On The Brink with Castle Island - Roundup 10/28/22 (Bitcoin's hashrate spike, Miner insolvencies, Lightning v Rollups) (EP.365)

Episode Date: October 28, 2022

Matt and Nic are back for another week of deals and news. In this episode:  Full time crypto haters What's the deal with the nocoiner think tank? Eric Wall and Udi vs Bitcoiners Did Bitcoin put all of its eggs in the LN basket? Scaling isn't LN versus big blocks any more Is there just one scaling solution for blockchains? What are the prospects for ZK Rollups on Bitcoin? Spam attacks on BSV and Zcash Bitcoin Miners are going bankrupt How did the Ethereum merge affect Bitcoin miners What's the deal with Bitcoin's hashrate spike? Are non-economic Bitcoin miners killing the free market for mining? What's the deal with miner lenders? Synthetic Bitcoin stablecoins Is Twitter fairly priced at the deal price? Matt Levine's 40k word article on crypto Is the pivot finally in? Sponsor notes: Talos powers institutional access to the entire digital assets ecosystem via a single-point of entry. Connect directly to your preferred prime brokers, lenders, investors, custodians, exchanges, OTC desks and more, or meet them on Talos. Get started at Talos.com Subscribe to the Coin Metrics State of the Network newsletter 

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of concentrated easing. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called a Bitcoin. Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. In this episode is brought to you by Coin Metrics. And here is the Metrics Minute. For today's Metrics Minute, we're talking about forks. So if you compare Bitcoin and Lightcoin, you can compare them by realized cap.

That is the market cap weighted by the time at which each unit last move. Bitcoin's Realized Cap is over $400 billion. Like coins is $6 to $7 billion. comparing a theorem with the theorem classic, the number of addresses holding at least one eith today is 1.6 million, while the number of addresses holding one ETC is 267,000. Looking at Bitcoin Cash, block space utilization is below 10%, while Bitcoin ranges from 70 to 80% utilization.

That's your metrics minute. Another wonderful metrics minute from the coin metrics crew, always pumping out the content there. And this episode is also brought to you by Talos. Talos powers institutional access to digital assets. If you're on the buy side or the sell side, you should know Talos. If you're in TradFi or you're a crypto native firm, you're on the Talos platform, and it enables end-to-end lifecycle trading.

So they have a great experience. You can trade via API or on the GUI. And basically everyone in the crypto ecosystem congregates on Talos, whether you're a prime broker, lender, investor, custodian, exchange, OTC desk, the liquidity is aggregated. They have the best leadership in the biz, and that's why everyone trusts Talos. Head over to www.talos.com to learn more. So we are, we're doing it again. We're recording this on a Wednesday.

That's on the bingo card, right? So we're recording on a Wednesday. Someone is going bankrupt on Thursday. I guarantee something's going down tomorrow. And we won't be there to cover it. Maybe we should just release this on a Thursday. I don't know. if it's big enough news you know what we'll hop back on or maybe well you're busy right so i will just

monologue we'll do a voice memo i'll do a voice memo you can just yeah while you're on the subway just send it over we'll put it we'll denoise it we have the technology we do yeah it's um so we we won't be recording as many deals this week because we're just missing a day or two so that's all right it was a busy week you think i mean we actually actually have basically no news. Well, you know, there's some Castle Island content. So you went on what Bitcoin did. I'm glad you still get to do the what Bitcoin did and that Peter never turned on you.

I'm amazed that I get invited to that show. Speaks to the quality of his character. He's a good man, that Peter McCormack. He is. I really enjoyed that one. So you talked about the executive order on Bitcoin mining. Very clear that that was a terrible report. It was a bad paper.

As I said on the podcast, if I was a college professor and I'd assigned that paper, I would have failed it on account of the poor referencing. Horrible references, just like basically referencing Digiconomist. That was the number one reference. The Dutch. Anti-Bitcoin blog. Dutch Central Bank affiliated paid no-coiner. What a terrible, terrible thing. Here's the fact about Dig Economist.

