The Wolf Of All Streets - Banks Bailed Out, CPI, Fed Pivots, Bitcoin Pumps! | Twitter Spaces With James Lavish, Preston Pysh, Mike McGlone, Bill Barhydt, Tom Dunleavy, Dave Weisberger

Episode Date: March 14, 2023

Banks Bailed Out, CPI, Fed Pivots, Bitcoin Pumps! | Twitter Spaces With James Lavish, Preston Pysh, Mike McGlone, Bill Barhydt, Tom Dunleavy, Dave Weisberger. ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget    ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Welcome everybody this morning. As you guys know, I theoretically was taking a week off. I'm not on YouTube, not writing my newsletter this week, but I could not miss the opportunity to host this Twitter Spaces and speak with this incredible panel. I listen in on Twitter Spaces quite often, and it seems to be mostly people offering unvetted opinions with little facts. So as usual, our goal here is to get together the legitimate experts and to have them join Mike McGlone. By the way, I've invited you to speak. I don't know why that's going through, but if you're having an issue, please request because, of course, you're welcome up here. I want to go straight to Caitlin, of course, because I always go straight to Caitlin because it's time to talk about banks.

At the end of January, Caitlin, obviously, Custodia was rejected for a master account with the Fed, which we've talked about. And now it seems like we're witnessing a direct attack on anyone who's affiliated with crypto in any way in the banking sector, but also, of course, a collapse that many, including yourself, predicted. So first, I just want to maybe you can give us a summary of the, there absolutely has been a coordinated effort to debank the crypto industry. Nick Carter's Operation Chokepoint essay was spot on and a lot of things happened. And it started with the coordinated attack on Custodia on January 27th. And a lot of things will be revealed soon about the extent of that attack and how coordinated it was between the White House, the Federal Reserve, the Federal Reserve Bank of Kansas City. And then Senator Dick Durbin came over the top. And a number of things have happened since then. Of course, you saw coordinated attacks on

stablecoin issuers with multiple agencies going after them at the same time. And then it culminated with what happened with Signature. Barney Frank, of Dodd-Frank fame, was a director of Signature, and he gave multiple interviews yesterday saying that Signature Bank was not illiquid and insolvent, and that it should not have been received by the FDIC. And what's fascinating is it does look like the FDIC stepped in a little bit by surprise on Sunday. That's not the way the FDIC normally works. Normally, when a bank goes through receivership, the FDIC brings its examiners in at five o'clock on Friday after the bank has closed, and then it gets the bank sold and opened under a new owner on Monday morning. But it looks like from the allegations, if indeed this is indeed factually true, that the FDIC

basically, that signature ended up in its lap on Sunday afternoon. Again, that's very out of the norm. And what's interesting is that Barney Frank himself said that it was an anti-crypto move. So to wrap it up, it does look like there's just been a series of anti-crypto moves. And some of these things. And there are a number of remedies for that. One is Congress. Another is the GAO, the Government Accountability Office. And of course, another is the judicial branch. Well, we saw the judicial branch outright rejecting the SEC over the last couple of weeks, obviously, in the Voyager case and elsewhere. Do you think that's the route we would need to take to see the FDIC sort of taken down a peg and to see this straightened out? I mean, does this have to go to court at this point for us to get some legal clarity? Well, I think likely, right, because a gao investigation of what happened here is going

to take months um uh interestingly the fed announced that it's going to be investigating itself um which i find hilarious because uh you know it's the fox guarding the hen house what what went wrong what did the fed do wrong these are fed supervised banks uh and elizabeth Warren came over the top. And I almost agreed with her on something this morning. And she said, Jay Powell should not be investigating himself and that he should let the vice chair for supervision, Michael Barr who led the charge to call custodia an unsafe and unsound bank for sitting a hundred percent in cash, which clearly would have prevented the bank runs had the banks here done the same thing. But, but moreover, he's of course not independent. And he also was the one on Thursday morning who said something to the effect of fed supervised banks don't have

bank runs. It has to have been one of the worst timed comments from a regulator ever, because that was when Silicon Valley Bank was in the heat of its bank run on Thursday. So you have investigations that can happen, whether they're internal or external. And then, of course, Congress can get involved. But look, Congress is divided in the United States. The Republicans control the House. The Democrats control the Senate. And you, of course, have the presidency controlled by the Democrats. And so it's very unlikely that Congress is going to come to the rescue. That also then leads to the judicial branch. And so there have been conversations among the companies in the crypto industry, okay, who's taking this lawsuit, who's taking that lawsuit?

And I do think that you will see a lot more litigation. First of all, I want to make it clear to all speakers, you can jump in whenever you see fit, you don't certainly need to wait for me to ask anything. Interestingly, you talked about the fact that Elizabeth Warren, you almost agreed with her this morning. Well, she was dancing on the grave of Silvergate helping to cause these bank runs just a few days ago, which to me was just pure insanity. James, I want to ask you, obviously, I think because you've been perhaps beating the drum more than anyone in my timeline who I speak to frequently about sort of the dangers here, fractional reserve banking and how easily this could all collapse. So, I mean, did anything you saw this weekend surprise you?

And what do you think the state of affairs is now that the Fed has stepped in? Hey, Scott, thanks for having me. It's good to be here and talking to all you very smart people i feel like i'm going to learn a massive amount from uh from everybody up here on stage so i appreciate it yeah i've been sounding the drum because of just the massive amount of leverage that we have in the system all the way up to the sovereign level you know we've been talking about it for so long. And and we knew that with the Fed raising rates at a meteoric level, I mean, they used a rocket launch pad to raise the rates. Right. And we all know that they're trying to tame inflation from the wrong side,

supply versus demand. And and we knew that cracks would begin to appear. I mean, we started seeing them in the ECB this summer. They raised rates and they had to turn around and implement something called the anti-fragmentation tool, right? I think they changed it to a transition protection instrument or something. And this was just because they knew as they were raising rates that their southern countries, Italy and Spain and Greece, suddenly had tremendous pressure on their tenure. So they essentially did a lopsided yield curve control using Germany's balance sheet to buy bonds. And then you have the Bank of Japan. And I posted this last night because it just dawned on me that all of these

issues have crept up because of number one, zero interest rate policies, ZERP, right? And for keeping interest rates so low for so long, allowing so much just leverage into the system. And then you've got the reaction from it, Right. So the Bank of Japan then manipulating their own rates, they tripped the 50 percent mark. They they own more. They own more Japanese government bonds than any other owner in the world, any other entity. Right. And so then you've got what happened in England this last fall. The Bank of England had to rescue its own pensions. Why? Because debt instruments, LDIs that they were using, just because zero interest rate policy has all of these entities starving for yield. So they levered themselves up to get yield. And then now you had the Treasury step in to save banks from a meltdown. Did I think it would happen? Yeah, I thought that they would do something. I didn't think that they would let the system melt down. I didn't think the Treasury

would allow that because of everything I've just said. There's just too much leverage. It would have caused a meltdown nationwide. But what surprises me is that they basically, what the Fed and Treasury announced, and this is my opinion. I want to hear Preston and Caitlin and Mike and what they have to say and Bill. But what they essentially said is that if you put money in a U.S. bank, if you deposit your money in the U.S. bank, you're now backstopped by the Treasury. I mean, they're calling it the FDIC fund. They're saying that that's the fund that will be funded by banks levying larger fees for the insurance. But that's passed on to the customer. And in reality, if we have runs on banks, there's not enough money.

There's no way they could get those fees up high enough, fast enough to pay for that. So it's, it's essentially money printing and it's more QE. And so what surprised me is that's what they announced. It's crazy. Yeah, go ahead. Yeah. just on that point, would you consider this to bail out them? And what do you think about the moral hazard this sort of creates with, you know, all depositors looking out their bank accounts and saying, okay, I thought it was $250,000 that I was insured for, but is it 500,000? Is it more? And if so, you know, does that keep the community banks alive? Because I think the thinking process here was if we don't actually insure up and above $250,000, you're going to get a lot of depositors who are saying, hey, I'm just going to go deposit at Bank of America or JP Morgan or one of those rather than. Yes. I think it's already happening, right? Because you've got those banks,

they've been deemed globally systematically important banks, right? You've got your J.P. Morgan Bank of America, Citigroup and Wells Fargo are the main, those are the main commercial banks that J.P. Morgan's really chased, right? That are deemed systematically important. And so they're too big to fail. So of course, if you have anything above $250,000 in any of these banks, you're going to move that capital

to one of those largest banks. I mean, it's just going to consolidate the assets into those four entities. Truly, that's what's going to happen, you know, in my mind. But, you know, Bill and Preston, they have their hands up. Yeah, I'd love to hear from Preston, especially what this does to Bitcoin adoption. You know, we saw the other day as Bitcoin prices rose, bank prices across the board were going straight down.

So I'd love to hear from Preston what this does for Bitcoin and how he sort of sees this fitting into the broader picture. Before I go down that path, Tom, just to piggyback on James and Caitlin's points that they were making. So at the most core fundamental level, the issue I've had since day one with all of this is we don't have a free and open cost of capital in the markets. And if you don't have a free and open cost of capital in the markets, you're literally manipulating the value of everything. Every single solitary thing is manipulated if you're manipulating the cost of capital. So now when we look at this action that happened on Sunday night, one of the most important things you can do as a bank and anybody that owns a bond fixed income security is you have to manage the inflation risk that's inherent to owning fixed income securities. That is probably the number one

thing you got to do as a bond trader is make sure that you are managing that inflation risk because that's going to creep into the price. If you buy at 1% and inflation was at a half a percent, something, a bond that was yielding 1% or 2% and inflation was a half a percent and inflation goes to 2%, well, you had to manage that risk as a bond trader and as a bank that's sitting on those on trillions of these treasuries. And what happened Sunday night was the Fed stepped in and said, you know what? Banks sitting on tens of trillions of fixing hundreds of trillions of fixed income securities. You don't have to manage that anymore. We've got it. You can just put it

on deposit here. And if your bond was trading at 90 cents on the dollar, well, now you can just extract the full dollar straight out of it. Just put it on deposit here. You don't have to manage inflation risk anymore, which is their primary job and responsibility in owning such a security. So what incentives are now popping out of this with respect to how banks and all their CIOs are managing their balance sheet? And I would push that back to James and Caitlin. I know we're going to go to Bill next, but like, but what disincentive, massive disincentive happened at the snap of a finger Sunday night when the Fed rolled out this new facility with respect to managing risk and free and open markets and free and open cost of capital. It's crazy. It's it's nuts, really.

