Digital Credit, Jane Street, and the Next Bitcoin Bull Market

Hey, everybody. Welcome back this week. I have on Parker from Apex Parker. Welcome.

Thanks, Tommy Joe. Absolutely. Glad to have you. Let's start off with digital credit and digital

money. It's been a been a hot topic as you're very aware of. Maybe for the audience that doesn't

necessarily know as we've talked about digital credit a number of times, but what exactly is digital

money from your perspective? Yeah. So, you know, I think Sailor kind of coined the term,

but it's essentially money that's backed by Bitcoin. You know, if you string it all the way back,

right? So Sailor talks about Bitcoin as digital capital. And then debt issued against said

Bitcoin as digital credit. And money today, fiat money is inherently debt based. So you can base

instead of the money based on the debt of a government or the debt of maybe even a corporation.

You could base that debt on Bitcoin. And so digital money is kind of the, I guess the second order

from Bitcoin. And it's candidly not a new idea. I mean, if you look at the look in DeFi ecosystem,

you've had die for a long time. Now Sky, I guess. And they had this idea of like, hey, let's create a

stable coin that's fully on chain native, right? It's backed by assets on chain. They mostly backed

it with ETH. But over time, ETH is kind of volatile. They were like, well, let's just back it with

stable coins. And so now Diaz or Sky, I guess, is mostly backed by other stables. So like,

starts to break down a little bit. It's just like, well, you know, whatever. But from the very

early days, there's been this dream to create a dollar-denominated asset that's backed by Bitcoin.

And Luna should kind of try to do that in the end of days, you know, for then they started

rapidly accumulating Bitcoin, but you know, too little too late. But I think here what you have is

the opportunity to really give money or US dollar-denominated money backed by Bitcoin a real shot.

And it's really exciting because you've got these public companies that have very transparent

balance sheets. They have all the audits. They have all the safeguards in place. They're even more

transparent than the average public company, right? They have dashboards that stream their metrics

live. And you can use that and debt issued against that to create money. And it's probably the best

form of Bitcoin-backed money that we're ever going to get. And so as Bitcoin vol continues to drop,

I think the viability of Bitcoin-backed money continues to go up. And that's ultimately what Apex is,

but I'll stop there. Yeah, no, that was a great high level overview. And there's a lot of

different questions in Topics that I want to go into on that. But I guess maybe first we can

backtrack a little bit. I kind of want to learn more about you. What you're doing,

you can get into Apex and everything else in a little bit. How did you even get into the DeFi

space and Bitcoin space and this to begin with? Sure. So I'm going to go back quite a ways.

So I was homeschooled growing up. And that meant that I had a bit of a kind of non-standard alternative

education of sorts. Always a curious guy. So I remember when I was 12 years old, my dad gave me

Hayek's road to surfdom. So I like to say I became an Austrian economist when I was 12.

And I have this vivid memory in my head of my sisters at swim meet. I didn't want to go to the

swim meet. So I'm sitting in the hot car in the Texas sun just like reading these pages. You

know, this is amazing as a 12 year old. And so from a very early age, I think I had this kind of

different lens to view the world, maybe standard for Bitcoiners, but different from like the average

kid out there. So fast forward, you know, I went through high school, got into finance,

had a Maryland internship in high school, went to university Texas. I kind of did the traditional

finance course, worked at an investment advisor, about two billion dollar institutional asset

manager after school. And it was in 2017 that I started learning about crypto, learned about

Ethereum first and got into my CEOs. And then in 2018, really started to dive down the Bitcoin

rabbit hole. So kind of like started Ethereum and then the funnel was into Bitcoin and really

started to dig deep. And so once I understood what Bitcoin was about, that's kind of when things

clicked. And it was kind of this meshing of the Austrian background, this kind of libertarian,

free money, free markets view of, you know, the economy and ultimately the world and Bitcoin. And

so once those two kind of got together, I was like fully hooked. So 2018, like 2018, I joined

Kraken, kind of depths of the bear market. And so I was at Kraken for about six, six and a half

years. And all through that time, obviously getting really deep into Bitcoin, learned about DeFi,

quite a bit. It was playing around with the DeFi apps, early DeFi apps, you know, compound,

Ave, you just swap, got into Salona, pretty early. It was actually Ryan Gentry, you know,

well known Bitcoiner that got me into Salona. And so just, you know, kind of like, obviously,

love Bitcoin, Bitcoin's great, but you know, looking at some of the other ecosystems as well.

And so after being at Kraken for six and a half years, it was early last year, basically a year

ago, that means some former Krakenites launched the first non Bitcoin debt. So we launched a Salona

debt. DFDV is the ticker symbol there. And started really digging into this kind of debt space.

Obviously, we'd see what MicroShredG had done. We thought there's an opportunity on the Salona

side. No one was really doing it yet in the US. And so we really jumped in head first. And

I've kind of been in this space since then. Nice. Very cool. Well, I guess is Ryan a Salonable.