It was originally called Dogeconomist. That's where the name came from. Because he was a Dogecoin fan, right? His whole thing was he was a Doge guy. And then I guess somewhere along the line, he had a falling out. You know, I don't know what happened. Someone in the Dogecoin community offended him. And now he's like the Crypto Grinch.

And his whole life is dedicated to attacking mainly Bitcoin. He's like a full-time hater. Like, where does he, how do you get up in the morning? like, yeah, I'm just going to spend all day hating on Bitcoin. Like, how do you get the energy? It's just incredible. The internet is such a weird place that you have these people that just dedicate their entire lives to just dumping on something.

It's just unbelievable. And it's incredible because he's never going to stop Bitcoin. So, like, he's guaranteed to fail, right? Like, what does success look like for him? Bitcoin failing. He's not going to do that. So, like, he's guaranteed to be disappointed for his sake. This is my personal appeal to Alibald.

DeVries. Alex, I know you're listening. Alex, for your health, you have to give it up, bro. Find a productive hobby. Basket weaving. There's a lot of other things in the crypto space that you can hate. Like, do an investigation on Dauquan or something. I'm sure there's productive, what did people in the Netherlands do? I mean, this actual tulips? They have tulips.

Yeah, real tulips. You could look at the tulips, windmills, clogs. Yep. Belgian, well, I mean, right across the border, Belgian waffles. maybe they have them in the Netherlands too. There's got to be all kinds of activities for him to do aside from just hate on Bitcoin constantly. It's, you know, I'd love to see some people

dedicate real time and attention to just on chain sleuthing on some of these bad actors that we've had this year. That's like good time well spent. You know, actually speaking of the No-Corner's, there's a No-Corner think tank getting started now. So it's like a, you know, like the bizarre version of Coin Center, which is like the anti-coin center. Wow.

They're actually getting together now. They're organizing. And they aren't satisfied with just being trolls on Twitter. They are now moving into creating full-time counter-crypto advocacy organizations. That's unbelievable. The No Corners had a conference. They actually had a conference dedicated to hating on crypto. I saw that.

I saw it actually sent that across. That's incredible. I mean, I don't even know what I would compare it to. Like the group of people that hate like parties and like donuts. The weekend. Just fear the weekend. They hate rainbows. They hate fun.

What drives them? What? Like, come on. It's such a strange thing. They're organizing. Imagine being the executive director of the anti-crypto think tank. And your day is dedicated to finding ways to interfere. In other Bitcoin-related podcast news,

Lara Shin had Eric Wall and Udi on to talk about the tribes of Bitcoin maximalism and how the Bitcoin, you know, cabal is getting a little bit stagnant. That was an interesting episode. I think Udi and Eric are very, very thoughtful. Yeah, I thought they made excellent points. And it didn't surprise me that the Bitcoin self-described plebs were extremely triggered by that because they just cut really deep.

And so, of course, there's this visceral reaction because they're just basically telling truths about Bitcoin culture which is rotten. It is rotten. It's intellectual cesspool. But it is interesting that I forget which one of them was talking about it, but efforts to fund more roll-up studies on Bitcoin. I think that's very promising. It's very clear that roll-ups are a much better scaling strategy than anything that's happening on Bitcoin, in my opinion. It's just, you know, the Bitcoin camp put all their eggs. They put one egg in the bat.

There was like an ostrich-sized egg. So they'd one basket and one egg. And the egg was lightning, right? Yeah. So they put all of their one egg in the basket. What if you drop the basket? You break the egg, right? Yeah.

You should have multiple baskets. What is wrong with roll-ups? Nothing. Back in the day, Bitcoiners was like, well, we're the only ones who are thoughtful about scaling because there was this lightning versus the naive model of scaling, which was like the Bitcoin Cash big block idea. That's not what, so there was like two choices back then. That's not the case today. There's a zillion choices. And many of these roll-ups and L2s are deployed in production. They work. They have millions of users. So it's not lightning or nothing. What about lightning and

right? So like the Bitcoin community is stuck in this time warp where it's like, oh, we're fighting our war against the big blockers. No, things have changed. There's new developments out there. Shall we take some learnings from the Ethereum community, perhaps? 100%. So I did that podcast with Stephen Goldfetter at Arbitrum a couple weeks ago and he was talking, we were both talking about back in the day there was a bunch of posts from Greg Maxwell on Bitcoin talk, talking about something. that looks and feels an awful lot like roll-ups. I mean, this is not a new idea.

