The Wolf Of All Streets - Bitcoin: Be Careful Who You Call Your Friends

Episode Date: July 19, 2024

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The crypto world has been celebrating the politicians and leaders of huge financial institutions that have been supporting the industry over the past few months. But should we be careful who we call our friends? Is it genuine? Do we need them? Are these the saviors that we didn't ask for? We're going to be discussing this, obviously, politics on the docket and all of the main news stories from this week on the Friday Five. NLW and I are ready to go. now and the election for the news cycle in this market. Luckily, I have NLW here to unpack it all for us. I think story number one has to be J.D. Vance. Trump's VP pick is the first ever Bitcoin on a presidential ticket. Of course, we had this article in the New York Post,

which surprised me. Trump picking J.D. Vance as his VP is a big draw for the Bitcoin crowd at the ballot box. And if you read deeper into it, it almost implies that Trump specifically chose J.D. Vance because of Bitcoin. That's a bridge too far for me. Don't think it has anything to do with it, but I do think it helps solidify that base that was likely already willing to support Trump. Yeah, I don't think that it was a Bitcoin-only decision by any stretch of the imagination. Now, certainly it does appear that the set of tech Trump whisperers have had an influential role in some of these decisions, but Trump isn't going to make decisions that he doesn't want to make. He had had a long courtship with JD Vance over the last little bit. I think he sees him as an heir parent. I think there's a lot more going on than just this guy's opinions on Bitcoin and technology.

However, it certainly does align with the part of the whole thing that matters most to our particular community. And he is the first, to my knowledge, VP or presidential candidate who is a known holder of Bitcoin up to $250,000. He reported not that long ago. Of course, he's been exceptionally critical of the SEC. He's been supportive of the industry in general, has been sort of one of the early political leaders that has been talking about our industry in the first place. You have to imagine that regardless of the other politics, which I have not followed and don't get too deeply into, this is probably a net positive for the industry if he ends up in power.

Yeah, he has a very... So I've looked at this a lot from both the AI side and the Bitcoin side, and there is actually a fairly consistent ideological through line when it comes to his perspective on technology. And that's basically like, so I don't know, for those of you who caught this or didn't catch this this week, Ben Horowitz and Marc Andreessen put out this long 90 minute conversation around why they were supporting Trump in this presidential campaign. And it basically comes down to what they call their little tech agenda. And the idea is basically sort of contra big tech monopolist type control. They're trying to make sure that the space is safe for innovation and startups and whatever. And like, you can critique that, but that's their philosophical conception.

And Vance is very little tech, even if he didn't use the same words as those guys. He's concerned with monopolistic control of big tech. Now he may come at it same words as those guys. He's concerned with monopolistic control of big tech. Now, he may come at it from a culture war perspective. His biggest sort of critiques of tech tend to be the way that they censor voices that are on the right side of the political perspective. But whatever the case or whatever the motivation is, he is definitely sort of an antagonist towards big technology of any kind. And I think Bitcoin fits within that, as do some other things. So there does seem to be a consistent through line to your point. And one of the things that I think

has some folks pretty excited about this from, again, strictly from the Bitcoin point of view, is that whereas with the Trump sort of move back into the Bitcoin space, there's this sort of lurking question of like, how deep is that conviction? How much has it changed? You know, for Vance, he just happens to be a Bitcoin holder. He actually hasn't spoken specifically about Bitcoin. He hasn't articulated, you know, a crypto position recently. These are just disclosures of him, you know, actually putting his money where his mouth is literally. So, you know, it kind of represents a slightly different type of force. It's interesting because a lot of people obviously think that Trump is taking advantage of, you know, an opportunity, a wedge issue to get the voters in crypto. And maybe it's

not a genuine interest in the industry. Now, I would say it probably started that way and is somewhere on a sliding scale between truly orange-billed and sheerly speaking to the audience. But I think he's obviously moving in the direction of really believing in a lot of this. Like you said, J.D. Vance owns the stuff. He's talked about the stuff. That was even before he was necessarily a politician. So there's no question that one of the two is a true believer because he's put his money where his mouth is and has conviction in the asset class. Yeah. I mean, listen, one of the interesting conversations this week provoked most particularly by Vitalik's long essay about this is actually a question of, it's a broader

