On The Brink with Castle Island - Weekly Roundup 05/06/22 (Metaverse NIMBYism, the BMC EPA letter, the SEC doubles the Cyber Unit) (EP.316)

Episode Date: May 6, 2022

Nic and Matt return for news and deals of the week. In this episode: Matt's takeaways from the Medici conference  The rapid growth of ZKPs We review Brink Nation posts on GM We look back at the history of the FUD dice  Are tungsten dice possible?  Big thunderstorm in Miami  Is the crypto industry sitting out the recession?  We consider the merits of virtual real estate  Does proximity matter in the metaverse?  Metaverse land rights and NIMBYism  The Bitcoin Mining Council letter to the EPA and what motivated it Ohio's primary yields an entirely pro-crypto field  CBOE acquires ErisX Goldman takes out a Bitcoin-collateralized USD loan Jane Street dives into DeFi  The SEC doubles the size of its cyber unit  CA issues an EO on the crypto industry The Dept. of Labor criticizes Fidelity for their Bitcoin 401k product The IMF criticizes the Central African Republic's adoption of Bitcoin  The divergence between public and private valuations in crypto and equities, and why they can't always be arbitraged away Content mentioned:  Prominent Bitcoiners' letter to the EPA to respond to Rep. Huffman's letter  Sponsor notes: Subscribe to the Coin Metrics State of the Network newsletter  

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

Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. This week's Metrics Minute is brought to you by Coin Metrics. Let's dive in. The BoredApe Yacht Club creators Yuga Labs launched a Metaverse Land project last weekend that cost the largest spike in gas prices in Ethereum's history. Over $150 million was spent on gas during the Mint, leaving the daily average gas price just over 800 gway. During the mint, Ethereum's miners received $6,200,

ETH approximately $17 million in total tips. Over 66,000 ETH was burnt, roughly four times the 13.5K Ethereum daily issuance. That was the Metrics Minute. Now back to the program. Under a minute. Metrics less than one minute. So you're looking slightly zombie-like.

We are taping this late at night on Wednesday. and I have not slept. I was on the red eye back last night from the Medici conference in L.A., so operating on very little sleep. But the pod must go on. Last year, they gave you, like, really nice bags, right? Is that right of the Medici? Last year, it was when my son was born, so I missed it.

But the year before, it was great sweatshirts. This is by far my top event of the year, by the way. Adam Winnick puts it on, and it is small, and it's just, high signal. So I had a lot of fun. A lot of people there. A lot of new protocols. A lot of just building going on. It left very, very optimistic about the state of affairs for this industry. The amount of talent. Hashtag bettled. It was just not a lot of price talk. Just an unbelievable amount of progress happening at the protocol layer just across the board. The one thing that I was particularly struck by, and I think it was Zaki from Cosmos who made the comment,

it's just the advancement in multi-party computation in zero knowledge systems over the past four years has been incredible. When we were at Fidelity, I don't know if you remember when the Enigma guys came in, that was like theoretical that MPC was going to be a thing. And it was like maybe in 10 years this will be applicable and zero knowledge proofs that were kind of like far out there on the horizon. Now you have actual live production, people using these things every single day. It's moved so fast. Yeah, it is kind of insane how quickly ZKPs became mainstream almost. I don't know if mainstream is the word. But I feel like Zcash was the first real implementation where they were used in sort of consumer software.

And now they're just all over the place. I mean, that's definitely like a cryptographic concept. concept that the crypto industry has accelerated by a huge amount. I think we're just scratching the surface of what's going to happen there. There's very few people in the world probably that are capable of implementing some of these things. So maybe that's the bandwidth. Yeah, there's a throttle because they keep also getting hacked or poorly.

There's critical bugs and a lot of ZKP implementations because even the authors get things wrong. Yeah. Like Zcash had that in the zero cash. Yeah. What was the, there's one of the roll-ups, I think, or no, it was, I think it was one of the MPC custodial,

uh, services had just like a huge, huge bugging out that was just undiscovered for a while. So like basically with the advanced cryptography stuff, there's so few people to audit it. Yeah. And that'll have to change the, um,

but the kind of the range of, of things that you could use these primitives for, I think we're just starting to grapple with. The most obvious one is just scalability. And so putting more data into a smaller format for the purposes of time stamping it onto blockchain. So pretty awesome stuff. Another example of how the crypto industry is just pushing non-crypto things forward, I guess, or non-blockchain things forward.

