On The Brink with Castle Island - Weekly Roundup 03/11/21 (GBTC redemption scenarios, Norwegian energy in Bitcoin, the NFT missing link) (EP.192)

Episode Date: March 12, 2021

Nic and Matt return for another intense week of deals. In this episode:  New Bitcoin FUD dice? Is there any new Bitcoin FUD? Beeple sells an NFT for $69m Are NFTs art or the autograph? The missing link for NFTs – where do you show off your NFTs and demonstrate status? One issue with NFTs and IP Is NY Life getting into crypto? Norwegian oil billionaire embraces Bitcoin DCG buys back GBTC to bring it back to NAV Scenarios for how GBTC redemption occurs Why GBTC trading at a discount is better for retail investors Moneygram and Ripple are no longer partners Grayscale hires an entire ETF team Should the US start a strategic Bitcoin reserve? Why Bitcoin makes sense for central banks Why CBDCs will never provide real cash-like assurances Content mentioned:  Aker Shareholder Letter This episode is brought to you by Sovryn, DeFi on Bitcoin.

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 On the Brink. I'm Matt Walsh. And I'm Nick Carter. And I think this podcast is just all deals. We're just going to spend the next 45 minutes talking about every deal that happened this week because there's a ton of them. Yeah, this might be the most deal heavy week in the one and a half years we've been doing the show. In other news, we both got block clocks.

Yeah. I'm looking at my block clock right now. It's 57.5.10. Pretty good. Mine is 57. 520. I'm a couple of seconds ahead of you. The price is going up. I love the block clock. I've purchased a lot of Bitcoin swag over the years more than I care to admit. And the block clock is my favorite. And we weren't even paid to say that. No, we're not. I really do like that block clock. I have a lot of good Bitcoin swag over the years too. I've got some good old school t-shirts.

I've got some shape shift socks. I've got a chain.com Bitcoin API t-shirt. That was a good one. That's like a 2015 one. You have like a Bitcoin shrine in your office. I do. I've got all the hardware wallets. Old ant miner.

Yeah, we've got an ant miner. Her wallets. Bitcoin Fudd dice, all three editions. Maybe some news coming on that front on the Fudd dice. It doesn't take a lot to figure out what you could be hinting out there. Yeah, so we're going to give a little tease maybe towards the end of the episode on that. I mean, it sounds like you just gave it all away. So I don't know whether there's any gaps to fill in there.

Okay, we're doing the fud dice again. Yeah, yeah. So we're doing a fourth edition of the fud dice, special Bitcoin orange color. Very exciting. Very excited about that. New fudds. New fuds. Well, there's always new fuds.

we're just just when you think that you're out of fuds, people keep throwing more fuds at you. Yeah, let me see. Let me get the original fud dice. One sec. All right. I found one of the original fud dice. Energy waste is on here.

I've got a version two. It's got tether, boiling oceans. China control. That's a good one. Yeah. In some sense, like, these are all the same fuds that we deal with every single day. But in other sense, there are actually, people are kind of creative and they come up with new fuds. Hence, the V-4 of the fud dice, very special, limited edition.

Physical NFT. Think about that. That's pretty groundbreaking. So, this episode is brought to you by Sovereign. that's sovereign with a Y, S-O-V-R-N. It is defy built on Bitcoin. So sovereign.app lets you earn, borrow, and trade without giving up control of your coins. It's a borderless free and fair financial system, open to all.

You can connect your wallet, earn interest on Bitcoin with their lending facility, pledge funds to the liquidity pool, trade with up to 5x leverage on the decentralized exchange. Sovereign. Sovereign. And they have a really sharp website too. It's like a comic book. Yeah, they have a good designer.

It's very slick. Yeah, I like the design. We might need to hire that designer. Just in general. Yeah, just to like do some, yeah, maybe they could do the fud dice.

Yeah, our like design at this firm was, it's all like anything that you see, which is a visual artifact, which is like Castle Island related, is basically something that I made in Photoshop, which is thus why from like a design perspective, we're not very sharp. Yeah, so when you see things like this sovereign app, it really does catch your eye.

Yeah. Well, art is being appropriately compensated these days. I think you could say if you're worried about starving artists, you're not worried anymore because it's been a real bonanza for artists recently. Yeah, do you want to get right into it? Beeple. that guy cashed a check people

people although in fairness the art that he sold for 69 million dollars was something like it was accumulated pieces of art that he'd been making every day since 2007 yeah so that's a proof of work

so yeah it's basically an art blockchain so I mean I you know it did take a lot of effort to sort of get there but it also does make him the third best compensated living artist on the planet right now. So to bring you up to speed, he, Beeple, who's an artist, I think he's based in South Carolina, he auctioned off through Christie's a piece of digital artwork on Thursday.

