On The Brink with Castle Island - Weekly Roundup 05/27/22 feat. Dan Matuszewski (VC dry powder, FTX' CFTC proposal, more Tether concerns) (EP.322)

Episode Date: May 27, 2022

Matt returns with CMS Holdings' Dan Matuszewski, filling in for Nic, covering deals and news of the week. In this episode:  Bitcoiners brief Norwegian policymakers History of the BitLicense Circle's physical BitLicense a16z raises a massive $4.5b fund The effect of VC dry powder on crypto startups Can crypto catch a bid until macro calms down Adam Neumann is back with a blockchain startup FTX attends a heated CFTC roundtable Arthur Hayes gets house arrest and probation Why certain Tether holders will never redeem An unlikely winner from Tether concerns Does shorting Tether make sense? Fallout from Terra's collapse Are algostables going to exist forever CMS's Super Pac and reflections on conversations in Washington SBF announces his intention to spend $1B on the 2024 election Scott Minerd is very bearish on Bitcoin What on earth is HEX ETH Merge concerns 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.

called the Bitcoin. Bitcoin. This week's episode is brought to by Coin Metrics, and here is the Metrics Minute. ERC 721 transfers hit their highest level since 2019 this past week at 666K. The total value of US dollar stable coins on Ethereum, which are ERC 20 tokens, is currently over $108 billion. This is compared to $69 billion in defy and $17 billion across other major ERC 20s. And on May 12th, the number of addresses on Ethereum that held at least $1 million of USDC past the number of addresses that held $1 million of USDT. That's all for today. And that was The Metrics Minute.

Welcome to On the Brink. I'm Matt Walsh. Oh, and I'm Dan Matashecki, not Nick Carter. Wow. All right. So we got our first guest appearance on the brink of all time here on the weekly roundup. Nick goes to Norway to meet a bunch of Norwegians and we got to replace them. So I think we found a good replacement.

I also I actually saw that photo of all those guys standing outside it seemed like a good crew just that was that if you were to pick like a draft of people that you would want to explain Bitcoin to Parliament I think that's like who you'd pick yeah I so actually I don't know it's on the background would they just like parliament asked to like get up to snuff on Bitcoin and they like this like is the galaxy sort of guardian crew that gets like assembled then they all just like show up there they dropped them in I think it was so it was the Oslo Freedom Forum Alex Gladstein put it on and uh Yeah, I think they wanted to give a little briefing. It'd be great if, like, U.S. politicians wanted to know a little bit more about cryptocurrency. They did that back in the day. Remember, remember Meltem? She, like, famously, like, said the word shit coin on the congressional floor. That's right. The blockchain caucus hop in.

That feels like a lifetime ago, though. Yeah, that does. Yeah. Markets have moved a lot since then. Yeah, they've changed. And then they had that big hearing got, it was, like, 2013, with it was like the Winklevi in New York. That was the New York, the Lasky ones. Yeah.

Yeah, yeah, before the bit license thing. I mean, there's a parallel universe where the bit license never happens in New York end up being like the epicenter for crypto across the world and didn't really happen that way. Yeah, and it's sad because it doesn't seem they care about it as much now. And they even talked about like fast-forwarding it, right? Like they want to do like a bit license light version of it. They want to get people through it faster, which makes sense because you effectively can't get through it right now. You have established financial services firms that are trying to get it that just are not open for business.

it. So it's a, it's a shame. Now you have Cracken has their terms of service says you can't access Crackin if you're in North Korea or New York. Yeah, Jesse definitely loves that. He definitely likes that. So to know, it's funny, so I'm already hijacking this. But so Circle had the first bid license, right? This is like a whole big thing, right? So, but there's an actual bit license. There's like a physical thing that's a certificate. It has like the one number on it. And when investors from overseas would like come to Circle's offices, they all wanted to see They all thought it was the coolest thing in the world That it had like the number one

It's like a big certificate And like yeah legal had it like in a plaque They like brought over it. I mean it is impressive To get number one is really good Yeah and there's probably only like seven right now Yeah I don't even know

It's not as many as there should be I feel like doesn't even matter Well it doesn't matter because everyone You know just avoid New York But it's not great if you live in New York You just can't access these services You can't be on Block V or in New York I mean there's a lot of things you can't do

There's a lot of people who are employees of crypto companies in New York that can't even use their services, which is so silly. Wonder what those, yeah, wonder what that app looks like. I don't know. I live in New York City. Not great. All right, so here's what we do. We read some deals of the week and then we're going to start riffing on a bunch of topics this week. I wouldn't say there's a ton of news this week. It's, the markets are a little slow, huh? Yeah, it's definitely, it's pretty pinned, or at least Bitcoin is. Like, the rest of this stuff seems to be dying slowly. All right, so the first one up, and this is a Castle Island deal. So Zen,

Ledger, which is a cryptocurrency tax software company that raised $15 million in Series B financing, and that was led by Parify Capital. Congrats to the Zen Ledger team. Congrats, guys. Somebody's going to solve this problem and be the richest person in crypto. Just the tax problem. The software, like the logic, yeah. And yeah, it's a huge problem not only for individuals, but also for, I'd imagine for you

guys, for a bunch of funds. I mean, we keep three in-house accounts to, like, do all this stuff, which is, like, Absolutely mind-numbing amount of headcount. That's crazy. Do you see this Andreessen news? So Indrisen has raised $4.5 billion for its fourth crypto fund. This is the largest fund in the history of cryptocurrency. So they're not feeling the recession here.

No, they're not. I think they went out Q1 for this. There was like, I think in January there was like leaks about it. But I think if I remember correctly, they've raised about seven total. So it's like a little more than half. But what's interesting to me is they said they're going to do it all in venture and seed. 1.5 billion towards seed, which is going to be, those are going to be some big seed rounds. But like, think about the math on that, right?

