On The Brink with Castle Island - Weekly News Roundup 1/17/20 (8% of RIAs think Bitcoin is going to zero!?) (EP.34)

Episode Date: January 17, 2020

Matt and Nic from Castle Island Ventures review the top stories of the week in the cryptoasset industry. This week's topics include:  - SEC Actions - Bitwise RIA report - Canada's Guidance on Exchanges - GBTC Q4 Report - Digital Dollar Think Tank and much more news of the week

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 to Britain's ailing economy with a new round of quantitative 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 the On the Break podcast. I'm Matt Walsh. And I'm Nick Carter. And it's freezing cold in Boston. It's going to be six degrees Fahrenheit this weekend. And my face almost froze on the walk in today.

Yeah, sometimes I walk to work and I wonder why I live somewhere where the air hurts my face. I think it adds to your character, though. It's actually your fault. It's your fault that I live here. So I could be living in Miami or something right now. You can think. This is where Fidelity is located. That's why I moved from North Carolina. So thank you Fidelity for being based in Boston. Now we're both miserable because of it. And we're out of the football prediction game, too. That didn't go so well for you last week.

So yeah, the Ravens lost. However, the 49ers, which was my other pick to make the Super Bowl are still in it. So I could be half right. Yeah, so 50% is not bad. So three of our four picks to make the Super Bowl are, eliminated already. Maybe we should stick to crypto. Yeah, whatever. I don't even like football anymore. Let's talk about crypto stuff. Yeah, Bitcoin will never let us down, unlike Tom Brady. Don't say that. Don't say that. All right, let's jump into it. Some deals and some fundraising stories. So here is what we got this week. So Lightnet, a Thailand-based company that is focusing on building a swift replacement,

raised $31 million in a series A from UOB venture management and a number of others. Swift replacements, very hot right now. A lot of swift replacements out there. You could never have enough, man. Another one is Banksa. So this is a company building Fiat Gateway Infrastructure for Exchanges. They raised a $2 million round from NGC Ventures. There's a project out of San Francisco called,

optimistic roll-up. This is an Ethereum scaling project. They raised $3.5 million in seed funding from paradigm and IDO. And this is the group that's working on plasma, I think, right? Yeah, previously working on plasma. I think, you know, roll-op is a different technology. But probably the most, the technology which has Ethereum's in a big tizzy right now in terms of being a potential scalability solution, this began as just a kind of research group. And now it's a full-fledged startup. So pretty interesting one to watch. Interesting. And then we had an acquisition this week. So crack in the crypto asset exchange acquired BitTrade, which is an Australian cryptocurrency exchange. So we actually had Ryan Selkis on the podcast earlier this week. And his prediction

was that we're going to see about a billion dollars in M&A activity coming from the exchanges over the next year. And this would be the first one. I tend to agree with this, by the way. Yeah, Australia has actually been kind of an underserved market in terms of exchanges. I believe Bitrex had a kind of like there's an exchange which is a portal to BitTrex and you know you have Amber of course but really kind of interesting that Australia has very small presence. I don't even believe Coinbase is operational there. Really? Interesting. So Australians, wildfires and don't even have great access to crypto. Someone build them some on ramps over there. Come on. They desperately need it.

So it was a busy week for the SEC. And I think we're going to have more and more busy weeks for the SEC as 2020 unravels here. So on Tuesday, the agency released an alert to urge investors to use caution before investing in initial exchange offerings, IEOs. IEOs is, you know, people probably know, are crypto assets that are issued by the exchanges. And so these are becoming, I guess somewhat more common as a funding. mechanism, definitely not on U.S. base exchanges. These things look and feel a lot like unregistered securities offerings to me. I love that people thought they could just change a letter in ICO and maybe, you know, people wouldn't note it or think it was a different product entirely. I mean,

it's the exact same thing is just that the issuer, you know, it's explicitly being kind of underwritten and issued by the exchange. But it's, there's no coin, so it's good. Yeah, there's no coin, but obviously there's a coin. Anyway, yeah. So, yeah, it turns out this like nomenclature game can like fool regulators maybe for like four or five years, but they, you know, they caught on. So if you are thinking about doing an IEO and you have anything to do with the United States, you are completely out of your mind right now. Pretty much. Yeah.