This is coming out on Friday. The name of the piece is every day is the first 5,000 days. And as you say, it's been 5,000 days of contributions to this. So it's sold for $69 million. on Thursday and it's a non-fundable token. It's an NFT. So it's by far the most that anyone's ever paid for an NFT. It's, I think it's in the top five of what anyone's ever paid for just art, art,

right? Art, NFT, otherwise. Yeah. So let's bust the NFT FUD right now. So I think what you're buying here is like, you know, like strictly buying the pixels or the arrangement of the colors or anything like that. because obviously that can be duplicated. You're buying like the proof that you own the sole copy of this.

So I had this tweet recently. I'm retired from Twitter now, by the way. But back when I was active on Twitter, I had a tweet where I said, you're basically buying the autograph rather than the art. Yeah. Does that make sense? Do you agree with that?

Yeah, I agree with that. I think that the provable nature of this that you own the only original is what you're buying. And, and I think that is, that does make sense to me. But the thing is that many NFT drops will contain, you know, dozens of the same art. So then you're saying you own an addition. But, you know, so I was looking at the Grimes, um, NFTs on, uh, nifty gateway. So yeah, thanks for explaining to me who Grimes was yesterday. Oh yeah. Yeah, Matt didn't know who Grimes was. Um, so I'm a big Grimes fan. And I really, you know, like her music.

I think it's great. And so I wanted to buy one of the Grimes NFTs. And so she had a few where she did 100 copies of the same art. And that was actually the first time I was like, oh, like, I actually really want, you know, this connection to the artist. But then the problem was that all the NFTs were $5,000. And I'm like, is it really worth $5,000 to have one out of 100 copies, digital copies of some art that? that she made. So I'm still sort of pondering that. If anyone has a Grimes NFT that they want to just bilaterally sell to me off market, please get in touch. I can't wait to see how creative this gets.

I mean, you're going to start to see NFTs that represent music. You're going to start to see NFTs that represent the ability to be in the front row at every concert once your favorite artist comes to your town. It's that what you could do with this is kind of limitless. I mean, I think NFTs tied to physical experiences is going to be really compelling. Well, here's my problem with NFTs. It's like, why do you really buy art? Why do you really buy art? To show off.

Yeah, not because you like appreciate the arts. It's so that you can demonstrate status. It's like any other monetary good, right? Well, I guess people like to look at it, right? Like, don't discount that. In theory, I guess. Yeah, I suppose you could look at the art. But like the main reason people spend a lot of money on art is like, okay, it's a store value in some sense.

And then it's also for status. NFTs, there's no like shelling point publicly agreed upon way to demonstrate your digital art because mostly we still live in the physical world. Like we haven't transcended, you know, fully into the digital realm yet. So there's no equivalent of like your living room where you would demonstrate your art. Until we get there, I feel like there's a missing piece here. Yeah, but I think that's a big opportunity. And I think we're going to see either a decentralized startup go after that or a centralized startup and create almost showcases for physically displaying digital assets. Well, I don't mean physically displaying.

I mean like a place where it's just societally acknowledged that you go to, you know, admire other people's like, you know, digitally native art, basically. Oh, like going to like a, you know, you. museum within the metaverse or something you're talking about. Yeah, but you're thinking really literally. Like, I don't mean like people, some people are going to listen to this and be like, okay, well, I have to make a literal digital living room and we're all going to have to strap on VR goggles and go look at each other's art. That's probably not what it's going to look like.

It's probably going to be something like a version of Instagram where, you know, here's my authenticated NFT collection kind of thing. Yeah. Anyway, that doesn't really exist yet, which is still the missing piece. with NFTs, in my opinion. NFTs are just on fire right now. Did you see that Wall Street Journal article about NBA top shots and the just the amount of capital that's flowing into these things?

