The Pomp Podcast - #1035 - Ryan Selkis On The State Of Crypto After The Market Crash

Episode Date: July 7, 2022

Ryan Selkis is the Founder of Messari. In this conversation, we discuss Grayscale's attempt to convert GBTC into an ETF, Crypto regulation, the Crypto contagion that has swept through the industry, the failure of CeFi platforms, where Crypto stands today, and Crypto & Politics going into the midterm elections. ======================= Bullish is a powerful new exchange for digital assets that offers deep liquidity, automated market making, and industry-leading security. Combining the innovations of DeFi with the regulated environment of traditional finance, Bullish empowers users to trade with certainty and earn passively at scale across variable market conditions, in an environment backed by multibillion-dollar liquidity contributions from the Bullish Treasury. Visit bullish.com/pomp today to learn more.   Note: Bullish is licensed by the Gibraltar Financial Services Commission. Virtual assets and related products are high risk. Consult your investment advisor and trade responsibly. Bullish is available in select locations only and not to U.S persons. Visit bullish.com/legal for important information and risk warnings. ======================= Since 2018 Copper has been at the forefront of institutional digital asset development.   From award winning custody solutions, to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services, in lock-step with a rapidly changing world.    No other infrastructure provider covers as many assets, across as many exchanges, with the speed and security that Copper can offer. To learn how Copper helps the world’s largest institutional investors secure their digital assets, head over to copper.co   Copper - the unfair advantage. ======================= Coinchange is an automated wealth management platform that earns daily compounded yield for you. Earn up to 10% APY on a risk-mitigated basis – your payout doesn’t depend on the volatility of the market and there are no lockups or minimums.  Register now at coinchange.io/pomp and get a welcome bonus of 40 USDC when you fund your account. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Ryan Selkis is the founder of Masari. In this conversation, we talk about Grayscale's attempt to convert GBTC to an ETF. We talk crypto regulation, all the contagion and the failures of the CeFi platforms over the last couple of weeks, and what his thought process is on crypto and politics going into midterm elections. I really enjoyed this conversation with Ryan, and I hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by Bullish. Bullish

is a powerful new digital asset exchange built for institutions that delivers the innovations of DeFi in a regulated environment. The Bullish Hybrid Order Book pairs the high performance of a traditional central limit order book with the automated market making. Powered by deep bullish liquidity pools backed by the multi-billion dollar bullish treasury so you can trade with certainty and at scale across variable market conditions you can learn more at bullish.com or follow bullish on twitter because the future belongs to the bullish now this is not investment advice digital assets and cryptocurrencies are high risk products consult your professional advisor before dealing in them bullish services are available in select locations only and not

to you as persons. Visit Bullish.com slash legal for important information and risk warnings. Go check them out at Bullish.com or follow at Bullish on Twitter. Today's episode is brought to you by Copper. Since 2018, Copper has been at the forefront of institutional digital asset development. From award-winning custody solutions to creating the first truly off-exchange settlement function, Copper pioneers technology, products, and services in lockstep with a rapidly changing world. No other infrastructure provider covers as many assets across as many exchanges with the speed and security that Copper can offer. To learn how Copper helps the world's largest institutional investors secure their digital assets, head over to copper.co. Again, Copper, the unfair advantage.

Check them out at copper.co today. This episode is brought to you by CoinChange. CoinChange is an automated wealth management platform that earns daily compounded yield for you. They've got sophisticated algorithms that automatically analyze and allocate liquidity to more than 25 DeFi protocols, where you can earn very high rates of return on a risk-mitigated basis when you hold your crypto. Earn while you sleep, exercise, or listen to this podcast. Your payout doesn't depend on the volatility of the market, and there are no lockups or minimums. They don't lend, trade, or rehypothecate your assets. This means that by becoming a CoinChange client, you start earning yield from day one and you can withdraw your funds at any time.

Register now at coinchange.io slash POMP and get a welcome bonus of 40 USDC when you fund your account. Again, coinchange.io slash POMP. Don't just hold your crypto assets, but earn smart DeFi yield with CoinChange. Anthony Pompliano runs POMP Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of POMP Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. I'm very excited to talk to Ryan. Ryan, what's going on, man? Good to see you, man. I feel underdressed. It's the first time I've ever seen you in a suit and tie all the time. It's clearly a new podcast.

