The Wolf Of All Streets - Bitcoin in Freefall: ETFs Postponed to Q2? | Crypto Town Hall

Episode Date: January 3, 2024

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I guess I couldn't make co-host today. What do you know? It's going to be a historic day. Forget about Bitcoin dumping and whatever Mario's covering on his spaces. You and I are going to co-host. I don't think it's ever happened in history. Oh, he's gone. See, I literally just got trolled by either RAN or spaces the minute that I attempted to break this important news. Yeah. Apparently, unfortunately, there was that explosion in Lebanon yesterday and four explosions in Iran today.

So Mario is hosting a Spaces. Apparently, actual explosions much more important than crypto explosions. And I think we can all sympathize with that. So just getting everybody up on stage, including Rand here, Rand, I'm trying, I don't, it says requested. His show's speaker on my side. For me, it shows requested. So God knows what's going on, but he certainly can't speak.

Hey guys, I think the best part maybe about spaces is that you get to see the complete debauchery and disaster that it is in real time at the beginning of every show. Now I'm showing you the co-host. Am I here? Yeah, you're here. You're with us.

You're here. Welcome. Look at you. Look at you. Thank you. You must have a nice vacation glow right now. I have a great vacation glow. I've been relaxing.

I mean, to be honest, I'm itching to get back to work, and especially after days like today. These are my favorite days. So I thought I'd jump onto the spaces, even though I'm on vacation. I thought I'd jump onto the spaces and just have a chat, bro. A three-week break. Three-week break is big it's great it's once it happens once a year yeah how was the holidays everything good

it's been amazing i did stream yesterday i i just got too bored and i just i needed to do something so i went into the stream it was actually the biggest stream the biggest stream I've done since 2021. Yeah, I think that was the case for me today. I was blessed by the market gods with volatility and coincidentally with Raoul Paul and then Chris, who's here, and says yes. So obviously these stars aligned pretty well there. So what's the chances that the ETF is not getting approved? I mean, I think this is the biggest load of garbage ever. Kind of glad it's happening, though.

I mean, yeah, I keep trolling about it on X because it's so dumb. But it's like Bob from accounting told his distant cousin that maybe there was a chance that it wouldn't be approved. And they put it into print and someone used that to liquidate a ton of longs but if you think about it from this what's called matrix research matrix board what do they call themselves matrix port and this is which is a platform uh a trading yield everything platform and then this is their research wing that uh puts out this report if you think about it from their point of view the risk reward here is amazing because you come out of the contrarian view. No one knew you before this. Now everybody knows you.

And they'll probably forget about you, about this mistake that you made. You probably picked up a whole lot of followers. In fact, I've been following them for the last couple of hours. They've picked up a couple of thousand followers. So I think from their point of view, really cool, a really good move. From a market's point of view, I mean, I'd be very, very, very surprised if the ETF wasn't approved. But let's just maybe spend a couple of minutes talking about,

like, what if the ETF isn't approved? Well, James is here, by the way. So, Jay, we've got our resident expert, everyone's resident expert. But go ahead so we can ask him. But go ahead. Yeah, I mean, listen. I think there's no chance that the SEC doesn't approve this ETF.

I think if they did, I mean, I don't think that in the history of ETFs, you could take so many companies down the garden path, give them crazy deadlines to amend filings before the holidays, go to court, get called capricious, and what's the other fancy word that the judge used? Arbitrary and capricious. Arbitrary and capricious. Arbitrary and capricious. I just don't believe that you could do that and then still decline the ETFs. I just cannot – even in the SEC's world,

I cannot imagine the world where that happens. And I mean, when I say even in the SEC's world, like I don't believe, you know, I think the SEC are the lowest of the low. And even in the world of the lowest and the low, I don't think this could happen. But I want to hear from somebody else. Yeah, Meta Lawman had a tweet about it today.

James Murphy, who obviously has been on here, is back on X finally after a long hiatus. If the SEC were to deny all spot Bitcoin ETFs, the applicants would immediately sue, and the D.C. Court of Appeals would again rule that the SEC was arbitrary and capricious. The SEC gave every reason they had for denying Grayscale and lost. I expect multiple approvals on January 10th. I mean, James, we should go to you on this. they had for denying grayscale and lost i expect multiple approvals on january 10th i mean james we should go go to you on this obviously eric uh your colleague belchunis very quickly tweeted i'm gonna give this guy the benefit of the doubt but i've asked him for sources you know some that effect and we've seen nothing to uh count contradict it i mean this is a guy's opinion and

listen i don't think there's anything wrong with him having opinion and putting it in research. But if you actually read the research report, his premise was basically that there's too many Democrats on the in the SEC. James, are you seeing anything here that shakes your confidence in any way, shape or form? I saw it at first and I was like, Oh, okay, I should look at this. And then I've looked at it since and obviously, no, I'm with you like

there's nothing in here that we haven't already i haven't already dissected something that we haven't already looked at like this is basically bringing up things that we're all looking at they said they talk about coinbase not potentially being a market of significant size which is something we were i was writing about in in august and july to be quite frank so i mean this just felt like they were just trying to put it out there. And kind of what Rand was saying, like, they'll look like geniuses if they ultimately are denied. Look, we don't think that's going to happen.

