$14bn profit, 150 employees: stablecoins are the real business model | Pascal Hügli

So Pascal, welcome to the show. So great to have you here and to be in this wonderful place in the center of Zurich. We want to talk about something which I've been looking forward to for a long time now, crypto. And I think there's a lot of mysteries out there and untruths and half-truths. And we want to build a little bit of consciousness today on what the space actually is about and what it means for entrepreneurs and for opportunities. But it all goes back to what you, I think, refer to an event in 1971, the economic murder of God. So for the people who haven't been born there yet, which might include us, what does that date still affect or how does that date still affect people's ability today to buy a house or to scale a company?

Yes, thanks for the question and thanks for having me. Well, I mean, it's quite a tough question. It's a tough questions that we take up first, I guess. And as you said, the connection might not be that intuitive just from a first sight, but I think what's important and this is also maybe just a little bit, it can get quite philosophical if we discuss this type of topic. It's usually a narrative within crypto that when... gold or like fiat money was detached from gold, something was lost, almost irreparably, just because it was tied to something real and now it's not anymore. What are the effects? Maybe we have to take a step back and see that different parts of society are maybe affected differently. Even that person, depending on what sort of actor he is in a society, he's being affected differently. If we look at this person from the perspective of a saver, not a saver, a saver, somebody who saves money, then I think he's also affected because the savings that he has are being diluted, which means the money is worth less and less vis-a-vis asset prices which are inflating, which could be the house he's looking to buy. We can look at charts over the last few decades and we can really see, especially here in Switzerland as well, house prices have gone parabolic for different reasons for sure. It's not only that money has been detached, it's also like actual demand functions with people wanting to come to Switzerland just because it's a very great place. But the fiat money thing plays into this because ever since fiat money has been detached from gold, what has come possible or has become possible is that you can intervene, you know, through a centralized authority, which is mostly government or central banks, and then also maybe commercial banks that make up the system, and they can create money. And ultimately, they're not bound to this very scarce real resource anymore. So if there is demand and demand might be justifying us to create more money.

But if everyone does it, it can at some point get chaotic. And then we have this situation where the central banks will have to tighten the money supply, because things are sort of getting out of hand. We see actual inflation in the economy rising. And that's then where this sort of schemer, I would say, of creating money that was maybe not justified by people not wanting to consume and giving up their savings. that there was sort of a mismatch, and that's really what can happen. so I would say, again, this person, maybe when he wants to scale his company, he maybe also wants to take on debt to scale that company. He's actually profiting from today's system, because a debtor again is somebody who profits, because if you take a debt in a depreciating currency, your debt gets It's less and less, and that's why it's actually good. But then on the opposite side, sometimes he's also the saver where he's running this uphill battle, depending on who he is. I think that's what many people don't even think about. It's just that they're taking it for granted. This inflation, just here. Maybe it is a necessary evil. We don't really know. Maybe we just need it for a functioning economy. But it hasn't always been like this. There was a past where things sort of functioned differently. And it also worked quite nicely. There is this episode, maybe just to finish this up, where it's called in history, La Belle Epoque, in the 19th century, where things have done quite well. Many inventions came along, many great entrepreneurs from that period of time. And it was all under a gold standard, where the money was still tied to something scarce. Things also worked, there were crises back then, there are crises today. that's kind of like what we need to understand. It's not as black and white, but I think to think about this sort of inflation, which might be embedded into our today's system and maybe how I can make sure I can defend or protect against this is certainly, I think something that an entrepreneur should think about as well.

And you alluded to it. So let's talk about dilution. If a founder works 80 hours a week to save cash, but the pool of money globally is being diluted by seven to 10 % every year. What does that mean for your investments and what roles does crypto play? Yes. mean, the seven to 10 % that you mentioned, you know, this is sometimes people, again, they feel like that's not even possible. I see normal inflation being in Switzerland almost close to zero. And then in other countries, it's maybe five to, or two to 3%. You know, we had this period a couple of years back after COVID, you know, with supply shocks that kind of accelerated this. And we also had then central banks, again, reacting to a crisis, putting in a lot of money into the system, which is maybe an outlier in that sense, you know. So people are like, generally this is not the case, but The interesting thing is if you actually look at the money supply growth, that's how I would sort of also consider what actual real inflation, it's not just a CPI, you know, the consumer price index that everyone is looking at where they like authorities come up with a definite basket of goods and some are excluded and others are in that basket. know, if you look at the actual money creation, the money supply growth done by banks and central banks, it is 7 to 10 over the last few decades. And so that's the actual inflation and that's your hurdle rate that you have. If you are an entrepreneur or if you are an investor or just somebody who has money on the sideline and now wants to invest, if you want to not lose value in real terms, you have to beat that hurdle rate. The hurdle rate is really the expected return of something that you need to have to just make it be break even. That's why you need to look for things which have this high of a return annually. Most of the things, if we look at it nowadays, aren't really providing this real return. Government bonds, for example, in the US, they have paid maybe in the last few years,