I would not have thought that. I won't, I won't out him anymore than I already have. So

fair enough. Yeah. Well, yeah, it's cool. Cool hearing your background. I mean,

obviously some things I align with you very closely with. And then this Salona side may be

not as much, but we can still be friends, of course. Yeah, so I want to start talking a lot about

Apex. But I guess first, you know, you brought up the idea of, okay, there's been a lot of

trials over the years of trying to create like this Bitcoin backed stablecoin one way or another.

I guess like, can you elaborate on like why that's even an interesting thing to pursue?

Yeah. So, you know, ultimately, you can put stablecoins on a blockchain, right? I think

Salona is like, you know, one of the best blockchains super fast, super cheap. You can pop

stables around for, you know, nothing on the weekend. My, my open clock and send your open

closet money, whatever, right? But the problem still remains that at any point in time,

a fiat-denominated asset can be frozen. It's not censorship resistant. And so,

you know, a lot of people like Tether, even though Circle and USDC is, you know, a little more

regulated or onshore. Don't really know exactly what that means, but I guess it's genius compliant

now. But people still prefer Tether. And that's because it is offshore and people perceive it to

have a few more protections. But if you're the Iranian government right now, you know, or you're

Maduro and the Venezuelan government or the Russians or an increasingly large number of

people in countries, your money can just be turned off. You know, the treasure department can just

or any of the US federal agencies can just reach out to Tether and say, hey, we want you to

freeze these addresses. You know, these bad guys turn them off and they'll do that. And so,

even though the rails are better, they're faster, they're cheaper, they're, you know,

pseudo-nonymous, the fundamental problem still remains on the censorship side. And that is

anyone at any time can have their money shut off from them. And you don't have to just be in

the third world country. You could also be protesting, you know, COVID vaccines in Canada as a

trucker, right, and get your bank accounts or stable coins frozen. And so, the idea has been,

well, if we can create a decentralized asset that is pegged to the dollar, then

censorship resistant, right? Can't really be frozen, can't really be seized.

And so, you need to obviously something to back that with. And there have been attempts at

different things. But ultimately, Bitcoin is the most censorship resistant asset, you know,

maybe on planet Earth or it's becoming that, right? Maybe competing with gold or something.

But so, the idea to back money by, you know, with Bitcoin means that it would become much more

censorship resistant, in fact, potentially as censorship resistant as Bitcoin. But still,

you know, dollar-denominated and doesn't have the dollar-denominated volatility that people don't like,

that kind of thing. So, that's kind of the, you know, the drive for it and why there's so much,

I think, pent up demand for it. It's just not really been possible until more recently as Bitcoin

Wall has come down and as there have been issuers of instruments backed by Bitcoin that are,

you know, trustworthy. Yeah, those are great points. And another thing that's obviously very

interesting about this digital money idea, which we're about to get into with APEX is the high yield

that people can theoretically be receiving, whether that's via digital credit or this idea of

digital money. And I guess like from my perspective, it's related to the whole, like, Bitcoin

backstable coin. In my mind, it's like we're living through the monetization of Bitcoin. And so,

if that's the case, then there's probably a lot of demand for an amplified Bitcoin

acquisition or leverage Bitcoin position. And, you know, to get that position on, you have to pay,

you know, you got to get the money from somewhere. And so, that's kind of what's happening with,

you know, strategy and strive, you know, creating the amplified Bitcoin position with the common

equity and then having like the dollar-denominated thing with digital credit. And then obviously,

with that, you know, there's, I would say, I would argue there's a very small percentage of the

world that like even once an amplified Bitcoin position, but they arguably, they, I think they

want it for a good reason. But then the other side of that trade is, is like this digital credit

or digital money idea. And that's where the yield comes from, you know, the people that want the

amplified Bitcoin position or willing to pay that to get the amplified Bitcoin position. So,

maybe can we, can we dive into APEX? What are you building exactly? You know, how does it work?

Yeah, tell us about it.

Sure. So APEX is, you know, I'd say the first large or, you know, relatively large iteration

of digital money backed by digital credit. So, it's an on-chain project, launched on the Ethereum

blockchain. We're coming to Solana very soon. And the idea is we have a brokerage account.

We buy a bunch of stretch, also buy a bunch of data. And we hold it in said brokerage account.

And actually, we're going to pretty soon have that be tokenized. So, we're actually going to

just hold the assets on chain themselves, but we'll still probably hold some in the brokerage

account. And then we wrap that around the stablecoin. And that stablecoin is basically backed

by these instruments. And it's over collateralized by right now. It's about 4% over collateralized.

We hope to grow that over collateralization over time. And so there's, you know,

a bit of a buffer built in if there's some downside volatility on some of these things.

And then we don't hold only preferred. We also do hold some cash, some other

stables that are backed by treasuries, and then some treasuries outright. It's going to

get a bit of a diversified asset base. And so you've got a stablecoin backed by that, which

great, you know, but these are assets are probably a little more volatile than just holding

treasuries. So why would you hold this stablecoin? And the reason you'd hold this stablecoin

is because you can lock it. And so when you lock it or stake it, whatever you want to call it,

it starts to pay you yield. And right now, we're targeting a 13% yield.