Like, if you did a million dollar seed deal every day for five years, you would get to that. Yeah. Yeah. So what's your, I mean, the impact on valuations at the seed stage is the obvious question. So I guess, like, look, so what's going on in the equity market, right, which is, like, you can't ignore it. And, like, what I assume is going on in the sort of traditional equity seed rate, like, I assume that most deals are getting like price lower, right?

Like I just like, I feel like that might not happen in crypto now because like there's going to be all this money like behind. Like, look, that's like a ton. Like in for context, like they can just like bully every seed round out there. And if they're going to have to deploy this, they're going to have to be pretty aggressive. So like maybe there's just a world that like the private markets don't reset in crypto because they're just like such a and they're still competing with other capital, right? They're not the only game in town.

I think I think it's a great point. So we're definitely seeing later stage deals compresses. pretty heavily on valuation. And public market comps with Coinbase are brutal for some companies. Right, right. Seed has been slower, but it definitely has compressed. I guess the question is, with some of these large funds, we'll name a few more that raised this week as well. Do you just end up in a situation where crypto is, to your point, a little bit not riding the tech wave, you know, where the money's still there? I guess the X factor is this money does not need to be put to work in a year or even two years. And so you're typically dealing with five-year

investment periods could get dragged on but yeah it's still a lot though right like even to do it over five years is like yeah yeah i mean look it's a great time to be like somebody raising a project right like if you're looking to get like seed stage financing like i don't know it doesn't seem like it's good to be like terrible for the foreseeable future well on that line so the the next one up is standard crypto uh locke and adam they raised 500 million dollars for their latest fund so congrats to standard crypto another big one it's congrats man it's it's it's a it's wild that we have. I mean, like, it's not a billion, but like, I mean, it's half a billion.

Like, multiple of these every weeks, though. It is, yeah. So two other ones real quick. So Volt Capital, they raised $50 million for their second fund. And NCG Ventures has raised $100 million. So, you know, a lot of capital out there, and, you know, it'll be put to work. Do you see this Starkware got to announce this week as well? So this is, of course, the L2 building on Ethereum.

They raised $100 million at an $8 billion valuation from Koto and Green Oaks. Yeah, so I made a joke that it's like basically what like two starkwares is a coinbase. It's like I don't know. Look, there's a world here where either like Coinbase is too cheap or the private markets are wrong. It's like it's not a trade you can put it like on, right? Because you can't do anything to like compress those things. But like you got to think that some of the public comps are like trading at a discount to where the market is. Oh yeah.

Or all this stuff is just like going to end terribly for everybody. But I don't feel that way. So we get asked questions about Coinbase all the time. I'd say we're generally really bullish on this podcast about Coinbase. Again, not investment advice. But sitting on a lot of cash has the most assets that institutional business is very well positioned. It's really hard to see why they're trading the way they're trading. Yeah.

It's just like it. They get it. They got competition. And I guess like for full disclosure, like I bought a little bit of this like like I do not have like a vested interest in it like in reality. But like I think it's the best way to exhibit like public interest in crypto and there's so little interest. Like here's the thing, right? Like you almost look at it like its discount should be sort of similar to the discount you see in like GBT. Right.

Like people like sort of like hate crypto so much in the Tradfai like world that they're willing to like sell Bitcoin effectively like half off in those products. Right. So like that's how much they don't want to own Coinbase too. I was like guess like sort of the way to think about like there's just like there's no risk appetite for these businesses. And what's it going to take to get a retail bid back in this market? I mean, that's obviously what drives Coinbase's revenue to a large degree. Right. I think retail needs like money. I think that's like the biggest problem. Stimulus package? Yeah. Yeah, that would be, like, we stuck doing stimulus. That would be such a swing. Yeah, I think like part of the problem is

like, um, like, inflation's real and like people have like a lot, like their costs are going up. So like if you're on like a fixed budget, like you're definitely getting like squeeze sort of everywhere. And I don't think wages have really like aggressively moved yet. And I'm not like a macro guy. So this is like just sort of like me on just like guessing sort of how this stuff plays out. But I don't know. Like I don't think there's a lot of like risk capital out there in like retail to like go like buy crypto right now. It just it seemed probably hasn't been for a bit.

And like it definitely seems like right now there's like not. And it's this whole sort of you have this like complementary goods problem where you can go by equities or can go by like risky crypto. it's hard to like look at something that's down 65% in it. And it's like a corporate company with like an existing business that throws off a ton of cash and yada, yada, yada, and be like, well, that's not interesting to me. Like I'm going to go buy like alt coin like, like, I don't think there's a lot of that going on. And I think of like risk capital that is like available where it's not. Do you think that a new crypto narrative can emerge in this macro environment or do you need to see a shifting macro environment to get? a new crypto narrative.

I don't think crypto will catch a bit until stuff, I don't think you need to see like a recovery. I think you need to see like it calming down. Like I think when stuff's like just puking left and right and like it's scary when like traditional stuff is like falling apart because like that hits home like pretty quick. Like everybody works for these companies in some capacity or like they have like their 401Ks. They have like, well, their other like vested interest like sort of in it. So like if that calms, I think you can get another crypto narrative and like they can get interest

there. But while the volatility, it actually hasn't been that volatile. The fix has actually not been super elevated. But while you have sort of like this like grind, even like lower, like it's hard to be like, oh, like I'm going to go like speculate in like the crypto world until that calms down. It doesn't have to recover though, right? Like you can just like sit there and just like stop, like causing consternation in everybody. I don't.

I guess like if I had to like pick a period, if you like put a gun in my head and you're like, where does this like slow down like on the calendar like definitively? Like I think you get through the midterm election cycle and then it definitely does. I like to think that like coming out of the back of summer, they like try to calm things a little bit. I mean, like, also like at some point, like, look, the goal is that there's like froth in like asset markets. Like at some point your job's done, right? Like, I mean, like, you don't want to like actually like body every like corporate in this country. Right.

