On The Brink with Castle Island - Weekly Roundup 12/13/24 (French Hill, Circle x Binance, more OCP2.0) (EP582)

Episode Date: December 13, 2024

Matt and Nic are back with another week of news and deals. In this episode: French Hill wins the nomination to chair the House Financial Services Committee Riot Platforms, a bitcoin mining company, announced the intention to raise $500 million via a convertible note offering. The proceeds will be used to acquire additional bitcoins, and for general corporate purposes. MicroStrategy acquired another 21,550 bitcoin for roughly $2.1 billion. Circle and Binance announced a partnership with the goal of expanding the reach of Circle's USDC stablecoin across Binance's trading, saving, and payments platforms. Additionally, Binance plans to adopt USDC as part of the company's corporate treasury. Coincheck, the second largest crypto exchange in Japan, went public via SPAC, joining Coinbase as the only other crypto exchange listed on Nasdaq. The total stablecoin market cap eclipsed $200 billion this week, a record high following a 13% increase in supply in the past month. Ripple's RLUSD stablecoin gained approval from New York's Department of Financial Services, a key step in the company's plan to launch the tokenized dollar by year-end. Google announced a new quantum computing chip, though the specs are still many orders of magnitude away from threatening the encryption levels of Bitcoin and other crypto protocols. Sponsor notes:  Coin Metrics State of the Network: Where in the World is Crypto Trading? Exploring the Kimchi premium, regional exchange activity, and crypto seasonality

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. Guest 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 is 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, $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. And this episode is brought you by Coin Metrics, and here is the Metrics Minute. For today's metrics minute, we're looking at time zone activity. So on December 3rd, South Korea briefly declared martial law triggering a kimchi premium. Bitcoin traded a 20% premium on South Korean exchanges. Based on exchange time zone analysis, Binance trading volumes are at 19% higher during European hours and 16% higher during US hours.

Most exchanges over indexed towards US hours, with Gemini showing the largest domestic bias of 57%. Cracken shows the strongest demand during European hours with a strong bias and then upbitt towards East Asian hours. Applying this to crypto asset, the US remains the hotspot for Bitcoin, ETH, Seoul, and USDC. Interestingly, demand for tokens like ripple,

Stellar, and Tron picks up during East Asian hours. No surprises there. And then Tethers on-chain activity peaks significantly during EU hours. That is your metrics minute. That's interesting. Tether peaking during EU hours, huh? I mean, I guess that's, I guess tether's just used worldwide, and the EU is kind of in the middle.

Well, busy week this week. Just you're a road warrior this week, huh? Yeah. Reporting in from New York, I was in Boston this morning. Almost missed the train. I was the last person on a train. train left 10 seconds after I got on. The guy at the station said the train was closed.

And I'm like, well, the door's open. So I'm getting on. Good for you. You can't stop me. Yeah. Just touch and go there. Well, it was a fun week and a busy content week. So we sat down with Matthew Lemurrell and Mitch Machedjian of blockchain co-investors to discuss their 20, 25 predictions for the blockchain space.

it's turning into a yearly podcast with those guys. That's a lot of fun with that one. Then we also published an article in Fortune, myself and Austin Campbell, called DeBanking Harts Everyone. It's time to end it once and for all. That is, of course, a general overview of what's going on with debanking. That was all over the press this week. My goodness.

Everyone's talking about this week. So there's a New York Times article. And you were in the Wall Street Journal. You were, I don't know if you were in the print edition or not. I haven't opened the print edition today. Yeah, I need to get my hands on one of those. I don't, I don't even know where to get it. I can't remember last time I bought a physical newspaper.

I get it delivered still. I'm told there's a picture of my smiling face in the print edition of the journal. Okay, I need to, when I get home from work, I'll, I'll pull that out. We're going to investigate that. So they are covering what we call Operation Shoke Point 2.10 title of this article is Crypto industry hopes Trump can finally get them bank accounts, which is kind of funny. It implies that I have no bank accounts. To be clear, I have bank accounts.