Maybe it's a better way to say that. In a similar vein, it's like the perpetual swap. basically a financial primitive that was invented for the crypto industry but that will come into traditional financial services eventually yeah I think it was invented out of necessity because

was it Bitmex or was it somewhere I think it's BitMex like I want to say the BitMex wasn't actually the first anyway bitmacks certainly popular there's a huge storm here like an insanely big storm yeah I just saw that was

big lightning strike there's tons of lightenies name the summer is here. I think it's because, you know, the exchanges were so fragmented and they, you know, there was no central clearing. It still is none. And so they had to kind of create an instrument that would work in that very limited context. Yeah, no central clearing and also stable coins weren't sufficiently advanced. And so U.S. dollar collateral wasn't really a thing yet.

they were formed out of necessity. But they will be used in other walks of life here, non-blockchain walks of life, I would think. So a new segment, Brink Nation Appreciation Minute. Okay. What do you got? So I'm just looking at posts on GM. So our community is thriving. Oh, yeah.

We did an AMA. We did an AMA last week. We did an AMA. We answered your questions. Check it out. I want to appreciate the post from weightwide. Deith appreciation for latest pod

this poster really appreciated our pod with David Gray Fidelity, well done. Okay. For doing that one. All right. So we appreciate your appreciation. So thank you.

Please keep posting on Brink Nation. GM.xYC. There was another one, a question about all the four editions. And of the dice. Of the dice. Yeah. People want to know, you know, are there more dice going?

Maybe. All right. So, yep, I-Turner. Good question. So addition one was the black dice. Yep. And I sold 500 of those on Lightning. Or Lightning and Bitcoin, I think it was really one of the first physical products to

to be sold on Lightning back in the day. Yeah, that was a productive use of your time, just going back and forth to the Cambridge Post Office. I remember that. week. I think it was. I mean, I did all the fulfillment and I, that sucked. I barely know how to mail things. I can't really. If you asked me to mail a letter, it's just not going to happen. I don't know how to do it. Yeah. So I figured out how to mail the dice. Some of them didn't get there. And it was definitely very tedious, but people really appreciate them. I did handwritten notes.

I mean, I think that won me a lot of goodwill back in the day. That did. And so that was the first one. The second one was the blue ones, I believe. Second was blue. The blue was a classic. New fuds. We put new fuds on them. I don't remember how we distributed them. I think we might have sold them on Quinn Solo. I believe. That's right. Yeah. There's third party fulfillment on that one. Yeah. We did a third party website. I lost money on, I think, all of the additions to the dice, by the way. Lest you think I'm profiteering. These are lost leaders, for sure. What they're leading for? I don't know.

The third one was the most rare. Yep. The third one was most rare. That was a white addition. That one most collectors will not have. That we gave away all of them in like a punch bowl at a conference in Boston that we co-held. We co-led it. It was a joint venture dice proposition with our friends at Pillar VC.

And those were not original fudge. So honestly, I wouldn't sweat it if you don't have the third edition. That was just remixed fuds of the first two fuds. Yeah, that was. And so your only opportunity to get them was if you're at that conference in 2019 with Pillar. That was an epic conference, by the way. Gary Gensler, people forget. Gary Gensler was there.

He used to be on our side. Yeah, he was sort of on our team back then. Are you seeing this lightning? Yeah, that's a, I wish we were doing this on video. There is a massive amount of lightning behind you. I think you can hear the thunder a little bit. Yeah, those are a good conference. 2018, I think.

Yeah, I think that was 2018. And then Fudd dice V4. Now, those are the orange ones. It was meant to be the Bitcoin orange. But as described on this show, we had a color-related dye snafu and our Polish Dice, custom dice manufacturing company

just couldn't get there. The first batch failed. Now, how a batch of dice fails, I don't know. We should, we should onshore our dice production, I think. We need to make these, these supply chains need to get a little bit closer. Yeah, I mean, this is a critical risk. We've offshoreed our, manufacturing, our dice are all over the world. There's no domestic dice manufacturing. Just the middle class dice workers are just getting gutted. They're out of jobs. Yeah. There's the blue-collar dice workers, you know, ever since Bretton Woods and, you know, the dollar reserve. It's not good.

