The Wolf Of All Streets - CBDCs And The Future Of Crypto - Mike Novogratz, Chris Giancarlo & More

Episode Date: April 11, 2023

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Mike, I want to go ahead and start. So clearly, a good segue from Chairman Gensler. We've seen a significant uptick in regulation by enforcement, obviously increased rhetoric from government officials. The Treasury called crypto a threat to national security last week. And even the IMF today was calling for nations to come together to protect consumers. But Bitcoin's casually pushed above 30,000. Why do you think that Bitcoin is ignoring all of this bad news and continues to push upward? I think, and I said this this morning on CNBC, that the bulk of the buying in this rally up has come from the crypto community. People that had sold before, new people in the crypto community, retail driven, Asia driven. And what started this whole movement

was a breakdown of trust with central authority, right, with banks, with central banks, with governments. And so when you see what seems to be or at least feels to us as an unfair application of enforcement, when you see banks like Silicon Valley Bank here today gone tomorrow, there's so many things that play into that classic original crypto narrative. It's in lots of ways galvanized crypto. I mean, that and there's a macro backdrop, right? We are going to have a credit crunch in America that's going to be pretty severe. That's in the cards. And so the Fed will be cutting rates by the third quarter. And, you know, you're seeing gold and Bitcoin and, you know, and the dollar all reacting like it smells something. You know, I think gold takes out 2000. Convincingly, it goes to 3000. And,

you know, that's a big move that will correspond with Bitcoin, you know, making a much bigger move than we've seen. But I think that's it. And, and almost, you know, every regulatory push is met with, oh, you got to be kidding, and fighting back harder. Do you think that the industry has the war chest to continue that fight that we're big enough and a meaningful enough sort of constituency to continue that if we continue to see this uptick in enforcement? Well, listen, adoption, you know, broad crypto adoption often accelerates with price, right? The way it works is, you works is you've got your Bitcoin, it's going up, you get so excited, you just start telling your neighbor and your cab driver. And so you're going

to see adoption accelerate with price. And so I think that part will help. I think institutions are going to still go slow. Listen, I had a breakfast with a very senior Democrat last week, and he was like, guys, let's just be clear. Your industry picked or didn't pick but had Sam Bankman Freed as your representative to D.C., to the SEC, to the CFDC, to all the regulators, and he turned out to be a fraud. And everybody had to back away a little bit because they've got political cost to having taken his checks and been supportive. I mean, you think of someone as influential as Maxine Waters, she was 15 photographs with Sam. And so even though she might still like Bitcoin, she's going to have to like it a little quieter until this time heals. And that has given, in lots of ways, a window for the people that don't like crypto, right? For Sherrod Brown, for Elizabeth Warren to raise their voices. For Gary, who seems to be very aligned with Elizabeth Warren. And then kind of the new anti-crypto constituent, I think,

is Treasury, is Yellen and Lowell Brainard over at the White House. And I think a lot of that comes from, listen, when Balaji says, I think crypto is going to a million and screw the banks and screw the dollar, that doesn't help. It might help galvanize the crypto community. But if you're in charge of the dollar, you're saying, hey, some of our smartest guys on the West Coast are now literally unpatriotically claiming for the demise of the dollar and, you know, the demise of our banking system. And so you got to be careful what you cheer for because it has political ramifications. I do think, I always say, I go to bed praying for a good stewardship of our economy because if Bitcoin goes to a million, we're going to lose civil society here.