Not as many as you should, though. I am not unbanked. I am underbanked, let's say. I'm not sufficiently banked. I would like to be more banked. Yes. Yes. So that, I thought it was a good article, actually.

from Angel, thank you. And then the Times covered it, how Crypto Insiders turned debanking into a political storm. Honestly, credit to them. I wouldn't say the Times is historically that positive on crypto, but this was a good article.

It was, you know, well reported, I thought. Yeah, I thought it was pretty good. I mean, they did kind of say, look, there's no evidence of a, like, a top-down conspiracy here. but we also haven't heard the end of this story. So just keep in mind that none of the bank executives have been able to testify in front of Congress

and reveal what was said to them under confidential supervisory information. Yeah, that's right. And also, I mean, also all of the federal regulators, financial regulators, came out in early 23 and said, we don't think banks should touch crypto. So it's kind of a little puzzling that people say there's no evidence

that it was coordinated there were joint letters written by the Fed, FDIC, and OCC. How is that not evidence of coordination? Do they just think that's a coincidence? It's like they're on the same letterhead. Yeah, they signed their names on the same letter. It was a joint letter. So it's obviously coordinated.

And yeah, as you say, like, the bank executives haven't been able to say anything. We haven't had the hearings or investigations. The FDIC is now in trouble for, over redacting their disclosures that they were compelled by law to make the documents regarding their pause letters. This just came in. Paul Grasol at Coinbase tweeted this. The judge says that the FDIC made excessive redactions on the documents that they released. So, I mean, clearly there is a desire to hide something. Is that fair to say? Yeah. How is Marty Brunberg still in charge of the FDIC?

It's very puzzling. So we're going to get slightly less redacted letters, I think, in the near future. And yeah, stay tuned. Look, the new Congress isn't in place yet. Give it until January, and I assure you we will get more information. All right. Well, let's hop into some deals of the week. First one up is lava.

This is a Bitcoin lending platform that raised $10 million from Founders Fund, Kostla and Peter Thiel. Then you have hyperbolic, a decentralized compute marketplace. there is 12 million from variant polychain and light speed faction. Then it's commonware, a blockchain infrastructure developer that raised $9 million from Han Ventures and Dragonfly. Then we have Sphere, a global payments network. There is $5 million from Coinbase ventures, Krakken Ventures, and Antigram.

Cast is a stable coin powered card platform. There is $10 million from peak 15 partners, Hong Shan, and others. Then you have Relay, a Bitcoin investment app. They raised $12 million from Ego Death Capital, Plan B, Bitcoin Fund, and others. Sweenend is a DFI protocol building on not surprisingly Sween. They raised $6 million from Robot, Delphi, and Figment. Then you have Spexie, a blockchain network for drone imagery, of all things. They raised $11 million from blockchain, moonshots, Capital, and Protocol Labs.

Drones are hot this week. You follow on the drones? Drone situation? Yeah, what's the deal with those? what's happening with the drones? I, uh, well, I'm not that worried about it, are you? Do you think these are UFOs or it's got to be just an intelligence agency with a bunch of cool new toys now?

But I'm, I would be worried about that. Just unknown drones? Like, who's drones are they? Well, they've got lights on them. So they seem to be FAA compliant. No one knows whose drones they are. I don't know. That's concerning to me.

The next one is. AX-a-Bits. This is a crypto-AI startup. There is $15 million from HackVC and others. Then we have Neptune Protocol, Stablecoin, D-Fi Protocol. There is 3.9 million from Anamoca, CMS Holdings, and BlockCcelerate. Then it's Perena, a stable-coin liquidity protocol that raised $3 million from Borderless, primitive, and Binance Labs. Congrats to Anna and the team over there. Next up, Synthetics. They're the D-Fi Protocol. They acquired TLX, a leverage trading platform, via a token. for token transaction.