There's one problem that I see is that people try to put sort of like third party content on NFTs when they've, you know, modified it in some way with fair use. I've seen some of the NFT platforms sort of shutting that down. and I'm starting to think that, you know, the Top Shop's model makes sense because you have the owner of that IP is basically, they're not selling the IP at all, but they're selling, you know, a derivative of that IP. So there's no questions there about ownership, right? But when it's, you know, a third party, like let's say you wanted to tokenize, you know, NHL highlights or something. And you did it in an interesting artistic way and you sold that. Now there's a big question, like, is that even yours to sell? So I'm starting to think that only tightly integrated platforms like TopShots, where the sale is sort of being done by the entity that owns the IP, only that makes sense. The other ones begin to these really thorny questions of like, you know, who's, who's right is it to sort of monetize

this content kind of thing? Yeah, you'd probably have to have, you know, but there probably will be aggregation points here, right? Because there's thousands of artists that will be creating things and there'll be almost like certificate authorities needed to validate whether or not the copyright is in place. Well, when it's an artist selling their own original art, there's no questions there. But what if you're, you know, a YouTuber or whatever and you make a collage of content from other. In fact, I saw an NFT. I've seen my likeness actually tokenized and NFTIs and sold. Like, I don't have a problem with that, but I can see that being the source of a lot of disputes for sure. How'd you look? Well, so there was one which was someone did as like, almost like

a conceptual art piece where they sold, you know, kind of deep dreamed versions of myself and like other CT influencers. And then they replaced the image with Persian rugs. And it was like this meta joke about rug pulling. It was like this making this grand point about NFTs. I guess some people might have an issue with like their own likeness being used by a third party to sell art, but I certainly don't. Yeah, well, if people start paying a couple million dollars for it, you might think differently. Yeah, I don't know if my NFT sold for anything. Well, anyways, that was a detour on NFTs, but that is one of the big stories of the week. We had an incredibly busy podcast week. Yeah, so this is our fourth podcast of the week. Don't know how we managed

do that money, but we started with David Fork, talking about the Dweb. So pretty salient, actually, because we're seeing a lot of NFTs being put on IPFS and SIA. David's project, of course, aside they're sort of getting some critical mass now, so I wanted to get him back on from update. You had Matthew Lomeryl on. Matthew Lomeryl talking about Generation C, which was an article that he published at Booz about 10 years ago, talking about some of the technology and societal trends that will come to light and a lot of them are. So that was fun having Matthew back on the podcast. And then we had Zach on again, Zach Prince from BlockFi. Yeah, I think we've done four BlockFi episodes now, actually, because we had Zach on previously. We've had Renee on. So anyway,

so BlockFi announced their series D, $350 million round of financing. We also asked Zach about how they're dealing with the GBDC discount, which was something that a lot of people had questions about and I think he gave some some pretty good answers I must say yeah he had a great answer it was probably starting at what about the 10 minute mark of the podcast we spoke in depth about it so I thought he thought he did a great job with that yeah and you know a lot of people ask sack for more transparency or direct engagement on Twitter he is really good I mean he comes on our show and you know communicates directly to his clients and users and things so I would, if you have questions about BlockFi, listen to the show we did with Zach and listen to the

Renee episode. I mean, Renee went super in depth about, you know, their actual lending practices, what they have exposure to, the risk management, so on. So speaking of BlockFi, why don't we get into some deals of the week? So BlockFi announced a $350 million series D at a $3 billion valuation. The round was led by Bain Capital, DST and Pomp Investments. And it had a participation from a number of firms including us, Valor, CMS, Akuna, Tiger, Paradigm, Jump, Parify, and many others. So great to see that round, and they're growing like crazy. So congratulations to the BlockFi team. Yeah. There's another Castle Island affiliated round today, River Financial. They announced their $12 million series A financing those led by Goldcrest Capital, Polychain, Kraft, M13, participated.

We also participated. So two big deals announced on the same day. And if you're not using the River Financial Hardware Wallet feature, I think is it still in beta? Is it limited release? But that is just a feature that you have to get on. It's really handy. Yeah, you can monitor your assets on a hardware wallet

through the River interface with all the sort of accounting advantages that that gives you. And you can send it and you can send assets to your hardware wallet, which is actually like something that you couldn't really do in a very simple and easy way before. So you know, you don't have to like pull out your wallet and pull up an address in order to, you know, send money to it. And here's the thing about River. You know, you remember when River raised, there were Bitcoin-only startups still are. And there's so much skepticism in the market about Bitcoin-only startups. Same situation with Unchained, with Kasa.