We don't want to live in a country with Bitcoin at a million in the next six months because it will look really ugly. And, you know, the secretary of treasury and the central bank governor have a really hard job to do with the amount of debt we have. We had this debt orgy for years, and I don't think they're going to be able to land the plane without inflating away a bunch of the debt. That's why I'm long a lot of Bitcoin. But I certainly don't want to have it in an accelerated fashion. It could. I just I don't want it to. And I think that's where Treasury's reticence is coming. And so, again, I think it's really stupid that the government is taking this approach. I think it's short sighted. Every time you put up walls, they don't seem to work. But that's where it's coming from. And our hope really is you've got

Tom Emmer and McHenry on the Republican House side that are digging in and are going to try to at least try to hold the SEC and regulators accountable. That's noise, really. And then we've got the courts, which, for the most part, are nonpartisan, not completely nonpartisan. And you hope, I mean, you know, again, Chris is going to have a far, far better view of this than I will. But like, just reading through what I've learned about Paxos' Wells Notice or claim bases, you know, in the old days, you had a Wells Notice, you were literally out of business and your life was ruined. And now, you know, I take my chances at a casino on those guys winning their cases, or at least selling for something small and moving on. And so I'm a little worried that the first big case that's going to get adjudicated is the Ripple case because that's a little less clear to me on how that's going to go.

So listen, full disclosure, we own, and it's on our balance sheet and disclosed, equity in Ripple the company. And so as much as people think I don't like xrp i'm cheering for ripple to win that case may be loud and clear i want them to win um uh but i worry about that one because we lose that people are going to be oh we're gonna lose all the cases and i think you gotta be very careful that you know each one of these things and you know is taken separately and you and you read the fine the fine print of the ruling. Anyway, I've been talking too long. I'll shut up.

Yeah. Well, Mike, I agree with your point that this is galvanizing the community. Even when I had Saylor on three weeks ago, I asked him the same question about Bitcoin pushing above $30,000. And he said, I would love to say it's mainstream adoption, but it's a bunch of crypto people moving into Bitcoin, which is exactly what you said. As for Balaji's bet, he even came on this show last week and said, I burned a million to tell people that they were printing trillions. So he openly admitted he also didn't expect us to be living in the Mad Max dystopian future in 90 days. But I do want to pivot to Chris because there's a lot to unpack there with what Mike just said, obviously. When you were CFTC commissioner, there was an air of acceptance surrounding crypto. You were affectionately dubbed crypto dad. We had Brian Brooks at the OCC who made a significant push

for institutions to be able to custody crypto assets, obviously for banks to be able to test stable coins as a competitor to SWIFT. Well, we've obviously seen a wholesale reversal in tone. Mike touched on the fact that there's a lot of egg on the faces of legislators and regulators who met with SBF. That could be the reason. Do you see this as a result of all of that contagion in SBF in 2022, or is this simply regime change? What do you make of this complete reversal seemingly in the regulatory approach to crypto. Yeah. You know, I think it was Gandhi who in talking about wholesale societal change said, at first they ignore you, then they ridicule you, then they fight you, and then you win. I think Brian Brooks and I were in Washington from the end of the ignore you to the beginning of the ridicule you phase, but before the wholesale fight you phase. I think we're in the fight you phase right now.

You know, I was at Stanford University last week. I was visiting a financial historian, Neil Ferguson. Many of you know him from his books, The Ascent of Money or The Square and the Tower. His name is spelled N-I-A-L-L, but it's pronounced Neil. And we were talking about his concept, historical concept of networks. What this technology is, it's about financial digital networks. And yet, as a historian, he goes back throughout human history and identifies networks. And he uses the image of the medieval city of Siena that has a large public square. That's the square in this title overseen by a tall tower.

And he uses that as an analogy for hierarchical networks, which have been throughout most of human history. And then the occasional, sorry, I said vertical, I meant vertical networks in the image of the tower and horizontal networks, more democratic, people-driven networks. And whenever there is a technological breakthrough, it often begins as a horizontal popular network, but then evolves into more of a hierarchical structure. What I'm getting at is, I think where we are in the crypto evolution, our traditional financial system is quite hierarchical. And in many ways, what Dodd-Frank was, was the victory of Washington over Wall Street. The belief that hierarchies will allocate capital as opposed to having it more market driven. And the hierarchies that control our financial system now, it's not that they don't understand the power of digital networks, which is what crypto is, they understand

it very, very well. The concern is a loss of that hierarchical control, the control of how capital is allocated to whom, for what purposes and when. And I think the battle we're facing right now is by those hierarchies that presume to have a control over how capital is formed, how capital is allocated. And it's not that they don't understand the power of crypto, they understand it very well and they understand its democratizing function and the taking away of that hierarchical control. And I think that's a lot of what's driving the phase we're in right now. But again, going back to Gandhi, as Gandhi said, eventually, you can't stop this technology.