I mean, we will do another run of the dice. We promise that, but we don't promise when. We'll make them in America. Well, I'll press them myself. I'll get the dice press. I imagine it looks like one of those manual, like espresso machines. You know what I would be a big fan of is if we could get a tungsten cube in a dice format. Is that something that is possible?

Now, talk about domestic manufacturing. That's in the heartland of America, Midwest, tungsten. Midwest tungsten. Maybe we go down there, we make a little documentary about it. But they don't like it when people roll up to the office. They said that in the Wall Street Journal article. Well, I think they would make an exception for you. I was told they're at the Bitcoin conference here.

I couldn't find them. I couldn't find anything at that conference. It was huge. It was enormous. It was like 10. football fields or something. I couldn't find anything. There were no, there was no signs. So I was told that they had a, you know, a trinket for me and I couldn't look at them. Wow. But I mean, is there any technological barrier to a 12-sided dye made of tungsten? No. No. No. No. It can be done.

It's something that we as a society, an industrial society, can do. We're going to get working on that. Midwest tungsten on notice. There's a lack of political will. So the GM community, just keep it going. The membership is growing. I'm quite entertained. The problem is, so we lured everyone there under, I'm not going to say a false pretense,

but we did promise digital trinkets to the first one to 200 community members. and I'm going to be honest with you. I haven't figured out what that is. We'll figure it out. I don't know what a trinket is, even a digital trinket. What is that? This is the blockchain industry. You just say something and it doesn't mean you have to build it right away.

It's all about rumoring or hinting at airdrops to get people to use your product. Right. I mean, I think mainstream non-crypto companies should start doing that. like if Volvo releases a new batch of cars, they should suggest that there would be an airdrop. Coming soon. I mean, I think Elon sort of does this with Tesla's. I mean, Twitter, you know, Twitter, Doge, air drops.

Ballagy suggested it. Ballagy wrote a whole thing saying that that's how Elon can take Twitter to the Promise Land is to do an air drop. I tend to agree with that. I mean, where the value comes from, who knows? Look, we're in a world where ape coin, you know what, I'm going to look it up right now. The ape coin thing this week was just preposterous. We live in a world where ape coin, which is a coin dedicated to images of apes, right?

That's what ape coins all about, is worth $15 billion fully diluted. $15 billion. We're in a world where... Well, they're building a metaverse. we're in a world where digital sneakers oh my god so Steppen

the walk to earn or run to earn application is worth $20 billion fully deleted so basically nothing makes any sense and meanwhile Coinbase is like $25 billion yeah

I was actually thinking about it today I mean like the step in sneakers or what's the floor on those like it's like 1500 bucks would you rather have real like luxury sneakers that you can wear on your actual feet or a cartoon image of a sneaker. Depends on who you're asking.

I guess the latter is income generative asset. Yeah. So there's a recession, but certain aspects of this industry are setting it out. Yeah. We've chosen not to participate in the recession. I mean, the digital image space is not recession. at all. I mean,

ape, like the, we had the number one day of NFT sales last week. Someone needs to do, someone needs to do a meme of that birth the broker guy,

the, just an Alzheimer and apply that to the crypto industry. Just YouTube that. The board apes, the board ape people sold was it $300 million of virtual real estate,

like land, property, that in a fictional place. It's astonishing. It's virtual real estate. Well, it's the metaverse. The thing that I don't get about it is that you're not constrained by the same laws of physics

constraints that you are in the real world with real real estate, right? So like, there's a concept of a beachfront here out in, you know, the physical universe. like there's the beach and there's like beach fund property and that's more desirable than property that's inland, right? But there's no like actual, you know, granularity. There's no excludability, right, in the metaverse. Am I wrong? I mean, you're going to have to replicate the properties of the physical world, I guess, to replicate the things that give land value. I think that this is an

interesting point and I see it unfolding less around third party objects and more around proximity to people with big brands in the meta. But proximity also doesn't make sense because it doesn't take any time to walk anywhere, right? No, but if you're thinking about the metaverse and you, you know, you're sitting next to Pomp and he has X million subscribers to his, you know, like metaverse land. Maybe Pomp wants to sit next to me. Maybe. What are you implying?

Just think about people with big Twitter followings, and they would be desirable people to be next to it in the Metaverse. I think that's how it's going to work. I'm very distracted by the Thundas Storm. It's incredibly loud. I'm going to have to find some filter to filter out thunder from audio. Keep it in. Keep it in.