So word to the wise, don't do these IEOs. The SEC just put everyone on notice. another story that came out this week. Actually, this came out after we went to press with our newsletter last week. So the agency filed additional documents in this ongoing case against Telegram. It looks like what they're trying to say is that there were sales of the token going on post-ICO. This would be a suggestion that securities laws were breached. So another just documentation kind of flood, not sure too much to read into this.

than to say it looks like the Telegram versus SEC case is just heating up and this is going to be one of the bell weather events of the year. It could be the telegram case is even more significant or definitive than the Kick case. Yeah. Telegram seems almost more marginal because it was this staff structure as opposed to just a direct ICO. Yeah, so Telegram raised $1.7 billion. Kick raised about $100 million. The timing was a lot different. So kick. was first. Telegram was really towards the tail end of the wave here. The big question to me in the Telegram one

is going to be can the SAF to transmutate into a non-security? And if this case establishes that it cannot, then what does that mean for other SAFs? Yeah, because presumably the investors accredited investors in Telegram bought the token with the expectation that this transmutation would occur

and that they would then be able to liquidate their coins on the open market to retail investors. That was the whole premise. If that is invalid, then the product itself is not worth owning. It's become, the hack doesn't work. So that is going to be a really interesting thing to follow. We'll see what the outcome is there. I can't wait for a resolution, although it might be years.

And I can't wait for kick too. It's funny. I was reading a book last week called Losing the Signal, and it was about the rise and fall of research and motion, the company behind BlackBerry. and Ted Livingston used to work at research in motion, and as an intern, I believe, working on Blackberry Messenger,

and the insight around KIC originally was having cross-platform messaging. And sometimes you forget that. It was such a breakthrough product in its time. Obviously, had a really hard time monetizing, and subsequently was beaten by the likes of WhatsApp and a number of other messaging platforms. They just never could figure out the monetization there, and then the monetization ended up being selling a coin.

Well, I mean, I was a very happy BlackBerry user for many years, probably in the 2010 era. BBM was like a revolutionary product at the time. I mean, you got red receipts. That didn't exist in text messages. Do you remember Brick Breaker? Yeah. I used to play Brick Breaker all the time. That was the default game that came with the Blackberry.

I loved the keyboard too. I still get, the physical keyboard was amazing. Yeah. And for a long time, it totally outclassed Apple's keyboard, which relied on, like, software to do autocorrect. I think now, you know, the iPhone keyboard is sufficiently advanced that, like, it can basically suss out what you mean to write. But the physical keyboard was amazing. Yeah. I still get emails from people that have BlackBerrys.

Good for them, honestly. They're fighting the good fight. Yeah. Took a little detour there, but I really liked my BlackBerry curve. Yeah, I miss my BlackBerry. Those are simpler days. Let's hit on one more of these SEC stories. So the agency also came out and said they're seeking $16 million in penalties against a company called ICO box.

I think we've talked about this company before. They facilitated the sale of a number of ICOs, also known as unregistered securities offerings. They themselves also did an ICO. Yeah. So they're guilty on many counts here. Just the worst name ever. So a lot of cleanup work to do. and we're going to see more and more of this from the SEC.

Hopefully they don't get too busy on all of these nefarious things, and maybe they can actually give some clarity into some of the market infrastructure companies that are trying to do real things and apply for real exchange, traded products and things like that. But we'll see. Moving on. I thought that this story from Wisdom Tree was interesting this week.

So Wisdom Tree is an ETF manager that has $63 billion under management. they unveiled a plan to introduce a stable coin. So this would be a, it looks like it would be a digital asset pegged to a number of traditional assets, including short-term U.S. Treasury bonds. And this comes on the heels of Wisdom Tree announcing last week, I believe, that they were the lead investor in a security token compliance platform called Securrency. To me, this is interesting because Wisdom Tree was a pioneer in the ETF space. maybe they're looking at this market and saying what could potentially unseat the ETF?

What is the technology that could make things easier from an asset management perspective, easier for customers to just get access to these things? And they're looking at blockchain-based assets as potentially one of these innovations. Yeah, this was really, you know, the dream behind kind of tokenized securities back in 2015. It seems like it's finally sort of being realized. It's interesting to see all these big, you know, conventional asset managers finally making a crypto play. Like Robin Hood did SoFi, got in dipping their toes and now Wismentry are in the market. There's a lot of smart people at all of these companies, first of all.