So what does this mean for Bitcoin i would just quickly summarize this this is a tectonic shift in in what the world thinks is base money which was u.s treasuries and and you know g7 treasuries that have been issued which was the their understanding of what base money was. And you're getting deflection in that legacy base money, which is sowing distrust, which is the core principle of money itself. You're sowing distrust in that legacy system. And people are slowly starting to wake up to what Bitcoin is, which is a system that I didn't have to worry about a 250K FDIC insurance on Saturday when everybody else was scrambling because they had deposits for their company at $5 million because they had working capital levels at 5 million plus, right? They were sweating their faces off because they didn't know if they were insured over

that 250K limit. So the trust is eroding. It's breaking down. I don't know how anybody couldn't see it as bullish for Bitcoin, but I spoke way too much here. I'm curious to hear what others think. Yeah, Bill, go ahead and jump in. And obviously, Abra is seeking a banking charter as well. So I think you have a lot of skin in this game and I think we'll circle back to Bitcoin a bit later. Yeah, sure. Really interesting commentary so far. I think, so look, I'm probably the only one in here who actually worked in a fixed income risk management at Goldman and also runs a crypto bank. Maybe that's why we're still

alive. I don't know. But, you know, the thing about fixed income and risk management is it's really not that hard. It's basic math, but you have to do it. Right. If you don't do it and you actually ignore the math, then eventually you're going to lose because it's just probability and statistics at that point. Right. And so, you know, the problem is, is that listening to the Fed give forward guidance on interest rates does not qualify as risk management, which is basically what happened here. Right. So SVB can say, well, wait a minute. You know, Powell gave us very clear forward guidance back in 2019 that rates were going to stay low or zero for an extended period of time. We acted accordingly. Well, everything that I learned about fixed income risk management says that's pure bullshit.

Right. Now, he may have lied. The Fed does that all the time. Right. Or or they're just wrong. I mean, they've never been right on forward guidance. As a matter of fact, that's probably if there was one thing that I could change that would probably have prevented all of this, it would be to stop the Fed from making any forward guidance on interest rates ever, ever. And I think that would probably make a lot of these problems go away, right? Because then you would have to explain yourself. Why would you basically be making all of these bets on these long-duration assets? And what is the risk management around them? Because you can't point to forward-fed guidance anymore.

So that's number one. I would say, you know, this is just crazy. So, but anyway. And Bill, just to put an accent on that and for everybody to understand is back in December of 2021, if you looked at the Fed dot plots, the average expected rate at the end of 22, so just one year later, was 0.8%. That's right. And where did they take them? They were off by a factor of 40. Yeah, they were off by a factor of 40 on their forward guidance.

The insanity of that is unheralded, even for them. But the point is, that's not risk management. So yeah, they should stop doing forward guidance. But at the same time, banks need to understand that we don't need to wait for Elizabeth Warren and others to create more regulation to say that banks have a responsibility to apply basic mark to market, even if you don't report it to the public. OK, which I think is a moral hazard. But let's put that aside for a second. Even if you don't report the daily value of your bond portfolio to the public or to regulators, you have to report it internally. This is crazy. They went for months bringing up massive losses on a bond portfolio and told no one that i can tell right and or or

the ceo knew when he sold stock which to me is fraud if i'm not saying that that's what that he did know if he didn't it's incompetence if he did it's fraud so either way he loses right so anyway and as it relates to bitcoin you know i can tell you we're seeing massive inflows right now from people who are saying, you know, it's game on. Everybody is expecting a massive pivot here, you know, in the coming weeks. Right. And I would be shocked if the Fed continued to raise under these conditions. It wouldn't put it past them, but I'd still be shocked. And I really do think it's going to be game on for a few weeks here. Go ahead, Mike.

Hey, thanks. I didn't figure out how to raise my hand. I really want to follow up on what Bill and Preston and James said. What you all said hit home for me. Bill, I started in the business mitigating risk for fixed income in the trading pit. So I agree with you completely. The thing is what we noticed, I'm sure you all see, when you see the bond market move at the velocity that it did, what's happening now is just logical.

Unfortunately, most people just can't keep up with how fast. It just doesn't show up on their value at risk model. So to me, this is impressive. I really appreciate what Preston said about Bitcoin. That makes more sense to me that Bitcoin's breaking above this key 25,000 resistance level as we're seeing this banking bailout. And I agree completely. Here's an oxymoron. Banking crisis, plunging commodities and Fed tightening. It just doesn't make sense. So if they do still tighten next week, it's going to go down in history, I think, is one of the worst decisions ever. It's just this is not an environment tightening. So I enjoy

looking at some of the inflation data. It's 12 months. If you look at inflation at 60 or 120 month data, it's collapsing. If you look at the foreign indicators, it's collapsing. Just look at housing, look at stock market, look at the yield curve. So I look at this as the Fed's really behind the curve. I understand about the whole bank bailout thing. But I look at from a macro standpoint is to me, the key things that's coming out of this is U.S. Treasury long bond is so beat up. It has only one way to go. And that's bond prices going up. Gold is breaking out and Bitcoin breaking out and all kind of predicated in the fed just figuring out that yeah maybe we should stop this aggressive tightening so to me this is all fitting in um

into the macro sense that my macro view this is the biggest macroeconomic reset of our lifetimes and now that's just this is a trickle into the banks you're just're just seeing it's only been as of two more days. It's one year lag. It's been one year since the first rate hike. Give us another year. We're going to see the full long and variable lags from rate hikes. It's just getting harder.

I'll pass on from there. Two things are going to happen at the next Fed meeting. Walk my words. The first is it's a miracle. Inflation is under control. Just watch, okay? All bullshit, right? It's been under control for weeks or months, okay? And by the way, it was probably more supply chain-induced than interest rate-induced in the first place,

and so most of the rates were unnecessary, right? And, you know, anyway, I'll stop there. I can go on and on. It's just infuriating. Mike, what do you think about, so you mentioned long and variable lags, it obviously takes time for interest rate policy to get into the broader economy. What do you think about the path of interest rates in the back half of the year? And then what do you think about quantitative tightening, which we really haven't felt yet because of the rundown of the TGA? Do you think we're going to start to feel those in the back half of the year, even if

the Fed stops tightening? Oh, yeah. Well, the Fed should stop tightening now. If they don't, it's just going to make it worse. I've done, I think it's just a matter of time that we get to this enduring deflationary period because people seem to forget this. Remember, it was the Fed that really created a lot of this inflation the first time. They just did QE and pump rates too low for too long,

and at the same time we wrote checks. Now we're taking that away. So I think we're in that classic dump stage of a classic boom and bust. We're in that bust stage in early days. Just this little banking crisis. So far, that's nothing. So you look at Fed fund futures. Earlier, they were looking at oh they're

going to go up to five and a half percent by june or july now it looks like we're going to drop to 4.3 percent uh 4.4 percent down the year that's just early days that doesn't even show the trickle down of housing starting to collapse of the stock market potentially going down the stock market needs probably a boost from the Fed. And I enjoy the data from PPI and retail sales when it comes out. And the retail sales numbers the last few months, they said, were good. But cheap overlay to subtract PPI and CPI, it's all negative. It's just, it's all recessionary. So I view this as, this is the beginning of the cracks the fed tightening until things break things are

clearly breaking and just the concept that some people are still looking for them tight next week or they still might tighten on because the backward looking data looking in the rearview mirror says they should is as bill did earlier people like him and i we just laugh at that because that this to me is this is the opportunity and that's the key thing we got to look at this is these are great opportunities. When you have potential mistakes being made by major institutions, people, investors, astute investors and traders can come in and do very well and make life changing decisions.

I was initially thought Bitcoin wouldn't get above this 25,000 level for a while, but I'm shocked it's doing it. And just by what Caitlin said earlier with this attack on cryptos and cryptos jumping above the one trillion mark and bitcoin taking off and ethereum bumping up to 1800 i look at that as um that's divergent strength and you're not supposed to fade it you look supposed to look supposed to look to buy dips go ahead preston yeah i was just gonna say uh the thing that makes this really hard, and I completely agree with everything Mike and Bill are saying, especially if you're in most locations, the U.S. pulling back and what the implications would mean for broad money on a global scale is where I don't know that it's such an easy decision point because it's, it's clearly out of control when you look in other locations. And if the U S starts easing up,

like the, the, the broad money is, is highly, highly impacted by fed action, obviously because it's just the sheer market size of the U S dollar. So, um,

they have to make decisions based off of U S, uh, first type interests. But I think that we have such an interconnected world at this point that, you know, they have no good choice here. I think everybody on this panel can agree. There's no good choice that they can possibly make.

There's just worse choices than others. And when I look at this backstop facility, I just, my God, if you are removing all of their, all of the inflation risk from their decision making, I just can't imagine what that's going to turn into as far as not allowing free and open markets to occur. Yeah, and just to help people understand what Preston's talking about, this interest rate risk, and Bill knows this possibly better than all of us that traded them. I traded a lot of swaps in my career,

and one of the things you do is you swap out that interest rate risk, and you can do that with a derivative, and it lowers the risk. Now, all swaps are not bad. Many times people use swaps to limit risk or to mitigate risk. And so what we're saying is they don't have to do that anymore. They don't have to manage the risk actively at all which is just it's nonsensical and on and people have to know on on every side of those contracts there's a winner and there's a loser and so if you're removing the idea that there can be no loser where in the hell do you think you're actually going to get the deflationary forces from if you remove that out of the equation?