Well, listen, this is my bear market costume. I wore this during the 2008-2019 bear market, defeated that bad boy. And so I figured we could use some help and I'm going to wear this whether I want to or not. I promised everyone I would wear it until the bear market's over. So we need to turn this bad boy around so I can stop wearing it. Let's do it. All right. There's a ton of stuff for us to talk about. Maybe we can start with GBTC and their hope to be converted to a ETF. They were denied in their most recent ETF application by the SEC and within hours turned around and sued the SEC. What is your general read on the situation and what do you think their prospects are going to court in terms of actually being successful with this lawsuit? I actually think that their prospects are pretty good. But before we get into all that, I think we have to talk about GBTC, what it is, how it works, the havoc

that is created in the market, and the SEC's really indefensible position around its potential conversion to an ETF. So basically, Grayscale is the largest asset manager on crypto. They have a set of passive funds that track Bitcoin, Ether, some of the other top assets, and then they have a couple that are baskets of assets, kind of like a top 10 crypto asset index. But the big one is GBTC and then to a slightly lesser extent, their ETH product. And these products have come to market and basically started trading OTC, not actual ETFs, but OTC through this loophole in securities law that essentially allows them to raise money from private investors. And then after a six-month holding period, those investors can sell the shares that represent the assets in the underlying

trust on the open market. And the way that an ETF works is you can continuously create and redeem baskets of shares that represent the interest in the underlying trust. So if for whatever reason, the share price deviates from the underlying spot price of the commodity that's held in the trust, you have brokers that are incentivized to make the market and basically arbitrage away those differences. So if the spot price is higher than the price per share, you're going to redeem shares and just convert to the underlying asset and vice versa, right? If the share price is higher, you're going to want to sell those shares and then use that to create more assets in the trust. And so you have this continuous feedback loop that keeps the spot price of the underlying ETF

relatively close and in line with what the price of the underlying commodity is. That's how traditional ETS work. Now, Grayscale's products don't do that because it's a weird loophole. So what does that mean? Well, it's created this dynamic where historically for a long time, the shares that traded on the OTC markets were at a premium to the underlying spot price. And the reason was there was a lot more demand for shares from different vehicles, either retail investors that weren't in their 401k or institutional investors that didn't really have any other access. And up until early last year, those shares traded a premium. February last year, the trade reversed. It trades at a discount now. And now the discount's actually

close to 30%. But again, because this is not an ETF, that's a one-way ticket. And the investors that hold the shares cannot redeem these shares. They can only get liquidity through the OTC market. So you don't really have a path to closing this gap. And what this has done is it's basically created $6 billion worth of capital impairment for the investors in the trust and these publicly traded shares with no path to actually recouping the assets that are in the trust as you would with an ETF. And this collateral, this trade was what Three Arrows Capital, BlockFi, a number of other big counterparties ultimately got caught in and created a bunch of the losses and some of this cascading effect that we've seen in the crypto markets with some of the illiquidity and

insolvency issues at some of the big investors. It was a synthetic trade that went sour. And now everybody's trying to unwind these positions. So the issue with the grayscale ETF conversion and the fact that it was rejected again by the SEC is the SEC is basically saying, well, the Bitcoin markets aren't fully surveillable and there's no kind of shared surveillance agreements between international exchanges. So we can't guarantee that the market's not manipulated. So we're not going to apply. We're not going to approve this ETF conversion. The problem is investors already have access to this thing and they're hurting to the tune of $6 billion. So I think if you look at that fact alone, plus the fact that the SEC approved futures-based ETFs six months ago,

you have a dynamic where the SEC doesn't really have a good leg to stand on because futures are a derivative of the spot market. And those are inferior products that were approved late last year. And then you've also got this consumer protection issue. So short of an ETF conversion, it does look like the SEC is basically engaged in hostage taking and is waiting until they have full oversight and surveillance rights of the underlying crypto markets in the US before they act. Now that's kind of between the lines, but I think that's, you know, hopefully a good two minute or three minutes synopsis of what's otherwise a really complicated product for most people to wrap their heads around if gbtc was being managed by a wall street bank do you think

that it would already have been converted like is this a crypto company specific issue and it's less about the product or is it about the product and not so much the company behind it i think it's a little bit of both to be honest i mean it's it's tough to prove uh that this is you know the reason that this product, you know, has not been approved. I think it's really much more the case that the SEC doesn't want to reward cleverness and, you know, a product that basically try to route around them by taking advantage of this loophole to get to the public markets, even though it's not an ETF. And even more importantly, I think it's about jurisdiction and it's about the SEC expanding its overreach to include the likes of Coinbase, Kraken, Gemini,

