On The Brink with Castle Island - Weekly Roundup 12/22/23 (Inscriptions mania, Fairshake PAC) (EP.490)

Episode Date: December 22, 2023

Matt and Nic return for another week of news and deals. In this episode:  Matt's tree crisis The Jamie Dimon Elizabeth Warren nexus Is there a really a revolving door between crypto and the government? Warren's latest volley of letters Promethian gets authorization to start trading We recap the inscriptions frenzy A new Super PAC is raised The BVI issues a seizure of the 3AC assets Zooko steps away from Zcash Content mentioned in this episode: Messari's Crypto Theses for 2024 Bitwise 2024 predictions Blockchain Coinvestors 2024 predictions Sponsor notes State of the Network's 2023 Year in Review In Coin Metrics State of the Network Issue 238, we revisit major stories that shaped the digital asset industry in 2023 with a data-driven lens

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 to Britain's ailing economy with a new round of Concentive Easing. You've printed a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin. 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. All right. Well, for this Metrics Minute, we're revisiting major events that shaped the crypto industry in 2023. After a challenging 22, digital assets rebounded in 23, with Bitcoin and Eith rising 155 and 86%. percent respectively. Wow. Bitcoin trounce Ethereum, huh? And Solana soared 637%. What a year. What a year for Solana. Q1 saw a theme of increased regulatory

scrutiny per onshore entities after the fallout of SVB. The stable coin market saw reshuffling. USDC fell to 22 billion in supply tether rose to 89 billion in market cap. ETH completed the Chappellea hard fork in Q2, causing 28 million Eth to be staked, with staking or hovering around 4%. Eith issuance fell 90% after the merge,

being 23 of the first year in which ETH supply declined. Didn't really help the price, though. There was a regulatory momentum with Ripple and Grayscale's court wins against the SEC, the GBDC trust saw its discount narrow from 40% to 9%. New launches like PayPal's PYSD, reignited conversations in the stablecoin landscape. Stablecoin settled over $6 trillion in value on chain with USDC being a lion share of that.

And Q4 brought a revival in network activity. Bitcoin futures interest on the CME, reached near record levels with growing institutional. interest, only 30% of Bitcoin actually moved in the last year. And lastly, digital assets outperformed other major asset classes, coin, aka Coinbase ended the year up 350%. Micro Strategy rallied 293%. The Velcroo Bitcoin miners' ETF rallied 228%. So overall, pretty good year for the coins. That is your Metrics Minute. Good Metrics Minute there. If you let you let you. like our sponsors go buy some data.

Yeah. Coin Metrics. Nothing says I love you like a network data pro subscription. Check out Masari too. Christmas present. It's come on board as a sponsor. Christmas present. People love crypto data.

Buy licenses for your loved ones this year. Just you can print out the receipt, put that in the stocking. Here's how much I love you. 24-7 real-time. So intense week. you had a tree fell on your house? You had a brush with death this week. Let's just hop right into it. It's just, and I will say, so a tree fell on my house. And the first thing that you said after I told you was this is going to be great for the podcast. I was like, there's a tree literally on my house. There's like a 5,000 pound tree. Wow. So I'm home on Monday. So I just happened to be home. Thank God. And there was someone coming out had to do something with a guest.

at the house, but there was this intense storm. And all of a sudden, it sounds like a bomb goes off in my house. The house literally shakes. All the lights go off. I thought it was lightning at first. Nope. A tree fell out of my neighbor's yard onto my roof. And thank God it was caught in the power line.

So it was being held up by the power line. And it kind of, so it hit the roof pretty hard, but not a ton of damage because the weight of the tree was. mostly being held up on the power line. And you would think that that would be something that you could immediately take care of. It just came off my roof this morning. It was on my roof from Monday until Thursday morning. Well, yeah, as I said, you know, and to be clear, I did verify that you had all your limbs intact

before being flipping about it. But yeah, when misfortune occurs to us, as it seems to do quite frequently, the bright side is that we got free content for the podcast. So if anything, we should be celebrating. So I came to find out that in Massachusetts, under the law, if your neighbor's tree falls on your property, it's your tree. That's how it works. And so you have to pay for the removal.

