The Wolf Of All Streets - BTC Nearing Massive Monthly Close… Breakout Time? #CryptoTownHall

Episode Date: April 24, 2026

In this Crypto Town Hall, the hosts analyze Bitcoin’s technical setup and bullish potential for a weekly close above $75K amid a heavily shorted rally. They highlight a U.S. Admiral’s testimony on Bitcoin as a national security asset, with the military running nodes and exploring Proof of Work to secure data against AI spoofing. The conversation covers Morgan Stanley’s new Stablecoin Reserves Portfolio positioning the bank as reserve manager for stablecoin issuers, followed by a lively debate on stablecoins’ value for global financial inclusion versus being synthetic fiat. Finally, they break down the Kelp DAO hack’s contagion effects on Aave, DeFi’s risk repricing, lack of bankruptcy protections, and why regulated lending may be safer for institutions. Learn more about your ad choices. Visit megaphone.fm/adchoices

Good morning, everybody. Welcome to Crypto Town Hall every other day, sort of here on X, a 10.15 a.m. Eastern Standard time. As you know, we do the show a bit shorter these days because of other commitments. That might change, obviously, when Dave comes back. But for now, I love to dive right into it. I'm looking at the title for the first time here. BTC nearing massive monthly close breakout time. So obviously, I think, you know, everybody's watching the Bitcoin chart for the, those who are technical. I think that level of 74 to 76-ish was key and people want to see us trading above it. That said, kind of an interesting area for price. And I still think we have a split world on whether we're headed up and whether we're headed down and what this means in the context of macro uncertainty

and everything else going on. I mean, if anybody here has particular thoughts on price, jump in. I'm co-hosting alone, so, you know, raise your hands or just start talking, or you're going to get a very long unhinged soliloquy for me all day. I'm here for a Scott Melker unhinged soliloquy. I do it twice a day on Fridays already, 9 a.m. and noon, so it's enough. What happened today? He's not allowed to go on vacation.

I know, he's on vacation, and, you know, I'm hoping you know, doesn't go the way of Rand and Mario. Maricio, go ahead, man. Hey, good morning, Scott. Yeah, just briefly, I think the level that a lot of people are looking at from a technical perspective, and especially some of the smartest technical investors I follow, they are looking for a weekly close over 75, which we have not yet had in, I believe, since the February 6th down or drop.

it does look like we're going to get that this weekend at least as of right now so I think that is the breakout signal that that he was looking for a particular John who I'm referring to he was looking for a weekly close over 75, weekly close under 65 was a breakdown so this is pretty much along the lines of what you just said

I'm really hoping we closed this week on Sunday over 75 yeah I think that that is the area for sure and looks like it could happen. So I think generally good news. I think also that this has been very much a hated rally. If you look at perps positioning and funding rates, we rarely see price push up this much and shorts continuing to pile in and giving more kind of fuel for a squeeze to the upside. So a lot of reason I think to be optimistic at least for Bitcoin to start trading in the 80s. And I guess right now we live in a world where you can only be concerned with what's going to happen tomorrow or a week later because you never know what truth or geopolitical events is going to come

come next. It's been a lot harder for people, I think, to take a long-term frame if they're actually trying to trade things and take a look. I mean, there's a lot of other topics actually that I think are much more interesting than price right now. I mean, this week has been bananas at the very least, obviously with World Liberty Financial and Justin Sun. I mean, I think we talked about that on Wednesday we've had a massive flow in-streak flow inflow streak here from the bitcoin and other spot ETSs we have prediction markets just insanity I know that that's not necessarily a crypto story but it's crazy and then of course I think you know and Marisa I know we're going to get into this at about 1045 a lot more so maybe I'll save it but the hacks that have been happening and then of course

still, you know, Coinbase dropping their quantum thesis. So I don't know exactly what direction to go in here. Actually, this is one we didn't discuss here. So I want to talk about this. The admiral who went on the floor of Congress and said that Bitcoin is a national security tool that the United States military is running a Bitcoin node monitoring the situation, so to speak, and that it's not a matter of holding the asset or investing in the asset, but that they're looking at it for a way to secure networks and use proof of work.