It's not like an Ethereum idea per se. It's just a general good scaling tactic that people in Bitcoin have actually considered in the past, but it wasn't ready. Now it is. And if you talk to Bitcoiners, they feel obliged to extol the virtues of lighting as a small scaling solution,

but it just makes no sense. I think lightning's great. We invest in lightning companies. I'm on the board of lightning company. It's not going to be a panacea, just like there's no one payment network that dominates out in Fiat legacy world. There's so many different types of payments networks for so many different types of use cases. There's cash. There's checks. There's ACH. There's wires.

There's Fintex. Venmo, Zell, whatever, you name it. There's credit card transactions. There's so many heterogeneous sort of patterns involved in transacting. You don't just use one choice. You don't have just one payment choice. So what about just being a little more pluralistic and saying, okay, landing is going to be suitable for some things. I would say small, granularity, high frequency online payments. That's what I think it's good for. What about just inheriting some of these ideas from the rest of the crypto space without being poisoned by this ideology that you've to reject all other innovation elsewhere and see if you can adapt them to Bitcoin. Why not do that? So I will give a shout out to HRF, I think, who funded this investigation to roll up.

I think John Light did it. They did, yeah. And to his credit, he used to be a skeptic and now he's pretty pro roll-ups on Bitcoin. I think it would require protocol changes on Bitcoin to work, though. Buckle up. I mean, I don't know. Yeah, another five years from now, maybe. It's very clear who won the Block Size Wars.

And by the way, I don't know if you monitor this Bitcoin Cash situation, but that thing is basically broken. Someone's just mining empty blocks on Bitcoin. Or not Bitcoin Cash. Bitcoin, BSV. Yeah. So that thing just broke, basically. Yeah.

There's also a spam attack on Zcash, I think, if I'm not wrong. A very cheap and sort of damaging spam attack. Yeah, it's funny, like, you know, go back in time five years. It's like Bitcoin Cash and Zcash were like these major top five, top 10 projects. Now they get attacked to Smith, Marines, and nobody even noticed. There's no one building like a real business on top of BSV or anything like this. So there's no one really at the party to complain. It's interesting to see an actual failure mode.

But yeah, clearly there's a level of security spend, which blockchain isn't secure. I mean, and also BSV, I'm not, they don't, they never change the hash function, right? I don't think so. So any Bitcoin, regular Bitcoin mining farm could probably trivial attack them. It was a lot of A6 out there that are at customs ports and in dump trucks right now, given how that part of the industry is going. Yeah, actually, I want to address this. So I did a panel today actually on sort of Bitcoin mining and future of the energy grid.

And I was asked about the merge. And the merge had two interesting effects, I would say. First was a lot of those AMD GPs. The low-end ones were just junked. actually, Ethereum community doesn't really talk about this, but there was a significant e-waste event. The higher-end ones, they kind of, in some cases, we have a podcast coming out on this, they're repurposed, sold or repurposed to rendering and kind of HPC use cases, bursty compute. One thing that we're not talking about is some of these Ethereum mining farms,

They'd already had their PBAs in place, right? So they had their power agreements. They had the infrastructure, transformers, everything. They slot it in Bitcoin A6 because what are you going to do? Now you have this costly contract and you might as well put it to work. And Bitcoin was the next best thing. So they started mining Bitcoin. So that explains part of the spike and hash rate.