3 to 5%, which, speaking, is a lot, but if you account for this actual supply of money growth, it's below that. And so they're losing value in real terms when you put it into government bonds. then equities maybe just slightly above it, and then you have to go further out the risk curve, and that's where crypto comes in. It is a very risky play, but this is exactly what people hope that they can achieve for them. because it's such a risky play with all these very new business models and innovations that come along that they can actually generate this type of return to beat that hurdle rate. And specifically Bitcoin, the Bitcoiners are arguing, okay, Bitcoin can help a lot here because of how it's built. And maybe we want to also talk about this because Bitcoin is maybe somewhat different from other cryptocurrencies as such. So we are a podcast for founders and startup operators. So of course we're super intrigued to learn more about the business models that you were also just like alluding to. So what were recently the most successful business models in the crypto space, according to you? Yes. So the business models, which are most interesting, you actually have to, there are a few, I guess it's not too many because that was one of the big sort of promises back in the day, know, that blockchain would revolutionize everything. And I've been in the sector for the past 10 years. And I have to admit myself that I also do lecture at a business school here in Zurich and I'm teaching and I've done this for years. every now and then when I re-prepare the slides, I'm like, okay, we're still stuck at the same problems. How can that be? And it's kind of disillusioning in that sense, you know? So I want to say this upfront, but... I feel like there are a few use cases who have been big. mean, the biggest, I guess, and the most profitable use case has been issuing stable coins. That's really it. What is a stable coin? It's a fiat denominated coin or token on top of a blockchain. So you can send fiat money on blockchain rails and blockchain rails are 24-7, always up.

very fast, very efficient, and you can really send dollars around with not being clinging to the traditional financial system, which can be in some parts of the world, be a very great benefit with people who are not as overbanked as we are, and they get to enjoy in that privilege as well. So you had this stablecoin issuer, great business model. One of the biggest is Tether. by far, it's this company, probably everybody knows by now, they've done, think, 14 billion in profits in 2024. And the last I checked for Q3 in 2025, it was also above 10 billion. And you ask like issuing a stablecoin, what is this? You just gave out a token on a blockchain, which is quite easy to be honest, it's not that much of an entrepreneurial achievement, I would say. achieving the network and people that use it, that's the actual ability and effort that they've put in. It's said that this Tether stablecoin is being used by more than 400 million people worldwide, especially in the global South, especially in Africa or in just emerging markets where they struggle with their own currencies and they can use it. For Tether, it's been amazing because the company has 150 employees. but has like this huge profit, which you can calculate. It's probably the best business model ever created on an employee versus revenue perspective or ratio. And that's amazing. And they've done generating these profits mostly through holding government bonds, which is kind of ironic because crypto, especially Bitcoin, started as a way to... kind of go against the traditional financial system, against government, and now stablecoins are holding government bonds and also providing demand for their debt. But they've held so much of that government bond. mean, Tether, it's up to 85 % of their entire balance sheet is invested into government treasury bills, short-dated treasury bills, and they have paid interest. I just mentioned it, 3 to 5 % in the last couple of years. So risk-free money that they're getting.

I would say the best business model for sure. Then you have the operating, the crypto exchanges for years, they've been very profitable and very successful. Coinbase, it has gone public. You have other crypto exchanges that might be going public. Crocconist is something that so many people look to see that there's an IPO quite soonish. Binance is a huge network across all... the entire planet, almost in every country now Binance has some footing, is just amazing. And it also started as a small crypto company in 2017. I mean, yeah, they always generate money through the trading wall that's happening. And people want to trade crypto when it's down, when it's up, maybe volume is a little fluctuating, but there's always money to be made from this. That's obviously something as well. And then maybe the last one I want to point out is a prediction markets. this is also something which is very interesting. only recently also been a thing. mean, in crypto, people have tried prediction markets for years. I remember back in the days, Augur was like one of these first projects. It didn't make it. It's still around today because it's a smart contract on a public blockchain. So it can't go down in that sense. but it doesn't have any users, you know, and, now we have polymarkets, you know, which is great. I mean, what is the prediction market in the first place? I mean, you can take bets, you know, on future events, whether they will happen, yes or no. And if they do, then like some oracle decides and you are being paid out when you are right and you lose the stake that you've given if you're not right, you know, if it turns out that you were wrong. And the hope is that this... revolutionizes how we think about the future and about probabilities. And we try to gather information from the market and this way we can maybe more accurately predict the future as well. And so many people were arguing, the polymarket will disappear after the 2024 US election, because that's when there was a lot of volume. Everyone wanted to bet on Trump or bet against him. And now we see one year in.

