Bloomberg <a href="https://www.bloomberg.com/news/articles/2025-08-19/circle-bets-on-its-own-blockchain-in-challenge-to-payment-giants">reported</a>.&nbsp;



If so, they will likely be converging from different directions.&nbsp;



Stripe’s blockchain, Tempo, is expected to focus first on retail-merchant payments, while Circle’s Arc sounds more like behind-the-scenes infrastructure — “an enterprise-grade foundation for stablecoin payments, FX and capital markets applications,” as they pitch it.



It’s tempting to say Stripe starts with an advantage here, since it’s already a last-mile business — it owns the checkout button and the customer relationship, connecting directly to more than a million merchants.&nbsp;



Circle, by contrast, has no direct contact to its end-users at all — we get our USDC on exchanges, not from Circle itself.



But the last mile isn’t always the place to make money.



Gas stations, for example, earn only pennies on each gallon of gas they sell while the oil majors they buy from make much bigger profits upstream. Retail brokers have to offer customers free trading while the exchanges they connect to mint money from data and transaction fees.



In other industries, however, the last mile and the infrastructure can be equally profitable: Nvidia and AWS, for example, both do very well for themselves.



The business of moving money that Stripe and Circle are both hoping to disrupt is enormous: Austin Campbell <a href="https://youtu.be/cULv9k3ExdM?si=Zk9cEvnFaOvDG9xY&amp;t=621">notes</a> that international transfers alone move roughly $1.25 quintillion annually. The all-in cost for a bank to make an international wire transfer is <a href="https://www.financialprofessionals.org/docs/librariesprovider8/default-document-library/determining-your-true-cost-of-payments.pdf?sfvrsn=52b5166b_2&amp;utm_source=chatgpt.com">over $8</a>, so I imagine there’s a lot of money for Circle to make just from banks (without ever reaching the end user) if it figures out how to do it cheaper with stablecoins.



Payments are also highly complex.



A single dollar spent on a YouTube ad, for example, might be collected in euros, split between Google in Ireland, a content creator in India and a publisher in Brazil, then routed through multiple banks, in multiple currencies — all of which is set in motion by a click on a website.



If Stripe can use programmable money to automate that complexity at the de minimis cost of a stablecoin transaction, its Tempo blockchain could be a hit.



There are many more niches of the payments world to disrupt, so even if Stripe and Circle are destined to converge, it might be a long time before they actually compete.&nbsp;



There should be plenty for both to do — it’s reasonable to imagine that every kind of payment could someday be made in stablecoins.



Guillaume Poncin, CTO of the crypto infrastructure provider Alchemy, told me that banking infrastructure “will run on blockchain rails,” noting that stablecoins are particularly well-suited for cross-border payments, ACH transfers and interchange payments between banks.



It might happen fast. “In five years,” Cosmo Jiang told <a href="https://youtu.be/QX6jxGQlM-w?si=s6g2i_xxfXP0md8z&amp;t=4617">Empire</a>, &#8220;I&#8217;d be shocked if not all the financial applications on your phone were running on blockchain rails.”



If so, it probably won’t happen on a general-purpose chain like Ethereum.



For stablecoins to be used at scale in the real world, they will probably have to be on a specialized blockchain like what Circle is <a href="https://6778953.fs1.hubspotusercontent-na1.net/hubfs/6778953/Arc%20Litepaper%20-%202025.pdf">building</a> — with predictable fees, dispute resolution, privacy for users and transparency for regulators.&nbsp;



I’m sure Stripe’s yet-to-be-announced chain will have similar functionality. But that doesn’t mean it will be a direct competitor.



If the stablecoin market gets as big as they think it will, it might not be Stripe vs. Circle, but Stripe and Circle both.



Or neither, maybe.



Austin Campbell believes that in the race to build stablecoin payment rails, “the answer to who will win is none of the people on the field.”



The race itself is only in its first mile.



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The stablecoin marathon enters its first mile

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“We are what we repeatedly do.”



