On The Brink with Castle Island - Weekly Roundup 11/04/22 (Fidelity Crypto Launches, Alameda's balance sheet, SDNY looks at Tether) (EP.368)

Episode Date: November 4, 2022

Matt and Nic return for another week of deals and news. In this episode:  Bitwise is moving into active management What's the deal with Uber on the blockchain? The boys review House of the Dragon The history of land-based blockchain bets Fidelity launches no-fee retail trading for trading BTC and ETH on their platform Matt reminisces on Fidelity's crypto journey Google announces blockchain node engine Nic's 2-year pending transaction on Venmo SBF continues to wrangle with CT Sam's debate with Erik Voorhees Alameda's questionable balance sheet is leaked Can FTX buy its way into respectability despite the existence of Alameda? What's the deal with the MAPS token? Is it far for FTX to start offshore and buy way into the regulated system? Elon's schemes for Twitter Coinbase and the Blockchain Association are supporting Ripple in their case against the SEC The Tether case is reopened at the SDNY Tether rips us off with their own bootleg FUD Dice What happens to Chinese Tether holders if Tether has to unwind If Tether fails, do funds flow back into BTC? The mining sector is deeply distressed Why the mining bankruptcies may cause concentration in who controls hashrate Circle delays their SPAC Coin Metrics releases a taxonomy with Goldman and MSCI Protos' weird hatchet job on Nic's tungsten cube infatuation Did we manipulate the market for tungsten? Sponsor notes: Talos powers institutional access to the entire digital assets ecosystem via a single-point of entry. Connect directly to your preferred prime brokers, lenders, investors, custodians, exchanges, OTC desks and more, or meet them on Talos. Get started at Talos.com 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 Concentred Easy. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called.

of Bitcoin, Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And this episode is brought to you by Coin Metrics. And here is the Metrics Minute. For today's Metrics Minute, we're looking back in history. Back in the day, Cracken was a major Ethereum venue. They hosted around 10% of all Ethereum were actually present on the exchange in 2016 after the Ethereum launch. In 2016, Cracken hosted over 20,000.

of all spot Ethereum trading. Those numbers now down to a couple percentage points for both the share of Ethereum supply and spot trading. For Bitcoin, Cracken's share of volume peaked at around 20% in 2016. The share of Bitcoin supply held on Cracken peaked it around 1%. Today, it's come down to about half a percent. That has been your metrics minute. And this episode is also brought to you by Talos. Talos powers institutional access to digital assets, whether you're on the buy side or the sell side, whether you're in TradFi or at a crypto-native firm. You can use the Talos platform for your entire digital asset ecosystem point of entry. So they have an integrated platform. You can trade via API or on the GUI. And basically every part of the ecosystem is on Talos. You can

connect to prime brokers, lenders, investors, custodians, exchanges, OTC desks. Talos is where the liquidity is. They have the best leadership team in the biz. So head over, to tallos.com to learn more. So speaking of our beloved sponsors, we have recording this from the coin metrics office. Well, it's our office too. We have office space and we pay for it. So I would say it's a shared office.

It's more of a barter deal. Well, it's... That's the trade that we do. The trade with coin metrics. We do the metrics minute and they give us office space. I think it's a good trade for both sides. they probably make out a little bit better because our listenership is going up here. That's the thing.

Yeah. Our number is going up. Yeah. We locked in the trade at a fit. We had a fixed rate. We should have hedged that trade. It should have been an adjustable rate because they should really every time our numbers go up, they should give us more and more office space.

More offices. So we, you know, maybe we hire an associate. That associate now needs a corner office. We're colonizing this office. We are. It's great to have a podcast studio. It can hardly hear anything. The acoustics are great.

Like the noise cancelling, I feel. like there's foam on the wall, which is canceling the noise. It's so noise cancely that I feel like I could almost barely hear you from over there. It's a lot better than when we record over Zoom. I'll tell you that much. This feels a lot better. Oh, yeah. So they did build a podcast studio to my specification. So thank you. Huge week for Coin Metrics. So we'll get into some news of the week, but big, big deal with Goldman and MSCI and Coin Metrics. You just love to see it. We had a big podcast week, I sat down with chronic guests, show attendees, Brian Venturo and Brandon McBee. I love McBee's last name. Isn't that just such a great last name?

McBee's a smart guy. That guy's dangerously smart. Venturo is smart too. I would say they're both smart. So they were talking about how they finally ripped off the bandaid and don't mine ETH anymore. Yeah. A very troubled relationship they had with Ethereum. They were some of the biggest ETH miners, but they, just couldn't stand the ETH leadership. Imagine that. Like your whole business model

is mining this commodity, but the people that produce the commodity or write the code are like totally antagonistic towards you and hate the fact that you exist. They finally ripped off the bandmade. They don't mine ETH anymore. Now they do like AIML stuff.

Well, I'm glad that they figure that out because yeah, it wasn't going to work long term for them mining Eath, but not a big piece of the business, obviously. Their bet was contrarian, it was that the merge would be delayed, delayed, delayed. So that actually did pay off. It was delayed. You actually, you also sat down with Jeff Park of portfolio company Bitwise. Big week for them, too. New active management products out for them. Yeah, so Bitwise has announced

that they're moving into active management on the crypto side, which has been in the works for some time. Jeff Park is one of the folks leading the charge over there. So I was really excited to have him on the podcast. You know, we've had Hunter on. We've had Teddy on. We did talk about salted meats. So Teddy in the soupie. I haven't got my delivery yet this year of the soupy, just saying, you know. You know, salted meats used to be a big topic of conversation on this podcast. It's just the salted meat ratio has fallen off in terms of what we talk about. Well, I don't know if we're public with the guy who sent us, his name, sent us the salted meats, but you know who you are out there. Thank you. Thank you for the salted meats. I ate all of them. You did. You didn't get any.