So it's kind of like Ethereum's final blow to Bitcoin on the way out is screwing over miners even more. That's interesting. I mean, this spike in hash rate, you got to figure that a lot of that is coming from other countries as well, though, right? Yeah, so a few explanations. One, the process of building Bitcoin mining facilities takes a long time, 12, 24 months. So the hash rate we're coming online now is hash rate that was planned for, paid for, and permitted, you know, over a year ago when things were good. So this is very laggy. Whenever you look at price versus hash rate.

rate, hash rate's laggy because price going up induces miners to build more hash rate, but it takes a while. So it's a classic capital cycle. I think also part of it is Russia. I think there is mining occurring in Russia, whether state sponsored or not. It's a way to get a hard asset. We've talked about Russia's, the government has spoken positively about Bitcoin mining in the past. it wouldn't surprise me if this was either an official or an unofficial program, but it wouldn't surprise me if a lot of this hash rate was Russia. And here's the problem with having entities mining that are less price sensitive. They may just want to acquire the Bitcoin covertly in a no KYC manner,

put their resources, mineral resources to use. I mean, remember, Russia has a lot of shut-in wells right now. they have a lot of gas that's kind of trapped. They have nothing to do with it, right? The gas is still pouring out of the well. Well, what can you do with it? Well, you can monetize it by mining Bitcoin. That costs them nothing.

But because Bitcoin mining is a single market, that massively disadvantages economically mined operators. If you have effectively a subsidy happening over there, that kind of pushes out of business to everybody else that's mining and has us to follow market dynamics. So, you know, it could be an issue long term. I mean, you think about that. Let's say Russia is mining and it's all state subsidized. Let's say China, maybe it's not state subsidized, but you have this kind of mafia black market thing. And, you know, you're getting free electricity. You'll look at the U.S. and you'd say, well, you just can't compete on price there unless you're getting access to like a pipe to crypto type of thing. And maybe the only viable mining in the United States is that. kind of the way we're doing it now, hosted facilities. Is there a world where that just doesn't work?

Yeah, I mean, there's something people don't get about Bitcoin is it is a single market. So every miner is competing directly with every other miner. Think about natural gas. Natural gas is not globally fungible, as we know. Americans mine natural gas at $6 per unit. I think it's whatever MMBTU. They sell it to Europeans at like $35 a year.

it because you have to put it on a big old ship, liquefy it, you know, whatever. It's not globally fungible. Bitcoin is obviously globally fungible because you mine it and then it's available on the internet. It settles instantly, right? You sell it on any exchange you want. So every miner that mines at a lower and lower cost basis is disadvantaging every other minor.

So if you have a Venezuelan mining with an old S9 or something with, free electricity or an Iranian subsidized electricity or the Russian government mining and they're not very price sensitive right they're happy to lose money on it maybe North Korea mining China black market electricity mining all of those are not as price sensitive as a for-profit business publicly traded in America that's mining and has a you know profitability threshold of maybe six cents per kilowatt hour and and below that that, you know, they can't get power cheaper than that, maybe. So the more of those kind of irrational, they might be rational in their own way.

Maybe they have objectives that are not economic objectives. The more irrational miners there are, the worse it is to be a regular old capitalist miner, right? It's, I mean, it makes you think about just the, the industry around Bitcoin mining, particularly with the lending markets. And so if that continues to play out, which it looks like it is playing out, your lenders that are collateralized with ASICs, those ASICs are useless. I mean, what are you going to do with them? It's not like you can take them over to North Korea and stick them into some free electricity, right? It's like you've got to put these things to work if you sees them. It's not like a, you know, it's not like a pizza oven where you can sell it off to someone.

And it's the worst kind of collateral because it's so correlated with the solvency. It's just correlated with like the space you're in. It's the lender. Right. The best kind of collateral is something that is sort of has its own return profile, you know, you foreclose on a house. Now at least you have a house. Yeah, you can live in it. You can sell it.

I mean, yeah. House is not going to decline by 90%. In is Bitcoin lender. when you're repossessing these A6, they're down 90%. Also, you have to figure out where to put them. You know, maybe if you're lucky, they can stay at the hosting facility and it's just a paper transaction.