And there's also a lot of smart people that are starting to get interested in crypto assets and starting to see opportunities for R&D experiments. we get people reaching out to us all the time that are working at some of these places and trying to figure out an angle to get people excited. And I think some of these small steps really, you know, move the needle. And I think will be a big talent retention benefit for some of these companies that are doing R&D around this space. You can see why tokenizing securities make sense for an ETF provider. That is, you know, a very direct and immediate application of, you know, the potential of token. for sure. I mean, it might not be as sexy as what a lot of, I mean, you know, wrapped treasury bonds.

But that's the direction this is going. Speaking of maybe not as sexy tokenized projects, Spencer Dimwitty thing came out this week. And this has been going on for a while. So this is the Brooklyn Nets Point Guard. He's issuing a bond representing a percentage of his contract on Ethereum through a company called Securitize. This has got a ton of coverage. In a MetLife, in a MetLife, Levine sort of wrote about it in a dismissive way this week. I would view this as just a proof of concept. It's interesting. I think what he wanted to do was a little bit more exciting, but some of the securities laws weren't there. Did you read too much into this? Yeah, it seemed like the original

idea was much more expansive, right, in terms of giving token holders, introducing lots of uncertainty and potential appreciation for the token. And the product as issued now is going to be somewhat neutered, right? But I guess the benefit here is more visibility into public blockchain technology. I don't see a downside of this. It's just kind of not that exciting as a financial product. I mean, I certainly like the idea of basically securitizing IP or, you know, specific contracts. I guess you could do this in, you know, traditional ways as well.

Yeah, there have been companies that have tried. tried to do this in non-blockchain-oriented manners, actually around athletes' contracts as well. But I mean, isn't one issue that the NBA kind of wants their pound-of-flash here? Right. And they're not just going to let athletes essentially sell their brand on secondary markets without, you know, them having a say. Bitwise released their second annual study of U.S. financial advisors' views and actions on crypto assets. So this is always one of my favorite reports. The first one was last year, and it was great.

This year, the highlights include they surveyed 400 RIAs, so financial advisors. 76% of these advisors got questions from their clients about crypto. This included 64% of RAs polled, expect the price to go up for broadly for crypto assets, and 8% expected to go to zero. We'll come back to that. But 8% of financial advisors are telling their clients that crypto assets are worthless. 6% have allocated it into client portfolios, and it is set to double to 13% that will have it in client portfolios next year. And the number one reason for allocating was just low correlations to other asset classes.

and the number one concern that these RIAs had is around regulation, which is certainly a valid concern. I want to come back to this. 8% of financial advisors in this panel expect that crypto assets are broadly going to zero. If you have a RIA, call them up and ask them what they think about crypto assets, and if they tell you that there is nothing to see here, that it's not worth paying attention to, and that the whole thing is going to zero, then you need a new RIA.

This is insane to me that the number is 8%. Honestly, I would have expected it be higher. It was higher last year. I talked about this on Twitter. It was like 13% last year. I'm not as scandalized by this. You know, like RAA is like, I'd be shocked if all of them had a well-formulated opinion on crypto. I mean, but like this would be like an RIA in.

the early 1900s being like auto stocks, I don't know. I mean, what is wrong with the horse? These automobile companies are just not going to work. Well, I was reading it a little bit of that early financial history and you had these curbside markets in New York for trading like the riskier stocks, you know? So like there definitely were, I think railroad stocks were considered to be garbage for a long time, probably because there were so many, you know, scammy ones. So you can kind of see the parallels a little bit. I mean, so these RIAs, they're not there to have an opinion

on every single individual stock. They're really there to just, you know, broadly put you into an allocated portfolio and to provide education. If you ask a question, you would expect that they would have some sort of a write-up that they could give to you. If they're telling you, no, don't worry about it,

it's going to zero. Like, what the hell type of advice is that? Well, I guess we could see, that as a call for more resources which target that specific segment in terms of educating them on crypto? Yeah. I mean, clearly if this, I mean, last year, if it was 13% thought it was going to zero, I guess this is good progress in a year.