It's been generating tons of volume still, which goes to show that there is a use case. so why is crypto maybe relevant there? I mean, we had prediction markets in the traditional world. still have them. Kalachi, think, is one of these traditional more operated prediction markets. But with Polymarket, the thing is... It's based on a blockchain, and the money that is being paid out is not operated by a centralized authority, but by smart contracts, which are of escrows on the blockchain. Then you have an Oracle provider who looks at the event, it actually materialized or not? And then automatically through a smart contract pays out the respective parties, which again can all be done sort of... trustlessly and just by virtue of this being on the blockchain. And I think that's really interesting and that's why we've seen this scale. And so I would argue this is also one of the use cases that at least are maybe known outside of crypto, know, so these three. Yeah. And what I found very interesting and it's just a small thing that you said, but it also speaks to any of the founders that we had so far in the podcast. It's really that he said, yeah, the technology is basic, mean, not too basic, but I mean, it's not super complex, but it's all about the distribution. It's all about how you get to the community that you want to create that then actually interacts with your technology. So again and again, we see this red thread through our conversations. It's always the story that matters. It's also with Bitcoin. As we said, this inflation story that we talked about in the beginning, Bitcoin is is now 17 years old. I would say it's the fourth use case, which I think has really staying power. And a lot of people still ask, what's the use case of Bitcoin? It's not used for payments, store of value, it's very volatile. But I think what Bitcoiners say is that it's a world's first where you have something which is digital, but is absolutely scarce. Even though it's software, you can't change this 21 million hard cap that Bitcoin has.

And that's quite an achievement, you know, because it's decentralized across so many 10,000, 100,000 of nodes, this network, you would have to even almost get a supermajority that imposes like, okay, now we're going to change this 21 million cap, you know, and this just hasn't happened and probably never will happen, I guess, you know? And so you have now something which is digital, but absolutely scarce. I mean, gold is somewhat scarce as well, but maybe when we talk about entrepreneurship, if someday we can do asteroid mining, which is maybe way still in the future, but then you can go into space and collect all this gold and then gold could become worthless all of a sudden. And with Bitcoin, because of its, we can't get into the details, but because of its design, it's really designed that it has a vertical supply curve. A lot of energy and all the energy you have at it, you cannot create more Bitcoin. It's really limited to this 21 million. And so you have something which is absolutely scarce, like an image of Rembrandt or something. But Bitcoin is just very liquid. there are not only one image, but there's like 20 million units at least. And that's what then Bitcoiners say this has value in a world where scarcity is less and less a thing, because technology all around us is producing so many so much abundance and that's why they believe in the future Bitcoin will be sort of like this global piggy bank, or maybe like a dark black hole, which sucks in all that liquidity because it is ultimately scarce. So it might not have a use case like we traditionally think about it, but it's just a long-term store of value with just almost, it sounds good to be true, infinite upside potential. No financial advice for sure, you know, but that's what Bitcoiners see you. That's why it's created like this. so, yeah, that's interesting. And again, to your point, it's not the technology, it's quite simple, but it's the narrative, the mind virus that people now project into it and they believe it. And I think that's not going away. And now Chris Dixon, one of the leading crypto investors from A16C draws a sharp line between basically the casino.

speculative trading and memes and the computer, so the underlying blockchain technology. And he believes that the casino is a distraction from the computer's potential to build a better internet. How do you look at that? And also maybe can you walk us through a little bit what is casino for you and what is serious? Yes, that's a very good question because I think it's ultimately in the eye of the beholder, know, or like really it's subjective in that sense. I'm with him, know, obviously a casino, as I said, it is one of the biggest use cases. I would argue a casino is something, it is a legitimate use case, you know, like in the traditional worlds, we humans like to play games, we like to gamble, it's part of our nature, you know, and so I wouldn't discard this completely and just say, okay, this is all bullshit, you know, and it's just a casino. I would acknowledge it that it is a casino and then also trade accordingly. If I buy most of the altcoins, apart from Bitcoin, and so I have to be aware I'm not actually doing serious investing, I'm doing more gambling. And that's what I have to be aware of if I do this. But if you want to do this, go ahead and do this. So this is certainly something I think needs to be acknowledged. And then, as I said, mean, what is not casino, I would say again, Bitcoin, because of what I just described with the scarcity, there is like this true innovation, which I think has never been around, you know, and people want something which is absolutely scarce. They will want it in the future. People have always been collectors in that sense, you know, way back in the stone age already, they collected the muscles and stones, you know, and now they collect digital. artifacts like Bitcoin, you know? And so this is something, the stablecoins that I mentioned, it's all about efficiency, making payment rails more efficient. We can maybe get into this as well afterwards. And then maybe also the trading is maybe now the playground for something way bigger, you know, and that's what's happening right now. We are tokenizing traditional assets and we're trying to run them on these crypto rails.

giving us all the benefits that crypto has offered in terms of the blockchain, know, faster settlement, more efficient 24 seven, can be non-custodial. can be composable across many different apps because it's all shared on one platform, know, it's peer to peer potentially, you know, and it's instant settlement also, you know, so you have all these features and we're now seeing this. The traditional assets are being brought on chain. That's what it's called tokenization. It can be equities, can be gold, can be real estate, all types of things. The most prevalent ones are stable coins, which are like fiat being brought on chain. And then also US treasuries, just because they pay a risk-free yield. And some crypto guys who didn't want to leave the crypto world also wanted to profit off of this yield. And so we're seeing this and I think this is really about modernizing trading infrastructure, even though at some point it is already very efficient. If you look at post-trading, what happens beside or behind in the back door, you can see that there's still clearing happening and then the actual settlement is happening and this takes maybe 24 hours with crypto. wrap away a lot of this complexity and make it faster in that sense. And you want to do this on public infrastructure, like public blockchains, like Ethereum, like potentially other things. so I think that's also where it is not here yet. We have been talking about this for many years, that's true, but I think we're going that way because it's just inevitable to make things... faster in this ever faster moving world. So that's, think, is also something which I wouldn't just discard as casino.