And that's why I keep beating the drum. We don't have a free and open market. Go ahead, Bill. Looks like Bill. Yeah, look, I mean, I think that we're at a point now where, you know, let's just call it what it is, right? It's game on, right? Rates are going to come down over the next year, right? We're at the kind of the edge now of, and it's at the margins where there's money to be made.

And I think we're at the margin now. And the expectations are clear. I expect to see just huge movements in the bond markets. I think there's going to be a squeeze on bonds that's just unprecedented. I could be wrong, and I don't give investment advice. I'm just telling you what I see. And if the charts don't lie and the numbers don't lie, I think we're set up for a massive, massive squeeze in bonds over the next few weeks. And it could be epic, you know.

So look out. So I have to echo that with Bill. I guess if there's two people to blame, you can blame us because this is the thing that I was wrong and too early on. And the lesson we all know, certainly Bill Preston and all was trading. You get stopped out, you move on, and then you reset. And I think this, I'm going to be publishing on it tomorrow. I'm just reviewing my bond gold, Bitcoin bullish outlook. That was too early on.

That looks like it's just, I've never seen this type of opportunity with the Fed still potentially tightening and with every one of my indications just plunging for inflation. One example is you look at the one-year average of one-year price change in natural gas. It's down 50%. It's the lowest price since 1990. You look at the Bloomberg-Kobani index. Leading indications for PPI. It's down 20% on a one-year basis. The Fed's never tightened in that environment.

So I always resort to PPI because there's that very high correlation to commodities and PPI. And then there's that connection with PPI and CPI. When we print the June PPI number, which is going to come in July, I fully expect it to be negative on a 12-month basis. And it is negative now if you measure it from that point to now. It's because commodities are collapsing. Everything trickles down, but these are major lagging measures. Another key thing I'll end with is unemployment, particularly everybody who's ever trade in trade fixed income trade treasuries, which Bill and Preston have, but Bill certain has is you we all know that the best indication of a recession is when unemployment drops from a very low level. It's a stated goal of the Fed. It's just starting to do that very early days. I want to jump in really quick and circle back a bit to the Fed and the decisions that were made this weekend to effectively backstop. I still consider it a bailout, and I think it's nonsense to use semantics and call it a backstop, but to bail out the banks.

Caitlin, maybe you're the best to answer this. My feeling is that it's unclear at the moment whether they've said we will backstop this two or three banks or whether we will backstop all banks no matter what happens. And to me, they were on the verge of a sort of crisis of confidence. Right. I think we all know that the banking system as structured money in general, it's a bit of a shared myth. Right. And so it only works as long as everybody believes in the system and everybody believes in that myth. And we were on the edge of a massive bank run because people were losing faith in the system. So I think they restored faith at least temporarily. But what would happen or what could happen if we have six or seven banks? Obviously, FDIC does not have enough money to backstop that. I mean, are we effectively talking about quasi-nationalizing banks because

the Fed or the government is backstopping everybody all the time into infinity? I don't really understand where this stops and what the policy exactly is. Well, let's face it. The Fed was created during what was called the progressive era. It was created in 1913, same year that the United States implemented the income tax. It was the progressives in control of the federal government back then. And we actually have progressives in control of the federal government again this year. What is so interesting is that the progressives really want to nationalize the banks and essentially have postal banking, which is what some countries have where, I mean, they've been very, they've been vicious about banks charging overdraft fees to low income people.

And basically they want to provide a nationalized banking service. And there are a lot, there is an anti-crypto, anti-tech wing of the, particularly of the progressives, of which there are many in the Biden White House. And they see how unstable the banking system is. And there are some who are, as you pointed out, alleging that the progressives were the ones who kicked off this whole bank run trend and were gloating about it. And, you know, I thought it was hilarious that Elizabeth Warren and Sherrod Brown, both senators on the Senate Banking Committee,

posted immediately, within minutes or even seconds, of Silvergate announcing that it was voluntarily liquidating, and they were gloating about it. Okay, that means the FDIC told them. Well, we know that all these agencies are working together. And again, a lot is going to come out because of what happened in the custodian situation that there are way overstepping bounds here. But unfortunately, the so-called free market people in Congress handed the power to the bank regulators to abuse their authority.

And to your question, what happened over the weekend was that the Dodd-Frank reform that allowed banks, bank regulators to deem banks as systemically important, got abused. OK, I'm sorry, but these these banks were not systemically important. And yet they were suddenly deemed systemically important. The moral hazard is that had they been deemed systemically important in the first place, they would have had to have complied with far higher capital and liquidity requirements that the truly systemically important banks had to comply with. But instead, they were allowed to roll the dice. Now, to answer your question, and by the way, by rolling the dice, I mean privatized profits, socialized losses. It's exactly what well-meaning

people should be criticizing and are. And by the way, Bernie Sanders has been screaming about this. So it's not all progressives who are screaming about this. But I think that the ones who are not screaming about this are part of this group that really, truly wants to nationalize a big swath or potentially all of the banking system in the United States and go to a postal banking structure. That is absolutely something they've been itching to do for a while and arguably have just done it. Now, are all banks systemically

important? Now, let's look at the Fed's BTFP, the new facility. What it does is a major break with central banking history. Central banks were set up by Walter Badgett of Lombard Street under the guise of lend freely against good collateral at a penalty rate. Okay, what's good collateral? It's an asset whose value is valuable in a market that has a true market price. I take Preston's point well that we don't know what the true market price of a US.S. Treasury security is because it's so manipulated. But at least there is a market price for it, whether it's true or not is a different question. OK, so what's happened? Here's my here's the punchline. The Fed is going to be making loans at a loan to value ratio of call it 130, 140 percent against

securities that have gone down in value by 30% because of the rising interest rates. The Fed has never, to my knowledge, made loan to value ratio loans above par, above 100%. And now they're going to basically they're turning themselves into a leveraged lender. They violated the big rule of central banking, which is, again, lend freely against good collateral at a penalty rate. They're not lending against good collateral because they're giving the banks liquidity at par. Now, let me put some numbers around this. According to the FDIC, as of year end, there were $650 billion of unrealized bond portfolio losses on the balance sheets of the banking system in aggregate. No one really knows what the size of this facility is going

to turn out to be. It's backstopped by only $25 billion from the Exchange Stabilization Fund. I don't see, by the way, how the Fed isn't going to take losses on this. They can get $25 billion from the Exchange Stabilization Fund, but you're now talking about potentially a backstop of $650 billion of loans. If you're JP Morgan or your Citigroup or your Wells Fargo, what are you going to do? You're going to go get liquidity at OIS plus 10 basis points from this new Fed facility for the $240 billion of unrealized losses that you have because you just got cheap funding from the Fed at no haircuts. So to answer your question, was this a bailout for the entire banking system? Absolutely it was. And it's through these backdoor mechanisms that you really

have to be a fixed income expert to understand. Now, also, there's another piece of this, this facility is open to foreign banks as well. So I saw people talking about how this is essentially, you know, a bailout of the US banking system and not the offshore banking system, which is what happened in 2008. A lot of the loans went to foreign banks. Guess what foreign banks are eligible for this one just the same. This is actually potentially a bailout for foreign banks as well. And it is going to be a large facility. The loans are only one year. But keep in mind, these securities on average are probably 10 or 15 years in duration. Ergo, I think the Fed's going to end up having to extend the yeah allowing international banks to to have this uh

facility what the treasury has done and i don't know i mean i i obviously don't know uh what they're thinking but we have seen a significant drop off in in foreign uh demand U.S. treasuries, right? So what the treasury has done is essentially said, okay, now that we're crowding out all of these balance sheets with just the sheer amount of debt that we have, the almost $32 trillion of debt that's out there, now we've created a situation where risk measures can be moved and balance sheets can take on more treasuries and not worry about that interest rate risk that Preston's talking about and not even have to hedge against it and maybe enhance that demand, that foreign demand for U.S. treasuries. It just solidifies the treasury as something that's backstopped.

Sorry, Preston, go ahead. No, you're all over it. If I'm a banker and I'm looking at these actions, I can just buy because I don't have any type of concern that I'm going to lose value in any price I buy, regardless of what happens with inflation and where it goes. So like last night, I'm sure you were watching the yield curve in Japan. And I mean, that thing was getting bid to the moon. And I guess and I don't know if this is still the scenario, but I know a couple of weeks back, if you FX hedge the Japanese yields, they're the highest yielding around, as surprising as that might seem for people. So if you're able to buy that, stick it on your balance sheet and it qualifies under under this new facility that you can put it on deposit and, you know, get your get the face value, you know, the full dollar regard, regardless of what happens with inflation, why the hell wouldn't you be buying buying the socks off of it? Yeah, Mike, I wanted to ask you a question. We've talked, obviously, roughly every Monday.

And both of us were sort of of the opinion that even if we saw a pivot, it would be more of a pause, right? Obviously, that easy money was sort of a thing of the past, and we wouldn't see QE to infinity, at least in the very near term. Has your opinion on that changed at all with what happened this weekend? Yeah, I think that was an inflection point. Most economists and most journalists are still pointing out that if they fed backs off now, it'll be panicking. My colleague just wrote an article on that, and he's spot on, I think, with that. But I think this is when they're supposed to panic. So to me, this is reading as most of us did, did not do anything but read and study and watch markets all weekend like Bitcoin.

