On The Brink with Castle Island - Weekly Roundup 03/08/24 (New ATH, Katie Porter out, ETH Denver reflections) (EP.509)

Episode Date: March 8, 2024

Nic and Matt return for a week of blockbuster price action and new ATHs. In this episode:  ETF flows recap Warren favorite Katie Porter loses her primary in CA Super Tuesday recap  Are crypto PACs working?  Why the Ohio senate race matters for crypto  State AGs amicus brief in Kraken v SEC The WSJ is accused of defamation in their Tether coverage Were Signature and Silvergate wrongly accused?  Arizona state Senate considers adding Bitcoin to state reserves Saylor buys Bitcoin  SEC comissioners Pierce and Uyeda write an entertaining dissent in the Shapeshift case  Is Prometheum the SEC's patsy?  Nic reviews ETH Denver How priced in in the Halving?  Sponsor notes:  Following Flows V: Pool Cross-Pollination In Coin Metrics State of the Network Issue 249, we examine fund flows among mining pools and miners, revealing hidden connections to gauge mining decentralization Join the conversation on Farcaster

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 dollars. Welcome to On the Break. I'm Matt Walsh. And I'm Nick Carter. And this episode is brought to you by Coin Metrics, and here is the Metrix Minute.

For today's Metrics Minute, we're looking at mining pool flows. In 2023, the top mining pool, top two mining pools found during Antpoole, secured 53% of all mining rewards. Binance, Coinbase, and Crockin were the top beneficiaries, rather, of mining reward flows towards exchanges. An address cluster tied to the Seychelles Exchange, Mexie and the custodian Kobo led in pool to exchange, flows. Since Jan 23, there have been more than 1,200 instances of coordinated transfers from

pools to exchanges, suggesting a consolidation mining pool outflows. Fifty-seven thousand Bitcoin and mining pool transfers have been directed to a single address, representing 18% of the total flows to non-exchange entities since Jan 2023. This implies the existence of a mysterious entity backstopping multiple pool operations. It's a little mystery. Examination of flows from issuance to pools to exchanges suggests a broad level of coordination among entities pointing towards a hidden consolidation of power in the mining ecosystem. Interesting.

That is your metrics minute. Hidden consult. What does that actually mean? So there's like one huge miner here? It sounds like there's a one or a couple entities that are. sort of dominant behind the scenes in mining. Not exactly what you want to hear. That's a little John Grisham novel here.

What's going on there? Yeah, a little mining mystery on our hands. Well, I'm glad we don't do these on video yet, although apparently we're pretty close. I've been saying that for a year, but I look like I have a little gray hair here coming in. I don't know if this is bad lighting. I don't know if that actually is gray hair or what,

but after this week, man, what a roller coaster. I mean, we tap the all-time high, so good job, everyone. That was way ahead of what I expected. And then we sold off 15% to level's not seen since, like, Monday. But it feels like a huge sell-off. The ETFs continue to be absolute juggernauts, Ibit's over 10 billion, the volumes for these ETFs. So they rivaled the largest ETFs on the planet.

I mean, it's some crazy stuff. All right. So listen to these flows from BlackRock. Monday, $420 million. Tuesday, $788 million. Wednesday, $282 million. We got Fidelity, $404, $125,205. These numbers are crazy.

You had Bitwise in there with a 90 and a 30. It's just the amount of capital that is going into these ETFs is just breathtaking. Yeah, and you know, I'm not one to complain, but I noticed that James Safer at Bloomberg was on holiday during all-time high day. That's not acceptable, James. You can't go, we need you, okay? So it's really just you and Eric that are giving us these numbers. So you can go on holiday later, okay? Well, I tracked them on this far side.com.

dot UK, which has a nice little table by issuer. So I'd recommend everyone check that out. But they have the flows. BlackRock ones always come in last, but the bitwise ones usually come in first. I would recommend everyone check that out. The outflows on GBT continue to be brisk, I would say. So they... Yeah, very substantial.

There were outflows of 368 million on Monday, 332 on Tuesday, and 276 yesterday. So we have significant outflows here still. And yeah, I don't think that we're seeing forced selling relative to Genesis yet. So it doesn't seem like they've hired a broker to liquidate these trusts yet. So I think we're just seeing a lot of organic outflow here from GBT. You know, I've spent a lot of time in airports lately. And GBDC just blankets them with their ads. Yeah.