the other US-based exchanges. And until they get that regulatory authority, what they're going to say is, how can we approve this in good conscience when we can't actually guarantee to investors that we have a good handle on the integrity of the underlying markets, whose prices we rely on for this product? And until there's some oversight of the exchanges themselves that provide the reference rates that feed these products and the underlying share price, we're just not going to do it. Right. So it's, it's very black and white. I think based on a technicality and based on the fact that they're basically waiting to expand their authority and get additional power from Congress. You've been around for quite a while. You've told

me the story previously of you tweeting out and kind of sharing the information about Mount Gox when that failed. There's been a number of companies some more painful than others who are going through similar types of situations whether you know it's just uh hey they're having stress induced by some of the gbtc and 3ac stuff uh some of them are actually shutting down withdrawals uh some of them look to have been engaged in uh quite nefarious or bad acting uh you know kind of situations how bad is the current crop of this kind of chaos compared to mount gox when you first came across it? I think it's arguably worse. You know, Mt. Gox, most people in the industry at the time knew that it was a shitty exchange,

right? And it had already had a number of security issues. It was just the largest by virtue of being the first, right? And that creates a lot of stickiness because that's where the majority of liquidity was. But you already had started to see some investors move away from Mt. Gox and do exchanges like Bitstamp, and there was a couple of others at the time. um the you know the the mount gox issue was one of technical incompetence and um and theft right because they had poor you know kind of risk control security controls in terms of how they custodyed assets the reason i say that this is arguably worse is because of the contagion that has been created by fraud and poor risk controls um and and by lending in particular

So with Mt. Gox, it was that the funds were stolen. With all of the cascading failures that we've seen more recently, it was due to leverage and margin calls and a bunch of centralized counterparties that were, I don't want to say gambling. I think gambling is a strong word in some of these cases, but they were essentially speculating with customer reserves and making high interest rate markets, but not really having a good handle on the true risks at their counterparties. So you created a series of insolvencies. I think that there's a big difference between, first of all, time. Nine years ago or eight years ago when Mt. Gox went under, the industry was just significantly smaller and under the radar from a regulatory standpoint. Fast forward to today, this is not something that was contained to just a few bucket shops or poorly managed operations. It really has hit a lot of the blue chip names in the industry. And a lot of multi-billion dollar companies or investors

have been impacted pretty significantly. So I think, you know, Mt. Gox, it was kind of like an isolated incident. It was terrible, right? It was a huge chunk of, yeah, standing supply, and it hurt a lot of investors. It took a long, long time for that to make its way through the courts. But it was a single entity versus this, you know, kind of ripple effect that we've seen with Three Arrows Capital and some of that, the result of the bad collateral that Three Arrows was subject to with GBTC. The other issue is this is impacting a lot of Western players. Mt. Gox was, no matter how you slice it, a bit out of sight, out of mind kind of thing. It was the big Japanese exchange to the Western kind of leaders thought, oh, well, Bitstamp's based

in Europe, and we've got Coinbase and Kraken in the US. So there was Western alternatives. And from, I think, just a top of mind standpoint, most of the regulators in the West just kind of looked at this and said, okay, you know, we have to have guardrails for the American and kind of European led businesses to make sure that stuff like this can happen. And all those entities are in fact regulated, but, you know, it wasn't as catastrophic as maybe, you know, it was in Japan, even though many U.S. customers were exposed. What is your expectation for changes in regulation or disclosures coming out of kind of all of the last couple of weeks and the chaos in the crypto market? I think that the centralized players are under-regulated. Now, the issue here is we need

to be very careful about what works and what doesn't and kind of where the dividing line should be. Because when it comes to the decentralized lending protocols, you can watch some of these liquidations happen on chain in real time as they were happening during the liquidity crisis a couple of weeks ago as the prices were getting drawn down. And that's painful for whoever's taking out a margin position on chain, but the protocols worked, right? And I think some of that is kind of missing here. The real issues were in the centralized black boxes that sat on top of this. And we're basically holding themselves out to be these really robust banks with good risk controls and really strong products that

are run by professional teams, when in reality, they're basically under-reserved banks with poor risk controls, even if they were defrauded. Some of these companies, to have 50% of your outstanding loan book be with one counterparty, that's just piss-poor risk management. There's no other way to to to slice it no matter how big three arrows was uh in in terms of you know it's it's important as an industry player so i think that's um that's one of the things that's going to be hard that's going to be a bell that can't get unrung right and and i i think that um regulating centralized entities um is important and in fact most people that are serious in the industry talk about the need to regulate the centralized entities here that are handling customer funds