I didn't, but, you know, Teddy, you know, send us some soupy and, you know, we're waiting. This is how we'll know if you listen to the podcast as well. We will, yeah. We'll see who listens. Well, why don't we hop in some deals of the week? First one up is DEC. That was the name of like an iconic computer company back in the day, Ken Olson. Funny little story about Ken Olson.

He has this unbelievable quote. So Ken Olson in the, I guess it was the 70s and 80s, was the foremost expert in the world, I would say, in computers. And he has this quote that I'll butcher. I can't remember it off top of my head. But something to the effect of there's no reason why anyone would want a computer in their home. Turns out that that was not the way it all played out. Well, you know, he might just be a dream deferred. Maybe in 10 years we're just going to be all in Zuckerberg's metaverse with like, I don't know, AR goggles on.

So maybe he'll be right eventually. He might be right eventually, but it's just an all-timer. And now there's a new company called Deck, DEC, and so it's a software company. company. They're building a decentralized ride sharing network on top of Solana. They raised 9 million from foundation capital, road capital, and several ex-Ur Uber employees. Decentralized ride sharing. So this is an interesting category. Do you remember, was it called Arcade City? Yeah, of course. Is it called Arcade City? That was built on Bitcoin, I think. Yeah, something like that. People have, this is kind of one of those arch typical blockchain use cases, TM, that

people along with like prediction markets that was like the first thing anyone would say in like 2016 it's like well what are you going to use smart contracts where it's like oh well we're just going to build decentralized Uber it'll be so much better and then the stuff that got built on blockchains was nothing like that but people

still haven't given up this dream well all the good ideas eventually happen so I think it'll happen and maybe these DEC guys will make it happen so next up I think we're being trolled by our intern again because this next one is just called fun I don't know anything thing you're about to say. I'll just caveat. So fun. Yeah, this whole thing is a mystery from start

to end. It's a blockchain developer building applications for the oddsy network, which also I haven't heard of. Again, I think I'm being trolled. There is apparently $3.9 million from also two funds I don't know, which is jam fund. Jam fund. Jam. Like Jam. So Jam is investing in fun. Jam. Yeah. Okay. And Great Oaks. Kind of more normal fun name. So anyway. that's fun. I'm not even going to fact check that. That's going right in the newsletter. I don't know if any of it is real.

But next one is, so Coin Fund is out there. There's a report this week that they're looking to raise $250 million for their new early stage fund. Fellow, at least partially Miami Fund. Shout out to Coin Fund. Next up, we have Bravo,

which I guess is a Game of Thrones reference. Yeah. So maybe we'll start to see more Game of Thrones named. Are you fully up to speed on this new Game of Thrones spin-off? I'm like two episodes better. watched it. So House of Dragon. I didn't like the amount of like horrible birth related graphic content. There's a lot of gory stuff there. I don't want to spoil anything for you. Don't spoil it. But it's in like every episode. There's a lot of birth giving in that show, which is just like I don't know.

It feels retuitous to be honest with you. Yeah. There's a lot of stuff going on there. I think it's actually more gory than original Game of Thrones, which is sort of shocking that they managed to outdo themselves. but yeah, it's bloodier. So he wrote a book about this. So he didn't finish the original Game of Thrones books, but he went off and he wrote a book for House of Dragon, which keep your eye on the ball, man. How do you not finish the core thing?

Like, I'm sympathetic to that. As a writer, I abandon many more projects. I start a lot more things than I finish. And so GRM is the same. It's cleaner to start and end new projects than just to finish your existing ones. It's just, just, you know, have a little focus, man. I didn't even know that he'd written this additional extra book.

I didn't either until, like, two weeks ago, and then I, of course, bought it, and I'm going to read it. So my problem with the show is the same problem I had with Game of Thrones, which is just there's so many characters, and I can't remember their names because they're all, like, named Dracaris or whatever. Right. And so I just completely lose track of people. It would be cool if you were watching it if there's some way to have a house map or a family tree. I need a genealogy. Yeah. I need genealogy.

Someone needs to invent that. This is why we need, you know, Zuckerberg's AR goggles so we can overlay family trees. Like this guy was eaten by a dragon 150 years ago by this guy's family. I thought the show is pretty good, actually. The show is. I'm glad they greenlit a second season. Bravo, I think, is a reference to the free city, right?

Wow. Look at you with your knowledge. Oh, my goodness. Yeah, that seems correct. So it's a wallet for Starknet. So they raised 10 million from Pantera, Road Capital, and Brevin Howard Digital. Next one up has to do with the EOS Network Foundation, the OKX Blockdream Ventures, and Alphenons. They have signed an agreement to invest $100 million in Busan, which is South Korea's second city.

And it's a burgeoning blockchain ecosystem, apparently. So a bunch of, I mean, I could be getting trolled on this. That's also pretty mystifier. I don't know. Like this could be a real story. this could just be something that we're getting trolled on, but that EOS money, you got to do something with it. Why not just invest in a city? I can't believe they're still going. I mean, it's like, I don't want to say zombie, but yeah, it's kind of a zombie. I mean, they raised all this money.