political question. It's not just for us. It's how much should a constituency care about the motivation for their elected representatives convictions? Right. Do they require of their political leaders that they believe the same things or simply that they represent the voices of their constituency in a way that's clear? And I think that's an interesting and open question. Now, when I so, you know, paying attention to this a lot, there was recently a very long Trump interview. And it was from June 25th. So it was pre-assassination attempt and everything. But it seemed pretty clear to me that where the real kind of genesis of this crypto thing outside of whatever sort of convenience or politics there are to it or sort of new allies that are whispering in his ear, there is a very strong, clear, I want the US to be the best

at everything. And if you read that interview, which we might get into a little bit later, it is very, it is screamingly loud that the reason to support crypto innovation here is that if we don't, China is going to, and we don't want to lose any competition with China, including the crypto competition with China. So once again, I think there is a philosophical through line in some ways, even outside of the asset class itself. Well, I think we've long said that people criticize us for being single issue voters or people in this industry, but that the issue isn't Bitcoin and its price. The issue is freedom, right? And so it stretches, crypto itself, that issue is symbolic of a much greater ethos and belief in the way that people

should be able to interact, period, but certainly with their money. And I think that that's what it speaks to. And Vitalik kind of touched on that a bit in this essay. I thought it was really great. But I think that that's what people maybe miss in this essay. I thought it was really great. But I think that that's what people maybe miss in this conversation. But it does speak to the sort of broader question presented and we'll get into Diamond and Fink soon, but be careful who you call your friends. The original point of Bitcoin obviously was to not have to listen to politicians, right? So we're kind of stuck in this interesting bipolarity where we're cheering them because they get it and it's going to certainly help the industry. And frankly, it's just backlash to how much pain there has been for the industry in the past few years. But the other is if someone says they're going to enshrine a right to self-custody, that makes a difference in our ability to not have to trust everyone else. And the reality is, of course, that we all live in a

world of politics, like it or not. And yes, Bitcoin and crypto represent a release valve and an escape valve, but they still operate in a context. And if you are operating in that same context, you do have to be conscious to some extent of how other things are functioning. lot of very important questions around how sort of Bitcoin and crypto audiences should view politicians should engage with politicians. And, you know, it's still pretty early, like, you know, we've commented frequently on this show about the sort of head spinning shift from where we were even just six months ago, to where we are now. And, and sort of we're rapidly catching up with ourselves in terms of what you know, what it means to be a political constituency that actually has a voice that's that's meaningful. Yeah, and we've seen sort of people running the gamut from let's not listen to these politicians at all to going completely all in and thinking it's the most important thing that's ever going to happen to the industry. It's been really interesting to watch. I will say I wasn't intending to talk about it. I just want to bring this up for people who missed it because you should know by now I'm a huge supporter of John Deaton. I did a fundraiser for him in Austin at Consensus. And he was struggling actually initially to raise money,

but you guys may not have seen this, but the Winklevoss twins just gave him a million dollars in Bitcoin and Ripple Labs also gave him a million dollars. So he has to be massively out raising her at this point, which I think is huge because that first quarter he had raised 1.4 million. It was more than her, but a million of it was his own. Yeah. I mean, listen, momentum begets momentum, and I think that what you're seeing is political momentum around these issues. Yeah. So pivoting from political momentum to institutional momentum, it's no surprise, obviously, that we have Larry Fink talking about Bitcoin. Once again,

we got the Ethereum spot ETFs likely coming next week. But the bigger story that we'll get into is the report from Trump. We haven't seen evidence of it from Jamie Dimon's mouth, that he has had a change of tune. Coincidentally, in the same breath of saying he could be the secretary of the treasury. I actually have the Larry Fink video, the interview with Jim Cramer. I think it's worth watching because even as pro-Bitcoin as he's been, every interview is an evolution of his view. And he truly sounds like he's been deeply, deeply orange pilled and is critical of the government and the system. So let's just watch that quickly. It's about two minutes.

I know that you have been a leader in willing to embrace crypto. You have made it so that people can be in Bitcoin. We hear that you are thinking about Ethereum. These are incredible things. Now, BlackRock is not known as a uh a gunslinger by any means so you obviously must believe that this may be as an alternative is this an alternative uh in order to be able because of the deficit maybe something long-term people should have absolutely um as you know i was a skeptic yes i was you know i was a proud skeptic. And I studied it, learned about it, and I came away saying, okay, you know, my opinion five years ago was wrong.

Here's my opinion today. This is what I believe in today. I believe the opportunity today. I believe Bitcoin is legitimate. I'm not trying to say there's not misuses like everything else, but it is a legitimate financial instrument that allows you to have maybe uncorrelated, non-correlated type of returns. I believe it is an instrument that you invest in when you're more frightened, though. It is an instrument when you believe that countries are debasing their currency, debasing their currency by excess deficits.