that are making markets and that are facilitating lending or exchange. I don't know anyone serious that's arguing against that. What the issue is going to be is where do we draw the line and can we ensure that some of the open protocols and peer-to-peer financial activity, like on-chain lending or like decentralized exchange, is not touched and it's fought for and vigorously defended so it's not thrown out with the bathwater when we start to see some more stringent regulations on the centralized entities. And if we do our jobs right, kind of collectively as an industry, I think that's where we'll end up, where the peer-to-peer will be protected and the centralized entities that look like banks are regulated like banks, centralized exchanges that operate like

New York Stock Exchange and NASDAQ, they're regulated as such. And that'll ultimately usher in the next wave of growth and institutional adoption. So I think everybody wins if we can get that balance right. Talk about the difference between the centralized platforms and the decentralized protocols or platforms and kind of how their performance has differed throughout all of this. Well, it's pretty simple. The decentralized platforms worked and you didn't have the ability to shut down user withdrawals, right? Some of these collateralized vaults, if they were at risk or, you know, they were not topped up with additional collateral, they did, you know, get liquidated, but they were liquidated programmatically, according to the rules of

the smart contracts as they were written. You contrast that with the centralized lenders, and they just straight up paused withdrawals because they were insolvent or close to insolvent. And they had to basically pause operations. It's happened with Celsius, it's happened with Voyager. And I'd imagine we're not totally out of the woods just yet. There's probably some other companies that are on the brink right now in terms of insolvency or trying to limit withdrawals and make sure that this doesn't cascade further. But hopefully the worst, the very worst is over. I wouldn't be surprised to see, you know, another couple of kind of final dying breaths of this particular liquidity crisis. You, given your kind of long history in the Bitcoin and crypto industry, have seen all forms of Bitcoin maximalism, and there appears to be a great debate. Is Bitcoin maximalism good? Is it bad? Is it the same it used to be? What's your take on Bitcoin maximalism and many of the people who kind of are carrying that torch forward today?

The majority of my investment portfolio, I'd say, is Bitcoin and then my own company, right? So when I say what I say next, I'd hope that people keep this in mind. But I think Bitcoin maximalism is about as close to brain cancer as we have, short of actual brain cancer. And I think maximalism of all types is pretty dangerous, just in terms of what you're willing to fall for and how closed off to opportunities you can be. I don't think Bitcoin maximalism is any different from any other sort of fanaticism, whether it's political, religious, or people that are just unhealthily obsessed with anything that catches their interest. I understand the

arguments for Bitcoin and its uniqueness as an asset and as a network, but not that it's the only interesting asset and network that is leveraging blockchains and some of the cryptography that was first written about in Satoshi's white paper in 2008, right? So I think that's where you can draw the distinction. And I think you're probably alluding to Nick Carter and the drama with Nick. I mean, Nick is one of the smartest, longest-term proponents for Bitcoin and one of best evangelist for Bitcoin and some of its technical underpinnings out there. And his sin was being open-minded enough to understand other networks and other opportunities within the cryptosphere. So he was routinely chastised and just wrecked online for his supposed betrayal,

I guess. I don't know. I don't know what purity test is used. I always use opportunities like this and little sound bites, like, you know, Bitcoin maximalism is brain cancer, um, to just like retweet and then block, uh, every single person, uh, that, you know, is, is going to come out of the woodwork and, uh, and attack because of it. Uh, and it just creates a better experience for me online. So I, I kind of routinely put chum in the water and, um, and make sure that I don't have to hear from those people because I just don't think that you're, you're going to get anywhere if that's your narrow worldview and kind of the way that you're going to engage with critics. So is it fair to summarize your thought process as like it is a form of extremism

and extremism, whether it's in politics or anywhere else, is not something that you think is healthy? Is it like a fair characterization? Well, it's not only unhealthy. I just think it's a sign of of you know emotional and mental weakness uh to not be able to entertain you know multiple thoughts at the same time or or understand that you know any any kind of nuanced views towards um innovation and and tech right i mean it's it's it's literally i mean it's it's just it's crazy to me that um you have some people that look at an invention from 13 years ago and now it's like a sacred text instead of a breakthrough innovation of which we will have many others deployed using this same kind of underpinning technology. So whether it's ZK