You want to like take the froth out of it. Like it was notable that there was, so there was some Fed chatter this week. I think four members of the Fed talked about September being maybe a time to re-evaluate, take the breaks off. Yeah. Yeah, that's like the first comments they're coming. I think, like, Ackman got, like, really angry about it, like, on, like, Twitter. I didn't see that. Yeah, his, like, was, like, you're being too dove-ish, yada, yada, like, you're talking about September.

I think they're all trying to, like, calm a little bit. Yeah. So, I don't know. It's just, like, such a hard game. I hate periods like this in crypto because, like, I don't have any edge in macro. And, like, I don't, I would say I don't even have, like, a great understanding of it all. Like, I just, like, no crypto sort of market structure. And like you're just, you're so beholden to the functions outside of it that it's like, like, I'm just like along for a ride that I don't really understand.

It's pretty wild that people's full-time jobs and financial services are to just monitor the Fed and it just shows you that they're in control of everything. More so now than, yeah, in the past. Yeah, right, it is. It's like, like, when they, I don't know if you like ever read like the commentary that comes out. Like they use this word here instead of this word. Or they like, they show the revision history to, like, the document and like people like drill in every piece of it. It's like the accountants. They use their special words that mean something.

Yeah. It's like, oh, no, it uses something like that's not my game. Like I've no. Read into it. Yeah. All right.

A few more this week. So Babel Finance is a provider of lending and trading services for institutional investors. They have raised $80 million from generation capital. Generation with a J. That's a good one. Dragonfly and Circle. Do you want to do a couple of these?

Yeah. We got flow carbon, which is our boy, Adam Newman, formerly of WeWork. They raised $70 million from A16 and others. I got to be honest, like, I love this guy stepping into crypto. I'm 100% for it.

Carbon credits, let's go. Yeah, a lot of people like carbon credits. I don't understand it, but there's a lot of people tell me that this is up like an actual blockchain use case. So we'll see if this guy, I mean, how do you not want this guy, like, running around crypto? I'm two episodes into that miniseries. I'm pretty sure I would have done that seed round. That guy is electric.

Yeah. Yeah. I mean, he did. Look, at the day, he still built a very interesting, valuable product. So, yeah, I don't know. Happy to have him on a team. We got Common, a Dow management platform,

raised 20 from Spark, Polychain Jump, and others. Got a lot of Dow tooling is a hot category these days. Dow tooling is really hot. How many DAWs are there, though? I don't, I feel like this is, like, maybe I'm wrong, and we're just going to have a million Dow's, like, in the future. But, like, it feels like,

we're building a lot of tooling for like a very small community and I agree it and this is not me like trying to like take shots at like the deal I just like maybe I'm not seeing the full like Dow emergence sort of thing yeah we we could use more DAWS that's for sure um next one here is azumi finance this is a multi-chain defy protocol there is 30 million from ivy ventures cobo and others we got swiss VC firm crypto valley venture capital um they launched an africa focused blockchain fund It's a, Africa's a hot market. We've got a company called the Yellow Card in Africa, and a lot of deals happening in Africa. The next one is there's a company called Old Fashion Research.

It's a group of ex-finance executives, and they've started a $100 million fund. Old-fashioned research. I kind of like that name. Dopplagger, which I assume is Dopleganger? Doppelganger? Yeah. NFT fraud prevention platform, raise $5 million from FTX Ventures and others. I wonder what is NFT fraud, exactly?

Like catching people that are stealing NFTs. I had a friend that just got his whole wallet drained on a fishing attack NFTs. Yeah. So as an aside, like I do feel like NFTs, I was very skeptical than NFTs, but like now that I'm like over my skepticism, like people love this stuff and like regular sort of retail non-crypto native people seem to love this stuff. And it's like it's pretty eye opening how bad just like the average person's like security level is. Like I don't know.

I feel like NFTs have really shown like we need. better solutions on like people protecting their keys. Are there any shops like yours that are trading NFTs full-time? Is that a thing yet? There's a couple. I know like mechanism dabbles. Like they're like pretty active. Like I would say like most definitely people in the PA in all these shops like play around with it.

And then like we we've heard a what's his name? KW on like Twitter. Something's like forklis. I forget where he is, but his fund trades him. Like he's been pretty active. So there's definitely guys like playing around. The biggest issue with it is it's like, it's resource intensive and it's like it's caps like it's not as super like scalable right like if you

kind of mean you're like 500 million to work in like nfts it's like that's not like a thing you can like sort to do right but you could like put like one or two million bucks across like a number of products I'm sure people I mean people are definitely doing very well in it so wouldn't surprise me if there's more funds that take taking positions as time goes on the last deal of the week here is meta king studios this blockchain based game they raised 15 million dollars from delphi makers fund and bitcraft blockchain gaming do you think that's the next narrative here can that pull us out of the bear um so here here's my so my brother works in video game making he makes like uh VR video games but he he's working gaming his whole life and I always ask him this and I'm like

I was like right like what's like the crossover he he kind of hates the idea that it would cross over but I think he's like cognizant that it's like going to be a thing yeah um like I don't know he's like very like a gaming purist so he's against it but his like thoughts on it, what he said to me is that people are like massively under appreciating the lead time that this life close. So he's like, if you wanted to make like a really good

game right now and he's like you had like a group of whatever 30 engineers, he's like you're looking like three years out. So his like whole point is like this may be a thing but even if you wanted to be a thing now like it's probably going to be a bit until you like get there. Yeah. And he's like unless you convince an existing shop to integrate it but he's like

the problem is the existing games that are really good. Like they have a lot of incentive him to not get involved in that because their businesses are already so good. They don't want to rock the boat. So he thinks it would have to come from a new sort of group. But he's like it's a thing. It's like a three to four year out thing. Yeah.

