The Pomp Podcast - #618 Elizabeth Warren Will Come Around To Bitcoin

Episode Date: July 29, 2021

Today is a new type of episode. We have no guest. I explain a situation, elaborate on the details, and finish with an opinion on where I think we are headed. Today’s topic is Elizabeth Warren’s recent comments about bitcoin and the cryptocurrency market.  ======================= Did you know nearly 338 million dollars worth of NFTs were sent last year? And in 2021 that number is growing faster than ever. Looking to make your first NFT? Check out NEAR’s fast, scalable, low-cost, open-source platform. Learn why NEAR is the infrastructure for innovation at near.org  ======================= Matrixport, Asia’s fastest growing digital asset platform with $10 billion in assets under management and custody, it offers one-stop crypto financial solutions including fixed income, DeFi in 1-click, structured products, Cactus Custody™, spot OTC as well as lending. You can earn from high single digit with fixed income to high double digit yield with their Dual Currency Product. If you hold crypto and look for yield, this is the app you don’t wanna miss out. Go download the Matrixport App and enjoy a welcome offer of 30% APY on USDC here: https://invest.matrixport.com/en ======================= Cosmos is building the Internet of Blockchains, marking a new era of interoperability, scalability, and usability. The free flow of assets and data between blockchains with bridges to Ethereum and Bitcoin will unleash the potential of DeFi, NFTs, and much more. Dive into Cosmos at cosmos.network/pomp

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. Hey, everyone. Pomp here. Today's a new type of episode on the podcast. We have no guest for me to interview. I explain the situation, I'll elaborate on the details, and then I'll finish with an opinion on where I think we are headed. The topic that I chose to start off this is Elizabeth Warren's recent comments about Bitcoin and the cryptocurrency market. I don't know if we're going to keep doing these or not, so your feedback is welcome. Just tweet at me after you listen to the episode, and I'll gather all the feedback and put together

a plan as to whether we keep doing these or not. But let's get into the episode, but before we do that, I want to quickly talk about our sponsors. First up is our friends over at Matrixport. Have you lost your way in this low-yield environment while searching for a better store of value to beat inflation? Look no further. Invest with Matrixport to get more out of your crypto.

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between blockchains with bridges to ethereum and bitcoin will unleash the potential of defi nfts and much more. Dive into Cosmos at Cosmos.network slash Pomp. Again, Cosmos.network slash Pomp. All right, let's get into this new type of episode. Let me know your feedback, and I hope that you enjoy this one. 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. All right, craziness in the markets. Elizabeth Warren has taken the aperture of AIM and zoned in right on crypto over the last 48 hours. Elizabeth Warren's a Democratic Senator from Massachusetts. I want to be very clear. I don't care about politics. I usually don't care about politicians.

None of this stuff matters. I'm an independent. I don't adhere to or identify with any political party, any ideology, any of that stuff, whatever. I'm me. I do me. I think for myself, that's my whole approach to life. This specific politician is no different than most politicians, but we're going to use her as an example because she's the one who's said a couple of things over the last 48 hours. So it started yesterday. She sent a letter to the treasury secretary, Janet Yellen. Janet Yellen oversees something called the Financial Stability Oversight Committee. And that committee is focused on financial stability.

Shocking. And as part of this letter, one of the things that Elizabeth Warren said in it was the FSOC, this is a quote, FSOC must act quickly to use its statutory authority to address cryptocurrencies risks and regulate the market to ensure the safety and stability of consumers and our financial system. As the demand for cryptocurrencies continues to grow and these assets become more embedded in our financial system, consumers, the environment, our financial system are undergoing threats. Now, when you read this, it's a letter. There's a lot of big words in there. There's a lot of kind of phrases that you would expect from politicians, corporations, et cetera. It's not really written in kind of layman's terms or plain English, but it sounds

scary. It sounds like, oh man, there's demand for cryptocurrencies, the safety and stability of consumers in our financial system, right? Like those things sound really material. But then when you look further into the letter, there was five points that were brought up. And these points were basically the underlying risks that have been identified. There were exposure to hedge funds and other investment vehicles that lack transparency, risks to banks, unique threats posed by stable coins, use in cyber attacks that can disrupt the financial system, and risks from decentralized finance. Now, I'm not going to go through all five of these because frankly, we don't have time to do that and we could spend hours and hours on this, but I'll just pick the

first one. Exposure to hedge funds and other investment vehicles that lack transparency. that is allegedly one of the risks that is provided by the cryptocurrency industry. Now, if you unpack that for a second, there's two components. There is the hedge funds and there are other investment vehicles. So let's start with hedge funds as an example.