proofs and all the innovation that's happened around Zcash, I don't know if Zcash is going to win, but ZK proofs and zero knowledge transactions and this privacy preserving feature that has been really popularized because of the investment around ZK and crypto, you know, that's going to be applied in many different use cases outside of just money. So, you know, does that sit on other blockchains? Does it sit in other kind of non-blockchain applications? I think the answer is yes to both. But Bitcoin is not necessarily going to be the network that incorporates zero-knowledge proofs before any other. So right off the bat, you're basically excluding one of most interesting cutting edge areas of cryptography out there because you've got this borderline

religious fanaticism around the Holy Scripture of Satoshi from 13 years ago. I mean, it's absurd on its face to basically anybody that really kind of just looks at the state of discourse on crypto Twitter. But I think that's not really an accurate indication of where most people's heads are, even crypto skeptics and Bitcoin bulls, right? Most people that have fallen into that camp are probably more similar to me. And I think you, Pop, where you're open-minded to everything, you've got pretty strong conviction around one particular asset and its staying power, and everything else is a little bit more experimental with lots of upside, but a number of unproven variables that will be de-risked over time.

Yeah. I don't even have a huge problem with people who generally believe what they're saying, and then their actions like support it. I think the part that screams kind of, I don't know, unsustainable or just comical is the hypocrisy. Like there's certain people who will yell and scream and kind of do the equivalent of virtue signaling around a certain set of ideals.

And then you look at whether it's the things that they build or the companies that they run or whatever. And you're like, you're literally doing the exact opposite of what you're accusing other people of doing or that you're like projecting on other folks. And so I tend to agree with you that just, you know, look at politics as an example, like extreme left, extreme right,

both is like very unhealthy. And so I tend to think that one of the most interesting data points in all of the crypto industry, whether people like it or not, is that 87% of Bitcoiners hold other assets. And there's a bunch of folks who think that that number will go down over time.

There's a lot of folks who tend to think that number is going to go up over time, but it used to be 100% of Bitcoiners held 100% of Bitcoin, right? Like it was only Bitcoin. And that's changed. And now what we don't know in that data, which I think is a very fair critique of the data,

is it like 87% of people have Bitcoin plus like some stable coins? And where does stable coins fall into the whole thing, right? Like are stable coins considered alt coins and therefore they're bad? Or are they okay because they help people get into Bitcoin? And I don't necessarily have like a strong opinion in either way, but like now you get into like the nuance

as you stated. And I think that the deeper you get into the conversation, the more obvious like a black and white view of the world is nearly impossible to overlay here, right? Well, I mean, the stable coin is one example, but the other thing is look at DeFi, for instance. If you are running a decentralized exchange like Uniswap, and you know that the market makers make fees and the protocol could hypothetically

make a small fee per transaction, even if it's one basis point, for instance, then ultimately there's ways to mutualize those revenues and those economics across everyone that's participating across the network. And that's essentially what I think a lot of DeFi protocols will be at scale. There'll be user-owned networks where, you know, the traders are the same as the, you know, quote-unquote equity holders are the same as kind of the market makers, right? So it's incentive alignment and it's ownership interest on behalf of the market participants themselves. That's really interesting. And you can apply that to any of the other kind of emerging application areas. If there is a fundamental use case that is economically valuable and people are willing to pay for that on-chain space, those ledger entries, the block space, then ultimately anyone that's involved with that network will be able to take out some of the fees that are used to process those transactions.

So it's no different from how a number of consortia work right now in traditional finance. um it's just uh it's just new and and it moves a hell of a lot faster because uh you're talking about open source code instead of you know six-year-old code that was written uh in in you know ancient programming languages that basically no longer exist uh on behalf of the big banks and and you know interchange uh operators so um i think that's going to be true for all sorts of assets right i know you spoke about nfts on on your podcast do i think that digital art should be worth $10 or $100,000. Well, A, it depends on the piece and B, I don't know because that's not really my jam, but I do know that there's a market for art and digital

art. So NFTs could be useful in that context. And then NFTs as a data wrapper could be useful far beyond that. But again, a lot of these things, you know that they could be interesting. It's how do we get there? That is the big open question for the industry. And we might go through another period of consolidation where we see Bitcoin dominance back above 80%, maybe even 90%. I doubt that happens, but maybe we could, because that is the application as the strongest product market fit right now. But that's not to say that everything will go to zero except for Bitcoin. Obviously, that's false. And we know it's false because it's already been proven false. And there hasn't really been strong evidence to support that everything else is going to zero,