There are ways that things could potentially be kicked down the road a little bit. But I even think those are very unlikely, right? And at the end of the day, they could still approve these things next week. And if they really weren't ready for them to launch, there are ways where they can hold them off for weeks, which other people have been saying. Now, I don't think that's what's going to happen. I do think that we will see these things trading this month, likely within a few weeks. But there are other ways than just flat out denying, which again, as metal lawman said, and you just highlighted,

like they'd end up back in the DC circuit court of appeals and the courts would likely rule the same way that they just ruled for grayscale. So yeah, I mean, we're, we're still pretty confident that the, we think the approval is going to happen. We're looking at Jan eight to Jan 10 still like we have been since the beginning of December. So nothing in this is like there, i thought i was going to see something in here that was like oh okay that might change that might change things a little bit but there's nothing new in here why are we even taking these guys seriously just remind me again like just

please just remind me why anybody is yeah seriously. Have they ever published a report? This is a PR tactic. This is a PR tactic. It's a PR tactic, and it's being taken seriously. Listen, we all know the facts, right? We were talking about it on Spaces yesterday. Annualized funding rates yesterday were 66% interest to be long. It was basically as expensive as it's ever been to be long

as of yesterday. OI was piled up. Everybody was long. Everybody was leveraged. And if you saw this move, it took five minutes, 10 minutes to liquidate 500 million effectively in longs from this market. This was a liquidation cascade.

It happens every single time. And because that news was used as the excuse, even though it had nothing to do with it. Now it's getting widely reported because look what this guy said. The market dumped. It must be viable or real. It's so stupid. It hurts my brain.

I will continue to mock it relentlessly because it's just dumb. You have experts like James who are literally talking to these people day in, day out. We have Matt Siegel here from VanEck. I want to hear your opinion on this, obviously, as well. VanEck, hashtags, Bitwise, you guys are spending money running. What's up, man? You're running Bitcoin commercials right now, obviously in anticipation of an approval. And we're sitting here talking about Matrixport saying there's too many Democrats on the SEC.

Yeah, I mean, if you read the headline of their report, it's completely different from the text of the report. Right. So it's it's clearly written to drum up some volatility at the beginning of the year when there's often a mean reversion trade to play when last year's winners tend to underperform. As you noted, funding rates were extremely high. And there's like a four or five day air pocket here where, you know, that is just back to work. They don't work weekends. They don't work after 5 p.m. So all the docs that were submitted on Friday, you know, are just to be looked at today, tomorrow. They've got pencil pushing to do. And in the meantime, you know, Matrix Sports sees an opportunity to sell some volatility.

And, you know, I don't I don't I think that they're a legitimate organization. I think Marcus is a good analyst and they've done good work on the cycle and the long term outlook for Bitcoin. I think their price target is still 150K. So I don't think we should read too much into this besides some short term fall. We haven't seen anything to indicate that there are going to be rejections. I mean, from a fundamentals point of view, nothing's changed. I think it was one bad report. But then if you look at that, it was one bad report, one contrarian report.

It's not even bad, by the way. I mean, he was right. Look, I mean, sentiment was one way, right? Funding rates were too high and everyone was piled into the same trade. Yesterday, we're all talking about a sell the news event. Well, it's good to get the selling out of the way on a report that has very little meat to it. So I bought the dip this morning. Yeah, I was actually talking with Chris 20 minutes ago, 30 minutes ago on YouTube. And Chris, you basically said the same thing when talking about the actual price

action and a reset. Like, wouldn't you rather get, your point was, wouldn't you rather get a Bitcoin spot ETF approval with leverage and funding rates down, everything liquidated at a slightly lower price than have it when everything's massively overbought, over leveraged, etc. Yeah, yeah, 100%. I mean, you know, I think somebody has mentioned it's been like the most over leveraged we've been in, you know, in quite a while. And, man, you know, if you need a narrative, if, you know, if your narrative for price going up is the ETF thing, then, you know, basically, this is kind of what you wanted to see. You wanted to see all this leverage kind of getting flushed out. You wanted to see all these, the resets there on that uh on your time frames and on your different time frames and that way you've got room to run um and so i mean it doesn't guarantee obviously that that the etfs are going to get approved or

whatnot but man i'll tell you you know if that's what you're looking for you got room to run now i agree i think it's a. It's a healthy flash out. I also think if you think about it, you've got to think of the bull market in cycles. And the first cycle, well, let's not say it's the first or second, but this cycle in the bull

market was that will the ETF get approved trade? Now, we're at the end of the cycle because the clock has run out on this cycle. And in the next week, the ETF is either approved or not approved with a very, very, very small chance

of it being kicked down the road. And so what you have to do is you have to deleverage this trade and then you have to move on to the next trade. And the next trade looks very different. Now, I tweeted earlier and I said, like, you know, this is the end of the, is the ETF going to be approved trade? And, you know, there's one of three outcomes.

