On The Brink with Castle Island - Weekly Roundup 08/14/26 (Anti-Datacenter sentiment, dinosaur fossil investing, SEC is DIYing Clarity) (EP.734)

Episode Date: August 14, 2026

Matt and Nic are back for another week of news and deals. In this episode:  Who is the main character in AI? Why are people so mad about datacenters? Sherrod Brown is back and he's running against AI Are datacenters being built with Flock? Culturally scarce goods and dinosaurs are rallying The SEC starts to fill the gap left by the Clarity Act FinCEN ends beneficial ownership reporting The CFTC charges a $400m Ponzi operator Are there successful Ponzi schemers? Is Bitcoin at risk from miners transitioning to AI? The collapse of the diamond market 

Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated.

The federal government loans American International Group, AI, IG $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry.

So out of this worry, we have something called the Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. Got some feedback last week that our podcast was. a little bit too negative and the newsletter was a little bit too negative. But it's true. It was just one of those weeks. There was a lot of bad headlines. Is that right? We're we were being negative. Well, I don't think we were being that negative, but I think the, you know, the newsletter and some of the

stories that we hit on, it's like cold card getting exploited. New York is suing Kalshi. An FBI agent stole a bunch of crypto. It was a bunch of negative stuff. Well, it's only negative according to your frame of reference, right? Like if you hate Kalshi, it's positive. Yeah. There's really no spin for the cold card thing. That was just bad. Something's really bad in a relative sense.

That's true. There's some more positivity this week. I think we'll have more to talk about. I mean, basically nothing happened this week, so you couldn't possibly complain. I think there's some good undercurrents, though, at the SEC around giving us clarity in the absence of a bill.

Yeah, and I know we might sound down sometimes, But we're just here neutrally reporting the news. We really are. I would say our vibe is always chipper. Yeah, I think we're always chipper. Except for probably in the 2022 bear market when everything was, it felt like the world was actually ending. Like post-FTX, you mean?

Yeah, in the credit crunch. But you know what? Those were our highest ever ratings for this show. Yeah, because everyone was just trying to figure out what was going on. There's just where Kyle and Suu hide. We were always trying to figure that out. There's a lot of intrigue focus on this podcast in particular. So, I mean, I think it's probably better that we're not at the center of the action.

Yeah, you never want to be the main character, that's for sure. But now that I think of it, where are Kyle and Sue? That's a great question. I think Sue still tweets. So I also on the main character front, who is the main character? It's Michael Saylor. You think it's still Sailor? Oh, yeah.

I think he's definitely the main character. Every time that guy does anything, including tweet, he's the center of attention. And you know, the main character, Curris never fails, although so far hasn't failed. And, well, yeah, it has failed in the context of Sailor because he's still going. But with Leo Ash and Bruner, he was the main character, for sure. Yeah. And, I mean, he's still in business, but he, you know, you really, how does comeuppance.

Who's the main character in AI land right now, would you say? As of today, I think it's Elon. But Elon is kind of immune to the main character curse. You'd say it's Elon over Dario or Sam Altman? As of right now today. Because Grok released a new model. SpaceXAI, I guess that's the name of the company now, had a good quarter, you know.

But who is the emerging main character? in AI. I think the cognition guy is going to have a cycle here. That seems like the hottest company in AI. Hard to say, it doesn't seem good. Have you talked to your normie friends about data centers? Yeah, I wouldn't say that I have a lot of friends who are like hugely anti-data center though. Do you? Okay, so you're saying your friends, I don't either because all my friends are, you know, very long AI stocks. But have you ever been? Have you ever been? been on Facebook or TikTok or something and you looked at what people say about data hunters?

It's a huge, you can tell, yeah, you can tell it's negative, especially with the political ads, actually. I think that's one of the leading indicators. On both sides. Yeah. On both. And I'm in deep red, Ruby Red, Florida, and it's a lot of anti-Data center content. We don't have any data centers in Florida.