much to the chagrin and, I think, frustration of the toxic Bitcoin maximalist crowd. One of the themes that I think is really interesting, because you running Masari, obviously, are very aware of so much of the non-Bitcoin world. What are people building? What's working? What's not working? What do they hope is the kind of promise of it? And it seems like now with the Lightning Network and then their proposal for Taro on top of Lightning from Lightning Labs, that the same ideas feel to be in both kind of communities or ecosystems, like the Bitcoin and non-Bitcoin side of the house. How do you evaluate Lightning Network's progress or the Terra proposal in light of what you're seeing in the rest of the market?

Are these things just echo chambers for the Bitcoin world and they think that they're really kind of highly adopted and growing fast, but in your experience, they aren't compared to other things? Or is there a strong argument there that those things are actually becoming more popular? I think Lightning is really interesting, but it hasn't scaled anywhere near as quickly as stable coins on Ethereum, for instance. That's not an indictment of Lightning and its potential. It's just a factual state of affairs and where the industry is right now and where the tech is. It's also factual to just say that it is orders of magnitude easier to build on Ethereum. And actually even on new emerging stacks like Solana than it is to build on the Bitcoin stack for if

you're a developer thinking about a new application. So these are just raw numbers, right? So you can get people to debate about the security model underpinning the blockchains themselves, or about what's coming next when it comes to extensibility of the Bitcoin platform, you need to build on a really robust foundation. I think those are arguments to be had. But in terms of where we are today in terms of capital, in terms of human capital and brainpower. Most of the interest is still on emerging layer one protocols that are a little bit more complete in terms of the functionality and the applications they support like Ethereum and some of the other so-called L1s. It's just not happening at the same speed or scale on Bitcoin yet. Maybe that changes,

But I think that the sheer number of people and kind of the caliber of talent that are building outside of Lightning versus within the Bitcoin community, it's pretty stark. And it's not in the favor of the Bitcoin zealots right now, if you just look at the raw numbers. I know that you recently heard the All In podcast. I usually listen to it, but I have not seen the one from last week. I saw you tweeting saying that you disagreed with their analysis of crypto. So maybe lay out what were their arguments as you understood them? And then what do you agree or disagree with from that episode? Well, you know, you don't have anyone on that show that's actually like deep into crypto.

I think you have a few guys that are kind of armchair quarterbacks. They haven't really done the work and kind of gotten deep here. And that's fine. right? And first of all, I'm a huge fan. I went down to their summit and I think those guys are super sharp. As an entrepreneur and an investor, I've gotten so much out of listening to a lot of their stuff just on macro and when you think about startup investing. But they don't really spend much time in crypto, so that's kind of understandable. And I was giving them a little bit of a hard time because Chamath, who I know you've had on your shows in the past,

He's brilliant and he did give a good market structure breakdown of what happened and how some of these lenders went bust and all the shenanigans in terms of the high interest rate loans that people were speculating with in DeFi and how some of these insolvency issues came to the fore. But I think they conflated the centralized with the decentralized, number one. They don't really understand the policy issues and the fact that right now we're operating in no man's land and no one in the right mind within crypto is saying that we shouldn't be regulated, right? It's that decentralized protocols should not be regulated the same as centralized institutions. And why don't you give us a little bit of clarity on what the rules of engagement are so we can safely integrate these centralized financial institutions and products into the

broader financial ecosystem. That is not a trivial mix-up or distinction. You're, on one hand, talking about an industry that has been spending a lot of time collectively on policy engagement and trying to make sure that we make some good headway and we can solve some of these structural issues because we think it's in the long-term best interest not only of the industry but all and users and potential beneficiaries of this tech, with just some of the carte blanche statements of everything's grift and I haven't seen any interesting use cases and so on and so forth, when the reality is, like I said a few minutes ago, all of the on-chain protocols, the facilitate lending, the facilitate decentralized exchange, and the like, they operated just