— Aristotle
</blockquote>



Central banks are buying gold in the 21st century for the same reason Romans bought it in the first: It has value because people perceive it to have value.&nbsp;



That circular logic has proved so durable that the purchasing power of gold is <a href="https://www.nber.org/system/files/working_papers/w18706/w18706.pdf">virtually unchanged</a> since antiquity.



In that sense, central banks are buying gold now because Romans were buying it then.



Perception has become reality through repetition.



The bet with crypto is that it can pull off the same trick, but faster — compressing millennia of belief into a few short decades.&nbsp;



Lately, it’s started to look like it might.



Recent <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5029660">research</a> offers empirical evidence that people are using crypto to protect against the risk of government default: “A 10% increase in sovereign CDS spreads is associated with a 2.9-4% increase in crypto app downloads.”



10%!!! 



It doesn’t take much to move a credit default swap 10%, so that correlation suggests people are quick to turn to crypto at any sign of a debt crisis.



Importantly, the correlation tests positive for causality: “Crypto adoption jumps in the months following news related to sovereign risk.”



The researchers established cause and effect by studying credit-risk events like inflation shocks in Argentina, Turkey and Venezuela and sovereign debt crises in Sri Lanka, Greece and Ecuador.



Advocates have been telling these stories for years as proof of crypto’s utility, but with limited effect likely because the evidence was only anecdotal.



But the data now supports the narrative.



In short, the study confirms that when bank depositors are reduced to <a href="https://www.aljazeera.com/news/2022/9/15/what-is-behind-lebanons-bank-robberies-explainer?utm_source=chatgpt.com">stealing their own money</a>, people really do turn to crypto.



Other studies also suggest that crypto’s narratives often line up with reality.



Bitcoin, for example, has long been framed as an escape hatch from irresponsible economic policymaking by corrupt governments — and that is, in fact, how people use it.



“We document a flight-to-bitcoin (FTB) phenomenon,” one <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3278469">study</a> concludes, “whereby local demand for bitcoin increases with local economic policy uncertainties.”&nbsp;



“FTB is driven by investors’ lack of confidence in government as FTB is stronger in countries where the confidence in government is low and corruption incidents surge,” the authors explain.&nbsp;



It gets even better for the broader crypto narrative: “Bitcoin ownership shifts from centralized exchanges to decentralized wallets amid such turbulence.”



What could be more crypto-narrative-confirming than that?&nbsp;



Another <a href="https://www.sciencedirect.com/science/article/pii/S1544612325013984">study</a> even cites crypto as a reason for corrupt governments to change their ways, concluding that “the control of corruption appears to discourage cryptocurrency adoption.”



Crypto advocates sometimes celebrate government dysfunction as another confirmation of their narrative (and who doesn’t love having their narrative confirmed?). But if crypto could frighten governments into good-governance reforms, that would be an even better story, I think.



The same study finds that “higher emigrant ratios in…lower-income countries are associated with increased cryptocurrency usage” — with the implication that people find crypto useful for remittances.&nbsp;



Remittances is one of crypto&#8217;s original use cases, but it’s always been surprisingly hard to quantify.&nbsp;



Western Union still hasn’t been fully undermined by crypto, but seeing the empirical evidence makes the remittances narrative more substantial.



Finally, another <a href="https://www.emerald.com/jfrc/article-abstract/33/3/406/1274488/Sanctions-and-cryptocurrency-a-catalyst-for?redirectedFrom=PDF">study</a> backs one of crypto’s grandest storylines — that it puts money and finance beyond the reach of government control. 



Studying the relationship between international sanctions and crypto usage, the authors conclude that “sanctions can act as a significant motivator for countries to adopt cryptocurrencies.”



Satoshi set out to create non-sovereign money, and sanctions evasion is proof that it works as such.



If these academic studies feel, well, academic to you, you’re probably reading from a developed economy: All of the studies found their results primarily in emerging markets.



