 Welcome to Digital Asset News, the top stories in cryptocurrency and digital assets, and a big amount of bite-sized pieces. Today we've really got three articles to go over and it's a lot. So first up, Capital One files patent for cryptocurrency market AI prediction system. And the question really is asked is, do they know something we don't? Which leads us to our next article, which talks about big money is already in crypto markets, but we've only just reached the tip of a slow-moving iceberg. And I got to tell you, this is the right time to be in the digital assets. And finally, this will jump into another article, which talks about bequant and now in crowded prime brokerage race and add bank integration. And this kind of goes into the whole theory about how the traditional world and our digital asset world are merging quickly. So first up, this is interesting because this is what I'm looking for as far as mass adoption because smart money knows where things are going. They take a look at data, they take a look at analytics and they can say, you know what? We think this is what's going to happen and we're not going to just waste our time. We're going to actually file for a patent to make sure we try to dominate this space. So what's going on here? So Major U.S. Financial Services Company Capital One has filed a new patent application for a crypto analysis and trading system that will attempt to predict crypto market trends and generate trading decisions using AI or artificial intelligence. And there's already some things out there. But I got to tell you, when you have a multi-billion-dollar company like Capital One behind it, could be pretty successful. We'll see. Anyhow, Capital One explained that crypto is trade 24-7, so traders need to monitor information for many sources all day. Numerous factors could affect trade decisions, including regulatory, exchange news, stock, rumors, opinions on social media, Twitter, Reddit, YouTube and Telegram. And then everything else besides it like the ICOs, the forks, airdrops, hacks, rebranding and company, future plans. And I got to tell you, when I look at these types of things and I see all you TA guys out there and gals, I got to tell you, I just, I tip my hat to you because it's so much information to go over. I don't know how you do it. I just like to invest, stick my money into it, Ronco food dehydrator, set it and forget it, and I'm out. But good job to you guys. Anyhow, it would be impossible. Oh, they stayed here. It would be impossible for human traders to track all the above mentioned crypto related data and respond to that data in real time. It's also being possible to verify the credibility of the information in real time the company added. And I got to tell you, that is a big thing, credibility, because there's all these different stories out there and who knows which ones are false flags and which ones are actually legit, because they can just be out there just to move the, you know, the markets this way or that. So who knows. And then lastly, to finish up here, it says the patent application describes a system with a credibility analysis engine configured to determine the credibility of the crypto related information with weighted assigned. In addition, it can be configured to generate and execute personalized trades automatically based on predicted crypto market trends. So this plus the fact that big players are going to be jumping in, I think could be massive. So if you have these enormous institutions coming in, doing all these things, you know, increasing the or decreasing the trade time, getting artificial intelligence in the game. I mean, this could be massive and it could be massively good or bad for our little market. So let me explain what I'm talking about in this next article. So this next one, big money is already in crypto, but it's slow. So what's going on here? So announcements have become fast and furious about traditional financial firms investing in digital assets or crypto startups. So often in fact, that's blink and you'll miss them. First of all, who writes like this? Who wrote this? Let's see. This is a, I'm just, I know what it is. It's Alex Maschioli and he's the head of institutional services at Bequant, a leading crypto and digital assets prime broker coming from traditional hedge fund space. He's been in the game since 2017, advising crypto funds and institutional investors will be good for that guy, right? So first off, I like Alex. I've liked the way he writes and describes things ever since we covered an article. This is on July 23rd, which talks about don't expect banks to jump on the OCC crypto news. And everybody had been making a big deal about this because the OCC said that banks could custody crypto currencies and everybody was like, this is going to be fantastic. It's going to be awesome. It's going to be the end all be all. And Alex, one of the few ones like, wait a second, what are you talking about? I'm in this game and I can tell you right now, they're not going to do squat because they're slow. And I covered this