fine. It was all the black box, quasi centralized slash, you know, fully centralized black boxes that were operating in the gray area and ultimately should be should be shut down. They should fail and they should base, you know, customer repercussions and lawsuits if they're being responsible to customer funds. I think what I took exception with is no one in the industry that has any credibility or seriousness whatsoever disagrees that the last couple of months were a huge black eye and a bunch of people screwed up, in some cases, should be going to jail for fraud, it looks like. But this wouldn't necessarily happen if we could get any momentum whatsoever on the regulatory side. Uh, so I, I think painting the entire industry and all of his participants with a, with a broad brush, it just, you know, it's, it's a lack of sophistication and generally that's to be expected from people that don't spend a lot of time here, but, um, I was having fun on Twitter and poking

the hornet's nest, as you know, I do. I know that I'm sure that they actually would agree, right. I mean, just given, uh, kind of who they are and hearing, uh, them talk about a lot of this stuff of like, they're just talking about it. It's easy to talk in generalities. And then if you really sat down and have a 30 minute conversation with them, there may be more nuance to it. Uh, so it's always hard. Right. But, but I think to your point about like the nuance is really important, uh, is a, is a fair one. Um, do you think that, uh, the traditional venture capitalists, not necessarily those, uh, for individuals, but just in general, will we see them pull back from investing in crypto now that asset prices have come down

and, uh, and they'll kind of go away? Or do you anticipate that you'll still have a kind of the crypto-native investors, plus you'll have a lot of those non-crypto-native investors sticking around and continuing to invest over the coming years? I think the variance is going to be huge between firms. So you're going to have some firms that are run, you know, and the partnerships are full of a bunch of crypto skeptics that are saying, I told you so, and basically just ceasing operations. You'll have others that are more open-minded and thinking about this as an entry point and saying, hey, how do we invest in infrastructure companies? We're in the next installation phase. We're going to be able to get good entry prices into good companies

and businesses that are going to be around for this next cycle and maybe solving problems that are addressing the institutional adoption and mainstream adoption problems. Then you're going to have some that are looking at this on the token side and they're saying, well, we missed the last wave, but now is the opportunity. Now's the time for us to go in and look at all these assets that are now down 90, 95, maybe even 99%. Which of these protocols actually have value capture mechanisms and real fundamentals behind them? Because there's going to be so much mispricing in this middle market of assets. It's insane. And it presents a ton of opportunities. So you think about assets number, you know, like 25 through 300, forget about the top 25. I don't

necessarily think that this is true, but let's assume that the top 25 are super efficient and there's a lot of information symmetry so people know what they're doing and how to think about these as relative allocations. Once you go past that, once you drop down past a billion dollars of market capitalization in research coverage drops, general kind of awareness of these assets and how they work in other communities operate drops. So you'll have investors that are willing to roll up their sleeves, get really, really interesting insights and kind of a proprietary edge, making this middle market more efficient. And actually, one of our star analysts, Ryan Watkins, just left a few months ago to start a company called Pangea. And their focus is to

kind of take this approach, do the work and think about the middle market liquid stuff that's just fundamentally mispriced. If you look at the underlying kind of value of the protocols or what they anticipate are going to be the value capture mechanisms long-term. So it couldn't be more different. And I think the seed stage is going to continue to hold up well because people think about crypto as like one of the frontiers that is going to be fundamentally interesting like mobile was 10 years ago and like the internet was 10 years before that. So we had a lot of room left to run and there's a lot of dry powder that's sitting on the

sidelines ready to be deployed. It's just a matter of really when do people get comfortable that the bottom's in and when the macro situation settle down a little bit. And then when you start to look at a lot of the fundraising that occurred up until, I don't know, 2017, maybe it was either Bitcoin related and equity, you know, kind of structured. We then got the boom of ICOs and that kind of swept all of the fundraising wind. Now, what are you seeing on the ground? How are people funding these efforts? Are they funding them through some variation of ICO slash token sale? Are they just doing equity deals with token warrant? What is happening now? I think the good news is that

a lot of people are already raised, right? So they're ready to deploy. And the companies that are having success raising right now are either at the seed stage and just going from zero to one and have really high potential ideas and good teams that people are excited about, or they're somewhere on the infrastructure side of things. So what's going to be a good directional bet on the industry? Not necessarily taking massive at-risk bets of $100 million, billion-dollar-plus token networks when it's still unclear how much those values are going to wane and how much more bleeding there is.