One, it gets approved. Two, it gets declined. Or three, it gets kicked down the road, very, very low chance for some administrative reason. And then the leverage for that trade has to be cleared. And then we go into leverage for that trade has to be cleared. And then we're going to leverage for the next part of the cycle. Now, the next part of the cycle could be how much money will flow into the ETF and how quickly. That's one option. The other option is it could be the

Solana's futures ETF trade. The other option could be the ETH ETF trade. So it's just, you know, in the bull market, we're going to get cycles. Cycles are going to be driven by narratives. People trade into the narrative. And when the narrative comes to an end, the trade has to come to an end as well. And that's exactly what's happening here. Now, we're out of this. I don't want to say it, but I'm going to say it anyway. I think that we're still going to get another little flash before the ETF. I think there's a lot of nerves in this market. This has been a very, very, very long cycle without a correction. And therefore, I think that it's quite tightly coiled. And I think that what's going to happen is we're going to get another something happen to release some more nerves.

And I think a lot more people are going to panic. And then we're going to get back to normal leverage. Now, let me give you an idea of when I say normal leverage. So I'm giving you the leverage on all coins, excluding Bitcoin and ETH. Now, that to me is the biggest sign of leverage because it's the altcoin degen leverage. The level of that leverage was at 15 this morning before the crash. It was at 15 billion. The previous high was in December 2021, and it was 13.4 billion. The normalized levels of last year were around 5 billion, and where we are now is at about 9.5 billion.

So, it's double six of the 15 we're flash six of the 15 we're still double what we were the whole of last year and and the peak which was which was really really really a peak was in 2021 uh it was the the peak of the bull market i remember that luna was at a hundred dollars or something at that point and that was uh at $13.5 billion. So just giving you like perspective of where we're at, we still have $9.5 billion of this leverage, of this kind of leverage in the system.

And so I still think that there's got to be a little bit more of a flush out, probably need to get it down to, you know, if you want to reset the cycle, you probably want to get it down to $6 or $7 billion. We're at $9.6 billion. So it needs to go down to 7 billion. Yeah, I'm just looking right now at funding. I mean, it's down almost even now with some exchanges showing predictive funding going negative in the next period. So this did at least reset the funding, it looks like.

I'm seeing Bitcoin OI weighted funding rate at 0.0059. That's negligible. Accumulate ETH going the other way and predicted negative 0.015. Best case scenario, we get another shakeout. I mean, I hate to say it because I know people don't want a shakeout, but best case scenario, we get another shakeout. The next shakeout should be a little bit scarier. It should – because remember, to shake the leverage from 10 – from 15 down to 10, that's easy.

To shake the 10 down to 7 is much harder because that's stronger hands. And I think the best case scenario now is we want this leverage out um and then we can start the new cycle which you know needs to start in the next week or so because the new cycle literally start this cycle was the etf trade the new cycle is the new narrative and if you want to start the new narrative on a clean slate with all the old cycles uh the old cycles leverage out we need another little shakeout whatever that shake out is it's pretty interesting that we got back up to basically all-time all-time highs for funding rates but yet leverage in the system was as you noted 50 a prior level so like all the lenders

went bankrupt right on chain there are very few ways to get leverage without even worse counterparty. See it yesterday, CleanSpark announced there's a Bitcoin miner, and they announced that they're setting up their own crypto trading desk. Like, I don't love that move, right? Because when oil and gas set up these trading companies, they trade for very low multiples. It's a black box, you're putting your balance sheet at risk. But I think it's an indication that there's just no place to get leverage in the system. And so they're going to do it themselves. And we'll see if this ETF becomes a vehicle whereby leverage is created in the TradFi system with the end result being buying more Bitcoin. And then it wouldn't show up in TVL. You wouldn't see that on chain. It'll happen through the TradFi rails. Yeah, that makes a ton of sense. Kelly, I saw that you actually had tweeted also about this just simply being an open interest flush effectively, right?

I mean, so you share the opinion that there's nothing really nefarious or out of the order. Yeah, I mean, it looks like it's currently an open interest flush. That doesn't mean, you know, to Rand's point, I agree, I still think there's going to be a move to the downside. We've seen in, you know, the previous two halving cycles, a drop of 40% or more before the halving. And then right into the 2016, 2015, 2016 halving, we ended up getting, you know, a run up into the halving and then a sell-off of about 20 a little consolidation and then that finalized at about a 40 43 or so pullback in the 2018 2019 having we ended up dropping around 53 55 before we even got the the black Swan event that you

know ultimately saw uh an even larger pullback. So regardless of, even if we cut out the black Swan thing, I think that there's still that the narrative flush that I think needs to happen. And even regardless of the news, the matrix thing, I, you know, I don't know if people were just support using that, you know, as an excuse for the price drop. But if you're looking at the structure on the chart, I was looking for a pullback anyway yesterday to come down and test that resistance that we had just broken out of on that triangle pattern that we had or the bull flat, whatever you want to call it. But we're just right now back in that range.

