Key takeaways

• Bitcoin is being compared to gold and silver in terms of market behavior, indicating its stability and potential growth.
• Tether’s decision to hold gold instead of fiat suggests a belief in gold’s superior returns.
• Gold’s value could be significantly higher if aligned with overall monetary aggregates.
• China’s preference for silver over gold reflects cultural and economic influences.
• The silver to gold ratio is expected to decrease, indicating potential gains for silver.
• Capital is shifting from crypto to precious metals, affecting Bitcoin’s market interest.
• DeFi platforms are gaining trading volume as traditional CFD markets remain opaque.
• The Clarity Act’s passage is unlikely, impacting crypto regulation.
• US crypto products struggle due to unfavorable regulatory conditions.
• Foreign companies show interest in the US crypto market, expecting regulatory changes.
• Bitcoin’s attributes of trust and transparency distinguish it from gold.
• Institutional capital may eventually migrate to DeFi, recognizing blockchain benefits.
• DeFi is poised to disrupt traditional brokerages by creating new market structures.

Guest intro

Mike Cagney is CEO of Figure Markets, the blockchain-native trading and DeFi platform from Figure Technology Solutions (Nasdaq: FIGR). He co-founded and previously served as CEO of SoFi, and at Figure he launched Democratized Prime, a DeFi lending protocol enabling high-yield on-chain assets like mortgages for cross-collateralization. Figure Markets also introduced the first SEC-effective public security, a fixed-income stablecoin called $YLDS.

Bitcoin’s market behavior and comparisons

• “Bitcoin is showing signs of life and is being compared to gold and silver in terms of market behavior.” – Mike Cagney
• Bitcoin’s stability is likened to gold and silver, suggesting a potential for long-term growth.
• The comparison to gold and silver highlights Bitcoin’s increasing acceptance as a stable asset.
• “Every time people keep saying that silver is a speculative bubble… gold continues to march higher.” – Mike Cagney
• Understanding Bitcoin’s dynamics requires knowledge of its relationship with traditional assets.
• Bitcoin’s market performance reflects broader trends in asset stability and investor confidence.
• The comparison underscores Bitcoin’s role in diversifying investment portfolios.
• “Bitcoin is a stable coin… it’s Bitcoin is a stable coin.” – Mike Cagney
• Bitcoin’s behavior aligns with historical patterns seen in precious metals.
• The asset’s stability positions it as a hedge against market volatility.
• “Well, you know, the title said Bitcoin shows life and I looked down and here we are back at 89,000.” – Mike Cagney
• Investors view Bitcoin as a digital alternative to traditional hedges like gold.

Gold and silver market insights

• Tether’s asset allocation strategy favors gold over fiat, indicating a belief in gold’s superior returns.
• “What they’re clearly saying is that they think that the marginal return on gold is gonna be outperforming.” – Mike Cagney
• Gold’s potential value is linked to monetary aggregates, suggesting a higher valuation.
• “Gold could be valued significantly higher based on its relationship to overall monetary aggregates.” – Mike Cagney
• China’s guidance to buy silver reflects a cultural preference and economic strategy.
• “China has had for a while now guidance to their citizens to buy silver not gold.” – Mike Cagney
• Silver is viewed as a long-term investment with potential for significant returns.
• “Silver is viewed as the ultimate stat arbitrage, particularly in the long term.” – Mike Cagney
• The silver to gold ratio is predicted to decrease, indicating potential gains for silver investors.
• “The silver to gold ratio is expected to decrease to the thirties.” – Mike Cagney
• Raising reserve requirements at the CME increases volatility, impacting the silver market.
• “Raising reserve requirements at the CME increases volatility and can positively impact the silver market.” – Mike Cagney
• Rumors of silver scarcity due to Chinese export restrictions are unfounded.
• “Rumors of silver scarcity due to Chinese export restrictions are unfounded.” – Mike Cagney

