On The Brink with Castle Island - Weekly Roundup 03/10/23 (Silvergate wind-down, NYAG comes after ETH, more bank runs) (EP.405)

Episode Date: March 10, 2023

Matt and Nic are back for another tumultuous week of news and deals. In this episode:  Nic's Vespa crisis FTX crime family update Grayscale's oral arguments go well against the SEC in the GBTC case Binance.US wins the right to buy the Voyager assets in court NYAG sues Kucoin and alleges that ETH is a security Silvergate is undergoing an orderly wind-down of the bank Why did Silvergate really collapse? Why are regulators trying to precipitate bank runs? Structural issues explaining why Silvergate's deposits were so correlated SVB experiences a bank run Are the Silvergate and SVB difficulties warning sights that the Fed's rate regime can't last? Content mentioned:  How Banks Fail, by Austin Campbell

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 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.

Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. All right. So the big news of the week is your Vespa. It was vandalized. Yes, it was. I'm devastated to report that there's been a despicable act of Vespa vandalism in Miami. And I was the victim. So you've had this thing for like one week and this thing gets vandalized. So what happened?

So honestly, I don't know. maybe one of you did this. Maybe this was a member of Brink Nation. Can't be. Can't be. Don't say that about the listeners. We love Brink Nation, but I'm a little suspicious here because one of the odds that my Vespas

specifically is targeted. I mean, how many yellow Vespas are there in the city of Miami? I guess that's the question. There's actually a lot. Okay, here's what happened. I go to get coffee at my local coffee shop.

I park the Vespa outside. Go about my day. Come back. It's missing a wingman. Just got kicked off, you think? Someone unscrewed the wing mirror and took it. Oh, it was like an actual, someone unscrewed it as if they have their own Vespa that needed a mirror. So I have two theories here.

One, someone just wanted a Vespa wing mirror as a keepsake. I don't know what use they would have it. Or somewhere along line someone else's wing mirror got stolen. Now we've this endless game of musical chairs where they're just stealing wing mirrors from the next guy. And so I was just the latest victim in that. It's terrible. So now what do you do? Do you just drive it around without a mirror on it?

Yeah, for a while I did. I did find a dealership and they actually had a mirror in stock so we're okay now. But I was shaken, honestly. Who does that? I would be too. I mean, long-time listeners of this podcast will know I have a little bit of experience in getting things vandalized slash stolen, my bike. There's a history of vehicular theft on this podcast and I won't stand for it.

I mean, I still hold a huge grudge against WeWork. So I was a member of the WeWork in Fort Point, Boston, during the beginning of the pandemic, and I parked my bike outside that we work every single day. There's a security camera, and the bike got stolen, and I went to the building management, I said, we need to figure this out. We need to have the security camera. And they showed me the footage, and it cut out for 10 minutes, just inexplicably, it cut out, and it was stolen during those 10 minutes.

So, like, no, it wasn't shown. It's like, you don't see this as proof. This is an internal job here. Building management. Unbelievable. Still not over it. It's a great bike. So I did reach out to the Vespa community here in Miami,

and I let them know that there is a thief, a mirror thief on the loose. Turns out I'm not the only victim here. Other Vespas have been stripped of a single wing mirror. So hold on. Are you guys all on the same text chain with this VESPA crew? Once you buy Vespra in Miami, you're part of this illustrious group.

So people are aware now. And actually, as I was walking down the street, I saw other Vespas that were afflicted by the same thing. So what I did the next day was I did a stakeout. Wow. So I parked my Vespa and sat down the road from it and watched it, lest the thieves seek to reoffend. And nothing?

I don't know what I would have done at that point. And I caught in the act. Right. That's the question is, what actually were you about to do? It honestly depends how if Liz Warren had written a letter that day and I was upset or if it was a calm day, I think it really depends on my state of mind how it would have reacted. Well, glad you have a mirror back, but it seems like this is going to be a problem.

Yeah, there's just a lawlessness pervading. Frankly, the problem is I think actually that it's spring break. And so there's a lot of visitors in the city. It's a bad time to be in Miami. So I honestly don't actually recommend being here at the moment. Trust me, there's no spring breakers in Boston right now. So kind of an insane week. Most of the news is bad.

But before that, Cass Island content, you sat down with Rob Hamilton of Anchor Watch, talk about Bitcoin Development, minisccript and Ordinals. Rob, loyal member of Brink Nation. Glad we got him on the show. Big Brink Nation guy. Yeah, he had a Brink Nation t-shirt on. He's got a bunch of our T-shirts, got a bunch of our merch. Rob's one of these guys that I follow on.