It'll be interesting to see what power the platforms have. So, you know, if you want to release a mobile game, for instance, good luck. I mean, doing that on Apple, having cryptocurrency integration, having D5 product. I mean, it's going to be the same challenge that Coinbase has with their wallet product. Right. Yeah. There's definitely like the exactly like you they don't entirely control their own destiny like They're they're very much like got issues with the platforms that they like sit on yeah I don't know I

It seems like a good pairing though right like I to me I get it like I can see the clear vision for like all happening But yeah I do think it's gonna be some time Like we've had like the weird like one off strike like Robata defy kingdoms and yeah I mean there's there's stuff out there that people are using and and I totally agree there's an overlap It's actually surprising to me that some of the blockchain purist or the gaming purest people don't like tokens and blockchains. I mean, there is this like religious thing going on there. There definitely is. I think it's just like the criticist that like shed a little bit of this like, I don't know, like it's like a speculator market that's like like, like, look, it's not exactly super clean still.

I mean, this is like why we still have like regulatory like conversations going on. So I think that like causes the and the energy thing definitely like plays out. Like that, like as much as like you, whatever side you're on, like it's not, it's not a clean conversation with a lot of like people. The energy debate. Yeah. The time. The age is old as time. The energy debate.

Well, a bunch of news happened this week. So want to get your take on this CFTC roundtable. So there was a big roundtable this week. CFTC held it. FTX has a proposal for effectively a direct to retail way to do derivatives in the United States. It would have real-time automated settlement, automatic liquidation. And there was a big, basically big talk about this. A lot of representatives, I don't know if you saw that, but Terrence Dempsey from Fidelity was in the back corner there.

I did see him, actually. He was looking good. So what was your take? I mean, I have a few takes. One is just there was a lot of pushback. Yeah. So, first of all, shout out to the comments Sam made about the people sort of like chastising, like the crypto industry. to participate, like, not understanding the market.

I thought that was, like, pretty good. I, like, got a lot of play on Twitter and whatnot. That was, like, a good comment. I'll say this, like, there's tremendous, like, inertia to, like, traditional finance. There's even more traditional, like, there's more inertia in, like, the margining and, like, capital structures that, like, exist in it. It's going to be, like, really hard to get all of these people to, like, love the idea of, like, changing the way their existing business models run and like how this like margining all works.

That being said, I felt I felt good about like the, like a lot of people recognize that like this could potentially like work and be like a better model. So like they were acknowledging it. But then you'd like have some random person who sat in FCM and she'd like sit there and like read through 35 regulations and acronyms that you never heard about and like why we got to like address all these things. And then you're like, all right, well this is like how stuff dies and bureaucracy. You're like, I don't understand any of this. But like. I have to deal with it. So it's going to be,

it's going to be like sort of a slow go. I do have some faith, though, that they'll be able to get somewhere with this. I think what it would likely end up happening if I had to guess is that like the other venues try to do it in conjunction. So I think there's the other problem you have is like, all the other venues don't want to put FTCS in a position that would give them the ability to cannibalize their existing business, right?

So they're like, look, if this really is like a better way to do this, then we need to have the ability to operate and offer it at the same time that FDX could be to even if FTCS is being like we just want to do this for crypto they're going to be like well yeah but I'm not going to put like my existing business at risk because you potentially could like come and like offer all the other like suite of products that we're doing right so like I think that's like another thing that's going on where they're like we gotta slow this down

because if we do think this is going to be a thing like we have to be like on par and like comparable to it I think that's a great point and I would guarantee you that from a technical standpoint, they're just not ready to do anything close to this yet. No, no, totally. And like, so I don't know if you've, if you've never traded, like, futures. So, like, way back in the day, I worked at Bay Hill,

which is, like, a fund, and we ran a CTA inside that and, like, we would have to deal with trading futures. And, like, there's a lot of, like, moving parts in it that you wouldn't, like, really understand. So there's, like, an FCM who, like, effectively, like, does your margining that you, like, interface. And then the FCM interface is, like, the exchange, right? So that, that model doesn't exist with FTX,

right because you're like you just have an account with ftx you trade there but they also do like all the margining and all that jazz like that that's pretty much better as far as I'm concerned like I don't think there's a need in today's day and age and with the technology and like also ftX has kind of done it like it's running live right so like they have some argument to be like look crypto's pretty volatile and like we offer like this product and like we've gone through some real regimes here and like it's been okay um I know I think somebody like made the comment about like this is as dangerous as Luna yada yada like went to zero but like the counter to that is like, well, like, Luna did go to zero and they offered uninterrupted trading and, like,

through the whole thing, right? Like, it kind of, like, worked. Yeah. So that's, like, the counter to even, like, sort of that argument that comes in it. But anyway, you can see, like, a world where you're like, this is just, like, a more efficient, like, next, like, sort of step to it. Um, there's, there's some real criticisms to it, which, like, I sort of understand and don't think are completely unwarranted.

I think, like, there's, like, this margining cascade problem that people, like, worry about and, like, but, like, these are solvable problems that can get, like, talked about. It's just, to me, it seems the playbook from chat, I seems to be like, slow it down. Yeah. And like, we'll get there. On the auto liquidation thing, so there was a comment from, I think it was RJ O'Brien's representative that said that auto liquidations are a tool of, a weapon of mass destruction in the financial services world. I mean, is there any validity to people should be worried about this auto liquidation feature? Um, so I think his point is that, um, I don't think his point's like ridiculous either. So, and also just is like a funny story, we used to use R.J. O'Brien back

in the day. But he's saying that like you get this cascading liquidation effect, right? Where like people get blown out of position so people get blown out of positions, yada, yada, yada, yada. And we see this in crypto a lot. And it's somewhat been like our, not fully, but like it's been a little bit arbed out of the market where like because this like pattern has exhibited itself and like people have like figured out how to like counteract it and or like trigger it and like anyway, like the market is aware of it and is evolved. I'm like skeptical that this would not happen in Chadify as well. Right. Like I mean like I'm pretty sure like the same shops that like trade other assets like for size won't be able to adjust to this world like

i don't think it's like that systemic of a risk that like will suddenly be like oh there's this new thing like we're not going to figure out how to adapt to it like if there's anything that like professional trading shops are good at is like evolving to like changes in the rules of the game right right and the under liquidation more of an issue when you're in a bitmec style set up where the collateral is declining too right that's definitely the worst right because you have to like I guess his point is just like you could just be liquidating everybody because like nobody can react to things. But like you also, you change the way that you like fund accounts and like, like the market evolves to like fix it. And like I think we take for granted because it's the

status quo in crypto that we're just like so used to like, but it's different in like chat five. But you also have the negative on that, right? Which is like the nickel episode. Right. Which Sam kept talking to right. Where like, I don't know, you get like that didn't seem to work very well. That didn't seem to work very well at all. Right. Like it's the counter where it's like, you got huge gap moves and like, why. when people at the post margin, like, that's inherently a risky model as well. Kind of wild how far FTX has come in a couple of years that we're even having this conversation that they're in the room with CME, CBOE.