My neighbor's tree is literally on my roof. It was almost in my bedroom. But it's my problem. Is this the same neighbor that feeds the turkeys? Is this the source of your troubles here? Correct. Correct. Now, he was great about it. I have no complaints.

I thought he was a stand-up guy about the whole thing. There's nothing like a tree falling in your neighborhood to just meet all the neighbors because all the guys come down. So you get a little pow-wow, four or five guys, and everyone's like, you know, has no idea what to do. It's like, well, I think you should call the fire department. No one got up there with a chainsaw.

I personally, I'm just saying would have gone way different if I was there because, you know, you get up there with a chainsaw. I mean, there's literally a live wire there sparking everywhere. There's no way on earth you would have gotten up there with a chainsaw. This thing is hanging on a power line and it's like the 4th of July.

And, you know, we're just sitting around trying to be manly men. It's like, call the fire department. Some guys did say I've got a chainsaw. I'm like, what are you going to do with that? So you were saved by virtue of the fact that it was taking on the power lines. now no power lines

no mat I mean that's it right there I mean if it weren't for the power lines I would be homeless right now so all in all very very very blessed it's the minimal damage

to the structure you got some firewood I gave the firewood to the neighbor okay so it all's well that ends well yeah no we're fine but you know a lot of other things

going on the Kestland family. Everyone at this company is sick right now. We're so sick as a cohort. I've been afflicted for weeks. We had to cancel our holiday party because everyone's got either the flu or COVID or some mysterious ailment. We did. Yeah, no, but that's okay.

We'll have two holiday parties next year. It did not slow down the podcast production, though. The podcast, I don't know what's going on with the podcast. this is the fastest rate we've ever produced episodes. This is episode 490. So this is the fourth podcast episode this week. So we don't have a Blockbuster 500th episode yet. So we have 10 episodes figured out.

It'll be a rundown. It'll be a rundown, right? You got to make the 500th. We need to celebrate. I mean, 500 episodes. That's like, that's an insane amount, most of all. Maybe we can retire and end the show. No, I can't retire.

We're just getting going. This market is just starting to come to maturity. Well, if you have any suggestions for eminent 500th guest, let us know on Twitter. Maybe we can get Gary Gensler. I don't know. Maybe that we could get all Gary. Do you think he would want to do it? Probably not.

Maybe we can get the Prometheum guys to do it. I'm sure they'd love to do a podcast. Yeah. They'd probably say yes. Yeah, I've already heard enough about them. Laura Shin did a really good podcast with them. We have to talk about them today, actually, because they got their approval to go live and list all of the crypto securities.

All right. Well, we'll talk about it. Busy podcast week. So Ria sat down with Nick Newman, the CEO of Kasa. they talked about Casa's expansion into stable coins. That's a cool, that's a very cool product update. So now you can hold stable coins the same way you hold Bitcoin and Eith. Yeah, very exciting there.

You sat down with Andres Samados, the founder of Fileverse, about those good episode. Yeah, he's building kind of a decentralized notion. There's like a file sharing service, very cool. And then I sat down with Dan Tapiero. I think Dan's been on the podcast three times now. So it talked about just the state of markets, what's going on at 10T and one roundtable partners. So that was a fun one too. Yeah.

I mean, has anybody else done the show three times? That's quite something. Oh, actually, you know, Brandon McBee has done it three times. Shout up Brandon. Oh, he has. Yeah. Not a lot of people get three episodes on the show. I just recorded a podcast with Selkis, and I think we're going to release it on maybe Christmas.

And I think he might, that might have been his third appearance too. Brian is pretty fired up these days. Yeah, it was great. Really good. Did you read? Have you read his Theses for the year? I did. I thought it was awesome.