Eventually the technology will prevail. It will prevail because a lot of the constituents of that hierarchical structures will bring it about. It's not that, you know, JP Morgan may have its CEO say one thing, but the fact of the matter is JP Morgan, banking in New York Mellon, NASDAQ, I mean, all the traditional names are moving into this in a big way. This technology will come and the hierarchies will adjust. But before they adjust, they will fight. And that's what the phase we're in right now. So the pessimistic view then there is that

the current regime is effectively clearing a path for the bigger Wall Street players to control the industry. I don't know if it's as direct as that, but there's no question that the focus of, you know, if we use the Gandhi analogy, we're in the fight stage. The focus of the fight is set against the new entrants. The incumbents are busily working away at this, while in many ways their public announcements are antagonistic, but their actions, their investment is ongoing. And that's fine, because both incumbents and new entrants should be at work. This new technology is something that as a society we should want. This will enable us to break down the silos that exist

in our financial system that are a drag on our economy, that pose costs to those least able to bear it, that are barriers to financial inclusion for many societies. This technology offers the answers to that by moving our financial services, financial system into digital networks with greater efficiency, greater capability. Now, it also has some challenges built into it unquestionably, and we've seen fraudsters take advantage of it. But, you know, fraudsters and money go together, whether it's digital money or analog money. The dollar, in its current form, is the

most used instrument in financial crime in the world, and that doesn't undermine its importance. And similarly, the fact that this is taken advantage of by fraudsters doesn't undermine its potential uh uh ability to transform finance and add efficiency but but until that until that is clear we're in this resistance phase but you know uh i'd like an uh uh service in in leadership positions to a conveyor boat you know, the septuagenarians that are at the head of our institutions, whether they be government or financial, will fall off the conveyor belt by one way or the other, and they'll be replaced by a generation that grew up in a network society, that understand digital networks. And this is more of a cultural thing than anything

else. It's no surprise that the septuagenarians that grew up in a world of branch banking and three-day check settlement and banking hours from nine to five are intimidated by a 365 world that is much more open and inclusive. But they will yield as they always do. You know, Doug Adams, the author of The Hitchhiker's Guide to the Galaxy series of books, one of my favorite, has a quote that I like to use. He said that anything that's invented before you turn 35 is something of a lifelong fascination. It may become the basis of your career. But anything that's invented after you turn 35 is dangerous, suspect, and needs to be repressed. And I think we've got a lot of just generational resistance to this change because for them, hey, there's nothing wrong with branch banking. It works.

I can write my check. I can use my debit card. I can use credit cards. Life is good. Why do we need a new architecture of finance, a digital network based architecture of finance. But for people, you know, that grew up in digital networks, they understand the power of this, and they're not going to turn away from it. You know, what's not going to happen, I can tell you right now, what's not going to happen is young people are not going to come away from all of this enforcement action, all of these publications coming out of the federal government and global

financial bodies saying, beware of crypto. They're not going to say, you know what? My grandparents were right. Branch banking is way cool. I'm going to start writing checks. I'm going to use debit cards. All that old technology is cool again. That's not going to happen. Yeah, and they're certainly not going to buy gold and ETFs, right? And all due respect to Douglas Adams, but all three of us are pretty screwed if the age is 35. I'm 46. Hold on, I identify as Gen Z.