But, you know, if you look at it now, there's a whole bunch of these Bitcoin-only startups. startups that are thriving, lightning labs, open node. There's a couple dozen, I would say, venture-backed Bitcoin-only startups. And I think we're at the point where the Bitcoin market has increased in size such that they are totally viable as a category in their own right. Yeah. Well, speaking of that, NIDIG, speaking of Bitcoin only, I know they do maybe a few other things other than just Bitcoin, but primarily Bitcoin. NIDIG raised $200 million from Stone Ridge, Morgan Stanley, New York Life, Mass Mutual, Soros Fund Management, FS investors, Bessemer, and FinTech Collective. So just a massive raise over at NIDIG. And I think it's probably not over.

These guys are growing like crazy, onboarding just all sorts of pools of capital. The CEO of New York Life joined the board of NIDIG this week, which to me was almost under discussed. Yeah. That seems like a big deal to me. Totally. I mean, New York Life and Mass Mutual, both, you know, I'm not sure if we've had an announcement about New York Life, but that certainly suggests that maybe something is in the queue. You know, both 100 plus year old insurance companies

and both of them clearly interested in Bitcoin. I mean, they're really doing excellent work over there at Nighting. And I think we're going to be hearing from them very soon, dare I say. Hint, hint, you might hear more from them on this podcast. Next one up is Falcon X, speaking about big rounds. Falcon X is a crypto asset brokerage platform. They raised $50 million in a round led by Tiger Global and B Capital. So congrats to Falcon X.

So if you like the deal, so it's funny because some people tell me they just don't pay attention to the deals and they listen to this show just for the discussion. And then some other people say they just listen for the deals. Yeah, some people love the deals because where else are you going to find all these deals aggregated like this? Yeah, so for the people that like the deals, this is like the episode for you because there's mad deals. So next up, huge acquisition, PayPal acquired Curve, that's CURV, the sort of MPC crypto asset custody company, not disclosed, but pretty exciting. PayPal has very significant ambitions for their engagement with the crypto space in case you're wondering. Yeah, so PayPal is where most.

of the brokerages and banks and financial services firms are going to be in two years when they say, oh crap, building custody is hard. We got to go find a really great team here and we got to buy it. But the problem is in about two years, no one's going to be left on the table. And so it's going to be a totally different landscape. So PayPal is really ahead of the game here. I think they've acquired a great team with the curve team. And we'll see. This is a big move, I think. Yeah, next up we have Eco. They're a crypto brokerage platform. There is $26 million from Andreessen, Crypto, Founders Fund, Coinbase Ventures, Slow Ventures.

I remember Eco from some years back as a sort of cryptocurrency, new base layer where universities would run nodes. I believe this is the same Eco. Well, it's the same name, but it's a different product. This is a brokerage platform that will have rewards points associated with it. All right. So here's an interesting one. We've got a whole diversity of deals, you know, from the earliest stage to the public markets to acquisitions. We have a public markets deal, cipher mining.

This is the parent company of Bitfiry, you know, really one of the oldest miners in the Bitcoin space, Georgia-based miner. They went public through a SPAC with GoodWorks Acquisition Corp. pricing the entity at $2 billion. So, you know, one of the oldest and most sort of established miners in the Bitcoin space, congrats to them. Next one up is Curio, which is a non-fundable token platform. They raised $1.2 million from Future Perfect A195 Capital, Longhash, Moon Whale, and a few others. Then we have Steakwise, which is an ETH 2.0 staking protocol.

There is $2 million from Greenfield 1, Collider, Collider, ventures, gummy cryptos, lines, chain, capital, and some others. Next one up is Fay Labs. This is a project building a decentralized stable coin. They raised $19 million from Framework, Coinbase, and Naval Ravacant. And these, they just keep coming. We got automated network, their privacy focused network. They raised a million dollars from Genesis Block Ventures, iOSG Ventures, and Alameda. Next one up is Open Ocean. This is a crypto exchange aggregator. They raised $2 million from multi-coin, CMS, kinetic, and autonomy.

Then we have Coimano, which is a digital asset custodian. There is $25 million in a series A led by Alan Howard with participation from Galaxy, NOIA, and Nomura. The folks over at BlockTower announced a new fund this week. This is a $25 million fund focused on DFI. Congrats to the BlockTower team. And finally, we have Somalia finance, a multi-chain D-Fi project. There is 3.5 million from standard crypto, multi-coin, and Alameda. I think Somelier is probably the best name of the deals this week.