I thought it was the best one yet. I like that. We're talking about the Masari Crypto Theses, which you can get on their website. Really good paper, I thought. I liked that we got a shout out. You and I. That was cool. Thank you, Ryan.

People to watch. People to watch, yeah. Yeah, I agree. I think we're watchworthy. Thank you. Yeah, I think so. Only watch us if you like us. We don't need like Elizabeth Warren watching us or anything.

She's watching, like a hawk. I mean, I don't know what we did exactly to deserve that appellation, but yeah, expect us. I think it was a lot of the calling out of the bad boys, which there's some bad boys news this week too. Yeah, basically our angry tweet seems to be the main commodity that people demand from us. So we'll keep doing it. We'll keep doing it.

The content strategy does tend to be a little bit angry and calling out bad behavior lately for about the past year, maybe a year and a half. People like it the more, I don't know what I was telling you this. The more tweets sound conspiratorial, the more people like that. so there's a risk that you get audience captured

but you don't even have to make up this story here I mean you get the bank lobby writing bills for Elizabeth Warren you literally can't make this stuff up the conspiracy theorists wouldn't even believe you if you told them that Jamie Diamond is working with the bank lobby to draft Elizabeth Warren's anti-crypto bills Elizabeth Warren is literally in charge of overseeing the banks yeah that's true I mean what do you call a conspiracy that's true

a true conspiracy? Just a reality. It's an unfortunate pattern of events is what it is. Yeah, you had a good hit recently with your thread there. Yes, I guess we can touch on it. So if you missed it, I tweeted about it, but this new Warren bill was literally written by the Bank Policy Institute. And so she choreographed, it seems,

this back and forth with Jamie Diamond about how bad crypto is and he would shut it down, come to find out her bill was written by the Bank Policy Institute, of which Jamie Diamond is the chairman of the board. Keep in mind that the Senate Banking Committee has an oversight responsibility for the banks. So her job is to oversee, you know, not only the SEC, but to have purview over the banking industry. So you're not supposed to be giving these people the questions that you're going to ask them ahead of time like she did with Gary Gensler. So that was also in the Tweetstorm. Heritage Foundation did. a Freedom of Information Act request on Warren's emails and Gensler's emails and found that there

was coordination on exactly what was going to be asked in those hearings, as well as some suggested answers, which is mind-boggling. So there will be FOIA requests on the diamond interactions and whether or not Warren's staff coordinated there. But the fact is already out there that the Bank Policy Institute wrote the bill. It's just you can't make this stuff up. The other thing that was crazy is the guy who runs the bank policy institute, this guy, Greg Bear, makes $3.1 million a year at a nonprofit. He's formerly the head of regulatory affairs at J.P. Morgan. And he formerly wrote, literally wrote a book with Gary Gensler. Conspiracy, like, you couldn't make up a conspiracy theory. That's that crazy. All right. Here's,

uh, here's another weird one. Do you, did you, uh, do you follow this guy? Matt Stoller recently? I don't think so. So Matt Stoller, he was the guy that tweeted that if you work on Bitcoin or crypto, you're committing treason. Okay, so just

hold that in your head. I actually like his analysis, independent of that. Part of Elizabeth Warren's recent spate of letters that she wrote to Coin Center and everything, she was criticizing the revolving door between the admin and crypto advocacy organizations, right?

Shouldn't like the revolving door. Here's an interesting thing. It's a little convoluted. Barat Ramamerti, who is a Warren plant in the White House, worked at the National Economic Council, then leaves to the American Economic Liberties Project, which is the same organization that Matt Stoller works at. And that's the revolving door between the admin and the nonprofit world. So to tie this back, so Elizabeth Warren wrote these letters to some of the policy groups in this industry.

Coin Center got one. The Blockchain Association got one as well. And she's critical of hiring former regulatory type of people, law enforcement people. people into this organization, kind of saying it's a revolving door. It's like, hey, yeah, but this guy used to be, wasn't he her chief of staff before he entered the role? So her other former chief of staff just took that new job. So, and then this guy, Ramoswani, is it Ramoswani? Rama Merti. Rama Merti, Rama Merti jumps into, jumps into this, this like, quote unquote nonprofit. It's crazy. I mean, how can you be, how can you claim to be against a revolving door?