What I'm wondering also about the different business models is so many different, different business models in a traditional sense, they rely on secrets, right? And they rely on secrets and on knowing certain things and how to combine them to protect their margins. And then on the blockchain, everything is fundamentally transparent. Everything is open to the, to the, to the world. So what does that mean for, for founders? Like how could founders or successful crypto founders also today thrive in an environment where everything about their technology is transparent.

It's a very, very good question. And I think it's also something that like actual use cases within crypto have been like struggling, you know, because of this transparency that the underlying technology offers. And then it might give them other benefits like being on this shared platform, you know, where it's 24 seven and nobody can sort of intervene and smart contracts do everything automatically. But then like if it's open to everyone, this is a big problem. And I think... One very good example that we have out of Switzerland is a flight delay insurance use case that was being piloted by Oxa Insurance way back in time. Well, for me, it's like it's been 2017 or something, you know, where I was really excited about this. And I remember sharing this with my students at the business school I'm at, you know, and this is an actual use case by a company. You can see flight. delay insurance, you can insure your flights and if it's late for two and a half hours, and Oracle looks at this and then feeds it into the smart contract and pays out these premiums and everything automatically, or the claim insurances. That was very, very interesting for me, but then all of a sudden I had to adjust my slides because the company, the pilot project was shut down and I was like, what's happening here? They said that it's because of demand, which was lacking, people didn't want to use it. maybe see that this has happened because there was also no Swiss stablecoin at that time. So people didn't want to be paid in Ethereum, even though back in 2017, it would have been nice if you get your insurance claims or the money back in Ethereum. so I wanted to dig deeper. then insiders told me that it was actually because of this transparency, because competitors could see Okay, OXA is paying out like this amount in premiums or in money, you know, and it goes to these and these addresses. And if you then did the connection by linking this up to the actual public flight data, which is available, you can kind of infer from that, okay, how much is being paid out here, which are the routes and maybe the time windows, which are the most profitable. And then you could as a, maybe as a competitor attack this, you know, and try to...

bring down margins, and this might not have happened, but I mean, that was exactly what they were experiencing and they didn't want this anymore. so that was really a problem. That's why I guess it was ultimately shut down. so it was probably back then, it was just way too early because nowadays I think it is possible, and many have shown this already, that you can selectively reveal some type of information on blockchains as well. And then for this, have... maybe a layered approach that we also just recently figured that we will need, you know, like there's not just one blockchain, a basic layer and everything is going to be built on top of this, but you will have different layers interacting ultimately all based on this base layer, which is public. then EY for example, has pioneered such a protocol, Nightfall it's called. There's other options out there and this really helps, you know, that you can selectively reveal certain information, but maybe in the case of Fizzi, they wouldn't have to show what types of premiums were paid out or what my money was when paid out to what holders, still but profit off that you are still based on Ethereum because Nightfall is a second layer protocol is sort of tied to Ethereum and ultimately profiting from this shared ledger. So this is probably how the way it will go. I guess I haven't been up to date, what we've seen on that front, but like I would say at least technologically these things are being addressed.

We're going to take a very quick break to thank our partner of this episode, Archip by Merky Baumann. If you're a tech entrepreneur, you know that building a company can create a level of wealth that is honestly just more complex than what traditional banks are built for. Most solutions out there are one size fits all, but tech wealth isn't. That's where Archip comes in. They have decades of experience specifically advising tech founders. What we think is unique here is how they bridge that gap. They call it tech banking with tradition. They help you navigate both your business and your personal wealth with a clear long-term focus. If you are ready to take those next steps, check them out at archip.ch. And I think what you are describing is zero knowledge proof, right? And I think to just give an idea, could you briefly describe on what that is in very simple terms, because it is a term which we have been hearing a lot. And I think there was a time when also Y Combinator was being telling, yeah, zero knowledge proof, that's a new thing to build. So just for people to understand what does that actually mean.

I'm also an old cryptographer so I can just tell you what I know, which is very basic. But the way I understand it is zero knowledge proof. It's already in the name, zero knowledge. If you want to prove something, like traditionally, let's say you are at the counter, you want to buy a pack of beer, you have to... pull up your identity card and then show it to the person behind the counter and they see your date of birth and also your name. And then from this, they can infer, okay, this guy's old enough, you can buy that pack of beer. so with a zero knowledge proof, you can still deliver this proof to that person behind the counter, but you don't have to reveal your age or your identity or your female male. It's in the proof somehow, it's mathematically guaranteed that this is true. so this is obviously quite revolutionary. I think there's different types of zero-knowledge proof. It's still very experimentary, think, a lot of experimentation that's happening around this. I wouldn't know of any use case where it's actually really scaled up and now working, but yeah, it's also been talked about. I guess if at some point we will make these breakthroughs, then... then I think this can be very, very cool because then you can have the privacy and still know, okay, this is all a bulletproof in that sense and you can't be cheated, you know, so that's how I would describe zero-knowledge proofs.