One of the best. One of the best, for sure. Yeah, I like that name. Yeah, we may be running out of names, but that's a good one. That is a good one. All right, well, let's get into some news. So you are going to be all over this one. So Acre, which is a 180-year-old Norwegian industrial company,

they dropped a shareholder letter this week written by their chairman, who I just can't pronounce this name. It's Cajel. Is it Cajel-Rachti? Is that how you pronounce it? I mean, it's probably Ciel. Do you know anything that would be Ciel? Kiel Rokte.

Rake. So in any event, this is a 180-year-old Norwegian industrial company. They announced this week that they have launched CT, which is a side business, basically, that is going to be focused on Bitcoin. The business will do as follows. So they will, number one, set up their corporate treasury denominated in Bitcoin, and they put $58 million in there to start. Number two is they're going to start mining Bitcoin using renewable energy. So wind, solar, and hydro. Sounds like they're working with Blockstream in order to do this. So capturing stranded energy, converting it to Bitcoin. Number

three, this business will begin investing in infrastructure companies in the Bitcoin ecosystem. And they mention a bunch of categories. And they mention Jack Mallors and Strike and some of the things that you can build on top of Bitcoin. And then most notably, the letter gives a very nice shout out to you, a little ego boost. So they talk about the collective knowledge and the extensive, brilliant material that was produced by others that got them to this place. And they name a bunch of people, including Safedine and Adam Back and Antonopoulos, Nick Carter, Ray Dalio, Mike Green, just all the luminaries. Yeah, that was, that was nice of him. I think he read my coin desk pieces on Bitcoin energy consumption. I could, I saw some echoes of them in this piece,

but yeah, this is this shareholder letter is one of my favorite pieces of Bitcoin content. I keep saying that, but people keep on creating new good Bitcoin content. So for all you content creators out there, you can still top all the old classics, okay? Never fear. Yeah, keep it going. This one was so notable to me because we're talking about this man is the richest or second richest man in Norway. He's kind of an energy barren, oil and gas, really. And he's actually been doing a bit of a pivot towards sort of greener energy over, you know, the last decade or so and focusing on renewables. And this letter, it's not all about the energy footprint of Bitcoin. He actually touches on scaling some really interesting points there, but he does, you know,

talk about Bitcoin as sort of an economic battery, which I know a lot of people have issues with that literal analogy. But he does address this notion of, Bitcoin energy waste, quote unquote. And he talks about, you know, how the exact same thing, you know, we've been talking about for a long time about how Bitcoin monetizes stranded assets and how that actually could be an incentive to build more renewable assets, especially if they're intermittent or they've low capacity factors. It's just one of the most clear-eyed pieces of writing I've seen on the Bitcoin energy piece

from someone who is clearly one of the real authorities on energy grids. And so it's hard, I think, to read this if you're an environmental critic of Bitcoin and say, well, what does this guy know about energy? Yeah. Like, he's built a gigantic franchise here. He has authority on them. I may not, but he does. Yeah. I mean, he's a practitioner. He's in the arena. To me, this, like, and he's putting skin in the game. Like, he's putting a lot of money to work here. pursuing this hypothesis, along with a bunch of other entrepreneurs that are, you know, using Bitcoin to monetize stranded natural gas or, you know, hydro. So at a certain point, like, this is staring in the face. Like the reality of Bitcoin really is this, you know,

geography, independent buyer of energy. And a lot of those sources of energy that are otherwise wasted are renewable. Yeah. Do you think that this show? shout out to Mike Green was a little bit of him trying to be funny here. Every single person that he gave a shout out to is positive on Bitcoin except for Mike Green. Not actually, no, Eric Townsend, Grant Williams, and Lacey Hunt are all opponents to Bitcoin. That's true, actually. So what he's doing is basically a tongue and cheat thing where he's thanking the critics and he's saying, thank you for making bad arguments against Bitcoin, because you help me see the light on this.

But yeah, I mean, I thought that was a clever way of acknowledging that he probably listened to my debate with Mike and also Grant sort of took Mike's side in that debate. And he's like, all right, I'm buying $58 million of Bitcoin now. It's moving the needle, Nick. Moving the needle. All right, next one up. We've got Galaxy's Bitcoin ETS.

So the CI Galaxy Bitcoin ETF receive regulatory approval in Canada. So get Bitcoin ETFs galore up in Canada, not so much in the United States. You know, I do think it's coming this year, though. There have been new ETF applications in the U.S. The premium is negative on GBDC, as we know. That's something that the SEC is going to look at and think, okay, well, this is potentially quite damaging to holders of that instrument. What about an instrument that could have daily arbitrage instead of six-month arbitrage?