And some countries are. I believe we have- countries where you're frightened of your everyday existence. And have you an opportunity to invest in in a something that is outside your country's- you know control. Then you can

have more financial control. And so I'm a- a major believer that there is a role for Bitcoin in portfolios. I believe you're going to see that as one of the asset classes that we all look at. I look at it as digital gold, as I said before. And I do believe there's a real need for everyone to look at it as one alternative to, I would say, the optimism that I have in the world. If you want to hedge hope, Bitcoin is not an instrument for hope unless you're hopeful you're going to make a lot of money on it. But I look at it as a vehicle in which you're expressing your financial acumen in something that you're more frightened of the world, you're more frightened of your existence. And I believe there's a great industrial use for it. And I think a lot of people are missing that.

I mean, that was a greatest hit CD for Bitcoin. I mean, he didn't even just go through the ethos of money printing and fear of government and digital gold and hard asset. He also hit on the good for your portfolio, idiosyncratic risk, uncorrelated. I mean, he hit every single talking point. I mean, listen, I think that an interview that starts with I hadn't really spent a lot of time on it and I had an opinion and I studied it more and I started to like it. There are more than a few people sitting here watching this conversation that had that exact same journey. Very few people come to Bitcoin with clear conviction the second they hear about it. There's usually a journey. And I think that there's sort of an acknowledgement

here that in many cases, previous attitudes towards Bitcoin were based on just not really spending that much time with it, right? Probably just reflecting whatever the mainstream was saying about it. Fink was probably listening to Diamond back in the day and dismissing it because he respects people like that, right? I actually think it's radically more, it's going to be much more compelling to people who haven't necessarily spent that time that Fink said, you know, I changed my mind on it. That's a lot more honest than, no, I was wrong. You that is the hardest to ignore for most people, even who aren't particularly interested in the sort of philosophy of Bitcoin, is the hedge against debasement argument, right? Because it's just math, it's just numbers. There are lots and lots of smart people out there who have the concern that currencies are going to get devalued on the way that because of debt.

And maybe they don't all agree that Bitcoin is the proper approach. Maybe some of them have skepticism around how how strong that 21 million hard cap is. But they get once you acknowledge that that is a risk. It's hard not to understand why some people would look at this hard cap thing as a as an answer to that risk. And so, to your point, I think that a lot of these are non-ideological arguments that still understand and put it in a global context. And I think every interview with him is more compelling than the one before for people who haven't really given it a fair shake yet. Okay, Jamie Dimon, though. I mean, are we believing this? It's hard to say. I mean, are we believing this? It's hard to say. So again, this came from the same interview. It was that June 25th interview.

And the interview is fairly leading in the sense that Trump is talking sort of broadly about a meeting with like 70 financial CEOs. Dimon's the only one that gets called out by name. And when he does, someone asks, you know, the interviewer asks Trump if he would consider him for treasury secretary. Trump says, yeah, sure. You know, he'd be a great candidate. It's not like he went out of his way to say, you know what I mean? Like, it's like, there's a lot of the guy, the three guys on my short list and we've had a call, right? Yeah, sure. That guy's awesome. Let's do that. Exactly. And listen, I would, what I would take the Bitcoin piece as is not at all Diamond changing his tune right now. It's Trump saying that me like a gauntlet that says a prerequisite for the next treasury secretary is sharing my perspective, my changed perspective on this particular asset. So that's how I read it. You may have seen yesterday that Dennis Porter

tweeted preemptively from what I've heard that Bitcoin has said he would make, Trump, I keep calling Trump Bitcoin. Trump has said he would make Trump. I keep calling Trump Bitcoin. Trump has said he would make Bitcoin a reserve asset. I'm not sure if you saw that. I didn't see that. Yeah. And rumor has it that that was maybe going to be Trump's big announcement that wasn't supposed to be leaked in advance of the Bitcoin conference, but adding it as a reserve asset to the United States Treasury. Can you imagine if Jamie Dimon was the Secretary of the Treasury and Donald Trump told him to put Bitcoin on the