But yeah, so I mean, the people I talk to in mining think that could be two-thirds of three-quarters of public miners are out of business in a year. I'd be, that's kind of like my base case, I would think. I'd be really surprised if we don't see a massive consolidation there. I think the, how much leverage

is in that system is the next question. And will you see a further flush on the back of some of the lenders in that space really running into the hurt too? I mean, right now it's like amend and pretend mode on those loans. There's just no way those things are getting repaid. We're in suspended reality right now. Yeah, I think we could consolidate down to five big miners. And yeah, the A6, all the failures are going to be correlated.

The A6 is not worth very much. so then you do wonder about the big lenders. And of course, you wonder about the Bitcoin held on the balance sheets of all those miners. As they go bust or as they engage in acquisitions and things like that. Yeah. I'm not saying that's final leg down. You know, the minor capitulation might be more drawn out. But it's definitely something that hasn't resolved yet throughout this bear market.

It hasn't been resolved. I mean, if you just look at where there could be forced selling in the market, that's by far the most obvious place and the largest place. I don't see a lot of other levered players in this market. Gox coins. Gox coins. Talk about new liquidity events. Obviously, you know, pretty well known, appreciated by the market.

Dare I say Price in? What if Sailor decides that he just is like an Ethereum guy or something? Yeah. He would really have to call it quits, though. I don't know if there's an actual mechanism to buy even. by shareholders to release those coins. Yeah, those seem pretty sturdy for now. All right, so that was talking Bitcoin mining.

You want to hop over some deals of the week? Sparse week. Maybe because we have only at half the week. But it's a light one. It is a little bit light this week because we're doing this podcast recording early. So the first one is actually a Castle Island deal. So Collider, which is an exchange that is building on top of the Lightning Network.

Speaking of the Lightning Network, They raised $2.4 million from Lemniss, us, polychain, Alameda, and Feffer Capital. And these guys are excited about these guys. They're building on lightning and they're focused also with stable coins on lightning, which I think is going to be, that's what you want to be doing if you're building on lightning is you got to get that U.S. dollar instrument on the chain. Yeah, we take back all the mean stuff we just said about lightning. Well, I think it's, you know, it has its virtues. It's like you should do lightning.

You should do roll-ups. You should do as much as. you can, right? Yeah, I mean, yeah, I fundamentally believe in lightning. I actually think there's a ton of alpha in investing in space that sort of hated. And, you know, look a shout out to Max Webster has a great fund, almost entirely lightning focused. And valuations are much lower in that space overall. So, yeah, Collider, very interesting. Their key insight was initially, if you're using the Lightning Network to kind of post-margin, post-collateral on an exchange, you can do it with much higher frequency, you can react more quickly, which means you can carry a lower amount of

capital on the exchange and top it up on a short-term basis if needed. Compared with Bitmax where part of the issue was that people had to wait for confirmations to post-collateral when it was in distress and there were congestion issues. So lightning does change the game there. I found that very interesting. The other product they're developing is a derivative-based stable coin. So it's a long spot BTC position paired with a short BTC position, and out of that you get a synthetic dollar. Seeing it done before, but I do like the idea. You know, you could imagine that integrating with the wallet, and then you just hit a button the wallet, which says sort of neutralize my Bitcoin exposure. And because of the, because of the, typically the longs pay the shorts,

most of the time, you're actually typically getting paid to maintain that short position. That's not always the case, though. So, yeah, intriguing model from the Collider team. So congrats to the Collider team. Next one up is Mintify. This is a collectibles analytics company. they raised 1.6 million from ARCA. Next up we have Spindle, a Web 3 analytics company founded by the one-and-only Antonio Garcia-Martinez. AGM. He is one spot in time he blocked me and then he unblocked me. Thank you.

I don't know why. Actually. He wrote the book Chaos Monkeys. He's very active on Twitter. I think he worked at Facebook. Is that right? Yeah, Facebook. And then he had a cup of coffee at Apple, right?

Yeah. He lasted one scaramucci at Apple. Yeah, he got canceled quick at Apple. Or do we say like one Liz Truss? We'd do it moving on from Scaramucci. I don't know. Keep the scaramucci. I don't remember what he did at Apple to be chased out of there.