He's high signal. I would definitely recommend following Rob on Twitter. I think it's Rob Wanham. Lots of good info. Talked about miniscript, talked about ordnals, talked about just the current state of Bitcoin development. So that was a lot of fun. And then Sean sat down with Michael Groninger over Chinalysis.

I thought that was a great episode, too. Two high-quality podcast this week. High-quality, high-quality. And Chenalysis is such a cool company. I mean, I know people hate on it because they think that they're surveilling them, but just what a great idea for. business that Groninger had there. Yeah, we'll have more to you next week. More on the ordinal's front. Actually, we'll keep covering that. Yeah, let's do some deals. First one up is

Kresis. This is a Web 3 super app. They raised $25 million from Liberty City Ventures, Franklin Templeton, JetBlue Ventures and Mark Benioff. JetBlue Ventures, huh? Wow. Welcome to the Get in the mix. JetBlue Ventures. Way to go. JetBlue Ventures. I have to tell you, JetBlue is falling off lately. You cannot get it. from you cannot get from Boston to New York in a good way. And you also, there's just, you can't travel by air. No, you can't. It's not even just just just blue. It's terrible. So I, if the JetBlue web three team, I guess they have one now, or if they're listening, I love JetBlue. I'm one of the, I'm a huge fan, but I have cut them off. I'm no longer, you know, I've JetBlue mosaic, everything.

I no longer patronize JetBlue. Really? Yes. I've made that decision. One, too many to I had one too many delays with JetBlue and I just I couldn't do it anymore. And I was so sad to go. I don't know what it is with the state of yeah, the state of air travel in this country is not great right now. The state of banks is not great. So JetBlue Ventures, maybe Web 3 will help them get back on track. Maybe they can reconcile the seats on the blockchain. I don't know, weather reports, whatever it takes, please.

I mean, not to be a jerk, but don't airlines go out of business like every five years? What's the deal with having like a Not JetBlue. They wouldn't. They wouldn't do that. They're trying to buy Spirit right now, which Spirit might be the worst airline in the history. Yeah,

I would be very dismayed if I were still a JetBlue loyalist to see that. Spirit is like being on the Fung Wah bus. That's really what you're dealing with. It's a really terrible experience. I don't know what that is, but I assume it's some sort of Boston reference. Boston to New York bus. It was like $5 and you'd just,

you'd be lucky to walk off that thing in one piece. I remember the Greyhound bus between D.C. and New York was also pretty questionable. The Chinatown bus. There was an infamous Chinatown bus. That was the fun one. That's the fun one. Yeah, that one. Someone was beheaded on that once. Really? That's not great. I think the DC to New York one. So I wasn't allowed to take that one. Well, that's like traveling on spirit. So next up, we have proven, which is a company building zero knowledge proofs for a variety of things, including proofs. proof of reserves, exchange proofs of reserves. They raised 15.8 million from Framework and others. Huge congrats.

I know this team well. Very excited to see what they're building, really pushing the envelope in terms of ZKifying proofs of reserved. Stay tuned. Lots to come there. Very cool. Very cool. Next one up is Impossible Cloud.

This is not surprisingly a Web3 Cloud Services business. They raised $7.6 million from HV Capital, 1KX, Protocol. Labs and a number of others. Then we have Toku, a payroll and tax compliance company. There is 20 million from blockchain capital, protocol labs, and Kwan Stamp. Next is Tenor. This is a Solana-based NFT marketplace. They raised $3 million from placeholder, Solana Ventures, Big Brain Holdings, and others.

Then we have ECSA, a Brazil-based stablecoin issuer. They raised $3 million from Y Combinator and ARCA. ECSA, that's kind of an interesting name for a company. stable coins, very hot right now. And the last deal is an acquisition. Coinbase has acquired One River digital asset management for an undisclosed amount. That's an asset management firm was backed by Goldman, among others. So congrats to the Coinbase team and the One River team.