I'd like to make that point for the record. Well, Mike, what do you think here? You obviously, I think you probably straddle both industries pretty well between Wall Street and the crypto industry. Do you think that this is an attempt, you know, either intentional or otherwise to sort of move the industry into the conventional system to move it to the Nasdaqs and Fidelities and JP Morgans of the world? Or do you think that that's just sort of the optics? So here's the depressing piece. I, you know, I've been spending more time with politicians and there are probably 15 politicians between Democrats and Republicans, House and Senate, that care about crypto out of 565. And so we've done a pretty miserable job as an industry of bringing our electeds along. And maybe I'm a little pessimistic.

Maybe it's a little bigger number than that, but it's not a lot. We don't have a lot of champions. And so it's not that people are like, oh, let's kill crypto or not kill crypto. It's just not that important of an issue to a lot of our electeds, right? And now you've got debt ceiling and war in Ukraine and the banking crises. And so it's left this vacuum for Gary and Elizabeth Warren. And Elizabeth Warren cares about it a lot for some reason. It doesn't make any intuitive sense to me. And I'm a, you know, some people would call me progressive.

I'm certainly a center-left Democrat. Her stance doesn't make sense to me. But she is calling the shots in a lot of ways. And so I'm optimistic that with a little bit of work on our side, we do have some champions that we need to support them, that we need to continue to educate people that will at least get a stalemate in the congressional side. And, you know, Gary will be in that job forever. You know, elections change things. People's ambitions change things.

And the courts have a lot to say in this. And so I think kind of our best scenario is a little bit of rope-a-dope for a while. And during that time, really working on trying to build constituency. Listen, do the banks like having the chance to catch up? The banks don't really worry in the short run about Bitcoin and Ethereum. What they worry about is tokenization. And so each of, you know, J.P. Morgan wants to be the tokenization bank. Apollo wants to be the tokenization player. Goldman Sachs. And they have big staffs that are working on this. To be fair, nothing's been tokenized yet.

But the tokenization idea resonates like crazy. Every asset manager we talk to, BlackRock, Invesco, you name them, don't think they can miss out on tokenization. And so that's kind of what's bringing them closer to crypto, not decentralized Bitcoin or Ethereum. And so it's interesting. I do think there's still a lane. I think companies like Coinbase and the retail side and companies like our own Galaxy are really important because we're the on-ramps to bring people into the system. And so you can't just have a completely decentralized system. You need ways to both educate people and bring people in. It certainly has made my business harder,

and we're moving more and more people offshore. The Hong Kong regulatory environment is getting more friendly. Abu Dhabi, France, lots of places, right? The UK. And so I do think it's a competitive disadvantage for the US soon enough. But you can't give up on the US because we really do need the US to come up with some rational policies. And listen, they do have the power to make your life miserable. I mean, you know, Chad Pasquarello at Paxos had a, you know, DFS approved, you know, he's as compliant as anyone I know. And next thing you know, he gets a Wells notice out of nowhere. Not pleasant. And so, you know, you can't live

without the US, especially if you're USbased. And so it's certainly frustrating. And I don't think the banks are, like, lobbying like crazy. But they certainly, when asked, you know, Jamie Dimon, him all the time, he's like, well, I have blockchain, sorry, but Bitcoin, I don't get it. It's like, listen, there are 160 million people that have already decided to take some of their hard-earned wealth and store it in this technology run by a community. And that includes some of the smartest investors I've ever met, Stan Druckenmiller, Paul Jones, Abby Johnson, Jeff Yass from Susquehanna, like world-class investors. So I always turn the question around. I'd like to ask Elizabeth Warren, though she won't meet with me. It's like, Elizabeth, you're so sure of yourself. Do you think all these people are stupid? Do you think I'm stupid because I trust this

community? Mike, let me take a shot at that maybe I could, because I was talking before about this notion of hierarchical structures. I think the barrier for some of these people who are clearly not stupid, I include Elizabeth Warren in that, is that we've moved away from the sort of Milton Friedman belief of 30 years ago that the best allocator of capital is the market itself, not because it's always right, but because it's more democratic, toward a world where I think there's a growing sense

that the market has failed in certainly certain communities, and therefore we need a political input into the allocation of capital. And I think that this view, this anti-crypto army view is that crypto takes power away from those hierarchies in terms of allocating capital and makes it more democratic. And I think that's where the resistance is. There's a feeling that they need to remain arbiters of how capital is allocated, at least broadly speaking. And I think crypto threatens that. Trey Lockerbie