I mean, it's like the most well-trodden thing that happens in D.C. Everyone does it. And also, like, you don't see a ton of, like, Biden admin officials joining the crypto industry. I haven't seen a lot of that. So I don't really, of all the things to criticize about the crypto industry, that doesn't seem to be, like, the main issue. No, it's just a distracting issue. I don't think it's meant to be like, here's the main issue. It's just meant to stay in the headlines, which I guess we're talking about it. So on the Prometheum front, as I said, they have now been authorized to begin their SEC compliant crypto custody trading. I thought the funniest tweet about this was courtesy of Bill Hughes, who tweeted a picture of a empty Venture.

machine because the point is that there's basically nothing that they can trade according to their view of what a compliant crypto security is. So I thought that was pretty funny. Well, they think Ethereum's a security. So maybe they'll try to trade Ethereum. What are you going to trade? Yeah. All right, why don't we hop into some deals of the week? First, and these are powered by Masari Enterprise. So check out Masari.io if you want to get the full listing of deals of the week. These are just the subset of the bigger ones. So tap protocol, a company building in the Bitcoin Ordinals ecosystem, raised 4.2 million from SORA Ventures. Shout out Ordinals. And you know, we didn't cover the inscriptions frenzy happening on other

blockchains. Have you been following this? Yeah, what the heck is going on? So basically, this is a Bitcoin thing that made its way to a bunch of other blockchains, which is weird that never happens that way. And basically people were creating these meme coins using the inscription approach on all sorts of other blockchains. And it's basically cheaper to do it because you're doing it in the Ethereum equivalent of op return. And it's not very composable to create an inscription that way. So it's like going backwards technologically. But yeah, this was a frenzy that happened last weekend and it took down a bunch of blockchains. It was like a Bitcoin concept that took down a bunch of other L-1s.

Transaction fees on AVACs were like 200 bucks. Yeah, it was just through the roof. And it was people kind of speculatively minting these meme coins, but in a different way, basically putting them in the equivalent of operative, arbitrary data space. Anyway, that was a crazy thing that happened that we didn't discuss. Next up, you have Unlock Global and Argentine Bitcoin mining company. They raised 15 million.

Then you have Web3 mine, a Web3 software company that raised 6 million from 1KX and PL Ventures. Then you've got Tres, which is an accounting and tax reporting platform, Tres. They raised 11 million to add new blockchains. So those are the deals of the week. I wouldn't have expected a ton of deals this week. This is usually not the time when you announce a fundraise. Quite a week. So should we start with Fair Shake?

Fair Shake is a new Super PAC. Focus on digital asset objectives. They were $78 million from donors, including Andreessen, Coinbase, Ripple, Ron Conway, Fred Wilson, Boinkled Boss Twins. So I think this is a significant story, right? So the idea with this super PAC, it seems, is to target vulnerable seats as well as promote pro-crypto members of Congress. And so this is not an insignificant amount of money to be able to spend on some of these races. Yeah, I think if my number one wish list

item, aside from unseating Elizabeth Warren, which I don't think it's likely to happen. I don't even know if she's up for a reelection. Is she? I don't know. It's not happening. I mean, no one can be to Elizabeth Warren. Sherrod Brown. Okay. That's my, my, uh, my, my number on target because he's such an antagonist of crypto in the Senate. And his race is very close. So if you live in Ohio, guys, you're a single issue voter. Okay. Sorry. I don't even know who he's running against, but vote for not Sherrod Brown. So that's the biggest one for sure in the Senate. And he's very vulnerable because Ohio went red in the last election. And he's the head of the Senate banking committee. He's been really antagonistic to the

clearly is doing what Elizabeth Warren wants. The other one is John Tester out of Montana, who's been pretty antagonistic towards the industry as well. So I think those two seats are the most vital. Yeah. And look, we don't need to persuade Congress that there's a cohort of 50 million crypto single issue voters. If we can swing one or two races, that might be enough to create some restraint on the part of

these anti-crypto senators. and representatives. I think we just need to show a little bit of muscle here. Just demonstrate, yeah, you know, maybe we can swing a couple of percentage points. Maybe that's enough. It's also supporting some of the folks that are on the margin or even supportive. And so folks like Richie Torres on the Democrat side, he's someone that we should be coalescing around and supporting.