Like if you've been to any domestic airport you've seen the ads, I'm really wondering what the purpose of that campaign is because do you think that there's people that go through the airport and they're like, okay, I'm buying GBDC? Or do they look to buy GBDC and they're like, oh, there's these other products that are approximately 10 times cheaper? Like, is that campaign working? Well, probably it would be very hard to measure that campaign right now in the wake of all these outflows. But, you know, the interesting thing about the marketing is that there's some rule with the SEC that you cannot. market an ETF for a certain amount of time until it's been active. It has to be active for, I think, six months or 12 months. And GBTC is the only fund that fits that bill since it existed

before the ETFs are approved. So they're actually the only ones that could have those airport ads right now. Yeah. I mean, maybe it's just a holdover from a prior campaign. They just decided to keep going. But I mean, it may be there are inflows to GBDC. It's possible. But they're just being sterilized and more by the outflows. Yeah, I think that's actually quite likely. So Blockbuster Week, Eric Belcunis tweeted on Tuesday, which was all-time high day, the top 10 Bitcoin ETFs did 10 billion in volume, which is a new record. And he says that they're bananas numbers for ETFs under two months old.

I mean, at this point, it is the most blockbuster ETF launch in history, as far as I can tell. You know, so not making remarks about what the price of Bitcoin is going to be, but if you just look at it structurally and the warehouse private wealth platforms, so the banks who operate these private wealth platforms, it's just not active on a lot of these things. So I think it's active on Goldman, but very few others. So Bank of America hasn't turned it on yet. Then you have the independent broker dealers like LPL. You have some very large RIAs that don't have it on yet. So if you just gauge that community, my guess is that we're about 30% activated from having these ETFs on platform.

So this could be an interesting couple months here. Yeah, that's right. There is a delayed factor here, which is it takes time to diligence the ETF and get it approved for all main nerve clients. The other thing that I'm starting to see is the inclusion of Bitcoin in these like diversified portfolios. Yeah. Like an all weather portfolio or like a 6040 or target date portfolio.

I mean that I didn't expect that this year. Be honest. No. We're kind of speed running that. If you were to get options approval here on these ETFs, I think you'd also see a lot more structured products. It looks like the SEC just today has kicked the can down the road on their decision to approve options on these ETFs.

I think Grayscale was the one that was asking for at first. So, you know, those will come at some point, but it seems like the SEC is willing to go to the mat here on maximizing the comment period. And then also, you know, maybe they'll just go to court and get overturned again. Yeah, I mean, and this seems to be more substance behind our theory that the ETH ETF is not being approved this year. I don't see the SEC becoming accommodative all of a sudden. Like I think they will continue to be intransigent.

And that people thought it would come in May. I just don't see that happening. I don't see that happening either. All right. Lots to talk about this week. Why don't we hop into some deals? First one up is Karma 3 Labs. This is a decentralized reputation protocol that raised 4.5 million from Galaxy, IDEO, and others.

Then we have Tyco, an Ethereum scaling platform. they raised 15 million from light speed faction hashed winterbune others this company's called privacy it's PR IVA C as in a C S-EA pretty interesting name distributed compute platform they raised 5 million from Binance Gate and others then you have cred shields there's smart contract scanning company there is 1.8 million from Draper Associates then we have stacks this is an on-chain points and rewards startup that raised 3 million from archetype, coinbase, scalar, and A Capital. Then we have banks, which is banks with two A's and an X,

which is a crypto payments company. There is 20 million from Lodger, Tezos, British Business Bank. I haven't seen that name before and others. BBB. Yeah, never even heard of those guys. Next one up is Utila, a wallet provider that raised 11.5 million from NFX, Wing Framework Ventures, and others. Then we have IO research.

They're an AI-focused blockchain startup so hot right now. They raise 30 million from HackVC, Salana Labs, and OKX. Then it's Sahara, which is also an AI-focused blockchain startup that raised $6 million from Polygon Capital. Then we have Tawn, which is the protocol that originated with Telegram. I'm not sure what the relationship is now. They raise $8 million from Mirana. Do you remember that telegram sale that was shut down by, I think Clayton was still the head of the SEC? They raised a ton of money.

And that was going to be one of the largest. Was it a coin offering? I forget the structure. It was like, what was it, $1.6 billion? Like, it was a huge raise. Yeah, that's right. It was enormous. And then it was halted.

