Wow, what a moment to see that Alphabet is hitting the primary market to raise a whopping 80Bn dollars (consider GOOG raised less than 2Bn at IPO 20+years ago)! While the main focus has been on the unusual scale of the ATM offering alongside Berkshire Hathaway's "signal", I actually think the most interesting feature is what crypto investors already have some unique insights to underwrite: the 15Bn dollars to be raised in the form of a MANDATORY CONVERTIBLE PREFERRED offering- As I've written about before, the preferred equities market is the "armpit of American securities"; it is has neither the protective features of debt nor the upside potential of equity growth and therefore is generally used sparingly by third tier companies that have some features of adverse selection at play. It's used most commonly by banks for example when they need regulatory relief capital, or by industrials like airlines when they have specific capex needs that are too cyclical for even the most credit oriented, and very rarely ever used by pristine tech companies. In fact, the only time that I can even recall that it was used by the tech sector was in 2008 after the GFC to recapitalize (coincidentally, many will remember the outsized role that Berkshire Hathaway played by trading the security of its name to arbitrage pricing for the favor of rescuing certain banks-- more on that later) I've also written before that if there is one thing that the crypto industry is very good at, it is inventing novel form factors of instrument specifications regardless of whether the underlying asset exposure is actually crypto native or not: perps, stablecoins, binaries that found product market fit, not necessarily only in tokens, but broadly for the securities market. It is now time to add preferred equities into that mix, for I see a lot of parallels here for what GOOG is doing versus what MSTR has been pursuing for several years now- The GOOG pref is not particularly cheap. It is approx. 150bps over (and ~100bps richer than its own debt) as a AA+ issuer they could get away with, and also caps some upside participation with basically full downside participation. For many specialists, it is not a very interesting instrument with a clear mandate. However, it signals two bets that GOOG is making: 1) there is going to be a large unfulfilled customer base that want higher yield that is willing to give up the volatility of the underlying growth if there is the perception of asset backed collateral/spend, and 2) Google wants to have access to this temporal dislocation because they are unable to make a termed bet on how the AI bets are going to pay off just yet. It's not unlike how Strategy approached the same market betting on both of those views, just replace AI with Bitcoin with an uncertain timeline for a certain outcome. On a more long term view, it's an early sign (or warning?) of reimagining what the corporate issuance market will look like when investors ultimately decide that certain "national security strategic companies" are more creditworthy than government spreads themselves in a post-Davos world, where investors are willing to tolerate a give up on the supposed risk free rate that does not allow you to outperform inflation and that the source of inflation may actually be more directly correlated to companies like GOOG that can price that cost of capital more cleanly as the true risk free rate. That is why I think seeing Berkshire Hathaway in this mix is particularly hard hitting; just as it saved the American economy via bailing out the banks in 2008, there is an uncomfortable sense that this, too, feels like a version of preemptive public-priviate financing for a bet the country cannot afford to risk losing. For while financial engineering without leverage is an optimization game, once you introduce leverage (esp unsecured), it becomes a confidence game. What this means is we may likely see a lot of preferred issuances that are now normalized as regular course of business in the future (just as bank bailouts did). This also means there's going to be a fair amount of relative value alpha in this new cohort of securities trading endeavors in a special sits format that new investors won't necessarily know how to navigate. People might not first think that this phenomenon is "crypto alpha" but in fact, it is my own conviction that it is absolutely birthed out of crypto alpha lores. Crypto has always been about capturing the ambiguous risk preference within an asset liability matching framework that investors have long misunderstood their time horizon relative to their own capital formation behavior. Take for example, STRC dropping to <97 this week for what otherwise investors are struggling to decipher the true cost of liquidity. The opportunity for crypto alpha has never been higher, never been more durable, never been more scalable. In fact, I think its entirely possible that we may see perpetual prefs by some of the best tech companies arrive in the future. It will no longer just be a play thing for DATs, but rather reconfigure the social contract of what "digital credit" might be. It will shock some traditional and institutional investors that have never seen it, but for those of us here who've been following the crypto journey will realize that it was only a matter of time: for crypto's greatest product market fit is the hyperfinancialization of the time preference arbitrage at the intersection of yield and volatility. I'm excited to have GOOG join us.

"its unsustainable if bitcoin doesnt go up forever" you know what else is unsustainable increasing fiscal deficit decreasing moral surplus increasing longevity declining birth rate increasing value of capital declining value of labor yeah i'll take my chances with this one

heres the real reason why regulators/banks dont want to let stablecoins pass yield- it destroys fractional reserve banking as a system consider the unspoken truth that "narrow banking" is practically illegal in the US. no entrants who wanted to run a 100% deposit only business has been successfully able to get a fed master account. what this really means is that the US financial system is entirely built on the backbone of credit --> "if you dont originate credit, you dont get to become a deposit institution" take that one step further where "productive" credit can only be originated without 1:1 coverage ratio, the ultimate business of banking is always the same: maturity transformation between savers and borrowers. for this is the only way the fractional reserve system can ever exist, which means the fatal flaw of is built into the very system of yield mechanism put simply, the idea of having a stablecoin that passes yield is by definition completely contradictory to the banking model. you obviously can't simultaneously do fractional reserve stuff and also be 1:1 "stable" so the yield question isnt really about customer rewards and affiliate marketing, thats just convenient gaslighting. its really about the endless cycle of credit on an semi-unstable yet regulatorily captive deposit base that capitalism must perpetuate at all cost. its always liquidity transformation: create more duration so that the day of reckoning gets forever postponed. until one day it fantastically implodes.