And so you actually get a little bit more yield than you would get out of just holding stretch or

say that. And maybe more importantly and more interestingly, for all the people that park cash

within D5, you can do stuff with it. You can lend it out. You can borrow against it. You can pay

for stuff with it. You can do all sorts of interest rate trading and derivatives. So like on

Pundle, you can trade perps against it. You can do options against it. There's this growing,

you know, kind of D5 financial stack. And this just plugs right in. It's completely composable

from day one. And so you can take the stablecoin, which is called APX USD, Apex USD. And you can stake

it or lock it. And then you get APY USD. So APY USD is the yield bearing token. And then you can take

that APY USD and you can just take it all over D5. You can send around. You can just use it everywhere.

24, 7, 365. And so for folks that already have cash on chain, this is a really attractive

option. There's been a growing number of RWAs being issued on chain. So real world asset

backed stablecoins. But the backing is kind of like sometimes it's opaque, it's reinsurance,

it's like data center lending against GPUs, it's like all sorts of stuff. And it's effectively

private credit issued on chain. And we've all seen the issues with private credit. And these

things are, anyways, we're paying maybe six, seven, eight percent. Most of them are. So it's not

that attractive. And there's a lot of opacity that you're taking on there. And so the attractive

thing with Apex is a high yield and a fully transparent backing. You can go look at our dashboard

at any point in time app.apyx.fi. You can see the dashboard and you can see the assets. You know

and you know if they trade down and hey, you know what, the things now 2% under collateralized.

So I shouldn't be willing to buy this for a dollar. I guess you should be willing to buy it for

98 cents on the dollar or something. So is that full transparency, that full kind of auditability,

that full liquidity that people find interesting. And so I think it's certainly a great home for

people that already have dollars on chain that want to get exposure. But I think increasingly,

as more and more money just flows on chain because it's just a better place to do business,

rather than in brokerage accounts or banks or whatever. People are going to see this,

you know, high yield bearing asset and are just going to plug right in as more of these flows come

into the on chain ecosystem. Yeah, one thing that I've started to learn from you and other people

in the space is it seems like the crypto world broadly or maybe specifically like the DeFi world

is like kind of starved of yield just like I guess the traditional financial system is kind of

starved of yield. And so a lot of people's in DeFi, I guess, incorrect me if I'm wrong, but

they tend to run some carry trade where they have an asset, whatever it might be, and they want

to borrow against that asset at whatever the prevailing DeFi rate might be, which actually is

pretty low, especially in comparison to digital credit or digital money. And they'll just run

that trade of borrow against asset at 5% or whatever the rate might be by Apex, you know, digital credit

whatever else. And then just carry that trade over time. Is that correct? Like is that a

booming trade that might be occurring? How are you thinking about it?

Yeah, so there's two pieces there. So one of the big

sources of yield up until recently has been the effectively the perps carry trade. So delta

neutral hedging where you hold say a bunch of Bitcoin and then you short the perps and you capture

the funding rate because typically the funding rate is at a premium. And then you, you know,

that was a source of yield for a long time. I think even like Alameda was running that, you know,

way back in the day. So then there was a big project, Athena that effectively tokenized that and

said, Hey, we're going to be able to stablecoin back by this. And in the early days, they were paying

like 20, 30% yield. People thought it's great. Piled in. They hit a peak of I think 15 billion in

TVL in October. Of course, October 10th happened. TVL started coming down. They're still like

6, 7 billion. So pretty good. But their yields there are now like 5%. So pretty boring. And it's,

again, it's opaque. It's trading strategies. So their dashboard is like, look, we've got capital

in these finance accounts and buy bit accounts. And it's like, all right, hope it's there.

So that's like one aspect of the carry trade is Athena. And there's a couple other like kind of

copycats that are running this similar trade. And then the other side of things. Yeah, there's

absolutely a standard kind of defy carry trade where people will borrow the post Bitcoin as collateral.

Then they'll borrow a stable at, you know, let's call it a 4, 5% rate. And then they can deploy that

elsewhere and capture the net interest margin. And in fact, we think that is people are going to

start doing that on apex as well, where you could say borrow USDC at 4, 5% and then plow it

into apex yielding say 13. And you capture that spread and that maybe 7, 8% spread. And yeah,

maybe there's a little volatility in the underlying. But let's say just always for the most part

trades back to par. And over the course of the year, you've made 8% on a, you know, levered basis.

So you can actually lever that up a few times if you wanted and get more than 8%. You could go

really crazy and get, you know, 20, 30, 40% if you wanted to take on that leverage. So the power

of defy is the ability to, you know, kind of dial up and down the risk based on what you want to do.

And these carry trades are absolutely a pretty common occurrence. You brought up Athena, which I,

I think you had also kind of taught me about. It's interesting to be how there's still like

$6 billion in that trade effectively. Well, why do you think, like, why is that the case? Like,

why don't they move all their money to apex or any sort of digital credit or digital money?

Yeah. Well, it's coming. We're day by day. We've been adding two, three million in assets a day,

which is pretty good for a project that launched three weeks ago. And only launched our transparency

dashboard yesterday. Actually, no, this morning. So people were just trusting us with 50 million

so far. Like, hey, these guys seem legit. Boom. Here's like, you know, millions of dollars.