In the United States, we have regulatory bodies that oversee asset management firms. If you want to go out and raise money as a hedge fund, you have to adhere to certain rules. If you don't, you get in trouble and you potentially can be regulated, you could be fined, you could be put in jail,

all these kind of penalties that come along with breaking the rules, breaking the laws. Now, most hedge funds, almost exclusively, can only raise capital from people who are accredited investors, meaning that you either have to make $200,000 a year consistently, or you have to have over a million dollars of assets

outside of your primary residence. This rule of accreditation is used to signify sophistication in the markets as an investor and also the ability to weather some sort of catastrophic event or loss of capital in the investment. So basically, you know what you're doing and you have enough money where if you lose the money you invest in this one investment, you won't go bankrupt, you won't be out of luck, right? Those are the two kind of reasons why we have accreditation laws. Now, I've got my own problems with why accreditation makes zero sense, including the fact that we've basically

written into rules that you have to be rich in order to invest in these assets, but that's a whole thing besides the point. If you want to invest in a hedge fund, you have to be an accredited investor. So there is no lack of regulation. There is no difference whether the hedge fund is investing in cryptocurrencies, stocks, commodities, or currencies in the fiat world. There's no difference. Hedge funds all have to be regulated by the same rules. So there doesn't really make sense when a cryptocurrency risk is exposure to hedge funds that follow the same rules as all the other hedge funds, right? That, again, just on its face makes zero sense. It is regulated. It's regulated by the exact same rules as the traditional system. Now, other investment vehicles. If you're

not investing in a hedge fund, you could be investing in a venture capital fund or maybe a publicly traded fund, right? Or maybe into a retirement fund. So if you're investing in a venture capital fund, similar to a hedge fund, the venture capital funds in the crypto industry have to adhere to all of the same rules as the venture capital funds that invest in other industries. Venture capital as a structure and a legal entity and a regulatory body and oversight all adheres to the same rules regardless of what industry you're investing in. So hedge funds and venture capital play by the same rules as traditional hedge funds and venture capital. Then when you look at retirement accounts, same thing. If you are going to invest in a retirement

account, it doesn't matter what you're investing in the retirement account, you still have to play by the same rules. And then lastly, publicly available vehicles or some sort of investment opportunity. Let's say that you wanted to buy the stock of a company like MicroStrategy that holds a lot of Bitcoin on their balance sheet, or you wanted to invest in something like GBTC that gives you kind of indirect exposure to Bitcoin by holding that stock. Both of those are regulated in the public market. So if they do something that is wrong based on the regulations of the public market, they will get in trouble. There are no extra protections for somebody outside of the crypto industry than in the crypto industry, whether we're talking about hedge funds,

venture capital, retirement, or publicly traded vehicles. It's all the same. And so when you just take that very first talking point around the risks that are introduced in the financial system by cryptocurrencies, it fails the test. There is no additional risk if you invest in a cryptocurrency hedge fund versus a traditional hedge fund based on the regulatory structure. Now, the underlying assets are different. There may be different risks, et cetera. But the decision that an individual investor has to make, who is rich and can weather the storm if they lose capital, is on them. There is no difference for that hedge fund. That hedge fund, if they break rules in the crypto world, is the same as if they break rules in the traditional world. And so what we have to

understand here is this letter has very, very light substance underneath it. But that wasn't it. We then went from the letter that was sent to a hearing yesterday. I think it was the Senate Banking Committee. And in the Senate Banking Committee, there was a back and forth exchange. And at one point, Elizabeth Warren was asking questions of an individual. And after asking, is this decentralized in this industry? And the answer kind of came back as like, well, it's decentralized kind of sort of, but like there's also people who can benefit, which essentially is, yes, it's decentralized. Elizabeth Warren said, instead of leaving our system, our financial system, at the whims of giant banks, crypto puts the system at the whims of some

shadowy, faceless group of super coders and miners, which doesn't sound better to me. Now, that is a statement that one doesn't make a lot of sense on its face. So if we are against banks having some sort of control of the financial system, and we then are also against a system in crypto that we claim has shadowy, faceless group of super coders and miners, it kind of sort of seems like you can't have it both ways. But then when you zoom in on super coders and miners, you start to realize the media has written about the people and the leaders of this industry more in some cases than they're writing about the traditional financial system. If I ask the everyday person in the finance world to rattle off the names of some of the leaders,