I thought that was just an astounding, astounding clip. Go ahead, David. I'm glad to hear that we now have boots on the ground in Bitcoin. That's right. Especially since the CIA created Bitcoin, so that's actually funny. No. Soon we're going to have the big red Bitcoin as opposed to the big red one. Well, if you watch Finding Satoshi, you now know that it was Hal Philly and Lentassman. Okay, Ryan, go ahead.

Yeah, actually using, so on this note, what Bitcoin shot 256 mining is really, really good for is proof of work. Believe it or not, we've been talking about proof of work for years. But what that means is it's proof of difficulty put into a specific piece of information. So if the military takes a document, for example, and they hash it and they put a ton of work into hashing a document, they could pair a document with a multimillion dollar hash and say, this is the authenticity of this document. And then no one's going to spoof that hash unless they want to put in that amount of work to prove it. So the Bitcoin Mining Network actually has a lot of uses around putting value.

into information. That'd be really curious where they go with it all. Do you think that's the key use case that they're looking at? I mean, obviously there's also that it's, there's no single point of failure, right? So you kind of have a decentralized system for verifying things if centralized systems go down. There is the logistics aspect of blockchain. So the Army right now has a cyber research grant out for a blockchain system. and they already have blockchain systems in place.

So they're just looking to interoperate across different departments. The interesting thing, though, is with AI, everything can be spoofed, everything can be faked. So everybody's looking at how do you prove that something is AI? And what's interesting is proof of work actually puts a value behind data. So there is a way of using Shaw-2-F2Defi. and old miners to put value on content. And therefore, it's just not like one-off cheap. It's the equivalent of if it costs you a million dollars every time to send an email,

then you're not going to get any spam because every email is going to be considered incredibly valuable. And the same thing is going to happen with content and data, probably starting with very high-value data, is they can show that AI didn't spoof those pictures. I didn't spooge with that video because it's paired with such an expensive hash. So interesting to me. I mean, do you think that there was any single, do you think they've been doing this for a long time? I mean, obviously we had Jason Lowry in Soft War, right?

And it's pretty clear that the guy read the book and understands exactly the implications of that. I mean, Ryan, do you think this is a new project? I guess it's hard to know. it's hard to know because a lot of unless you're like really really in the military groups it's hard to know like how long the stuff's been about but i'm pretty confident since 2013 they've been playing around with everything from um you know bitcoin forks to different uh you know closed federated networks um they never move quickly so the fact that they do have a logistic blockchain in place already means that they've spent the last 10 years working on it. And then the fact that they're actually actively giving out grants too small and medium-sized businesses to research the topic even further means that they're very concerned about AI. They're very concerned about data security and data immutability, the idea that you can't

go back and change the record. I mean, that's what blockchain is. amazing at is it propagates an immutable ledger. So that's exactly where military. That's exactly where government's going to go because we have too many people tampering with the data. We have too many people faking numbers. I mean, look at our grants program across this country.

If we move that onto blockchain and we had an actual provable ledger of where the money went and how it was used, I mean, it would cut down so much fraud. And some of that, some of that, I mean, not to like, be devil's advocate, but some of that could also be done on proof of stake networks that were cheaper, right? I mean, maybe there can be levels to it where the most sensitive and the information that requires verification the most, obviously, is done with proof of work, but a blockchain itself could be a better ledger for a lot of these other lesser use cases that are still relatively tamper-proof, right? Absolutely, yeah. General purpose information is fantastic

to be tracked on proof of stake because it is incredibly cheap to do so, especially in a federated way. Proof of work is really, really valuable for very high-valued information. So information that has to be interoperable between untrusted parties, that is incredibly valuable. That's where proof of work shines. Anyone else thoughts on this specific topic? I find it fascinating. But way over my head, so I'm glad you're here, Ryan.