But I think it's going to be accelerating. But ultimately, stablecoins have two kind of key,

I don't know, factors if you want to call them that. The first one is it's an incredibly sticky

business. So once you kind of, as an issue, we're are able to cross the mental threshold of being

safe in that individual's mind, they're going to hold the asset, you know, probably forever.

It's similar to banks where like, I mean, I still use the bank account, the actual account,

not just the bank, but the actual account for now is 16 years old. In fact, I think my dad's

like still in the bank account somehow should probably take him off that. But like, it's incredibly

banking is incredibly sticky. Stablecoins are the exact same way, incredibly sticky.

And then the other factor and the reason they're sticky is it's so trust based, right? So people

trust that tether's not going to run off with their money and that they are fully one-to-one backed.

People trust circle with the same. And people now, because they've been around for a couple years,

trust Athena, even though it's a little more opaque, there's weird stuff going on.

People say, hey, look, they've been around for a number of years. They've grown quite a bit.

And you know, they went from 15 down to 7 billion in TVL. Peg was maintained.

Yeah, look, they're probably fine. And a 5% yield is like, it's more than treasuries.

And so because of this, you know, this building of trust, it just takes time. A new stable coin that's

been out for three or four weeks, like, is not going to get the flows that a big one is.

But over time, as we build up that trust, we maintain the peg. We communicate with the community.

The flows are going to come. And, you know, we're going to grow. And then, you know, as it grows,

it's a bit of a one-way door, not entirely, but like it is pretty sticky.

Do you think if Athena had anything to do with the October crash, you kind of mentioned that there's

a little correlation there as far as the timing?

I don't know if they were a victim or a perpetrator, but 100%. They were actually the cause.

Because it was USDE, I believe it was, that de-pegged on Binance. Because Binance was using

not the redemption rate for the pricing, but their own market rate. And so someone nuked

the price of USDE, which was a collateral asset meant to always be held at $1. Someone nuked the

price of that. And so as it started to nuk, it started to liquidate everything else,

which then further liquidated that and the price of USDE, like mega-depegged, specifically on Binance,

not elsewhere. And so it's just candidly like, moronic market structure by Binance, which I'm

shocked that they make this mistake. And you know, the year of our Lord 2025, but here we are.

But yeah, they were kind of like at the center of it. Were they the catalyst, though? I don't,

I don't think so. I think it was just Binance made a mistake. Rookie mistake,

you know, I saw all this stuff at Kraken, you know, I just make this mistake way back in the day,

so I can see how it could be done. But yeah, I think maybe more of a victim, but certainly had some

involvement. So like interesting. So like in the case of USDE, like, quote unquote,

deep-pagging, or like the price on Binance going down a lot, was that, was that like another actor

that's like recognized that, oh, Binance is treating this interactly. And therefore, we're going

to try to manipulate the price, manipulate the price lower. And that's what caused it. Or

or was it, or was it something else? Could be. Yeah. I mean, this is not like, it's not the first time

this has happened. All lending markets on DeFi, like nobody pegs a stable like this to the market

price. That's like, I mean, rookie, rookie move, you always use the redemption value because,

you know, these markets can be illiquid sometimes, especially over the weekend.

October 10th happened, you know, like Friday afternoon, like one of the least liquid times.

You know, I put out some pieces, I put out a piece on Twitter that, you know,

I think somebody was fucking around with the market starting, you know, maybe a little bit prior to

October 10th. I've thrown out the name James Street, thrown out maybe some other names. I don't

like want to accuse anybody directly because I don't have any hard evidence, but I certainly wouldn't

put it past anybody to recognize a market mechanism or market mechanic bug or deficiency.

And then just waited for the right opportunity and Trump, you know, reinitiating tariffs on October

10th kind of created that opportunity to exploit the, you know, the bug effectively. Yeah, this entire

the entire industry over the years, you see so many like interesting things go down and it's like,

you don't necessarily know what happened, but it's just a crazy time to watch what's happening.

Yeah, on the topic of digital money, though, and like USDE, and then also, you know, of course,

these these new digital monies that are backed by Bitcoin effectively, and including Apex,

like, how do you guys maintain your peg? Like how do you how do you how do you think about preventing

a DPEG effectively? Yeah, so I think a lot of stablecoins historically have maybe approached this

upside down where the goal is maintain a peg at all costs. And what they ultimately do is sacrifice

the entire protocol to maintain the peg. And then what you have is a catastrophic DPEG when that

peg can no longer be maintained, the whole thing blows up. And you've seen this in currency markets

for like, you know, thousands of years or at least in the last 50 or 100 years, where central banks

used to have hard pegs too. And so I'm still do to say the dollar. But that creates or injects

a lot of brittleness into the system. And so the more favorite approach nowadays with central banks

is to maintain a soft peg. Maybe it's a formal band, you know, hey, we're going to trade it within

this range. Or maybe it's just like a even less soft or less hard like, hey, we're going to

roughly try to maintain some type of parity and just like leave it at that, right? Maintain

discretion. And so for us, yeah, look, we can be over collateralized. You know, we can have a mix

of prefs and treasuries to further reduce the volatility. But ultimately the blowoff valve is

going to be the market price. And so we're always showing the collateralization ratio on the site.