And I think investors got 70% of their money back or something. But then Taun went ahead and launched. Like, they did do a launch in the end. So Ton launched, but it's not technically telegram. It's some group of people that really liked the project. and they launched it, but apparently they have an integration of the telegram. Yeah, it's in the telegram. The telegram has a wallet now.

Not in the U.S. That's true. Not in the U.S. It's like all these crypto things. You can use them if you're not in the U.S., which is tough. Yeah. Next one is AGO ratings. It's a crypto ratings company that raised 4.6 million from SuperScript and Portage Ventures.

This is a monster round This is Zama They're a cryptography Cryptography The other crypto company Focus on fully homomorphic encryption There is 73 million

From Multi-Coin Protocol Labs, block change and others Huge round That's one of the biggest rounds of the year Eigen layer at 100 And then these guys at 73 I think those are two of the largest ones That we've seen this year

Yeah really curious to hear multi-goin is always really good about writing their feces. I think this might be their largest ever check. So definitely looking forward to reading that. Last one up is Firewall. This is a blockchain security infrastructure firm that raised 3.7 million from North Island Ventures, Breyer Capital, and HackVC. It's going to be on an island that's not Castle Island. We like North Island.

Yeah. So I don't know where to start. There is some politics stuff that happened this week. It was Super Tuesday. RIP Katie Porter, one of the biggest crypto haters of all time. Sorry to see you go home, Katie. Yeah, she was one of the coochiest members of the house, actually. Her whole schick was doing like visual comedy in the house.

Do you know about this? I've seen a couple of her things. Yeah, she does, she does big posters. She's kind of like she's teaching a class on how to kill capitalism. She was basically a war night. Like she was clearly being groomed to be like a Warren accolite or, you know, member of the Warren caucus. She would go to these hearings and turn it into a show because they started televising the hearings. And she took advantage of that.

She'd make sound bites. And she would bring in like posters, like these like kooky little posters. That was what she was known for. And the base loved it. But she did lose in California. was weird Senate primary, which only the top two candidates advanced. And so she lost Adam Schiff. And I'll give some credit to Fairshake. Was it Fairshake, which is the PAC? Yeah, Fairshake had a lot of messages against Katie Porter here. And I think this actually

was a pretty great use of funds here for Fairshake. So, you know, this was a competitive race. Schiff is a Democrat. Steve Garvey was a Republican. He's a former baseball player, former professional baseball player. So he came in first. This is for Feinstein's seat. So that's why it was structured this way. It was a runoff election and then top two advance. Now, Katie Porter actually sold her email list, apparently, which is kind of a dumb move on her part. So they were attacking her on that front for invading people's privacy and actually just selling her donor list to the highest fitter. So they ran some really targeted campaigns. And Porter's been really in this war in camp of just being anti-innovation, anti-crypto, doesn't want

any market structure clarity, doesn't want a stable coin bill. And so- hated Bitcoin mining. Hated Bitcoin mining. She signed a letter to Urquhart attack harassing the Texas grid. It's like the California grid is nothing to write home about Katie, but they attack the Texas grid because they have mining. Yeah, like really, you know, basically just takes whatever Elizabeth Warren.

is advocating and kind of runs on that in California. And for someone who wants regulatory reform in a lot of different categories, she just is not in favor of bringing regulatory clarity to the digital assets industry. She's been trying to shut it down. So Fareshake did a great job. So we really have to shut those guys out.

Encourage everyone to check out Fareshickpack.com to learn more about what these guys are up to. But it's a political action committee that is not focused on Democrats or Republicans. They're supporting both sides of the aisle, and they're laser focused on candidates that actually want to support the introduction of a market structure bill, support the introduction of a stable coin bill, repeal SAB-121. So let the banks come into the space and really just allow jobs to stay in the United States of America in this industry. And so this was really their first big test in the primary season here. And they're super successful. I mean, getting Katie Porter off the map here is a big win. And so hopefully they can. they can do more in Ohio and Montana. There's a race in Massachusetts you might have heard about. I think there's going to be more to come on that front.

