The Wolf Of All Streets - Bitcoin Pumps And Dumps, ETF Mania, SEC Loses Again l Top 5 Crypto News

Episode Date: September 1, 2023

I am joined by Nathaniel Whittemore with whom we are going to break down the top 5 most important news of this week! Tune in on Friday at 9 am EST! Nathaniel Whittemore: https://twitter.com/nlw ►��� JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►OKX Sign up for an OKX Trading Account then deposit & trade to unlock mystery box rewards of up to $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►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/   ►►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  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  Timestamps: 0:00 Intro 1:30 September is the worst month? 4:00 Grayscale victory 12:45 Bitcoin spot ETFs  19:40 Uniswap 25:50 Binance sealed case 32:50 Impact Theory 39:00 Brian Armstrong’s 10 crypto ideas 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.

As the famous saying goes, there are decades when nothing happens and there are weeks when decades happen. It's been a very slow news cycle generally for crypto, but this feels like one of those weeks when decades happen. We've had some massive stories. We've had crazy price action and just a lot going on both globally and in crypto. What we're going to do now every Friday is myself and new co-hosts, which I'm very excited about, NLW, are going to review what we view as the five most impactful stories of the week. You guys don't want to miss this. Let's go. Let's go. really, really cool. I'm just going to go ahead and bring him on right now and spare you guys the niceties. Good morning. How are you? Good. How's it going, man? Good to be here. It's going well. So this was one of those weeks, as I said, where it was almost hard to drill in

on five key topics, right? And until the last day, we were getting new stuff. It's like the world knew that summer's over and it's go time again. And everyone's done touching grass. We're coming back, headed into a fall of hopefully more consequential action, I think. More consequential action. But we do know that seasonally for stocks and for crypto, September is the worst month of the year, right? I think we've seen generally 12% down over nine of the 12 last years on average for September. Yeah, it's interesting. I always forget that fact heading into because September is such a, there's so much new energy coming back into markets. It's just that a lot of that energy tends to be rebalancing and getting rid of things,

I guess. There's a million, anyone can go Google why September is always a down month. There's a ton of different theories, but I don't know. It's interesting. I feel like when it comes to Bitcoin and crypto, I almost always feel still better in September than in June, July, or August, just because it's like, at least there's something happening, even if things aren't necessarily screaming up into the right. Yeah. I think a lot of people in legacy markets refer to it as window dressing season. It's just sort of you come back from the summer, everybody's worried about what their bonus is going to be for the rest of the year.

They start selling some things in September to lock in gains. And then you move on to the Santa Claus rallies and the other at the end of the year. We sort of on one of the shows came up with, you know, you have sell in May and go away. But now we need something like uh but remember buy the dip at the end of september or something like that before we come into the the fall because we in crypto we also as bad as september is we sort of have this notion of october right we have this huge move where october first hits and all of a sudden things go wild it's it is it's you know the thing is i mean i'm sure you find this as well

like the further from being reliant on actual sort of day-to-day movements for making one's living the more able to sort of just enjoy the you know the the patterns that happen you know like you spend more time on uh on coming up with fun aphorisms like, remember by the dip at the end of September than actually worrying about it. Yeah. I'm just hoping that it's not another month of bad news. I think we're going to talk about it right now. I think we got a lot of the ETF hype out of the way because we know we won't know anything in September. So maybe at least we don't have to talk about ETFs for the rest of the month. But here's the five stories that we sort of highlighted so that everybody knows.

Obviously, I think the biggest story of the week is the Grayscale victory against the SEC. And then, of course, what that has meant for ETFs. We have the Uniswap class action being thrown out, yet another victory in the court system for DeFi and for crypto. The SEC sealed filing against Binance. That one is really curious. We'll dig into that. Of course, the fact that the SEC came down on impact theory for their NFT. And then at the end, something totally different, which is the top 10 crypto ideas, basically Brian Armstrong saying, hey, if I could do it all again, if I wasn't really busy being a billionaire, these are the things that I would do in crypto right now. A whole lot of SEC

here, man, right? I mean, this has been the dominant thing for 2023, though. When we write the story of what this year was about, it's going to be cleanup and follow through from last year and sort of the fallout of 2022's actions. And a huge amount of that is battles in the courts. The arena for crypto this year was the legal sphere. And hopefully that's not every year, but it makes sense in the context of this transitional period where even before FTX imploded,

still the dominant theme was getting to regulation that would work. know and it was just that it was internal industry actors pushing for that and subsequent to ftx imploding it was basically a situation where the the most vocal critics in the administration across all of the different agencies where they inhabited it's not like they didn't exist before it's just that they got louder and everyone who was standing between them and, you know, policy got out of the way because who's going to step up to defend if you're if you were, you know, positive, maybe, you know, but you're probably deprioritizing it. But if you're just neutral, and you're sitting at the