Yeah, 5% of them learned. Holy crap. That's crazy to me. So if you use an RIA, you might want to just put a phone call in and just see if they're in this 8% bucket because, jeesh. The thing that one thing that I interesting. interested me was this notion of like being attracted by the uncorrelated returns. Obviously, if you're doing everything within a regulated framework, you're not going to be attracted by the

sort of black market or gray market money, permissionless, you know, finance thing that, you know, is really touted as the main value proposition. I think it might be a bit of a poison chalice to tout the uncorrelation of Bitcoin and other crypto assets because I expect them to become more correlated to, you know, just macro assets. And we've seen a little bit of that over the last two weeks even. All right. So if I'm an RIA, here's what I'm saying. There's a lot going on in crypto. And I don't have all the answers, but there's a few things that are worth paying attention to. The concept of money as we know it is being challenged. We're seeing the emergence of the ability to have non-sovereign money that is not controlled by the government.

Non-sovereign money that it is not, not only is it not controlled by the government, but is not controlled by anyone. And so that's a big thing that has a huge total addressable market. The second thing that's going on here is that this is also potentially a new technology paradigm

where we're seeing the ability for individuals to have greater ownership over their own data. And so you can believe the money side of this. You could also believe that the data monopoly, as we know it, these modern monopolies in the form of Google and Facebook could potentially be at risk as a result of this technology. Certainly, you have a lot of exposure in your portfolio to these companies that are

just brokering our data left and right all over the internet. So pick your poison. Either this is a monetary phenomenon, this is a tech phenomenon. Maybe there's some picks and shovels plays, you know, there certainly are, by the way, to support both of them. But, you know, I guess the third option is that this is all BS and it's going to zero. Well, I, you know, I'd probably pitch in the same way. But I do, however, appreciate the irony of the asset class, you know, being mostly useful for activities you want to do outside of the purview of the regulated financial system. And then, you know, the wrappers, which allow people within that same financial system to access

these products, I don't think it's a fatal irony. but if 90% of Bitcoin, you know, were contained within these wild gardens, I think it might be. Well, so you bring up a great point. And this is another thing that financial advisor should be aware of is, hey, client X, you know that Swiss bank account that you have and you're trying to keep money away from the government. And you know that huge plot of land that you bought in New Zealand. How about just putting it into crypto assets? Well, that only works if you own the keys. That's what I'm saying.

Yeah. Own the keys and put the Swiss bank account in your brain instead of... I think that's the best pitch for a slightly paranoid high net worth individual. I mean, how can you afford not to be paying attention to this? It's just, it's crazy to me. Obviously, I'm all riled up about this, but... Yeah, clearly. I mean, it's still relatively small asset class.

I hate to be the one to say it. I mean, just how bullish is this for the industry? If this is what people are being advised on the street. goodness gracious. All right, let's move on before I get all fired up. Let's talk about this Canada thing. Yeah, so I thought this is really interesting. So the Canadian securities administrators, which I guess is their version of the SEC, not 100% sure on that, they just came out with this really interesting guidance. It's called the guidance on application of securities legislation to entities facilitating the trading of crypto assets. You can see it rolls right

off the top. Yeah, they did not use the word exchange, and that's deliberate. This is an extremely kind of punishing notice. They're basically saying, they call them platforms. They don't call them exchanges. And actually, the SEC in their IEO notice, they also said these things represent themselves as exchanges, but they're actually, they're not the kind of, they're not NASDAQ or NYSE tier exchanges. So you can kind of get a sense just in the nomenclature. So, so it's a sense. So, anyway, the Canadian securities regulators are saying, you know, keep in mind Quedriga, and there's a smaller exchange called Einstein that failed in Canada. This is looming large in their imagination. So they're saying, you know, not only are most of these or many of these tokens, not only do they look very much like securities and that they might have a cash flow element, you know, they're entitling you to the efforts of some third party, but also some of these exchanges, the way they operate, the commodity tier assets like Bitcoin, when they're held with an exchange, they might actually constitute a derivative. So this is kind of interesting, controversial. They're saying what you have

when you own Bitcoin in a custodial manner is actually just a claim on Bitcoin, and that might force the exchanges to go through derivative regulation. So they are mostly interested in this notion of immediate delivery. So if you immediately deliver the asset upon sale, you know, and there's no custodial relationship, then you're exempt from this. But if you're not providing immediate delivery, they're suggesting here that you do not have a direct claim on Bitcoin, but instead you only have ownership over a derivative. And, you know, if this is implemented, it would be extremely onerous for any custodial, you know, exchanges. in Canada because it would force them to go through that kind of regulatory framework.