They know exactly who the leaders are. You can go through all the exchanges. We know who the founders and CEOs are. We know who all the investors are who have kind of large holdings in the space. You would be hard pressed to be able to identify somebody who has an outsized stake in one of these industries in the crypto world that nobody knows about.

So it's not that they're faceless or shadowy. It's simply that they're different. They don't wear the suit and tie and cologne. They may live somewhere else. They may actually not even be from the United States. That's okay. They're participating in an industry, but we know who they are. On top of that, the structure of the industry is completely different. If you were to look at the monetary policies of, let's say, the US dollar versus Bitcoin, the US dollar system, if I asked you today how many dollars were created today,

you couldn't tell me. If I asked you how many dollars were taken out of circulation today, you couldn't tell me. If I asked you to show me the code base of the US dollar system, the Federal Reserve, the Treasury. You couldn't do it because it's not open source. But if I ask those same exact questions about Bitcoin, how many were created today? How many were taken out of circulation? Who's moving those currencies where? Show me the code base of the currency. Show me the programmatic monetary policy. I can do all of that. And so therefore, just on a base level currency standpoint, Bitcoin is a much, much more transparent, programmatic, meaning that it has certainty and it's predictability to it than a legacy financial system. On top of that, we have

things like this. Will Clemente is doing a fantastic job looking at on-chain data where in real time over the last couple of hours, real-time data, he's able to see that 63,289 Bitcoin moved off exchanges this morning in three separate batches, which totals $2.5 billion. So we can literally see the on-chain capital flow of where Bitcoin is moving and what size. Is it moving on or off exchanges? This is a fully transparent system that anybody with an internet connection can access this data.

We then have another tweet from Will that shows the coinciding drop in total balances on exchanges. In the legacy financial system, if I asked you in real time to tell me what the assets at individual banks are or individual exchanges, you couldn't tell me. And we'd have to wait for quarterly updates

or other periodic updates. But instead, I can tell you in real time exactly what the balance is on various exchanges, platforms, asset management firms, and individual wallets is in this space. This is full transparency. There is nothing more transparent than the system that is being built

in this digital financial world. And so if we kind of bring it all the way back to politicians in general, and those outside of the Bitcoin and crypto industry, the people who don't spend every day on this, I actually don't think that somebody who sits in Elizabeth Warren's seat or others that are similar,

or nefarious actors who are trying to be intellectually dishonest. I don't believe that. I generally believe people are doing what they think is best. They're trying their best to create a better world. But I think that there's a lack of education. There's a complete mismatch between what is being said and what the actual facts are. If you, like Elizabeth Warren for the last decade, advocate for a more transparent system, a system that is not controlled by the legacy incumbents, large centralized players, then you should love Bitcoin and cryptocurrency. You should embrace this in a way that is unlike anything else you've seen. Because while politicians only have certain tools in their toolbox, which include using

legislation or words to try to make change, that's all they have. They can either use legislation that is then voted on, or they can use their words to try to affect change. That is what the toolbox is of a politician. These shadowy super coders have been able to take the exact same ethos and actually build a new system. They've been able to put it into practice. They've been able to use their expertise in writing code, in innovation, in technology, in entrepreneurship, and create a new system. So one group is able to kind of leverage words. The other is able to leverage a different type of word. Code is free speech. And they've been able to use that free speech to express it in a very unique way that not only changes the way that people will have

a relationship with financial assets, but it does it in a way where they say everyone at the table is the exact same. Everyone has the same opportunity. It is a fully transparent, decentralized system. And so what I think is going to happen, and again, I could be wrong, but I think it's going to happen, is that over the next 24 months or so, Elizabeth Warren, other politicians, and other people who have been critical of this space are going to become more educated over time. When I first started out, I knew much less than I know today. That is true of anything that you begin to learn about, that you begin to look at. And as that occurs, I think that what we're going to see is many politicians are going to actually become huge