Well, there is a whole bunch of bank drama playing out as we speak, actually, as we speak. But before that, let's cover our favorite crime family. La Familia FTA. Just the bad boys, the bad boys of crypto. Man, Sam has really just brought this industry to a tough place. This guy really can't go to jail fast enough. But let's hit on some of the highlights here. So the FTX debtor group, John Ray and the team,

they have filed a lawsuit against Gray Scale, trying to force the company to offer redemptions of GBTC. So turns out Alameda is sitting on a bunch of GBTC. They got that from BlockFi. That was part of the transaction that they did with BlockFi. And they bought some of those assets from BlockFi. So that's how they got it. Why they didn't sell it before they went bankrupt is anyone's guess,

but probably has something to do with the fact that it was a poorly run business from the start. So what we have here is they basically want to be able to sell it at Nav. They want some redemptions here. No shot that this lawsuit works. This is a totally frivolous lawsuit. And we don't expect it to go anywhere. I will maybe just take the opportunity to say I misspoke on the last week's podcast when I said that there was a world where the SEC would just go where Grace Gale could win this lawsuit against the SEC and that the SEC could just come back and say the spot market surveillance is not in place and redeny the application. They actually can't do that.

They could find a new reason. Yeah, they can't just go back and deny for the same reason. apparently. New reason. Has to be new reason. They could find a new reason. I think they could probably shut down the futures ETF. There's a bunch of stuff they could do.

So if Grayscale wins, it's not that they definitely get an ETF. There's other stuff that could happen. But I specifically misspoke on the last episode. And hand up. You got to put your hand up. We own up to our mistakes on this podcast. That's what we do. I own up to it. I like the Grayscale team over there.

So I'm not trying to get my facts wrong. But in any event, Grayscale is not going to lose this lawsuit. FTX because it's just without merit. All right. So next up in FTCS news, the U.S. government has appealed the bankruptcy court's decision to not appoint an independent examiner

to get to the bottom of all the nefarious deeds of SBF and his cabal of co-conspirators. Don't know what that means, to be honest with you. I'm just reading the words. That was my language. I put that in our newsletter. So you left out a couple words. I called them fraudulent co-conspirators.

Yeah, I thought, that was gratuitous. So what does this mean? The government wants to have this independent examiner report done so that they can figure out exactly what happened. And, you know, as you've seen with the Celsius independent examiner report, they get to the bottom of stuff. So they go in and they find out, you know, individuals who have acted with malice and with fraud. And that's how you kind to come up with stuff. Now, the downside is that it costs a lot of money to do these things. And so that was the basis that John Ray didn't want to do it. The bankruptcy court, said that they didn't have to have an independent examination.

And the government now is saying that they want one. And I'm telling you this, if they get one of these things, a lot of people are going to jail. A lot more people are going to jail than have already been indicted. So I, for one, am rooting very hard for this independent examiner report. Lastly, on FTX, they are reportedly selling their LP stake in Sequoia, which was an insane thing that happened. I can't believe it. But that's being sold to the Abu Dhabi sovereign wealth fund.

So they had an LP stake in Sequoia. It looks like it's, you know, in the $50 million range of sale. It's hard to tell. But what about their stake in Toy Ventures? So they're an LP in Romnik Aurora's fund. He was, of course, the head of venture capital, head of corp dev, head of product over there. So anyone want to buy that LP stake? Not sure there's a lot of demand for that secondary.

I don't see that being a high demand. of secondary. But that was all the FTX news. I mentioned Grayscale. There was some Grayscale news. Yeah, this was really interesting. I listened to the oral arguments in their case against I don't think there was video and the audio was garbled, frankly. But here's an interesting thing. It appears that Grayscale was initially the underdog in that case and now seems poised to win. And now it's not a trial by jury. There's three judges. It appears that they persuaded one of the Democratic judges to their side. This is, of course, concerning GBC's conversion to an ETF and the SEC's denial.

So that doesn't necessarily guarantee that that gets converted to an ETF, but certainly a setback for the SEC if they lose that case. Yeah, the SEC did not comport themselves well from what I heard there. I mean, I was surprised that the SEC lawyer was not more on the ball. They were rebuked by at least two of the judges, I think all three maybe. The SEC is making this argument that there's no real clear linkage between spot and futures markets for Bitcoin. What are you talking about? It's like 99% correlated. It's preposterous.