And if the prefs depag by 10% and say we're over collateralized by five and then we've got some

treasuries, maybe we depag by two or three percent. If we try to defend that and say, now we'll just

pay out at one. Then people are going to redeem and dump into the market. And maybe we can survive a

couple percent depag. But if it starts to depag 10 or 15%, then like that could be the end of the

protocol and the whole thing grows up. But if we allow the price to float a little bit. So people

know, hey, look, like this is a fairly stable instrument. But it's not exactly pegged to one.

Then they build that into their models. They don't lever up quite as much. They build in a little

bit of volatility possibility in there. And so we let the market handle the depag risk, not us trying

to in a non-market fashion prevented. So that may reduce growth a little bit because people

realize, hey, it's not the same as USDC. But we think that will contribute to long-term

resiliency for the project. It makes a lot of sense. I mean, I feel like Sailor kind of

had the same realization as he was building STRC from what I could tell. It seemed like it initially

he was like, oh, I want this to be perfectly pegged at $100, which is cool and theory. But maybe it's

not reasonably possible. I'm kind of reminded of an airplane. If you look out the window,

the wings shake a little bit and that's by design. It actually makes it safer than

probably if the wing was perfectly steady. Yeah, I mean, look at buildings made for earthquakes.

Another great example. Yeah, it's a great point. Another thing that you brought up earlier

is Luna. And I've already seen people starting to compare a lot of these things to Luna. And I guess

USD, whatever that was called, USD, how would you argue that this is very different from Luna and USD?

Sure. Well, the biggest one is that project backed the reserve over collateralization was just

their own token. So Luna is more similar to FTX, we're at the exchange, we're just backed by their

own token. In this case, you know, the comparison or the similarity would be like if say you guys were

like issuing preferred backed by your own stock or something, not backed by Bitcoin. So fundamentally,

I don't think it's the same at all as Luna. I mean, towards the end, right, Luna started buying

some Bitcoin, but it was like a fraction of the overall basket. So it was, you know, too little to

wait. But look, the fact that people are looking at this space, scrutinizing it, criticizing it,

pointing out all the risks, I think is fantastic because A, it makes the projects better, more resilient

and keeps them honest. And B, it helps, you know, it helps moderate the growth a little bit to

something that's certainly sustainable, right? So we need, for us, we need the prefs to grow in

liquidity to the point that we can build and buy positions that on their own wouldn't move the

market. So we need to be able to sell some to say meet with some redemptions. And if we can't do

that because we're 50% of the issuance, then, you know, that starts to inject some systematic risk

into our project. And so we kind of need the prefs base to grow as well. And so there's a bit of a

cap. I mean, that cap is constantly growing last week. It's pretty crazy in the growth with stretch.

But so I think all these questions and this focus on risk kind of gives us time and gives

us space time to grow, which is great and not get over our skis, as I say. But I think also it's just

a sign that we're still early. These are bear market times. Like these are the questions that

get asked in a bear market. Nobody asks these questions in a bull market, which is, you know, probably

bad, but it is what it is. So I think, yeah, I welcome all these questions. I think they're very

great criticism. And, you know, people should enter these positions. Why eyes wide open to the risks.

And know what they're getting and, you know, not sell their grandma on risk free 13% because,

you know, it's not that completely agree. I was very well said. So, so you brought up an

interesting point of like, okay, well, for digital money to scale, you need digital credit to scale.

Obviously, you know, going to last, just looking at last week and the success of stretches,

you pointed out like that's starting to definitely work. I mean, the fact that strategy raised

like a billion dollars and one week from stretch in a bear market is pretty incredible.

If stretch and say that and others out there can continue and continue to scale digital credit,

like how big do you think the market for digital money and apex might be?

I mean, I don't know what's the total M2 money supply. Like, if digital capital is, you know,

a $300 trillion market, then digital credit is, I don't know, like a $50 trillion market,

a $100 trillion market, maybe more. And so then money backed by $50 to $100 trillion in credit is,

I mean, I don't trillions, many, many trillions, tens of trillions.

It's going to take a while to get there, but these things also, you know,

they have been faster than you would expect. Maybe slower than the hype would have you believe,

but you know, I find it hard to believe that in 10 or 15 years, all our open claws are going to be

trying to pay each other with bank accounts that we like somehow gave them and like the open

claw got a passport somehow and like did some KYC like, no, it's not going to work. And so I think

digital money, whether that's backed by US treasuries or backed by, you know, digital credit and Bitcoin,

I think digital money is going to grow significantly as our world just goes more digital.

But I think ultimately as faith and government starts to break down, continues to break down,

I think there's actually going to be a greater and greater preference for digital money back by

digital credit and Bitcoin rather than back by, you know, full faith and credit. So I think it's

a massive tam, many, many trillion, tens of trillions, something like that.