One thing about the business models is we have in a very practical sense, obviously cross border payments, right? And you also described that you described how in different regions of the world, crypto or blockchain actually enables, transactions and enabled some form of banking. when you like, how would you look at these cross border payments from the perspective of a business, which is operating a global on a global scale and has these problems with, okay, can actually my traditional banks can actually my traditional banks capture the payment needs I have at a reasonable cost.

Yeah, mean, the cross border payment flows, they are, think, one of the biggest use case of crypto. Maybe also not right now, but I stable coins will eat the bank's lunch when it comes to this. I mean, nowadays, how are cross border payments operated? It's operated through this immense, very complex, like correspondent banking system, where if you want to reach like... somebody, I don't know, in a rural town in India, you have to hop through like four or five different banks, just because this bank needs to know this bank and they have then like a relationship with this bank and that's how it's all routed through and that every bank along the way wants to take a cut of the action and charge or something. And with stable coins, mean, potentially this can all be cut out. It's probably not the case that each and every intermediary will be cut out because I feel like banks are already looking at stablecoins as well. We have first, I think Societe Generale in France has pioneered and piloted stablecoin projects. They are looking at this as well. But I think this is really how stablecoins can help, that you don't have to go through that many intermediaries. And maybe you can also just go through like a crypto exchange, because basically what you can do as an entrepreneur, you can ask your suppliers, would you want to be paid in stablecoins? And then you can peer to peer route these stablecoins over to them. You technically don't have to go through any provider like a bank.

Yeah.

Now, being in this institutionalized world that we are, we have like sort of operational things, you know, that we have to adhere to. And then you can't just randomly from your own personal wallet, play your suppliers, you know, but I mean, that's probably where we will go. And we see already some companies doing this, you know. So for example, a very prominent example is SpaceX, know, Elon Musk, it was being shared around. I haven't experienced it personally, but I've heard that. on podcasts and from other people sharing the information that with Starlink, this is also maybe in areas where it's usually no banks are operating there because if there's no internet, you don't want to be there as a bank, you may be and have a branch. That's why he's been using stablecoins to collect the payment from these people who have been using Starlink. And that way he could also very easily or efficiently evade FX problems. crypto is so... Because of the trading that's happening all around the world, because of this use case, it has pushed the boundaries of where it is at now. Almost in every country, you have a crypto exchange, you have maybe ATMs and that's why... that the coverage of distribution is so wide. This is something Tether is profiting from as well, because people did the trading first, but now the infrastructure is already there and they can be using it. The same goes for people like Elon Musk who can now collect these payments. That has been happening and I feel like, I guess in the end, Revolut, for example, we all know them and I know they are very great for likewise, you mentioned for... sending around like money cheaply globally. But even Revolut is seeing an uptick of people using stablecoins within their platform. You can use stablecoins within Revolut. And I think in 2025, they did about 10.5 billion transaction volume in stablecoins. And it's been growing massively, more than 100%. And if you compare it to the traditional total payment flow that they've done,

It's way less, you know, and so I think even if Revolut, the customers are using it in Revolut, it kind of shows that maybe I wouldn't be surprised if Revolut themselves maybe at some point use it in the backend, you know, and we people don't even know that. I feel like I do a normal bank payment, but it's the stablecoin that are doing the work here. And I feel like is it really cheaper? That's what people argue, you know, by now. Stablecoins, you have to understand there is obviously a transactional cost involved also on the blockchain in and of itself, depending on what blockchain you use. It can be cheaper if you use it on Ethereum, at times it can be more expensive. And then there's the off and on ramp cost, you know, because a lot of people still can't use their stablecoins or even suppliers of companies can't use the stablecoins to pay their suppliers. So it's this chicken and egg problem. And I think it takes time that as of now, I wouldn't kind of definitely say, okay, this is the cheaper option, but we will probably move there. I guess it's the same with internet over telecommunication. Maybe at the beginning, the internet, making calls through the internet wasn't cheaper in that sense, but it was more convenient. It was just better. You could globally reach everyone all the time. And this is, you can at some point send messages, you know, and stuff like this. And maybe we're moving in the same direction with stable coins, which just will take some more time. But yeah, I think cross border payments are definitely something they are disrupting. And now we've talked really about the company side, what it can mean for, let's say, startup scale-ups. I also want to shift a little bit to the scale-up founder that might have... made money secondaries and now is thinking about his or her portfolio. Entrepreneurs often need a very conscious approach about personal finance. So let's look at some basics here when it comes to crypto. So you advise and said that also in our prep meeting, like a two to 3 % rule for crypto in a portfolio.