balance sheet? I'm just here for the theoretical 1% future entertainment of that. Yeah. I mean, up is down and right is left, right? It's just unbelievable. I agree with you you i don't think this was saying anything specific about jamie diamond i don't think that they necessarily had a real phone call where jamie said you know this bitcoin thing may really work out for people right i think we know exactly what his tune is question to me is is his dismissal of bitcoin his hatred for it really about him and elizabeth warren and he'll go wherever the political winds are shifting and whatever benefits JP Morgan in the long run. It feels to me like his baseline is antipathy towards Bitcoin and crypto. I think it's fairly hard to ignore that. If you map his statements, there is a slight pullback in just how antagonistic he is at moments where JP Morgan

is somehow more involved. There's been a slight pullback recently post ETF, for example, because JP Morgan is involved as a market maker for all of these things, but he's still comparing Bitcoin to smoking. He's saying, I think smoking is bad for you, but I'll defend your right to do it. That's the most positive we've had. Do your Bitcoin. Do it. He had another one of those slightly more positive moments when we were on the upcycle last time. And then as soon as FTX happened, it was back to, it's for criminals and I've always hated it. His baseline is that he does not like this asset. And he's clear that he thinks the government should ban it. However, he's ultimately a market animal who's going to stiff the winds and cares more about making money than he does about being right. And, you know,

I think that that sort of brings up, you know, the main question of the title of this episode, be careful who you call your friends. You know, it's one thing when we're talking about politicians, it's another thing when we're talking about appointed officials that we've seen how much control and how much ability to screw things up for us. These folks have right. Uh, Gensler has been, you know, the, the, the big bad for this entire cycle, uh, because he's sort of been off the leash and able to do what he wants and, you know, don't be, I think that we should be careful, especially when, uh, when we see this sort of like, you know, full road to Damascus conversion

experience, you know, expressed in a Treasury Secretary. Treasury Secretary has a lot of ability to screw with us. You know, you think that you think an antagonistic SEC chair has a lot of ability. It's nothing compared to a Treasury Secretary who decided that they really wanted to push. Yeah, I'm gonna hope that this one just ends up in the rear view of our news cycle and that we never hear about Jamie Dimon for Secretary of the Treasury again. There's other people who don't like Bitcoin very much. Apparently, it's the German government. We've reported on this before, but it seems that even as of a week ago, they're done. Right. But so this is more a story about supply overhangs. I think Germany has unloaded all of their Bitcoin in an inefficient manner as sort of an FU. We literally don't care about this stuff to the industry. But now we obviously also have Mt. Cox, 36% of Mt. Cox Bitcoin distributed to creditors, but whales keep accumulating. Good news. And then this hyperbolic, insane-o story saying that 99% of Mt. Cox's $8.2 billion could be sold, which like, how does that even end up in print?

Okay. My official comment on that one is, okay. Cool story, bro. Yeah. So the German thing is actually interesting because they actually did a little bit of a postmortem. And it appears that there was a bureaucratic triggering where when the government has an asset that they have to sell as part of this sort of normal course of business and criminal seizure like this, if there is a fear of a certain level of volatility, they have to unload it fast rather than sort of keep it on the books as per German regulations. And so there's speculation now that Bitcoin had dumped about 10% in the advance of when they started unloading. And it might've been basically a bureaucratic trigger that forced them to move as fast as they did. Now, they try to say there's no impact on price

and blah, blah, blah, blah, blah. But I don't think it's as clear cut as basically them saying like, oh, we just don't like Bitcoin. We want to get rid of it. Oh, it's not. I'm just saying, you know, they didn't think about it. They did it at sort of an inopportune random time and they had no problem just like sending it to exchanges and YOLO selling it into the market. For them, it's still fake internet money that somehow landed $2.88 billion in their coffers. Like I don't believe that it was probably treated

for the people who were involved in that sale as, hey, we could have maximized this and gotten $3.3 billion if we had done it right. It was, we went from nothing to $2.88 billion. That's a good day for us. Yeah, it should at least cover like one day of budgeting for any major nation, if not one hour. But yeah, next story, Ethereum spot ETFs.

Are we actually going to get these things next week? Looks like Beltuna is saying July 23rd or July 24th. That's now in four or five days. We do have evidence that Bloomberg is getting ready. As you said, Tuesday DES pages being put on Bloomberg now ready for action. So, you know, Bloomberg basically doing the back end work to make sure that these are ready for listing when it hits. And then of course, James Seifert showing us the fee war. And maybe this is the more interesting story than talking to death what's likely to happen when an Ethereum spot ETF gets approved because holy my goodness, how can Grayscale be coming in with a 2.5% fee after seeing what happened