In the US, by contrast, bitcoin’s “digital gold” narrative took a hit in 2023 when it failed to hedge against 9% inflation.



But the study on sovereign default risk showed that people mostly use bitcoin to hedge inflation risks resulting from a sovereign debt crisis, and not, say, supply shocks.



Even with CPI at 9%, no one doubted the US’s ability to service its debts, so people didn’t feel compelled to swap their dollars for bitcoin.



But there are signs that crypto’s value proposition is starting to be recognized in developed countries, too.



“In just the last year,” the lead author of the paper on sovereign debt <a href="https://youtu.be/YEXsFk4XKX0?si=kXyB3ybbVzjp-MGA&amp;t=2827">observed</a>, “we’ve seen [the crypto] narrative migrate from being just an emerging markets’ story to one that folks in advanced economies are contemplating, too.”



The signs are mostly anecdotal so far, but also impossible to miss: Larry Fink referring to bitcoin as a “flight to safety” asset class; Jim Cramer recommending both bitcoin and ethereum as a hedge against deficit spending; even the US government itself starting a strategic bitcoin reserve to hedge against its own irresponsibility.



The risk of US default remains small — but not so small that Wall Street, CNBC and the US Treasury can resist hedging it with bitcoin.



The more that behavior is repeated, the more the perception of crypto will become its reality.



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Are crypto narratives becoming reality?

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“The effect of liberty to individuals is that they may do what they please; we ought to see what it will please them to do before we risk congratulations.”



— Edmund Burke
</blockquote>



When Queen Victoria sent President Buchanan a 98-word message over the first transatlantic telegraph cable, it crossed the ocean in just 16 hours.



This technological feat inspired The New York Times to describe the invention of telegraphic communication “full of hopeful prognostics for the future of mankind.&#8221;



Some even foresaw the end of disinformation.



“The infallible Telegraph will contradict their falsehoods as fast as they can publish them,” a contemporary journalist <a href="https://www.amazon.com/Information-History-Theory-Flood/dp/1400096235">predicted</a>.



Telegraph signals were spoken of as an invisible current carrying the truth itself — a technical channel free of human bias that would broadcast news from a single, trusted source (the Associated Press).



It didn’t work out that way.



Another journalist soon noticed that “intelligence thus hastily gathered and transmitted has also its drawbacks, and is not so trustworthy as the news which starts later and travels slower.&#8221;



Instead of re-broadcasting a canonical version of the truth, local newspapers put their biased spin on news arriving via telegraph — and the speed of transmission amplified mistakes and misinformation.&nbsp;



100 odd years later, however, people had similarly high hopes for the internet.



In 1996, cyberlibertarian John Perry Barlow confidently <a href="https://www.eff.org/cyberspace-independence">predicted</a> that cyberspace would be shaped and defined by “ethics, enlightened self-interest and the commonweal.”



By freeing information from government control, many believed the internet would topple dictators and return power to the people.



In 2007, Al Gore assured us this hope was being realized: “Broadband interconnection is supporting decentralized processes that reinvigorate democracy,” he <a href="https://cyberlaw.stanford.edu/blog/2007/05/assault-reason/">wrote</a> in The Assault on Reason. “Networked democracy is taking hold. You can feel it.”



If you’ve been on social media recently, you’re probably not feeling it.



But that was only the first iteration of the internet.&nbsp;



The internet’s second act — Web3, aka crypto — comes with similarly high hopes: What the telegraph promised to do for information, blockchains really will do for money.



“Bitcoin is a tool for freeing humanity from oligarchs and tyrants,” Naval Ravikant promised.



“Follow the protocol,” The Declaration of Bitcoin’s Independence <a href="https://bitcoinmagazine.com/culture/declaration-bitcoins-independence">urged</a>. “It has anarchistic implications&#8230;Bitcoin undermines governments and disrupts institutions because bitcoin is fundamentally humanitarian.”



But anarchy is not generally conducive to humanitarianism.&nbsp;



The French Revolution, for example, promised liberté, égalité and fraternité, but delivered famine, terror and dictatorship.