So there's some big races here that are winnable by pro-crypto senators or potential senators, which is really interesting. Yeah. And remember, it's like obviously there's some partisan dimensions to this. That's inescapable. But in this case, Adam Schiff, who is more of an establishment Democrat, he, got I think he got an A rating from that body, the rates members of Congress on crypto. Katie Porter got an F. They're both Democrats. So we can move the needle on crypto without it

necessarily being partisan. And I think the Super Tuesday results were very validating for the new reinvigorated crypto dark money groups. I mean, that sounds sinister, but like we have to stick up for ourselves. Other industries do it to a much greater extent. Relative to the size of the crypto industry, we barely do it. And most of the candidates that were identified as being pro-crypto one. And so the big test will be in November. We'll see like Ohio is absolutely critical. Like, that's a flippable seat. Sherrod Brown looks like he's going to be up against Bernie Moreno. Bernie, super pro-crypto. He's having like a crypto fundraiser next week.

Sherrod Brown, of course, basically along with Warren, the main antagonist of crypto in the Senate. Yep. Yeah. Sherrod Brown is the reason why Bank of New York Mellon is not in the custody business right now. So Senate banking has been blocking U.S. banks from coming in and being the custodians for these ETFs. And so he's someone that's not only preventing innovation in the United States, but he's actually just making this a lot more dangerous for people that are in these Bitcoin ETFs. And so that's a really important race.

We'll definitely be, we'll be talking to Bernie Moreno at some point, actually. So excited to have him on the podcast and talk about what he wants to do for Ohio and shine some light on really some of the bad behavior going on with Sherrod Brown. Yeah, we've had a lot of Ohio coverage historically on this podcast. Vivek is also from Ohio. He endorsed Bernie. There's another candidate that we interviewed from Ohio previously. running for Senate.

But yeah, look, to the extent there's folks running for Congress in 24 and they want to make their case to the crypto industry, they're welcome to come on this show, regardless of political affiliation. We've done quite a few at this point, and we'll keep doing it. Right. So another thing that I want to call out this week was a coalition of states' attorneys generals from Montana, Arkansas, Iowa, Mississippi, Nebraska, Ohio, South Dakota and Texas have jointly filed a brief that challenges the SEC's understanding of the

Cracken case. And so this Cracken case is one that we haven't talked about as much as the Coinbase case, but basically there was a settlement, the SEC with Cracken over the way they had their staking operation. Then the Cracken leadership had some comments around the SEC relative to, you know, market structure and what they're doing in front of Congress at one point. And then like the next day the SEC came down and they basically copy and pasted the Coinbase action, and they just applied it to Cracken. And this coalition of state's attorney generals are basically saying that the SEC is in the wrong here and that this whole ecosystem is very undefined and the SEC is overreaching where they shouldn't be and that the states are regulating Cracken under these money transmitter laws.

And it's worth checking out. We'll put it in the show notes. But I think it's fascinating. to see these states actually get in the mix here and just call out the SEC. And a lot of these are swing states as it relates to pro-crypto regulators. We've talked about Ohio. Montana is a very big Senate seat right now. John Tester, super anti-crypto. That could flip to a pro-crypto candidate as well. So hopefully Cracken wins here. And it looks like they're getting support of eight critical states with a lot of people that live in them. Yeah. Initially, you said attorneys general, which I really appreciated because that's the right and esoteric pluralization and then unfortunately. Did I slip?

I set it wrong? Switch back after that. But the first time was good. Attorney's General. Yeah. So it's not attorney general. Do you know that I didn't take basic English grammar growing up because I was in a French immersion program?

Me too. I actually need to dust up on my English, it appears. I learned math in French. I learned, which is different kind of math. It is. Like, they didn't do algebra until much later. I had to pick that up. I learned French history, so I know a tonne about French history, completely not useful.

No disrespect. I mean. Not very useful. Yeah, it was very strange. Yeah. All right. So what else is going on this week? I have a, I would like to attack the Wall Street Journal if you'll permit me.