But how does an anti-crypto army at all appeal to a progressive base? I'm with Mike there that I certainly don't understand it at all. I can certainly understand her push for, I guess, regulation and control, but to go outwardly and outrightly anti-crypto doesn't seem to appeal to anyone. I don't think there's a voter base that is voting on hating crypto. There's certainly a voter base that's voting on loving it. So it's just very confusing to me. And obviously, anyone who's progressive should support a money that supports people who are underbanked or unbanked. Or a technology that allows artists to monetize their creativity through, you know, NFTs and so many other ways, musicians. The one thing that I think is clear, though, is Elizabeth Warren likes to harp on all these consumers that have lost their money. The government has done a terrible job protecting the consumer, but our industry has also done a horrible job protecting the consumer, right? We've not had proper disclosure. And I'm sure like when I think of BlockFi or Celsius or Voyager, my guess is if you read through their disclosures, they didn't do anything that they didn't say they were allowed to do. But if you polled 400 of their retail investors, I'm doubting those investors thought they were making a, you know, an unsecured loan to a 50 times levered asset liability mismatched hedge fund.

Right. They thought they were depositing their money like they were depositing it in a bank. uh and so you know kind of shame on us as an industry for the amount of stupidity bad risk management at times fraud greed that that caused so much dislocation but quite frankly shame on like the sec knew about all that stuff and didn't do anything uh the sec allowed a you know a grayscale etf knowing that it could that it was trading at a 30% premium and then a 30% discount and hedge funds were arbitraging the ETF and wouldn't allow – if they had allowed a normal ETF early on, grayscale would have never grown to those giant heights. And so there's dirt on both sets of hands. There's dirt on our community for behaving like, you know, imbeciles. But there's also dirt on the regulators for, you know, not protecting the consumer one bit.

And so it's a bit rich that Elizabeth Warren loves to point and others love to point to, ah, they screwed the consumer. Your job, if you're the SEC, is to protect the consumer. And so that has been frustrating. Put in a plug for what we did at the CFTC, because what we decided was not to push the application away to create a Bitcoin future, but to engage with it, to adapt our 90-year-old rule set to accommodate it and allow the launch of the Bitcoin futures market within the regulated CFTC environment. And five years later, the proof is in the pudding. That marketplace is well-regulated. It's transparent. It's liquid. It's evolved to new products that meet customer demand. It's worked very, very well. And it's right here in the United States is the leading futures market for Bitcoin and Ethereum operating under regulatory supervision with very little, virtually no fraud manipulation that's operating as it was intended as as we in the regulatory state um uh formed it to do so it's it's funny it's a it's a little uh noted success story but it does prove

that regulators if they're willing to engage with crypto willing to adapt old rule sets to accommodate it can actually bring to market a very successful product that takes consumer interests and investor concerns into account. And bravo to that. Absolutely. And Mike, then to your point about Grayscale, you sort of talked about how a lot of this will be litigated and we'll see what the judicial system has to say about it. It actually seems that in their case, Grayscale has been getting somewhat favorable opinions or at least commentary from the courts. And I think it's an important reminder that we give often here that just because a regulator says it's true doesn't mean it is until the legal system says so. I literally said that on TV this morning. I was like, come on. You can approve a futures ETF but not a cash ETF. Like it just

makes like zero common sense. And I think that's what the judge at least hinted to. Like, it was like, what are you guys talking about? Yeah. But interestingly, there's some fear that if Grayscale wins, that actually it could cause pushback against the futures ETF rather than a spot ETF approval, which to me seems utterly upside down. Yeah. You know, the other thing that I was pushing on Democrats and pre-FTX, they all got it. And now they're kind of stuck and scared a little bit, is that being anti-Bitcoin, being anti-crypto is really not smart from a I want to get elected perspective, right? I don't know, you tell me what the number is, 40 million or 60 million, but some large amount of Americans have a crypto wallet and own some crypto. And a decent portion of them are rabid degen crypto single issue voters. Right. I talked to a lifelong