There are risks to crypto’s idealist visions, too, like North Korea exploiting mixers, pig-butchering scams enabled by stablecoins and corporations re-centralizing everything.



I don’t expect any of those external villains to precipitate a crypto reign of terror.



But the biggest risk may come from within: insiders extracting value from the very retail investors crypto was intended to empower — because the decentralization of finance increasingly seems to be centralizing wealth in the hands of a few.



Low-float, high-FDV token launches make the system feel rigged. Memecoin launches really are rigged. Giant insider unlocks flood the market with supply. Holders of public tokens often find themselves subservient to holders of private equity. Sniper bots and sandwich attacks are an invisible tax on retail.



The latest example is digital asset treasury companies, where insiders invest at or below NAV in private raises while everyone else invests at a fat premium on public exchanges.&nbsp;



In many cases, retail investors are getting stuck with the bill for paying bankers, asset managers and stock — the very things that crypto was meant to disintermediate.&nbsp;



In other cases, they’re providing exit liquidity for executives of failed shell companies.



In a few cases, as Andrew Keys explains <a href="https://youtu.be/KHGEZf0TnzY?si=eyQitqf1cAG8_MyA&amp;t=828">here</a>, they&#8217;re creating a “honeypot for class action lawsuits.”



This all seems dangerously contrary to the spirit of an industry that started with the fair launch of Bitcoin and the Ethereum ICO, open to all for 42 days.



The original high-minded ideals of that era still stand as a counterweight to the scams, grifts and insider games we’re currently suffering.&nbsp;



These ideals can still prove transformational — just as the telegraph did, in its own way, even while falling short of its promise to end misinformation.



&#8220;Professor Morse&#8217;s telegraph is not only an era in the transmission of intelligence,” The New York Herald opined in 1842, “but it has originated in the mind an entirely new class of ideas, a new species of consciousness.&#8221;



Crypto is similarly meant to be an entirely new class of money and new species of investment — one that can not only democratize investing, but change the world.



These are high-minded ideas, worthy of pursuit.&nbsp;



But, to paraphrase Edmund Burke, we might want to see what people do with their new financial freedom before we risk congratulations.



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Decentralization in progress: High ideals and hard realities

Fundamental insights and behind the scenes perspectives from the industry’s key operators and innovators

Empire

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Investigates the macro landscape as the laws of investing are being rewritten, helping investors adapt to a rapidly changing environment.

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Detailing Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Creatures crawl in search of blood / To terrorize y&#8217;all&#8217;s neighborhood” — Michael Jackson, Thriller
</blockquote>



<a href="https://www.fincen.gov/sites/default/files/shared/FinCEN-Notice-CVCKIOSK.pdf">Crypto remains the best money to steal&nbsp;</a>



When Bitcoin Depot went public via a SPAC in 2023, investors marvelled at its ability to charge as much as 25% to use its ATMs.



Now we know why: Bitcoin ATMs are elder-fraud machines.



A recent FinCEN notice details how “convertible virtual crypto kiosks” (CVCs) enable crime by giving scammers a quick way to cash out.



“The speed and difficulty of reversing CVC transactions makes CVCs an attractive payment mechanism for scammers,” it reports. “This generally differs from traditional bank or wire transfers where a payment transaction can remain pending for one to two days before settlement.”&nbsp;



Two-day wire transfers seem like archaic technology, but they’re also a useful deterrent to fraudsters who want their money instantly and irrevocably.



The risk of a bank compliance officer blocking or reversing a transfer is such that fraudsters go through the trouble of convincing their targets to withdraw cash from their bank account, find an ATM and convert the cash to crypto.



These are usually older people: “More than two of every three dollars reported lost to fraud using CVC kiosks was lost by an older adult.”