fantastic read a link at the very end. And ever since then, I've been listening to what Alex is talking about. So before we get into this article about, you know, the big money moving in, but it's very slow. What we're talking about as far as trading goes, it was an article about Alex's company, Bequant. And one of the things that was concerning to me was about the reduction in trading time and as far as like speeding up to milliseconds. So this was a quick one and it just talks about where we are Bequant now in crowded prime brokerage race. Alex says for our sales cards, we're going to racing Bequant builds a crypto exchange to go into prime brokerage. That's their sole purpose. And that's from Alex Massioli. If you don't know prime brokers are facilitators for financing and trading for deep, let me say it again, deep pocketed institutional investors. All that digital asset space doesn't have a lot of prime broker options. Currently, several crypto firms, including Coinbase, Bitco and Genesis Trading, have announced just in recent months, their intention to build prime brokerage. And these guys have been doing it for over two years now. And I got to tell you, so when we're talking about getting the big players, the whale of whales into this space, I think this is a missing piece. However, there might be a downside. This is a quote from CEO George Zaria, where he talks about, to compete a newly crowded market, Bequant's connection to signature bank signet will allow the firm to more easily settle fiat for more clients. It's an important transition between the legacy financial markets and the new digital market. So they are the ones laying that track, building those institutions up so they can do all these things in our space. So again, linking everything together. Moving down, international world investment banks like Goldman Sachs, Morgan Stanley connect clients to hedge funds, pension funds and endowments. Bequant is connected to a leaven source of liquidity, including hit DTC, Binance, OKX, Huobi, Bitrex, Bitfinex, Derabit, and Bequant's own exchange and plans to expand its exchange connections to a dozen by the end of this year, which is coming up pretty darn fast. These exchanges are venues that our team has one-on-one relationships with. Masculi said, this isn't as simple as dropping in APIs. And I got to tell you, it's not about what you know, it is about who you know, and it's all based on relationships. So if these guys are going in there, building relationships with all these different companies and institutions, I got to tell you, that's going to pay dividends massively later in the line. And that's why I think it's impressive, not just about, like he says, dropping APIs, talking to a face, talking to a person and getting those connections. But here's where it becomes concerning and we'll jump back to the article. It states, one of the issues that we've had with some of our exchanges is that rate per second allocation. The CEO said, if you trade a high frequency trading strategy, you may want to opt into a higher rate per second allocation. Bequant's internal trading averages around 400 microseconds per trade, which is close to the London stock exchange, 150 microseconds. So if you're a day trader, which I am not, this might be bad news for you. But I got to tell you, it's inevitable. And why I think it's a bad news is because this is kind of squeezing the little guy out. When you start to get these microtransactions or these super fast transactions down to milliseconds, all these things that are happening on top of the AI that we just saw, I mean, it just is a, it is a worrisome type of outcome. And this actually comes down to a story that I had read a while back, which talked about the new transatlantic cable built the shave five milliseconds off stock trade. So if you don't think that time is important, listen to this, hibernian, how was that, right? Atlantic is building an undersea fiber optic cable that will stretch from New York to London. Now keep in mind, this was a article on 2011. This is already done. It allows computers to complete financial transactions just five milliseconds faster than their competitors. Finance is now increasingly dominated by automated trading and to a computer, five milliseconds is an eternity. So I don't know how much it costs to create this type of cable from New York all the way to Europe. But I'm guessing it wasn't cheap. But I'm guessing, I'm also guessing there was a reason for it. And it's probably because it's a lot of money that they're making. So yeah, moving back to the original article here, Alex talks about hedge funds and retail focused products are celebrating major fund raises and traditional banks are leading or planning to lead investment rounds in blockchain firms. And if we're talking about hedge funds and, you know, getting the institutional players involved, maybe we can look no farther than digital to a grayscale where they're just dominating right now. I mean, this was in quarter one 2020. So Jennifer, so around the beginning of April, they put this