So this is, it seems to me, a reaction to the Quadriga scandal and a desire on the part of the regulators to really clean up the custodial crypto industry in Canada. So pretty dramatic and very much an endorsement of a kind of not your keys, not your coins. Yeah, I think this would make operationalizing one of the, you know, these businesses just much more complicated in Canada. I think in a lot of ways, it would make some of these business models just not work as they work in the United States. If you had to go through derivative regulation. Yeah. But this is the consequences of misbehavior. You know, if the major exchanges, in keep in mind, Quadrigo was Canada's biggest exchange, in the wake of that scandal,

it's not surprising to me that the securities regulators are going to take ownership over this and render the regulation more punitive. Yeah, obviously, the U.S. environment is much more regulated. It's much more mature. I'd say there's clearly better companies from a talent and a infrastructure standpoint. But this is the type of thing that really calls out the need for some of these exchanges, potentially to collaborate and to start to form these self-governing, bodies to bring surveillance under control and to really just get out in front of this so that

the regulators don't take such a punitive action, which it looks like this is a pretty punishing blow here for the Canadian exchanges. Yeah, yeah. So some of those entities active in Canada like bull Bitcoin are non-custodial. So it looks like they would be exempt. So, you know, congrats to them. And that shows a lot of foresight, you know, on the part of leadership there. But yeah, this is one potential path here, which is, you know, the exchanges fail in spectacular

ways and the regulators step in and they insist on regulation. The other path is the exchanges realize the track they're on and start to self-regulate themselves to ward off the regulators. So maybe that means surveillance sharing. Maybe it means a proof reserve protocol. You know, I know I harp on this all the time, but we have yet to see it. any of these US exchanges, even though it's very much technically possible. Do you like proof of reserves?

Yeah, I like proof of reserves. Yeah, I mean, I don't like it because I, you know, like the cryptography. I like the assurances that depositors get. So if what the regulators are saying here is, yeah, you have no real assurances when you have a claim at an exchange, you know, are you junior to creditors in a liquidation situation, for instance? This was a question I interrogated based on the state-by-state regulation. that exchanges go through in the U.S. That's very much unclear, with the exception of Wyoming,

which passed this really interesting law, which you should definitely look into this, mostly on the work, thanks to Caitlin Long. So Wyoming has a specific law about a kind of a full reserve crypto bank, which that is not under the MTL framework, but that would be an exchange would have to specifically ask to be regulated under that law. But, you know, aside from that, it's very unclear on what rights depositors have at U.S. exchanges, possibly with the exception of whether the exchange, if they have a trust license in New York, which is a little bit more clear. So, you know, kind of which way, you know, you can opt for this kind of catastrophic system,

which ends up making custodial crypto exchanges much more difficult to run, or you can solve regulate. So I think the path is clear. I'm waiting for exchanges to see the light on this. Makes sense. Another story this week was the gray scale put out their quarterly highlights, as they usually do. And this is the report that they release that talks about the total investments flowing into

the gray scale asset management products. And so for those of you who aren't familiar, gray scale, gray scale is the subsidiary of digital currency group that is building crypto asset investment products, one of which is the Bitcoin Investment Trust, which is the oldest investment product holding Bitcoin, and you can access this, obviously, on a range of ways, and it trades on the over-the-counter QX market and is available in a brokerage account. So what did you make of this report? So this is very interesting because there were a lot of takes out there on Twitter saying, wow, look, because Grayscale breaks it down by what kind of entity owns GBDCs.

So they break it down and they show that the majority of investment came from hedge funds. So 71% came from hedge funds. They don't get into much detail beyond that. So there are some takes saying, well, you know, this shows that like the institutions are coming, et cetera. But I think we've covered this on the podcast before. The reality might be slightly more nuanced. So there is a suspicion which has only intensified recently that lots of these funds are just doing essentially the premium trade. Yeah, I mean, I wouldn't even call it a suspicion.

It's a fact. So basically there's the way this product works is that you can create it. And it's not nefarious at all. So there's a, the way the product works is that you can create the product at nav. You can buy it at nav. And then you have to hold it for a year before that becomes freely tradable. as you have to be an accredited or institution to do this. Right.