Is this to me is just a complete normal reaction from people trying to hedge. We all know is much more difficult than it sounds as bill has learned and john have learned impression hedge your interest rate liabilities when the market collapses at that pace now the key thing I like to point out is this um is the the few banks that are going under yes I'm solid sorry it's sad that the politicians are going after cryptos but cryptos are showing their resilience to this so to me this is the macro just kicking in in its early days of what i've been calling the greatest economic reset of our lifetime and i don't see what stops it so for

instance this morning we had our bloomberg intelligence call and they are our chief interest rate strategist ira jersey still thinks the Fed's going to cut a raise hike, raise rates next week. And then we just so we did this call. The Bank of England still raising the bank of bank. European Central Bank is still still tight. They're all still tightening it. And for me, that's just that is the classic example of lagging central banks, following lagging data, and missing what's really happening here. So one thing that's really impressive is the resilience in the stock market.

So I have to point that out. Right now, again, today, the S&P 500 is stuck at that 4,000 level. I think part of that's pin risk with options expiration Friday. You notice that a lot of the markets went right to these high concentrated strikes and put open interest and then bounced. To me, you've got to get kind of through that. And then at some point, that's going to be the key shoe that drops. It was the same case in 2007 and 2008. I remember loads of us who saw the same thing happening, got short way too early, and it didn't kick in until 2008.

That was, to me, the whole story of the big short. But to me, this is the biggest one ever because I point out things that's happening in housing, just rolling over from the highest levels ever. And then I always say, OK, what's going to save this? And I like to end with the key quote from our equity strategist

from Monday morning, Gene Martin Adams. This is up for the Fed. The Fed is really only going to be the savior in this place. And the Fed is still considered tightening. Yeah, so it's interesting, Mike, talking about central banks being visionary versus reactionary and how they're looking through their, you know, they're making policy and it's kind of like they're looking in the rear view mirror. But if you remember this summer,

if anybody questions this and is wondering just how reactionary these central banks are, the ECB was still maintaining negative rates all the way through July of 2022, while their inflation rate across Europe was in double digits. I mean, these people are absolutely fools. Well, that's a good point. That was my key takeaway from reading the book by The Courage to Act by Ben Bernanke, which, you know, when we first hit COVID, some of us knew exactly what they were going to do.

I just underestimated how much liquidity would pump in the system, got bullish Bitcoin right away, should have been more bullish stocks. But that's the key thing now that we have to point out is this is going to go down in history we're going to write the textbooks of how we created this 1929 time scenario now it's because we pumped way too much it's it's the essence of all big booms in history that's busting is when you take that liquidity away and i read the book recently boom and bust and this to me is just this is one of the most extreme examples ever. I ask myself every day, what stops this? What we see more is more and more dominoes falling that way.

Okay, if it's 19. There's nothing to stop it. Yeah. No, there's nothing to stop it because we're already, I mean, we're in a debt spiral. We've talked about this. You know, Scott, you and I have talked about this a number of times before. Press and I have talked about it ad nauseum. I mean, there's no way out of this. That's what people keep asking me. When are we going into a debt spiral? We're in it.

The Treasury knows it. They published a report that was literally the subtitle of the report was an unsustainable fiscal path. They know it. And this is we're in it, period. Yeah, my next question, then, obviously, Mike, you know, if this is 1929 and we're about to see a great reset, we've seen it's very anecdotal, very temporary. But we've seen a decoupling here of Bitcoin. And anyone can answer this. Obviously, you know, we have the old meme where Pomp would say, short the bankers, long Bitcoin. Well, Monday was the first time you could do that and make a whole lot of money because banks were down 50%, 60%, and Bitcoin started absolutely flying.

But if it's a great reset, are we going to see Bitcoin trade like a risk asset and drop with everything else? Or can we see a continued trend? Is this a legitimate move now in Bitcoin as a flight to safety, a safe haven asset? Can Bitcoin rise in the face of, I mean, you're effectively saying a potential Great Depression? Well, that's what we're going to figure out. And that's where I was most impressed with watching this weekend when we all knew markets were going to be hit hard Monday. But Bitcoin was hanging in there around $20,000, $22,000,

an inching higher Saturday and Sunday when you all could see everything was coming out from the Feds and what's going to be doing to save markets and everything with banks collapsing. So that's the key question, Scott. I wish I could answer it. I think in the long term, absolutely, Bitcoin is going to come out of this ahead, trade more like U.S. Treasury long bonds and gold. But is this inflection point? I have to admit,

I'm glad I'm not making those decisions as a trader because it's a hard one. Long term, you've got to be bullish. Shorter term, I suggested a tactical short around twenty five thousand. Getting stopped out of that, in some ways, is a good thing because it means the bigger picture indication is much higher. But here's my key problem is I'm fully expected the low in the S&P 500s can be around $3,000. And right now, it's around $4,000. That's just a normal correction in a recession, 50% peak withdrawal. That's what we've had the last two times. It gets everything kind of cheap, which is the way they should. It gets, to me, it looks like copper getting down to three and 10-year notes getting below three.

That's just normal. It's where Bitcoin comes out ahead when I think the stock market makes the next low. Right now, I'm pointing out, has Bitcoin just made a new high in the year? And the Nasdaq's still 5% below its high in the year. So it's happening. That divergence strength is happening. It's just a question of the volatility. And we all know one thing about bear markets, they'll take money from everybody, make it difficult to trade. But in the long term, if you're buying and holding and looking to buy dips, I'll end with this. It's just why I can't take my eye off of that GBTC.

And it happened to me back in December. One of the smartest, most successful retired distressed debt people I know calls me and says hey mike what's this gbtc thing and his thought was oh it's just distressed debt at 50 discount you gotta buy it and hedge it that was um that basically put it i'm gonna go to you in one second i just want to make one quick point mike when we were talking about 25 000 as a tactical short that was the last time that it hit and it did drop to 19 06 so that So that was not necessarily a bad call, just to be clear. Preston, I want to go to you and then Bill. Here's what Wall Street doesn't understand about Bitcoiners. We're psychopaths. And I say that in a way that people don't understand how

much we don't speculate. We just buy and we hold the living hell out of it. And for the last year and a half, you've had speculators selling Bitcoin like crazy people all over the place. And guess what? They're gone. They're out of the market. When you look at the Bitcoin,

here's another beautiful thing about Bitcoin, right? We can look at the blockchain and we can see exactly what's happening there. When you look at Bitcoin that haven't moved in over a year, it's the highest number that has ever been recorded as a percentage. Well, guess who's holding those? The psychopaths. People like me, Caitlin, James, others that don't speculate on crap. All we do is just keep on buying as much of this Bitcoin as we can soak up with our free cash flows, never to go back on the

market ever again. That's what they're up against. I think the bottom's in. And I think people have no clue as to what that means with respect to price action in the coming year, because we're not selling no matter what. Love it, Bill. Yeah, I mean, I don't know if I consider myself a psychopath, but I've been holding for a long time with no intention to sell. I don't know if it's longer than anybody else here, but not long enough. Look, I mean, just echo the math, right? I mean, my math is like 15 to 25 percent of all Bitcoin ever mined is probably gone due to breakage. Probably 70 percent is in long term storage now. And the rest is speculated on, which is a tiny amount. And so the amount

that's available to the public is dwindling. And I think you're going to see a huge run up right in the next couple of years to coincide with the having to make Preston's point just based on supply and demand. Never mind, you know, the fact that Bitcoin is still let's let's be honest. I mean, Bitcoin is still a levered bet on risk on assets. The promise of Bitcoin, which we're be worth a dollar, in my opinion, which is, you know, still probably, I don't know, 1000x higher than than where we are now. So so the opportunity here, it hasn't changed. In my opinion, I like to go out to go further out the yield curve. And I look at where we're likely going to be. And I think we're in this migration

during the next run up where it's not just about the psychopaths who are basically saying, you know, you'll be able to pry this out of my cold, dead hands, but it's actually become going to become part of a real shadow banking system. And I mean that in a very positive way, not in a not in a degenerate. Let's let's, you know, let's buy every vice known to man way. I mean a true shadow banking system in the sense of it solves real problems, right? I look at Lightning adoption. I look at Ethereum smart contract adoption. I think as interest rates fall again, it's going to be game on again for yields. And I know I probably differ a little bit with my my fellow Bitcoin holders on this, but I do think that there is going to be a big adoption of DeFi in the next in the next run up. And it really

proved its mettle, you know, when all these crypto banks were my competitors were dying because they were doing all this risky shit. And I think there's a place for that. I think there's a place for that in Bitcoin as well. I don't think you need to basically lever yourself on Bitcoin. I think that's silly. Right. You've got an 80 vol asset. You don't need to lever yourself on an 80 vol asset. Right. But, you know, people are going to want to hold it. Right. And maybe borrow dollars against it. Right. That's OK. Right. And we'll see where this goes. But but I think you're going to see as you go out on the yield curve, a whole set of banking applications that start to emerge around this stuff that really is going to make it much more tangibly real for a billion people who today see it just as a speculative asset, which isn't bad, right, because we all believe. But the question

is, what is it going to take to get a billion, two billion people? I think it's two things, right? The first is all these horrible things happening, whether it's in Ukraine or Afghanistan or Venezuela, we're here with banks failing. And, you know, and then to just these these applications of being able to send money, being able to do core banking, using using Bitcoin, using Ethereum, smart contracts, whatever. And it's happening now. And I think that's what it's going to take to get, you know, two to three billion people doing this in the next run up, which is what I predict is going to happen. That's a great point, Bill. So you mentioned a few things there. You know, DeFi has been working just as it should. And all of those rails that DeFi is sort of facilitating run on stable coins.

So we had USDC depeg the other day all the way down to 88 cents. And I'm wondering what regulators are thinking in sort of that regard. And if the end game for them here is, hey, let's move towards a CBDC to actually, if we can't stop this, help facilitate and control it from that angle. So we'd love to hear what the panel thinks.