People like to say crypto is bad to steal because blockchains are transparent, but crypto ATMs provide a vivid counterexample: criminals converting fiat to crypto, because that’s the only way to steal it.&nbsp;



In theory, transparent blockchains should be bad for crime, but revealed preference proves the opposite. Instant, irreversible payments are so helpful to criminals that they pay ATM fees as high as 25% to get their stolen money onchain.



Their money is safer there, even without taking price risk: “Scammers will also often quickly swap scam proceeds into a stablecoin,” FinCEN reports.



Happily, many states have <a href="https://www.governing.com/policy/fearing-scams-states-add-regulations-to-crypto-atms">started regulating</a> crypto ATMs, making them less useful for fraud.



But the revealed preference of criminals paying 25% to use them remains instructive.&nbsp;



<a href="https://www.ft.com/content/d06f66c0-aaf0-42b3-89ad-7db0d0e73946">Crypto dad logic</a>



Financial historian Brendan Greeley reminds us that “over the long run you can’t force people to use a deflationary currency; they either come up with a local workaround or they revolt.”



The founding principle of crypto is that fiat money is inflationary and people should be able to opt out of it.&nbsp;



Greeley thinks of crypto as “finance as if the past never happened.”&nbsp;



He doesn’t mean it as a compliment, but that happens to be my favorite thing about crypto — a chance to rethink finance from first principles.



One thing that doesn’t need rethinking, however, is hard money.&nbsp;



Greeley says he is frequently confronted by “crypto dads,” who have made money in bitcoin and therefore think that hard money is a good form of currency: “To them, an idea can be tested with a bet. If it pays off, they were right.”



By that logic, hard money is good because bitcoin is hard money and the price of bitcoin has gone up.



But hard money, Greeley explains, has only ever benefited pre-modern merchants who traded across oceans and creditors collecting on loans. “For everyone else, hard deflationary standards have been a grinding punishment.”



William Jennings Bryan accusingly labelled the gold standard a “crown of thorns” and a “cross of gold” because hard money favors creditors over debtors and the rich over the poor.



That’s not an indictment of bitcoin — bitcoin is a much needed way for people to voluntarily opt out of fiat. 



But it’s an illogical leap to then conclude that hard money should replace fiat money.



Greeley concedes that if he were a betting man, he would buy bitcoin.



But his focus is elsewhere: “As an American academic who worries about deflation…all I want is for bitcoin to stay the hell away from the dollar.”



I get the logic: I’m an American newsletter writer and occasional betting man who has bought bitcoin because I’m worried about inflation.&nbsp;



But I, too, want it to stay away from the dollar — because the only thing worse than inflation is deflation.



Fiat remains the worst form of currency, except for all the others.



<a href="https://mcga.com/news/trump-media-group-cro-strategy-to-acquire-cro-digital-asset-treasury">The inverted logic of DAT investing</a>



Crypto.com is investing in a digital asset treasury company that will buy tokens issued by Crypto.com.&nbsp;&nbsp;



This creates some unusual incentives.



Investors typically want to buy an asset as cheaply as possible, but Kris Marszalek, CEO of Crypto.com, seems to be taking the opposite approach — his <a href="https://x.com/kris/status/1960502232362967214">public enthusiasm</a> for his new DAT, co-founded with the Trump Media Group, suggests he’s attempting to pay as much as possible for the CRO tokens the DAT plans to buy.&nbsp;



CRO is the native token of Cronos, a nominally decentralized blockchain that <a href="https://www.cryptoninjas.net/news/crypto-com-sparks-chaos-pushes-vote-to-re-mint-70-billion-cro/?utm_source=chatgpt.com">remains controlled</a> by its developer, Crypto.com.



In addition to the $200 million already committed for that purpose, “the company will also have access to a further $5 BILLION LINE OF CREDIT from Yorkville to, yes, you guessed it right, acquire even more CRO.”



Telling everyone how much you’re going to buy something before you can buy it is an unorthodox investing strategy that would seem to benefit the asset (CRO, partially owned by Crypto.com) far more than the buyer of the asset (the CRO DAT, also part-owned by Crypto.com).