I mean, I'd geek out about this stuff. Carlo, I have a question for you, moving on topics. Did you see this Morgan Stanley news today? No, I was doing my show this morning. Okay, so I'm going to read you the story because I find this one fascinating and once again need to use you for fodder for opinions to steal them for myself. Morgan Stanley is positioning itself as the reserve manager for the stable coin industry. The Wall Street Giant has announced a fund build specifically for stable coin issuers. Here's what it does and what it means for the markets. So if you break this down, Morgan Stanley is effectively creating something called the Stablecoin Reserves portfolio,

where they're offering to custody, manage treasury, redemptions, and issuance of stable coins for companies. So think of it as if USDC or USDT gives up all of the back end of doing it, or more specifically, probably, if someone wants to launch a new stable coin, you now have Morgan Stanley behind you handling everything. Give me your first take on that. Why do we need this? Well, I guess because we don't. We don't. But if you're an institution and want to issue, I guess, a stable coin,

maybe you trust Morgan Stanley more than staffing up yourself to maintain, you know, for the fiduciary responsibility and duties of managing the back end. And that's because Morgan Stanley has tons of experience in working with blockchain technology. Just being a cynic here. Oh, I'm not agreeing or disagreeing. I agree with that. But I think that, you know, if you're a big bank and you want to launch a stable coin, you might trust them. Look, I think my initial reaction is, I think it's predictable because it's kind of a repeat of the last cycle. Whenever we start to inch up into what I think we're inching up to into, which is the bull run, the hype cycle for

digital assets, I think everybody wants to jump in with the new. shiny object and they all want to create a technology layer and exploit this stuff for their own economic benefit. Is this necessary to issue a stable coin? No, but are they going to try to capitalize on that and use their institutional record and background to sort of give them a credibility indicator here? I mean, really? I don't know. I mean, I'd love to see what their institutional backing is for this, who their comms team is, who their developer team is, and why this is a better, and again, this is just off the top of my head, why this is better or why you even need this.

Because they're Morgan Stanley. Everybody trusts. Oh, shit. Okay. Morgan. Everybody trusts the Morgan. J.P. Morgan Stanley. It's one company.

Go ahead, Jamie. Yeah. Listen, I think this is like kind of everything you touched on earlier in your earlier show, by the way, you did a great job. And what we're talking about today, all of this stuff to me is shaping the narratives, right? It's like public fear, you know, stable coins, like you're trying to drive sentiment and customer behavior toward traditional banks. I mean, this seems like at least, I don't know, predict your markets, like the chasing the quick memes, the defy getting hammered. Like, doesn't it seem like that this is the narrative that's happening that's being shaped?

They're just trying to drive sentiment toward them back toward the quote unquote safe play with the traditional banks. Scott? Yeah. Yeah, I agree with that. Is this like an alternative to STRC where you're basically getting a T-Bill yield on your stable coins if you park them with Morgan Stanley? I don't think so. The way I'm reading it is they're actually the plumbing. Like they're going to hand, and I think that they think by gathering them all collectively, it'll be more liquid. It's saying that they're going to be able to offer, you know, faster redemption and issuance and liquidity. I mean, they, just basically want to be the custodian and I think the like kind of wealth manager manager on the treasury

from what I'm reading. I think they're going to have major competition from Coinbase on this because Coinbase launched their own branded stable coin infrastructure and launch pad. And obviously they have a lot more experience in doing this stuff. So I'll be curious to see how they penetrate the market with this idea. Right. Yeah, I think when they're looking at the landscape, it's, they're realizing that traditional banking just is not, I guess they're not. You can't say traditional banks are fucked. Yeah, basically. So they're looking at how do we help them pass the buck?

How do we help them like offload risk? Because that's really like this country is amazing for creating systems on top of systems to allow someone else say, oh, it wasn't my fault. So if Morgan Stanley gets to set up shop and say, oh, All traditional banks come to us. You don't want to trust Coinbase. That's the D-Gen, like, consumer product. Come trust a, you know, an institutional product.

And they want to set themselves up with Chase and all the other banks. And they're just trying to do another traditional bank play. As you're describing that, Ryan, I'm sorry, but I cannot help but seeing Dr. Evil in my head with his hands waving. Come here. Come here, Scott. I'm actually really confused as I'm reading this because they're calling it a fund, which has a MSNX. That's why I thought it's something similar to STRC. Yeah, maybe it is a high yield play.