Yeah, totally. So 2024 is going to be a test of this. Is there a crypto demographic in the? the U.S. Do we exist? Or is it just a few dozen people? Let's find out. All right. So moving on. Did you see Zucco stepped away from the Zcash project? Kind of the end of an era there for privacy coins. Yeah. I mean, I think Josh Swihard is running it now. But yeah. I mean, I don't think Zcash, you know, ever really got the traction that maybe they were hoping, unfortunately. But yeah, it does seem, I mean, Zcash was created in, what, 2015, 16? It's really been a long journey for them.

Yeah, one of the most novel projects that ever popped on the scene, I would say. I remember when it was being released, it was just a kind of a groundbreaking technological breakthrough to be able to build that. Yeah, I would say Zcash was probably the first real world deployed zero knowledge proof system, I think. Is that fair to say? and their impact has been very material because ZKPs are now all over the place. They're in roll-ups. They're in all sorts of other technologies. So I want to give the Zcash team a lot of credit for doing that. I think it's one of those cases where the valley created is far outstrips the valley captured by the product. And that's just one of those things, an open source.

Yeah, it's kind of like some of these predecessors to Bitcoin. you know, Way-Dyes project. Some of these, you really stand on the shoulders of giants in some of these categories. And certainly Z-Cash was just a pioneer. And the privacy stuff is just crazy right now in terms of the advancements that we're seeing in fully homomorphic encryption and zero-knowledge systems.

There's so many more things that will launch in the coming years that take a lot of inspiration from Z-Cash and other projects. So, Sam Bankman-Fried, he has sought to delay is sentencing until after his second trial, which is the second trial about campaign finance violations, or is that the bribery case? Chinese bribery. Bribery.

So the judge has denied that request, as it turns out. Yeah, I guess why would you want to delay? I mean, doesn't he get, if he gets sentenced, he gets to leave Brooklyn, MDC. Yeah, just give us some closure on that one. So that's due in kind of the spring of next year, right? I think that, I think he gets sentenced pretty soon here. I think that's coming up in Q1. But speaking of just really horrible actors, Three Arrows Capital, BVI Court has issued an asset freeze against the founders of Three Arrows Capital. So these disgraced folks, the disgraced duo, they apparently have assets of $1.14 billion that are being sheltered amongst not only themselves, but their spouses. They currently owe their creditors $3.3 billion. Kyle Davies is on the lamb.

I don't know if he's coming back to Massachusetts area for Christmas. Probably too risky. But you remember when this all was blowing up and they said, hey, we're going to work with our creditors. We're going to work with people, good vibes. Now, they're just hiding $1.14 billion. Yeah, I mean, I don't think this should come as a surprise

to anyone. We kind of knew this was the case. The three hours recovery claims were always trading very modestly, like in the single digit cent range, which kind of implied, not that the money vanished. The money didn't vanish. They had just perloined it and sequestered it away under the couch cushions or whatever. Unfortunately, we're dealing with crypto assets. It might be somewhat difficult for the court to recover, but it's an important step forward. You know, And I think we need to acknowledge that it appears that they have actually illegally, you know, sequestered the money.

It's not just bad trades or anything like that. So, yeah, props to the BVI for finally getting around to doing this. It's not only crypto assets and probably fiat assets, but it's also real estate. So I wonder if the real estate holdings are included in that number or not. Yeah, this is a complex multi-juriscery. jurisdictional case. I really hope that we achieve some kind of resolution here because it's just gross that this thing is still outstanding. It's gross that one of them is still on Twitter, just tweeting crazy things about having a comeback. It's just get off of Twitter, man. No comeback. Sorry.