Another thing that I've seen you make an ex post about is, is private credit touched on this

briefly earlier, but obviously that's, that's kind of starting to break down if you're following

anything in the traditional financial world. At the same time, digital credit seems to be accelerating.

You know, how do you think about the, the comparing contrast of private credit and digital credit?

I mean, I think it was just pure luck, but like, couldn't have been better timed, right? I mean,

private credit is an alternative source of yield. It's a source of yield designed for people that are

starved for yield. And it has two problems. It's illiquid and it's opaque. Digital credit is an

alternative form of credit with a high yield design for yield-starved investors and it's two strengths.

It has some weaknesses, but it's two strengths are liquidity and transparency. The exact two things

that private credit is falling over on right now. And so I think it's like this kind of match made

in heaven. Like, you know, the, the digital credit guys just started building a bridge into the

mist and then all of a sudden a bridge was being built the other way and they didn't realize it. And

now like we've, you know, we're connecting this bridge here and I think you're just going to see

all this money flowing over because it's a real natural solution. And the knee jerk reaction

to any kind of calamity or crisis is to go somewhere that fixes the problems of the place you just

came from. And so private credit is illiquid and not transparent. Digital credit is liquid and

transparent. I think you're going to see a lot of capital flow across. Yeah. And I think you and

others have pointed out that private credit is already a multi-trillion dollar market despite it,

you know, arguably having some pretty serious risks that, you know, may not necessarily be compensated

by the return that you're getting from private credit. Another thing that I've seen recently

is block fills. They filed for chapter 11 bankruptcy. I think they had like either a hundred to

a hundred to five hundred million dollars of liabilities and only 50 million to a hundred million

dollars of assets. Any thoughts on that? You know, that's also been happening in the space.

Yeah. So I put out another, I put on X-piece. I actually got a quite a bit of traction, but

on February 5th. And my hypothesis there is that February 5th, somebody blew up. Somebody

really big blew up. I think it was probably a Hong Kong-based hedge fund that was trading

I-bit options and, you know, blew up. So who knows? Maybe block fills landed to these guys.

But ultimately, I think probably multiple firms blew up on February 5th. You don't have a move

like that where everything is correlated to one where Bitcoin falls more than Salana and ETH

on the same day. I mean, everything's just nuking double digits. Like that's a blow-up event.

That's a stress event. That's four sellers. And the only time you have four sellers at those

prices on Bitcoin is like someone's getting liquidated. Someone's getting margin-called.

And so I think block fills was just a casualty there. And I think you're going to see probably

a couple others come to the surface. 13 F filings for I-bit for Q1 are due in mid-May,

45 days after the end of the quarter. So we'll know here in about 60 days who else may be blew

up, but I think you're going to see one at least large holder of I-bit, you know, file saying they

no longer hold any I-bit because they blew up. So yeah, block fills was the first. There might

be a couple others. I don't think this is like systemic, but you know, it's just crypto-cab

boys doing crypto-cab boys shit. Yeah, since you work to crack and I kind of want to ask you about

this, like do you think the I-bit and Bitcoin ETFs generally have like significantly changed the

market for the space or is it kind of just another way that people plow a bunch of money into Bitcoin

and doesn't really matter that much? Yeah, I mean, on the one hand, yeah, it absolutely has changed

the space forever. I mean, I-bit is the fourth most liquid options market on planet earth now,

which is wild. It's the only other more liquid options markets are the SPX index options, SPY,

ETF options, and the queues. So basically the S&B 500 and the NASDAQ options market are more liquid

and then it's Bitcoin. So anybody that's like, oh, Bitcoin is this like niche thing is, I mean,

it's just a moronic thing to say at this point. It's one of the most liquid options markets,

derivatives markets too, in the world. And that's after being the ETFs only been out for like,

what, two, a little over two years now. And so the level of growth there is, it's just absolutely

completely off the charts. So in that sense, yeah, it absolutely has changed Bitcoin forever. You're

seeing a lot of these structured products that banks like Morgan Stanley and JP Morgan are putting

out. I dealt with a lot of these structured products back in the day in my Tradify life.

And you know, these things are interesting for average, normal investors that don't have to have

any view on Bitcoin. They can just take a structured exposure to it, right? And that's because

of the derivatives market. And so it all flows back to the I-bit options and is creating so many

additional products that banks and everyone else can trade. On the other hand, though,

you know, price discovery for Bitcoin still happens on exchanges, primarily in the Purps market,

primarily offshore, on Binance, on Bybit, on OKX. To a lesser degree, it happens on the

spot markets, Binance spot, Coinbase spot, Kraken spot. But the I-bit market and the Tradify

markets, the Nasdaq markets, they are price takers relative to the offshore markets.

And so maybe that'll change over time. CME is going to be adding here pretty soon. I think it's

actually about in 60 days as well. 24, 7, 3, 65 futures, CME futures on Bitcoin. So that'll help

bring more price discovery onshore. But the majority of price discovery still happens offshore.