We are pleased to deliver a new investment solution to the marketplace that seeks to address the needs of stable coin issuers. A significant increase in stable coin issuers as well as the growing number of assets held in stable coins represents an evolving portion of the marketplace that is ripe. for future growth. This is so unclear. They kind of want to be the bank grade vault for circle and tether and other stable coin issuers, it sounds like. Right, but who can buy this fund? Like, do I just go buy MS, what I say, MSNXX, and I participate in, like, as if I was buying a security and the performance of stable coins, the yield? Like an SCRC, like you said, it's really confusing. I've read the article now twice.

I'm not sure. I think they're trying to trade a competitor to Coinbase for a way of getting on and off the banking rails and probably trying to gear it more towards institutions. Yeah, I mean, it's clearly for Stigate coin issuers, right? It's clearly for stable coin issuers. They're going to park their one-to-one backed reserves here. That's what I'm getting.

And doesn't that invite a... a potential contagion effect, you would probably be smarter if you're a stable coin issuer. And I think Tether's already doing this, Jamie, to spread your risk across multiple layers than entrusting it all with one. I think that invites a potential problem. Yeah, I'm finding this really confusing. I'm trying to learn from chat TPC while we're talking. It's very hard.

I got a take, if I could. it's a continuation from our conversation on Wednesday. Go ahead. You can run the show for the next three to four minutes. Oh, lovely. Okay. First of all, everybody goes down with power. It's in my pinned profile. So I put out a piece this morning which talks about the slow cop and the fast cop. And it essentially is discussing how tether and circle respond to requests to freeze and flag wallets. and my thinking on this has evolved somewhat after looking closely at Tether's recent announcement of what they did with those Tron tokens. Tether is more nimble and more like banks when it comes

to freeze mechanisms. They'll do it on notification from a quote credible source like law enforcement. Circle is taking a very more cautious approach where as I characterize them as the slow cop on the beat where they need actual legal a mandate. a legal mandate to do it. And obviously Circle has been sued in a class action lawsuit. Tether is being much more nimble. And the thesis of my pieces that I think the scammers are seeing this. And I think the scammers are looking at USC as being slower to respond to freezes and freeze requests.

And possibly that may make USTC a more preferable token to move on. and I think protocols are looking more at USDT and their more nimble faster response mechanism as being the better play when it comes to how to respond after the fact to a hack and an exploit. So this notion of a fast cop and a slow cop, I don't think either one of them is ignoring the law.

They're just kind of interpreting it differently and there's a huge gap in the Genius Act as to exactly what these stable coin issuers need to do under the hood when it comes to the freeze mechanism because all the Genius Act says is they have to have these freeze and these other security protocols in place, but it doesn't go into the legal mechanics of how you do this. And this is something that I think is pretty interesting. Carlo, call on people. Just kidding. Brian. I say, can we all take a step back and remember a stable coin is it's nothing more than a synthetic fiat currency that's sitting on somebody else's

chain right and you still need Ethereum, you still need Bitcoin, you still need Solana, you still need the main tokens to make these chains run. Just blowing out stable coins and having everyone just move into a synthetic dollar, it really doesn't change anything. It's just moving old rails onto a new system. And it's, it's kind of worthless long run, because it's the same inflationary currency that we're all trying to get away from. So it's, it's just crazy to me that so much hype in, in the crypto space is around, you know, it's like, it's like newspapers on the internet. It's like, well, I don't know, I'm sorry, newspapers are antiquated.

Why are we celebrating the fact that, oh, now we have an online newspaper publisher. And it's just, I think, like, stablecoins are the most boring part of this entire ecosystem. And yet, everyone seems to be so excited about it. Hey, hey, hey, come on, man. You're harsh and his mellow, bro. I just say there's so many cooler things happening in, you know, crypto than stable coins. And I don't know. It's just, you know, doing stable coin roll-ups and stable coin platforms and everyone in their mom is going to issue a stable coin.