So tis the season for just predictions for next year. So I really like the bitwise ones. So we'll put that in our newsletter, 24 predictions. Blockchain co-investors, they had a good 2024 predictions, enjoyed that. And then a couple good grayscale blog posts. So they put out a blog post. I was getting a little nervous about the cash create impact on taxes for GBTC, but they put out a good blog post correcting the record on some of the misconceptions in that category. They also had a good blog post about the role of crypto in the 24 elections. So well worth a checkout on those. Yeah, it's almost time for us to issue our predictions. I guess we have one roundup left in the ear. Did we do predictions last year? I can't remember. I find it difficult to be popping

off with these predictions all the time. Well, you have a week to think about them. All right. I don't think about that. And you can't copy Bitwise's homework. So they said first prediction, Bitcoin will trade over 80K. God willing. Okay. Yeah, I could see that. Spot Bitcoin ATS will be approved. I think we all know that's going to happen.

And collectively, they'll be the most successful ETF launch of all time, according to bitwise. Okay. They think Coinbase's revenue will double. More money will settle using stable coins than Visa. That's almost already the case. So I would not be surprised for that to occur. the slide that I made for token 2049 about that

comparing stable coin transaction value to other settlement networks, I've seen that slide in at least 10 other pitch decks, which is cool. Yeah. That is cool to see that. Using it rampantly. Baywise says JPMorgan will token a fund and launch tokenize a fund and launch it on chain. Fair enough. Ethereum revenue will double

5 billion. Can see that. Taylor Swift will launch NFTs. I don't know. She doesn't strike me as the NFT type. That would be, who knows if that's, you know, from the perspective of knowing something, but that would be incredibly big. I mean, do you imagine how many Swifties would be getting wallets if that were the case? So this is an interesting one, I thought. They said more than 100 million will be staked in prediction markets, which will emerge the new killer afro-crypto. I've actually been loving the prediction markets recently. Holly market, very good. Yeah. Yeah, they're very accurate. Very accurate. Yeah, I've been using them to follow fast-moving events. They get there faster than in some cases the pollsters, the professionals, like the Argentine election.

I was getting faster updates from the prediction markets than from the press. Yeah, yeah, definitely. So, yeah, you know, you remember in 2015 that was the touted first DAP was a prediction market? Auger and Nosis. Remember, Nosis used to be a prediction market. And Auger kind of went nowhere. Nosis is now multi-sig, very successful multi-sig on it there, which is very entertaining. One of the best pivots ever.

Yeah. But they finally work now, eight years later. speaking of Argentina, actually, this was an interesting thing. So Argentina, the minister of foreign affairs said that financial contracts can be denominated in Bitcoin. Don't know what that means exactly. Why not? They're doing something over there in Argentina. Can't you denominate a financial transaction in whatever you want?

Yeah, I would imagine that you, could if you just specify. This is the unit of account. It's like I'm taking delivery in a bushel of corn. That should be fine. Yeah. Now you can officially do it, going into the tweet. One of the predictions from the blockchain co-investors piece that I liked a lot was around these AI use cases driving blockchain adoption. It sounds like a cliche, but based on what we're seeing this, I think this is actually going to happen. I think you're just seeing more and more of these provable inputs to LLMs that will just start to timestamp down to blockchains. And I think there's also a really interesting payments use case there.

So I know it's the hot thing to say that AI and blockchain will converge here. But if startup activity is any leading indicator, then it seems like that actually will happen. The blockchain co-investors also say that there will be more than 500 million active crypto users in 2024, which would be almost a doubling, I would say, global adoption. Well, we are hereby committing to release our own predictions next week. Okay, so you're signing us up for predictions? Why not? You have a week to think about it. All right, everyone. Have a safe and healthy weekend, and we will see you on Monday.