So I think right now is sort of a no trade sort of zone to see which direction the narrative wants to take it. And we still have the CME gap directly below us. Ren, I want to dig in more. You keep saying that the ETF approval trade is done and now we need the new narrative. What's the new narrative? Are we moving on to the halving or is it something ETF related in your mind?

Just one second. Let's just quickly talk about this haunting CME gap. There is that CME gap at 39,600. Usually all the CME gaps are filled. I think that that's the next... I think if you want to ask, when does this correction end and how do we flash out the leverage?

Let's just close that CME gap just for the sake of coming full circle on the charts. Let's just close the CME gap and then that'll probably shake out the leverage to 7 billion instead of the charts. Let's just close the CME gap. And then that'll probably shake out the leverage to 7 billion instead of a 9.5 over on. And then there's really no more thrust in the system. And that's, yeah, I mean, that's kind of like what I'm looking at. Let's talk about new narratives. So I think the most logical new narrative is going to be ETH, we're seeing a lot of signs around the fact that ETH is

the next narrative, we're seeing so ETH hasn't moved much it's the most hated trade of the year if we look at the ETH ecosystem though, if you look at Arbitrum and Optimism Arbitrum and Optimism have been absolutely absolutely incredible the last couple

of weeks, Arbitrum touched Optimism. Arbitrum and Optimism have been absolutely, absolutely incredible the last couple of weeks. Arbitrum touched $2 earlier today. Just to give you an idea, it was at $0.77. Let me give you some timings here. It was at $0.76 in 23rd of October. It hit $2 today after ETH hasn't even started moving. Optimism also started moving very quickly. So what this is pointing to is it's pointing to the fact,

which kind of makes logical sense, that maybe the next narrative is ETH. Raoul Paul made a tweet and he said, the last time Bitcoin was at 44,000, ETH was at like 1,250. Now Bitcoin's back at 44,000, ETH at 2,250. So I think it kind of makes sense that the next narrative is actually ETH. It doesn't really excite me.

Yeah, I've been screaming that for like six months. People have been calling me crazy. I've been writing newsletters about it. I think that that lag is, regardless of what you think of it, I mean, I think that lag is an opportunity and not an indictment of anything being like largely wrong with it i think that like look i i went to lunch today i went out to lunch today and at lunch there was in like the nursing home had also gone out for lunch and you could see they were really excited about the fact that he was about to pump like they were like really excited doesn't excite me at all but i mean a lot of people are excited about this eve narrative that that's about to happen um i think we've had a solana summer solana winter whatever you want to call it just we had a solana summer which kind of ran into winter we've just had a cosmos or i don't

know if we're starting or in the middle of a cosmos uh summer um i think that this there's a solana solana futures etf probably next on the cards kind of makes logical sense so there's a Solana Futures ETF probably next on the cards, kind of makes logical sense. So there's a lot of great narratives to be talking about. But I do think that the next one is going to be ETH, unfortunately. The only place that I get pause there is that is it logical to get a Solana futures ETF next? Why do you believe that? Because at least Bitcoin we know is not a security. Ethereum, you know, there's the doubt, but Gary won't say it.

I think going any further down that curve, certainly with this administration, is almost laughable. Hold on. Why can't you have an ETF of something that is a security? In fact, most ETFs are. I'm not saying they can't be a security. I'm saying the SEC, they've named Solana as an

unregistered security in previous suits. That's good. You can still have an ETF on a security, can't you? You need to see a media lift by the same agency. You need to see me to list the futures contract. Yeah. Yeah.

I think pretty, I think pretty logically that's the next thing. I mean, look, we could maybe, I just think it's further down. I'm not saying you're wrong. I'm just saying next,

I guess timeframe, because I think that's next administration to even talk about that. Yeah. I mean, there's a lot of narratives. I mean, you know, like maybe we're a little bit early for the election narrative, but that's narrative that, you know, that could be the next trade. It's maybe a bit early. I think that, you know, 11 months is a long time for a trade. But I mean, there's a lot of narratives here that could that could take us quite bullish so quickly just because we have uh two particular guests here there's two other topics i want to talk about that aren't necessarily on the docket we have clint here obviously crypto tax fixer uh and clinton you uh i want to talk about i don't even have it in front of me but i've been seeing i don't know how substantiated i know that's in there, but obviously this mention of the new law that went into effect

two days ago, effectively saying that if you receive $10,000 or more in crypto as a United States citizen, that you have to somehow report that, including social security number information about the sender within 15 days to the IRS, as if any average person literally knows how to report something to the IRS, or you could be charged with a felony. And then Thomas, I do want to talk about what's happening with the FTX claims and such. But Clint, first, I just saw you here and thought, man, we need to get to the bottom of this. Well, I'm glad you brought that up, Scott. That information put out is true, but it's been posted on Twitter in a very misleading fashion. So this is part of the anti-money laundering law.