SEC or the DOJ, you know, coming coming off of last year, you just get out of the way. And that's a lot of what we've seen, I think, is is that battle playing out. Now, the good thing is we'll talk about this week is that it turns out that the courts weren't quite as aligned with the approach as the SEC and other agencies might have hoped. Yeah, it's a point we talk about quite a lot here, but just because a regulator says it is so does not mean that that's actually the law. So it is really encouraging to see that pushback from the legal system. And to your point about FTX, I think if you were even a neutral legislator, a congressperson, a senator, or even if you were slightly leaning pro-crypto, it became really easy to just say nothing there for about six or seven months and let it all play out and shake out. But I think that now we are seeing as a result of some of this enforcement action or some of the court action

that maybe being on the anti-crypto army is becoming a little less popular and the pendulum is swinging back to where having a favorable opinion of this is going to be the better move politically. That's how we have so many young presidential candidates who are talking about Bitcoin and all in a positive manner. So I think that that maybe is the good thing about them pushing so hard against the industry. I mean, this will be seen as a brutal, brutal, but incredibly strengthening year, I think. I know, I mean, really two years, because if you view 2022 as the beginning of a period of really cleaning out a lot of bad behavior in the space,

and then 2023 as following through, dealing with the consequences of that, but also actually having to, you know, back pinned against the wall, have the fights to get things sort of, you know, lined up and legal as they need to be. That's an incredibly difficult process. Obviously, it would be have been nicer to do it on a different standing, but we were never not going to have to go through it. And, you know, the it's going to be harder than ever to kind

of look at this as a passing concern once it has survived this particular set of actions, I think. And so ultimately, again, speaking of cliched phrases, that which does not kill us makes us stronger. You will never have a better example of that in the Bitcoin and crypto space than this year, I think. Yeah, the old adage of that, then they fight, you phase, right? To your point, it was inevitable. And I think that we actually have the right fighters in the arena clearly to potentially win this. And I think that only has strength in Coinbase's case, which is the big fighter that we have. But let's dig specifically into Grayscale here. Obviously, for people who don't know, Grayscale sued the SEC after the SEC rejected their attempt to convert GBTC, the Bitcoin trust, into a spot ETF. Grayscale decided to fight back and sue. People to question why they were even there. And now we got a decision, which is

that Grayscale won and that not only that, the SEC was outright rejected their arguments called capricious and arbitrary, which are two fun words used in legal jargon, obviously to say, why are you guys even here? This case was ridiculous. So to you, how big not only is the Grayscale victory, but the language used by the judges and the way in which the SEC lost? Super significant. So digging into the specifics, a couple of things that the case was not just to get it out of the way. It does not mean that Grayscale Bitcoin Trust automatically gets converted. Everyone is very quick to point that out because it's a nice counter-narrative tweet point that you get, but that does not mitigate how significant this was.

The reason that it's significant is that effectively what the judge ruled on is the logic that the SEC used to deny this particular application. And it's logic that they've applied to effectively every denial. And at core, I mean, there's a number of different issues, but the core one is this question of market manipulation, right? The SEC has long maintained, and this goes back to the Clayton SEC before Gensler as well, that one of the reasons that there can't be a Bitcoin spot ETF is this fear of market manipulation, right? That the market is too shallow. There's too few, you know, kind of players who are exchanges and where that manifests practically for an ETF is in the price feeds, right? Basically, they say, you know, if the market for Bitcoin can

be manipulated at one of the, you know, four or five exchanges that's feeding in, you know, if the market for Bitcoin can be manipulated at one of the, you know, four or five exchanges that's feeding in, you know, to this price feed, then that's too high a risk, right? You don't pass muster. The problem that Grayscale had with this argument is that it's the same price feed that feeds the Bitcoin futures ETFs that were approved. Now, the SEC had kind of some weird logic around why because of the venue of the CME, there were more protections in place and how it better fit. But at the end of the day, what this judge said, and this is where some of the harshest language was, is effectively that it failed to meet standard reasons of using your brain, that the that the price feed, feeding one wouldn't also that the same scenario wouldn't apply in each of

these cases, right? That if you're talking about the same price feed, that you can't say that one is going to be manipulated and the other one isn't. And effectively, the judge also said that you didn't provide any evidence. So that was the big sort of thing that was rejected in this case. But the challenge of that for the SEC is that although the judge doesn't, you know, the ruling doesn't say you have to convert this, the ruling says you can't use that particular logic. And so when it comes to future ETF denials, should the SEC choose to want to deny other applications that are sitting there, they're going to have to find some entirely new reason that's not that that's not basically any of the reasons they've used in the past to deny that. Now, they're they're a creative bunch when it comes to hating crypto. So I'm not putting putting

anything past them. But it does create a very different scenario. And I think what a lot of people have noticed is that from a pure political standpoint, it creates a really nice safe, face saving moment, where they can kind of say, look, you know, the the courts have ruled, we're not trying to overrule courts, like, you know, we're going with it. And guess what, you know, BlackRock is here, these traditional institutions are here. Sure, fidelity and a surveillance sharing agreement, you know, means that we're going to pass that, right, it gives them a chance to kind of walk it back. And so that's the real question is, will they take that opportunity to sort of save face and shift the narrative a little bit? Yeah. And interestingly, that's what, I'm not going to play the statement, but Matt Hogan, who we have here often,

Bitwise urges SEC to greenlight all Bitcoin spot ETFs as deadline looms. He was very political in his statement in basically saying they were right to reject these in the past. The industry wasn't mature enough. We don't blame them for that, but now is the time to greenlight these. And that speaks to that exact safe face saving situation that you just talked about. Gensler can literally say, yeah, now the market has matured. BlackRock and Fidelity are giving their stamp of approval to Coinbase as a legitimate place where we can't have market manipulation. They can throw out all these arguments now and say, so now is the time. We were right.