It's amazing. So, like, just as, like, way of background, like, we, I knew Sam and those guys when they were Alameda before, like, it became, like, FTX. And a guy who worked for me, this guy, Ryan Salem went over there, like, pretty early when they were, like, sort of, like, starting FTX. And it was, like, pretty clear once they got the exchange, like, running that, like, this was going to be like a contender. Like this was like,

all right, like this is like a real shot. Like I didn't think we'd get as big necessarily as it did. But like you could tell pretty early on they're like, this is, this is going to give it a shot and like a run for it. I did not think that they would be having like CFTC like comment like periods where they're like basically like going to fight with like ice and CME and all this jazz.

But power to him, man. Like I do think you can see though the way that they're looking outside of crypto. Right. Like there's there's a clear like plan to move outside of just like crypto as an asset class. for them. And there was some, that's another new story this week. There's a number of kind of rumors and I think actually Brett Harrison might have been on record talking about some of this now that I think of it, but talking about them buying inequity trading platform. Yeah, I think they talked to like Apex Clearing, like Wobble, like a couple of the, yeah,

I mean like they have a big slug in the, what's Brad Casayama's sort of, IEX, yeah, yeah, yeah, they were slugging that. They have like the personal position in Robin Hood, which I actually don't entirely understand yet at this moment. But yeah, like you could, you could see that they're making like a real sort of like to, I mean, look, if you think about it, if you really think you're going to be able to offer a wide variety of crypto products to like U.S. users, like, I don't know, like grabbing a slug of like equity's users to be like, hey, we're going to like merge these products. It's not a bad idea.

It's not a bad idea. All right. So speaking of exchanges, so Arthur Hayes, the co-futious. funder and former CEO of Bitmex. He was sentenced this week, or last week, I guess, last Friday, two years probation after violating Bank Secrecy Act. I think all things considered probably pretty good outcome here for Arthur. Yeah, I think that's like a pretty good out time.

Like he avoids jail time. I think he's got six-month house arrest and then after that it's like probation. Yeah, good. I mean, like there should be like the other two get sentenced, I think, soon. Yeah, it's weird how they do that separate. Yeah. I don't entirely understand why. I mean, like, well, the other co-founder is British, so maybe that's why.

But, like, Sam Reed isn't. He's, like, a U.S. persons. I don't know why that, like, timing is, like, sort of off. But, yeah, look, I think it's good that nobody got jail time for this. Like, I think this is a big win for sort of everybody. And they had the civil fine a little bit back. So, look, I really hope we get to, like, see these guys continue to liking crypto, like, going forward.

It seems like they will. What's the current state of play for Bitmex, just in terms of your business? I mean, is this, and folks like you, I guess, just generally speaking, is Bitmex still a big player on that? Not really. It's like, so when the first, like, DOJ thing came out, I think it wasn't, I don't want to say like it was like the end, but like it was like sort of the last push you needed to be like, it doesn't really sort of makes. So there, there was always this problem with Bitmex where your collateral was in the asset you were sort of trading, right? And you have this like negative like risk profile on the way down. Right.

If you're long, right? So cash collateralization models like especially so when COVID hit, right, and the crash happened and like you saw a lot of people just get, we like knew to a lot of the like OI and like a lot of people like in aggregate on finance because of like the fact that like you had crypto's collateral on a crypto position and just like didn't really work out. People really like started to like gravitate towards cash and USDT margin systems and finance and FTC kind of won that sort of flow. and honestly post that,

it really hasn't gone the other way. And like I get that Bitmex has tried and they've like gone to like model like USDT margin like sort of stuff. But it seemed like too little too late and like people have like largely moved on from it. It's so you bring up USDT and I want to get your take on that.

So there is the market chatter on Tether just continues. It's been the same chatter for three years, I guess, really. But the shorts are out there. What's your take on what's going on right now in terms of Tether? I mean, I've always liked, like, I mean, I came on this pod, like, way, way long ago and, like, said, like, I created and redeemed tether. And, like, that still stands to be true. I think, like, the thing now people are, like, looking to, like, attack it on is that maybe the makeup composition of whatever their, like, basket of assets, like, might not work.

And, like, if everybody tried to redeem. I think what people forget about it is there's a really large contingency of tether that, like, isn't going to redeem. Even if, like, the asset makeup is, like, 95 cents. still works for 90 cents like right for the for the most part like there's like especially in asia there's like a portion of people that are like this is dollar like enough and like I'm okay with that right right so like you're not going to get this bank run situation in my opinion of like half of it in like some like very short period of time and like I think they're going to have the liquidity needs to like deal with ever burst sort of liquidity needs they're going to

have i'll say like bUSD and usDC seem to be the winners of it though because like that seems to be where the flow goes from tethering into there, but I don't know. Like a lot of people really want that thing in Tradfai to like just toast, but I don't see like a systemic deep hanging that like persists on the whole thing. Does this make that much sense as a short?

If you're traditional shop, you're looking at this, let's say that you're of the view that there's 80 cents on the dollar there. Can you actually get paid on this? Do you think the market infrastructure here will support, you know, if the news came out that it was 80 cents on the dollar, would this thing still trade at 80 cents on the dollar? or would this thing trade at 95?