Shocker. Already today, just so everybody knows, that if a business receives $10,000 or more in cash in one or more transactions during the year, it has to report to the government who it was that gave it to them. And you're all kind of familiar with a similar law when you travel through the airports. If you're carrying more than $10,000 in cash, you have to report it. It's the same sort of thing. It's an anti-money laundering law. It's not a tax. There's no tax involved. But if you don't report it, you could be penalized. Now, they implemented this law to apply also to companies that receive $10,000 or more during a year in worth of cryptocurrencies. You have to fill, those companies have to file it out. This does not apply to individuals,

right? So if you and I trade currencies for whatever reason, that's not anything that has to be reported. So this is just companies and it's companies receiving payments in cryptocurrency in exchange for products and services. So I think that really the post that went out there didn't make it clear that it applied only to companies. It really only applies to traditional companies. I think he actually said it applied to individuals. I think he actually said it even applied to individuals. Yeah, I think he not only did it not imply it, I think he explicitly said individuals and companies. Clinton, I wanted to ask you about that because I'm familiar with the CTR stuff for the $10,000 and fiat currency reports.

But is there any difference or change on the 15-day reporting requirement of potential family charges? Or is that new for the crypto? No, it's parallel to what's happening with cash. It's really no difference. So it's basically, and this is something we're seeing across the board, by the way, and I think we'll see like with wash sale rules and such. It's basically the IRS catching up with things that are already laws for all markets that they're just explicitly now finally saying, yeah, by the way, Crypto Bros, this applies to you too. Yeah, I was on a space last night with Garrett Cardone, and he made some pretty good points about this, suggesting that we're all up in arms about this. And in reality,

these type of regulations are really just further codification of Bitcoin and crypto moving into the space that it needs to. And regulation is needed. And the fact that these things are being implemented actually speaks volumes about where we're at in the space. That's a very good point. And rather than the government or administration implementing a comprehensive set of crypto laws, they're basically doing it with incrementalism. And we're seeing a lot of parallelism with cash and how cryptos are reported, including FBAR reports, foreign bank account reports, and these sorts of transactions. And it's all part of moving into a regulated crypto environment. And I know that scares a lot of people, especially from a privacy rights point of view and that sort of thing. But banks and everybody are collecting this information and exchanging it already.

It's as discomforting as it might feel. It's already happening. And it's worked okay in the cash environment. In the crypto environment, I think what we're ultimately going to see is people are going to start to move towards a regulated and non-regulated manner of work trading with their cryptocurrencies. But ultimately, the regulated space is going to become a larger environment over time. Just for example, these ETFs, it's a big move into regulated crypto trading. Yeah, and Clinton, I mean, at the end of the day, my assumption is that if you are an American citizen, just report your transactions and pay your taxes. Right. Oh, that's so big. Scott, I got a tweet yesterday from a guy.

He said his tax attorney and accountant told him that there's no laws that require the reporting of cryptocurrency. And he wanted to know what I thought. It's on the first page of the, it's on the first page now of your tax filing, like first line, do you own or have you traded? I know, I told him I have clients that have come to me because they've been, they've spent time in prison for not reporting their cryptocurrencies. Oh yeah. You know, basically it's an asset. You have to report it like every other asset, although there is some gray areas. And I think I'm pretty sure on this, but I've just been careful throughout the years with crypto. But it still shocks me that there's a lot of people out there that think that if they're trading between Bitcoin and Solana or whatever crypto to crypto, a lot of people still believe that they don't need to pay taxes until they convert it to fiat, which is just minefield they're stepping in because every every trade between any different asset is a taxable

event that is still 2017. i always say i always think if you want to if you want to evade your taxes evade your taxes on anything that's not crypto because you know i don't know i don't know how it works in in in in other countries, but in some countries or in South Africa specifically, you've got to keep your tax records for five years. You know, like there's the mandatory law that says you have to have your tax records for five years. Seven here.

Yes. Whatever it is. But with crypto, the problem is that the records are kept forever, whether you like it or not. So even after the five years, you can't breathe a sigh of relief and say, you know what, well, you know, they can't come after me because the records will be there forever. So if you, you know, if you evaded your taxes in crypto 10 years ago and a smart agent at the IRS gets hold of the, you know, and can track back your address, that's it.