Capital shifts and market dynamics

• A significant capital rotation from crypto to precious metals is occurring.
• “There is a significant capital rotation from crypto to precious metals.” – Mike Cagney
• The ongoing rally in gold and silver suppresses interest in Bitcoin and other crypto.
• “The ongoing rally in gold and silver will likely continue to suppress interest in Bitcoin.” – Mike Cagney
• Trading volume is shifting to DeFi platforms as CFD markets remain opaque.
• “The CFD markets are opaque, but a significant amount of trading volume is shifting to DeFi platforms.” – Mike Cagney
• Crypto tokens representing physical assets can enhance market transparency.
• “Crypto tokens representing physical assets like gold can be used as collateral for trading other assets.” – Mike Cagney
• The next use cases for crypto trading will emerge from the metals market’s transparency.
• “The next set of use cases for crypto trading will likely emerge from the opaque metals market becoming more transparent.” – Mike Cagney
• The Clarity Act has a low chance of passing, affecting crypto regulation.
• “The Clarity Act has a very low chance of passing in its current form.” – Mike Cagney
• Media portrayal of the Clarity Act’s progress is overly optimistic.
• “The media portrayal of the Clarity Act’s progress is overly optimistic compared to the reality on the ground.” – Mike Cagney

Regulatory challenges and opportunities

• The SEC was surprised by Senate bill language limiting their authority.
• “The SEC was caught off guard by language in the Senate bill that limits their authority.” – Mike Cagney
• Political climate hinders meaningful agreements on crypto regulations.
• “The current political climate makes it unlikely for meaningful agreements on crypto regulations.” – Mike Cagney
• Bitcoin businesses may receive exempted relief due to their simplicity.
• “Bitcoin businesses are likely to receive exempted relief due to their simplicity compared to broader digital trading businesses.” – Mike Cagney
• The promise of tokenization is restrained in the US due to regulatory challenges.
• “The promise of tokenization is being restrained in the US due to regulatory challenges.” – Mike Cagney
• The crypto industry must demonstrate mainstream adoption within three years.
• “The crypto industry must demonstrate massive mainstream and institutional adoption within the next three years.” – Mike Cagney
• Improved user experience is critical for crypto’s broader adoption.
• “The need for improved user experience in crypto is critical for broader adoption.” – Mike Cagney

US crypto market and foreign interest

• The US regulatory environment for crypto is unlikely to improve soon.
• “The regulatory environment for crypto in the US is unlikely to improve significantly in the near future.” – Mike Cagney
• US crypto products struggle due to lack of favorable regulatory conditions.
• “US crypto products are struggling due to a lack of favorable regulatory conditions.” – Mike Cagney
• Foreign companies are interested in the US crypto market, expecting regulatory changes.
• “Foreign companies are increasingly interested in entering the US crypto market due to perceived regulatory changes.” – Mike Cagney
• Investment focus is shifting abroad due to international opportunities.
• “Investment in the US crypto market is not a priority compared to international opportunities.” – Mike Cagney
• Bitcoin can be built upon, but other use cases face challenges.
• “The overwhelming opinion is that while Bitcoin can be built upon, many other use cases are currently impossible.” – Mike Cagney
• US exchanges offer leveraged trading, but it’s less effective than perpetual swaps.
• “US exchanges can legally offer leveraged trading through bespoke products, but these are not as effective as perpetual swaps.” – Mike Cagney

Integration of traditional finance and crypto

• Traditional finance and crypto are converging, allowing real-time settlements.
• “The traditional asset world and crypto worlds are converging, allowing for real-time liquidations and margin settlements in stablecoins.” – Mike Cagney
• Cross margining is crucial for adoption in the trading space.
• “Cross margining is a critical factor for adoption in the trading space.” – Mike Cagney
• Metals markets are likely to continue moving higher in the mid to long run.
• “The metals markets are likely to continue moving higher in the mid to long run.” – Mike Cagney
• We are in a commodity super cycle with significant inflows across the sector.
• “We are in a commodity super cycle with significant inflows across the sector.” – Mike Cagney
• Tether Gold is becoming a significant player in the gold market.
• “Tether Gold is becoming a significant player in the gold market.” – Mike Cagney
• Physical demand from Asia drives gold prices.
• “The physical demand for gold from Asia, particularly China and India, is a major driver of gold prices.” – Mike Cagney