I always thought we'd see more of these token to token M&As, didn't you? Yeah, but there's a few happening now. And last one up is Interchain Foundation, the developers of Cosmos. They've acquired Skip, which is a cross-chain infrastructure platform. Busy deal week. Kind of quiet on the news front. We have some sort of corporate finance events here, Riot, the Bitcoin Minor. they announced their intention to raise $500 million via convertible note offering,

the proceeds will be used to acquire Bitcoins. No surprises there. So the Micro Strategy Playbook in play at Riot Platforms. And speaking of Micro Strategy, they acquired another 21,550 Bitcoins for roughly $2.1 billion over the past week. So what do they call it? Is it the 2121 plan? 21 of equity

and 21 of debt over the next few years in terms of what they want to raise I think they're well on their way Wow Did you listen to Michael Saylor on Alex Thorne's podcast? I haven't had the chance yet What do you make of it?

Well he talks really fast to Michael Saylor And he throws a lot of numbers at you I feel like I'm going to have to go back and listen to it again So I guess people are still excited about the strategic reserve I think Trump maybe implied something to that effect this week, although it's unclear what his plans are. Texas, apparently there's a bill in the Texas legislature now to pass, to start acquiring a Texas strategic reserve. This is the same lawmaker that actually passed the Texas Proof Reserves bill that we collaborated on.

He was on the podcast at one point, right? I think so. So he actually does have a track record of getting these bills through. So that one could happen. So Texas is going to have a strategic reserve of Bitcoin? I mean, I think that makes more sense than the national level because it's not really throwing the dollar's dominance into question. And the states, some of them have these mineral funds

or equivalent of sovereign wealth funds. So I think for the states it maybe does make some sense. How do you think borrowing works in that context? They'll issue dollars against it, won't they? They'll borrow against their Bitcoin holdings. I don't know what the plan is. I don't know what the plan is, but I'll have to dig into the legislation. That'll be really interesting.

All right. Next one up, Circle and Binance. What do you think about this partnership? So they have done some sort of a USDC stablecoin partnership. It sounds like USDA is going to get even more integrated into the trading, saving, and payment platforms that Binance uses. And USDC will be used as a corporate treasury asset at Binance. It's quite interesting.

I mean, because Binance had historically sought to capture the interest on stables for themselves by issuing BUSD, which they've done with Paxos. Presumably some element of revenue sharing is part of this deal. you'd have to imagine. But I would say it's a huge win for USDC being able to integrate with Binance like this, by far the largest crypto platform globally. Do you think Binance goes public here during this cycle? I think they'd have a really hard time, but they already have B&B,

so they're kind of public in a way. Yeah, they kind of already have all the benefits. And I guess they don't have a lot of early shareholders that, and if they needed liquidity, plenty of ways to get them liquidity. Yeah. Speaking of offshore exchanges, Coincheck, the second largest crypto exchange in Japan, they went public via SPAC.

Joining Coinbase is the only other crypto exchange listed on NASDAQ. The only thing I know about Coincheck is that they were hacked for around $500 million worth of NEM back in the day. Remember NEM? NEM, man, what a throwback that is. What was NEM just like a better Ethereum? What was that their marketing? It was just Japanese Ethereum, I think.

That's crazy. And I think North Korea got the NEM. What do you do with the NEM once you get it? Does anyone tick NEM? Yeah, I don't know if that NEM's worth much today. I don't even know anything about NEM. But I remember tracking them in 2017. It was a hot project for a minute.

Yeah, that really was. So this company, Coin Check went public via SPAC, or SPAC's back here. Wow. Incredible. I mean, the whole thing's incredible. I didn't even know Coin Check was still going. Yeah, this is wild.

Well, congratulations to Coincheck, I guess, going public and being listed on the NASDAQ. I think tomorrow is the call for, is tomorrow the micro strategy call to see if they get into the NASDAQ 100? Oh, right. Yeah. I'm assuming they will. Yeah, I would think so. Well, Coin Check's trading. 1.3 billion. So congrats to them.