They have some sort of permanent endowment now. In 100 years, EOS will be like one of the biggest shareholders are like, just like stuff. And people will forget where they came from. Well, and of course, bullish, which is block one's exchange. Yeah, they have an exchange. No, it's a thing. Is it going? Yeah, it's going. I mean, they raised like hundreds of millions or a billion dollars for bullish, right? Yeah, no, that's a thing. So you got EOS still is out there, and then Block 1 is now doing the bullish thing.

So maybe the legacy would be that EOS funded a ton of centralized financial market infrastructure. Or apparently city infrastructure, like is this subways, or do we know what they're investing in in Busan? Unclear, you know, the blockchain ecosystem. It's like, no, blockchain, not crypto, probably. I will say that historically, city-related or land-based blockchain bets have not paid off. So do you remember the one out where they were going to buy a ton of land in Nevada and just kind of build a new city?

And then there was the one island where there's this video released for the island, which was just insane. Yeah, it was like a fire fest type of thing. Yeah. What other land-related blockchain? Well, there's one that got funded recently that is endeavoring to buy a city, right? Praxis. Right.

Yeah. So that one seemed, I mean, that was funded by actual VCs. Right. I think that's Patrick Friedman's thing, like some of the sea-setting people. And then there's, of course, several countries have endeavored to raise crypto. Like you have the El Salvador with the Obisettian. board of volcano bonds. I don't think that ever happened.

The Central African Republic has tried to do this. May still be trying. So I think a lot of politicians just look at crypto and like, oh, there's a lot of money there. We should like have some of it. Sprink a little blockchain on it. Use it to build regular old infrastructure. Don't think it's worked so far, but we'll see.

We'll see. Next up we have Ling Fang Innovation Fund, founded by ex-Binance Labs executive Nicole Zhang. They raised 20 million for an early stage crypto fund. Next one up is called Rakar Digital. This is a crypto custodian. Powered by Fireblocks, it looks like. They've raised $10 million from SCB 10X.

CB10X is super active in crypto investing. Next up we have Centrofuge, well-known real-world asset tokenization protocol on DFI. They raised $4 million from Coinbase Ventures, Block Tower, Sightail, and others. Next one is Evmos. This is an interoperability protocol that raised $27 million. and a token sale to polychain, galaxy, circle, asymmetric, and a number of others. And then you have Wallet Connect, very well-known Web3 Coms protocol. There is 12.5 million from a range of funds, including Circle, Polygon, Coinbase, and Shopify.

The last one is an M&A deal, so backed, which was originally spun out of the New York Stock Exchange. This is a, you know, now they do custody and payments. They have acquired Apex Crypto for $55 million in cash. I don't know why Apex wanted to get out of that business. That's an interesting move. Seems like a lot of people are moving into the business. So huge news week. Yeah, this is big.

We're back while the Fed raised rates. Maybe that'll be the last rate hike ever. What do you think? No, no, no. They're going to go 50 more. Okay, well, maybe one more. So big news, Fidelity. What's going on?

Fidelity crypto. So Fidelity announced kind of just sprung this on everyone. There wasn't like a huge press campaign. about it. It was just, hey, guys, we're here. We're doing Fidelity Crypto. This is retail. So the ability to buy, sell, trade, Bitcoin and Ethereum, it looks like, out of the gates. And so this is the real deal. This is the retail offering. The waitlist is up. You can go to Fidelity.com and you can get on it. I'm already on it. You're on it? Yeah, do you think I have a shot of getting up the, if anyone's listening over there, you know, throw me a bone. I want to get on there.

So how does it feel having seen the beginning? and really the middle of the journey, you were there pushing crypto in 2014. Eight years later, they're now out the door on the retail product. I have to tell you, this is, I am so proud to have worked at Fidelity. It is, people just can't grasp

how hard it is to get crypto projects done at big institutions, but Fidelity just stuck with it for so long. I mean, there were some super dark days working on crypto at Fidelity where I thought, you know, for the industry, really. So 2014, 15, 16, there were periods of time there where we were staffed up, and I was just thinking that we were all just going to get laid off because there was nothing going on in crypto. All of my peers at the other banks and asset management firms, no one was doing anything.

And so we were having these meetings with very senior leadership at Fidelity talking about crypto. And I remember just thinking, this is all going to get shut down. But to their credit, to Abby and the senior team's credit, they stuck with it. They put some great people on this project over the years. And to be able to launch it, I think it's just such a testament to the leadership and the team over Fidelity. It's just, it's awesome to see. It's crazy to think that we've been out of there for well over four years now, even though we still have a close relationship with them. I think there's something to be said for just building a culture and being a firm that vocally signals affinity for the industry in terms of being able to attract the right people to build these kinds of things.

Totally. I mean, and look at the infrastructure that's getting built here. So it's very obvious that digital assets are going to be a thing, and it's very obvious that you can't do anything without having custody and trading of those digital assets, and that those are core to unlocking asset management. So now you have, and by the way, whether or not that's Bitcoin, Ethereum, or eventually I do believe you're going to have tokenized securities. And so Fidelity has just put themselves in the leadership position in terms of being in these categories, but also just being able to attract and retain talent that wants to work on this stuff.

And so you have the custody piece, you have the trading piece, and you have the asset management piece. Yeah, I think it's a foundational franchise that if you think digital assets are going to be around, they're just off to a huge, huge head start. Other big announcement this week from none other than Google, they have announced blockchain node engine, a Google cloud product to help Web3 builders, basically run nodes and build and deploy applications. First chain supporting is Ethereum. Very interesting to see one of the largest companies in the world get into blockchain infrastructure directly.