And now we're giving you what you want. And frankly, then they can still continue to attack the rest of the market, in my opinion. It's interesting that sort of statement that you just ascribed to Matt, I think, is reflective of a larger trend that we're seeing in narrative making coming from the industry. I think there is a sense that the tide is turning a little bit, and that now is a really good time to offer narrative olive branches to the agencies to kind of walk it back. So, you know, I will, I will stop short of guessing whether Matt actually thinks that the industry wasn't ready in the past. But the fact that he's saying that is there's an op in Coindesk from the CEO of CleanSpark talking about Bitcoin mining that I actually read for my kind of long read Sunday this week. Same tone of, we know that you

tried to put this Dame tax on the industry like three months ago, but the tide is shifting against you. So here on a nice little platter is a fresh narrative that allows you to kind of get with the picture a little bit. Now, I think that that may be a little bit optimistic overall. Things still haven't turned totally, but I do think it's interesting to note just how much of that repositioning I think is happening right now. And it has to be mentioned then, a lot of people were extremely optimistic that because Grayscale won this week, all of a sudden we were going to see this slew of spot ETF approvals. I was not one of those people, to be clear. I think that Gensler will continue to kick

this down the road as far as he can before making that decision. But the SEC deferred decisions on Fidelity, BlackRock, Bitcoin ETFs. To be clear, all seven of them were deferred yesterday, even though some of them did not have to be deferred by yesterday. So they basically just did this sweeping, uh, bucketing of all seven of them. Curiously, they reject, they, they, they kicked six of them down the road and then waited about an hour or two for BlackRock, which gave people just enough time to have these wild tin hat, uh, tin foil hat theories that BlackRock was about to get approved. But we did see all seven of them kicked down the road. And from James Seifert, who was on the channel yesterday, next dates to watch middle of October are the next

major days to watch, namely October 16th. Now we've basically kicked this 45 days down the road. I don't think this will be a narrative in September unless the SEC surprises and just happens to approve one before the deadline, which they can theoretically do. But can we at least stop talking about ETFs now for the next 45 days? Yeah. I mean, listen, I think that the important function of the ETFs, by and large, there's three pieces of it. Two of the three have taken place, I think, in some ways. One is a signal to the market that traditional financial actors are still interested in this space. BlackRock coming in and filing that ETF

was, I think, a huge inflection point moment for the industry. To the extent that there was any question left of would the crypto industry survive this sort of existential cataclysm of the last, you know, nine months or 12 months or whatever, that put the stopper in that, right? It was just done after that. So that's one really important thing from an ETF. Second, really important thing is this decision, right? That this sort of showing that the courts are not just going to sort of blindly follow what agencies say, they're going to uphold the rule of law. And in areas of question, the right actors to figure out law are Congress. That's what the, you know, these court decisions keep saying, basically. So that's part two, part three, that will be valuable. Is it actually existing?

But that will always almost always underperform expectations, at least in the short term, in terms of how it's going to impact price. So it's kind of like we've got two of the three. Now it's time to sort of just chill, move on to other narratives for a moment. And I think like it would have been insane to think, I think that the SEC would approve something. One, by anything in government, anything in bureaucracy is going to go to the last possible moment just by nature of how bureaucratic decision-making takes place. If you have the opportunity to delay it, you delay it until you can't delay it anymore. And that's about everything.

That's not just about Bitcoin. Two, I think from the standpoint of if we're actually trying to give the benefit of the doubt to the SEC for them being reasonable, waiting for, they now have a whole new set of information that needs to be dissected, poured over, reviewed by counsel. They actually genuinely need that. And in fact, to the extent that you want to be optimistic, them saying, whoa, you know what? Hold up. We're going to push all these off. We now have a whole bunch more reading to do and our lawyers got to dig in. That actually could be more optimistic because it suggests that they are behind closed doors figuring out what actually needs to happen next versus just following their proceeding course, which is to reject everything. It literally just lost this week. If we thought the SEC was going to absorb that information and make a final decision within two

or three days. I think that that was a bit nonsensical, but classic for crypto Twitter, I would say. A few things I just want to brush through on this and then I want to wrap this topic up. We have to mention the price action, obviously grayscale, massive pump, and then even kind of saw it trail off over the next day. And then before the ETF rejections were even mentioned, massive dump back to the downside. Just so you know, guys, Bitcoin's $26,000. That's where it was before BlackRock even approved. Maybe right now we're just in that part of the cycle where Bitcoin's just kind of $26,000. But if you're looking for another asset that outperformed GBTC, up 137% if you bought the dip in December.

And that's because of this discount window, which you guys can see here. It went to about 15% or 16%, I think, on the Grayscale News back to 20%. But if you were buying that in December, not only did you get the benefit of all this upside from Bitcoin, you got the discount window closing. So GBTC, in this case, was a much better trade than Bitcoin. I'm going to go wrap that up so that we can move on to the next story, which is, well, we'll start here. The court sides with Uniswap over class action lawsuit. Basically, a bunch of people got together. We're suing Uniswap because of rug pulls and scams that were happening on Uniswap that had nothing to do with Uniswap, but basically saying you as the platform, you as the intermediary allowed these scams to be here, therefore we can sue you. And they also mentioned in that case that they were suing because Uniswap was allowing for unregistered securities to be trading there. I think that this story is a great narrative, but not as big for the law as a lot of people are pointing out. I would love your thoughts on this.