Oh, WSGA. I forgot about this one. Yeah. So the WSJ, they have an anti-crypto tilt, which is embarrassing for them because they're meant to be more conservative as publication and doesn't really make sense that they're so hostile. And it certainly doesn't make sense that they've been carrying water for Elizabeth Warren and her quixotic crusades. They have been accused of defamation over their Tether Bitfinex article from 2023. they've been sued for defamation by Christopher Harbourn in an article about Tether that they wrote

where they implied that he was doing the bidding of Tether to set up shell bank accounts at signature, I believe. And as it turns out, he happened to own equity in the parent company, but he wasn't in any way on behalf of Tether. He was just trying to do it personally for his own businesses and so he's actually suing the WSJ. So not only has their campaign brought them infamy

and earned them a rebuke at the highest levels of the treasury, but now they're also being sued. So I look, I mean, get your act together, Wall Street Journal. Just like drop the anti-cryptoanamus and all your problems will go with it. Yeah, I think that's the message. Hopefully this guy wins

because there has just been some brutal, brutal coverage. Do you remember when post-FTX, Wall Street Journal did a huge front-page thing around how this is terrible because all of these charities that SBF is giving money to, now they're not going to have any money, and this was like a bank run. Yeah. Just totally off base. Yeah. I mean, what I remember well was all the reporting around signature and Silvergate that had served FTX, all the claims in the mainstream press that they were facilitating money laundering or terrorist finding or like, genuinely illegal stuff knowingly, none of that materialized. No, none of that was true.

Didn't stop Elizabeth Warren from copying, pasting a letter she got. The short sellers and the members of Congress that hated crypto used that as fuel to attack those banks. And, you know, in my opinion, fragileized them and made them, like I remember conversations of people that were withdrawing funds from those banks on the basis of those unfounded allegations. I mean, this is serious stuff, right? It's like the reputations of significant banks, especially signature,

being totally torched on the basis of what appear to have been total fabrications. Yeah. I mean, yes, they may have done business with FTX. We don't know the extent of that, but it doesn't appear that the criminal angle was in any way correct. So I just want to, like, it's been a year now. I want to go back to that almost exactly a year. and say those people were lying. Yeah, we're lying.

And those banks were totally unfairly maligned. And that remains a scandal. Do you want me to share my username and password with you? Because I know you dropped the subscription in the wake of that. To, uh, WSJ. Yeah, you might need access. I know. I have to use all my tricks to beat the paywall now.

All right. Well, here's something that I wasn't expecting. The Arizona State Senate, they have advanced a resolution that would compel lawmakers and state retirement fund managers to do a study into putting an allocation of the public pensions into the Bitcoin ETF products. Talk about things that I was not expecting to hear right away. Yeah, I mean, this is moving a lot faster than I thought, to be honest. That's not quite a sovereign, but it's not far from a sovereign either. Yeah, that's a pretty big step. I mean, obviously it's just a study, but I didn't think we'd be having that conversation this year.

a conversation I did think we would be having is Michael Saylor wants to buy more Bitcoin. So he announced last week that he's doing another convert. He upsized it to $700 million. Can you guess what he's going to be using the new 700 million US dollars for? What's that? Buying more Bitcoin. Yeah. It's trading in a significant premium now, right?

It is. Yeah. I mean, he just, that's the playbook, right? I think the problem is that he will face dilution if he wants to, significantly increase the float and risk losing control. So there, I think, is a limit unless he creates dual classes of stock to his ability to do at the money offerings or anything like that.

I think that's right. So in product-related news this week, we've been talking a lot around these Ethereum ETFs in the U.S. context and saying we don't think they'll get approved. They should get approved, but they won't. and then, of course, they don't have staking. A lot of them don't have staking. But Figment and Apex Group have partnered up in Europe to launch Ethereum and Solana staking exchange traded products.

These are going to be traded on the six Swiss exchange. They're going to start next week. So it seems like this is a big effort by Figment. And shout out to the Figment team. And Josh Deems, our former colleague, for getting on the board with this product. Yeah, I mean, I think there is a big effort. interstate competition developing here. I've also heard Hong Kong is trying to fast track their own Bitcoin and crypto ETPs. So now that the U.S. is finally caught up, at least in the

Bitcoin context, I think you have had exchange traded products live in other countries like Brazil and Canada for years. I think that increases the urgency abroad to allow for the creation of these products. I mean, I think all custodians will eventually need to be offering staking services. That's kind of where I think we're going. Obviously, there's not a huge market need at the current moment in time due to the regulatory environment. But if you think staking is going to be around, which, you know, like, do you think Ethereum's

going to be around? Do you think Solana is going to be around? A lot of these new L1 chains that are launching, they all have staking. So, you know, you want to be competitive there. You're going to have to be doing it at the custody level, I'd imagine. So what did you make of this dissenting opinion from Commissioner's purse and Uyeda on ShapeShift in terms of their settlement with the SEC. This was one of my favorite things besides Katie Porter taking an L this week.