There are none. So why is it a big issue? Sherrod Brown is running on an anti-Data Center mandate basically. Oh, is he back? Oh, yeah, he's running. He could win. I mean, he could be back in our lives. Ohio, I will say, has had a lot of power increases because of PGM capacity auctions,

which is partly a data center thing. So the Ohio political wins, I totally see why they're anti-Data Center. Yeah, he's not running on anti-Crypto this time. on anti-Data Center. But that's so interesting, right? Because the Zykeye says moved and now AI is the big investment theme and this divisive political issue. But I think it's actually harder in some ways and less reasonable to be anti-AI data center.

I don't think it's reasonable, but it's politically popular. That's right. I think it's, so I think on the fact level, the anti-Data center people are wildly over their skis and there it's generally a fact-free argument I would say but what I think it really is is just kind of a manifestation of anxiety over tech and over wealth and equality that's to do with asset prices and the massive asset boom and you know this class of Silicon Valley EAs that are you know trillionaires and you know control the world now I think it's that and one of the tells is the flock thing. Oh yeah. Because everybody says, well, all these data centers are being put up for

flock. And then I went and I actually, it's not hard to run the numbers. You just ask AI guys. It takes five seconds. If you run the numbers, what percentage of data centers is flock responsible for? Do you think? I mean, it's got to be sub one basis point. Right. I mean, is it anything? Yeah. It's, it's approximately one basis point generously. So good, good guess. So flock is not building a lot of data centers. Actually, because I think with flock, a lot of the compute happens locally. It's like an edge compute. So then people say, well, these data centers are doing mass surveillance. These are flock data centers. And so it's just like so disconnected from the truth, then it makes me think, okay, so what's the real issue here? You know, because it's obviously

not that. So what are they concerned about? It's interesting that it's a popular position on both sides. I mean, Tucker Carlson's anti-data center as well. Yeah, and I think it's a big mistake, by the right. Because normally the degrowth left, okay, they hate crypto, they hate nuclear power, they hate data centers, fine. I expect that from them. I don't expect from the right, but it is happening on the right, big time. Yeah, it's a horseshoe theory. So I think it's going to be a really tough midterm for, I think this is the risk to the AI KappaX build up. I mean, I think this political risk is the main risk. Yeah, I think that's right. Speaking of main characters in the AI world. Did you see that the Lakers were required for over $12 billion by Kushner and

Bob Eiger this week? No, that is action news to me. And it was purchased, I think, last year for 10. So, I mean, the prices of these sports teams keep on going up. Pomp's brother had a good tweet thread about some of the tax treatment of professional sports teams, some of the incentives to own these things because you can pass through depreciation. an interesting way, but the price of these things keeps on going up. The Lakers don't even own their own stadium. And I guess the idea is that culturally salient objects like a sports franchise, there's just only so many of those.

They're completely finite. Yeah. I mean, yeah, for Kushner, right? Like you're so exposed to AI and high growth tech stocks. And that's going to change what the world looks like. But people like going to sports games. And do you might buy some favor? You mean?

No, I just think it's a good barbell strategy. It's like on something that's in the physical world, it has cultural resonance regardless of technology. And then the other side of your investment portfolio is just risk on. But now that you mention it, you can buy a lot of popular support by buying a sports team. You can. You can.

Well, I think that goes into this data center thing too, right? You can gain culture on political current. by owning a beloved sports franchise. Or sponsoring the stadium, which is why a lot of tech companies have done that. There's an oligarch who bought an English soccer team, and it totally worked in terms of buying him visibility so that Putin wouldn't kill him.

Oh, so Roman Abramovich, he bought Chelsea. And basically everyone in, well, all Chelsea fans, for sure, loved the guy. And I think it actually saved his skin in Russia for a while. But then, unfortunately, when Russia went to war with Ukraine, the English government kind of confiscated it. Oh, really? So, yeah, it didn't really work out in the end.

I didn't know you could do that. The other acid class that's doing really well is dinosaur bones. Dinosaur bones. Ken Griffin is so early to so many trends. Some good friends of ours have some dinosaur bones, right? They're not making any more dinosaur bones. They're just not. So here's my problem with that.