Wow, good stuff. All right. In other news, what do you make of this Google quantum computer chip here? Everyone kind of freaked out for about five minutes on crypto Twitter and thought that it might impact Bitcoin, but it doesn't. Yeah, I mean, quantum is one of those. Look, I don't want to say FUD because FUD implies that you're being dismissive towards the critique. and it's a valid critique, you know, like in theory, ECDSA, and maybe even Schnorr, I think, would be quantum vulnerable if there is a sufficiently good quantum computer.

This one that Google rolled out seems to be orders and orders of magnitude away from the power required to crack the digital signatures that Bitcoin uses. And also I'll note that Shaw 256 is quantum resistant as far as. as I can recall. Am I correct in that assessment? I don't know. It's possible that you're correct, but I'm not exactly sure.

That's my understanding. So I think the hash functions, reversing a hash function, is not something thought to be doable with QC. So I would class this as a problem for later, maybe a decade or two down the road.

Presumably quantum computers will continue to improve. I think it's worth. keeping on the radar. You know, if ECDSA can be cracked, then Satoshi's coins would be vulnerable because they are not hashed. The addresses are not hashed. They're kind of naked in a way. And there are, the good news is that there are quantum resistant signature schemes. I think other blockchains actually have included these, but they're not as data efficient as ECDSA for instance. So I don't want to fully, you know, dismiss the threat here.

I just think it's something that we should worry about in 10 to 20 years. So if there were a hard fork to just change into a quantum resistant algorithm, what would that actually look like from a user perspective? Yeah, I think you'd have to maybe claim your balances on a new fork. I don't know if there would be any way to do it as a soft fork, you know. So then you'd really figure out if Satoshi was still alive. Yeah, I think it would be messy, honestly. No one in Bitcoin Core is talking about this as far as I'm aware.

I haven't seen a proposal. But yeah, this is something that should be discussed. Like what's our contingency plan, you know? Because in the mid to long term, this will be something that Bitcoin has to grapple with. Yeah, interesting. Breaking news, Congressman French Hill, Republican from the state of Arkansas, has won the chairman of the House Financial Services Committee for the 119th Congress. He won it on the second ballot after Representative Frank Lucas from Oklahoma dropped off.

Talk about a win. That is just the best news, Matt. That is the best news. I hadn't seen that, and that I'm so happy you just told me that. That is a big-time deal if you want to see a market structure bill. or a stable coin bill happen in 2025. He is the number one pick for that spot. French Hill is absolutely the man.

Just a great guy. I had the chance to meet with him in Washington when I was there. He gave me specific assurances, and this isn't a secret because he told the press this, gave me specific assurances that he would, quote, knock down doors to find out the truth of debanking and chokepoint. There are some doors that need to be knocked down. I need those doors to be eviscerated, just shattered to smithereens.

He's great. So he came on the podcast, I don't know, what, a few months ago and was super eloquent on what needs to happen, both at a SEC level and then through Congress. Also a huge champion for getting Tigran Gambarian out of jail in Nigeria. Yeah, I mean, a decent guy deeply understands. you know, his subject matter here in terms of financial regulation, very aligned with the crypto industry. Just an outstanding result. And it just fills me with optimism for the next Congress here. All right. So let's hop into some other things. I actually want to talk about the Crenshaw nomination.

So it looks like this is on pause for now, but the Senate Dems made an attempt this week to throw Caroline Crenshaw back into the mix at the SEC and people went berserk, rightfully so. This is probably, this is someone who is probably more anti-crypto than Gary Gensler, someone who, do you remember that even after a federal court ruled that the Bitcoin ETFs needed to get approved, she voted against them? So she basically Yeah, I do remember. Voted to break the law, super hostile to. Wasn't there a moment on this podcast, am I misremembering when he thought for a second she might be warming on crypto? Am I right about that? Yeah, you're right. because she had not been on the record with anything about crypto.