You're going to pay. I mean, they've got records for the last 10 years. And it's not even like the old days where they had to dig through files of paperwork. It's one piece of software where they press one button and it just generates a P&L. Yeah, and that software is going to catch up, right? So to your point, eventually, they are going to be able to just push a button, run everybody's wallets, figure out exactly what they theoretically owed and what they paid and then we're, you know, so I would say it's time to get on top of all those taxes.

But Clinton, you definitely, I think, put a lot of people's minds at ease. Certainly mine. Because like I said, I wouldn't even know how to, I don't think your average person would even know how to go about reporting to the IRS, right? Just that's not an easy thing to do. You can't even get, you can't even get them on the phone if you need to talk about your taxes. So here's a funny sort of thought based on what Ran just said and you too, Scott. Do you think it's going to be something where they're going to use crypto, basically individual tax records to identify companies that are allowing leverage trading

around the laws, not necessarily persecuting the person, but using them to target large institutions that are allowing that? I mean, they're starting to do that already. I don't know if you've heard. We think, we speculate that Coinbase has been getting subpoenas about their customers that traded on Bybit. And I think what they're trying to find out is which American customers got money, were trading on Bybit, which they were, they were allowed to trade on Bybit, and then moving

money into Coinbase. And so, like, you know, I think that's the first thing. I think the second thing that you've got to remember about the United States is that the United States has an amazing, amazing, amazing legal system. And people in the United States don't understand how amazing their legal system actually is. But when you come from another country which has a normal legal system and you see what goes on in the United States, the United States, the way they do things is they create so many laws

that they've always got you for something. And then it's just a case of when do they want to enforce, right? So when you live in the United States, states you break because there's so many laws and more laws than any other country you break i don't know hundreds of laws every single day without even like you wake up in the morning you breathe through the wrong nostril first you've broken a law in the united states it's just a case of when they want it's just a case of when they want to prosecute you and then and then they just switch on the switch that's so i think this is just another one of those laws um it's just another one of these laws that they've got that if they ever want to catch you out for something you know

like well you know like i mean let's talk about cz for for a second, right? And listen, I agree that CZ maybe didn't do everything by the book, but I don't think that – I think if he wasn't so big and he didn't grow that so fast and he didn't threaten the incumbents and he didn't threaten the banking system, I don't think he would have been prosecuted for the moves that he – for what he had done. But you know how it is. They had him for a thousand things and then they got him into a corner

and said, okay, we need to make an example. Bang, let's just flip a switch. And that's how the U.S. legal system works. Well, you should assume that settlement with CZ, that part of that involved finance turning over all their transaction records for U.S. citizens to the IRS. Yeah, so next week I'll be hosting this show alone because Scott won't be here anymore.

Well, you know, I will say this. I come to people who haven't been reporting. One year you didn't report, then you find out the next year you should have, and he's like, oh, what do I do? And then the next year comes around, you don't file again, and you get into this spiraling down hole that you can't get out of and it just gets to be a bigger and bigger

problem. And if anybody's like that, they should contact our company and we can have a consultation and we can help people get back into a place where they can feel safe again without bankrupting themselves. I can vouch for CryptoTaxOffice.com. Listen, I can really, really vouch for them. So, yeah, just honestly, like, and I'll say this again, like, I don't live in the U.S., but if I did live in the U.S., the one place I wouldn't mess with the taxes, I wouldn't mess with the crypto taxes.

Mess with your taxes on all your cash transactions because those are very difficult to pick up. But, you know, I wouldn't mess up with anything to do with blockchain, because if they track your address, it's literally one piece of software and they will catch you up. Or you'll just have to spend endless resources and time defending it, even if you're right. Right, Clinton? Thank you very much. Yeah, exactly. Andrew, I saw you jumped up. I didn't know if you had a specific feeling

about this conversation. Otherwise, I do want to ask Thomas, what's going on with FTX? We've obviously seen this massive Solana move to the upside. We know that FTX made a couple investments. Is there really a chance here? And now we're seeing news that maybe this takes years, which I think we expect. Maybe you just give us a very quick update on what's happening with the FDX bankruptcy now since it's still... Yeah, sure. Can you hear me okay? Uh-oh. You're good. You're good. Okay, let me... I just turned off my Wi-Fi. Is that any better? No, you're good, man. You're good. Go ahead. Uh-oh.

We can hear you. Can you guys hear me? We can hear you, Thomas. I'm going to try to talk. I'm trying to make sure you can hear me before I start talking. I'm going to just give a thumbs up just in case you can't hear us yet.

Okay, okay, okay. Yeah, hey, how are you guys? Thanks for having me up. Yeah, I mean, the estate's moving along pretty quickly. FTX is, you know, of course, looking like it could be close to 100% repay on the petition date values. Yeah, Solana moving is great. We don't have as much color.