I'm asking myself, why does adding such a small amount of volatile assets like Bitcoin and Ethereum actually make a portfolio saver over a, let's say, four-year cycle? Yes, that's a great question. The question is, is it making it safer or is it making it just more profitable with the same amount of risk approximately? That's what I would argue. I think you really have to look at this risk adjusted basis and I mean, we've done many sort of experiments with data and judging from this historical data. It's very interesting if you just include 1 % of Bitcoin and 1 % of Ethereum in a portfolio at the expense of like 2 % of equities, but everything else stays the same. You are diversified across different asset classes. You can really increase your portfolio's return quite significantly. Let's say we have a traditional portfolio. over four years, somewhat diversified. That's why it's a little conservative, generating 15 to 20 % return. If we add these 1 % Bitcoin and 1 % Ethereum, can over different time periods, we looked at different time periods, we can increase it almost double the performance. We have maybe 35 to 40 % performance with just these 2 % crypto allocation. being added on, you know, and why is this the case? It's really the case because crypto is still, like these two are still, they're big enough, but they're still not that correlated to traditional assets, you know, and that's what's very interesting. And the most fascinating thing is, as I said, you always have to look at this from a risk adjusted basis. You can't just say, okay, I have more performance. If you have a lot more risk, then it might not be justifying that performance. But with crypto, what we found is that the volatility, is usually the risk of a portfolio is only slightly increasing. So it's a few percentage points while the return increases more rapidly or more aggressively. And that to us then means,

It's called the Sharpe ratio in portfolio terms, which means the better a Sharpe ratio, the more return you get per unit of volatility, which is nice. And this is achievable. You want to have a portfolio with a higher Sharpe ratio. And so that's what you can achieve. And that's what I always find fascinating. Everything that we talked about in the beginning, people want to know the use case. They want to know the ideas behind it. But ultimately what really... moves the needle for many investors, like just seeing these numbers, you know, and then like, okay, I sort of understand this is not going away. It will be here because of the things he said before, I didn't understand everything, but now the numbers are speaking for itself. I have to do some type of investment just in case this still goes on, because we have a data series of 17 years. Obviously, the first five to six years might not be representative because the data was still... only in a few exchanges, but I think this will hold true in the future as well because of the reasons we discussed. so that's very interesting just from this very objective portfolio thinking reason, so to say. And when we switch now also the perspective to more institutional investors. So there is the saying 3 % is the new 1 % indicating that crypto is growing for institutional investors. These investors are usually entities which are very risk-averse. Now, can you walk us through what you see there and what you derive when it comes to personal finance? Yes. Yeah, that's a great question as well. These 2-3 % that we're mentioning, we're still somewhat conservative, I would say. Maybe some of the listeners have seen it as well. has been Bank of America just at the end of last year announcing that their wealth advisors are now allowed to advise or recommend crypto exposure or Bitcoin exposure up to 4%. So they're going even bigger and Bank of America, it's the second largest bank in all of the United States. they have something to say here and that's quite interesting.

Yeah, this will go on, this adoption among institutional investors as well. They are slower, they are more conservative. But again, for the reasons we explained in the beginning, that we have this fiat system as of today, where money can be created at infinitum. so the problem with this is if there's ever more money chasing like scarcer goods, even equities are more scarce than money. It's probably harder to create equities, make a capital raise, then just click a button and create more money. Everything is sort of scarcer against fiat. That's why then everything is sort of hollowed out when it comes to its performance. That's why even institutional investors have to go out further on the risk curve and look at other Investments, private equity is a thing that's grown in the past couple of years or decades as well. And crypto is the same. And so I think they will have to adjust also maybe because of the demand. Some people will want to have this included in their pension plans, I guess, or the Sule Drei, and stuff like this. So this is all coming and that's why I think they will have to look at this. Rightly so, they're very cautious, I would say so because it is moving further out the risk curve. This is something you have to be aware of, but that's why I think there is also some upside. That's what we discussed upfront. Is it all maybe with crypto? The biggest performance has already been priced in that sense. Bitcoin has gone from zero to 100,000. It's quite a run. Is there any upside left? And I would argue for the reasons discussed, yes, because it's like there's this fundamental reason of this money debasement happening, which won't be going away anytime soon. And then the world in and of itself, as I said, is making progress as well. Everything is becoming more abundant. That's why you maybe want to focus on stuff, which is actually scarce. And then, as I said, the pension funds and even maybe the central banks themselves.

At some point, they will look at something like Bitcoin as well, because we know gold has been rising in recent months because central banks have been buying a lot of them out of geopolitical reasons. mean, to me, Bitcoin is really the better gold because it's digital, it's neutral, it's least another version of gold. Why not diversify at some point and also keep some of your assets in gold? I know this is all very far into the future and very much speculative on my part, but I could see a world where something like this could maybe happen in a few decades time. so I think there is still upside and that's why I think it makes sense to include a tiny bit of crypto on Bitcoin in your portfolio. Yeah, because I mean, if we now exaggerate it a little bit, we could basically say if the conservative investors go into that space, then basically the wild wild west days are over and there is not really a window of opportunity for outsized gains for entrepreneurs. Yes. Well, that's probably true. That's how things work in life generally. You have the early adopters and then at some point, maybe things fizzle out and you just have the boring investors coming in. Maybe these very outsized returns that we've seen over such a short period of time, I would also maybe assume that this is... maybe things of the past, but then at the same time, Bitcoin is still very small. It's not even a $2 trillion asset. And if you compare this to the world's biggest company, NVIDIA, mean, it's double the size or even more than double the size. And then you have to argue, now this use case of Bitcoin that I argued, it's this ultimate store of value that is absolutely scarce, has only one use case, which is storing money.