It also seems like a tacit admission that Marszalek knows he’s playing a greater-fool game.



Despite its integration with Crypto.com, the Cronos blockchain has not gotten much traction: The chain collected just <a href="https://defillama.com/chain/cronos?tvl=false&amp;chainFees=true&amp;groupBy=monthly">$58,000 in fees</a> last month.&nbsp;&nbsp;



That appears to give CRO very little value, so it makes sense for Marszalek to focus on doing something about its price: “The mission of Trump Media Group CRO Strategy,” he <a href="https://x.com/kris/status/1960321095309144508">explained</a> on X, is to enhance shareholder value by maximising THE FLYWHEEL EFFECT: more funds raised, more CRO bought, prices appreciate, allowing for more funds to be raised and more CRO to be bought.”



This, I think, further explains his pay-as-much-as-you-can investing strategy: When price is the only source of an asset’s value, the more you pay for it, the better.



That appears to be his plan.



The SPAC’s fundraising, Marszalek notes, “will add up to an UNPRECEDENTED amount of DRY POWDER for any Digital Asset Treasury company, exceeding the total market cap of<a href="https://x.com/search?q=%24CRO&amp;src=cashtag_click"> $CRO</a> as of the time of announcement.”



Smart!&nbsp;



Promising to spend more on an asset than its entire market cap is a surefire way to make the price of the asset go up.



CRO has in fact doubled this week, so mission accomplished, I guess.



Even more remarkable, however, is CRO’s fully diluted valuation (FDV), which is now up to $31 billion — 43,000x its annualized revenue!&nbsp;



In addition to doubling this week, CRO’s FDV recently tripled when Crypto.com <a href="https://unchainedcrypto.com/burned-tokens-are-gone-forever-right-for-70-billion-cro-maybe-not/">decided</a> to re-issue 70 billion CRO tokens that were “burned” in 2021.



Projects typically burn tokens by sending them to an address from which they are unretrievable, thereby permanently reducing the maximum supply of the token.



Cronos, however, appears to be a magical place where deceased tokens can rise from the grave.



Token holders were understandably <a href="https://x.com/Wyll_BBK/status/1896452917722296775">unhappy</a> to have their investment diluted by 70%.



But the CRO token traded up on the news — so maybe crypto really is a magical place where normal investing rules don’t apply?



If the new DAT really does have $5 billion to spend on CRO tokens, I guess that could work out for all of its holders — for a trade at least.



But here’s some old fashioned investing advice: Beware of tokens that come back from the dead.



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Thursday links: ATMs, dad logic and zombie tokens

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“He that is neither one thing nor the other has no friends.”



— Aesop’s Fables
</blockquote>



When President Reagan announced his Strategic Defense Initiative (SDI) in a televised address from the Oval Office, it was met with derision.



Scientists explained that a plan to shoot down Soviet missiles from space using lasers and particle beams was simply impossible with 1980s technology.



The press sarcastically renamed his plan “Star Wars,” because it sounded as fictional as the soon-to-be-released Return of the Jedi.



Only one constituency took it as seriously as President Reagan: the Soviets.



Soviet scientists doubted their American counterparts could pull it off. But they couldn’t rule it out either, and the Kremlin wasn’t willing to take a chance that they might.



The Soviets saw Reagan’s plan as an existential threat — so much so that it forced them to the negotiating table.



“SDI is a key reason that the Soviets have been willing to negotiate cuts in offensive weapons,”&nbsp; the US Secretary of State <a href="https://www.latimes.com/archives/la-xpm-1986-10-13-mn-3014-story.html">said</a> at the time.



By taking SDI so seriously, the Soviets transformed Reagan’s idea from sci-fi daydream into political reality.



“If the Russians keep appearing alarmed by SDI,” a <a href="https://scholarship.law.nd.edu/cgi/viewcontent.cgi?article=1309&amp;context=jleg&amp;utm_source=chatgpt.com">contemporary study</a> concluded, “it will be politically impossible for Congress to vote it down.”