out, they had 2.2 billion assets under management. Now it's, I think it's like 4.5. I know it's in the fours. That's quite a bit of an increase. And right here it states majority of investments come from institutional investors dominated by hedge funds. So pretty much what we're talking about here. Then it's in any states, a publicly traded company has converted a significant chunk of its balance sheet to Bitcoin. I don't know what he's talking about about there. And US regulators have agreed to let banks custody crypto assets on the past two months. And this was the article we covered about OCC a couple of weeks ago where Alex wrote it and I agreed with him and he said banks aren't going to do anything not for a while because they're slowest nails. And that's true. These developments are all massive signals the rest of financial work. It is, but it just takes time. So further on he states a normally quiet season has seen a historic flurry of activity in the crypto and blockchain space. It's been a transformational time that's put the old guard on notice and forced them to turn on a dime from positions they previously held on to the digital asset space. And yeah, it just makes sense, right? I mean, what has been happening globally, we have still seen a massive increase in digital assets and cryptocurrencies. I mean, look what's going on. I mean, the economies in different countries are just getting lambasted. But here we are in the traditional stock market and more so in cryptocurrency having these huge runs. So what's going to happen in two, three, five years? I think the sky's the limit, but just an opinion. Moving on it states all this was recently bolstered by the OCC, which we talked about. It allows banks to charter custody of crypto assets. But this was a good piece here it says, but the smart money knows this change will not happen overnight. It will be a while before we have a Wells Fargo custody Bitcoin or Northern Trust hold a hedge funds ETH. That's why I like to listen to Alex because he talks to these people that maybe you or I are not privy to. And then here talks about even Goldman Sachs, which famously said the start of the summer that Bitcoin is not a suitable asset for an investment or an asset class at all has since you turned and named a new head of digital assets early this month, and they will be getting into the game by talking about maybe doing a stable coin. So it's amazing. They go from saying, it's not even an asset class cryptocurrency assets, but we're going to do one. So bunch of liars. The hedge funds, Pantera and NY big also recently announced they have pulled in nearly 175 million and 190 million respectively. So not too bad. Sentiments clearly swing in favor of digital assets. I can see it myself. This is because sophisticated investors, big clients are increasingly talking about Bitcoin and Wall Street is scrambling to get up to speed and satiate client demand. And I got to tell you, like when I see this, I'm like, this is like the biggest dumb moment. I mean, why wouldn't they? It's like they're sitting on their hands and just going, well, you know, we'll see what happened. We'll see what happens. But if you look at it, I mean, for Pete's sakes, Bitcoin and Ethereum have been the investment of the decade. And there is a video that I put out that just looks over the last 10 years, the highest performing stocks and different investments. And you can see right in 2010, we had Netflix was dominating everything and Domino's Pizza, who knew? Also dominating Amazon, Mass Car Visa. But if we speed this up, we see Netflix still there, Lulu Lemon, I mean, for all your ladies who like to do yoga. And then look at this from out of nowhere, here comes Bitcoin in 2013. And if we just play this a little bit longer, we can see that Bitcoin not only dominates, but it's going to actually massively outperform everything. So when they're starting to talk about all these things like, well, maybe we should do a little bit. Maybe we should do a lot. I don't see the problem here. Just do the things you're supposed to do and talk to your clients about like, look, it's not like it just came out of nowhere. And we're talking about tulips. This thing's been happening over the last 10 years. So just do whatever you want. Bitcoin or Ethereum seems like not a difficult choice. But that's just me talking just some armchair investor who's just throwing out random advice. But I just look and see what's happening. And I kind of make sense to me. Anyhow, to finish this up, he states, the clock is tipping, ticking, many firms are still sitting on the bench waiting to come into the game. Big question is where are we at? We're in the first quarter, the second quarter, and no one knows what's going to be the top, no one knows the bottom. But I got to tell you right now, this is history being made. And he's right. If you're in the space right now, if you're listening to this video, this is the most exciting time. It's not exciting. I mean, it is exciting when, you know, you know, maybe Bitcoin goes to a million or something