The giant whales in the space, yeah, MicroShredges giant whale and there's some others,

I-bit's a big whale, but there's still dudes out there that have a couple hundred thousand

Bitcoin. And they slinging around like it, you know, it's still at a price at a thousand or something.

And so, you know, in some ways, things haven't really changed. I think for the most part,

things have changed quite a bit, but there's still some of that cowboy nature out there, for sure.

When you say price discovery happens, like offshore and on Binance or other exchanges,

can you kind of elaborate on what you mean by that? It's as simple as like, OK, yeah,

there are the large players, like you mentioned strategy and I-bit, but like,

there's most Bitcoin is still owned by individuals and individuals are just kind of doing a bunch of

Yeah, exactly. And so if you're going to, you know, if you're going to do an order, let's say

MicroShredgedy, you know, I think they execute through Coinbase. And maybe Coinbase moves most of

their flow through their own order book. But let's just say that same MicroShredge was using WinterMute

to execute. WinterMute is going to do the majority of their volume offshore because that's

what the volume is. That's what liquidity is. And so, you know, it's just kind of like some of

these offshore venues with the most liquid venues. And so that's ultimately where the price discovery

is happening, even when say a buying or MicroShredge is executing on Coinbase, the market makers that

are providing that liquidity are matching it off against offshore liquidity. And so, you know,

my hope is that over time the onshore liquidity overtakes the offshore liquidity. But

I don't think I actually ever will because offshore is just literally the entire rest of the globe.

And I think Bitcoin is global and we want Bitcoin to be global. And so the global market for an asset

should always be more than the, you know, national market for Bitcoin. So, yeah, I guess that's

what I mean by that. Yeah. What's your take on, I guess, like the current Bitcoin market, like in

general, you know, like 2025, I feel like a lot of people expected to have kind of like a blow off

top, kind of like 2021 or 2017, obviously did not happen. Now we're back down closer to 70,000.

What's your take? You know, like some people, I've seen this thrown a little bit like paper,

Bitcoin is being thrown around. You know, why do you think that we're down around the 70,000 range?

Yeah. So my big hypothesis, I do think there was, you know, a giant player in the crypto side that

also is probably an AP on the authorized participant on the iPad options as well. So there's like five

names that it could be, but I won't, you know, name them here. But I think somebody pushed the price.

And that can be done because of the giant mismatch and liquidity between derivatives and spot.

And so the purpose market was already a lot larger than the spot market. But when you layer on

the iBit options market, the derivatives market on Bitcoin absolutely dwarfs the spot market.

And anytime you have this situation occur with derivatives far outstrip the liquidity in the spot

market, you create an issue. I mean, this was what happened in 2008, right? You had mortgages,

but you had the, you know, the MBSs and then the CDOs and then the CDS built on top of that.

You had this giant, you know, inverse pyramid of derivatives built on top of this, you know, like

smaller, like fixed mortgage market. And so I think that happened with Bitcoin here just because

volumes and iBit grew so fast that the spot market was not able to catch up. And I think

October 10th created a bit of a tear in the liquidity, you know, seems, if you will, on the spot

side. And so that ultimately created this opportunity. And if you look at, and I'll go back to Jane

Street, although I'm not, you know, necessarily blaming them, you look at back in July 2025.

The Indian securities regulator sued them and Jane Street just like paid them. I think it was

$500 million and then went back to trading for manipulating the Indian bank derivative market

relative to spot. So what these, what they would do is they would build a derivatives position

in the morning, fairly liquid market, very liquid market in the Indian bank stocks. And then they

would bid spot much less liquid throughout the day, which would obviously cause the price of

the derivatives to go up. And then they would book a profit on the derivatives. And then they

could close their spot. And doesn't matter what happens spot, they could lose money on spot.

I probably did lose some money on spot, but they made so much money in the derivatives that,

you know, it was fine. And they just kept doing this over and over and over. And over.

Funny enough, Jane Street actually sued Millennium a couple of years back because some of the

Jane Street traders went to Millennium and Jane Street was like, hey, they're going to run our

strategy over at Millennium. And then the Indian regulators saw this lawsuit and they were like,

wait a second, you guys are doing what in our market? And so it's kind of funny how it all

like came full circle. But the timing is really interesting that, you know, July of 2025,

they kind of got shut down. And then October of 2025, this kind of similar dynamic, but in reverse,

going the other way occurred. And this is, you know, the 10 a.m. dump that people are talking about,

right? The market opens, 930, a lot of traders throw out the first 30 minutes and then boom,

the price of Bitcoin gets dumped, which causes the derivatives, all the I-bit derivatives to move.

There's a whole thing with, you know, gamma squeezes. I won't get into that here, but

I think a lot of that was just that, like plain old fashioned liquidity mismatch in games being

played. Yeah, there's probably some selling. There's some whales that maybe sold to help catalyze it.

You know, there's the whole software, you know, narrative, but like, AI doesn't disrupt Bitcoin.