Bitcoin and gold relationship

• The discussion of gold versus Bitcoin is misguided; both assets complement each other.
• “The discussion of gold versus Bitcoin is misguided; both assets complement each other.” – Mike Cagney
• The focus on metals may shift back to Bitcoin in the near future.
• “The focus on metals may shift back to Bitcoin in the near future.” – Mike Cagney
• The rise in gold prices could elevate Bitcoin’s price ceiling significantly.
• “The rise in gold prices could elevate Bitcoin’s price ceiling significantly.” – Mike Cagney
• Trading interest gravitates towards lagging assets, following historical patterns.
• “The trading interest in financial markets tends to gravitate towards lagging assets, which is a historical pattern.” – Mike Cagney
• Bitcoin has attributes that gold will never possess, particularly in trust and transparency.
• “Bitcoin has attributes that gold will never possess, particularly in terms of trust and transparency.” – Mike Cagney
• Trust undermines blockchain’s value with non-native digital assets.
• “Trust is a critical factor that undermines the value of blockchain when dealing with non-native digital assets.” – Mike Cagney

DeFi’s potential and challenges

• We originated $23 billion of loans on-chain, focusing on DeFi applications.
• “We originated $23 billion of loans on-chain, focusing on making these loans accessible in DeFi applications.” – Mike Cagney
• Yield becomes more interesting when Bitcoin is trading sideways.
• “Yield becomes more interesting to investors when Bitcoin is trading sideways.” – Mike Cagney
• Significant capital in traditional finance could be better served in DeFi.
• “There is a significant amount of capital in traditional finance that could be better served in DeFi.” – Mike Cagney
• Institutional capital will eventually recognize blockchain benefits and migrate to DeFi.
• “Institutional capital will eventually recognize the benefits of blockchain and migrate to DeFi.” – Mike Cagney
• Traditional rating systems for DeFi pools may attract institutional money.
• “To attract institutional money to DeFi, we may need to implement traditional rating systems for DeFi pools.” – Mike Cagney
• Democratized Prime allows unique cross-collateralization of assets.
• “The democratized prime model allows for unique cross-collateralization of assets.” – Mike Cagney

Lending and capital market innovations

• We are originating upwards of a billion dollars in loans monthly.
• “We are originating upwards of a billion dollars in loans monthly.” – Mike Cagney
• The protocol democratizes access to lending opportunities previously exclusive to major institutions.
• “The protocol democratizes access to lending opportunities that were previously exclusive to major financial institutions.” – Mike Cagney
• Democratized Prime is bringing billions of yielding assets into DeFi protocols.
• “Democratized Prime is bringing billions of yielding assets into DeFi protocols.” – Mike Cagney
• DeFi is poised to leapfrog traditional brokerages by creating a new capital market structure.
• “DeFi is poised to leapfrog traditional brokerages by creating a new capital market structure.” – Mike Cagney
• The new equity offering on blockchain eliminates the need for traditional intermediaries.
• “The new equity offering on the blockchain eliminates the need for traditional intermediaries.” – Mike Cagney

Emerging blockchain equity markets

• A new equity capital market native to blockchain is emerging, more significant than tokenizing existing stocks.
• “A new equity capital market native to blockchain is emerging, which is more significant than merely tokenizing existing stocks.” – Mike Cagney
• The growth of new yielding assets on-chain is expected to accelerate.
• “The growth of new yielding assets on-chain is expected to accelerate, with an addition of $1 billion a month.” – Mike Cagney
• Access to liquid real-world assets that generate yield is the future of finance.
• “Access to liquid real-world assets that generate yield is the future of finance.” – Mike Cagney