But that's the thing I don't get is that what does it mean to be someone's neighbor in the metaverse. You know, like, can't you just always find a way to squeeze in? Like, it's not like there's any, like, you know, or the metaversus that they designed with very, like, you know, fixed plots.

Yeah, there are plots. They're plots. What about other dimensions on top? You can build up, but there's zoning. Oh, so your plot extends. You can only build up so far. Yeah. I mean, what about below, right?

I mean, remember, we're thinking laws of physics, analog world doesn't, you know, I mean, it's kind of like saying, I don't know, like something doesn't sit right in terms of the way we're reasoning about the Metaverse.

I don't think we've got it quite right. I don't think we have it quite right yet either. Like what about squatting, you know, a thousand feet in the air above, you know, Acon's Metaverse Mansion? You could probably do that.

What's he going to do about that? Or does you get a clean, claim as above so below he gets the claim all the way up all the way down well i think you get there's a dow for voting on the land rights or the air rights this is going to be hotly debated so i'm just going to wait to see how that unfolds i'm not i don't really care that much nimbi yimbi metaverse nimbi Speaking of laws and things in the crypto space, you co-authored a letter with Michael Saylor and Darren Feinstein to the EPA, the Environmental Protection Agency, rebutting a letter from 22 House Democrats who made a bunch of, I'd say just factually inaccurate claims about Bitcoin mining.

And this letter that you guys wrote was signed by a number of participants. in the industry, Jack Dorsey, Tom Lee, Mike Novigratz, Don Wilson, Tom Jessup, many, many others. So tell us more. Yeah, I mean, shout out to Taras over at Core Scientific. He did a lot of the coordination. Shout out to Pete Brigger, who really, you know, was the driving force behind this. I did contribute, you know, parts of the letter. You know, basically we felt that we couldn't really let Huffman, who's the representative,

that was the primary author. We couldn't just let him get away with penning a letter full of basically falsehoods and misrepresentations to the EPA. And, you know, like, I don't think we're going to change anyone's mind here. But at a minimum, I think it's worth correcting the record. If 23 members of Congress are just signing their names is something that is not correct in many ways. I mean, there's a number of assertions in that Hoffman letter that are false.

and provably so. It's not just, you know, different value judgments, difference of opinions, it's just facts, right? The e-waste thing is factually not correct. You know, the Greenidge and the Stronghold case studies very unfairly maligned. I mean, listen to our episodes with both Greenage and Stronghold. You'll get a taste for it.

The idea that Bitcoin miners themselves are causing pollution, like physical effluent, you know, waste is just not really the case. I mean, it's no more pollution than any other data center. And you don't get representatives, you know, agitating, asking the EPA to look inside the contents of those data centers and regulate the computation that's occurring. That's just way outside of their mandate. Wouldn't make sense, you know.

And so obviously the thing to be concerned with in the context of Bitcoin mining is the emissions from generation. That's already regulated. You know, that's all. EPA is already very familiar with the power grid and generation. air standards for, you know, thermal generation facilities. Bitcoin doesn't change any of that. Bitcoin is just buying the energy that's made available on the grid. So we, yeah, we wanted to put together response

and I was really pleased how many, you know, really key stakeholders in the Bitcoin industry signed it. Really, really happy with that. It shows a lot of unity. I thought that was great to have that buy-in. I was shocked that Stephen Lynch did not sign this 22. 22 person kind of erroneous statement that was going after the industry. Do you think he was busy like sitting with Elizabeth Warren thinking about ways to shut down big companies in his district

that are exclusively focused on blockchains? Yeah, that's a great question because he loves hating on crypto. I mean, also Rashida Talaib, I would have figured would have signed this, but I don't think she did. No, I don't think she did. There must have been some other meeting. maybe there's some maybe they're writing maybe they're working on a worse letter yeah like even more hot

this letter was too moderate for them could be but I thought that got a good response so we'll see I wonder if does the EPA react to these things I mean I don't even know if the EPA is going to read it

it wasn't really for them I have heard that Congress may be working on their own letter a letter of their own to her butt or pushback at the Hoffman letter. Wow.

That'd be great. That'd be great. We have allies. I mean, speaking of Congress, speaking of politics, Ohio primary took place this week. Both candidates now, Republican Democrat, are pro-crypto, J.D. Vance, Tim Ryan. And their runners-up were also pro-crypto.