Yeah, this is a big story. I guess in another week, this would have been the biggest story of the week, but it makes total sense. I mean, the ability to index and query these nodes, it seems like it should be a core competency for a search engine. Yeah, I mean, shocked actually that no, there's no ubiquitous blockchain search product. I can clearly see why Google would want to do it. I mean, they want to index all the world's data. There's a lot of new data out there on blockchains. And it turns out it's pretty hard to run it. You know, certainly speaking from experience,

we were just talking about talking with the coin metrics engineers about Solana. They told me during Salonnas downtime, they believe they were the only Salana node running. Way to go. Way to go. Shout out. We weren't even paid to say that. We weren't even paid to say that.

Way to go. Well, there's some other news out of Apollo. So Apollo is, of course, I guess it's a private equity firm, but I'd call it a diversified financial services firm. They've got everything over there at Apollo. It seems like Apollo is doing things that historic banks have done, insurance companies have done anyways. They're huge in digital assets quietly, but they've chosen Anchorage to be their crypto custodian, it looks like. So that's a big win for Anchorage. On the visa front, visas made no secret of their crypto ambitions.

They have filed two trademark applications related to. digital wallets, NFTs, and the Metaverse. That reminded me, we didn't talk about PayPal. So their terms of service where they had the ability to deduct $2,500 from your account if they don't like what you're saying, basically. And then they came out two weeks ago and said, oh, no, that was a mistake. We're not doing that. Do you see they put it back in?

Yeah. To PayPal think they're actually going to launch a crypto business with that type of job? Yeah, right. I mean, and remember, Venmo is owned by PayPal. Venmo is ubiquitous. I had a Venmo, and so I tried to cancel my account, couldn't figure out how. I had a Venmo transaction outstanding for two years

between me and a certain Naraj Agrawal. Okay. And I was testing to see if, I think I made the memo field, like at the time they were canceling transactions with the word tardigrade in them. Okay, why? Tardigrade is like a little small,

like microscopic bug-like creature. Okay. And so I think I made the memo like Tardagrade, Persian rug, because they were canceling stuff related to Iran, like Cuban sandwich. Okay. And it was outstanding on the platform for two years. And then they finally canceled it.

It canceled. So it didn't go through. Yeah, but they locked up $300 of mine for 24 months. Well, if you had $1,500, $1,500, they would have just taken all of it. It could have been worse. I don't know. I don't know why they would. put that back in their terms of service if they said

that they were going to pull it back. But I think it's a really bad look for PayPal. It doesn't seem very aligned. Okay, interesting Crypto Twitter wrangling news. Sam Bankman Freed has stepped back maybe from his policy proposals

that he launched. There's been a lot of backlash on crypto Twitter against it. Did you see this our debate he had with Eric Voorhees from ShapeShed? Yeah, I mean, I frankly, I thought Eric carried that debate, to be honest with you. Yeah, I think everyone thought that.

Just on the basis of aesthetics and calmness, I have this whole theory that in a debate situation, if you're just more calm, people will interpret you as the winner 80% of the time, even if what you're saying is complete nonsense. That was certainly the case when you debated that buffoon, Mike Green. Mike Green, see, I may not have, I think I was right on the issues,

but I was just more chilled out. Although, actually, there was no video. and if there had been video, you would have seen that I was bright red at points in the debate, especially when he compared me to a fentanyl dealer. That wasn't a very nice thing to say at all.

I thought that was mean. I thought that was mean. That was a very mean thing to say. And then he started selling Bitcoin products. He did? Simplify or whatever, they have a Bitcoin product. So it's like, dude,

at least be a pure no corner. If you're going to be a no corner, like, why don't you, like be consistent, you know? I had no idea that he got into that. Yeah. So there's, a bunch of FTX stuff. So what you're talking about is Sam is taking a lot of heat because of his stance on Defi. Eric Voorhees believes that we should leave Defi out of this bill. I agree. I think that we're probably not ready to talk about Defi. You do have to sympathize a little bit with Sam because he's trying to enter the United States, trying to enter these regulated markets. And he probably just seems, he thinks he's being practical.

Yeah. I mean, he wants to give concessions to, let's say, Washington. I get it. It's a pragmatic approach. In his view, the more near-term need is sort of C-Fi regulation, and maybe some defy can be sacrificed to that altar. Obviously, defy people don't like that. I mean, he kind of stepped back, which I respect. I saw the funniest headline maybe of all time regarding this, which was on the block. Headline is FTCS, is Bankman Freed to quote, Let crypto Twitter take the wheel on digital asset policy. Why would you give the wheel to crypto Twitter? Don't give the wheel to crypto Twitter. That is a way to get steered off a cliff. Crypto Twitter does not deserve the wheel. No. Hold on to the wheel for as long as you can hold on to the wheel.

Don't give it up. So more FTX drama, though, independent of this, maybe even more serious drama, perhaps. Yeah, so CoinDesk had an article this week that reveals that Alameda Research has $14.6 billion of assets against $8 billion of liabilities. All right. So that all sounds good. What are the assets, though?

Well, maybe even before we start, it's worth kind of reminding people that Alamedo Research is a proprietary trading firm that is owned by Sam Bankman-Fried. And he also owns FTCS. I mean, I would say it's the same entity as far as I'm concerned. It's basically the same thing. In my opinion, it's the same thing. you'd never see that in a regulated market, right? So it's illegal to have an exchange and to be a prop shop trading on your own exchange.