It's just, it's still tied to this incredibly inflationary asset that, you know, I mean, I don't know. I thought the whole point of this was to find our way out of the dollar, not just bringing the dollar into our house and trying to safeguard it. I got a take on that, Ryan. And it's kind of why I kind of developed that my book, Make Your Wallet, Your Bank, and the whole premise of it is because I think the consumer still is largely dependent, and the merchants are still largely dependent on a fiat system. And the digital dollar is the next iteration of the fiat system,

but it doesn't solve the debasement problem. It doesn't solve all the issues that carry over from the old fiat system. So I think the play for the consumer and the merchant is to use the stable coin infrastructure as a way to get out of the bank fee extraction, toll booth economy, as I describe it, save on moving your own money, move your own money on your own terms, but then you've got to have a secondary asset strategy where you move those savings into something that I think is the answer to the debasement problem. I don't care what it is.

If it's gold, if it's Bitcoin, whatever you think your two-asset strategy should be, I think there are so many interesting two-asset strategies like Bitcoin in blockchain technology, but you still are not going to get to the point where the consumer is going to be buying and transacting goods in Bitcoin because we're still locked into the Fiat world. I mean, yes, and it just feels like a huge Trojan force of, let's get stable coin into all these chains and all these areas. And then government sets up a little bit straighter and says, but how do we do KYCAML on tax collection?

Okay. There's no question about it. They will do all of that because this is the most centralized thing you're going to have on chain. But I think in another perspective, it's the Trojan horse that gets people digital wallets and gets them comfortable playing in blockchain. And hopefully, once they get, comfortable moving digital dollars, they then start to explore things like Ethereum and Solana

and Bitcoin because they're already comfortable with the notion of custodying their own digital dollar and moving it on a blockchain. I think that's the Trojan horse, hopefully that on boards the masses. We just hope ours is bigger than theirs, huh? Yeah, seriously. Exactly. Maricio, go ahead. And then actually, I want to chat with you. So go ahead, Marycy. Yeah, no, just on the topic of stable coins, I think the, I understand the perspective of the comments that have been mentioned, and I agree in a Western context, it's sort of the least revolutionary instrument in this whole thing or in this whole stack. But I think I grew up in Venezuela, and I've lived through, for seven billion people

around the world that have no property rights, a property right was often seen as that that greenback, right? Like having cash in your hand in a place like Venezuela, is your only property rights. Nothing else has property rights. And with stable coins, we've created permissionless dollars. I know they're not permissionless because it can get frozen, et cetera, but for the average person in Guatemala, Venezuela, Zimbabwe, they're not really thinking about who's going to freeze my tether, right? They're thinking about, I don't want my government to have access to my bank account. And I don't understand these other assets that are not dollars. They're way too volatile. And other people have gotten scams. So this USDT thing seems pretty safe. Everybody

uses it. And I think the excitement in the Western world is because they are seeing stable coins as a way of basically vampire attacking the Euro dollar market. And there's a lot of banks around the world in non-U.S. countries that let you hold dollars. Those dollars are not guaranteed by FDIC. They're not buying treasuries with them. You're much better off holding stable coins. So I think we are going to see a great adoption of stable coins, just not in the U.S. first. But that's sort of way, the other side of that coin. Yeah, well, I got to say that's actually one of the best responses I've heard to the reasoning for it.

And a lot of times, like, it's so focused on North American mindset. I forget about that as a great point. So, Maricio, I invited you because I wanted to ask you about, obviously, the defy half, everything happening there and how you manage or how, I guess, that can be compared to what you guys do at Lennon. We were supposed to do it from at 11. And, you know, I'm on a little shorter time frame. So I want to jump right in with you here because, I mean, this, I'd never even heard of Kelp Dow.

And now apparently Kelp is like, has caused contagion risk through all of DFI. And really, I think, exposed a lot of cracks. And now we're seeing proposals to, I mean, for haircuts and socializing the losses across DFI United. Like, I mean, this literally sounds like 2008 bailouts. So, like, I guess from where you sit, like, as running a regulated. lender, what did you actually just watch happen? Because I'm having, I've been unpacking this on a daily basis and every day it blows my mind more. Yeah. No, thanks, Scott. So I, I, obviously, I, we operate a Bitcoin, a regulated Bitcoin back lending business and we look at Bitcoin and crypto credit