In other words, the magnitude of the Russian response to SDI made SDI seem more credible to Americans.



Now, something similar may be happening with stablecoins.



In support of the GENIUS Act, President Trump <a href="https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/?utm_source=chatgpt.com">has promised</a> that “stablecoins will play a crucial role in ensuring the continued global dominance of the US dollar as the world’s reserve currency.”



As commonplace as that sentiment has become, there are reasons to be skeptical: The dollar is the world’s reserve currency because of America’s deep capital markets, predictable rule of law, independent central bank and trusted institutions.



If the world were to lose faith in these things, even trillions dollars of demand for US debt wouldn’t keep the dollar afloat for long.&nbsp;



Europe, however, has reacted to the GENIUS Act as if stablecoins are not only a lifeline for the dollar, but an existential threat to the euro.



Last week, the Financial Times <a href="https://www.ft.com/content/8ad60169-d1e5-4d2c-b928-d53d668f0ec6">reported</a> that EU officials are now “rethinking plans for the digital euro” because the GENIUS Act makes stablecoins seem more threatening.&nbsp;



Specifically, EU officials are “considering running a digital euro on a public blockchain such as Ethereum or Solana rather than a private one.”



That is no small change for Europe, where some countries limit cash transactions to just €1,000, few object to the idea of CBDCs and law enforcement has long been prioritized over financial privacy.



But now it’s going to put their sovereign currency on Solana? To mix with memecoins???&nbsp;



Europe must really be worried.



One ECB official recently <a href="https://www.ecb.europa.eu/press/blog/date/2025/html/ecb.blog20250728~e6cb3cf8b5.en.html?utm_source=chatgpt.com">warned</a> that “without a strategic response,” stablecoins could undermine Europe’s banking system, threaten its financial stability and even lead to “geopolitical dependency.”



(Note to Europe: Can we call this strategic response the Stablecoin Defense Initiative? Please???)



The ECB’s most senior official, Christine Lagarde, has similarly <a href="https://www.idnfinancials.com/news/55648/christine-lagarde-stablecoins-threaten-national-sovereignty">warned</a> that if stablecoins are left unchecked, “central banks will struggle to influence the economy through monetary policy.”



If you still need evidence of the power of blockchains, I think we now have it.



Blockchain-based dollars have tied the EU in knots, with monetary officials now trying to figure out a digital euro that’s good enough that people will use it instead of dollar-denominated stablecoins, but not so good that they use it instead of bank deposits.



That’s a tough needle to thread — tougher even than hitting an incoming missile with a laser beam from an orbiting satellite.&nbsp;



The EU’s plans for a CBDC have been half-hearted, including ways to limit their usage, and its stablecoin legislation is similarly hedged, requiring issuers to hold deposits with banks.



The economist Luis Garicano <a href="https://www.mercatus.org/macro-musings/luis-garicano-future-digital-money-and-lessons-learned-history-euro">says</a> that a not-too-good-not-too-bad digital euro is “an unusual design problem” that leaves the ECB in “no man’s land.”



He characterizes the central bank’s position as, “we’re scared of stablecoins, but we don’t want to give a big advantage to a CBDC,” either.&nbsp;&nbsp;



This seems unlikely to end well: A digital euro that’s half-stablecoin, half-CBDC risks the fate of Aesop&#8217;s bat — by trying to be everything to everyone, it will be useful to no one.



But is Europe right to be that worried?



President Trump’s claim that stablecoins will significantly extend the dollar’s dominance sounds no more plausible to me than Reagan’s claims about SDI.



Back then, the scientists were proven right — Reagan’s lasers and particle beams were science fiction.&nbsp;



Even now, 40 years later, President Trump’s plan for a “Golden Dome” is not much more feasible.&nbsp;&nbsp;



But Star Wars still had a real effect.



And it demonstrated that if nothing else, the strength of the reaction to a threat reveals the size of the interests it threatens.