That's an ETF. I think at this point, the pressure is just going to be getting very, very strong for the SEC to finally approve an ETF. Yeah. And on that note, on the premium Digital Currency Group came out this week and announced that they would purchase up to $250 million worth of Bitcoin in order to essentially bring that product back to NAV or close to it. which I thought was just a very smart move on their part. Gray Skills move makes sense for a couple of reasons. First of all, it's not in their interest for this thing to trade at a deep discount for a long period of time. Second of all, they're buying Bitcoin at a discount.

Yeah, it's a great trade. Yeah, it's just fundamentally. It's like a no-brainer. A good trade. I bought some GBDC recently. Honestly, why wouldn't you? If you know there's Bitcoin's underneath this thing and you think there's some eventual, redemption mechanism, whether it's getting rolled into an ETF or it's an activist play where

Bill Ackman comes in and buys half of GBDC and renegotiates the trust charter, that's possible. That could happen. Yeah, or they could add just a simple, as you say, redemption mechanism on this thing. Yeah. There's so many ways for this to return to par. I think it's absolutely inevitable that it does. So, you know, not financial advice, but yeah, opportunity. buy Bitcoin a discount. Yeah, not to mention, I mean, all of their clients are probably calling them and

saying, hey, come on, like, you know, we got into this trade. And, you know, just, this just is a, makes perfect sense and they can make money by doing it. Yeah. One interesting thing that, you know, I talked to a few concerned journalists that somehow thought this was going to cause some sort of de-leveraging cascade. Everyone always thinks that, you know, there's a trigger which is going to be the one thing which kicks off some sort of like cascading liquidations thing and a whole bunch of people out there on Wall Street thought this was going to be it. I told them that GBDC trading in a discount was actually better for retail investors because if you think about it, when it's trading in a premium retail investors are the ones getting harvested by hedge funds that make money on this trade.

But at a discount, it's the other way around. Retail is harvesting the hedge funds that are losing money on the trade. So it's like the real life version of the GameStop thing that was romanticized as retail beating the hedge funds of their own game. This is actually that situation. Yeah. I mean, you're getting Bitcoin on sale in a brokerage account, you know, tax advantage account if you want. Like it's like, yeah, it's great for retail. It's a no-brainer. Yeah. Next one up is CoinChair. So they have gone public. They are now a public company. on the NASDAQ Nordic stock exchange.

And they raised about $80 million as part of that. Huge congrats to Meltem and the whole team over there. Corn shares is like the European DCG equivalent. I would say they've got a bunch of products, probably the second biggest Bitcoin asset manager behind DCG, wouldn't you say? Publicly, with publicly listed instruments. Yeah.

Yeah. So here's an interesting one. Money Graham and Ripple are no line. longer partners. Wow, you could not have seen that one coming. So that deal was so sketchy from the get-go because MoneyGram

was basically on the road to bankruptcy and then Ripple buys their stock at an insane premium in exchange for basically buying the rights to say that they're using XRP in the MoneyGram network. It was very

paid for play in the first place. like Ripple, MoneyGram is publicly traded, so they had to disclose the fact that they kept on getting these under the table handouts from Ripple in exchange for staying quote-unquote partnered with them. And I think MoneyGram finally had enough now that Ripple is under SEC investigation. Moneygram netted $61.5 million as part of this program. This is a partnership that you do all day. And management in the board at MoneyGram should be applauded, because if you see $61.5 million for running a couple random experiments in your lab, you do it. And that's material. Their entire market cap is $560 million right now.

So get the boys in the lab to spin up a couple payment nodes. We're going to say that we're doing XRP movement all day long. The entire ripple story is just dependent on the conflation of their software and XRP, the token. And if the SEC, you know, finishes them off or wins their case against XRP, then I don't see how the narrative can last at all. Okay, so more EDF chatter. Grayscale is hiring an entire ETF team. That's pretty interesting. What do you think that means?

I mean, to me, that means that they're building ETFs. And since they're in the crypto space, I bet they're going to be crypto ETFs. I bet there might even be a Bitcoin ETF. Yeah. The question is, are they just doing this in a big-brained move, you know, anticipating the SEC does something? Or, you know, do they know that ETFs are coming? I don't know.