Yeah, of course they're not making anymore, but we have not scoured the world for these things yet. I think we're going to find a lot more dinosaur fossils in the couple of years. Do you think so? Yeah, I think we're looking for them in the American West a little bit, but these things are all over the world, and we haven't really started looking for them. I think you're going to find that supply and demand

are kind of out of whack in that market. Well, I think we've been looking for them since the 1880. right not not like full scale looking for them it costs a lot to go start a dig and the technology's improving such that I think we're going to be able to have a better sense of where these things are in the next decade hmm I think we're going to start to find them so you think we get up some discoveries like you know 1849 with gold you think we're going of dinosaur discoveries definitely I think I mean there are parts of this country that are there's tons of dinosaurs well I hope so because right now

It's looking totally out of reach for me to ever buy dinosaur skeleton. I know, and I kind of want one. Who doesn't? Kidding? What would you want? It's got to be T-R-R-X. T-Rex isn't even the biggest in the category, though. I mean, it's a giganticus, spinosaurus, gigantosaurus.

Well, you want the biggest carnivorous one. Yeah, I think the coolest. Is that the gigantosaurus? So, velociraptors, are they actually not that big? Is that the thing? They're quite a bit smaller. They're small. So that's not cool.

Right? I mean, it's not exciting. The T-Rexes that are found in the United States, those are the most expensive ones. I mean, the going rate for intact T-Rex is like 100 million, right? Yeah. Yeah. All right. So sports teams and dinosaurs.

And you know what? Asset Class is popular, but I don't understand. I'll never understand it is Pokemon cards. They're back. I don't get it. It's been my entire life that people have been in. to Pokemon cards. I know. I just don't understand it. I've never been down that rabbit hole, but they're super popular with kids right now. And grown men. And I know it's silly of us to say,

well, why would you pay $1,000 for a Pikachu, given that NFTs were a thing for a while that we participated in, sort of? But also, I don't get why people are paying thousands of dollars for a Pokemon card. I don't either, but I'm also saying that as someone who still has all of baseball cards from childhood, and I'm still holding out hope that they put my kids through college. It could happen. I wouldn't roll it out. They just overproduce those things. But, I mean, kids these days, they don't understand. We used to have baseball card stores all over the place when I was grown up. And now they're vape stores. Yeah, now it's, yeah, exactly. All right, well, should we get into the deals of the week? Yes, first one up is in Travel Group. This is a travel

booking and rewards platform for crypto exchanges and fintech companies. They raised 7.5 million from ethereal, finality and Gsr. River Markets, their prime brokerage for prediction markets, there is 8.5 million from Han Ventures, Coinbase Ventures, and YC. VanGrid is a decentralized network for gathering robotic data. They raised $9 million from hashkey, crypto.com, and others. Trade Zero, which is an online brokerage was acquired for $230 million by E. Toro. And then Goldman has acquired NEO's investments. This is an ETF manager. They do more than just crypto stuff.

It's mostly options income strategies. But they also have a $1 billion Bitcoin covered call fund. The purchase price of this was $2.25 billion. So big acquisition there. So I guess our top news item is that the Clarity Act very much did not pass, but we're scheduled for a September 15th cloture vote. Is that right? Yes. So the Senate did go on its holiday. So they're on recess. Before they did go on holiday, John Toon did schedule this vote. So the vote is scheduled for September 15th. It's a cloture vote. It's very unclear to me if this bill

has the requisite 60 votes to pass. I'd say it probably doesn't as of today. So there's a month of back and forth here that is going to happen still seems to me that the ethics language and Trump's financial involvement in the industry is at center stage. Procedurally what would happen here on the 15th, if you can get 60 votes on cloture, then that doesn't mean the bill is passed. That means that the Senate can actually move the bill forward, at which point there would be additional debates. You could have additional amendments that are put onto this thing. And hopefully, if you get, you know, you still have 60 there, then it could pass through the Senate,

at which point it would have to go back to the House, pass the House that have to reconcile the bills, and then it would go to Trump to sign. So still a long ways to go, but it's good that we're on record here for having a vote. And if nothing else, we're going to see, people are going to have to assert where they are on this. So this will become an election issue.

If you're a no on clarity, then, you know, I think, you're going to have folks in the crypto industry not supporting you in these midterms. It really does boggle my mind that you need, I know, this is nothing to do with the clarity in particular, you need 60 votes for someone to get through the Senate. If it's not a budget issue. Yeah. I mean, what kind of a stupid, ridiculous rule is that?