And so you buy it at NAV and so it's, you know, you buy it at whatever the spot price of Bitcoin is. And that window is open right now. And then after a year, you can sell those shares on the secondary market. And since there's a kind of a supply constraint here, these things are trading at a premium to the underlying. And so you can check this on a variety of websites in terms of what the premium is. And so there's interesting ways that you can potentially play that as a trade. And so one of which is becoming a more popular is the in-kind type of play here. So you go to, you borrow Bitcoin and you pay, I don't know, what would it be,

five to six percent a year, you call it. So you borrow Bitcoin. You put the Bitcoin into the trust with an in-kind transaction. So you create shares of the trust at Nav and you're paying a management fee of 2% a year. So let's call it all in 7 to 8% a year is the cost to be in that trade. And then after a year, you can sell those shares and take advantage of whatever the premium is, which could be as high as 15% sometimes. Well, no, I mean, historically, it's been up to over 100%.

It has been, right. And some of these other products is much higher. But it typically fluctuates between about 10% and 30% on this product because, you know, because the arbitrage cycle is slow. Right. So when you see that a lot of hedge funds are in it, I guess your point is that, hey, this is not a proxy for like the institutions are coming. People can't wait to just get Bitcoin exposure.

I mean, certainly some of that AUM growth is reflected in that. But I guess your point is that, well, there's just a bunch of these firms are probably just playing that trade or playing some variation of that trade. Yeah, yeah. I think that should be the assumption. fact some of the numbers really bear this out. So in this report, Grayscale did not cover what the fraction of in-kind creation was. So in all of 2019, there were over $400 million worth of inflow into the Bitcoin product specifically. In previous reports, they've actually specifically stated what fraction of those inflows were in-kind, as in those were Bitcoin inflows, not

not fiat inflows. So in the Q3 report, they said it was 80%. In the Q2 report, they said over the trailing 12-month period leading up to that date, it was about 70%. So we know that the majority of the inflows are in kind, and we can basically presume that this means these are entities doing this premium trade, this one-year premium trade. So there's two big takeaways from that for me. One is if you're smart about it, you can estimate when, the trade is going to, when the arbitrage is going to close, and you can expect premium compression on those days. So if you were smart, you might be able to even forecast when the premium would compress in the future. How would that work? Because you know when the inflows

went in. And nobody, and you expect that these institutions don't want more than 12 months worth of exposure because it's costly. I see what you're saying. Right. Since it operates around these windows which are pretty much there because grayscale runs commercials and they can only sell at nav during certain windows. And if you look at this report, it's very clear that there were two moments of very large jumps in the subscriptions for GBDC in 2019. So you might extrapolate 12 months ahead. There's also the potential for this 12-month requirement to be shortened to six months.

So that complicates the analysis. Yeah, so I guess that's interesting. I don't think there's any new news here. I take your point around, hey, this is not a proxy for big institutions getting involved. I mean, I only say that because that was what most people took away from the report. And, you know, I think the reality is actually most of the exposure to this product recently is more chasing this premium trade. You know, I think one of the big takeaways here is that we probably will see an institutional stampede. just that the products that these institutions need will need to look and feel a lot more

like traditional products that don't trade at large premiums to NAV. And when some of these, you know, that could be a Bitcoin ETF, that could be any number of things. But the wrapper probably needs to change significantly. My view on this is that kind of waiting for the institutions to, you know, bail out retail is the wrong way to look at this. You know, I view Bitcoin is a primarily retail-driven. phenomenon. I expect that to really continue for kind of the indefinite future. You know,

Bitcoin is something which empowers individuals for the most part. Of course, there are funds that seek to capitalize on that trend, but I still think retail investors globally will constitute the largest source of capital into this asset. Well, not the retail investors whose RIAs are telling them it's going to zero. Still mad about that, huh? Still really upset about those RIAs. If you are one of these RIAs that said that it's going to zero, free invitation to join the podcast and to defend yourself? If you dare. Why don't we move on to the story about a new think tank being formed? Gotta love think tanks. So former CFTC chair, Chris John Carlo and former Lab CFTC director Daniel Gorfine are launching a think tank called the Digital Dollar Foundation to explore the

tokenization of U.S. dollars on a blockchain. So I guess I don't know that much about think tanks, but I guess they're going to get a bunch of people together and think about what a digital dollar is. So Matt actually asked me if think tanks were venture backable businesses. Yeah, do we want to, do we want some exposure to this think tank? And I, so I've worked at think tanks in the past. And so think tanks are not like cash generating. Well, this one is creating, this one is literally creating cash. All right. We'll give the, Yeah, we'll give Giancarlo an exception. But yeah, for the most part, think tanks are if you want to promote a certain, you know, discourse in Washington in a generally in an academic way.