People have some on-chain stuff, some off-chain. There's lots of rumors around how much was sold, how much lock Solana was sold, blah, blah blah but it's it's all looking good for creditors i know everybody on a crypto basis if you're a solana holder isn't crazy about getting dollarized at 16 16 17 dollars uh us dollars just per solana but i mean that was kind of always going to happen that doesn't mean i need to understand something i need to happen to voyager yeah well i i want to understand something so so so hold on if the if the estate gets back like 100 so let's say ftx owed 5 billion and they get back over 5 billion and i had a solana in in i had my my claim against ftx was 10 solana on the day of the crash which was equal to 160

dollars or whatever it is right does that mean that i'm getting back 10 solana does that mean that i'm getting back 160 dollars does that what am i getting back you're getting back the dollar you you get a claim for the initial petition date value of that. So let's say you had a million dollars worth of Solana and add the petition date values. So the first order of business for you to get back that dollarized petition date value. And then under the bankruptcy code, there are a few other ways potentially to get more of the upside. There's potentially to get what's called post-petition interest or basically interest on your account of your claim. And like in Mt.

Gox's case, actually the creditors did get the crypto uplift. But Mt. Gox is a very different time, and crypto ran a lot harder. I mean, when Mt. Gox filed, it was only Bitcoin, and Bitcoin was at $483, was petition date value. So everybody got dollarized in the same way, but they called it data claim value. I can give you some color on that. Yeah, go for it. Yeah, I mean, just giving color from what happened with Voyager, I can't say it will be exactly the same, but we got effectively what they called

a 36% payback, right? Which was 36% of the value in July of 2022 when the platform collapsed. So it wasn't 36% of the value of the tokens at that time. So it was actually 24% of the current market value when we got paid back. And now that the market's gone up, it's like 14%. It's like 14%. So what, does the balance then go back to the equity holders?

Here we go. Are you saying that if there's a leftover money, that SBF will actually get the money? Well, there are a lot of creditors between customers and SBF, but it's possible that people further down the wall. Including the IRS. Isn't the IRS first in line? Not necessarily.

I mean, technically, yes, an IRS claim is usually a priority claim that comes up before all unsecured claimants. But there are a lot of people that are probably Alameda creditors that might try to claim secure status for their loans. But they're still behind customers because they're in the Alameda silo, not the FTX silo. And FTX money was basically stolen to lend to Alameda for trading. So you have to think about the silos

in addition to the priority because within each silo, you have that same priority matrix you're talking about, that priority waterfall. And the IRS is technically first, potentially if they have a claim on Alameda or fdx but uh the estate's basically chipping away and the state's position right now is that the irs claim is likely zero or close to zero um they just

didn't have books and records to be able to support the claim of zero and you know part of what john random has to do which is very expensive is you have to have real books and records they have to rebuild the entire financial system of the company so that they can be able to say that that's a zero claim or close to zero claim, even as a $500 million claim. So, but you, but it could go to lower people in the total poll, including people that are associated with SPF. But I mean, you know, if someone works at paradigm or someone works at Sequoia and they wrote a $300

million check in the FFX and they're way down the waterfall, you know, I don't think you can necessarily say they were in cahoots with Sam, right? So you like to think that. I know what I'm going to be in my next life. I know exactly what I'm going to be in my next life. I'm going to be a liquidator. I'm going to be John Ray, bro. $1.5 billion. How much has he built already? I mean, I think it's probably 600 plus is like all estate professionals, maybe 500. Wasn't

an article that came out that said it was like a billion plus already? I don't think it's a billion plus already. I could be wrong. I'd have to go and check numbers. Maybe they're on a run rate to do a billion, which is entirely possible. I mean have to go and check numbers. Maybe they're on a run rate to do a billion, which is entirely possible. I mean, Lehman and I think, let's see, what's another one that's over a billion? Both Lehman and I think Madoff was over a billion.

It's a very similar setup. And I'm sure Enron was close there, although you have to take into account inflation. I got a question regarding all this because I know there's a lot of people out there that are going to be getting money back. What are the taxable implications for this? When you get this back, is it already written off from before? Do you have to pay tax on the full amount minus the difference in what you didn't get back? How does that work? I can give you a non-tax response. And then if the tax guy is still up here, maybe we can have him chime in. But there are some special rules around

write-offs, especially when it has to do with write-offs due to fraud. And then generally speaking, if you have a basis, your basis is your original amount, and then you have some recovery. And in very simple terms, if it's a taxable event, you just take your original basis times what you recovered. There are some arguments in Mt. Gox, some creditors there, they put in Bitcoin, they got back less Bitcoin. They're trying to claim that there was no taxable event because of an in-kind distribution. You have to talk to your own tax people. And I've been wondering what the tax guy would say. Clinton, hey, how are you? Nice to meet you.