markets obsessively, right? It is, it is what we do for a living. And if you look at the crypto or dollar, crypto dollar credit curve, if you want to call it that, uh, we're, uh, we're call it that. Before the weekend, before last weekend, before this hack happened, you had the Federal Reserve earning 3.64%. You had Lenin Bonds, which are investment grade rated by S&P, the senior tranche of that at 6.84%. You had strategy, a regulated business, taking perpetual prefers at 11.5% APR. You have U.S. credit cards at 21% with 4% default, but you had AVE deposits at 2.3 percent. That's significantly less than the Treasury overnight rate. So at its face value, this would seem as the market is pricing a sub 10-year-old permissionless contract as lower

credit risk than the Federal Reserve. So obviously, if you look at that intuitively, there's an outlier there. Something does not add up, right? And others like Luca Persfari, and I'm not sure if anyone else is on this chat, but there have been people making the case that defy rates and stable coins should carry a higher risk premium because of the potential risk of loss. It seems like they were treating these deposits into AVE as if they were risk-free. And even the Central Bank of Canada came out with a report, I want to say two weeks ago, boasting that AVE had zero percent non-performing loans and that, therefore it was a very efficient way of managing loans. The problem is that over the weekend,

we had a big hack that exposed massive vulnerabilities in that model and has caused the rates to basically become repriced. And what I think is happening is you're seeing, effectively what you're seeing is a repricing of defy risk, right? Like investors, especially investors managing size, should know. not be accepting less than the risk-free rate from a Federal Reserve who can literally print the dollars to pay you back, that should not be, the defa should not be less risk than that, right? It doesn't really make sense. Not from a credit risk perspective, right? Like, if you're paying that premium, it's not because you think there's a lower chance of losses. So it has been

demonstrated now that there is no risk-free in defy. Risk-free defy does not exist. Inherently, it has risk. Neither does decentralization, right? Well, I mean, I would argue that some of the safeguards that you would need to protect people participating in these pools, like panic buttons, etc., are incredibly centralized measures, right? And so there shouldn't be necessarily, that is the value proposition of defy, right?

The value proposition of defy is that it's a permission list. The challenge, and I think what investors realized during this exploit, is that defy has no bankruptcy rails. There's no court. There's no recovery. Everybody that got out of Ave first took the full money out. Everybody that's still at Ave is waiting to see how much of the law. losses are going to get pinned to them. And so if you're an institutional investor and you can estimate the potential of a loss, but you cannot estimate how those losses are going to be attributed,

you cannot determine your exposure. And so what I expect to happen is you're going to see over time it's happening right now, but this is going to continue more so after this unravels. I expect the CDI5 rates to move higher to compensate investors for the risk. You obviously built that in the opposite way, right? So fully collateralized, regulated group of reserves, right? So, I mean, when you see everybody chasing all this yield, re-hypothecation, these collapses, I mean, how do you decide that you're going to, I guess, take the opposite approach? Well, for us, it's, I think over time, when you try to, you know, promise things that you cannot keep

And when you're trying to offer stability in a world that's entirely programmatic, you're not really going to have, it's going to be very challenging. Like, our view at Leden was always that if we wanted to get the cheapest cost of capital to disperse to clients in Bitcoin back loans, we had to go the regulated route. The regulated entities like pension funds, insurance companies, banks, etc., they are the ones that historically have the cheapest cost of capital, which makes the most sense for you to borrow from and lend to other people. So an example of that is our ABS bond,

which has did the first Bitcoin ABS bond, rated by S&P. He got an investment grade rating by S&P. It was two times, more than two times oversubscribed, and that marks the first time a Bitcoin bond has ever been issued in the ABS market, and we can continue to tap into that market as our business grows. In fact, the secondary market trades on our bond have actually started to come in lower than where the bond was priced. And I think that that's going to continue.