It just doesn't happen because it's illegal. But this is crypto, so there's no rules? Well, so it's offshore, it's unregulated, and it happened anyways, and it's still happening. Now, keep in mind that FTX is applying with the CFTC to get regulated in the United States. They're also pursuing money transmitting licenses in the United States. So they're trying to come under this umbrella, but they, of course, have this kind of issue with Alameda. So it's against that backdrop that you get this report in CoinDesk that just reveals a bunch of things that are basically like trade secrets. So for assets on this 14.6 billion of assets and 8 billion of liabilities, you have to dig into what these assets are.

So there's 3.66 billion, allegedly, of FTT and 2.6 billion of FTT collateral. So that's over $5.5 billion of that asset base is a token that was... They printed out of thin air. So that's their exchange token. Some would argue that would be an unregistered securities offering. And certainly, look, it passes the Howie test. The Howie Test is not a test you want to pass. Yeah.

So anyways, a lot of their assets are... in FTT, which they created. $292 million of these assets are alleged to be in Solana with 863 in locked Salana, basically unvested. So illiquid. It liquid. Super illiquid. So here's what I'd say about this.

The presence of FTT is a big issue here. And there's some evidence that Alameda has really bootstrapped their entire company by taking out loans against FTT collateral. Again, FTT, is an asset that they created out of thin air. And you're starting to get some folks

that are starting to talk about this, namely in this Coin Desk article, someone's fingerprints are all over this. And so you think about who has the incentive to see FTX get revealed a little bit more here, shine some light. And, you know, some competitors potentially, potentially some large trad-fi competitors

that are threatened by the market structure that FTCS is pursuing in the, derivative space. So you don't have to squint too hard to see that, you know, there's some incentives at play. The other thing I'd point out is that the lending desks are all under enormous strain right now because Bitcoin mining sector is blowing up in real thing. And so if you're a lender to Bitcoin miners, you're in a world of hurt. Alameda is known to be a borrower from many of these venues. And so maybe a leak like this is a shot across the bow to a negotiation maybe that's happening with some of these lenders around giving the borrow back or

returning the loan. So who knows? There's any number of reasons why this could have leaked, but this thing just doesn't leak on its own. Someone clearly had this story planted with KynDask. And I mean, recall that misrepresenting the balance sheet and the solvency was a huge part of the Three Arrows issue. This is, I'm not going to say it's identical situation, but this is just a lot of illiquidity. Well, I, I, I, To be clear, I don't think there's any allegation of impropriety here. I think that there's no one out there publicly saying that they're misrepresenting their balance sheet. It's just that here is their balance sheet.

And so maybe this is even something that they're revealed to a lender for all that we know. I think the issue is, you know, these assets don't really look like they're industrial-grade assets. And there's also just a conflict issue. So it's against that backdrop that I think people are saying, what the heck here? Like, this doesn't smell right. And, you know, as you point out, there's some other assets on that balance sheet that, you know, frankly, I'd never ever heard of.

Right. So the MAPS token, for instance, you know, it's a hiking app. They didn't, you know, effectively IDO for the token. Only less than a percentage point of the supply actually circulates. And now they're marking it on their balance sheet as a liquid asset, a real collateral type. It's illiquid. I mean, the valuation is illusory, right? This is not the same thing as, let's say, public equity that trades on the NYSE.

So, you know, question more from that perspective. And I would just say generally, if you look at the incumbents of the crypto firms that have been onshore since creation, they probably feel pretty hard done by by the fact that FTC started offshore, then they're sort of trying to buy their way into respectability after the fact. Meanwhile, they still have this odd hybrid structure with Alameda. and, you know, they've benefited from being outside the regulatory apparatus this whole time. That doesn't really seem fair. I know, you know, you can't ask for fairness in capitalism, but that's kind of why we have rules of the road.

So everybody plays by the same rules in a regulated financial system. You have firms that come from the outside, come in, ignore the rules for 99% of their life, and then come back in trying to, you know, render themselves respectable. That's not entirely fair to the firms that have been regulated from day one. So, you know, you're pointing out some of the potential incentives to leak something like this, and I think that's one of them. It does sort of, it makes me really wonder why Sam keeps on tweeting these, hey, we're buying FTT things. It's clear that he needs FTT to be worth more than zero here to keep Alameda functional.

I think that answers the question. So they do an automated kind of buyback rep share thing for FTT, but he tweets it every single time. He does it. I mean, questionable also. You know, imagine that kind of transaction in a regulated public equity context. It's just you're bound by so many more rules for disclosure. Well, so, you know, you get to this point where you're like, CME clearly doesn't want FTX to be successful here. And shining a light on some of this stuff maybe accomplishes some of that objective too.

So who knows where this came from? But this is, we're going to be talking about this for a while. I mean, FTT looms large as a huge risk to the lending ecosystem if half of what is being written is true. Yeah. And one wonder is also about the conflict between FTC equity and FTT because those don't have the same, quote, unquote, cap tables, right? It's not a one-to-one. And as we've said before, FTT is kind of this thing that siphons off revenues from FTC. If I'm an equity shareholder in FTC, I start to ask questions about FTT.