Well, I mean, it's a big-brain move either way. You get the entire asset, traditional asset management industry just asleep at the switch. And these guys are growing faster than any legacy asset manager, you know, by a long shot. So staffing up and get your popcorn ready here. You look at Bitwise, you look at Grayscale, you look at some of these crypto-native firms, and they are explosively growing these days.

So here's a weird one, Binance, the sort of offshore and wholly unregulated crypto exchange without an apparent domicile or country of origin or really legal status as far as I can tell. has named a former U.S. Senator Max Baucus, who is a Montana senator for 30 years as their policy and government relations advisor. This guy's like 79, right? Not that there's anything wrong with that, but do we really think that Max Baucus is going to get finance

like in the good graces with the U.S. government? Well, do you remember when Theranos had Henry Kissinger on their board? Yeah, and George Schultz. Didn't do them a lot of good. This might be an expensive advisory share type of arrangement. Good luck, you know, good luck, you know, coming back into the light of the sort of the lit markets and the regulated space. We'll see if they can make that transition. You couldn't do better than Max Baucus?

Was there anyone else out there? Like anyone else want a paycheck? Like John Boehner or something? There's a bunch of ex-senators floating around. Like, I don't know. Yeah, they don't come cheap. Maybe Max Buccas hit the bid. So in more government news, the U.S. government is selling a grand total of 0.75 bitcoins next week.

Yeah, so this is a part of their usual seizure and then they auction these off. But what are we going to have to do to get the U.S. government to hold onto these? These are strategically relevant assets that the government should not be selling. Yeah, I think those 0.75 Bitcoins or 75 million sats. should be the basis of the U.S. government strategic Bitcoin Reserve. Yeah, and they have more. They haven't all made it through to Marshall auctions and things like that. But, you know, if you're going to have to go buy this thing on the open market anyway,

once all of these other central banks start to reveal that they're buying it, then why wouldn't you just take what you have now and not sell it? Those Tim Draper coins were sold at a massive loss if you look at it through that lens. Yeah, and I don't want to, you know, engage in rumor monger. But sometimes you look at the price action, it just feels like there's a central bank T-wopping in a Bitcoin. You know? If you don't think that sovereign wealth funds and central banks are like not active here, like, I don't know what to tell you. Like I'm not saying that they're buying right now, but to think that we're going to get to the year 2023, 2024, and there won't be central banks that have already announced positions, like, I'm just going to tell you that it's inevitable.

And we're at one-tenth the market cap of gold. So that's the market saying, probabilistically, there's a 10% chance Bitcoin replaces gold, right? So as that number increases, and you're a central bank and you have gold reserves, you know, most central banks do. The U.S. certainly does. You're probably doing the math of like, huh, well, I own, you know, 3% or whatever of the world's gold held in strategic reserve. what's that number? How do I solve for that amount of Bitcoin, which is a potential successor to gold here? Or, you know, an independent alternative to gold. It's a pretty low number right now. But as with any

monetary transition, the longer you wait, the more expensive it is. So basically, I think the most four-sided central banks are going to be making a real calculated decision, thinking about it really carefully over the next couple of years. And then it's, you know, the more laggardly ones are going to have to buy $500,000 a coin will be their loss. Just fast forward. The way they'll look at this in my mind is to just take this to polar opposite conclusions. So on one end, you know, fast forward out 100 years. We're living in a much more digital world. We're living in a place where people are organizing around ideas potentially instead of even sovereign nations. people are spending a lot more time in whatever the metaverse ends up being.

Do you really think that there won't be a kind of a provably scarce non-sovereign asset in that world? And in that world, don't you think that governments will want to own some of it? It's completely inevitable that central banks are going to buy this thing. It's inevitable. And you know what's crazy is I didn't actually believe that until this year. But now I'm 100% convinced. And actually, if you were to ask me, and I'm not exaggerating, I do believe that central banks already own Bitcoin. They just don't really have an incentive to reveal the fact that they own it.

I mean, there's a lot of anecdotal data that suggests that Iran and Venezuela own it on the sort of state balance sheet. But I'm talking about non-pariah nations. I really do believe that if they're not currently accumulating, they're actively thinking about it. because again, if Bitcoin displaces gold, you're going to want your pro rata share of that or more. Yeah. I think all of this, and this is maybe a dovetail into, so Newberger Berman, the asset management firm, put out a pretty bad take on Bitcoin this week called the Bitcoin Experiment. And one of the things that we'll talk about maybe a few of these points, but one of the things that really made me,

think of is when you when you look at all of this Bitcoin analysis through the big asset management firms they all sort of have an expected value way of thinking about this right they're all saying like if this works then it probably competes to be gold some version of digital gold that's a big market but there's a you know an X percent chance it goes to zero and you know depending on you know who you talk to it's like hey it's 50 percent chance goes to zero 25 percent chance goes to zero what does it do to the price of Bitcoin when these people start to just remove zero from the potential equation. And when you start to look at it on an expected value basis through maybe a more positive lens, like the floor is not zero.