I think that what matters, there's a couple things that matter about it, but they are, to your point, Scott, less sort of about precedent and more about the context that we find ourselves in right now. So the two pieces that I think are relevant are one, this decision, even more than the Grayscale decision, said quite literally in a couple places this has not been determined by congress i will not be party to expanding authority you know expanding securities designation until that has happened right so so part one of the significance is just a judge saying stop trying to use courts to get this point proven when it hasn't been proven. This is a question for Congress. She literally said at one point, you know, this question is

better directed to Congress than to me. So that's one. And the reason that that is, it's very emotionally satisfying. And, you know, I certainly, you know, had a nice calming sip of coffee after reading that. It's not actually that relevant because it still leaves it to Congress. Someone has to decide. It's not going to be the court reinforcing some power grab. The second piece that does, I think, is relevant is that it's the same judge who's involved in the Coinbase case. And hold aside even the specifics. I mean, I think that the specifics point in a positive direction. I think that what people were most excited about who pay really close attention to this is this is a judge who very clearly has gone extraordinarily deep into this industry to

understand the nuance of these protocols and how they work and what these things mean. And I think the position of a lot of folks in this space who are confident and optimistic about it in the long run is that when you dig in deeply, things are clearly not as clear as they seem to the sort of antagonists who are just trying to call everything a security. And I think that that sensibility was validated by seeing someone who had really taken the time to actually try to understand the nuance of this space. So those two things are both very good. They're very positive. They're just not precedential, right? In the sense of, you know, going to make big, big impact in future cases.

Right. I saw people claiming that the SEC had lost here. This was a class action lawsuit for people to be clear, a civil class action lawsuit. This has nothing to do with the SEC, but, you know, people may point to, I just want to point out a few quotes. Due to the protocol's decentralized nature, the identities of the scam token issuers are basically unknown and unknowable, leaving plaintiffs with an identifiable injury, but no identifiable defendants. The judge wrote, I really liked this one, the court finds that the smart contracts here were themselves able to be carried out lawfully, as with the exchange of crypto commodities, ETH and Bitcoin. So quickly there, this judge called Ethereum a commodity, but maybe that's a story for another

day. And then finally, developer or self-driving cars liable for a third party's use of the car to commit a traffic violation or rob a bank, which is the most obvious thing we come back to, I think, constantly when it comes to crypto. This has been the defense of Bitcoin since the very beginning. If you use an iPhone as a drug dealer to do a drug deal, Apple shouldn't be sued because they created an iPhone. If a country or a criminal uses Bitcoin to send money, the agnostic protocol, Bitcoin, the asset should not be punished because somebody used it for a nefarious purpose. We've seen this with the

internet over the years. So to me, even though, like you said, it's not precedent, it's nice to see logic coming from the court system. Very obvious statements. And I think it was Steven Paley who pointed out that this that that underlying issue, although it wasn't the core issue of the case, that underlying issue of how culpable developers are for the use of the software they develop is a question that has always I mean, it is lurked around the internet since the very beginning of the internet, and it is going to be put on trial again in or to hope that Section 230, that exemption that has protected internet platforms from what their users do, does not apply to AI. And you've even seen people like Sam Altman in Congress when he testified before the Senate saying maybe Section

230 shouldn't apply to artificial intelligence platforms. So I think that having, I think it's a good thing in general, if one is a sort of, of the of the mind, like I think many are, if not most in crypto are, that developers shouldn't be held responsible for the uses of their software, that we're seeing some sort of legal, you know, agreement with that when it comes up in cases. So, you know, it's, it's, it's certainly a touchstone for something that I think is going to be a much bigger issue going forward. Yeah, it'd be nice if the same courtesy was applied to the Tornado Cash developers, but I guess we will see how that plays out and if they were actually legitimately involved in any of those transactions or if they

only created the protocol and then it was used for nefarious purposes. To me, that's sort of the case that's going to really determine all of this much more than a class action with Uniswap. 100%. Yeah. The next story, obviously, we have here, SEC's secret Binance court filing has observers bracing for bad news. Now, this one is curious. I've seen a lot of takes in different directions. Obviously, John Reed Stark, who used to be with the SEC, who, by the way, is one of the few people who I have to take a deep breath and a Xanax before I read anything that the guy writes because it always makes me think that the world is ending. Rand Nooner said something to the same effect yesterday. This guy hates crypto

and he loves the SEC. He worked there for decades. But to be clear, we have this sort of sealed motion, which is very rare. The SEC is usually very transparent and public with the things that they're doing in these cases. But in this case, it was sealed, which usually means, according to Stark and others, that either it has something to do with protecting an individual or a witness, or there's a DOJ enforcement action on the side that they don't want to conflict with or to impact. So basically, they don't want to conflict with or to impact. So basically, they don't want this information being public because it could impact the DOJ's efforts to execute a criminal investigation. I think I was putting odds on it.

Betting odds are very strong that something's coming from the DOJ for finance. I mean, is that what you think here this means? I don't necessarily think that this changes the odds of that one way or another. So if you look at the history of the... Binance and the DOJ are like this weird odd couple who have been dancing around each other now for a year and never really being able to get it together. So you saw, we had this article, I think it was either in late December or early January, Wall Street Journal article about how there was internal conflict at the DOJ around whether to bring charges to Binance. Now, that's an extremely weird article to have. The DOJ is not in the habit of talking about cases that they might do. And frankly, holding aside whatever badness Binance might have been a part of or participated in, there has been for sure a nonstop campaign of leakage from DC- agencies and departments and, you know,

parts of the administration against finance. And to me, that indicates that the whatever case they have is not nearly as on as solid a footing, like they wouldn't do that. If they had a strong case, they would just go after it. Now, that's absolutely not to say that a more evidence hasn't come in B, they haven't just decided to go with the case or anything like that. But I guess that what I would say is, if you've been watching this closely, it's kind of been six of one, half dozen of the other around whether the DOJ is going to actually bring charges or not. I don't know that sealed documents showing up necessarily mean that they are.