Quantum, like quantum, the quantum threat has been around forever. I think it's just this is good old

fashion, like, you know, I don't want to call it market manipulation because it's technically legal,

but like just market games effectively. And it's just growing pains, right? You know, you have a

young dog and it has legs too big for its body and it trips over itself because it's just growing so

fast. And I think that's what we have here. We have a derivatives market that's just way too big

for the spot market and does can take a little time for the spot market to catch up. But,

you know, it'll get there and then we'll be a healthy market and be the most liquid market on

planet earth very soon. Makes sense to me. Maybe looking forward, you know,

like thinking about like where the bid for Bitcoin might come, you know, we talked about

strategy. Looking back last week, they clearly did. We're bidding on Bitcoin, you know, a billion

dollars. But, you know, I guess questionable of like how much that actually affects the price,

especially if like price discovery, like you mentioned is kind of happening on offshore

exchanges. Do you think at a certain point digital credit and digital money to like apex is

actually going to place like a serious bid under Bitcoin and like drive the Bitcoin price itself?

Or is that, you know, possible, but still like very, very far away if it ever happens.

No, I 100% think it's happening. It's happening today. And like I am mega bullish Bitcoin over the

next six months. I think we're going back to all time highs, like bear market extinguished.

Probably eat my words, but you know, some wood here on my desk. I'll knock on it.

But like, yeah, like you look at 2023, 2024, like that whole run was just microstrategy running

the ATM and bidding Bitcoin. And no one understood what microstrategy was. I was a skeptic. I was like,

they have this dumb software business. Like I don't like that, you know, but like missed the

forest from the trees, you know, at least I did. That was the bid that got Bitcoin kicked off

of the bull market. Like liquidity, you know, US liquidity numbers are not up. They were down.

Global liquidity is up, but like, you know, it seems that Bitcoin may be correlates a little more

with US liquidity. That wasn't the bid. It was just microstrategy. And so once again, we have microstrategy.

And now they've got a one two punch. They're running both ATMs. And everyone's figured out

this playbook. And there's a hundred deaths in the market. And not all of them are going to be able

to do prefs, but like more than two are going to have prefs. And I think this is going to be a

massive, massive bid, especially because, you know, sailors pitch is so elegant. It's not, hey,

buy this Bitcoin thing. Bitcoin is digital capital is digital real estate is digital whatever.

He's just like, hey, do you like money? That's it. And all these private credit people,

all these yield seekers globally, investors in private credit, they're not like, oh yeah,

like these guys made a loan to, you know, clean AI to like scale ARR. And here's their

cacks. No, no one understands that. They're just like, oh yeah, this BDC is offering, you know,

13% yield. And so seems interesting. I'm going to ape, right? And so I think that's going to be

the same thing here. And yield globally is just or a yield seekers globally are just going to ape

digital credit. And that just all flows right back into Bitcoin and creates a nice feedback loop.

I mean, I guess it kind of goes both ways. But, you know, as the price grows and as liquidity grows,

like once Bitcoin's a $10 trillion asset, larger central banks will seriously consider it. It

won't just be, you know, the El Salvadorians. It'll be hell. It'll be the check central bank,

you know, they bought a little bit of Bitcoin. And so as liquidity grows, like, yeah,

it's a feedback loop both ways, but it's a bit of a one way feedback loop in many senses because

it gets larger, more institutions acts allocate to it. And so I absolutely think it's going to be

a key driver going forward. And it's just sucking in a whole new investor archetype that has never

touched Bitcoin before and may never directly touch Bitcoin. But, you know, they're indirectly touching it.

Yeah, that makes a lot of sense. I mean, it's something that I was thinking about, like, a lot

recently too. It's, you know, being in Bitcoin over the years as you have been as well. It's like

to hold Bitcoin, in my opinion, you need to, you need to have a very long time preference. Like,

you need to be willing to hold this thing for four or five, 10 plus years. And like, yeah,

you'll probably do pretty well and outperform almost everything. Or at least that's historically been

the case. But like 99.9% of people are not willing to think for more than like two seconds. You know,

we live in like the TikTok, you know, high dopamine culture. And so it's like, we've finally created

like the Bitcoin based product that appeals to the masses. Like, this could actually take off.

It's almost like so good that it's, it's like kind of frightening to me because I'm like, wow,

like, this is, this is probably, this is happening actively. And it could accelerate really fast,

which is, it's just kind of interesting to think about. I mean, it is accelerating. I,

I remember I tweeted on the Tuesday, it was like, all time high for SDRC volume. And then Wednesday,

well, new all time high folks. And then Thursday, well, they doubled it by, you know, almost double

the previous all time high from yesterday. I mean, this shit is getting crazy. And yeah, I think

you're right. I think we found a product that is going to siphon hundreds of billions of capital,

if not trillions into the ecosystem. And I think this is how we get a million dollar Bitcoin.

Yeah, makes a lot of sense. Well, Parker, this has been an incredible conversation. We'll definitely

have to do this again at some point. Where can the audience go learn more about what you're doing

and what you're building? Sure. So you can check out apex apyx.fi. So apyx.fi is the website. You

can follow us on Twitter at the same. And yeah, you can follow me on Twitter at the other Parker

underscore. And yeah, that's what we're building. Love it. Well, thanks again. This is a great

conversation. Thanks. Have a job.