So talk about, you know, both sides, the ballot. remind me in the Biden EO, what was the estimate on the number of Americans that own cryptocurrency? I don't remember exactly, but it was significant. I want to say it was like 20 to 30 million, which is a lot. And you would think that that would have an influence on some of these people that might be on the fringe of, hey, should I lean into this? Should I support this? why wouldn't you it's growing very fast it's employing a lot of people young constituents are really into it and so leaning into this could be a really politically savvy thing to do so i'm not

surprised that both candidates you know each side of the aisle in ohio are into it it's impressive i think we're going to see a lot of races like that no lose races for the crypto industry now if you're not a single issue voter you care about the other facts but uh i think we're going to see see a whole bunch of races like that in the Senate and House where both candidates are basically pro-crypto. I think that's absolutely right. All right, well, why don't we hop into some deals of the week? First one up is an official closing of the ErisX CBOE transaction. So this is a portfolio company of ours, Arsex, regulated crypto spot and derivatives exchange. They were required by the CBOE. CBOE will operate the brand under CBOE Digital. So huge congrats to the ErasX team.

Yeah, awesome, awesome outcome for ERIS. Great for CBO. Great deal all around. Next up, we have Syndicate. They are a startup providing asset management tooling for DOWS. They raised $6 million from Carter, Circle, OpenC, and Uniswomp. Next is to Crypt. This is a media platform focused on digital assets.

They've spun out of consensus. They have raised $10 million at a $50 million valuation from HackVC and Hashkey Capital. Then we have NIM technologies. They are a privacy-focused startup. There is $300 million for increments for a fund that will incentivize to developers to build on their technology. Speaking of funds, Pangea Fund Management has raised $85 million for their inaugural fund focused on crypto assets.

Then we have Amber Data. They are a crypto data provider. They raised $30 million from NICT-N. Nullwood, Investment Advisory, Nexus, NXO, sorry, Coinbase, and others. Congrats to Amber Data. Next is Bundler. This is a decentralized data storage platform. There is $5.2 million from Framework, R-Weave, HyperSphere, Permanent Ventures, and others.

Then you've got Stakes, which is an NFT startup focused on sports betting. They raise $5.3 million from DCG, FBG, CMS holdings, and others. So recording this on a Wednesday, there'll probably be a bunch of deals that we missed that get announced on Thursday, but we'll try to get them next week. Not the longest deal week. No huge news this week, I would say, in the crypto front, some regulatory. Yeah, we got some news. I thought this Goldman thing was interesting.

So Goldman announced that they've done their first ever lending facility back by Bitcoin. So basically facilitating a Bitcoin collateralized U.S. dollar loan. Coinbase was the counterparty. And, you know, this is not huge news in and of itself, but I think this is representative of just the culture at Goldman pushing more and more into the space, which is really good. And so in recent months, Goldman has done a crypto-OTC options trade with Galaxy. They've been rumored to be having strategic conversations with FTX in the press, participated in a funding round for CERTIC, participated in a funding round for Coin Metrics. So there is a lot going on at Goldman. There's some really talented people working on things.

There are other banks that are doing nothing. And I would say Goldman is kind of the total polar opposite of that right now. Well, they dithered for a while, but now they are clearly in the running to be the most crypto-native investment bank. They are. And making a name for themselves there. No surprise. They were always one of the more sort of tech-forward firms. Related news, Jane Street.

is now active in Defi. They borrowed $25 million in USDA from Defi Marketplace Clear Pool. That's the first time Jane Street acknowledged transacting with the Defi protocol. Yeah, and who knows if it is the first time or not? Obviously, there are competitors in the category that are doing a lot in Defi, but Jane Street's been really active in these markets for a long time. So it's great to see. They have a big presence in the liquidity landscape.

in the C-Fi world and obviously now in the defy world. So really good to see. So our beloved SEC is beefing up. They are adding 20 employees to their crypto asset and cyber unit. It's basically doubling the size of that group. Yeah. Show of intent from the SEC. Yeah.