It could just literally mean that the DOJ is saying to the SEC, you know, don't undermine our optionality around that with, you know, XYZ, right? Like, it could be that the parts that are the most compelling of the DOJ's case are relevant for the SEC's case, but still ultimately not enough for the DOJ to decide to bring a case, but they don't want the SEC's filing to make that decision for them. So one, it is 100% clear that the DOJ is at least exploring a case against Binance and against CZ. And so to some extent, that I think is inevitable. I'm just not sure how much this actually suggests that that is for sure coming or just is further confirmation that it's an active pursuit. That Wall Street Journal article was extremely confusing and baffling to me. It really was because, first of all, the DOJ generally

doesn't worry about the price of assets and how it can hurt consumers or insolvency and things like that. That's literally the SEC's job. So having the DOJ come out and say, we're worried about investors and how this could impact them, to me, to your point, says maybe there's not that much there. If they had a slam dunk, open shut criminal fraud case against CZ, there's no way they would have been saying that. Yeah. Well, and listen, part of what's interesting right now, again, if you're just watching from the outside, you don't have a dog in this fight is almost tying it back to the conversation that we were just

having where the lines of culpability are when it comes to how people use platforms right like binance is clearly lax with controls at the beginning you know that that you from the cftc case from the sec like is very very clear where does that that you from the CFTC case from the SEC, like, is very, very clear. Where does that flip you over into criminal culpability, right? Like, it seems very unlikely, given that we haven't gotten an action yet, that CZs, you know, sitting in a back room, you know, with, you know, like, you know, terrorists from the Middle East, like making plans, like, you know, it's, it's, it's much more likely that it's sort of like there's suspicion that some organization that shouldn't be there is trading and they don't necessarily go out of

their way to clean it up. And so does that create criminal culpability? And part of this may be just the authorities trying to figure out if it does. Not to say that that's good, but these are weird, uncharted territories. I've always been of the opinion that Binance likely did a lot of things that were on the fringe in 2018, 2019, 2020, not necessarily intentionally, largely because regulation wasn't in place. They didn't know the rules and they just went ahead and went with the, I guess we'll ask for forgiveness instead of asking for permission approach. And they've probably tried to clean that up largely in the past. So I will be surprised, I guess, if their ongoing efforts here to clean up are false, because you see CZ out on a roadshow with regulators and legislators literally everywhere

on this planet trying to get in line with what they want in each of these jurisdictions. I just think it's an impossible job, but it remains to be seen. It remains to be seen what's going to happen here, but I think that maybe you're right that maybe this story in and of itself is a bit of a nothing burger. I mean, the other obvious realm of speculation for people was that it was them protecting Sam. Three or four weeks ago, SPF shows up in New York, not around a particular hearing, gets photographed, and then a few weeks later, secret documents are filed. That is sort of interesting late summer speculation because

there's nothing else going on, I think. I would only say on that front that i would not be surprised if uh if sam even outside of protecting his own hide had desire to screw finance over um but i i i think that it's unlikely right now that that's actually the case because it does not appear that uh that that that spf is in any other mindset other than defending himself. I don't think he's in cutting a deal mindset. I think he's working under the delusion that he can still get away with it because he's so smart. I agree with you.

The next story that we have to talk about here, once again, back to the SEC, and here is the actual filing. SEC charges LA-based media and entertainment company Impact Theory for unregistered offering of NFTs. They made about $30 million, paid about a $6 million fine. To be clear, Impact Theory and Tom, who you know we've had on the channel quite a few times, Impact Theory did not admit any guilt, right? They just said, we're going to pay the fine and move on kind of like Kim Kardashian. But interestingly, in neither admitting or denying the SEC's findings, they did have to establish a fair fund to compensate impacted investors, as well as to destroy all of the founders' key NFTs and

eliminate any royalties that might collect from secondary market transactions. So it wasn't just a fine. I mean, this was a bit of scorched earth. And I think that everyone's question here is what does this mean for every other NFT project on the planet and how it was launched? Is this about the NFT itself being an unregistered security? Or is it about the language and marketing used by Impact Theory to promote these NFTsTs and how will that be applied? This is about the SEC using enforcement actions to expand its jurisdiction in advance of Congress saying it is so. It's sort of surprising that it's taken this long to see an NFT action, but I think that the playbook is pretty clear, which, go after a project that was high profile enough that there's there's money to be had and sort of narrative impact to be had, but not so high profile that they're actually going to fight back, you know, basically go to someone who where the path of least resistance of just paying the damn fine seems better, you know, or is likely to be the chosen path. So that then the SEC gets to point to this as, you know,

precedential again, we keep using that word, but that's sort of, you know, I think that they want there to be the implication because these guys paid the fine that NFTs are securities and it comes in their jurisdiction, even if it doesn't say that, right. There's, there's clearly a, um, uh, a might makes right sort of thing going on and that's effectively what the dissents uh from the sec commissioner said is basically like look we don't love you know how they were uh promoting this project we have concerns around that in general when it comes to nfts but that concern does not justify expanding our authority through enforcement actions, more or less. I'm obviously summarizing. Yeah. My favorite line from Hester Peirce and