I know. You need almost a super majority to get any piece of legislation through. But we talk about it every year or two around, either it's the Republicans or the Democrats that want to kill the filibuster depending on who's in charge. Yeah, and there's an elaborate game theory around it. There is.

But either side is always a little too scared to kill the filibuster. Exactly. But people are talking about it. Mike Lee, the senator out of Utah, has been hitting this for months saying we should get rid of the filibuster. If you didn't have the filibuster,

this would already be law. Yeah. So on the administrative side, the reaction we expected is a So the SEC has announced they're going to hold an open meeting on August 14th, which is tomorrow or the same day you're listening to this probably to consider whether to propose new rules for a tailored offering regime for investments involving crypto assets. In our view, we think this means the agency is taking the rulemaking path to enact parts

of the Clarity Act. Is that fair to say? Yeah. So this is the part of the podcast that's super positive. I mean, the fact that the SEC did the, what do they call it, the Sunshine Act. So they put out the Sunshine Act notice saying, hey, we're having this open meeting on the 14th. We're going to be talking about starting the rulemaking process. That's hugely positive.

And I think we had thought that the SEC would wait to see if the Clarity Act failed before they really jump started this process. But you can tell that they're just moving forward with urgency. And I think you're going to get, you're probably going to get better, language for the industry through this rulemaking process, then you even would have in the Clarity Act, is my opinion. Because they can push this rulemaking through since they have the pro crypto balance of power at the agency level. So it's good news. I think where this will become important is two vectors. One is protocols issuing assets. So giving clarity to what it would take to get a layer one, layer two blockchain protocol launched, how that token would become a commodity.

what that process is like. And the second thing is, I expect that you'll see a lot of the concepts in Atkins' March speech, which is called regulation crypto assets, a token safe harbor. I think you'll have a bunch of that in this rulemaking process.

And then you'll also have clarity on tokenized real world assets as part of it. So I'm very bullish on this. And it's happening in the same week. So the SEC granted Franklin Templeton a no action letter yesterday. So it cleared the way for Franklin Templeton funds to custody shares of the on-chain money market fund that they have Benji through an affiliate transfer agent for cash management purposes. And they needed that no action letter just because of the way the custody rules are written, that there's not full clarity on how custody should work in this arrangement.

Franklin presented how they think it should work, and the SEC gave them this no action letter, basically saying, move forward with your plans. So I thought Benji was like an elaborate acronym. You know how certain bills in Congress are really clever acronyms? Is it an acronym for anything or it's just short for Benjamin? I think it's just short for Benjamin. Like Franklin, Benjamin Franklin. Yeah. Yeah, well, I thought it was something clever.

The agencies have been busy. Vincent did something interesting. Pretty dramatic, actually. They ended beneficial ownership reporting. under the Corporate Transparency Act and will delete the ownership data already filed cutting the number of companies that have to identify their owners

from $32 million to $20,000. Wow. I mean, that's interesting. It's hard for me to say where this starts and stops because we've even seen it in our business over the past decade where the beneficial ownership rules

have just gotten a lot more strenuous in terms of looking through to your LPs and their underlying investors in the case of funding. funds and things like that. So it's gotten really complicated to comply with a lot of these. So I'm certainly in favor of reducing some of this red tape. Obviously, that cuts both ways because the reason that this beneficial ownership reporting works in the first place or the reason why I was put in in place is typically around like illicit transactions and not wanting to have

shell companies for bad actors and stuff. So it's a balance, right? It's a balance between adding just cost and bureaucracy to U.S. corporations versus going and identifying and getting the bad guys. Yeah, I think probably, though, at this point, the consensus is that the BSA and kind of all the affiliated KIC that has to happen is overly burdensome for what it actually achieves in terms of fighting crime. That's the thing is it doesn't really catch these bad guys. it's ineffective. Yeah, and there's obviously different aspects to what FinCEN does,

but I think at this point we're due to relax some of these standards because there's a lot of false positives and maybe not that many false negatives, which kind of implies you need to loosen the dragnet a bit. Well, anyone who's ever spoken to someone who works in compliance at a bank about suspicious activity reports will know that they just don't, like no one ever gets caught. using a suspicious activity report. You send them over to the government.