Yeah, I definitely do. FTT is competitive with FTCX equity. I don't know how you resolve that. that. So maybe we'll have more to come in the, you know, the weeks ahead. But I think FtX would be better served to just spin out or shut down Alameda, try to get out of that business. I mean, you can't be a regulated financial institution in the U.S. running both of those businesses. You got to choose one of them. Completely. And Sam would probably be best served by maybe tweeting less. Take it from me, you know, crypto Twitter, you don't have to answer every

reply I got on Twitter. It's healthy or not. You actually don't have to be active on Twitter if you don't want it. I found this out. Yeah, you don't have to be. I tweeted 20 times a day for 10 years and then quit basically and my quality of life is immensely greater. You seem a lot happier. So Sam, you know, take it from a friend. You don't got a tweet. Speaking of tweets, are you going to pay $8 to have your blue check mark? So I have a blue check market. Now you have to pay $8 a month to keep it. I think I should be grandfathered in with a special symbol showing that I had the check mark before, that I was part of the Twitter elite. This is going to be like the sneaches on the beaches with the marks. I mean, I kind of support it. It's kind of like, you know, Bain taking over

Gotham and, you know, letting all the prisoners out of the asylum kind of thing. It's like with Elon letting people back on the platform and just giving the power back to the people, I guess. despite the fact that I'm a blue check, I am enjoying the fact that all the blue checks are enraged by their loss of status. I mean, the man has to make some money. He's got some debt payments. Yeah. So I do kind of sympathize with the critique that there's a tension between sort of the radical free speech approach Elon wants to pursue and then the business model of Twitter. Going to a subscription model is a way to avoid the pressure that advertisers can bring. so I kind of understand why he would need to do that. I don't know if enough people are going to pay for this, though.

Well, I think you have to try. And the multiple that you get on subscription revenue is going to be a lot better than the advertising multiple. I mean, I respect Elon taking a swing. I do wonder how long his attention will be fixated on Twitter as opposed to as many other businesses, though. All right, so this is the regulatory podcast. So I'm going to bring this one up.

So Coinbase and the Blockchain Association have joined in support. filed briefs asking to join Ripple in its ongoing case against the SEC. I find this to be very interesting from a couple of different perspectives. The first is something in that Hinman disclosure that Ripple got its hands on must have shifted the math here for Coinbase and the blockchain association to want to come on board. So do you know what I'm referring to? Well, I remember the HINman test, but is there something new? So Ripple had been trying to get their hands on some internal communications around the time of the Hinman test comment, around certain people at the SEC Hinman included making declarations about presumably what was or what wasn't

a security or what was grandfathered in, but their view. And so Ripple got their hands on that a couple weeks ago and there was a tweet from their general counsel, something to the effect of this is going to be very revelatory. Then you see Coinbase and the Blockchain Association join in support. Keep in mind, Coinbase doesn't have Ripple on the platform right now. Yeah, they're not. Not like historic ripple fans or anything like that. Yeah, they're not like sitting with ripple and enjoying Chris Larsen's company. So they're pretty practical over there at Coinbase. The blockchain association, I haven't seen them be outwardly pro-Ripple necessarily either.

They haven't been, yeah, unlike some of the other trade associations, they haven't been that close to the ripple orbit. So my guess, if I had to guess, and I will, that Coinbase and the blockchain association think Ripple's going to win and they want to be on the winning side here. I think Ripple's going to win too. I am coming to that conclusion as well. Yeah. I mean, I remember when the quote unquote Hinman test came out. It wasn't really a test.

It was just a letter. And at DC FinTech Week some years ago, I raised my hand. Hinman was presenting and asked, do you understand that this is an actual, this is being interpreted as an actual test? And he's like, oh, no, this is just guidance. It's not a real test. These aren't bright line principles or anything like that.

I do wonder what has come out, which has sort of emboldened ripple in this way. I can't wait to read it. But let's get this. case done with once and for all. I mean, we've just been talking about this for years. Yeah, the litigation approach to clarity on securities regs is not an efficient approach. Tell you that. No, I mean, it's just so painful. So kind of more regulatory news, Tether case back open. My goodness. I think this might actually be more serious than people think. It didn't

really make a lot of noise. So the DOJ has, they had an investigation in Tether, and now this is shifted to the Southern District of New York, which is kind of the infamous litigation entity that, you know, really goes after fraud on Wall Street historically. Having a case be shifted to the Southern District of New York is bad news for whoever's being invested. They're pretty good at what they do. They're, that's like, didn't Prit Barrara have like 100% win rate there? They're like the New England Patriots of enforcers. They're like the best in the mix. Well, when the paths were better at football.

No, still. There's still the playoff team. So TBD on that, I would say the odds of something adverse happening in Tether. By the way, I have a bone to pick with Tether regarding the Fudd Dice situation. Tether thinks that they can do Fudd Dice. So for the listeners, we have had this Fudd Dice concept for a very long time. Four years. It's, how many versions?

We have four versions of the Fudd Dice. You roll the dice and it'll tell you another reason why Bitcoin's going to fail. They just outright copy dice. They stole our idea and I want royalties. Okay, I have prior art, abundant prior art. I have prior dice. Thousands, really. They stole our idea.

They're now selling the fud dice. The level of disrespect that it takes to just blatantly steal someone's fud dice idea, just unbelievable. And by the way, they didn't understand the joke because in the case of Bitcoin, you're putting fuds, which are like easily debunkable critiques on the dice. that's the point, right? The tether fud is actually real. No, it's like a good fud, yeah.

Yeah, it's not like fud per se. It's like actual genuine critiques. Like, yeah, the SD&Y could probably shut them down if they wanted to. It's like you're under investigation by the Southern District of New York. It's not like we're not making this up. Yeah, no. This is not fear, uncertainty, and doubt. This is like real bad stuff.