I don't think it would trade down to 80. Like, I just, like, don't think that, like, that's, like, personally, I think, like, it would just be bid. So, I mean, you're, and you're paying for the, like, trade, right? So, like, it's not free. Right. Just sort of put it. I don't, like, I don't see the upside sort of in it.

And I guess, like, some people have, like, said that, like, a lot of people will just, like, put these sort of positions on to, like, hedge, like, their existing crypto books. And that, that might be true, right? Like, that might be, like, I need a bias or an exposure to a tax. tether because if tether goes down like my other like portfolio might be like toast so i got to like own like cheap sort of like downside protection on it it's funny like my my favorite part of this whole thing is like us tuesday like actually went to zero right and like it was like you could have put the same sizing on that trade as you like put on tether and like all these like tragic by guys like effectively

missed it as far as i know 50 billion dollars of vaporization right but like they like pick tether They didn't pick, like, the one that, like, actually wasn't backed by anything. It's got to be... Not, it was backed by something. But, like, there was, like, if you look at them in a vacuum, you're like, right, well, this is, like, the one, like, I want to, like... It's going to be a hard explanation for your LPs. Hey, we're, you know, fraudulent stable coins.

That's our big idea. We're going to short it. And, uh, you missed the $50 billion once in a lifetime short. You know that there's somebody who saw UST and, like, thought that was the thing that they had bought. Like, that they were buying the downside on. And you had to, right? Like, even when they called up and be like, you guys nailed it and be like,

Well, actually, it's a different one. I mean, it's so painful. Imagine explaining about your investors. I mean, you really got to hope that the tether works if you're that short now. That's tough. Yeah, I don't know. There was that night that it, like, depegged to like 95 cents. But they redeemed a ton of it.

It just shows that it was working, really. Yeah, I mean, it got stress tests for what? What was it, like $8 billion sort of on the thing? Yeah, I think it was an $8 billion over a couple days, yeah. Yeah, I don't know. What is the fallout here of UST? So we've been, what's it been a week and a half here, the thing went to zero. I'm surprised we haven't seen second order effects.

I mean, maybe it takes a while for funds to say that they're closed or, you know, trading desks to admit losses. But you haven't seen a ton. Yeah, it's kind of true. I mean, there was like a couple headwind ones you heard about of like people that were like very active in like Tara who like made statements about it. But yeah, none of the lenders seem to have gone down. That was like pretty big, I think. Yeah.

It seemed to be pretty. pretty contained. Like, it doesn't seem like it had a ton of contagion, which is wild to me. That, like, I don't know. It went fairly smooth for something that, like, really did go to zero in, like, 48 hours. And it's just to just tell you that a lot of these gains were just kind of paper games. I think so.

I think there's a lot of it. Yeah. I think the people that got hurt the most were also, like, on paper up, like, just a like, like, like, well, hash, like, the biggest, like, swing of it. But it was also, like, all unrealized, I assume P&L. So, like, you lost it, but, like, you weren't levered into it, you know, a lot of the yeah yeah don't think anybody was i mean if you were levered into it i don't know how you come out the other side of that right so um and no um you know no big impact on exchanges so you know

it seems like the exchanges just seem angry more than they are like having like problems right like yeah and i guess we'll see how this like 2.0 version of it all goes down um i don't know so yeah terran 2.0 excited about this i i don't know i i kind of just like want to be over with it to be completely honest, but I know that's not an option at this like juncture. So I hope people that got burned get something back. Like I mean, like, look, like we did lose like some money on it. Like it wasn't like a ton, but like we lost something. So like I'm like not against like throwing a stub back. But like at the same time, I'm like we should just like get over this. Like it's I think you're the first person to admit losing money on this. I know. People like act like it's like

ridiculous and be like like all of you had some exposure to this thing. Like I'm not like I'm not like I'm not going to sit here and be like, oh, I was so smart. I was out of this thing for like we and be like, yeah, no, I got my teeth kicked in, but, like, enough that I'm, like, here to tell the tale. What's the, is this the death of Algo Staplecoins? Do you think we'll just... No, there'll be another one. We're, like, doomed to do this in perpetuity forever. Just the holy grail of, if I can create...

Oh, no, we've already seen pictures of people being like, we know what happened and went wrong with Terra. So, like, now we have the, like, solution. We're going to fix it. We're going to be interesting to see the relative growth of something like Maker versus the relative growth of something like USDC and who the beneficiaries are here. I think they're different too, though, right? Like, I mean, like, I obviously, like, want to say, like, circle and, like, Jeremy and them, like, do well. But, like, that just seems like a bigger market than, like, the Algo St.

Like, the pool of people that, like, really don't, like, they want to make sure that they, like, really only own, like, cryptographic sort of, like, dollars versus, like, dollar-like instruments, like, that are just, like, tied back. Like, I don't know how big that, like, market is and, like, relative, like, people love stable coins. It's I mean it's a killer use case for cryptocurrency from a ton of different angles Yeah, it's there's five or six just no brand or obvious use cases for stable coins and yeah Continue to be a case they seem to love it yeah I don't like I I I've seen like circles like decks on it and like they're like crazy sort of go I say even given the carnage that we've seen Like I think stable coins end of year net issuance is much higher than like where it started

I think that continues yeah So I had some regulatory chatter this week. So last week on the podcast, Nick and I were chirping some of our elected officials here in Massachusetts. It's pretty good. It ends up that I ended up being in a room with three state-level officials, elected officials, forming a blockchain caucus in Massachusetts this week, which I am cautiously optimistic about. Maybe we have some of the younger folks that sort of see single issue voters that are doing well in their districts, and they're kind of leaning into it.

So I'm cautiously optimistic here. Yes, I'm definitely cautious about it. I mean, like, look, like, you're seeing, like, candidates, like, come forward and be pro. Like, I don't think you're seeing anything like that locally. But, like, you're definitely seeing people being, like, not hostile, like, which is, like, at the beginning step of, like, potentially sort of being pro it. So I think it'll happen. That's what I said is just do no harm could be like the, just don't say crazy combative things. And that's a win.