crazy like that. That's exciting, right? But as time goes on, we're going to look back at this like, man, can you believe that the prices were this much and can't believe we got in this early? This is insane. And here we are. So I've started businesses and some make it and some don't. But I got to tell you the most exciting part is the startup is laying the track and building the foundation. And then when everything gets up to up the snuff, you can just kind of sit back and go, we did it. Anyhow, I will tell you this, these articles that were written, it just leaves me with a couple more questions. So what I did was I reach out to Alex, I go, hey, hey, man, if you're not busy, answer these questions for me because I don't get it. So because of that, let's jump in the office and have Alex answer them. All right, everybody, welcome back to the office. Pretty nice day. Hopefully those three articles give you some insight about what's going on. But there was a couple of questions that I had that I just I couldn't wrap my head around. So what I did was I reached out to Alex Maschioli, the gentleman that actually wrote or was in a part of those different articles just to ask him for specific questions. So Alex, thanks for coming on. I really appreciate your time. I know you're a busy guy. So thanks, Rob. Thank you for having me. It's an honor. I love the show. But so here's the first question in the first article where we were talking about it was the big money moving into crypto markets and the very, I don't know, first or second paragraph, he said, a publicly traded company has converted a significant chunk of its balance sheet to Bitcoin. I was just curious about which company was that because there's all this information out there. So you would be the guy that has the inside track. Yeah, I mean, it's an interesting story. So the company is MicroStrategy Incorporated. They're data analytics and mobility company. And with a market cap of about $1.2, $1.3 billion. So they had a $500 million balance sheet. And they said that they took a couple of months as CEO and I guess some of the executives and they decided to purchase $250 million and put it of Bitcoin and basically split their balance sheet in half. And it's interesting. The reasoning to hedge against the valuation of the occurrences. Right. So I found that particularly, particularly awesome because it definitely is hitting all the check boxes, at least for the maximum. Yeah. And you know what? I remember covering that story maybe like four or five days ago. And what was interesting to me was that the CEO, it wasn't like he was beating around the bush and going, well, you know, Bitcoin could do this or it might do something like this. He was like, this is what it's going to be. And we put 250 million into this because we believe strongly that this thing's going to happen with the economy, with all the money printing and to, you know, hedge against all the different things that are happening. So I found that the most interesting on top of what they'd already done. So I thought it was a pretty good step. They had analyzed a lot of different investments that weren't crypto related before making that step and purchasing essentially 21,400 Bitcoin. But it was the best option they had, they said. Yeah. And then I mean, they have all that data, all those analytics to look at everything out there that, you know, I don't have. I mean, with as many resources as maybe not you don't have. And of course, the average guy doesn't have. So if you're looking at all these things and going, you know what? Bitcoin, cryptocurrency, digital assets, I think that's a bullish sentiment. That's just my thing. For sure. All right. So that was that. Okay, I just want to make sure. So yeah, I got it. The second one was since you're in the space, you're in the space with these high net investors. What's the sentiment with them, you know, two, three, four years ago? And what's their thoughts on digital assets now? I mean, do you kind of get that feeling like we're crossing the Rubicon, we're actually getting over this hump and they want to come in or is it kind of like, eh, you know what, we'll wait and see. Yeah. I mean, we've been speaking with institutional investors which carried over from the traditional hedge fund side of the street for the last three years. And there has been a big shift in the wind, so to speak on that. There's a lot, there was a lot, a lot of skepticism three years ago, two years ago around institutional investors allocating a portion of their portfolio into cryptocurrencies or Bitcoin particular. I think what has happened over those, that timeframe is that crypto has not gone away. And we're seeing month over month different stories popping out of mainstream businesses or financial services houses getting into it in some way or another. And so I think maybe a few of them decided that they wanted to wash it, just watch it go away, but it didn't. So right now, what we're looking at from an investment or a portfolio allocation style of thinking from them is that they're either