Bitcoin Decoupling From Stocks? (Uncut) 04-29-2025

Bitcoin Decoupling From Stocks? What’s Next In Coming Storm

Bitcoin is always a safe haven asset. The new administration is recognizing that they are open to working with everybody that’s here at this conference, whereas the prior administration wasn’t. What are the major problems facing institutional and retail investors when it comes to custodying your digital wallets? We’re talking about this theme with our next guest, Mike Belshi, CEO of BitGo.

I’m David Lin, host of The David Lin Report. Bonnie from Bonnie Blockchain. Mike, thanks for coming in.

Thanks for having me. Great to see you guys. Let’s start with the economy.

So the FedWatch tool is projecting a Fed rate cut by around June. That’s the first cut that the markets are pricing in. What are your expectations for monetary policy given recent tariffs, trade wars, heightened inflation fears, unemployment fears? Volatility for a while.

I think we’ll see Bitcoin trade more or less kind of up and down and laterally for a while. But later this year, I think we’ll see things start to grow. How the monetary policy goes, like there’s a lot, a lot up in the air right now.

Ukraine, of course, potential war, I guess now in Yemen, adding more to the mix. And a lot to deal with here with the tariffs. How do you think markets are going to respond to an escalation in the Middle East? The Houthis just got attacked.

I don’t think it ever goes well. Markets don’t like it. Okay.

Well, probably good for defense stocks, but I want to get your outlook on Bitcoin then. Is Bitcoin a safe haven asset for this year in light of volatility? Bitcoin is always a safe haven asset. So people talk about, is it the… Is it though? I don’t mean to interrupt you, but it goes down when the stock markets go down.

Look, it’s been correlated in the past. It’ll get increasingly uncorrelated over time. But if you look at the best performing asset over the one year period, a five year period, a 10 year period, and you kind of slice it over any range over the last 10 years, it’s always Bitcoin on top.

So, you know, people have a hard time with the volatility, but that volatility is not to be unexpected given how small Bitcoin is relative to other markets. You went to the White House Crypto Summit. I did.

How was it? Look, it’s exciting. It’s an honor and a privilege to represent BitGo, represent some of the industry. A great collection of leaders were there.

It was good to see a lot of the early friends that I’ve met in the crypto space all attending this. But it was really a point in time where the new administration is recognizing that they are open to working with everybody that’s here at this conference, whereas the prior administration wasn’t. So it’s not so much a working meeting as it is kind of a, hey, we’re declaring that there was a problem.

We’re fixing it. Let’s move forward. I think the number one thing people should take away from it is we can now have innovation in digital assets.

And the new administration is going to help figure out how to regulate that, figure out how to foster innovation in that, instead of being regulation through enforcement, which was obviously a problem holding everybody back. Is there anything the media is not talking about that has happened at the summit? Any fun things? Any fun things? I mean, look, I wish I could say they wined and dined us. People ask me, what did you eat? We didn’t have a meal there.

They had some cookies and some coffee. No, they did roll out the red carpet in terms of some of the pomp and circumstance that you see behind the scenes. It’s obviously experience to go to the White House under such conditions, but what you saw on TV was most of what there was to see.

Well, David Sachs is an investor of BitGo and he’s going to be the crypto star. What’s your feedback or take on his outlook for the industry and what he may do to change things up? Look, I’ve known David for the better part of 20 years at this point. He lives out in the Bay Area.

I would say we’re friends. Certainly have common viewpoints on a whole number of things. But David is a super high intellect guy.

And you can see this in his PayPal roots, his Yammer sale to Microsoft. This is a very capable, serious, serious guy. So he’s going to figure things out.

I’m really happy to have that kind of brainpower in the White House working on this problem. Have you heard any plans that he’s about to deploy? He wants to be really level-headed. I mean, I think you saw just from his behavior in the last month as he’s moved into this role.

This is a very ethical guy that wants to do things right. So he wouldn’t give anybody any inside scoop, I think, even if he could. I see, I see.

Bybit hack. It was the biggest hack in human history. Does that worry you? I mean, a little bit for the industry, right? Like we have to put an end to these types of things.

Any one of the failures that occurs, whether it’s this one or some of those in the past, they all should be lessons, right? And the positive news on this, look, I think Bybit responded super well. Their incident response was really better than any we’ve seen in the past. They were able to cover the losses for all of their clients, which of course makes it a lot easier.

But also there’s some mistakes made. I’m sure that they’re thinking about how to deal with that. As we move forward, digital asset security gets harder and harder.

That’s what we do at BitGo, right? So we’re not an exchange. We’re focused on how do you keep this asset safe. And we’ve been pioneering this since the early days.

We have a no compromises approach to security. We do two out of three multi-sig. We do two out of three MPC.

We have layers on top of that, policy controls, et cetera. So look, I think increasingly, we’re going to need to see separation of duties. Market structure needs to evolve.

And we’re going to need to see the folks that are doing security be hired to do that security for large amounts of assets. Well, you offer hot and cold wallet storage, I believe, at BitGo. So comment on the security advantages and disadvantages of both.