That's what think tanks are for. So that's what the ex-CFDC chairman is doing. This kind of vexes me a little bit because all the messaging is about making the dollar digital. Am I going to be the one to say it? Dollars are already digital. Dollars are digital. They're mostly digital already. Fair point, but I think the idea here would be, can you use the power of this technology to put a representation of fiat onto a blockchain, make it even easier to move it around the world?

And probably what they're getting at here is just the U.S.'s ability to export dollars on a global scale would be supremely to the advantage of the country, if you think about it from just a geopolitical order perspective and national defense perspective. Well, I don't disagree with that. but then I think we should make the nomenclature reflective of that. So the interesting thing about these dollars is not that they're digital, it's that they are maybe less permissioned or they're kind of outside the purview of commercial banks. We should make the nomenclature reflective of what the particular innovation is here. Well, how are you going to get people excited about it if their dollars on an SQL database? Come on, man.

Yeah, I mean, I just, I don't think that representing these things, as digital dollars is in any way contrast to the way the financial system works right now. Well, all right. Well, note to John Carlo and Gorfine, Nick doesn't like the use of digital. Change the name of the thing. I have a nomenclature quibble. So what would you call this? It would be the blank dollar foundation.

What would it be? I don't know. The direct-to-consumer global export dollar. It doesn't sound great. sounds a lot better, Nick, actually. Look, I'm not saying they need to hire me to do their comms or anything. I think Nourage would be much better. But, yeah, digital dollar, all the dollars are pretty much digital.

Let's just recognize this. Well, this is why you listen to the podcast for naming tips and hot takes like that. The language we use matters. The language we use matters is a great essay, Orwell, politics in the English language. Definitely recommend everybody read it. The language we use matters. is why blockchain, I have such an issue with the word, the abstract article free, the brute blockchain, because the blockchain is not the interesting thing about Bitcoin, right?

It's really a time chain. It's a time chain. Satoshi said it himself. So, you know, quibbling over language isn't just like a fun intellectual exercise. It actually matters because we end up with these confused concepts in our heads. All right. Why don't we close it out with a little bit of price talk? price of Bitcoin is up a lot this week, and there was a report out from the coin metrics folks that maybe there was some geopolitical angles here and potential patterns with the price. Yeah, so the Iran skirmishes with the U.S. Bitcoin seems to have been reacting really directly to that. And a lot of people notice this and pointed this out, so it's not exactly original.

But the interesting thing is, you know, the coin metrics team did a study. They looked at all of the Fed pronunciations, everything the Fed said in the last two or three years, because that affects the prices of capital assets normally, but it had no effect on Bitcoin, really. There was no coincident move in Bitcoin. However, Bitcoin is now starting to behave potentially as a macro asset by moving directly with these geopolitical events. So the initial drone strike on Soleimani, there was a three-hour latency there. But then, interestingly, the Iran reprisal and the Trump speech diffusing the tensions, Bitcoin moved on those events to the minute. So it looks like allocators may be paying attention to this

for the first time in Bitcoin. We haven't really seen this behavior before. Well, so this is interesting. I don't know. I mean, obviously, this is a fact-based analysis. it'll be interesting to see if this plays out over time. There's so many market infrastructure things that impact the price here and just large allocators making moves into the space. The Fiat on ramps are really underdeveloped. So count me intrigued with this analysis.

Yeah, I mean, I'm not claiming that Bitcoin's price action is solely a function of geopolitical risk factors, but maybe it is now partially a function of that where it was not before at all. So why don't we leave it there? This is it for the week. It was a busy week. And next week we have some great episodes coming out. We had Hunter Mergart, who's the head of U.S. operations for BitStamp, USA, one of the longest running Bitcoin exchanges and crypto asset exchanges. So that was a fun conversation. And we'll have some more surprises up our sleeves in the weeks to come, some really good interviews. And as usual, some hot takes on a Friday. So have a great weekend, everyone.