For Europe, we now know, stablecoins are as threatening as lasers from space.



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Europe’s monetary Star Wars moment

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;What&#8217;s in a name? That which we call a rose / By any other name would smell as sweet.&#8221; — William Shakespeare, Romeo and Juliet
</blockquote>



The thing about pancakes is that they’re really just cake: flour, eggs, sugar, and butter, topped with more sugar.&nbsp;



But because they’re flat and branded as breakfast, it’s socially acceptable to eat them in the morning.



This is kind of weird: Even your anything-goes dad wouldn’t serve you leftover birthday cake for breakfast, but he wouldn’t think twice about making you pancakes.



Lawyers and accountants recognize this as a question of substance vs. form: The form of pancakes is breakfast food, but the substance is dessert.



In the Roman Storm trial, for example, the prosecution asked jurors to ignore the form of Tornado Cash — non-custodial, immutable smart contract code — and instead focus on the substance of what it enabled: money laundering.



The economic reality and true intent of an arrangement, they essentially argued, matter more than the technical form it takes.



In short, prosecutors accused Storm of using a technical innovation to cleverly sidestep the law.



This is what the rest of crypto is often accused of, too.



In substance, skeptics say, tokens are stocks, protocols are companies, labs entities are c-suites, staking yields are dividends, token burns are buybacks, airdrops are sometimes IPOs, DAOs are general partnerships, and stablecoins are bank accounts.



It’s often hard to argue with.



Crypto people commonly talk about their tokens as if they’re shares in for-profit companies, for example, and expect those profits to be returned to them in staking yields or token burns.&nbsp;



But they don’t want their tokens regulated like stocks…because they’re tokens.



Lab entities first get their tokens onto exchanges via an airdrop, but don’t want to file an S-1 with the SEC.



Many DAOs choose not to incorporate, but they all want the corporate benefit of limited liability.



Stablecoins are celebrated as a means for anyone, anywhere to have a US bank account, but we don’t want them subject to KYC checks.



This begs the questions: Is the form of crypto just a way to do the same, old finance things but without the rules?



Or is crypto something substantively new?



There’s no one answer, of course.



BTC, ETH, SOL, DOGE, AAVE and UNI, for example, are genuinely something new: tokens that accrue value from networks that are not controlled by anyone.



The VC firm a16z crypto helpfully <a href="https://a16zcrypto.com/posts/article/defining-tokens/#section--4">categorizes</a> these as “network tokens,” and contrasts them with “company-backed tokens,” which “derive value from an offchain application, product, or service operated by a company.”



These, it notes, “have historically mostly been used in the US to unlawfully circumvent securities laws.”



In other words, some tokens really are unregistered securities.



a16z’s distinction supports the substance-over-form view: Just because something takes the form of a token doesn’t make it exempt from securities or banking laws.



A further crypto category they list — “security tokens” — makes this point even more distinct: A tokenized security is still a security, even when it takes the form of a token.



By that logic, tokens that are substantively stocks should be regulated as such, stablecoins should be regulated like bank deposits, some airdrops should register with the SEC, and — most importantly — pancakes should only be served for dessert.



Pancakes remain cake, whatever name you call them by and whatever form you serve them in.&nbsp;



But when it comes to the law, sometimes form is substance.



Roman Storm’s many defenders argue that Tornado Cash’s form is what really matters: Because the code was autonomous and permissionless, Storm wasn’t “transmitting” anything and had no practical ability to stop or redirect transactions.



His attorneys would likely say the government mischaracterized the substance of Tornado Cash by shoehorning a peer-to-peer protocol into the legal definition of a financial middleman.



The defense might even have argued that the government implicitly conceded this point when it chose to prosecute Storm not for writing code, but for operating the Tornado Cash protocol.



Storm said the jury’s partial verdict was “a big win” for him, and that he expects his conviction of operating a money transmitter to be overturned.



But the guilty verdict might serve as a warning that crypto will ultimately be judged by the substance, and not just the form, of what it creates.



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