And over time, I would expect that the cheapest cost of capital comes from institutional regulated markets, which offer investors the most assurances and guarantees. That's not to say DFI is going to go away. I think unregulated markets have always existed for every asset in every period of history. They've just never been cheaper than the regulated options, that they've always carried a risk premium. And this is true on-chain or off-chain? Truly interesting. So obviously, huge news,

and I think we talked about before, the rating from S&P, as you says, kind of first time it's ever happened. What would it take, I don't know if they would want it, but what would it take for like an AVE to earn the same rating, or is it literally structurally impossible because of how DFI is built? Well, my understanding,

is it's structurally impossible because you would have to, a lot of the exercise that S&P does is estimating what are the potential risks of loss in the instrument. And they run the instrument through all sorts of assumptions. And more importantly, you have to estimate the loss, but you also then have to estimate how that loss will be attributed, right? And so it'll go from the first loss, let an equity buffer, then it goes to the junior tranche, and then it goes to the senior tranche.

So you could potentially also do a tranching within Defi. The problem is you'll never going to know who's in or who's out and who's leaving first before or others. So you can't really claw it back. For example, right now in Ave, there might have been people that took billions of dollars out of the protocol before the losses were attributed. Nobody knows who these people are. So now the people that are going to pay the losses are the poor souls that didn't get out in time, right?

In centralized finance, this isn't allowed. If you got out before others, you get clawed back and you get sued and you get the money back, right? Like that happens to centralized finance. That cannot happen in defy, which makes it really, really challenging for you to assess what your exposure ultimately will be. It's very much survival of the fittest, right? And so that's great for some use cases, but it's not great. It's actually terrible for institutions. I mean, you also, I would say as an investor in D5 was proven this week that you don't even know where your risk is.

Because if you're in AVE, like AVE's smart contract worked, right? The platform worked perfectly. It's that somebody basically turned to the debt toxic. Yes. That's where the contagion comes from. I think that's what's so new and shy. this time. It's not like someone just hacked a platform and went and took and sold the money. They went on to Ave and used a functioning system to turn that debt toxic and take a loan

against it and that debt is accepted everywhere. Yes. And again, these are some of the issues with this whole compostability feature that DFI has. In addition to that, you have a lot of on-chain rehypification, which is exactly what looping is. You have people depositing, there's, you know, stable coins into a protocol. They're getting a token receipt. They're putting it into another protocol. They're borrowing another stable coin. You know, even to get to the point where the, the kelp Dow was even used, that was used largely

by recursive looping and yield strategies. These weren't necessarily people taking out long as do real things in the world. They were just, you know, trying to juice their yield. And that is another problem in defy. There's so much on-chain re-hypification, you don't really know what's real. And I expect as the AVE liquidations and losses get attributed and more capital is allowed to exit, you're going to continue to see knock-on effects on other protocols. I know this is not necessarily an AVE issue.

This is a Kelp-Dao issue. But as we can see, everything is connected. And AVE was very much as a central piece of D-Fi was connected to a lot of other protocols. It feels like we just built a much shittier version of the system that we were supposed to be fixing. Well, it's different. It's different. And I'm saying it's a permissionless version of the system. And I think a permissionless version of the system has a lot of benefits, but it also has a lot of drawbacks. And a permissionless system, again, just using my anecdotal experience in Venezuela, like when you're buying and selling dollars in the parallel market, because the government will sell them to you. Right. If you're a small player, you know, you're making small transactions. It's not that big of a problem for you. You know, it's a couple thousand bucks. If somebody, you know, scams you, whatever, it's a couple grand. And this happens. But if you're a company and you're trying to pay a supplier and that parallel market trade is going to be, you know, 100, 250K, it's a very different ballgame. So the size and the scale of who that market appeals to changes, whether it's regular.

or unregulated. And, I mean, kind of alluded to this. I mean, we obviously saw Celsius and Luna and Genesis. I mean, I guess more specifically, Celsius block by Genesis, a Voyager. They were at least, I guess, for better, for worse, allowed to declare bankruptcy. Like, D5, I think we don't talk about, there's literally no process for this, right? I mean. 100%.

So we actually helped a lot of. of the Celsius borrowers refinanced their loans into Latin. So I got very close to the people in that bankruptcy and I went through the process. Listen, it was a grueling process. It was a very painful experience for everybody involved. However, those clients got Bitcoin back. Okay, the Block 5 bankruptcy clients got assets back. The FDX bankruptcy clients also got assets back. We can sit here and debate all day long about, is it enough? Should have gotten everything? What asset, you know, what was it denominated in?