The market makers that trade in the futures are active on spot. They're causally linked. So that was a very tenuous argument. And an interesting thing that did come up in that case was one of the judges asked the SEC, what would they do about the futures? Because basically the crux of the SEC's case is there's some distinction between the futures product and the spot product. And one of the judges asked the SEC, well, would you delist the futures ETF if you lost

this case? Because Grayscale is trying to make the case that you should either approve both or none. and that could be a weird outcome that maybe they lose the case, the futures ends up getting delisted. That's a hard question for that lawyer from the SEC to answer, because first you have to say, I need to go check with my boss, Gary Gensler, and Gary Gensler would have to say,

I need to go check with my boss Elizabeth Warren. So it would be a game of telephone to get to the answer there. I mean, it would embarrass the SEC if they did that because it would basically mean that they made a mistake in approving that product. Well, they approved a, a 33-act product. So I think Grace Gale's in a great spot to win this, actually. Yeah. So the outcome of that's in a couple months, apparently, seems to be three judges. If they, if the SEC loses this,

I suppose they could appeal it to the Supreme Court. I don't know if the Supreme Court would hear the case, though. I think they should. Other SEC news, so a bankruptcy judge has ruled that Binance U.S. can move forward with buying the assets of Voyager, the bankrupt crypto broker. SEC objected, and they wouldn't really state in detail why they were objecting. I mean, they said, Binance is running an unregistered securities exchange. They said Voyager VGX is a security, but they didn't really define exactly what they needed to define, and the bankruptcy judge really didn't seem to have any time for it. So he kind of called them out, and then he approved.

this transaction. It's a remarkable outcome. This was on the same day that the gray scale arguments were heard. Two big setbacks for the SEC in one day. I mean, the judge rebuked them pretty firmly here. The SEC has not put out interpretive guidance for the crypto industry in over four years. And it's just very clear they're just, they don't have a handle on this. And so we, ultimately, we're going to need an act of Congress here. We're going to need a market structure bill from Congress just telling the SEC or the CFTC for that matter and what to do. So get the safe harbor going, give CFTC oversight of the spot market, whatever it is. It's going to have to come from Congress at this point because the SEC is just not capable of doing this.

So last piece of legislative news, I suppose, or litigation news rather, this late breaking as you're recording, NYAG has now claimed that Ethereum is a security in the their lawsuit against Ku-coin. What? That breaking just as we're midway through recording. What did they have with Ku-coin here? Why is Ku-Koin being sued? Yeah, I mean, basically they're being sued for operating an unregistered exchange in New York.

So sort of the usual stuff. But yes, they pretty explicitly claim that ETH is a security on the basis of the ICO and the transition to staking, as well as the way that ETH is promoted by the Ethereum Foundation. Well, this is going to be a big story. Good luck with this. I don't, I mean, ETH might have been a security when it was issued, but good luck trying to put that back into a box.

Yeah, not sure that one is going to be persuasive, but yeah, very interesting late development here. That's pretty incredible. Well, we'll keep an eye on that one. Shall we talk banks? All right, story of the week here. Incredibly dramatic. Silvergate is no more. Well, that's not even that dramatic. Honestly, that's just an orderly wind down. So Silvergate Capital has announced that they will wind down the bank. So they have indicated that

all deposits will be fully returned. Silvergate was, of course, the leading bank for crypto startups, basically. You know, huge proponents of the industry, built a great franchise. Unfortunately, got tied up with FTX. And they were FTCS's bank. So they can't. came under a tremendous amount of regulatory pressure and then had an old-fashioned bank run, which I guess it's really important to point out here that they have experienced no losses from depositors. And so no customer has lost money on Silvergate. Yeah.

But it is a shame to see them not on the map anymore. Big time. I have so much to say about this. First of all, I will direct your attention to an article by Austin Campbell on what happened to Silvergate, which I thought was really good. a very detailed discussion of why they failed. A short version of it is basically they bought long duration assets for higher yields. And then they faced massive outflows because of their depository base was basically all crypto. And of course, a lot of those crypto depositors went

bust or, you know, had to withdraw for other reasons, suffered a 70% drawdown, and then they had to sell their long duration portfolio of fixed income assets on a short-term basis. So, of course, it's a classic problem of banks. You're borrowing short and lending long. Wait, you're lending short and borrowing long? Whatever. I don't know. It's a classic duration issue. The main reason, There are two main problems. One, that they had this highly correlated client profile, obviously all being in crypto. Two, interest rates rose a ton, which reduced the face value of the bonds. And so they took a loss when they sold them. They were forced to sell them, so they were forced to taking that loss. So that's kind of like the mechanical market economics reason they failed.