Apathy is great. Right. Yeah. Which is what I found from like the Superpack stuff. Yeah. So just like as way back around like I started a super pack with Vance from Framework and Ryan from FTX. And like we've been like very active sort of in the election cycle. And like the biggest thing we've like found is like there's really there's actually very little sort of interest in crypto positive or negative.

It's really like mostly like I don't have a form of opinion. I just go with like whatever the party sort of like says. And like changing that to being like, well, why are you against this? And not that we have that direct conversation, but, like, I think people are more open to being pro it, like, once they have a reason to think about it at all. Right. Just in general, like, they just, like, sort of forward the poli line, which on the Democratic progressive side in particular has just been like, we're anti this. But there's not a lot of, like, thought or logic that goes into it. So I think that is very much, like, changing in the landscape.

Especially because it's becoming a voting issue. It isn't a big one yet, but it's, it's, there's enough young people that vote, or at least that, like, enough they can vote. in like the population that people are just thinking about it at least. And like other, like there's definitely candidates that are leaning into it, which is like huge too. But like it's not that much of like, I don't have to think about this at all.

Just like whatever like Elizabeth Warren says I jump on. Right. So the pack that you co-founded is called GMI pack. And it seems like they're after a great start. How are things going? So far, yeah. I mean like of the candidates like that sort of out there, like it's been good.

Like I would say like the primary stuff has been like pretty receptive. Like I very, very cautiously optimistic about this like sort of as a thing going forward there's not a natural like opponent of crypto in a lot of these things it's sort of a weird thing right

the very few races right like there's like a couple like vocal critics like warns one but like Brad Sherman's like another one like and Erica Rhodes is going against him and there's like ones that you can like clearly point to more it's like a situation of like all right there's like a primary race where there's like five people and like one of them is like very pro crypto it's like right well how do

help this person like sort of like move forward but yeah there's there's actually very few super against like candidates out there it's like we find especially as you get into younger candidates like there's not a lot of like hatred sort of like for the industry it just seems like a free option if you're sort of on the fence about or maybe you just don't know that much about crypto and you're a politician just being for this would on the margin seem like a better policy decision than being against it. I think so for younger folk. I think there's like in them being

super like broad here and like but like it seems that like older candidates who like have like already like formed opinion that this is like a scam. It's pretty hard to shake them of that like that sticks pretty hard amongst them. So that that's been like where you see a lot of the or like people who have like kind of like

built into their personality. Brad Sherman's like the one that comes to mind where it's like all right like this guy like part of his like thing that he's like known for now is that he just like he's anti-crypto. Yeah. But there's not a lot of that. What I get concerned about, and like, Jim, in particular is, like, pretty much

been pretty on no party line. Like, it's not a Democrat or Republican sort of thing, is that it's, like, kind of become a little partisan. I do hope that we're, like, early enough in this, that that doesn't become, like, a longer-term issue. I think Sam's been pretty smart to court the Democrats here. Totally. I mean, he's groomed for that, too, right?

Like, that's his whole parents thing. Like, that's, like, his, like, thing. And I think he wants to be like, listen, like, I'm on your guy's side. Like, why are you trying to, like, fight me so hard on this thing, right? Did you see that he said this week, I think, in an interview that he was ready to put hundreds of millions of dollars to work in the election? He said he put up a billion in the election if Trump runs. That was, like, sort of the thing on it.

It's a lot of money. He'll make some friends on the Democratic side, I suppose. Yeah. So I think, actually, that wouldn't even be the most ever. I think Bloomberg has the record for the most spent. Was that on his campaign? It was his campaign and then other stuff that he did. So what I found, like, doing the political side of, like, all this stuff is, um,

there are some people that just come in and just, like, spend an outrageous amount of money. Like, Soros is an example of one, like, obviously, like, people, like, love to, like, talk about like that, but, like, Bloomberg's another one where they'll just come in and be, like, I'm spending 75 million on primary races. And, like, that's... And what do you get, do you get a Lincoln bedroom stay out of that? I mean, what exactly is the RLI there? I guess they just don't...

I don't think they care about it. I don't think it's, like, an RRI perspective. I think like for a lot of those like sort of like dollars you see and it's more like they have a vision of what like the future should be and it's like crafting the world to that because like you're not there's not like an ROI like you're not going to get that money back like especially like Bloomberg blowing a ton of money on himself like that's just like definitely not coming back ever right. Are you so are you overall content with the state of how people are engaging with the policy

issues just talking about crypto specific people entrepreneurs and fund managers. think I'm definitely happier than I was like seven or eight months ago for sure and I think like the trend is very much in the right direction so like yeah like I say like it's working out in the direction that I like sort of hope that would go yeah and is it you know is there like a call to action that you think people should be checking out or is it just you know I think people need a dialogue with their local leaders a lot more um like look like sometimes you can't like sometimes like sometimes like you can't get anywhere with it but like what I what I find is that especially in smaller districts

it's not a lot of people that sort of like move any race in a given time and like those elected officials like really do care about like talking to sort of the people that live in their district so like look if you're like into crypto and like you care about it from a policy

perspective like reach out to like your senator's probably hard but like you're for sure your like local elected state representatives or like in reach and like your house of reps person is also like within reach. It's also like it's a good thing to know and like I don't know if people are

if you go to DC you can just like go to your rep's office. Like it's not like I've heard that. Yeah. You can. You can just like show up. They might not be there. But like you can like leave a message and like say, I'm not saying like everybody should go do this.