I love what your thoughts are if there's in-kind distributions, whether that would be a taxable event. I mean, no, not tax advice for me at all. I don't know if Clinton wants to preface it as well. Well, two answers to that. One is anything that's given in kind, the tax implications are interpreted in terms of the fair market value in U.S. dollars. So you'd have to think it through that way. But typically with an FTX claim, what we did for our clients, of course, there was basically what's called the Bernie Madoff provision, where if somebody got indicted as a result of a fraud, then you're able to write off between 75% and 95% of that, of the money that you put into it, not its value,

but the money that you put into it. You can claim that as a write-off in the year that it happened. So for FTX people, a lot of my clients who had money in there, they were able to claim a write-off in the year that it happened. So for FTX people, a lot of my clients who had money in there, they were able to claim a write-off already of 75% to 95% based on whether or not there's been a, in this case, a distribution. So now you go forward a couple of years, like let's say 2024, now you get a payout. You basically have to reconcile that. Did you get, is that a net gain or net loss and you pay or get a, you have a capital gain or loss on that transaction? Right. Your basis would be zero then, right? Or close to zero, whatever your write-off

you took. Well, let's say in this case for FTX, because there was an attempt to get, there's a legal action to get the money back. You could only write off 75%. So for every dollar, you know, when it happened, was that 22, you could have written off 75 cents of that, which means 25% of your basis still remains. So it's not zero basis, it's 25% basis. So now you get a payout. If what you get paid out is 30 cents on the dollar,

you've already got a basis of 25 cents on the dollar. So you're really experiencing a gain of 5% in that situation, which is generally a gain because you a basis of 25 cents on the dollar so you're really experiencing a gain of five percent in that situation which is generally a gain because you only put in 25 cents and you're getting 30 cents back or it might be a loss if it's the only way around for a person but it's yeah there are a lot of international just to jump in here and say i can't believe bitcoin's already back at 43 500 these one day dips dips are like... Rand, the reason why it's back at $43,500 is about nine minutes ago, Eleanor at Fox Business just put out a post that the SEC is having meetings with the exchanges about finalizing comments on the spot Bitcoin ETF.

So, you know, the story by the block earlier today, I don't want to cast serious dispersions, but pretty clickbaity. And, you know, just seeing it for what it is, there's no slowing down here. The SEC is moving forward. The reason it's backed up, Andrew, is because there was no reason for it to be down. Except for leverage, and the leverage is gone so agreed there agreed there but now we've got you know the truth about actually what's going on which should be obvious to most people but uh yeah interesting morning that's for sure yeah i mean look i the just to finish here can i can i finish answering your question which is there have been different cases around the world where the upside the like call it post petition

because when you follow bankruptcy is and especially in america is referred to as a bankruptcy petition so like that post petition uplift in value like who gets it and there's been lots of squabbles over it over the years and the main arguments in ftx are we'll hang on like the terms of service say that title never changes hands so this is not a state property so that we should get the uplift in value which is a decent argument is that it has to be made and actually articulated with real expensive attorneys in court a lot not just like us on twitter spaces but it's a decent argument uh the other one is like oh it's just inequitable for like the equity holders to get like a huge recovery like it's for sam to get a like let's say that bitcoin runs 100 000 and like

uh genesis digital which is like their big crypto holding and you know everything it's like a 200 repay and what sam's going to get a check in in jail for like 10 billion dollars like that doesn't make any sense um so there'll be equitable arguments against the big windfall for equity holders that doesn't mean there will be people down the waterfall that won't try to make really articulate arguments and hire very expensive counsel, as you've already seen and noticed appearances this week in the docket. But in that food fight, once you start getting really, really high recoveries in almost every bankruptcy, you will get like a total food fight over the spoils. And even the estate professionals, I mean, no offense to them, but you will start seeing, you know, padded hours. I mean, you know, why not? There's 100% repay, who loses? So from a crypto perspective, it doesn't seem very fair.

But I think if there is a huge overflow or excess or surplus of funds, there will be lots of arguments against equity keeping all that. But that doesn't mean that Sequoia won't get their 300 million back or that Paradigm won't get their 300 million back or whatever these people pumped into the company. Because they have liquidation preferences in their investment agreements, I'm pretty sure. And so, you know, they'll show up to corporate lawyers and try to get that at least allowed claim before creditors get that upside lift. Yeah, I know it doesn't seem like it. But with this broken process, if the retail creditors get back the value of their portfolio at that time which sucks it would be a huge win sadly it's better than everybody else has done yeah Scott

I'm gonna go I'm gonna go watch a sunset on the beach my family's killing me for working on vacation so I love you man yeah we can we can we can wrap. We had the Bitcoin crash of this morning that we were able to talk about. We're already more than halfway back. So I think we can wrap and wait for Mario, hopefully, to come back tomorrow. And we can all get in this together. Are you going to be back tomorrow, Ray? I'll be back on Monday. I'll be back officially on Monday.

So we'll see you tomorrow. All right, everyone. Thank you. Go ahead and wrap. Thanks guys. Bye bye. Thanks for having us. Everybody have a good day.