And then it seemed like there was a bunch of momentum building up. And I said, I wonder if someone flipped at the SEC. I wonder if we're actually going to get an ETF because someone flipped. And it turns out the person who flipped was Gary Gensler, not Caroline. Yeah, it wasn't, it was not her. She is pretty bad on crypto. So what happened here? They tried to rush through a vote in the Senate Banking Committee to give a vote.

Yeah, they tried to jam it through. And they put Adam Schiff. in charge of it, who was recently, you know, he recently became a senator. But then it was delayed. So there was some procedural thing that happened with their Republicans came in and delayed the vote. And now it's, it's on hold. I mean, there's only like seven days left in this Congress. So it could still happen, but right now it's not been scheduled. It would need to get voted out of the banking committee and then it would need a full Senate vote in order to pass. and you would just hope that there would be enough nose on that.

I mean, this is where you need to see the, you know, super PACs and the crypto lobbyist reminding these senators, you know, what happened in this last election. And, I mean, if you want to undo the damage that's been done, you just can't vote to reconfirm her. That's just not an option. Definitely not an option. So, and obviously there's going to be a Democrat.

in her seat. But why don't we find a better one? What about Chris Brummer? What's he doing? Let's get Chris Brummer. Brummer is amazing. Yeah. So, yeah, let's hope that one goes the right way.

But it was a scary moment. Ripple's R-L-U-SD stablecoin got approved this week in New York. So they got DFS approval to launch their tokenized dollar. Congrats to Ripple on the stablecoin front. Stable coin market cap a notoriously slippery metric, actually. I'll tell you that. There's no one number for the stable coin market cap. But according to the block and coin gecko, actually, it has eclipsed $200 billion.

An all-time high, significant all-time high, actually, as of right now, according to them, it's $207 billion. So stable coin market cap just surging. That is crazy. think we'll see a big crop of new stable coin issuers coming to this market over the next six months. Yeah, and you'll see the biggest asset managers and financial institutions in the world issuing their own stables. And you'll see bank consortia issuing their own stables. I mean, it's going to become a knife fight out there to try and win market share from Tether from U.S.D.C. It will become a very hot space very quickly.

Do you think Tether ends up as a U.S. domiciled company here in the next few years? I think that would be in their interest if they're able to do it. There was another article in the journal. They really don't like Tether, man. I don't know how else to put it. They hate Tether. Talking about Lutnik and Tether and Kanner and, you know, Tether being used for all sorts of nasty things. their current stance is to be as XUS as possible in every single respect in terms of the principles, management, cap table,

and then obviously the users of the token. I think they should be looking at plans to onshore. I mean, because if you get a stable coin bill, it's going to be really hard to connect to the financial services infrastructure in the U.S. if you're not within the bounds of that bill, right? Yeah. So they stand to potentially be a loser if legislation enshrines domestic stables here. So yeah, that's one of the biggest open questions, I think. One of the gray swans hanging over the industry still is the status of this.

This one could have been in the deal section, but also looks like it just came out. So Avalanche has raised $250 million to do a major overhaul of their L1 blockchain. This was a locked token sale led by Galaxy Digital Dragonfly and Parify. investment firms in this deal. So congrats to Avalanche. So that's one of the bigger deals of the year. Good for them. So I think that's it for the week. We've got to cut this one a little bit short. You have an engagement to go to tonight. You're just a busy man on the circuit. Heading to Pub Key, I guess the only Bitcoin bar in New York. Is that fair to say? I would think so. Certainly a Bitcoin bar in New York, probably the only, going to talk about

what else, Operation Shugpoint 2.0 with Austin Campbell, noted academic, on entrepreneur, stable coin expert, keeping this media blitz going until we got the answers we deserve. Well, it's all looking up here. I think we're going to get some answers to this Operation choke point now that we have French Hill in the seat. So good way to end the week here. Thanks for listening. Everybody have a safe and healthy weekend and we will see you on Monday.