Yeah. So you can't put it on the side of a die. I don't even know if they put that on the tether fud dice. It's, no, I will say, look, If you want to send us a box of the Tether, Fudd dice, we'll take it. To be clear, I actually insist on that. That's our deal to you, Tether. Yeah, send it over.

We will waive our copyright claim if you send us a box of your Fudd dice. I want the dice, obviously. Send us the Fudd Dice. We're the progenitors of the Fudd Dice idea. We deserve to have one of every die. Previously, I owned all of our four editions of the dice. I need a complete set. Oh, yeah.

We need that. So Tether, yeah, you know how to find. is send us the dice okay we'll drop our claim get your act together and uh i don't know i'm a little worried about tether actually yeah sam you know what i've shifted my attitude i don't know if it was the dice that did it or the fact that it's the sdn y but i would actually be concerned at this point i wouldn't want to be like indexed to the to the future of tether yeah um especially if there's legislation in this country ratifying let's say an onshore stable coin at that point you would expect that the sort of policy political apparatus would be like, okay, well, so here's the one that we've kind of baptized and is real and they're playing ball and they're doing disclosures.

There's probably additional political will at that point to go after the ones that are cannibalizing and competing with these sort of actual regulated firms. So let's just say that you are a wealthy Chinese person and you use Tether to get money out of the country, which is a very strong use case, strong product market fit for Tether. If tether goes away because of something in the southern district of New York, what would you use to get money out of China? I honestly couldn't tell you because I think that was kind of the last resort thing, right? And it's not like you can easily redeem tether if you're a tether holder and let's say you're a Chinese elite that was trying to offshore your wealth. This is why I think tether had less of a drawdown more recently as rates rose than USDC, right? USDC holders tend to be firms that can sort of, you know, cross the veil back into the traditional financial system, right? And so rates rise, inflation's still high.

So, okay, well, then I'll hold some treasuries instead. So that's why I see USC supply drawing down. Tether supply hasn't really come down very much, which suggests that these are firms that don't have access. Yeah. Especially as China-U.S. relations deteriorate. Chinese and American capital markets I've long maintained will be severed. We're seeing that happen, right? You're seeing China becoming more of a command and control economy, less of a market-based economy.

You're seeing massive moves being made in this sort of cold war between the U.S. and China with the, you see the chip manufacturing thing? If you're an American citizen working on Chinese chips, you're forced to quit several weeks ago or face rescinding of your citizenship. There is a cold war developing between the U.S. and China. You're not going to have porosity between those two markets. I don't know what an earth, let's say Chinese tetherholder is going to be able to do at that point.

Well, I think you'd sacrifice the stability for just the censorship resistance. And so maybe you'd use Ethereum or Bitcoin. Yeah, you'd probably have to just flow back into crypto. You're probably not going to want to, or even be able to flow into a USDC. You might just flow back into liquid crypto. I would think so. Interesting kind of weird edge bull case there. I think the bull case for Bitcoin.

Now, the bear case in the short term is just that the mining sector as we know it is just over. I mean, Bitcoin miners, every time I fire up the SEC website to see if there's any 8Ks or 6Ks, it's a house of horrors on this Bitcoin mining stuff. Everyone is filing statements that saying we're working through it with our lenders or we're not working through it with our lenders. We're just outright not going to pay these things. if you're lending to the Bitcoin mining sector, you already know that you're in a world of pain, but you're in a world of pain. We don't have to tell you that.

So it was funny last week. We recorded on Wednesday, and we said, hey, there's probably bankruptcy going to happen on Thursday. Core Scientific. Yeah, it didn't go bankrupt, but it looks like it's about to. Yeah, troubling news there. Biggest U.S. domestic publicly traded miner, Argo now in dire straits.

frankly, as I've said on this podcast before, I expect significant consolidation. I didn't think Khorasai would go bankrupt, I mean TBD there. But yeah, I think when this is over, you'll have maybe five publicly traded miners in the U.S. And people are saying this is good for Bitcoin mining in terms of centralization. Contrary in view here, this is going to cause significant consolidation and who controls Bitcoin's hash rate, right? Oh, definitely. And I think on a longer term, too, just good luck ever. getting financing in this sector again.

It's going to be so toxic. All the lenders, both crypto and the crypto firms that lent to the miners may themselves be out of business, but the, the legacy trad-fi firms that lend to the Bitcoin miners, it's going to be completely toxic to them. Some of these lenders, so they're going to, they're amending and pretending and extending and, hey, don't pay us now. You can pass in a few months. Don't pass now.

You can pass when you go public. what they really need is the price of Bitcoin to be $50,000 tomorrow. There's not going to be a quick fix to this. These amendments and pretending, it's just, I mean, it's not going to work. And as we said, the business model of mining could be fun. Look, egg on our face, mine, I guess, specifically because I have had so many mining episodes, although, you know, we've always tried to kind of get to the truth of the matter. And, you know, we're not big mining investors by any means.

But the business model of mining could be fundamentally impaired here. As we said, I think last week, if there's non-economic miners that are mining for non-economic reasons, being an economic miner could just be fundamentally unprofitable indefinitely. Yeah. So in other news, Circle SPAC partner, which is called Concord Acquisition Group, they've again delayed the plans to consummate the SPAC. They said it's going to get pushed to February of 2023. I mean, you wonder at this point if Circle just goes public via IPO.