Uyedas, I guess that's how you pronounce his name. I probably butchered that. From their dissent here was, we do not routinely bring enforcement actions against people that sell watches, paintings, or collectibles, along with vague promises to build a brand and thus increase the resale value of those tangible items. Buying a pair of Jordans on eBay and selling them for $47 more does not constitute the sale of an unregistered security. So if you view NFTs as collectibles, that seems very obvious, but clearly the SEC does not. I also think that there's an element here, you're right, of them expanding their jurisdiction, but also just going after the low-hanging fruit. They can go after these NFT projects until the end of time, and not a single one has hundreds of millions of dollars to defend themselves and to fight this in court, to go through that process, and then even if they win, to be handicapped by how much money they've spent to do it. So this is what I think now, if I had to put on my tinfoil hat, once again, we're going to see from the SEC. I think their appetite for going after the Binances and Coinbases and ripples of the world is over. I think they're overextended there. And so now I think we're going to see a whole lot of influencers, NFTs, like middle to low end

hedge funds, people that they can get four or five, $6 million, 400, 500, $600,000 out of who will not admit guilt. And they just claim these to be win after win after win after win against the industry, expanding their jurisdiction, and obviously just showing who's the boss, right? Nobody can break these guys unless you have hundreds of millions of dollars. Well, the other thing I think that is worth keeping in mind is, so I agree, contributing to that is also the fact that we are now coming up on an election cycle, which means, you know, you kicked off the show talking about how investors come back and they try to kind of consolidate their gains heading into bonus season. Apply that to a politician's career trajectory when they're on year three and a half of their

time in the administration and they just want to wrap up that nice little package. They have chosen, I mean, Gensler and his SEC have very clearly chosen that the story for their fellow Democrats is enforcement action wins equal us doing good. And so, you know, you put a few more of those on the board, especially, by the way, if they represent a nice cross section of people, to your point, you know, we've got an NFT project now. Maybe we chuck an influencer there, maybe we chuck a VC, maybe we chuck a hedge fund, then you have a nice

little collection of enforcement W's, right. And that is now your application for your future role at the DOJ or wherever you want to go next. And I think that as cynical as that sounds, that's going to be a lot of what the next six months are about is just sort of, you know, consolidating and jockeying for that, you know, for the next set of roles. Right. And maybe the continuation of that logic is that it also prevents future releases or future action by the same kind of people doing the same thing. So you're going to think twice about releasing an NFT project. If an influencer, we did see in Bellino, we've seen a few of them, but if an influencer gets charged for manipulating a coin or something, no more influencers will talk about coins. And so if a hedge fund, then hedge funds will just stop trading crypto. So I think

that it's really prohibitive and it just is this big kind of red stop sign or traffic light to people who are doing similar things who will now live in fear of the SEC. 100%. Yeah. And obviously our final story that we have today is Brian Armstrong sharing the 10 ideas I'm most excited about in crypto right now. Here's what he said. If you're building something in crypto or thinking about doing so, check it out. We're building lots at Coinbase, but we don't have time to tackle everything. So I figured I'd share these. Bear markets are the best time for building. Why not start today? That's a 23-minute video that we're not going to watch together. But maybe we can just quickly book through these one by one, which is what, as this article said, Ryan Selkis from

Masari sort of did a thread and capitalized on the hype of it and gave his takes. The first one was a flat coin that tracks CPI. He said it could be a huge opportunity for the crypto economy to really leapfrog in many ways. Decentralized coin that tracks the consumer price index to provide stability and inflation resistance, unlike volatile cryptocurrencies or fiat-backed stablecoins. What do you think of that? That seems complicated. Yeah. I mean, listen, I think stable coins have as much or more product market fit as anything in this space. So a near cousin that is sort of organized around something that makes sense to people like that seems interesting. I don't know. I guess the question would be in who you know, who uses it and for what? But I think it's an interesting thing. And, you know, my guess is that a lot of the point of this is simply to get people thinking,

you know, so I don't really have much more on that, though. Yeah. But to what you said, I've long said that stable coins are the killer app of crypto, which I know is ironic. And people who are Bitcoiners probably hate that because we're supposed to be railing against the fiat empire and fiat's going to die and Bitcoin is going to become the global world reserve currency. So tokenized fiat maybe wasn't what they had in mind. But stable coins are the things that most people in the world who are living in hyperinflationary environments are using because they want dollars.

So a backed stable coin that's a flat coin that actually acts as an inflation hedge in environments like that, I think could be a very interesting idea. On-chain reputation is number two. This is what Armstrong suggested. Tracking entity reputation on the blockchain is a way to combat fraud. We don't yet have a reputation system associated with ENS. And then obviously, Telkis went on to say, I invested in a bunch of stuff like this, dude. Right. So there's obviously happening, but I think that this is actually very important. Yeah. I mean, I don't know. My Bitcoin or skepticism comes up constantly when anything that sort of starts to get into the realm of tracking. But I think there are lots of uses of that that are non-dystopian that are actually really important. And I'll put it this way. Social credits, right? It does make social credits.

It is certainly a thing that I can't imagine at least a half dozen pretty well-funded startups taking a big swat at this because it has a little bit of a solution in search of a problem type of thing in that we don't know exactly where that reputation would be put to use because it's not a one-to-one comparison of things that exist, but it seems highly possible that there are particular areas where that reputation is extremely valuable in a certain type of business dealing, a certain type of industry, a certain type of interaction, where if it's figured out, even just in one area where it's applied versus just highly generally, it can be very valuable. Yeah. I would have just pivoted this one to on-chain identity, which I think is more impactful. Being able to sign into things and do things without divulging all of your information and

protecting your privacy. But I guess this is one step further. Now that I'm thinking about it, it does reek of social credits. I'm not sure I love it. The next one, obviously, on-chain advertising. Given the unique properties of Web3, we might be able to do this. He said, smart contracts can enable pay-per-action advertising if transactions included optional referral data. That's pretty simple, I think.