then what could be its TAM, its Total Addressable Market. And some people argue it's all the assets today who have sort of a monetary premium and are held as inflation protection assets, but aren't really meant to be inflation protecting assets, like houses, for example, all the real estate out there. I mean, you buy a house to live in that house, but then at some point, if you have too much money, you start buying houses somewhere in Hong Kong or in Zurich or in Paris just because you know... This is going to preserve my purchasing power and is going up because it's also somewhat scarce, concrete gold, how they call it. But its actual use case is being diluted here. A house is being built to live in. The same is probably with art. Art is something cultural, you want to look at it, but... Increasingly, people are buying up these very great art pieces and then they're storing it away somewhere in the basement for nobody to watch it just because they want to protect their purchasing power. And I think that's the use case of Bitcoin and people will slowly get this. then the time is huge. A lot of this money could be migrating into Bitcoin because Ultimately, also storing Bitcoin or let's say storing 100 million in Bitcoin is probably a little easier than having 100 million in a huge real estate complex that needs to be managed. Bitcoin maybe every now and then also needs to be managed, but it's easier because it's digital and you can store it and we maybe talk about this, how you can store it. I think for this ease of use, for all of this, for the absolute scarcity, people will recognize. And that's why I think because the TAM is still that big, a lot of money can still potentially flow into crypto if this penny drops and then they're still upside. Especially talking about Bitcoin in that sense. And so for the busy entrepreneur who doesn't want to manage private keys, what are the...

regulated ways to actually get this exposure? Yes. There's always the possibility that you can buy the coins themselves, as I said. This is what crypto has enabled. It's called non-custodial. You can also be your own custodian and then you can go on to a crypto exchange or nowadays we have brokers or banks in Switzerland, which are also regulated and you can buy them. Some of them you can even withdraw and then really host it all yourself, know, this entire infrastructure. But then there again, obviously you are your own security risk. know, if you don't properly back up your private keys, that's what it's called. It's like your sort of your access code to your crypto because they're all just represented as, I mean... virtual numbers in a public ledger, which is decentralized, but then if you lose that access code, you will never be able to retrieve it. so, yeah, you want to be maybe with a few thousand dollars, you do this, but then if it's more, you want to like, adequately save and store this. And so this is probably where a bank can come in, where we do this on behalf of clients, especially as well, or other banks. And then obviously, yeah, especially if you go for a bank and not for a broker, mean, banks are usually FIMA regulated, know, their custody is an institutional grade solution, you know, and not that this cannot be happening with brokers as well, but I mean, there's just more eyes looking at this and more regularly, and that's maybe why you maybe also sometimes slightly pay more with these options, but you have more... additional security in that sense. And so I think that's how it's doable. Or if you don't want to buy the actual coins and you don't want to go, you're not with a bank that can do crypto and does buy the actual tokens, you can still just with your normal house bank buy maybe an ETP or an ETF, which with a proper icing, can just have your banker buy this for you and there...

You have somewhat exposure to the underlying, but obviously you're not owning it in that sense. And this can be achievable as well. And for some, might be the right option. For some, it might not, but there are different options. And I think it's not that difficult today anymore, especially here in Switzerland. We have so many players. If you really want to get your first exposure, then yeah, you can. You can do so through one of the banks or the brokers who have also somewhat an established track record for sure.

I want to turn to something which might sound very abstract and very far away still, but I think which will implicate or which will have a lot of implications in the short run already. And that's the consequences of AI and AI agents on the web. And I think also Stratecary refer to this as the agentic web. And a lot of entrepreneurs out there rely on a content business on content creation, on media retention, and they follow metrics like retention time, listening time. watch time, click through rates. And the problem is basically that you now have AI agents, which I can configure in a couple of minutes, which can scrape through a random YouTube channel, which I like and basically say, okay, give me all the transcripts and turn that into a one page memo, which I can consume on the bus to work, which is super nice for me. And I saw a lot of really, really cool use cases off that on, on X or on YouTube, but it is a problem for the content creators themselves or other businesses who amplify through content creation, because you kind of kind of pumped the water out of your own pond, right? If you are not visiting them anymore, they don't have an incentive to create, which basically don't give you something to consume. and. crypto can play a role there because it might be a mean to compensate content creators. So can you walk us through what is possible there and which might be a huge use case which no one thought about but which came up quite recently, let's say.

Mm.