advocates of the space. They're going to realize that if I cannot get the incumbents and the centralized players in the legacy financial system to give up power to do the things that I want to do, the next best thing is for nobody to have control, for everyone to be on equal playing field. And so it becomes a fascinating exercise to watch for the next 24 months is as the education level within members of regulatory bodies and politicians increases, will we see them become advocates? I think that we're going to see more people like, I think it's Senator Lummis or Congressman Warren Davidson, people who already have become educated and said, you know what, this is actually a positive. We should be advocating for this. If you look at somebody

like SEC Commissioner Hester Peirce. Same thing. I've done the work. I understand this. I see where the advantages are. I think that we're going to see more and more politicians follow through. So, Joe and John, what was your guys' take in terms of listening to the comments yesterday, seeing the CNBC interview this morning? What did you guys take away from all this? Same thing. She hasn't done the homework, right? I think she's 72 years old. She's spent a lot of, majority of her life fighting financial institutions and organizations. And Bitcoin solves a lot of the problems that she's been arguing against, right? So I think it's more of an education gap. I think if she looked into it, she would find that she actually agrees with

most of the things. And then secondly, I think her intentions were probably good. I think that she made the mistake of kind of categorizing all cryptocurrencies together instead of separating out Bitcoin versus others and whatnot. But her advice should have been very simple. It should have been only invest what you're willing to lose uh have a long time horizon and don't buy any shit coins but she uh she didn't keep it at that and i think that she confused a lot of people with kind of her uh her attitude toward triple crypto in general when uh she should have separated out kind of bitcoin and some of the more uh legitimate ones from some of the shit coins the other piece of this that i think is fascinating um is from a political standpoint uh willie woo responded to a

tweet i had this morning and he basically said look it's gonna be political suicide to be against an asset in an industry that 20% of Americans already have decided they want to participate in. And it's growing at an accelerating rate, right? Like it's almost an element of if you bet against the people, then you end up just being removed from office. And the community is so strong. The community is really, really strong. So I think when you combine that with the fact that so many people already own it, yeah, she's going to get, I feel like if you look at her mentions on Twitter for the next like 24 to 40 hours, it's going to be ugly. There are senators with laser eyes on twitter right there's politicians local politicians mayors etc same thing we even

have a head of state in the world in uh bukele from el salvador that has laser eyes like like this is a thing that it feels like if you step in front of you just get steamrolled because you can't bet against technological innovation right like that is a losing battle and so do we feel like the solution here is solely education or and what is becoming a little bit more apparent is it more so just about getting attention right if you're against the banks and you're against bitcoin cryptocurrency like what are you for like what is that like what is the thing that you actually are advocating for like what's the box that you want to draw to put everybody in yeah i think it's more of just yelling right and she's she's super angry and and kind of dishing both

the banks and crypto and stuff and bitcoin specifically but if she did the homework like we were just saying i think she would agree with a lot of the stuff so either you're going to continue to be intellectually lazy to some degree right and not do any of that work or you're just going to continue to yell on Twitter and people are going to get really upset because it's not clear what you are for, right? There has to be a solution. There's only so much yelling you can do about problems. Is it fair for us to agree the common ground between Elizabeth Warren's view of the world and ours is that the legacy banks are probably not acting in the best interest of the people at all times? I feel like that would be, I feel like if Elizabeth Warren was on the

show, which I have now invited her to come on and we can debate all this, uh, conversate about this and, and, uh, she could present her case. We could present ours. I actually think we have more in common than most people would realize because the uniting component here is that the legacy banks are actually not doing the right things, right? I think last year, I don't remember the exact number, but it's like eight or $10 billion in overdraft fees. Yeah. So literally Novogratz tweeted something like that. Does he have the updated numbers? I'm going to look. All right. I invested in a business a couple of years ago called Bridget, B-R-I-G-E-I-T, and this was one of their huge things was at the time the top four banks made $8 billion off of overdraft fees, literally taking money from people who don't have money. I'll just read a tweet real quick.