Yeah, I don't want to talk about ads. No podcast ever wants to talk about advertising or sponsors ever again. I also lived in ad world for a long time. Yes, you did. Let's skip that one, but it could be done. On-chain capital, which is on-chain capital formation, tracking the net accumulation of capital goods, such as equipment, tools, transportation, assets, and energy can increase access to fundraising. I don't disagree, but we haven't seen fundraising on the blockchain go that great in the past.

It is one of the fascinating things. I mean, anyone who watched the ICO boom saw this. It was so powerfully good at aggregating capital quickly that its capacity to do so overwhelms any actual sort of applied use of that. It just made the bad opportunities from that so much higher and more present than the good ones. I think that what a lot of people feel, which is legitimate, is that there's this hunger for the version of that that has that so low frictionized capital aggregation, but applied for good. It's just a question of how and where. And I mean, that's sort of if you look at the Coinbase blog post, that's effectively what he's saying is that like, ICOs showed this thing that could have been, but it wasn't? And is that thing even a thing? And, you know, who knows?

It's hard. Humans are getting human. That's the problem with this, right? There's certain places where you actually may want some regulation in place or at least some barriers that tell you to slow down, right? I mean, we've even seen it this year with meme coin projects, guys literally rug pulling and then somehow sending a tweet and raising another $5 million in rug pulling and sending a tweet and raising another $5 million in rug pulling. I think we can all agree that that's not helping our industry at all. Decentralized labor market,

a global marketplace for labor that uses crypto to pay people across borders. Cool. But I think it's kind of, I mean, people are already using crypto to pay people across borders, right? Yeah. Yeah. The way that it's framed on the Coinbase post is a job or task marketplace for crypto. I mean, listen, that's another one where it feels... Yeah. I mean, they use reference examples like Braintrust, which is basically that. It's Upwork,, crypto native Upwork. It's just gonna, that's so something that people are exploring already. You know, the question is

how much, how much crypto actually matters for that, or it just becomes a better sort of natural currency for it. Yeah. You know, as I read through these, what's interesting is I think that these are all really obvious and largely just going back to the crypto improves this, but it doesn't really change anything. These are web two ideas that operate with faster transactions, right? So I mean, these are largely pretty much problems that are solved, or maybe crypto could be a part of it. But I don't see these as full crypto businesses as we dig into them. But layer two privacy, as Selka said, early and obvious needs here. I think that we need privacy across all layers and not specifically to layer two. True peer-to-peer. Armstrong suggested that

a fully decentralized peer-to-peer exchange can be built on top of auditable smart contracts and be a great censorship resistant solution for escrow reputation dispute resolution. They always get shut down when centralized. We've had some false starts here but it feels like the infrastructure can support this now isn't that bitcoin yeah i mean i think i think it's i think it's sort of you know uniswap with no hate and uniswap with no you know i don't know i i i guess the bigger question, if you put it in context of Brian wanting to fund things or Coinbase Ventures wanting to fund things is sort of what do you fund? Because I think this one, the whole play here is for it to be basically uncapturable, untargetable, you know, and as soon as you introduced, you know, funding for it, you

know, there's someone to go after. Absolutely. Finally, here, number eight, Web3 game economies. I mean, this was one of the darling narratives of the last hype cycle for sure. Armstrong suggested on-chain games where users are able to truly own in-game NFT assets, creating persistent worlds with real economies. I mean, this literally was the metaverse hype, the NFT hype, all wrapped into one, the gaming hype. So there's absolutely nothing new here. The question is, I think, will it proliferate in the next cycle? Will it be more successful than it was in the last? I mean, what do you think about blockchain gaming? We haven't seen a great game, I'll tell you that. One of the most fascinating things about, or funny things if you're sitting there as Mark Zuckerberg. So Zuckerberg has gotten a lot of flack for renaming the company Meta and talking about

the metaverse. And then six months later, being all in on artificial intelligence and really putting that as sort of AI as the stamp. The funny thing is, though, a lot of the technology that's now being created nominally in the AI realm is useful for making metaverse experiences a thousand times more interesting, compelling, and engaging than the first generation of random crap where you had Morgan Stanley creating a lounge in decentral land or whatever the fuck it was uh you know last time around which was like you know listen that's not me hating on anyone involved in that decentral land whatever

you have to try stuff it's just so like everyone knew i believe including you know the people who were doing those experiments that they were just those early experiments. So listen, I think the, the on chain game thesis, it's really to me is more, to what extent this is its own category versus, you know, game developers just start to have this set of opportunities in terms of how they design the assets within them. And that's just going to be decisions that that, you know, game developers make. I don't know, I think that there's, my guess is that a lot of the folks who turn their attention to playing around in that sandbox didn't leave just because, you know, NFT collections got cheaper. If they were interested in that, I think that there's probably a more fundamental field, but games, you know, they take a long time to come to fruition.