I'm going to read you this Newberger-Berman a piece from it. So from our perspective, the Bitcoin phenomenon is worth watching closely. Those with exposure should understand the speculative nature of their investment and the potential windfall is notwithstanding, be prepared to lose almost all of their committed capital. Like, what if you just look at it through a different lens, I guess, is my point, and start to look at this through the lens of something that will never go to zero. Yeah, I mean, the case for Bitcoin, you can zoom out, I think in the simplest possible way,

it's, look, 12 years ago, zero people on Earth own Bitcoin. Today, probably around 100 million people on Bitcoin. Do you expect that to reverse? Do you expect that trend to reverse from zero to 100 million people from zero to a trillion dollars? What could possibly be the conditions that would cause it to reverse and to cause this growth of enthusiasm to ebb? I mean, I can't conceive of a possible way where the world doesn't get more accommodative to digital bear assets. And that's the simplest case for Bitcoin in a nutshell. among the potential investment risks that this paper calls out is substitution.

So Bitcoin will face competition from cryptocurrencies that offer cheaper, faster, safer, transacting, or substitution could be mandatory in the sense that governments could insist that central bank digital currencies are used. I mean, is this a real, like, asset management firm putting out this garbage? I cannot believe that, you know, it's the year 2021 and Newberger-Burman is sending this out to their customers. This in particular, the CBDC talking point is so absurd to me because CBDCs offer you the precise opposite of Bitcoin.

And you have to be your thing about it at a real kindergarten level to think that a CBDC and Bitcoin is somehow substitute goods or compete with each other. People don't like Bitcoin because it's a digital way to transact. We already had those. We've had those forever. That's what PayPal is. That's what electronic bank transatl. for his czar. That's not the case for Bitcoin. The case for Bitcoin is a strong settlement assurances.

They get transactional autonomy, freedom. You can transact independently outside the, you know, highly surveilled regulated financial system. You can make cash-like transactions online. That's what different. Are you going to get those assurances with CBDC? Every position paper I've ever read on a CBDC says, KYC, AML, counterterrorist financing, embedded. I've never seen one, aside from the David Chom paper, which was really cool, saying, we owe our citizens real digital cash. I've never seen that. I think it's a real, it's fiduciarily irresponsible to put out this level of analysis on an asset.

And it really makes you question the other types of analysis that you're doing on other assets that maybe we don't know about as much. But the conclusion here in the Newberger-Burman piece is from our perspective, as a fundamentals driven asset manager and investment in cryptocurrency should not be part of a standard allocation. So like that's the type of thing you just want to timestamp into the Bitcoin blockchain

and you're going to look back on something like that and you're going to wonder, you know, where were you as this was all happening? You know, if you're a customer of New Burger Berman, you're just not getting access to good information right now. Well, I don't know who said this, but, you know, everybody gets Bitcoin at the price they deserve, you know? So the clients of this firm,

we'll get it, unfortunately, much later than clients of City, for instance. Good job, City on your report recently. That was great. City put out a great report last week. Yeah. They caught some flack in the financial terms I saw. Yeah, FT. Not good.

Not good, FT. All right, so I think that's it for the week. And we will have a lot of things going on next week. We'll have an awesome episode on Monday with Nidig. Yeah, we got some amazing stuff cooking as a firm for this podcast. just all kinds of crazy stuff going on. It's hard not to be optimistic when you're watching the block clock tick up to 57. 577, you know, up over the 40 minutes we've been reporting.

And we'll tease, you know, you could go to on the brink. Dot shop and you might find some stuff. Well, that's not a teaser, might, you just told them. Well, we didn't tell them at the beginning of the episode, so we'll see who listened to the All right, we're selling merch now. Please buy our merch. On the brink. Shop.

Yeah. On the brink.shop. Yeah. There will be dice there soon. Yeah, we're going to sell you all some dice. So selling some mugs, t-shirts. It's great. All right, everyone.

We'll see you next week.