That's fine. But the point is, they got assets back and somebody faced a judge and somebody went to jail. And that is a bit of a ceremonial process to get closure so that we can move on and feel like justice has been made. That doesn't exist here. I would argue that, you know, you had potentially a North Korean attack. come in, drain the protocol, and you now have all these VC-funded treasury stepping up to basically fill the hole. So it's really, I don't know, I mean, maybe I'm missing something, but it feels like we're just transferring VC tokens to the attackers. And so that, that I think is very interesting

as well. Yeah, and retail's like paying the fees to do it. Yeah. So I think, listen, like, obviously there will be, they will always be regulated and on regulated options. One of the things I find a bit concerning, frankly, is there's a lot of regulated slash centralized or retail companies that are trying to gain speed to market, and rather than building centralized loan solutions or centralized deal solutions, they're just connecting into these pools. And many times the people using these platforms have no idea they're using DFI. And if this continues, we're a few hacks away from Janet in, you know, Michigan not being able to withdraw her dollars because there was an exploit

in some other smoking chicken fish token, right? And so I see a problem with people disclosing that risks that these products carry and being upfront about how they're bringing them to market. Man, you have a lot to think about here. What do you think happens with Defi after this? I mean, just kind of as a final question here. I mean, you know, like, do you think does, do you think the rates snap back. I mean, what I do find interesting is that this one was obviously different, maybe just as I'm thinking through this, because previous, we've had massive hacks all over defy and elsewhere, right? I mean, exchange hacks. I don't think we ever saw this level of capital flight and reaction like we did to this. Like, to me, it's just like if you're looking at it from

the outside ends, like Kelp Dow is, first of all, I don't know how they would have hundreds of millions of dollars on a platform I've never heard of with a name like Kelp Dow and who trusts that. but the amount of capital flight from very longstanding trusted platforms is unprecedented from what I've seen before. Maybe I'm wrong, but. No, I think you're right. And I think there's two reasons for one main reason for that. And it is that AVE was the sort of, Avey was at the core of this idea that defy can be done responsibly slash safely and that you can, basically put in all the bells and whistles to prevent defaults.

And you go as far as the Central Bank of Canada was referencing Avese 0% non-performing loans the week before the hack as their support for saying that defy is incredibly promising. A lot of banks, both central banks and private banks, are going to have to start walking back their excitement, I think, after seeing the risks and after the risks being demonstrated, My thinking is that the result of all of this should be, if you think about it intuitively, a repricing of risk in DFI. So yes, you will still be able to take a loan in a permissionless manner. That loan is not going to cost you 3%. That loan is going to cost you 15% to 16%. Right? That's probably where it's going to go. If it doesn't, then we know that the premium or the discounts

in Defi are not attributed to the potential credit loss. So if you're paying a premium on a product that has much higher chances of a loss than another product, then you're paying a premium for another reason. And that reason might be anonymity, that reason might be that you don't have to report. It might be another reason, but it certainly won't be because there's a lower chance of you losing your money. Fascinating. I know we got to run, but anything else I missed here?

No, no, I think this covers as well. Breaking news. Oh, no. DOJ announced they're closing their investigation in Jay Powell. You mean he's not the man behind the budgeting of a building? Well, now we get lower interest rates because Kevin Warsh is in. So Bitcoin goes up. Money machine goes br-dr.

But the investigation to Jay Powell was around the building, right? Or there another investigation? Yeah. Yeah, it was around the building budget. So stupid. As if Jerome Powell was like meeting with the architect and the plumbers. That was, although it did give us the single greatest like memeable clip in history with him and Trump and the hard hats. This all could have been avoided if Trump would have been in charge of that project as the G.C.

Obviously. It would have been, it would have been beautiful, I'm sure. The best, the beautiful. most beautiful asbestos. All right, guys. So much winning. I got it. All right.

I'm going to win right now. I've got a bill. I'm five. Go get them, Scott. Thanks, guys. I will see you. We'll see you all on Monday. Have a good one.

Bye.