I think it was stupid. I think he wrote Chaos Monkeys. And then they just, they had the internal uprising because of some of the language that he used in Chaos Monkeys. I'm pretty sure that's what it was. So this is like this is the pre-Elon era of Big Tech when you could still be canceled. Now post Elon, you know, who knows?

Maybe all bets are off. That's probably a candidate for a newsworthy event on a Thursday tomorrow is what if that deal just gets called off? What if Sam Bankman-Fried buys Twitter on Friday? Well, he was, Sam approached, I think, Elon's team about it. Yeah, there was some league text. Yeah, there was some league texts. I don't think even Sam, I don't think he's the bankroll to do it. I think it might literally be only Elon,

the only man on earth they can actually buy Twitter. Well, so, all right. Let's just finish this spindle thing, and then I want to talk about this. So he raised $7 million, AGM from Dragonfly Chapter 1, Tribe, Polygon, and Multicoin.

So congrats to you're right to AGM. This is the first time hearing of it. I disappointed he didn't let us sell off the deal. No, because you were blocked. That's the thing. But on this Twitter comment, So the banks are holding the debt still. Have you seen this?

So the thing is going to be underwater. The banks are not going to be able to syndicate at this level. Why not? Because it's too high of a valuation. There's no buyers of the debt. That's the valuation. That's the valuation that the bank signed up for. And so that's the valuation where the deal will get done, it looks like, by Friday.

But that means the court of law has, the courts have insisted that the deal gets done there. Right. And so the mechanics of this are going to be that the banks fund it on the, the debt side, Elon will show up with the money and the deal will close, but the second the deal closes, you would think the banks are going to have to take a mark to market right down on the debt because there's no buyers for that thing. And so they're going to be hitting on it just a steaming like a pile of trash, really. And so. That trash was the word you wanted to say there. Yeah, trash. It's a family-friendly show,

but that's like a $14, $15 billion hole. But why would any bank sign up for to lose money? They already signed up. Those contracts are pretty rock solid. So they're going to fund. It's going to happen. And so it'll happen on Friday. And then the question is, what do you mark the book at?

And they have, they revealed that they are sitting on most of the exposure. So it's not like there's a hedge fund that, you know, hopped in and took that risk on. a lot of these banks are sitting on it. So that's not a systemic issue per se, I don't think, you know, $13, $14, $15 billion, but that's not great. Would you be a buyer of Twitter today at these levels, $5420? No chance. So there was a report that came out today, I think, saying that the super users of Twitter

had curtailed their usage. Did you see this? I did not see that. And they defined super user as someone that treats four to seven times a week. which really tickled me as someone that tweeted 20 times a day for 10 years. Brutal. Yeah. So I don't know.

There's no like word you could use to define me relative to super user. But apparently they've left the platform in droves. So the reality on the ground is even bleaker than maybe even thought. Huh. And not good. I don't remember who the report came from, but. They said there were two segments of Twitter that still had kind of the vibrancy. And you might be able to guess crypto Twitter.

Fintech Twitter and crypto Twitter. Crypto Twitter is one and like pornography Twitter was the other. Okay. It was like sometimes if you search innocent, innocuous words on Twitter, you get harrowing results. They have not been able to figure out the space. It's not even bent. apparently you can just freely post not save for our content on Twitter. It's a whole parallel world that it's like we're not really even aware of.

I guess sometimes you just get reminded like yeah there's other parts of Twitter. So basically crypto Twitter is the most manic part of Twitter. But I mean you have to imagine even there the engagements down. I mean so there are things he can do, right? The problem is he's going to have a debt cover. situation immediately. And so he has no margin for error there with the lenders. So he might end up having to buy some of this debt himself, I think.

But, you know, maybe you turn on subscriptions. Maybe you build some payments functionality into this thing. You probably do have to lay off like 80% of the people. I mean, look, I support him doing that regardless, to be honest with you. Like, what were they doing? What were they doing? I have no idea what they're doing. The product has deteriorated at an unbelievable level.

rate over the past two years. Well, they made the DM search better. I will say that. Yeah, and the tucking thing is good. The spaces are good. That can't have been too hard. That's like two engineers part-time. The spam stuff is just brutal. Spam? Oh, my God.