It seems like Circle's just on an absolute tear. with rising rates here. Yeah, I mean, and very interesting kind of, because their economics have massively improved throughout this kind of bare market. But the SPAC, I guess, delayed. Maybe the window still kind of closed and not seeing a lot of public listings right now. I don't know exactly the reason for the delay of yes. So Circle's fundamental core business only continues to improve as rates rise.

Another story was, so the monetary authority of Singapore has launched two DFI pilots, One of them was with J.P. Morgan, notorious hater of all things, public blockchains, with the fork of the Ave protocol. So it's kind of a version of Ave arc, it looks like. So that's significant. I think J.P. Morgan does have a talented team inside that wants to do things. Jimmy Diamond doesn't really let them out much, but that was promising to see. So we didn't talk about the CM news, but Coin Metrics has released a taxonomy with Goldman Sachs and MSCI.

to be distributed through Goldman's marquee data platform. Pretty momentous development, I would say, for the data company. And cool to see Goldman and MSCI taking such a crypto-native approach to the space, releasing this sort of classification scheme. It's a huge development. And I think for a lot of asset managers, a classification rubric is really what they need in order to get into the space. So this is something that is not only really exciting,

for Coin Metrics and Goldman and MSCI, but I think it's going to be really exciting for a lot of the customers who are going to buy this framework. And so we're going to build products and asset management services around the taxonomy, the types of assets that eventual customers will get exposure to and how you think about doing reference rates on some of them. So it sounds kind of boring, but it's actually going to unlock greater institutional participation. It's one of the really critical things that has been lacking in the space. Completely. And my theory, and my theory, with CM was always if you create institutional grade data you will actually open up the crypto industry to more participation from more firms and it was kind of a pinch myself

moment I mean reading the press release today CMs founded around five years ago maybe a bit earlier than that and it was initially just a website publishing node data pulled from Bitcoin and some other proof-work blockchains and now Now here they are basically partnering with some of the largest and most important index providers, asset managers, hundreds of institutional clients publishing taxonomies that will literally help grow the crypto industry. Yeah, it's just it's super exciting to see. Teams done an awesome job. And it's great to do with some great partners too. So Goldman has been just a great partner and investor in coin metrics.

And one of the banks that's really leaned in to digital assets. Yeah, I mean, yeah, full credit to the Goldman team. Obviously, they've been through a few different phases of their crippler exploration, but they seem fully, fully engaged now. So I'm super impressed with them. I want to talk about this weird article in this publication that I'd never heard of before called Protas. So these guys wrote an article about you showing tungsten cubes? Yeah, so I didn't want to acknowledge it.

Well, I did actually because it's really funny, but I didn't want to acknowledge it because it's like such a weird kind of hit piece. So they appear to not understand that the tungsten cube thing was a joke. They think that you manipulated the market for tungsten.

Yeah, they think I'm like the Onion King or the Hunt brothers with silver, but with tungsten. So, you know, to be clear, our engagement around the tungsten issue has not altered the global markets for tungsten a valuable industrial commodity with actual uses. Crypto-Twitter, people buying a couple hundred cubes here and there,

doesn't alter the market dynamics for tungsten. I don't know. Have you seen the shipment that CMS got tungsten cubes? CMS might have actually moved the needle. It was like an 18-wheeler dropping that thing off. Yeah, so that was quite... I tried to lift even the smaller cube, I think the five-incher. Yeah.

I don't think I could. So Protas basically are implying with this article that I pumped the price of tungsten And they kind of imply that I somehow cash in on tungsten, which to be clear, I've only ever lost money on tungsten because I bought the cubes and gave them to people. Again, we have never lost money on it because we've never sold tungsten. Well, I don't even know how you how do you sell a retail tungsten cube. Well, why would you even want to? Yeah, so the article says, Nick Carter, in a conspiratorial tone,

Nick Carter admitted that he enjoys giving away Tungson Cubs as holiday gifts. I guess that's their big. It's just, Nick Carter just reveals that he's a generous gift giver. And then they say, eventually months into his initial pump of the commodity, which, to be clear, didn't pump.

The price of Tungson's been unchanged. Nick Carter may have capitulated into a seller, and referencing a joke tweet that they appear to be very kind of like illiterate and not well read people because the tweet was for sale Tunks and Cube lightly used

Yeah Which is a... I got the joke Obviously a joke I'm not selling my cubes I don't know who I would sell them to So yeah they seem upset basically That um That we had a podcast with the

Tuncston Midwest Tungsten guys And that I tweeted about Tunks and Cubs basically Well, look, if they want to talk about it, then they're more than happy to come on the podcast. We can talk to them about tungsten cubes. We're kind of overdue for another cube episode. So that was incredibly weird, and those people should probably get a life or write about something. Like, what about a real investigation, guys?

There's plenty of things to investigate in the crypto industry. I'll tell you right now. The Three Arrows Boys are still running around with their new faces wherever they're running around. Yeah, where's our three-hour? What about Doe-Quant? Where's Do-Quant? Doquan is probably running around with three of them. They're probably out there cooking up their next Ponzi ski.

So, yeah, that was this week in weird hit pieces. All right, I think that's it for the week. Tons of news this week, huh? Yeah, that was a big one. So congrats again to the team over at Fidelity. Get on that wait list. And if you're at Fidelity, take me off the wait list. I didn't even know you could get on that.

Oh yeah, I got right on it as soon as I saw it this morning. All right, everyone have a, well, people say that I shouldn't say have a safe and healthy weekend. So we got some. We did get feedback on that. All right, everyone, have a dangerous weekend. See you on Monday.