directly investing into Bitcoin or they're laying the responsibility onto a hedge fund or asset manager. And whether it comes to Bitcoin or another crypto, they're slowly beginning to understand. And I think the figures around 1% to 5% of portfolio allocation into crypto is where the wins are. But we're also seeing the check riders, those amounts of allocation of capital into outside asset managers go up slightly. I would say maybe 30% over last year and last year was 90% over the year before, as far as the amount of checks they were writing or the amount of capital they were investing. Yeah, that's insane. But it makes total sense, 1% to 5%, you're not breaking the bank and then they can get in there and get exposure, then I don't have too much high of a risk. I always thought this would be a great idea for all the different finance managers to tell their clients go, hey, hey, Bob, just so you know, we have these new things, this new digital asset or asset class, and we go 1% to 3%, I'm not going to crush it. And it's one of the best performing assets of the last decade, Bitcoin and Ethereum. What do you say? I just don't see why they won't do that moving forward. So it makes total sense about that. I think it's a long sale cycle for them. I mean, I've advised and educated corporate pension funds and a sovereign wealth fund over the last 36 months. And I will tell you that that process is a very long one when interacting with their operational due diligence teams that select investments. So I still don't see them coming in in the near term, I would say we're probably looking for liquid trading strategies to be invested in by corporate pensions going out 12, 18 months. Gosh, can you imagine pensions coming in pensions? We may not have enough Bitcoin left. That's what I'm talking about. And see, this is this is why having you on is so invaluable because like we are this channel covers those stories, but to get, you know, the story behind the story and listen to somebody who's actually, you know, in that space, walking and talking to these people, it just kind of validates all those things. Because a lot of people will say, well, it's just a story, you know, and anybody can make these things up. But I mean, here's Alex and he's talking about like, look, I talk to these people, I know these people, this is this is where the winds are going. So I got to tell you, thanks a lot. Appreciate it. But but that and then so all these people that are coming in, which is fantastic, right? But the question is, then, when you talk to these people, what's their digital asset of choice? Are they is it just Bitcoin? Are they like, you know what, Bitcoin or is it like Ethereum? Or is it something like some crazy stuff? Like, hey, I heard about this tomato coin. I got to get into this. What is it? I'd like to, you know, I'd like to say everybody's still taking baby steps in this. So when we're talking to an institutional investor from a principal standpoint, as in it's their capital, it's 100% Bitcoin that they discuss. But that being said, they are the allocators are willing to put money with successful asset managers in the space that are trading across an array of coins. So it could be Ethereum, it could be Ripple, it could be, it could even be DeFi. I know there's a lot of asset managers that have certain allocation DeFi now. So when they make that investment into these asset managers, they're leaving it up to that manager to drive Alpha for them and get those yields. And they're not particularly concerned with what particular coin because that's what they're hiring the asset manager do. But when it comes to normal conversations, it's Bitcoin. That's what everybody knows and hears first. And so, you know, that's their educational standpoint right now. Yeah, and I get it. I mean, people out there, when I do a video, I talk about Bitcoin, it's one of my main holdings. They're like, why are you in Bitcoin? That is an old technology. It is the Netscape Navigator. Why don't you upgrade to Google Chrome or Brave browser? And I tell them, like, look, you have to understand, this has been around for over a decade. It's been battle tested. People know it and it's in the public consciousness. So when I start talking about the different things that are going to pop off, I think it's going to be Bitcoin first, because I just think that's how it's going to go, then Ethereum, and then down the line all the way to, you know, a coin market cap of 150. But that's just how I see it. And now it makes sense. Yeah. Yeah, something like that. I think it's a volatility, I think it's a volatility discussion, right? You know, I mean, Bitcoin, you go back to your question one with micro strategies converting some of their balance sheet. And it's an hedge against devaluation of fiat. So I think that, you know, listen, Bitcoin is one type of investment strategy. I think it is going to, it begins to differentiate from, say, the defies, which are, you know, are accumulating very quickly, or the mid cap coins that are lowered down on the coin market cap sector, which