It's embarrassing. How hard can it be, guys? It's bad. Yeah, I'm not a buyer either. Not a buyer at these levels. I mean, just look at the, you know, the comp set in the networks, right? Like, Snap is getting absolutely crushed. I think a lot of these privacy changes on ad tracking have really impacted Snap.

I'm sure they're impacting Twitter. Meta's burning $15 billion a year on their Metaverse. Yeah. Incredible. Next one up is Exclusible. This is an NFT startup. They raised $5 million from Tioga. Then we have Sinota.

a Bitcoin payments company. They raised $3 million from Ego Death Capital and TBP. Next one is Tala Labs. This is a D5 protocol that's building on Aptos, newly launched Aptos. They raised $6 million from Parify, White Star, Shima Capital, and others. You know, I just can't wait to build all of DFI on Aptos

and then on sui and then on every other new L1. I don't know. I don't think that's going to happen. It feels a little wasteful. dare I say, do we need the same exact thing built on all these all ones? I would suggest maybe that's a little duplicative. Maybe we don't need a new L1 and all the same D5 stuff built on all of them. There's a lot of X for Y situations going on right now.

A lot of compounds and uniswops for net new blockchain 1, 2, 3, 4. Yeah, put me on record. Not a believer in any new L1s. I think we have enough. I said it. I think there's enough. I don't know. That might be famous last words. I think there's an infinite ambition there from the entrepreneurial set to build new L1s.

I wouldn't be surprised if we start to see new L1s even just years in the future. 10, 15 years in the future. It's a dismal vision of the future. I support the L1s. Just let a thousand flowers bloom. Well, lastly, we have origami. a Dow Tooling Company. There is 6.2 million from Bloomberg Beta and others.

A couple other interesting news stories this week. So there's some Celsius news. So Westcap management and CDP, which is the Canadian Pension Fund, they applied for committee status with the bankruptcy judge. A committee status basically is that you get to be represented and the legal fees get paid for by the bankruptcy process as opposed to out of your own pocket.

and the judge just outright denied it and basically said there's going to be no equity value here. Like, don't worry about it. You know, pay your own lawyers, which is kind of a no-brainer, right? I think the customers are not getting their money back. I don't think that there's any world where the shareholders will get it back. But they had some argument around the subsidiaries and some of the ancillary businesses that they should have exposure to. But long story short, that was denied this week, which, I was kind of surprised they even applied for it in the first place, but I guess you've got to shoot the shot, right?

Tough story there. Here's an interesting little tidbit. Yellow Card, Castle Island Portfolio Company, one of Africa's biggest digital asset brokerages, maybe the biggest. They got a license in Botswana, first company to operate to obtain a license there. Fun fact about Botswana. Africa's longest continually operating democracy. No kidding. Stretching back to 1966.

No contested elections, no coups. Strong record of governance. Actually, Botswana is one of the more prosperous sub-Saharan African countries. I would say probably because of that. I mean, how is George Noble going short Bitcoin when people in Botswana now have the ability to point and click and buy it? Come on. Yeah, the Botswanan behemoth has been unlocked.

People talk about the institutions are coming. That's a whole country that just got unlocked. China is back maybe. Did you see their stirrings of China? You know, China was actually just a sleeping giant this whole time. China, man, I don't know. So I did see this, the Zero Hedge article this week. Did you read this? So a wealthy Chinese are activating quote-unquote escape plans, terrified of she's coming reign of terror and why this is good news for Bitcoin. Wow, that does sound like a Zero Hedge headline. Rain of Terror. talks about, you know, this basically this capital evasion, capital controls dynamic, which is definitely happening in China already. I think there's some strong evidence that that's why tether is as big as it is because a lot of people in China use it as a way to get money out of the country. And, you know, I think there's a very logical next step there where Bitcoin starts to be used much more aggressively as that country starts to tighten up and shut itself down to the other.