Maybe Caitlin might be the best person to weigh in here on what happens here for USDC, what happens here for CBDCs going forward. know what the panel thinks maybe caitlin might be the best person to weigh in here on you know what happens here for usdc what happens here for cbdc is going forward yeah i mean this is what you know as i understand it this is what caitlin and others have said we need right if you had a stable coin uh that's not a stable coin but was actually issued and stored at the fed then you wouldn't have a dpeg because it would be you know a true stable coin stable coins are completely misnamed because they trade on exchanges and have a value

versus the actual dollar, which wouldn't be the case if they were actually stable. Anyway, I'll let Caitlin comment because I know this is what you're trying to build. Hey, Caitlin, before you speak, which I'm sad I won't hear this part, but I have to go. Scott, thank you so

much, Tom, for having me up. It's always good to hear what Preston, Caitlin, Mike, and Bill. I'm sad I won't hear what Dave has to say, but I appreciate you guys having me up. I've got a partner's meeting for this opportunity fund. I've got to go run. Thank you, James. I will talk to you guys later. I know other guests may have to go at varying times.

If you do, obviously, feel free. Caitlin, please jump in. Thank you, James. I know other guests may have to go at varying times. If you do, obviously, feel free. But Caitlin, please jump in. Well, and a lot of folks think that the reason why Custodia was targeted first by the Fed is because we proposed to do just that, which is to be a bank issuing a tokenized U dollar. And moreover, we didn't publicize this, but Custodio was granted the patent last July for tokenization of bank deposits. We still have that patent. And by the way, we are a Wyoming special purpose depository institution. We can operate and we are looking at the possibility of issuing a bank issued token essentially would be a stable coin issued by a bank. Now, not a bank that yet has Fed master account access, so not a pass through to the Fed, but definitely superior from a legal and regulatory perspective to existing stable coins. So Bill, your point is spot on. It was precisely because we got as close as we did in some folks' minds that we were shot first. It was shoot the stallion to scatter the herd. However, I will underscore it is far from over for Custodia. that they went after us first and then Paxos and then Circle and Coinbase from different agencies.

That, of course, is not an accident. Anyone else can feel free to jump in. So, Caitlin, at the beginning, you mentioned some illegal actions. I'd be curious. I think it was as it relates to Chokepoint and I'm using air quotes here, bank de-risking as it relates to crypto. Can you give an example of what you think would have been a clear illegal action and what the response that should be? Well, there are actually many, but one I'll give is the January 27th Federal Reserve policy statement. Number one was released at the same time as the denial of custodians' application

before it actually took effect. But number two was published in the Federal Register on February 7th. This is the bigger issue. The Administrative Procedure Act requires that when an agency makes a policy that has a sweeping impact, that it be open for public comment. That was not open for public comment. Public comment typically is 60, sometimes 90 days, 60 if it's fast, right? So it does take months for an agency to make policy, and it is required under the APA and under the Congressional Review Act to be put out for public comment. That was not put out for public comment. That's just one of many examples. Is that law or is that administrative procedure? It's a law. The APA is a law that was put into place in the 1960s, I believe, after a decade of debate over how do we rein in administrative agencies that are overreaching? There has to be some method for that. And of course, the court system becomes the remedy for that. And, you know, here's the thing. When you get divided Congress,

like we have in the United States, what that means is that Congress is essentially on the sidelines to overrule administrative agencies that overreach their authority. And so in the infinite wisdom of the founders of the United States, we have three equal branches of government. If Congress isn't going to overrule an overreaching executive branch, then it's the judicial system that has to be counted upon to do so. And there are many lawsuits. As we know, there are three already in flight in this industry. There's Ripple against the SEC. There's Grayscale against the SEC. There's Custodia against the Fed. And there are more coming. You know, my experience in that, by the way, there's custodia against the Fed, and there are more coming. You know, my experience in that, by the way, I don't know if the public realizes it, because people may look at this and go, well, that's crazy.

You know, you go up against the government and you're going to lose. And actually, that's not the case, according to my research. If you actually, in particular, fight the SEC in court, it's actually surprising how often the public wins. And I don't know if you've done the same research as it relates to the agencies you're, quote unquote, I'm fighting here, but I remain surprised at how often the public wins. Stay tuned. All I can say is we went into this eyes wide open, looking at all the different scenarios, recognizing that it's plausible that it would end up in court. Yeah.

Scott, sorry, I'm going to ask one more question. You're making my job very easy. A lot more questions. All right. Yes. OK, I'm going to put you on the spot because you brought it up a couple of times. You mentioned it in private. You mentioned it in public.

You keep saying that there's information coming to connect the dots. Come on. You got to share a tidbit with us here. We all basically gave up an hour and a half of our morning to partake of your wisdom, and you're not going to share anything to connect the dots for us? I don't accept that. So come on. Give us a hint. Give us a scoop. Yep. Well, I'll tell you what's coming. The Federal Reserve has not released the public order yet explaining in detail why it declined Custodia's application. Under, again, the Administrative Procedure Act, when an agency takes action, it does have to justify its action. They have not released that. This is the first one in, we went back 10 years. There've been more than 200 Federal Reserve Board orders.

This is the first time the Fed has not released the order on the same date as the vote. Now, it's pretty obvious why, because this was, in retrospect, rushed through. By the way, if you go for FedWatchers, the vote on Custode's application, it came out at exactly the same time, 11.30 a.m. Eastern on January 27th, as the White House released its anti-crypto policy and as the Fed released this policy I just talked about that hadn't gone through the proper APA procedures. Fed watchers will notice that that was during the blackout week ahead of the FOMC vote. So there are a number of irregularities. I will point to a lot of them when this order finally does come out, and that is going to come out soon. But I will also

show a little leg. There were press leaks that happened two days before the Fed vote. And reporters were hounding us saying that not only the Fed applicants, which is Custodia, but also the OCC bank charter applicants, Paxos and Protego, were all asked simultaneously to withdraw their applications or have their applications voted down. And the reporters were hounding us two days before the Fed vote, telling us that we were going to be voted down. And I'll give you even more. Within hours of us sending our response to the Fed, a reporter was reading it back to us. We sent that response to the Fed's general counsel. And within hours, it had leaked to a reporter. We do know a lot about

what actually happened in terms of the coordination between the White House and the Federal Reserve. So when folks were saying at the time, asking the question, was this coordinated? Folks, it was coordinated from the very beginning. A lot of illegal things happened, folks. As you say, Bill, I mean, this is going to be amazing. I hope you get your day in court very soon. And I can't wait. And all I can say is we need you. And thank you for what you're doing. I mean, this is incredible. Thank you.

Thank you, Bill. I will say I have not yet called on this industry for help and may very well do so. We have, it is public record that the lawsuit was filed in June of last year. It's also public record that two motions to dismiss have been denied. And very soon there will be more news coming out. And I very much would appreciate the backing of this industry because there is a lot that may very well come out. The secrets of the temple have never been revealed because lawsuits, as you say, against the SEC have a information, the Fed's motions to dismiss have been denied twice. And the irony is what you're proposing de-risks the space, right? Correct. that blows my mind. And it just shows you how corrupt

the existing incumbents are and how integrated they are with government bureaucracy. I cannot wait for this. I just hope that they don't, that they play the shot clock card on you and schedule things and get all stupid, which I think you should fully expect.

Preston, just wait. It's coming. It's coming, guys. And I am going to ask for this industry's help. When I say the custodian was defamed, I mean it. It is stunning, the departures from from existing policies and procedures. And believe me, we have a whole list. Most people, when they're asked to withdraw a bank application, run away with their tail between their legs. We have tentacles all throughout. We also, and I'm very grateful to the people who have come forward. Washington, D.C. is a sieve,

and they have explained to. Washington, D.C. is a sieve. And they have explained to us exactly what happened. It is stunning. And when it all does come out, it's going to be very transparent to the public what happened here and the untoward nature of it. And when I saw what happened to Signature, where Barney Frank was saying this was an anti-crypto move to take down a bank that he believed was solvent and a going concern. Folks, this is, once everybody starts putting the pieces together, and once the, again, the GAO, the inspectors general of these agencies, the intrepid reporters, the congressional oversight committees, and of course, the judicial system, that is how all this is going to come out. And it is a scandal.

So, Preston, I can't wait, honestly. And Preston, I'll say, you know, we chose the Wyoming route. And I'll say also to service retail. And I think I think, you know, Caitlin's focus is on institutional with the same charter in large part because of Caitlin's efforts. We did a deep dive on myriad trust models, myriad, you know, de novo charter models, acquisitions, the speedy in Wyoming. And it is clear, crystal clear when you dig in that a fully reserved model. Right. For high risk assets, for high risk companies is the right approach. And if small businesses had that opportunity, not just in crypto, by the way.

Right. So to your point about addressing the challenges of our space, it actually transcends our space. And by the space, I mean, Bitcoin and crypto. Right. If small businesses had access to a fully reserved bank account, it would be a very different banking environment in this country. And people would be more likely to adopt things like stable coins. Why do big banks not want stable coins? Because as soon as they adopt stable coins, trillions of dollars in unnecessary fees are going to evaporate. Right. And that is what's going to happen when you go to a fully reserved model, because you

have to earn your keep all of a sudden, as opposed to all this crap that the banks do to earn money on leverage, you know, privatizing profits and socializing losses, as opposed to all this crap that the banks do to earn money on leverage, you know, privatizing profits and socializing losses, as you all said. Anyway, so I'll stop there and say, you know, again, thank you so much. And the irony on top of that, Bill, is so obviously the banks don't want that because of the reduction in fees. But at the same time, somebody needs to show up to buy all these treasuries at some point. Exactly.

Exactly. Not just the U.S. treasuries, but global. Really quickly. China basically killed the model. Yeah. Before Dave jumps in. Caitlin, am I correct in that you're not the custodian is not the first bank that's been rejected that has floated the idea of being fully backed with reserves.

Correct. So like this obviously has something to do with the crypto industry. But also, you have to imagine a bank that safe, that's not fractionally reserved, is a major threat to every bank, because it would suck the liquidity out of any bank that was taking more risk. So I don't agree with that assessment. And I'll tell you why in a second. But we technically are the first bank that proposed to be 100 percent reserve that was rejected. There was a bank that Lynn Alden wrote about yesterday called the Narrow Bank. That is a they've been waiting for five years. They haven't been rejected.