They don't even look at them and they just pile up. And so if you have a case, if there's a federal investigation into a bad actor, maybe at that point they go and they find, hey, was there a SAR filed? And if there wasn't, then maybe they would take some action against the bank or something like that.

But these are not generally, as far as I understand, the way that bad guys are caught. No. And I think it is kind of a, fallacy thinking that you can stop the criminals just through the financial layer. I think it would be nice if you could just use the banks as cops and stop criminals in the real world just through the financial domain. But in the real world, you have to stop them in Meetspace. It's just not good

enough to rely on the banks as cops. In other news this week, this is also in tokenized securities land. Coinbase has won a license in Abu Dhabi from their financial regulator to build an international tokenized securities hub. They will be issuing equities that are fully backed by underlying shares. Token holders get dividends, voting rights. They only need a wallet. You don't need to have a brokerage or a bank relationship. This is a market structure that we want in the U.S. and Abu Dhabi is just doing it. I mean, props to them and props to Coinbase for being able to get through that licensing regime there. I think this is what we're talking about with the Clarity Act and better rulemaking here in the U.S.

to try to have this type of activity be in the U.S. capital markets. Over at the CFTC, a couple of CFTC items, the CFTC invoked emergency authority to order Calci to keep operating in New York. So they've escalated the clash with the state right after the NYAG sued to shut down Calci in New York. So this is going to keep rumbling on. Yeah. I mean, this is like an emergency measure from the CFTC. I wasn't even aware of this, but this is the type of thing that you get when there's a major market disruption,

CFTC has to step in, order someone to do something. This is the CFTC stepping in and telling Calci to keep operational for the integrity of that market, which is pretty wild. They also, you know, it's funny when they shut down a Ponzi scheme that's huge, but we've never heard of it. So this happened. The CFTC charged galise. Advert ventures and its CEO Christopher Delgado, Florida in a Ponzi scheme,

alleging he took 397 million from 1,600 customers for Bitcoin and ether trading and basically misappropriated all of it. I've never heard of this thing. How is it, how is it that these things get so big and no one who works in the industry has ever heard of them? It's just, it shows you how big the world is that people can get caught into schemes like this. So we were talking about this before the show, but are there successful instances of Ponzi schemers getting away with it or getting away Scott Free somehow? And I think our answer was basically no.

No. You can't gracefully land the plane on a Ponzi scheme. I don't, do you think maybe there have been like funds that ran Ponzi schemes that eventually they had some sort of a windfall and made it up? Like maybe that's happened. Obviously, you wouldn't hear of it. Actually, FDX wasn't a Ponzi, but they could have if they had survived. You know, because fast forward, their investments were worth a lot of money. So they could have maybe filled the hole in the end.

I'm sure there have been cryptocurrency exchanges and maybe stablecoin issuers that have run with less than one-to-one backing and then gotten back above that. That's not exactly a Ponzi But I agree I think with a Ponzi schemer You have to just go on the run If you want to end it Well yeah Well Joe Lowe is he's not a Ponzi schemer

Right is he more of just a kind of more of Crucker Yeah So he's still living And under the protection of the Chinese government Presumably I don't understand why they are protecting him But he's still on the run

One MDB Crypto Queen. I think Crypto Queen is the best case. Ruha Ignatova. So one coin. One coin was in the billions, I think. And I think it was a Ponzi. That's a Ponzi. Yeah. It was a Ponzi. And she

escaped. She might be deceased. Nobody knows, really. But she escaped. Yeah, that's another wild story that when that was going on, I had never heard of one coin. Right. The other one, I asked chat about this. Who's the most successful

Ponzi schemer? Someone called Darren and he ran a fund FX firm called QYU Holdings for 13 years. It was a Ponzi, he raised 100 million, so he was kind of a minor Ponzi schemer. And it wound down in 2023. He was caught. He was released with an ankle monitor. He cut off his ankle monitor. He escaped.