However, it doesn't end there. They faced a regulatory onslaught, the likes of which I've never seen before for a bank. Typically, regulators try to be fairly supportive of banks because it's not good when banks fail, right? In this case, it's almost like the federal government wanted Silvergate to fail. And I think it's pretty bad. I think it's bad look. I think if you care about the safety and soundness of the American banking system, you should not be trying to encourage bank runs or trying to strip away forms of insurance

that banks can use to stay alive. So there was an investigation by DOJ into Silvergate. It may have been warranted, but that was certainly one of the things that started to cause people to desert them. There were letters being written to Silvergate, pressuring them asking questions, very hostile tone from the likes of Elizabeth Warren. Then Silvergate, of course, was facing, you know, stepped up questions from their, from their bank regulators directly. Of course, we've covered that. Additionally, Silvergate was drawing on this line of credit, the federal home loan bank, I think it's called, F-L, F-H-LB. And that was withdrawn summarily with very little known. which forced them to liquidate a few billion dollars worth of bonds to pay that back.

So that is something that I would love to see more explanation about why the, you know, the stool was kicked out from under them with this line of credit that they were employing, which was the last draw. And it forced them to go into the liquidation. Yeah, I'm looking forward to seeing that. I mean, I guess the question now is, so they didn't file bankruptcy protection. I guess one question is just, is there a business there still? So I think there's a couple interesting things on that note. The big story here is definitely what you're saying around Elizabeth Warren and some of the forces that really, you know,

I wouldn't say cause this bank run, but really accelerated it. And I think the Freedom of Information Act is going to be used here to get to the bottom of some of this. So I'm eager to learn more about that. There's also just a question of what does this company look like on a go forward basis? is it still around? You have to remember, they still own some pretty valuable infrastructure. So this SEN platform, you know, that's interesting. That was widely used. You could see that being acquired potentially. They also own the DM asset. So they had bought, I think it was a $200 million purchase of basically technology from Facebook. It was the Facebook Libra project.

Silvergate wanted to launch their own stable coin. They got Stonewall the whole way, which goes to our point that we've been harping on that not only do we need a market structure bill in this country, we need a stable coin bill. So this McKenry-Water's stable-coin bill that was proposed at the end of the last Congress, we need something like that, because Silvergate would have been able to launch a stable coin. But what do they do with that asset now? Do you sell it? Or is there actually an interesting activist play there? So I won't say the name of the person whose idea this was, but it wasn't my idea. but there's kind of this concept that maybe there's some value as it relates to the aptos and sui projects

and is there a world where some of the IP that was developed at Facebook and that Silvergate bot is being used on some of these blockchains and so could there be a play where you acquire the asset and then you sue aptos or you sue sui and you end up getting you know percentage of those networks really interesting stuff but I don't know I think there's there are assets that bank well beyond just a core bank platform. And the thing that really deeply offends me is now we have the Elizabeth Warren's the world crowing victory over the collapse of a bank, which didn't harm any depositors. None were harmed.

The shareholders that took the risk that knew the risk they were taking, they lost money, of course, but that's what it means to be a shareholder in a bank, as if this is somehow good for the American financial system. And there's another point which I want to make is the fact that Silvergate was so exposed to crypto was, I tried to say this on TV, I did Bloomberg this week, I tried to make this point, but couldn't really, it was because banks are discouraged from servicing the crypto industry, because it's very expensive. So it doesn't make sense as a normal bank to have a partial crypto practice because that incurs so much additional costs and oversight and scrutiny. So it only makes

sense if you're kind of like a specialist bank and you do crypto and that's your thing. And so you have the opportunity of scooping up all those firms that are underserved and you incur the additional costs. So then you end up with these boutiques that are laser focused on crypto. But of course, the deposits are all correlated and the withdrawals happen at the same time. So because structurally, from a bank regulator perspective, banks are generally discouraged from touching crypto, you get the concentration of deposits in a small number of institutions. And that is the ultimate thing that did Silvergate in, in my opinion. That's a structural factor that doesn't need to be the case. Crypto doesn't need to be a Haram industry. It is a legal industry in this country. Banks don't need

to be this one of this weird things where the regulators are trying to reduce systemic risks, but they're creating risk by basically discouraging banks from service in crypto. So that's the ultimate issue here is that you have a tiny handful of banks and then of course they suffer when crypto has a decline. So that's the thing that I can't stop thinking about here is I think a lot of the culpability here. I mean, of course, Silvergate they're ultimately accountable. But a lot of the culpability is with the structure of the financial system and the way that it intersects with crypto. 100%. I mean, and what's going to happen here is, and you're even seeing this and we should

talk about SVB, but we're seeing this just flow of deposits into the biggest banks. So the J.P. Morgans and the Bank of America is who are not really open for business on crypto at any stretch, but it creates this further concentration of risk in the largest banks in the country as well as just they start to feel kind of like they're nationalized, right? Like you have these large banks that are essentially tools of the government to enforce sanctions and things like that. So you end up with this financial system that, you know, just doesn't feel like an open financial system in any way. It's a real shame. Yeah.