side. I mean, they're not reporting GDP anymore. There's a lot of financial metrics that they're not reporting. Um, Huxentau got walked out of the event there. Yeah. It was a little strange. Tough to see. I mean, uh, the whole new leadership team, senior leadership is they're all Xi Jinping loyalists. So any sense of restraint, um, has gone out the window there. I mean, it's a full retrenchment of power, most centralized power structure since, since Mao. Probably not good for Chinese capital markets, dare I say. No, but maybe it's good for cryptocurrencies, who knows? So the other piece of Bitcoin China news, this one is on the less good side, I would say.

The DOJ has alleged that two Chinese intelligence officers tried to bribe an undercover FBI agent with Bitcoin, wish they could have used dollars. Why don't have to be Bitcoin? They tried to bribe the agent with Bitcoin for information about the US government's investigations into Huawei. And apparently they used one of these mixing services. They used the wasabi wallet, actually, believe it or not.

So unfortunately, these headlines don't help, I would say. If they could just not use Bitcoin. Why don't you just put some cash in a briefcase? What would happen to duff? bags. Yeah. It's like, come on, guys. It's tried, tried and true. It's lindy. Cash full of duffel bags full of cash is lindy. Yeah, it's like the wasabi thing. Did you not read the headlines that Chinalysis has a pretty good beat on wasabi anyway? It's a bad idea. That, you know, mixed, I would say the news out of China this week. So have you read this Matt Levine,

Bloomberg feature? It's basically the whole magazine. I haven't read it yet, but I'm looking forward to reading it when I have time. Yeah. It's 40,000 words, but... Matt Levine wrote an entire novel-length book on crypto. On crypto. I mean, he is... I think he's up there in terms of the most talented writers out there right now.

He's an incredible writer. There's actually, like, an affliction I see among young writers, which is they try and imitate his style. It must be impossible, all right? I can't imagine... Well, he just comes up. off as a pastiche. It doesn't come, you know, I mean, it's kind of an informal style. He has a lot of idiosyncrasies, but it only works when it's him, you know? I have never seen it done well by

someone else. I just, to be honest with you, I don't have time to read novels about crypto, even if they are written by Matt Levine. I'll read this one. I'll read almost anything that guy writes, but I just don't have time to read it, so I don't have a hot take on it. I'm sure it's great. I'm certain it's great. I would like. to hear from someone who has read it please I'm soliciting reviews so as we record this Bitcoin's hanging in compared to equities got crushed today yeah actually I think the pivot happened last Friday the capital P pivot so you mean the leak to the WSJ well that I think the leak was indicative I think that was a key piece of

in our pivot investigation I think financial conditions are no longer tightening. They're not loosening. They're just tightening at a slower rate. And I think Bitcoin and crypto markets generally are anticipating that. As the purest gauge of liquidity in the system, I think that explains the price action, actually more than anything else. I think, yeah, the Fed's in the driver's seat. So, yeah, if you missed it, they basically leaked to the, what's his name, Tamacos? How do you say his name? Nick? Yeah, he's basically the Fed Mouthpiece at this point. When they want to leak something, they leak Timmy leaks. Doesn't, what is it? Goldman called him Timmy Leaks? So he basically had,

hey, it's going to be 75, but then it's going to be potentially 50 after that. And, well, right, because they changed their minds within the space of like two hours. Right. So it's Clearly, something was going on. I think what was going on was the BOJ was busy selling long bonds as fast as they could to defend the yen. The Fed took notice of that, realized the treasury market would be significantly impaired if the dollar kept rallying. So now the question is what they do. It's not necessarily a resumption of QE or anything. There's other ways to inject liquidity into the system that is inflationary, but has a different name.

so more covertly and so they can sort of claim they're not doing QE, but it would still, you know, effectively be an injection of liquidity. That's what I would look out for now. All right. So I think that's it for the week. We'll jump in here with a quick recording if anything happens tomorrow. But have a safe and healthy weekend. We'll see you on Monday.