So I think we'll just have to kind of see you know but but i'm not totally sure that uh that we'll see it quite as sort of um clearly a category in the next cycle where it's like on-chain games are a category of thing versus this sort of just this technology is integrated into into that whole sector i saw a comment here scott dead drop star atlas metal core, Phantom Galaxy has decimated lots of them out there. Listen, I'm not saying there won't be AAA games. I'm not saying there are not AAA games in development. I'm saying we haven't seen a successful AAA game on blockchain yet. And to NLW's point, I mean, you could just see a situation where Call of Duty allows you to own some sort of NFT in the game and we call it a day from the legacy

players. But yes, I do think that there's going to be aspects of this. I just want to see a AAA game before we move on. Tokenize everything is number nine. I think we've seen that narrative before and a lot of people are passionate about it. Tokenizing real world assets can make markets more liquid by encoding standardized metadata, putting debt on the blockchain could enable decentralized ratings and exchange, he added. I mean, everybody's been working on this for a long time. There's literally no way that this doesn't happen. The question is, is how much of a driver of new unique value it is for the crypto sector versus just, I mean, one of the ways to look

at the crypto industry is this sort of powerful internet native financialization of everything, right? And it has actually kind of been surprising to me that Wall Street hasn't jumped on board with this faster because the ability to tokenize and create a new layer of financialized products on top of things, thanks to tokens, is such a clear and obvious opportunity that, I mean, I guess it just speaks to the risk of the industry as a whole, but TLDRs, this is happening. I mean, if you listen to Larry Fink, part of what makes his interviews so powerful this year is he has obliterated the Bitcoin or blockchain narrative in a way that no one ever has from TradFi. He has just completely said Bitcoin and blockchain. In fact, he has

swatted down people who have tried to say, it's just the underlying technology that's interesting, talking about why Bitcoin is valuable. But then in the next breath, talked about how obviously they're interested in tokenizing real world assets too. And I think that is sort of, we missed some of the nuance of those details because we're just so excited about BlackRock putting a spot ETF. But BlackRock is very clearly going after not just a miss those details, but that there's a very large swath of the Bitcoin community that hates those details. So they focus on the Bitcoin ETF and they don't go back to his March investor letter, his annual investor letter, where he talked extensively about tokenizing everything. Because let's be frank, that probably, well, could, but probably won't happen on Bitcoin, right? So I think the Bitcoiners want to focus on the ETF side and everybody else is screaming, hey, this guy's also talking about blockchain and crypto. And finally, number 10, network states. This is obviously the Balaji's idea that he's invoked many times before and saying that we could, here we go.

Armstrong said network states, the successor to today's nation states can be run like decentralized autonomous organizations or DAOs. He called for the creation tools for governance, fundraising, access controls and services. Do you want to start a country, man?

It has always seemed to me that there was inevitably going to be sort of internet native organizations that exist somewhere between, you know, a business, you know, a town and a Facebook group. The question is just what, you know, the unknown question is, who uses those sort of communities? And for what, you know, I mean, that's been a lot of the experiment with DAOs. The interesting thing is, I guess the interesting question is, if you read sort of the precise language from the Coinbase blog post, how much it, how different it is than the incredible number of, you know, DAO management sort of software startups we've seen. What,

you know, what makes it unique to manage sort of a network state. But I think that this one is maybe that flyer, you know, you were saying in the beginning, a lot of these are sort of web two ideas, just sort of made crypto. I think this one is that that flyer for there might be totally different forms of human organization coming in the future, in which, you know, if they are not organized geographically, crypto makes sense as an organizing function. And maybe there is some interesting things to be built in and around that, which if we go that generally, I think is an interesting place to explore. That one's for my kids, man. That's not happening in my lifetime.

And every example, and this sort of is like gaming or NFTs or all the other things, metaverse we've talked about. But DAOs to me have just been experiments that have largely ended like Lord of the Flies, with basically Constitution DAO. I mean, hilarious. You get tens of millions of dollars to get there for a bunch of crypto degens. You lose the auction. Then you go, what the hell do we do now with these tens of millions of dollars that we're sitting on? So listen, it's a great idea for the future in my

mind, but not something that's happening anytime soon. Yeah. Well, I mean, listen, that actually to me says, and maybe that's why it's the last one on this list. What you just described is probably the most interesting use for venture capital is these things that describe futures that might be, but are certainly not guaranteed to be. And who knows? Shrug seems crazy. That's where venture capital both accrues value and also creates value by enabling new things. So I like that one. I hope they invest a lot in there. It's just a guys, I have to tell you that we were talking right before the show. And we were like, probably 20, 30 minutes. It's five topics? And then we knocked out an hour here. As usual, we pushed it right to 10 o'clock. So obviously we had a lot to talk about here.

This is on both of our YouTube channels and it will also be on our audio channels. And I'm assuming you're going to put it on yours, redo the intro, make it match everything that you guys got over there. I've told you guys this a million times. I listen to The Breakdown every single day. It's one of the few things that I do. You guys should be doing absolutely the same and checking out Nathaniel's channels. Absolutely my favorite, which is why I'm so honored to have him here on Fridays. I think this was a great first run.

What do you think? That was fun, man. It's good for me. I mean, people who listen to my show know I don't do as much editorializing. And one of the reasons I was excited to do this is it's a bit more of a chance to get into some of that sort of op-edding around the news, which I think is fun too. Yeah. News reporting gets pretty boring after a while if you don't get to actually throw some

sort of opinion and feel into it. And I think it was great. I really enjoyed the discourse. And now we got to go. But guys, we're going to be doing this every single Friday, 9 a.m. Eastern Standard Time. Again, you can check it on his YouTube channel, my YouTube channel, and then all of our Spotify's, Apple Music's, and wherever else you listen to audio. And thank you very much. I appreciate you getting up early in the morning. I know you're probably up way earlier than this in the morning to do this with me, but I'm looking forward to seeing what we can build here. Cheers, man. Loved it. Thank you guys. Everybody have an amazing weekend. Peace.