So let's tee this up. ShapeShift. People know Shapeshift. This has been a company founded by Eric Voorhe. He has been around for a long time. This used to basically be how you traded one crypto asset for another. And the user experience was... Yeah, I remember Shapeshift being the most efficient and convenient way to move between...

Still one of the best products I've ever used in the crypto context. The user experience was sensational. Now, this was before decentralized exchanges existed. So you'd basically come with one asset, you get back another one. Anyway, so they stopped doing that product because of SEC concerns. They now still have an entity, spend decentralized. So their shape shift, Dow, I believe, runs a lot of this infrastructure, but they dissolve the corporate entity because it seems like the SEC was going to,

going after them and saying a bunch of these tokens are securities. So since Shapeshift doesn't exist anymore as a legal entity, it seems like it was easier for them to come into this settlement with the SEC, which, what was it for? Like $270 million or $270,000 or something like that? Yeah, it was really normal. Yeah. So, you know, there's not much to go after there, right? Like there's not even an operating entity anymore.

So they settle. I was kind of expecting that to be the end of it. And then there comes this dissent from Hester Perse and Mark Uwaita, SEC Commissioners. The name of the statement is on today's episode of as the crypto world turns, statement on ShapeShift AG. And it goes into detail on how there's just no clarity here. And it's pretty ridiculous that Shapeshift had to even be forced into the situation. And they wrote a screenplay.

Yeah, they wrote a one-act dramatic play. They wrote a play. Now, should we reenact this play? Who wants to be the SEC? I think we should, we should perform. This should be the inaugural performance of the play. Okay. So I'll just tee this up.

So one participant here is going to be, quote, unquote, future shape shift. And one of us is going to have to be the SEC here. As bad as that side, do you want me to? I'll be. You'll do it? I'll be the SEC. I'll be this innovative company that's looking for clarity. Knock, knock.

Come in. Hi, I'd like to register as a dealer. Why? Because I think that some of the assets that I might plan to deal, they might be deemed to be at some point to be securities by the SEC. Which ones? I'm not sure because I can't really understand what criteria used to decide whether a token offering is a securities transaction. And if and whether the token that was the subject of the investment contract remains a secure. in the secondary market trainings?

Well, if you don't know whether you're dealing in securities, you can't register. And by the way, if some of the assets you're dealing in are not securities, you also can't register. Huh. So can you help us think through which of these assets are securities? No. We suggest that you read the 2017 Dow report, and it'll be all clear to you. You can also look at our enforcement actions if you want. Yeah, I've read that and I've read your enforcement actions and I still have questions. I suggest you hire a lawyer. I did. The lawyer has even more questions.

Sorry, we can't help you any more than we already have. We don't give legal advice. End scene. This is written by two SEC commissioners. This is incredible. So they wrote basically a parody of the way that this is, is like modern day Voltaire. They're in a parody of the way that the SEC operates.

But it's very penetrating. It's incredible. I mean, this is the exact conversation that happens. When they say, come in and register, you show up, well, you know, tell me which assets are securities. Or if you show up and you're on the other side of the table and you want to do an actual security, it's like, well, how do I do this? You know, the 15c3-3-3, like, how do I actually register security?

What's the secondary trading look like? No clarity on either side. And this play was co-signed by Brian Armstrong and Coinbase Council. So this is basically indicative of real actual conversations that take place frequently. So really appreciate the level of candor here that we saw with this descent. I think that was phenomenal. So hopefully we get some more, hopefully get some more people talking about this. Certainly the chair of the CFTC was talking about this type of thing this week.

So Rostenbenham, who is the head of the CFTC, he went before Senate Ag this week. And they were asking about Ether and how that would work. And basically, you know, the issue is that Ether is a commodity in the eyes of the CFTC. They have Greenlit Futures contracts on Ether. And he's saying, if the SEC were to come out and assert that Ethereum is a security, that would have a very negative impact on the CFTC's companies that are kind of operating. operating in this space. It would make them not in compliance with the SEC's view of the world. So it would be disruptive. And the kind of the read between the lines was the SEC doesn't know