So, again, you know, Kraken, by the way, applied before Custodia did. They haven't been rejected either. Custodia was the only one that has that was rejected. And again, wait till this and Kraken, by the way, applied before Custodia did. They haven't been rejected either. Custodia was the only one that was rejected. And again, wait till this all comes out, folks, and you'll see how disparate our treatment was by the Federal Reserve. And that raises all kinds of questions. But again, we are fighting like hell. And I really am grateful for the support of this industry. But coming back to the question of the of like, you know, is that a threat to the existing system? Absolutely not. And here's why.

A non-lending bank can't pay interest because it's not earning spread on a lending portfolio like a traditional bank is. And so if the traditional banks cannot compete with a non-lending bank that can't pay interest, then something's very wrong. And ultimately, you know, people do pay attention to interest on their deposits. The whole broker deposit market exists and huge swaths of money will move for one extra basis point from bank to bank. Okay. So if, if a non-lending bank that can't pay interest isn't going to, isn't going to be able to compete on interest against a traditional bank, it's not going to suck deposits out of the traditional bank.

That makes perfect sense. Go ahead, Dave. So I think, you know, first of all, this has been amazing. And thank you for all of it. I've been tweeting. So you guys all know that I agree with most of what's been said. The most important dichotomy here, though, is this disaster, regardless of who sparked it, is basically a failure of transparency in the in the traditional banking system. That is more or less what it is.

And so it's not remotely surprising to me that of course they want to blame the single most transparent potential banking system financial system which is crypto at the same time if you compare what you're trying to do at custodia caitlin or with just d5 protocols and certainly bitcoin on the blockchain frankly you know what the assets are in all of those cases. Whereas the cause here is even today, nobody knows what the unrealized losses at all banks are because even the regulators don't know, you know, how much and what they do. And we haven't even talked about off balance sheet or shadow banking. The reality is, is it's the same.

It's like I feel like I'm going through ridiculous deja vu. I was at Citigroup in 2008 and had a front row seat to monumental stupidity. I mean, things that are just to this day, I still can't believe it. I mean, their nickname on the street at the time was the monkey with the gun for a reason. The fact is, opacity in risk is literally the thing here. And we're all working in an industry which is trying to make risk and everything around it to be more transparent. So of course, they're blaming it. This Barney Frank story is huge. And what's important is, you know, regulators are trying to make things better for investors. And we just did some research just just to put this out there within crypto exchanges right now.

If you looked at if you go back a week, you start right before all this happened. The average spread between Bitcoin and Ether, you know, between the various prices on various exchanges was somewhere between one and two basis points, pretty consistently for months at a time. As soon as Silvergate and Signature's network, Signet, was down, it is now sitting between eight to 10 basis points or more of divergence. And so what does that do? That way, the market's less efficient. Well, what a surprise. Clearly what the regulators want. It's not stopping volumes because it's still a relatively small amount. But the fact is, it's a big issue. And, you know, we've seen it

and they seem to be trying to make things more opaque as opposed to more transparent. I think that's really the essence of the fight. I want to go back to one quick question, which is after seeing the closure of Silvergate's signature, of course, Silicon Valley, Caitlin, I actually, I think I DM'd you immediately this weekend and said, so who's left to bank the crypto industry? I mean, I know, obviously, there have been articles,

Circle, banks with BNY Mellon, but if we see one more, one or two more of these, are we really at the point now where our, I mean, our exchanges and our industry will be unbanked in the United States or close? Well, so here's, here's what's funny. I was on a space as a couple of days ago with Jesse Powell of Kraken. And he said, look, you know, the big players can always go offshore. And, you know, frankly, that's what Tether did the whole time, right? They, they, they alleged that they've never touched the United States. And as a result, they're getting their US dollar services from offshore banks. This is what drives the Fed crazy. They don't have control

over the banks that handle US dollars offshore. And it's the euro dollar market is the name of it. It's a misnomer. It's kind of just like stable coins. It doesn't really mean what the name says. And in that case, it dates back to the 1950s. The first euro dollar, which just means offshore dollar that never touches a U.S. bank. The first euro dollar was issued by a British bank in the 1950s because Russia had to sell its oil in U.S. dollars. Thanks to OPEC only agreeing to use U.S. dollars, thanks to OPEC only agreeing to use U.S. dollars in the global oil markets. And as a result, Russia had to put U.S. dollars somewhere. But thanks to the Cold War, the U.S. banking system wasn't willing to bank Russia.

And ergo, the British banks stepped up and said, we'll start making a market in U.S. dollars entirely offshore. And that offshore U S dollar market has just exploded in size. And it's, it's now bigger than the onshore U S dollar market. And so as Jesse said, you know, the, the, the big companies can go offshore and can get U S dollars offshore. It's retail onshore that has a tougher a tougher um you know path because um if they're really going to try to shut off the u.s dollar access to the whole crypto industry

um then it's really only the big companies doing business with the big banks which is what we have right now um and doing business with offshore it's the little guy that gets frozen out. So we centralized to a few major banks and a few major players once again. And this is theoretically a situation where retail has either bank accounts closed or access closed off to crypto exchanges. Correct. And I think it'll be real when all this comes out. What I'm going to I'm thinking about ways because so many people have offered to help us. I'm thinking about ways to, you know, sort of bring this industry called its Congress people en masse at the same time and just lit up the phones and lit up the emails. Ultimately, Secretary Janet Yellen backed down and Congress backed down. And we have more power than we realize. We just need to organize around it. Caitlin, is it is this really a Gensler issue? Is this a Biden administration issue?

Would changing of the guard help, you know, in the next administration? Or is this really just an endemic, you know, hate towards crypto throughout the entire administration and throughout the entire body of different government arms? Oh, absolutely. It's a Biden administration issue. Absolutely. Because the people at the top of these agencies, and I will say, I will say this, the folks that we dealt with on the ground at the Fed, I know we had real supporters, and they were truly objective and doing their jobs. And then all of a sudden, in January, as we've said publicly, we got blindsided. Well, it's crystal clear that they were rushing this out, this announcement, a denial of custodia out in concert with the White House. We actually had someone come forward and tell us who was orchestrating the whole thing. OK, so we know this. It was an insider who came forward. And

again, like this all got confirmed subsequently because it's such a sieve in Washington. And so we know what was happening. It is absolutely the Biden White House and it is absolutely the Biden appointees to these agencies who are coordinating. And, you know, when it all comes out, the extent of the coordination is going to surprise everybody. So back to your question, do we just have to wait out the Biden administration? There's some evidence that that might be actually what we need to do. Mike, I know you had a comment, so I'll let you go ahead. Well, that was a good lead-in because it's a virtual guarantee that we're going to have a severe recession. You never reelect an incumbent in a recession. And so a young Republican potentially with a female vice president, it's gaining a lot of potential. But I really enjoyed, I was smiling as Kate was speaking, because when she described indirectly the euro dollar market,

which some of us have been trading for years, I just look at that right now. That's a crypto dollar market, which is the euro dollar market 50 years ago. People call them stale coins. I'm like, well, they all track the dollar. Let's call them what they are. They're crypto dollars. And I'm here in Miami and I have a friend who moved from Wall Street. Now he's head of LATAM at MasterCard. That position didn't exist two years ago. So, you know, that's just adopting the technology to say, hey, we can transact better in this. So I I look at this as, yes, we might have to wait out the Biden administration. They did have to point out that as much as people hate Gensler, those of us who dealt with him when he was at the CFTC, people at Goldman Sachs hated him in the commodity market.

And then we worked it out. But this case, he's got two years left and he did approve the Bitcoin ETF. This Grayscale Bitcoin Trust litigation is going quite favorable for Grayscale. And I love people coming out with the worst case scenario that might actually delist cryptos and Bitcoin. That would be so seriously bullish in the long term and so bad for the U.S. in the short term that it's almost unfathomable. But I look at it. Well, that would be a great opportunity if you can ride out the waves. It's not like these things don't exist in other countries that are doing just fine. So here's my takeaway from this. First of all, I want to really thank you for having me come on because I've learned a lot, but I wasn't digging into the details as much because the macro

just kind of was overwhelmingly. I think my next thing I'm going to be publishing on is how I think Bitcoin 20,000 was very akin to Bitcoin 5,000 back in April 19. And there's major similarities because remember, that was 2019. Bitcoin had made a bomb around 3,000, bump around 5,000. And then the New York attorney general came down and tethered. Tethered, broke the buck for a week. A week, Bitcoin came back to $5,000. And I've been bullish since that day in the big picture. To me, this is similar, but on steroids. The government's coming, cracking down on Bitcoin. We're having a banking crisis. And yet it's

showing sort of impressive resilience. And as a markets guy, you do what the market tells you, and sometimes you're wrong. To me, this is very similar, but from just another level, different time. Thanks, Mike. If you got to appreciate the time, Bill, it looks like you want to hop in. Yeah. Just so just to build on what Mike was saying, I have kind of an emerging theory based on what I'm seeing the last week. And I've believed for a while that that Gensler wants to be Treasury Secretary. I believe that someone is going to be looking for someone to blame for what's happening with the banks now. I believe that Gensler more or less reports to Elizabeth Warren and Maxine Waters right now. And so you can play this out and you can see a scenario where, OK, if Yellen's head is on the chopping block because of what's happened with the banks and Warren Waters and company supports Gensler as treasury secretary, well, guess what?

We now end up with the nightmare scenario where the are kind of, you know, crypto public enemy number one is now Treasury secretary. And I actually think that is, if I was to bet on this, the most likely outcome of all of this over the next six months. I don't know if he would do it before the election or after. But I can I can honestly say that this is a very realistic outcome, which would be very bad for crypto right now. Do you think that that's actually his agenda? Or is he using crypto because it's an easy sort of hobby horse to beat down and get a lot of wins and then move into that seat? And maybe he'll move on to something else. And crypto really isn't what he's concerned about. He's more concerned about his career trajectory.