Yes, that's definitely true. mean, the agentic web as it's called, it's going to be huge. And the implications, I mean, I don't really want to think about it right now because it can be so disruptive in the way we just interact with the internet in general and computers even. And so I'm actually somewhat looking forward to this, but at the same time, I have these same qualms and just like queries that I feel like, okay, how is this going to affect us? I mean, you're right. know, one thing that blockchain really enables is sort of streaming money. know, and I mean, we know all the streaming, you know, from Netflix, you can just easily stream video and films and everything, you know. So nowadays it's very embedded into our DNA. Everyone knows how to do this and why not do this to money? You know, we can do kind of streaming bits and pieces of money across to people. And that way you can in the background earn

that

as you go in that sense, and that's really enabled by something called micro transactions, which blockchains can do because of this infrastructure, which is up 24 seven. And then if there's not too many, if it's maybe happening on a second layer and not on the base layer in and of itself, not every transaction also has to be kind of validated all the time. And that's why it can then be made possible. And there I see a possibility that you could embed this into the internet in and of itself. mean, Coinbase has done such efforts already to maybe embed this into web 2 technology that then at some point, exactly as you mentioned, if an AI agent comes across your way and gets some of your content that it automatically pays for this, and you will then profit off of this. We're probably still not there, but I mean, some of the niches that we see within crypto people are already trying this out. mean, it might not be AI agents yet that pay, but like other people who maybe consume your podcast. There's an app called Fountain, which is kind of interesting. It's something similar to Buzzsprout or just to all the... managing podcast apps that are out there and they really build on Bitcoin itself, on the Bitcoin Lightning Network, it's called, you know, and there you can exactly do this. So if you are a user, you have a crypto wallet embedded into your account, you know, and then you listen through the fountain app, like the app thrown from Apple. And then once you click play, you're automatically streaming Sats, which is like this, the smallest unit in Bitcoin. to people, just a few sets, which could be 0.000 Swiss francs per second, which I think in the traditional world wouldn't be possible. No card payment processor or something would allow you to send that money, that little amount of money, especially if you are listening, maybe you are a podcast producer in Switzerland and somebody from, I don't know.

Bangladesh listens in, you know, and then they can still compensate you this way. And I think this will happen at some point, know, this streaming of money. There's other possibilities that you can just maybe block content that you have. If you are a newsletter content creator with a paywall. which can easily be unlocked again through a crypto wallet, you know, with one click it can open up and everything like this, you know, and I'm also trying to think about this. How is this going to disrupt how we do it today? mean, somewhat annoying if you are a reader and you want to read so many things on the internet, but then for everything, you cannot just unlock just one article, but you always have to get a subscription, which is like, oh man, I can't. run hundreds of subscriptions across all these platforms. That's just too expensive. I just want to read this one article like selectively, you know, and with crypto again, you can do this. The technology is already here. The question is just like, we're not running against the technology only, but also maybe against just basic human needs again and basic human economics, you know, in the sense of like... With subscriptions, I mean, they play their part. They delete something like mental transaction costs because you know it when you have the subscription, you don't have to think about it again. This is something which is very good for humans because humans don't like spending money. This is behavioral economics, I guess. From the part of a producer, obviously having a subscription gives you predictable revenue. We're also up against this, when it comes to these options that are already out there with these micro payments, but I guess at some point, things will change and we're already seeing it at the margin with these options that I just mentioned. So I feel like there's also a lot of opportunity there. mean, just recently with the, just maybe the last point, Ethereum, which is this other great ecosystem that we have.

They also recognize that these AI agents, will have a common language they can speak and also a common platform where they can trust each other. Because maybe at some point it will also be the AI agents doing transactions among themselves. The machine to machine economy, it used to be called. And they need to trust themselves. They need to know, is this a reputable AI agent? What is his identity? And Ethereum is building now this standard, which might be going live soon on the blockchain in and of itself to really provide a trust layer for these AI agents to get an identity, to have a reputation trackable, and then also to be verifying this on the spot. Because again, you need to do this at crypto speed. It needs to happen 24 seven all the time. It needs to be up all the time. This is really where we're going. And I think their blockchain can play its part through different angles, so to say.

It's very interesting. And I think it was very interesting because in the last years, people were talking about like obvious use cases, like the tokenization of real estate or something. And now all of a sudden you have AI and agents scraping the internet and roaming from left to right. And there might be a much more obvious, much more quicker use case, which people have to adopt to. And Cloudfair also is going into that, right? I mean, I think time's up and we have to move to our last section, the rapid fire questions. a really a really a nice wrapper around a topic which many people don't know about what's what's going on and to maybe kick this round off with the very first question so we're just gonna ask you a short question and you can answer whatever comes to your mind if you could only hold one asset besides bitcoin for fun for the next 10 years to protect your sovereignty what would it be gold productive land or a personal server

I'd probably go with a personal server or just with a device that gives me unlimited access to the internet, you know, because like I'm a perfect example for this. You know, I'm a self-made man when it comes to crypto. I discovered this back in university, found it very interesting, but then all of that... autodidactically learned everything by myself, because there wasn't that much out there, but the internet really helped me. And now I can be on podcasts like this, sharing the information just because I had this opportunity. so the internet, knowledge is power and the internet gives you bits and pieces of that knowledge, one insight at a time. so that's, I guess, the biggest asset that I would hold just because it also yields the biggest ROI, I guess, knowledge in that sense. Now for a founder with 250k in company reserve sitting in a traditional bank account today, what is the safest percentage they should move into digital asset tomorrow? Yes, so I go with 3 % that we have at our bank, which is the upper limit that we recommend. so in that case, would be 7,500 that he would be investing. And yeah, I would do so. Get off zero. That's how we say it in the crypto world, you know, just to experience what it's like.