He went on the run. He's been on the run for two and a half years. Wow. This is a U.S. guy? U.S. guy. So it's suspected to be in Panama, UA, you're Columbia. So he actually,

this is the best case. I mean, it's not a very good life, I think. No, to be on the run. I think you have to be, you have to almost be blessed

by a government to live a good life on the run, don't you think? You can't, I don't think in a world with flock, speaking of flock,

how can you be on the run anymore? AI, facial recognition technology? You'd have to be in an emerging market, don't you think? Yeah,

I mean, you go back. and watch movies from the 90s of like CIA agents like going on the run or something. It's just not possible anymore. No. Like technology has made that impossible, except I guess, in the case of Daron. Well, we talked about three arrows. I don't know what flavor of crime you would classify them under, but they're still on the run.

I mean, they seem to be very happily living their lives. Yeah, I mean. So that worked out. The wheels of justice kind of grinds slowly, I would say. They might have ground to a halt, actually, in that case. Yeah. We haven't done a bad boys section in a while. Also, I don't know if we ever talked about it on the podcast.

So we have YouTube now, but we're not doing the video version of it. Every time we did the bad boys theme, it got taken down from YouTube. Oh, you will. I mean, yeah, it's a copy strike. It's a copyright thing. So we might need to just come up with our own instrumental version of bad boys. They might still get us. Really?

I think the copyright goes deep. So we need to license the bad boy. Yeah, we might have to license it. I just hope we don't have the need for it. We don't need any more bad boys in this industry. Will there be more? Undoubtedly, there'll be more. Oh, yeah.

But maybe new and exotic flavors of being bad. Did you notice that Marathon Digital came out with another SEC statement saying that they've sold more Bitcoin. So these guys have sold roughly 23,000 Bitcoin, $1.6 billion worth in the first half of this year. I think we're going through that cycle. It's like every cycle, these miners have a bunch of Bitcoin on their balance sheet as we go up and then they puke it out on the way down. And you know what's funny is Marathon specifically did that twice. Yeah. So you'd think they would learn. I mean, I don't be mean, but you'd think they would learn, right? And well, this time is different because the reason they're selling it is to invest in AI. And last time they're selling

it, I guess they were just selling it to live another day. I mean, probably the exact same thing is going to happen with GPUs instead of Bitcoin A6, you know? Probably. What's the latest on just miners in the U.S. though? Is that like all these guys are pivoting to data centers? Yeah, the more successful ones are the ones that did the pivot sooner or rather than later. And so I remember in 2021, I went interviewed basically every domestic miner. I do. They all, it's very funny to go back because Iran was one of them. They were a tiny company back then.

Now there's big AI behemoth. They're all AI companies now. Yeah. I mean, it makes sense. It does make sense. I know people worry about Bitcoin's hash rate like, oh, what if all the miners go do AI? That's silly.

Because if no one minds Bitcoin, this can be a great opportunity to mine Bitcoin. So someone's always going to mine Bitcoin. People don't think. Of course someone's going to mine Bitcoin. Bitcoin doesn't really need a specific level of hash rate. That's another misconception. People are like, oh, well, if it goes from 60 to 30,

you know, the hash rate just has to be very high. It doesn't have to be a specific number of Xa-hashes. So that, I know people are a little worried about it. I'm not worried at all. Every domestic Bitcoin miner could flip to AI and Bitcoin would be fine. All you need is that it's not just literally one entity that's mining most of the Bitcoin. You just need some decentralization to be fine. It is interesting to think about at what price per Bitcoin the miners come back in the U.S.

And they seek to take that power away from their AI approach and go back into Bitcoin. Yeah, I mean, mining is just so competitive. And so it's always going to be a thin margin game, in my opinion. Whereas AI, as a data center and PowerShell or a Neocloud, there's just huge margin opportunity. And you're selling to everyone using AI as opposed to one buyer, which is the Bitcoin network. Yeah, it's a fundamentally way more attractive business in the sense that you can go out and have these relationships, not just with a protocol. You can have bilateral corporate relationships and you can upsell and you can do clever things. I mean, you could theoretically have millions of clients as a neocloud, whereas you by definition have one client with Bitcoin.

And it's a tough business because if someone else turns on a miner anywhere in the world, your economics just got worse. Yeah, it's completely unpredictable on the hash rate. Now, the question is, is there an equivalent of a Bitcoin miner buying Bitcoin and holding on his balance sheet? What's the AI version of that? You can't buy AI and hold it, you know? Would it be speculating on GPUs, just hoarding racks of not powered on GPUs? Probably, right?