So Mike Novogratz, Galaxy Digital, tweeted last night at 8.47 p.m. He said, banks charge $12 billion in overdraft fees, a fortune in ATM fees, a fortune in checking account fees, but you keep going after crypto where saving and money transfer is a fraction of banks. Good job, Senator Warren. you really don't seem so progressive to me. I mean, yeah, like you nailed it, Mike. You nailed it. The other thing that Elizabeth Warren was advocating for this morning was basically an annual wealth tax. So regardless of where your wealth is or whether it's income, capital gains or unrealized gains, she basically wants to tax it every single day, which by the way, I went to Bucknell University. Ken Langone, one of the co-founders of Home Depot also went to Bucknell.

How do you know? Almost every single building on the campus is Langone Center. Ken Langone and Elaine Langone Center. Like every single building is named after the Langones, which, hey, shout out to him for donating so much money, making an awesome campus. But he was on television today and he's like, I'm a multi-billionaire and I get a social security check every month, right? It's like three, $4,000 he gets every single month. And he's like, that's absurd. He's like, I don't need the money. I'm a multi-billionaire, but the government continues to give me a couple thousand dollars a month. And I think that that's a perfect example where you can take kind of the bombastic approach of like, let's just tax everybody. Jeff Bezos has so much money, whatever. But Jeff Bezos

doesn't actually have the money, right? Majority of Jeff Bezos' wealth is tied up in a stock of which he has not sold. And sure, he can borrow against it. He can do all this stuff. But if you borrow money then you have to pay it back in the future right like like there's an element to this it's not necessarily you're taking uh income you're simply using financial components the credit markets to your advantage but i think that when you look at what ken was highlighting was ken was basically going after the fact of i have no problem paying the taxes but there's a lot of inefficiency in the system there's a lot of things that uh don't seem to make a ton of sense which i think was a pretty strong argument from his standpoint couldn't agree more what do you think

about uh all the crypto and the super uh super coders are you a super coder i am not a super i mean you have you have a hoodie on which is step one to being a super coder the last thing i want to talk about when it comes to the crypto world and uh kind of the the super coders etc if you had to design a financial system would you rather it be one where politicians economists etc controlled it or would you rather it be software code that is fully transparent and predictable obviously the latter unless you're a politician right like to me that is ultimately what this comes down to right is if you can have an automated financial system which is ultimately what this is moving towards that almost feels like it's an inevitability and anyone fighting

that is somebody who has skin in the game that they're going to lose power they're going to influence they're going to lose the ability to make money along the way but i don't think it's going to change where we're going right like i just don't see us not getting there do you want i i hope somebody gets it on live video uh or on video somebody should explain to elizabeth With one, the system is so transparent that we can see what's in your bank account. That is how transparent the system is. I literally, if I have your wallet address, I can see how much of an asset you have in your bank account. And I don't need to go to the FISA courts or go and get a warrant or anything.

It's a transparent system. If I know that's your account, I can literally see into your account. Which also means that I can see into the accounts of the big banks, of the funds, etc. You can see on Twitter, on some of these platforms, we literally can watch the flow of funds, right? Let's pull up the Will Clemente thing again, where we can show the flow of funds on the actual blockchain. What other financial system is this transparent? And ultimately, what we're getting is we're getting to the point where we just need to start calling it what it is. Bitcoin is the most transparent financial system in the world.

Bitcoin is the least malleable and corruptible financial system in the world. If you do not believe in the current state of Wall Street, you should be the biggest advocate of the Bitcoin market. This is the answer. This is not legislation. This is not complaining on television or on Twitter. This is working software code that completely changes the game and is diabolically opposed to the existing system and it takes the power from central entities and it puts it back in the hands of the people. That is Elizabeth Warren's entire political approach is consumer protection and economic opportunity. There's nothing that is more protecting of the consumer and more freedom giving than returning sovereignty to individuals and saying to them,

you are in control now. No longer do you have to rely on centralized entities. No longer do you have to rely on any sort of rent seeker, you're in control. And I think once somebody explains that to her, my guess is Elizabeth Warren is going to become the largest Bitcoin proponent in the world. And she is going to go absolutely nuts publicly saying, this is the solution. We just have to educate her.