Well, let’s see. One of the things we believe in is decentralization and centralization. So when you’re talking about businesses, they’re usually using custody.

They should be because they need business continuity. And self-custody allows them to offer some amount straight off their balance sheet. And you can do a small amount there.

It’s the analogy would be like what’s in your wallet. You probably have a little bit of cash in your wallet that you carry with you. Technically, it’s at risk.

You could lose it right now. I could mug you. I’m not going to mug you.

But I don’t even know where my wallet is. I took it already. OK.

But you’re not too worried about it. You’d be annoyed if you’re not too worried about it. But of course, you still use custody.

So everything we do out of custody is cold storage. We’ve been pioneering that for a long time. I think it’s what people expect.

Frankly, when you’ve got nation-state attackers that don’t have to be near you because they’re virtual, right, and they can take the money from a hot wallet, it’s just unacceptable. In this day and age, you should be using cold storage for any sizable amount. The Bybit attack was using a type of cold storage.

But they also made some other mistakes. So it’s not perfect. Of course, these are addressable problems.

Is there any crypto insurance in place today? Or how is it evolving after all these hacks and institutional adoption? Look, insurance is an interesting thing. People say the word insurance, it’s a single word, but it can mean a lot of things. What does that insurance cover? Does it cover hacks? Does it cover insider thefts? Does it cover natural disasters? These are all different types of insurance that you can get.

If you ask Boney Mellon, they’re probably here somewhere, are you guys insured for your, I don’t know how many trillions of assets? They’re gonna be like, no, they’re not. They’re not insured. There’s only one guy that can write an uncapped insurance policy.

And of course, that’s FDIC. And he writes uncapped insurance for US dollars because they can print the dollars if they have to print. But other than that, you can’t.

So one challenge with digital assets is that, yes, you should have insurance. So BitGo Carry is one of the largest programs that you can get. It’s $250 million plus there’s excess cover up to like $700 million.

But we also have $100 billion of assets. So how do you protect $100 billion of assets with that type? Like one of the things we do, and this would have helped the Bybit folks, we already rebalanced our clients. If you’ve got $1.5 billion, that’s at least 15 wallets of BitGo.

It would have been chopped up into $100 million piles, which means that that particular breach, just by using BitGo, they would have saved $1.4 billion. And it’s without even looking at anything else. So that’s a basic practice.

And it would have been in cold storage. So look, insurance is not something that you can commercially expect to cover 100% of digital assets. They’re too big for that.

You cannot find an underwriter that can give you $100 million insurance program. Just doesn’t exist. But there are things that you can combine with your security policies and your insurance to be able to cover all wallets.

Well, I know you service institutional clients primarily, I believe. But for the retail audience watching out there, what advice or lessons have you learned serving the institutional side that could be applied for the retail service side when it comes to security and insurance of custody? One of the things I think is a big deal, if you’re using someone else’s custody, is ensuring that whoever you’re putting that custody with has a fiduciary duty over your assets. So what does that mean? I mean, on one hand, it’s a bunch of legal muckety-muck.

But it means that we’ve gone through a level of scrutiny with our regulator. We adhere to a set of policies. We do things like third-party risk management procedures, which sounds really boring.

But remember, the Bybit hack had a third party that failed. So understanding what is your risk and dependence on third parties is actually a really key part of what we do. We do SOC audits.

We do redundant controls. So there’s no insider theft possibilities. All right, when you have a fiduciary duty, you’re known to your regulators.

It’s a lot harder to imagine any type of breach of BICO that would steal the money. So this has been available for institutions. Institutions demand that they use a regulated custodian.

I think retail needs to make that same demand. So BICO has recently opened up. Actually, you can come to BICO.

You open up a BICO retail account. You will get the same institutional controls at BICO that institutions would get. I want to congratulate you because BICO recently became the largest independent crypto custodian.

Oh, thank you. I mean, I think we’ve been for a long time. We just announced a new milestone.

Right, right. With OCC now allowing traditional banks to enter crypto custody, do you see them as potential partners or enemies? Both. Look, we work with a number of banks already and provide custody.

Either we do self-custody to us and custody through them, or they’ll use us as a sub-custodian. We can do both of those models. It’s a great way for them to get started with a lot of digital assets.

We got the best coverage of any custodian out there. And of course, we’ve been taking security to the nth degree for a long time. At the same time, look, I think innovation, smaller companies move faster than bigger companies.

BICO has gotten to the point where we’ve got the maturity of processes. We’ve got the maturity of regulatory controls. Those are all built in place.

And then we’re still able to move very quickly. So I think innovation is going to come faster under the new administration than not. And I think we’re going to see banking change in a really positive way for both institutions and retail.

And a lot of it’s going to be thanks to digital assets. Okay. What is next for the future of digital security? And how does BICO fit into this path going forward? So security is eliminating single points of failure.

We have seven trust companies around the globe today. We operate two in the United States here. Switzerland, Germany, Dubai, Singapore, and coming this year in South Korea.

The purpose of this. Americans roughly keep their money in America. Europeans roughly keep it in Europe.

Asians roughly keep it in Asia. This is the way it’s always been. It’s difficult to open foreign accounts.