are a lot more volatile, right? So I think they're all different investment strategies in their own right. Yeah, I try to be as safe as I can, or as safe as I can be in crypto. And that's one of the safe bits. But, you know, people want to invest in the lower ones. And even I do as well, but it's not that much. So if you got 5%, 3%, whatever else, and you're putting X percentage into Bitcoin, and then 10% to something, 10% to something else, sure, it makes sense. All right. Thanks, Alex. Cleared that up. The last question I have for you, and this was from, this was the article where it talks about the quant, now in crowded prime brokerage race. This is what your CEO was talking about. And this was, I thought, the crux of the arguments for the conversation. He stated one of the issues that we've had with some of our exchanges is the rate per second allocation. If you trade a high frequency training strategy, you may want to opt into a higher rate per second allocation. The quant's internal trading average is around 400 microseconds per trade, which is close to the London stock exchange, 150 microseconds. And when I read this, I went back to an article that I had heard about a long time ago with that, the transatlantic cable, which was by Iberian Atlantic, but they built it from New York to London just, and it was billions of dollars, I'm sure, to run a cable all the way that way. And the only thing it did was it sped up their transactions by five milliseconds so they could get an advantage. So when I see these types of things, I see these big guys coming in and they have these high transaction volumes, and they're reducing the actual rates. How does that work for the little guy? Like, I don't know, me. I mean, I think, so I don't think it would have, it really affects the everyday person investing in Bitcoin or cryptocurrencies. You know, the latency issues, which is the speed of transactions, is really geared towards high frequency shops. So they're doing thousands of transactions per minute, maybe even per second. So latency is very critical to them in order to really make that arbitrage yield that's happening, and it's a very little yield. That's why they trade a lot of volume very, very quickly so that those pennies add up to dollars. But the way it works is the closer you sit as a trader to the venue that you're trading off of is the quicker that your trades will get executed. So for instance, if you were an equity shop and you were trading, you know, primarily across the New York Stock Exchange, you want to be sitting as close to their servers as possible and connecting to them as opposed to a guy sitting in Ohio. So there's a difference in speed. So with us, there's, we have a very low latency institutional trading platform, and we actually have hedge fund clients from all over the world that ship us servers, and these servers sit next to ours or cross connect. And that way that when they're trading, it's happening right there instantly between servers sitting next to each other and not a guy in California who's trading to a matching engine in London. That's amazing. That's crazy. And these things just happen like split seconds, milliseconds, blah, blah, blah. It's done. Microseconds. See, this is this is the world that I am not a part of. That's why I'm glad you're here to explain it because it just blows my mind that things happen that fast. And those transactions are, you know, running around and it's just like milliseconds. That's amazing. Those transactions are being run by by machines as well. So I mean, you know, you say, Hey, how can a trader fire off 1000 trades in a minute? It's not being it's not being executed by a human. It's being executed by an algo driven computer. Yeah, perfect. Which goes off to our first article, which talked about Capital One and the artificial intelligence they're building and the patent and everything else. Full circle, Alex, great job. You're making my job easy. I appreciate it. No worries. Thank you, Rob. Pleasure to be here. And then everybody just so you know, Alex Maskeoli has got his own YouTube channel. It's in one of my top five or top six and the recommendation that you can find in the description of every one of my videos. And the reason I like to watch it is because he has some of the best people in the game and he gives us access to a world that we may not be actually privy to because he's got the people that make up these things. Alex, appreciate it. Thanks so much. Thank you, sir. All right. All right, I'll be like that little segment. Hopefully it's shed some lights. I got to tell you, these are a world I'm not aware of. So I'm glad Alex at the time. If you like to have some videos and be two months going to pop up on your left and right, not for sure because YouTube controls that just like the unbelievable ad you probably saw, which was probably a scam. And I'm not, I have no control over that. So if you have any problems, talk to YouTube. They'd love to hear from you. And that's it. So thanks a lot. Appreciate you guys stopping by. See you in the next one.