It would probably be levering up and just building inventory of GPUs. And when you put it in that sense, it sounds insane. Yeah, but that's what, I mean, Facebook is doing that right now. Well, I mean, I think they intend to turn them on eventually. Right.

But so it would be kind of be like, well, if like Chriso or Corrieve or Lambda was just like, okay, we've got all the GPs that are turned on. Also, we've got a warehouse full of millions of billions of dollars of GPs just as a commodity bet. Yeah. You'd think that, that sounds crazy to do. But isn't that kind of how the gold market works in certain respect? The diamond market, I guess, a better example of that, right? Is that right?

Yeah. Like De Beers has a big warehouse. Well, I guess that's because they don't want to dump it all at once, right? I mean, talk about a tough market. Diamonds, that's the worst market in the world. I mean, diamonds can just be made by a machine, and they look completely identical. Yeah, I mean, have you been monitoring the natural diamond prices? It's been coming off, right?

It's down terrible. Yeah, and that's despite the diamond cartel has actually restricted the flow. They have their own diamond opaque thing. It's been bad for the entire GDP of some nations, like Botswana. poor Botswana they got crushed by the lab diamond thing I didn't know that yeah I mean I think it was like 30% of their GDP well and then it's like with these lab grown diamonds you don't have the humanitarian concern around how the diamond was actually picked up right

yeah I mean I think there's just no reason to go natural at this point for a diamond there's just no reason and the value of natural diamonds has also collapsed So, you know, it's just they're not holding their value either. Here's another interesting story this week. North Korea's state-backed Kim Suke group. I think that's how you say that. There's a report that they are running local AI models to sharpen their crypto attacks. Great.

According to South Korean firm, Genius, they basically found that these hackers are using offline LOMs to generate polished fishing documents. So I guess no surprise North Korea is using AI to attack people. Yeah, I mean, if you were a hacker and you're not using AI, you'd be like the worst hacker in the world. Yeah. So I mean, it is unfortunate, though, all these Bitcoin Red Team guys are doing great work. They have to use the open source models. What's going on, Anthropic?

Why can't we use the good models to do cyber security stuff? I know, despite the fact that Anthropic has that white hat program, right? Like you can go KYC and you can say, hey, I'm a white hat or I'm protecting people. You're still getting downgraded apparently. Yeah. I mean, I don't think the status quo can continue. I mean, something's going to have to break. The big labs are going to have to loosen the restrictions a little bit.

I think they're just too averse to any kind of harm happening with their models. But they're just cutting off so much capability because of that. I think the thing that they're worried about is the stability of the U.S. financials. system is you get all these banks that are running on legacy infrastructure and they're just worried you know you can't have like fed wire shut down for 24 hours it would be a disaster it does make me think that crypto is this kind of petri dish where stuff moves a warp speed and it's the most hostile environment that exists digitally and so once we have been in this regime for a while maybe six months crypto will emerge much hardened and much better off.

And then other industries will go to crypto to learn best practices. I think that's right. I think crypto has been the frontier of a lot of markets here. I mean, you think about some of the companies that started the neoclouds. They're founded by people who previously worked in crypto. Think about the AI cybersecurity space. It's founders that start in crypto that are moving their companies into that space. leaders. It's the quantum thing is a great example where you have these world-class

cryptographers that see the need to go to post-quantam and they're building big infrastructure. So crypto is the petri dish here. It's kind of bleeding into all of the frontier tech markets. Yeah, I think it's useful for the world for there to be a hyper-capitalist, ruthless environment where, yeah, the attackers can make a ton of money if they exploit things. But also defenders have to learn really, really quick. I don't know what an analogy would be, like to an industry or historical episode. But crypto's hyper capital, I think is quite good for the rest of the world. All right. Well, I think that is it for the week. We will be recording in person next week. So get ready for that. Yep. A rare in-person OTB. Your comments are welcome. It's actually nice that people send us emails and

stuff. So please, please keep doing it. It's nice to know that someone's listening. We love the listeners. All right, everyone, have a safe and healthy weekend. We'll see you on Monday.