because we just haven't seen a bottom generally in the macro backdrop and in tech in general. So it's going to be a lot easier to just price those private rounds, maybe with tier point like token warrants and to the extent that there's a token that's released by the team at some point in the future. But I'd say private placements or private kind of token purchases from big venture firms, I would, that's going to grind to a halt for sure. the last thing i want to talk about is uh crypto and politics uh you have uh i think at one point even said that you might run for an office you have been uh very quiet no thoughts whatsoever

when it comes to politicians uh or regulators for that uh uh um on the internet what's your thought right now and current the current you know kind of position of crypto when it comes to the political landscape in America? I think everything has been reset the last quarter. I have no idea. There's a few things that happened in the last quarter. If you would ask me at the end of March, where are we? I'd say we're in a pretty good position because it looks like Republicans are going to retake Congress. And so you'll have divided power, which will kind of grind the worst elements potentially of legislation down to a halt. And then you also have the dynamic where we are starting to get more informed champions on the left and that

progressive base that's going to be really important so that this remains a bipartisan effort when we do think about more proactive legislation, right? So first is put sand in the gears to make sure that the worst case scenario doesn't play out. And once there's a balance of power. Now you have some really smart champions on both sides. Hey, what can we hash out as an agreement? But there's a few things that happened in the last quarter that I think threw everything off. One is just the three arrows capital situation, the Luna situation, like all these cascading failures and the black eye that that's given the industry and the fact that a lot of customers have lost funds. And you're going to start to hear more horror stories about people

losing their life savings and just like terrible, right? It's bad in general, but it's certainly bad also from a political optics standpoint. And then you've got everything that's going on socially, right? So everything out of the Supreme Court right now, and just general impression that there's going to be social issues that start to drive the midterms. If it was just about the economy and kind of the direction that things are heading in the macro backdrop with inflation and potential recessionary forces, you can think that we're going to have divided government in November. Now that's not at all quite so obvious. So we'll see. I mean, I'm net bullish still. And I think that the engagement efforts from the big kind of crypto policy groups have started to bear fruit.

And we're going to have some really thoughtful discussions with the new Congress. Realistically, nothing's going to happen from a legislative standpoint until there's a new Congress sworn in next January. The meantime, it's going to be really about fighting some of these regulatory battles that come from the Biden executive order that was released a few months ago. So we'll see. I think the battlegrounds are going to be around the right to private transactions, the right to kind of peer-to-peer commerce. And a bunch of those are going to go to the Supreme Court, which regardless of your opinion on social issues is probably a net positive for crypto as an industry, because they're going to be, I think, much more likely to look at some of

the Fourth and First Amendment issues that are laid out in front of them when it comes to crypto. When we think about Masari, the last update I think I got was at the turn of the year. What is the mid-year update? And where can people go to check out some of that work? We've got a lot coming out throughout the third quarter, the second half of the year. We've got our main net conference where we'll have about 4,000 people in New York. We're going to have a few big product releases and other kind of major announcements there. You go to massari.io. We've got a full suite of analytics tools, research, and asset diligence tools for individuals and enterprises alike. Most of our business is really focused on enterprise B2B, but we offer a ton of

free resources as well as both our top of the funnel and a quasi-public service. So I'm happy to have people connect with me on Twitter at 2BitIdiots. And certainly happy to answer other questions about some of the opportunities to work with us as a company and hopefully help some of these new institutions that are entering the fray get smarter on crypto. 2BitIdiot still is one of the best Twitter handles on the entire website I appreciate you coming on as someone said to me when I told them that you were coming on they said oh he has very

what did they say he has very mainstream views and then they laughed and I was like yes that's why I want to talk to him he continues to share a thought process that I actually think is really important because if there's one thing that we've seen

over the last 8 to 12 months is that many of the widely held kind of consensus views have been wrong. That's true in the macro environment. That's true in crypto. And so having kind of you constantly question why is something happening, I think is incredibly important.

And, you know, they may not like it, but the legacy system getting questioned by you as well. Well, here's the thing, Pomp, and I think you know this is true. I know that was said tongue in cheek, but I actually think that a lot of what I say is mainstream. people are just too afraid to pipe up so i i think that that is actually more true than people will admit is that uh i've i've seen it like you've tweeted some things and somebody sent me a tweet

or something and they're like he nailed it and i'm always like why don't you just respond with you nailed it and like no no no no can't be associated with that the internet it doesn't forget it doesn't forget um awesome man well listen thank you so much for taking the time to uh to come on here we'll definitely do it again in the future thanks pop all right see you later thanks so much for listening to today's episode i really hope you guys enjoyed this one make sure you're subscribed on apple spotify or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or crypto industry we've got you covered head over to palmscryptocourse.com we've developed a curriculum

with the top teams across the industry it's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.