what they're doing over there. Yeah. And this was in the context of Prometheum, basically determining that Ethereum is a security and the SEC appearing somewhat likely to co-sign that. So I guess my question is, do we think that Prometheum is actually a Patsy, that, that, the SEC is pulling the strings behind the scenes. This is my little conspiracy that the SEC is cleverly using to try and establish ether as a security via Prometheum. I think that's pretty safe to say. So Prometheum is the only special purpose broker dealer that has been approved. They don't have an operating business. I mean, they have a company. They have no customers. They're saying they're going live in Q1, and they're taking the stance that the first security they're going to list on their

platform is Ether, which obviously has not made them a lot of friends. I tweeted out, they've released, since they're now under the SEC's oversight here, they need to release their financial statements for the year. This is a company that, by the way, has 900, as of the end of the year, has $920,000 of cash in the balance sheet, total assets of a little over a million dollars. And very little equity. So, you know, a bunch of liabilities on that balance sheet. This is a very thinly capitalized company that has major concerns about their solvency. Like the ability to just like stay in business here is a concern for this company. So I cannot imagine a world where institutions are going to be rushing to use these guys. But they do play this important role in the industry where

the SEC is able to point at them and say, no, there's a way to register. You just, you do a Prometheum did. And it's like, okay, well, look at Prometheum. They have no customers or a business. Yeah, it's just not very persuasive. If Prometheum was a real business with real volumes, maybe this ploy might have worked, this like Petemkin village of, you know, securities registration, but they're just not much of a company. I mean, it does remind me of the way that the government doesn't end around the constitution. Other ways, like, you know, getting around the First Amendment by informally pressuring like big tech companies to censor in line with the government's desires that thus eliminating First Amendment considerations

because it's quote-unquote just a private company doing it. This seems of shades of that. But I don't think it's going to work because everybody thinks Prometheum is a laughing stock and they're not a credible actor. Yeah. Yeah, it really rubs me the wrong way, the way that that management team has conducted their business. in this industry. I mean, there's a way to go forward and run an actual business that deals in securities. Like I've mentioned many times, there are a lot of issuers that want to bring real world

securities on chain, but to go out and say that Ethereum is a security, they're not making any friends there. So we'll keep an eye on that one, as always. So on the Ethereum front, I went to my first Ethereum conference this week. Yeah, East Denver. East Denver. I went to East Denver. it could have just as well been called Bitcoin Denver because Bitcoin stuff was absolutely popping off. I will say that. Well, EVMs on Bitcoin, that's going to be a thing. So it's a merging of the two worlds. Yeah, and I'm very comfortable with that.

I think there is, I think there's an acknowledgement now that we're in a new era of Bitcoin with greater conversion between Ethereum and Bitcoin. That's not a bad thing. And we're trying new L2s and we're inheriting. tools and infrastructures that were built on Ethereum, and we're going to try them on Bitcoin, like optimistic roll-ups. I think that's fine. You know, like the Bitcoin Renaissance event that we attended, and it was one of the best attended side events.

The amount of hype there was unreal. A lot of participants from Asia, actually. So there's an interesting division in Bitcoin land where a lot of the enthusiasm for this new wave of Bitcoin stuff is coming out of the east. and Western firms haven't appreciated it much, although post Denver, actually, they're now starting to realize how big it is.

I did get a culture shock from the ETH conference, though. I will admit that much. It seemed like, yeah, it was a little bit outside of your strike zone. Yeah, so I felt like an anthropologist in a foreign, like, nation like surveying the local tribes or something and trying to understand their customs. So first of all, they did have the option to put your pronouns on your name tag, which to be clear, that wasn't mandatory. I was just making fun of the ETH people when I posted the picture on Twitter. But there's a lot of weird stuff. Like, can someone explain to me why Ethereum has all

these strange motifs that seem really like forced memes? Like this isn't me being me. Like, I'm I'm not trying to be mean about Ethereum. Like, I think Ethereum is fine. But why do they have, what's the deal with the spork? The spork whale? Why? What is a spork whale? Yeah, I don't know.

What is the deal with the bufficorn? A buffalo unicorn? What's the deal with unicorns? Well, unicorn is a uniswap thing, right? But they had unicorns before uniswap, right? Or which came first? I don't know. My daughter always asks me if unicorns were.

are real. It's very heartbreaking to tell her they're not. Why did they have gigantic squids, people in squid costumes, walk around the conference? What is that? What was the nautical theme? This is Denver. What was the deal with the squids? Well, what do you think they thought about coming to your Bitcoin Miami conference with all the creatures walking around there? I think there could be the same level of it.