But like government's supposed to be approachable. Like you should be able to like communicate with like your elected officials. Yeah. I mean a lot of people don't even know who their elected officials are. Yeah. A ton of people don't. Especially on the state side. I feel like people forget that there's even like a state legislature like in most like

So it's where and like look those people tend to feed into the house too so like it's good to just like get in front of them if you can So that that'd be like my biggest advice is like just dialogue Well I think the GMIP is off to a great start so I encourage people to check that out Good follow on on Twitter too. There's a lot of good content on there Switching gears a little bit Scott Minert has another Bitcoin prediction. It's going down. It's going down. It's going down. It's going real down right I think it was either six or seven thousand it's like it's a but I don't know I think that's when you have to long it when he's saying it's going short, it's usually not going short. And vice versa, by the way.

He does get irrationally exuberant on the way up. I saw him in, in L.A. a few weeks ago. I was out there at a conference. He's a big good. Yeah, where's it like a Dodgers hat around? He's kind of a unique angle. I'm not convinced that he really understands what he's talking about on Bitcoin. So I don't know.

His price projections are all over the place. Like if the market's rallying, he'll be like, it's going to a million dollars a coin. And then if it's like, the market's falling, he's like, it's going to like $5,000. And like, I get it. You're like bearish when it's going down. Like your boast of what's going up. Like that's, it's not like terrible,

but like it's always extreme like both sides of like the coin. And then at one point he said he's like, I'm done making price predictions because and then he comes out. It came right back. Yeah. But then he also said like, oh, we bought 30,000 and sold 40,000,

which like it's good. But like I don't know what to make of anything that's like coming out of there. It's just like it is what it is. But yeah, real, bearish price prediction. I don't know. understand for the life of me some of these large institutions and I'm not sure how much of this public so I probably won't say any names but these large institutions that bought bitcoin and then chucked it

immediately and it's it's hard for me to like why is this a trade if you're a big like long only asset management firm that sort of has this thesis around digital gold but then you're willing to sell it almost immediately it's just uh I'll never understand that because I don't think they're like actually comfortable on it yet they just don't want to mark the P&L like when it goes down there Oh, that's definitely part of it. Yeah, for sure. Like, I think it's that. And then I think it's also just like, they're like also not that safe in like doing

the trade anyway. Which gives you as an investor in some of these companies, it would give me a lot of pause to see that you made the investment without being fully confident what you're investing in, that you would reappraise it after a quarter or two quarters, that you didn't really know what you're getting into. Yeah, I agree. I've always said this. Crypto has like a certain amount of pain that you like have to go through.

Yeah. Like everybody does. Like it's just like part of the game. And like maybe they're like very worried about like that coming to fruition. It's a what's max pain on this cycle? Is it sailor has to post additional collateral to Silvergate? Yeah, that'd be pretty bad. That'd be like in the 20s.

Low 20s. Yeah. I forgot the thing said he said like he could post additional collateral to like protect it to like 3,000. I don't know what the stock does if he's like. doing that kind of game. Well, he can't be forced to sell, really. Does silver gate stuff he can?

But he can just post additional Bitcoin. So Bitcoin would have to go real, real, real low. Yeah. I don't think that. I hope not. He has control of the board. Yeah, so you can get through that scenario. I don't know.

In 2018, you had a lot of people going out of business. You don't really have that yet here. So maybe we're not at Max Payne yet. No, I think Max Payne is like equities rally to an all-time high and we just like sit here. Yeah. I think that's like painful. That's the painful.

That's like really hard to like, be like, oh, this is. Well, because hold on. And then you have like both problems where you're like, at least like right now you can be like, well, like macros like blowing up and like we're just following equities. But then if like equities rally back and you just sit here and be like, well, like, I don't know. That's like a real. That blows up a lot of narratives. Well, you still have these, you know, I had never even heard of hex until about 10 days ago. You still have these things, apparent Ponzi schemes out there that still exist.

So maybe Max Payne is when a few of these things disappear. What the hell is Hex? Hex, yeah. So, I mean, hex has been around for a bit. Like, it was definitely, like, through the whole cycle. It's like Richard Hart's thing. Look, I don't know. Like, it doesn't really trade anywhere that's, like, real.

But, like, it's, like, sort of still, like, a thing. And, like, it has, like, non-zero value. And, like, look, people have made money on it. So it's, like, not completely sort of, like, out of it. But, yeah, I mean, like, that, I mean, it's down a lot now, like, like the recent sort of like time horizon but it's like it's another like one of these examples of like there can be like billion dollar things in crypto that like you've never heard about and like there's a ton of people like involved in it so what was the one one coin or

one coin was one i mean big connect it's like yeah these things that we're like i've never heard this but it's like it's enormous and all the people are losing their shirts in it right right like that was the big blow up from last time yes it's a good example of like how big crypto's gotten where you don't even know what's going on half the time that's like in it. All right. So last thing, take the summer off and wait for the merge. That'd be great. Yeah.

There was like a little bit of concern last night around some stuff with the merge. But I am still of the opinion. They try to like push that thing through for summer. That'd be great. That'd be pretty solid. I would like that as like an outcome. Is that a pretty, I mean, is that a narrative that can take hold here? You think that's a real catalyst?

I think you can. I think nobody's going to do anything until it's closer though. It's like, it's hard right now, right? because like if you've got like traditional blowing up all over the place and like and also just like crypto like nuking left and right like it's really hard to be like I'm gonna go buy some meat right here for some like trade three months out so like people don't want to do anything people are just like spooch constantly right so I don't think like unless like that stuff comes and we got a little bit like closer in like time frame like I don't think either of those are gonna play out anytime soon yeah I mean but even like the last halving right like people were like yeah it wasn't like super bullish going into it and we got nuked right before because of COVID maybe we just start talking about the having. I mean...

We could start talking about the having. It's two years out. I mean, that's... You need some good news. Two years away, we're going to get a Bitcoin halving. Right. All right. Well, it's all doom and gloom, but

great to have you on the roundup. This is the first guest roundup that we've ever had. Wow, I'm happy. It's next time we'll have to have Nick here. Nick, Nick's going to have to edit this, unfortunately. Sorry, Nick. Late night in Norway, but thanks for joining.

Or early morning. All right, everyone. We will see you. On Monday, we have another episode coming out then. Have a safe and healthy weekend.