So speaking of which the House, as we speak, is House Financial Services Committee is hosting a hearing on the binded and let's see what's the title. Coincidence of coordinated the administration's attack on the digital asset ecosystem. We'll have to talk about that next week because we're recording as it's occurring. saw Representative Emmer's comments. They didn't disappoint. That's be usual. We need to rally behind Emma. I think Emmer needs to be the president here.

So there are certain factions that are sticking up for crypto or at least asking the right questions. I would say the House and the courts. Those appear to be our two lines of defense here. Aside from that, it seems like every portion of the government, and every agency is largely united against crypto here at the moment. So another thing that's happening here, and this is playing out in real time, it's not a crypto story, is that Silicon Valley Bank is experiencing just a massive

background today. So SVB is down at the time of this recording over 60%. They took a massive loss in their asset portfolio. So they sold over $20 billion worth of securities at a big loss. they're raising $2 billion, it looks like, of equity, and the stock is down 60 plus percent. So this has nothing to do with crypto. It's more of an old-fashioned asset liability mismatch, kind of to your earlier point around having long-dated securities that if you don't have to sell them, you don't have to eat the

loss, but they were forced to sell them for duration mismatch issues. And this is a big deal because SVB banks just a ton of venture funds and a ton of early stage startups. Not really as many in the crypto space, but more of just life sciences and financial technology, early stage startups. They're really, they're kind of like the player in early stage startup land. And so this is not great. It would be it would be very advantageous if SVB stick around, put it that way. But right now, that's a big thing that is happening and we'll have a bigger impact on just broader startups, less so just crypto startups. Well, I don't think it's a coincidence that the jitters around SVB have increased post-Silvergate wind down.

I think there's definitely some correlation there. I think depositors are spooked. And of course, their depository base is different, as you say. It's much more venture portfolios, fintech, things like that. But I think the folks in the administration that are cheering the collapse of Silvergate will come to regret it if we see a run on adjacent banks like SBB and maybe others. It sort of begs the question of what do you do? I mean, a lot of this is exacerbated by the interest rate environment. And the tightening in financial conditions, which would have reduced investment, which reduces the flow, the depository flow.

So those two things together, this is what we saw in the Great Depression. destruction of money supply and a whole series of bank runs. I keep thinking about the parallels to Luna, right? So Luna blew up and we all kind of sat there for two weeks and said, well, isn't this remarkable that you could have a, you know, $60 billion category here just disappear and nothing went wrong? And then you saw three arrows. And then you saw all this other stuff.

Obviously, FTCS was kind of the last shoot-a-drop. And with the rising rates, I think a lot of people were saying, well, you can't really just ride, you know, you can't hike that fast. something's going to break. Nothing has broken yet, but I think this could be what starts to break is that the banking sector starts to really get pinched here. And you have a huge, important bank like SVB and, you know, who knows what happens. I don't want to start rattling off names, but there are others with similar kind of deposit concentration and asset liability issues that could come into play here. So what do you do? I mean, are there, you just access more

liquidity at the Fed? They put together some special program or did they stop, raising rates. I don't think it's coincidence that it's happening this week as the Fed is now talking about potentially even larger hikes, understanding that inflation is higher for longer, and making extremely hawkish sounds about the financial environment. I think this is the thing that is breaking. Some people thought it would be dysfunction in the treasury markets. I haven't seen that quite yet.

But I think this is, you know, when a bank, the scale of SVB experiences trouble, something is deeply, deeply wrong. I mean, Silvergate was very small in the grand scheme. SVP is pretty colossal. And, yeah, so it's, I think you'll, you might actually see this get referenced by, you know, members of the Fed and potentially harken a more daubish shift, unless they'd want a pattern of coordinated bank runs.

I don't think that would be in anyone's best interest here. But yeah, it could be that this is what sort of slows down the hikes. hopefully they do it in time. I don't know. All right. Well, I think that's a good place to leave it for the week. I think it'll be a busy weekend here on the bank front. And we'll keep an eye on it.

Yeah, hopefully we're still banked come Monday morning. Hey, if you're the CEO of a bank that wants to really double down on your crypto strategy, we'd love to have you on the podcast. We'd love to have you start. We'd bring a lot of customers your way. That's true. Everyone is looking for redundancy. all right everybody have a safe and healthy weekend and we will see you on one day