And Elliot's good sir playbook move here and is using his enforcement division to build a name for himself with the end game being the treasury secretary position to solidify his place in American history. That's what I think. So I mean, I don't know if I could put a finer point on it than that. So what is the end game for the administration here? Is it, you know, just de-platform all of crypto and then move towards the CBDC? Or is that not likely? Is it just they want to de-platform crypto

and sort of leave it at that and CBDCs are years down the line, if ever. So this is interesting because, again, we've heard from insiders and corroborated by multiple people on both sides of the political aisle. It's now pretty much an open secret what happened here. Bill, you rendered everybody speechless. Yeah, well, it is stunning, right? Because, my God, this is the United States of America where we have rule of law.

We have guaranteed due process in the U.S. Constitution. And I ask rhetorically, are we still a nation of laws? Does due process still matter? Because the folks that have been involved in certainly what happened to Custodia, but also some of the other companies, it would appear, just chucked out of the window the legal and regulatory constraints on their power and just went for it. But here's the thing. There is some hope that the more moderate folks within the Biden administration are going to pop their heads up. And in some ways, it kind of happened over the weekend, because you saw Janet Yellen, who is not one of the moderates, Sunday morning say there will be no bailout. And then by Sunday night, there was a bailout. Okay, so what happened in the interim, and I kept commenting on this,

because this anti-crypto, anti-tech, more progressive wing of the Biden administration was the one that really got this whole thing going. And here's the thing. There was a power vacuum in the transition in the White House, as I understand it, from the old to the new White House chief of staff and head of National Economic Council, who were both much farther left than the people in those seats right now. And as a result of that, there is some sense that because that power vacuum existed in the transition and the anti-crypto, anti-tech wing went for it, that maybe the more moderates will start walking it back. Because let's face it, crypto is definitely,

there's a generational demographic that matters to the White House for re-election. And so I have not yet seen any evidence that that more moderate wing, now that the people are in their jobs, is you know is resurgent but i'll i will put a puzzle piece together governor brainard who had been fed governor lael brainard who had been a supporter of the concept of the wyoming special purpose depository institutions voted against custodia's application and got a job in the white house so um and she's now head of the National Economic Council. So everybody should keep an eye on what happened there and whether whether there were deals cut and the and whether in her new role, she's going to start walking back what her deputy did in filling the power vacuum. And the deputy, by the way,

was the head of economic policy for Elizabeth Warren's presidential campaign in 2020. So, Bill, your allegation that Elizabeth Warren is really the one pulling the strings, it may not be far off. I'm not saying that that's exactly what's happening, but there's certainly a lot of smoke around that. And certainly that's what the talk inside Washington, D.C. is. Well, we do know for a fact that her, quote unquote, hardball questions to him in the hearing were given to him in advance for him to vet and prepare. So that always happens. That's not her. That always happens. He'll go up and meet with the senators to get the hard questions out of the way so that what happens during the hearings are softballs. Welcome to Washington. So Caitlin, I do want to ask you one more pragmatic question that I think everybody would be interested in. You've kind of hinted multiple times that there's going to be a time when you're going to need the industry to back you up. My next question is, what can we do? How can we do that? How can we facilitate that?

Is it a series of spaces and YouTube videos and calling our senators and Congress people? How do we actually put that into action? Well, stay tuned. One thing I will say is I am really, really grateful for the amplification of the social media messaging right now. Everybody's watching, including the folks to whom I've directed some of my messages.

So please keep it up. Thank you. And also back, Scott, on your earlier question about some of the sea change that has happened. Did we actually hit a regime change this weekend? I did comment that I got deluged on LinkedIn. LinkedIn, of course, is naturally going to be more of a sort of a professional, you know, bankers, Wall Street regulators, lawyers, that sort of thing,

audience than Twitter is. Twitter is more global and more freewheeling, definitely a lot more crypto people. And so there's certainly overlap in the follower universe of folks like all of us between our Twitter followers and our LinkedIn followers, but LinkedIn is definitely more mainstream. And here's the thing, I got absolutely deluged by mainstream people. And it was senior people at banks and regulators and lawyers over the weekend, I went to bed, I was I slept for five and a half hours on Sunday night and had a hundred new messages when I woke up on a Monday morning.

It's just, it's insane. And to me, that's a qualitative piece of evidence that a lot of people woke up over the weekend to the instability of the banking system. And they're all now getting crypto curious and willing to reach out and learn. And you can see it. I'm sure all of you have had similar experiences. I 100% agree with that. I know we're probably going to wind down relatively soon, but I want

to just circle back very quickly to Bitcoin and Mike, Bill. Do you think that this move we're seeing right now is truly the spark to hedge against all this nonsense? Or do you think that we're just seeing a short squeeze and this is yet another trader's move? The answer is yes. I wish I was if it was that easy. So that's why I've been trying to give a little time before I stick my neck out and say, OK, well, he could be the idiot. He could be right. And I think it's that transition where Bitcoin is clearly going through this test right now, becoming global digital collateral as we crack down and as U.S. banks are collapsing and falling like they should be as their reserves

decline and assets decline. And it's just a question of how you quantify it. So the bigger picture macro, absolutely. I still think it's it's made this whole period is going to make it look like Bitcoin can get to 100,000 quicker, probably by the calving and GBTC getting to 100, which is to me is one of the bigger trades because that going to an ETF. But it's how we get through this next through weeks, I think will make the key, because I'm looking at right now this issue I'm having with the divergence strength to the equity markets. Just what you want to see. The banking crisis is just you want to see Bitcoin come out ahead. But it can't be easy. It's this transition should not be easy. And that's why I want to be very careful buying

into rallies. If I was a trader and just looking for little dips in these rallies to add to positions. Yeah, I'll echo that and say, look, I think two things. You know, I said on Money Talks last Friday, I think the move to 19.6 or 19.5 was beautiful, right? I mean, from a technical perspective, it was really a great unwind and a rewinding of the rubber band to pop higher. Did I think, you know, the 20% was going to happen in a day and a half? No. Uh, but I, I, I did see a clear, pretty clear path to 30 K, which is more or less what I see now. And from a technical perspective, there's really no resistance above like 35 K, uh, which is amazing. Right. So, uh, do I expect a clear path in a week to 35 K? No, but I didn't

expect this either. So so, you know, I would have expected, you know, maybe eight to 10 weeks. But but we have what we have. And clearly, Bitcoin is still a levered bet on risk on assets, given that it hasn't really become that kind of shadow money system for the masses yet, which is what I think it's going to become in the next two to three years. I would say probably 500 to a billion holders is the is the magic kind of range for us to start to be there, in my opinion. But we're on the way. And I think this next run up gets us there. And then all of a sudden, people are going to be like, hey, this stuff is so valuable. What can I do with it? Because it doesn't make sense for me to hold it if it's worth 10 trillion dollars, which is where I think it's going in the next run up. So so so watch out for for the this migration to kind of, you know, what Preston called the psychopaths to true network effects, which is what I think is coming next. And it's going to be really exciting.

Tom, I actually want to open the same question to you, obviously. You're a co-host here, but this is really your core competency. You're the guy I go to anytime I'm looking for research or insight. So, I mean, do you think that this is a real move that's being driven by fundamentals, or do you think it's a technical trade? Yeah, if I look at broader markets, I think I share Mike's view that we're still going down to $3,200, $3,000 on the S&P. And I have a bit of trouble thinking that crypto is fully decoupled and fully going to sort of shake that move off. That being said, I think it's between right now flows and fundamentals. And flows, as Preston hit on earlier. There are no sellers of this asset left. All of the people who are current holders aren't selling. There's

only buyers right now. So I think we could sort of hold this level as we sell off an equity world, but it's going to be really, really challenging to see sort of a sustained breakout in my mind, Bitcoin, Ethereum, and all of the other assets right now until we really, really clear up the macro picture. And if it's going to be as bad as all of us think here, I just have a hard time believing that Bitcoin is really going to break to the upside. But I really, really like Bitcoin sort of as a store of value and sort of holding this level right here while everything else goes to down the toilet. And I think that's actually, it's fantastic for the asset as well, because it sort of showcases that it can be that ballast in a portfolio. And one thing I think coming from

kind of the institutional side, people forget is that we need incremental flows into this industry, especially from institutional allocators. And they have a really hard time sort of placing Bitcoin right now in the portfolio. Is it inflation head? Is it a risk asset? And the more time we give it to decrease in volatility, and to sort of progress through these cycles in ways that we think make sense, the more they'll be able to allocate to it. And we have all of these sort of retail buyers, obviously buying in right now, but when we actually get those incremental institutional flows, and you start to get one, two, three, four percent positions from these institutional allocators, I think that's really when you see the actual decoupling happen. But, you know, right now, I think Bitcoin's at a great spot and really, really love to hold it at these levels, but still a lot of a lot of trouble ahead for equities.

So really quick, Tom. So, A, I love the idea of the decoupling being Bitcoin's just stable and everything else goes to hell. Okay, I can see that. But B, for that institutional allocation that you're talking about, and other speakers as well, please feel free to jump in. Does that require an ETF? I think the ETF is the retail product. I think the ETF is the retail product. You know, if you're an institutional allocator, you're going to try to get exposure through a separately managed account, commingled fund, or just directly buying the asset. So an ETF would really be the retail flow.

And while I think it would be meaningful, it certainly could be a sell the news event as well. So I think that's really the retail product you're looking for there. I'm interested to hear what the other guests think. Yeah, I totally agree. I think ETF may have the retail product you're looking for there. I'm interested to hear what the other guests think. Yeah, I think I totally agree. I think ETF may have its place with retail, but there's such a small piece of the overall Bitcoin allocation available. It's going to get to scraps long term.