You might have done some of it. It’s complex. Regulators are also going to demand that the assets roughly stay in region.

The reason we’ve connected all these trust companies is because now you can be operating out of Singapore. You interface with Singaporean banks, a Singaporean regulated BICO. You can be in the United States.

You’re talking to U.S. banks. You’re talking to U.S. regulated BICO. You guys can trade together and then settle it all on our global network.

So look, I think this is what’s coming. There’s elimination of single points of failure by way of a couple of things here. A, you get to keep regionally.

You don’t have to put all in one big honeypot. But B, when you start to talk about multi-signature, we can start to take these keys and put them all over the place. So instead of having keys all at a BICO, all at a Coinbase, etc., we can put keys in multiple institutions.

What is your solution to quantum hacking, the advent of quantum computers? That’s not a custody problem. That’s a, oh shoot, everything’s at risk problem. Look, good news is we have a little time.

Bad news, technology moves really fast. And Bitcoin development in particular is known for being slow by design, which is good, right? If you want to invest in something to a billion dollars, you want to know that it’s not going to change right underneath you. Look, I know a lot of the folks on the Bitcoin side are working on this problem.

There’s some quantum resistance already built in when you use multi-sig. Actually, you’re better off than if you’re not. If you’re using single-key wallets or MPC wallets, those are more vulnerable.

But anyway, there’s efforts among those of us that have been in the industry for a long time. I don’t mean to bring up Bybit one more time, but they have multi-sig as well, right? It’s not impenetrable. Correct.

There’s different types of breaches on different types of attack surface areas. When you talk about quantum computing, quantum computing would be trying to brute force your private key. And that’s much easier on a single-sig wallet than on a multi-sig wallet.

Multi-sig definitely protects against any single point of failure. Remember, Bybit had a single point of failure in that they were all using the safe wallet UI. Would AI overwrite the human aspect of multi-sig? They could impersonate people, identities.

Would AI… Look, I mean, I can’t deny that there’s probably some breach that you can imagine. But no, not by itself. What’s the point of security? You eliminate single points of failure.

If you have a key held by one person, you split it across two. If it’s held at one company, you split it across two. If it’s held in one jurisdiction, you split it across two.

And then if two is not good enough, you go to three and four and five. So when you do that, even for AI, it’s going to have to figure out how to penetrate each of those independent keys. So no, AI is not a magic penetration.

Sure. On quantum computing. So I asked a lot of experts about this, and they said we’re way too far to talk about that.

Or people would say, if that happens, Bitcoin would be the last thing you worry about. So I want to get your opinion on this. Look, one of the things is Satoshi’s coins, which haven’t moved for a long time, they are on the chain in a way that you can see the public key, which means they are more reachable by quantum computing.

Then the current format. So there’s new formats like when you’re using your keys, you don’t expose your public keys generally. So there’s some concern that if you’re building a quantum computer, the first thing you might do is try to go get Satoshi’s stash.

And it’s a reasonable concern. Satoshi, assuming he’s not around to claim his coins anymore, you know, this means they could get on the move. And so there’s two questions for Bitcoin.

Number one is, how do you make it quantum computing resistant? And that may need some time. The second one is, even if we do make all the new wallets quantum resistant, what happens to Satoshi’s old coins? So look, I think that is a potential attack. There’s discussion about, would you freeze Satoshi’s coins? Now that goes against the ethos of everything that’s Bitcoin, right? Like you’re not supposed to freeze coins.

But look, humans at the end of the day, all together collectively govern Bitcoin. And we’ll figure out a solution to that particular problem. Again, I think we have enough time to solve it.

But I also think we should not dilly-dally. We should get on it now. And then maybe in three years’ time, we’ll have a solution.

Quantum computing won’t be here yet, but we’ll all feel safe. By the way, with security, one last thing, you’re never done, right? So the level of security that you would employ back in 2011 to secure the entire Bitcoin blockchain was very low. It wasn’t worth that much, right? And then by the time it’s 2013 and 2015, you start to see million-dollar wallets, and then hundred-million-dollar wallets, and then today billion-dollar wallets.

And the level of security that you employ, you have to keep going up. So the same thing is true as Bitcoin grows. It’s incumbent upon the Bitcoin ecosystem to figure out how to make sure it is applying the appropriate level of security for the size of asset that it is.

To Bonnie’s earlier question about banks now being able to potentially custody cryptos, how would you evaluate the security of traditional financial systems compared to a custody solution like yourself right now? Look, we are re-figuring out how to deal with bearer instruments. You’ve probably seen in the movies bearer bonds, right? And you may not be familiar, but bearer bonds, for the most part, have been removed from our financial system. And that came back from laws back in the late 1980s where the U.S. disallowed bearer bonds because we didn’t know how to secure things that were bearer instruments.

We now have to figure that out again. And good news, it’s digital. We have digital capabilities.

And so I believe we are solving those problems. It is doable today, but people need to take great care. I think that about sums it up.

Mike, great coming. Great to have you come in. Good to see you, Bonnie.

And we’ll speak again soon. All right. Thank you for having me.

Thanks.