And I thought there's a couple things here. one is just the the release itself comes off a little bit aggressive and specifically calls out categories in the market where they're going to be beefing up oversight including crypto lending and the number of other categories non fungible tokens stable coins staking defy exchanges i mean well that's basically everything yeah so it's not like mention game five they didn't mention game five. You know, no real mention of like all of the fraudulent ICOs that they missed the last time around. So it's not like, hey, we're hiring a bunch of people to go clean up and get the scammers out of the place. There's a little bit of, hey, we're beefing up here so that we can

crack down on some of the categories that are actually vibrant. So that's a little bit concerning. And I think maybe Hester Perris might have been thinking along the same lines because she tweeted kind of openly questioning the rationale. Let me pull it up. So the SEC is a regulatory agency with an enforcement division, not an enforcement agency, she tweeted. Why are we leading with enforcement in crypto? I think that's a very valid commentary

and certainly something that almost every entrepreneur in the space would agree with is just give us some clarity here. And I think a lot of asset managers would probably feel the same way. Just give us some clarity. Tell us what it's going to take in order to get our products compliant. We're just not seeing that. The SEC is taking a very aggressive posture. And we'll see where it goes.

Yeah. I mean, they've apparently brought 80 enforcement actions in the crypto space since 2017, which is a pace of... What, 15 a year? So I guess we can expect them to double that. I mean, there's sort of this interesting dynamic where there's a lot of people chattering that Yellen might be done at the end of this year

and that there's going to be a vacancy there at Treasury. And Gensler is incredibly ambitious and just gunning for it. And so is going after it and one of the key people that he would need on board for his promotion into that job would be Elizabeth Warren, who obviously hates crypto. And perhaps Warren had a big role in making sure that Gensler actually was named into the seat in the first place. And so, you know, there's some dynamics there that lead you to question what the motives are,

which is unfortunate, because I think if the legacy of Gensler is just that the SEC got a lot more hostile towards the industry and didn't allow it to flourish. It wouldn't be the best thing for the history books. So here's something surprising in the regulatory space. Gavin Newsom, much maligned California governor, issued a crypto-friendly executive order, which from all accounts looked pretty favorable. Yeah, so it kind of outlines a regulatory strategy

for supporting the digital asset space and making sure that California stays a leader. So that was awesome. I mean, maybe we'll see more state-level actions there. And also at the state-level French regulators approved a license for Binance. So maybe Binance has finally found a home. Well, I don't think they've found an HQ, but getting a license definitely, that seems like a win for Binance, for sure.

After we recorded the podcast last week, so you and I riffed on the Fidelity 401K announcement, the fact that pretty soon plan sponsors will be able to offer accounts with 20% Bitcoin in them. After we recorded, we actually got David Gray on the line who leads Fidelity's efforts in this category. And we spliced that into last week's podcast and released it. And I thought that that was a good conversation. The next morning in the Wall Street Journal, there was a big story. And there was a senior Department of Labor person, Ali, Kawar, who came out with the quote, we have grave concerns with what Fidelity has done.

I mean, that is one of the most hyperbolic quotes. It's almost like Fidelity, you know, committed a mass murder or something. It's absolutely insane. Like the wording on that is preposterous. It's ludicrous. I mean, you're letting clients get exposure to the best performing asset

of the last decade. and that is apparently extremely dangerous. You have planned sponsors that are offering 401Ks with egregious fees in no selection or just terrible products. And you have the option, not the mandate to have a new account type with you can put 20% Bitcoin.

You know, you can take control over your financial future, get more involved in your retirement, but they're gravely concerned at the DOL over there. And this apparently, yeah, is so, I mean, of all the assets in the investable universe, this is the one that prompted the Department of Labor to say something. Insane.

This is this quote is a complete joke. I really hope that there was a discussion there that maybe you should not be saying things that are that insane to the Wall Street Journal. So there's actually kind of a related story at the sovereign level. The Central African Republic, as we know, has, embraced Bitcoin, apparently, as a legal tender. That's real. There was some questions as to whether that was fake. It's real. It may not be the most salubrious thing. There's some somewhat questionable token promoters involved. So the IMF is now concerned about the Central African Republic adopting Bitcoin. So they've issued...

a note indicating their concern. Are they gravely concerned? I don't know if gravely was the precise word that they used, but they've certainly raised concerns. They said they may soon regret adopting Bitcoin. Oh, that's like a threat. Yeah. I don't like that.