with a 1.5% fee on GBTC? Basically, everybody coming in with almost a 0% starting fee, then there's waiver fees. And then after a certain amount of time, we land somewhere between roughly 0.19 and 0.25 across the board. They're at 10x the fees and still have $9 billion, almost 10, sitting in the Ethereum Grayscale Trust, ready to be just absolutely blasted into the market as a supply overhead. I don't think anyone has any idea what Grayscale is doing at this point. They did, I guess, also pull 10% of the assets out and put them in this mini trust, which has the lowest fees. But people aren't happy about that too, because you have to realize

the gains on ETH that you have to sell. It's a whole weird thing. Listen, I think the interesting story with this is I've thought about this a bunch and I genuinely have no idea what I think is going to happen, what I think the demand is actually going to be. I think that we are very clearly not in anything approaching the hype level and excitement that we were going into the Bitcoin spot ETF. Both for the reason that Bitcoin had been brewing for a very long time. And there was so much sort of, you know, a question around it. We were also still on the upswing of like, you know, sort of new cycle coming in, whereas now we're in this sort of weird low moment, plus we're in the middle of the summer. But on top of that, like, you know, the second one is just always going to be less of a, of a big sort of thing than the first one.

I think that the, it's, it's pretty clear that there's not likely to be a huge amount of sort of retail demand rushing in. I don't think. I could be wrong about that. But the thing thatcale is going to fairly significantly outweigh inflows into the other products, but we'll have to see. We saw that with Bitcoin, which had much larger demand, to your point. But also, I think you have to have some concern that if it's really ugly and really bad, your average person, institution doesn't read the headline. They just see selling off for 90 straight days or something crazy like that. It just sort of spoils the entire launch. that we're going to see most likely what we saw with Bitcoin as a result of this fee. If this fee came in low, I wouldn't be so concerned about a sell the news event, even though we know it's something fundamental. Now I'm concerned that if Bitcoin went down 20% because of GBTC post ETF

launch, a less liquid, higher volatility asset, what if we could get a 25, 30% drop in Ethereum if it's sort of the same playbook, but I'm buying that just for the record. Yeah. Yeah. It'll be interesting to see. It's going to be interesting for sure. Yeah. And the final story that we have, which wasn't even on my radar actually until you shared it, Judge Grint's Tornado Cash Dev Roman Storm's request to delay trial over prosecutor's objections. Maybe you can just go ahead and unpack this one. Yeah. I mean, so basically, so this is the Tornado Cash case. There's sort of a parallel case going on in Europe at the same time with a different developer involved with Tornado Cash. So what's notable about this is that the judge involved, Judge Valia, is asking some really good questions. And it's very clear, you know, the stakes of this are much

bigger than crypto to a lot of people, because it's about the culpability of developers for, for what their, you know, tools are used for. And the US government is basically saying that the, you know, the developer of tornado cash is culpable for the use of it by actors like North Korea, right. And the interesting thing is that it appears that the case is not trying to pull up specific communications where, you know, this person knew about and had communications with the North Koreans. They're simply saying that by not taking it down when they, you know, had a sense that it might be being used by that, that makes them culpable. And it appears that the judge is real, real skeptical of a lot of the government arguments.

Now, the case is going to proceed. It's not going to be dismissed. She granted them an extension, basically a delay to do more discovery. Effectively, the defense said, there's so much discovery. A lot of it's in Russian. it needs time to translate, you know, we need extra time. So what's positive about this is that the judge in the case appears to be biased towards rejecting the most extreme sort of interpretations of developer culpability as being argued by by US prosecutors here. So it continues to be an interesting one to watch. I don't think we're going to hear that much more for a little while, but it is a fairly significant case, not from a kind of bags perspective, but from a human freedom perspective.

It is from a human freedom perspective. This is one of those other things that could be massively altered, not the case itself, but sort of the view on how this is judged if we get regime change. Yep. Absolutely. And this is one of the big fights for sure. Absolutely. All right. I think we unpacked that all well. Are you going to Bitcoin Nashville next week? I'm with family elsewhere in the world. I'll be watching that. You'd be smart because I think this one is going to set records for shit showiness. Yeah. Listen, I don't have a FOMO bone in my body, but there will be part of me that is missing out for sure. I'll tell you offline the biggest rumor that I heard, and I know they have some other huge things coming.

I cannot share it lest I be ostracized, but I'm going to some other huge things coming. I cannot share it lest I be ostracized, but I'm going to message you. All right. I love it. It's going to really FOMO you. And look for that next week on The Planet 5.

That's right. I got you guys. Thank you guys. We'll see you next week. Have a good one. Let's go.