That's just the way it is. Bitcoin is too close over the next 10 years to be used for real world transactions. Ethereum the same. I think you're going to get to a point where the ETFs don't make a lot of sense. So fine, it is what it is. I think the public has a right to buy that product as a security if it wants to. So the current state of affairs makes no sense, both legally, ethically and otherwise. But I actually disagree a little bit on the stock situation, because to me at the margins, as soon as the traders perceive that we're at the margins of rate changes, I really do think it's game on.

And I think a lot of people are going to basically be sitting on their hands and wondering what the hell happened when when the Fed basically does the hard pivot. I think they're I think they're about to be in soft pivot mode basically does the hard pivot. I think there I think they're about to be in soft pivot mode and then the hard pivot is going to follow. Yeah, there may be a 10 percent move to the downside beforehand, but I think the move to the upside is is going to be dramatically bigger than that. Could be wrong, but that's what I think. Scott, I think I'd like to take the other side of that one. I think that the ETF decision is kind of a big deal for one reason.

And that is, if you really want to know what's going to drive Bitcoin to the, you know, the 10 trillion level, to use the level someone just said a few minutes ago, it's the ability of institutional allocators to be able to do that. In order for that to happen, the investment consultants need to be able to classify Bitcoin as a asset that belongs in, and I hate to use the word 60-40 portfolio, but basically something that they can, that's investable. Having an ETF, which could be in people's brokerage accounts, is a big difference. And it's really a question of moving that off the line. Right now, Bitcoin is an alternative investment, hedge funds can buy it, people can buy it, but it is much, much easier if it's considered a mainstream and not an alternative asset. I think that's really where that's why I think, you know, people are fighting against it. Yeah, so I would just add a bit of nuance there. So I think on if you're talking about sort of RIAs, I think that they definitely need a product to actually put this into a portfolio. And I've talked to numerous

RIAs who have had issues getting Bitcoin allocations or crypto allocation, just because it doesn't sit within the normal set of accounts. And it's hard to get a whole portfolio perspective. For the institutional side, though, I think those guys are certainly going to continue to allocate through the, you know, bigger players. And I think, you know, some under the institutional side, though, I think those guys are certainly going to continue to allocate through the bigger players. And I think, you know, some under the radar news, but, you know, Aladdin opened it up to open up Bitcoin and other assets, institutional players and little incremental steps like that. We're getting behind the scenes, I think, will make this flood of the next sort of up move, you know, bring on those institutions. Once we can get a lot of the regulatory clarity that Caitlin hopefully is helping us with cleared up. Yeah, I'll just say that I don't know anyone who's done their homework, who has decided that they want to make an allocation to Bitcoin or Ethereum that has not been able to make their allocation to Bitcoin or Ethereum.

I totally agree with Dave that an ETF in the short term would make that easier. Totally get it. But on the other hand, I have RIAs as clients. I have their clients as clients. And when they're motivated in retail, they figure it out. Could it be easier? 100% it could be easier. And I think, as I said, the public is within their

right to buy Bitcoin wrapped as a security if it wants to. And the fact that they can't right now is ridiculous. But people are getting it done when they're motivated right now. But Bill, does that apply to endowments, pension funds, sovereign wealth? Oh, they have Bitcoin. Many of them have Bitcoin right now. So, go ahead sorry go ahead please no i'm just gonna say that again that that you're making my point you know sovereign wealth funds endowments many of them have made investments in bitcoin in funds that invest invest in crypto companies uh it's happening it's already happening it

happened during the last run-up right and and it's going to continue to happen. As I you know, as I said, yes, an ETF will make the allocation easier. But I think that, you know, there's so little Bitcoin available still. And the miners are going to get an outsized piece of what's still to come. And they're probably not going to be selling it during the way they had to last year during the next run up that I just don't see that there's going to be trillions in ETFs. You know, there'll be billions, which is great. It's fine. I just think that those institutions that want to do this either are doing it or are going to be doing it, whether or not the United States itself has a real ETP or ETF for spot Bitcoin or Ethereum. So effectively, the importance of the ETF is marginalized with time as the asset class. Long term, for sure.

Dave makes some really good points in the short term, which I have to say, you know, makes sense. But mid to long term, I think I'm right. Well, just to be clear, Bill, mid to long term, I think I'm right. Well, just to be clear, Bill, mid to long term, I think most people will be self-custodian. So it's just not that far. I don't have a crystal ball that goes out that far, but that makes sense too. Sure. So the signaling aspect matters. I'm thinking more in terms of the investment consultants. Yes, there are people who get out on the curve. But if you look at the history, you can pick your asset class, it doesn't really matter, just even

allocations to hedge funds, right? It was, I mean, I'm old. So right, I can remember when, you know, sovereign wealth funds were the first, but pensions had a real hard time allocating all but a small amount to funds that weren't straight beta uh and it's different right you know it's really a question of when does it get over the hump and i have a feeling this is one of those things where it's you know and to use a a popular meme in crypto i mean you know slowly then suddenly is i is what i sort of expect it's like when when people when mercer and towers parent and all the investment consultants say, you know what, this is OK, that's when it matters. And that's why I think that Preston's point a while ago, which I tweeted about, I think he's right.

I think this is an inflection point. Going back to what's quantitative easing by a different name is going to get people's attention. And I've been calling it the second Genesis event for Bitcoin. And I think that's sort of what's happening. And maybe it's a little bit of hyperbole, but it is non-trivial. People are paying attention. Yeah, Dave, just to add a bit of color to that.

So I, you know, my prior career was actually as an investment consultant at one of the top three shops you're talking about there. So, you know, advising CalPERS and all those guys and just actually discussing crypto in the room would get you sort of about there. So, you know, advising CalPERS and all those guys and just actually discussing crypto in the room would get you sort of laughed at. And it was the only folks that I

saw who had it were the foundations and endowments who were sort of safe enough that they were willing to put money there. But as the consultant, we almost had to, you know, get sign off from them and say, hey, we're not sure how to value this stuff. We'll put, you know, a volatility and expected return on it, that's probably gonna be meaningless. But you have to sort of sign off and say, you're okay with this in your portfolio, but the investment consultant wouldn't sign off on having that position or initiating a new position. And that view is still held. I talked to my former colleagues at these firms, and that's not changed. And the research they're doing around crypto is really surface level. And they're just, you know, sort of writing high level white papers. If a client asks about

it, okay, here you go. Here's the white paper that we wrote about Bitcoin and how it may contribute to portfolio returns. But they are so far away from actually recommending allocations. It's somewhat scary. And I don't think even on that side, it's going to be quick once the next up move comes because these things move in quarterly board cycles. So you have to go to a quarterly board meeting and say, oh, okay, here's this Bitcoin thing. It's going up. This is interesting. Okay. We'll bring you some recommendations on how to put it in your portfolio the next meeting. Then the following meeting, you bring in some managers. Then the following meeting, you make an allocation. So these things take quarters to years to sort of institute. And you have to change the culture of

even considering the asset before you do that. And there are firms who are sort of more cutting edge than others. But from what I've seen and from the folks I talked to, it's still going to be a bit of an uphill battle. That being said, it doesn't take a lot of flows to actually move the asset class. If you get a one to 3% allocation, the asset class can literally double in size. So you just need at the margins folks to start considering and start allocating here. But, you know, to date, it really hasn't happened. And, you know, I'm still skeptical it's going to happen in the next, you know, six, 12 months until things start to clear up. Yeah, so the uptake is all relative, right? I mean, I noticed our head of asset management,

Marissa's listening, so shout out. But, you know, we're seeing a large number of allocators asking for guidance how do i make allocations to bitcoin ethereum even solana right and and you know that the coins that we think are going to represent real usage uh you know polygon matic right at the at the l1 l2 level right now and and and the level of awareness and intelligence in the conversations that we're seeing versus two years ago in the last run up and then five years ago before that is truly astounding. People that are asking, OK, so so, you know, we're doing X and Y for yield right now in these fixed income funds. What about DeFi? Where is that going? Right. And just the fact that they're now looking at DeFi and saying, OK, yeah, we should basically put 100 million to test in this position or that position. That's a that may seem like small numbers relative to what is small

numbers relative to, you know, the community you're talking about, but it's going to go fast, in my opinion. And I think you're going to see that group come in, in droves over the next 24 to 36 months. Yeah, totally agree. I think it's, you know, sovereign wealth funds, foundations, and then the last in line are probably the old blind pensions. But it'll be it. It'll be a cascade with the faster money moving first. Yeah. Hey, Scott, I've got a staff meeting to run. So I'm going to I'm going to leave you to it. And thank you all for having me.

Sorry for for talking too much, but really enjoyed it. No, I love it. And guys, I think actually this is probably a perfect time for us to wind down also for me because I have two kids waiting for me. So I appreciate you guys spending the time. I know that probably you were generally committed to an hour and we put in almost two hours here. So a bit of a marathon,

but I think that we really parsed these situations well, gave a lot of insight and hopefully quelled a bit of the panic and nonsense. So I want to thank Tom very much for being an amazing co-host while I was struggling through some Internet issues here as well. Caitlin, Bill, Dave, Mike, we had obviously Preston and James earlier. Everybody, please go follow them. We'll be doing these spaces every single Tuesday, at least, and probably going to be ramping up the frequency. So you'll see all of these guests

quite a few more times in the future. And thank all of you for showing up. Obviously, this will be available for recording. So feel free to hit that little arrow button up top and share it with everybody. And for me, that's it for me for the week. So I'll be back on Monday in full steam with Dave and Mike, who are both here for our Macro Mondays on YouTube, which, man, was I sad to miss that one yesterday. That would have been the day of all days for that stream. And Caitlin, I just want to say just, you know, thank you so much for what you're doing and for the fight that

applies to everybody especially please keep us uh updated as to what we can do to help uh everybody that's about all i got thank you once again see you all very soon thank you so much thanks for having me thanks take care Thanks, Scott.