They don't like it when sovereign states adopt Bitcoin. They don't like it when sovereign states decide to do things that are out of band with IMF recommendations. That seems to be a trend. I mean, and you know, frankly, it's not like Bitcoin can really worsen the fortunes of the Central African Republic, not to be callous, but it is the, you know, top three least developed nation in the world, according to HDI. Yeah. So can Bitcoin make things worse? Unlikely. All right. So a couple of things that I was interested in getting your thoughts on. So one is this conversation that I've had with a few people now around market structure for venture

funds and hedge funds in the crypto space. So you have this dynamic now where a lot of the liquid market and cryptocurrency has gotten crushed. Maybe not as bad, by the way, as the equity markets, the tech equity markets, but certainly you have a lot of tokens out there that are trading below their last private round price. And, you know, a lot of people would say, I just don't understand this. Like really quality project, but there's no bid here. And I think one interesting thing to think about here is just that structurally speaking, there's a reason for that.

And you have a lot of these crypto venture funds that have gone out and raised capital from LPs and sort of explicitly said that they would only do privates and that they would not be out there buying liquid tokens and that they don't want to be perceived to be a hedge fund by their investors. and you just don't really have a ton of crypto hedge funds that are focused on kind of long-term buy-and-hold venture. You do have a lot that are doing more actively traded strategies, market neutral, things like that. And so you sort of end up in this spot where there just aren't that many people that can go out and buy, not that many firms that can go out and buy liquid tokens with a long-term time horizon and, you know, just sit on them for a while.

You know, certainly there are some venture funds, but not a ton. So I think this is an interesting kind of conundrum here in the market where there's sort of a void. There's like a capital allocator void for funds that are venture but like purely liquid. Yeah, I think you're absolutely right. And it comes down to mandate. I mean, if you're pitching to your LPs that you would have access to do these private rounds, they would raise an eyebrow if you're just going out there and buying publics, even if they're at more modest valuations than privates are.

Yeah, and so then if you're one of these token projects, you're sort of in this world where the only, you know, the only constituency that can buy your token is retail. And that's a little dangerous. You don't want to be perceived to be just advertising yourself to retail. Certainly, the SEC would think poorly about that. So sort of a tough spot to be if you're one of these token projects. In many ways, it mirrors what's happening in, you know, equity, I would say, you know, private equity is trading much more richly. you know, late stage, growth stage, trading a much richer valuation than the equivalent publicly traded firms.

Yeah. It's almost like going public was a poison chalice in the last year. So if you went public, you got crushed. Yeah, look at Robin Hood, Coinbase, yeah. You know, your peers that are still private, even though things have cooled off at the late stage in venture, not in crypto, actually, but in sort of generic venture, they're still raising capital with less dilution than their public peers.

Yeah. But what's interesting is the decline in enthusiasm in venture, which has trickled down all the way down to CNAA and has affected your median valuations and round sizes, has not spilled over into the crypto space. So crypto is in a state of suspended reality, disbelief, optimism that is not matched by the generic venture markets. Well, maybe that gets down to sort of what Paul Tudor Jones was talking about on Squackbox this week and just talking about the talent that's flowing into crypto. And so maybe the argument would be, look, there's been a lot of capital raised in the crypto fund space over the past year. I mean, not a lot compared to the traditional world,

but certainly a lot compared to historical crypto norms. And just the talent inflow is insane. So you have people that are quitting their jobs from just the highest caliber tech firms, the highest caliber of financial services firms. And so maybe the mental model is just follow the talent. I wonder if we'd ever notice if it started going the other way, then people went back to their Web 2 jobs.

I think you'd notice. I mean, remember in 2018, it wasn't. like this. I mean, you're getting pitched. People did, people, people capitulated like crazy back then. You know, you had people that just totally vacated the industry. And then the other thing that you saw a lot back in 2018 is just people pitching you things that they had absolutely no qualification to talk about. And so, you know, people pitching you that they're starting exchanges, but not coming from financial services being like web developers. You don't see that anymore. That just doesn't happen. Yeah, that is right.

I think we would notice probably if the outflow began. Oh, yeah. I mean, you'd see like high profile funds just calling it quits. You'd see people that work at large C5 businesses just flocking back to like traditional hedge funds. That's not happening. That was definitely happening in 2018. All right. So I think that is it for the week.

Hopefully no huge news happens on Thursday. We'll break in if someone announces something huge. We'll do another 10-minute episode contribution, but I think that's it. We will see you on Monday.