Look, I will concede Bitcoin Miami is no less cringe than East Denver. They're on the equal plane of cringe. But I'm more familiar with the weird Bitcoin culture stuff, which I also disdain at this point. But what I want to know is where this stuff came from. Like, why was the hangout zone? I actually took a picture of it, because did you see this thing on Twitter recently

about the Willy Wonka experience? No. They, like, went horribly wrong. It reminded me of that. There's this huge room with gigantic octopus things. and squids. What? What does that have to do with Ethereum?

Yeah, I don't know. I don't even know how to react to that. I've never seen that. Yeah, so, look, I'm baffled by Ethereum culture. Bitcoin culture, I understand and also think is strange and unnecessary, but Ethereum culture seems even more forced and made up, is my verdict. Be careful what you wish for, because if the price of Bitcoin goes 100k here. The next conference that you go to is going to have 100 people in suits from

Deloitte. And that's going to be these conferences from then on. Give me the suits. Give me the deal slides. Give me the collared shirts. I didn't see a single person in a college shirt the entire time I was there. I mean, everything that you said sounds great compared to the 2016-17 conferences where it would just be a bunch of guys telling you that they're going to recreate the DTCCC and you know, securities lending on the blockchain was going to be coming in 18 months because of some partnership they have with like some third rate bank yeah i mean i guess if given the choice i would take the hoodies and the unicorns as opposed to the bankers trying to do private blockchins how's the merch do you get any good merch i don't think i got any merch oh man that's the best part of those

conferences yeah no merch i've got i know what the heck i got a nice coin metrics backpack this week i got nothing good merch week i also got some end state sneakers this week i don't know if i told you that. Oh, yeah? I get the, did you get the new drop? Museum of Fine Arts drop, yeah. Oh, yeah, tied to a blockchain. There's some great shoes. I know, whenever I tell people that the shoes are an NFT, that ends the conversation instantly. Yeah, they don't lead with that. So that's good for them, I think. So, like, I think Bitcoin needs to go up a little bit more for the shoes to have NFTs and them to be a cool talking point, because right now it's not working for me as a conversation starts. I agree. A couple odds and ends here. So Bloomberg had an article around some of these hedge funds that have been making a killing in these FTCS claims. So bow post-FATS claims. You know, we saw this in the early days post-FTCs. We were getting phone calls, people trying to see if we knew people that had FTCs claims. And the market was just so negative there. And we thought, I don't know, it's why we're not hedge fund guys. But you kind of have to have guts of steel to go in there and be buying it.

you know, 10, 12 cents on the dollar, but these guys have just done great. I mean, this could be a hundred percent recovery. What a trade. Yeah, it was an amazing trade. Credit to them. And then the last one of the week in things we're reading, a good research piece from Fidelity Digital Assets, the economics of the Bitcoin having a miner's perspective. So I recommend everyone check that out. We'll put it in our newsletter as well. What's your verdict on the priced inness of the having? You know my thoughts on it. I think that these ETF flows are the main story. I mean, if we were seeing ETF flows that were more like muted,

I would have a stronger view, but I think it's priced in. Yeah. And every time we have a new having, the delta in terms of supply gets much less. So this is a 0.9% annual delta. I don't think that matters that much. I hate to say it. All right. So we got to get this Farcaster community.

talking more. We did have, I turners making frames. So there's a frame. There's some, I've seen some of them. They are actual fud dice type of frames made out of tungsten, digital tungsten.

So there's some interesting stuff going on, some trinkets, if you will. Our merch guy, by the way, got back in touch. So I think he must have seen the price of Bitcoin. He's asked if we wanted to do another merch thing. I said, I don't even know if we have a merch store anymore, but there's stuff on there.

Yeah. On the brinkdot shop, right? Apparently. Domain's still resolve. I don't know. We did. Yeah.

No, it still works. Still works. So he's interested in doing stuff again. Yeah. I like our merch. There's a nice camo hat there. It's amazing. It's amazing what the price of Bitcoin goes.

People want to talk to you again. People remember you. People are asking for coffee. Your merch guy gets back in touch after one year sabbatical. Look, the conversation is a little light on our forecaster. Is it a channel or forecast a channel? It's a channel. So go to On the Brink.

If you say something funny on there, we will read it on next week's episode. We will. Far away. All right. So I think that's it for the week. Everybody have a safe and healthy weekend. And we will see you on Monday.