Democrat this morning who is wealthier than than most people are lucky enough to be, who said, that's it. I'm only supporting Republicans and I'll and I'll make big donations to the ACLU and and Planned Parenthood to offset it. But he was just like, it's not good politics to be anti something that really should be a neutral. It's a technology. It's like I'm anti Internet. And so I think and the Democrats all got that pre-Sam. And so I'm hoping this is we're still just in that, you know, I guess that echo of FTX that fades with time. And maybe after this, you know, this this cycle, this election cycle kind of rationality comes back. Yeah. And Chris, I want to talk now about CBDC, obviously, for anyone who doesn't know,

and I'm assuming this is still the case. You are co-founder of the Digital Dollar Foundation, which is effectively creating a central bank digital currency, but with all of the privacy features of cash. You know, last time we spoke, that was sort of the core of our conversation. I think there's been a lot of tin hat theories in the crypto community that a lot of this pushback is to make way for a central bank digital currency i think there's been some unfortunate takes on fed now being deemed a central bank digital currency uh so where does that play into all of this do you think so scott let me let me be clear uh so we're not advocating actually deployment of a u.s digital dollar we're not seeking to create one the digital dollar foundation digital dollar

project our 501c3 educational organization our goal is to be a think tank for what a digital dollar might look like should the US decide to deploy one. We believe that we take note of the fact that over 114 countries in the world are working on central bank digital currency of that 50 of them are in advanced stages. China's already placed their digital yuan into 240 million digital wallets. And that's an 18 year old figure, 18 month old figure. Europe has said they'll start deploying a digital euro by 2025. And Britain has said they'll have a digital pound by the end of the decade. So we take note of the fact that central bank digital currency is coming around

the world. Americans are going to be dealing with CBDC, whether the US deploys one or not. American multination Americans are going to be dealing with CBDC, whether the U.S. deploys one or not. American multinationals are going to be dealing with CBDC, whether the U.S. deploys one or not. The question is, what are the pros? What are the cons? What are the opportunities? What are the challenges of developing U.S. central bank digital currency? And within that, there's a growing politicization of this issue with it seems to be on the right there's sort of a general assumption that private development of digital currency good central bank digital currency bad and on the left it seems to be private development

bad central bank digital currency good and both of those are relatively shallow and and and and poorly considered um conclusions there's much more nuance to this now gotten developed right and and both china and europe see the opportunities a central bank digital currency could serve as sort of an operating system like a microsoft os for a a a fully digitally networked economy that would break down the myriad silos we have in our financial system right now. You don't want to put on a hedge on a commodity transaction. You're in one legal framework, CFTC. You're dealing with parties that are registered with that agency that only operate in that

silo, like Chicago Mercantile Exchange. You then want to do an equities trade. You're in a different legal framework, a different silo, different counterparties, DTCC and others. You want to do a banking transaction, more silos, silos, silos, silos. The opportunity of a central bank digital currency, and China's certainly pursuing this, is a fully networked digital economy, breaking down these barriers, adding efficiency, taking away cost, putting your economy into hyperdrive, especially at a time when we're potentially going into recession, the ability to do that and bring more people into the system. I mean, there's a lot of potential challenges now, potential opportunities. At the same time, there's a huge host of potential challenges, such as what about privacy? But that's an issue, quite frankly, that people on the left and the

right make assumptions about, oh, well, if the government does it, it won't be private. But somehow, if private actors do it, the private sector does it, you'll have your privacy. I mean, that hasn't exactly worked out, whether you transact on Amazon or conduct business on Facebook. And so private sector is just as likely to do surveillance and even censorship of economic activity. We need to get away from those wooden characterizations and recognize that economic privacy is a civil right. It's a fundamental right, whether that's privacy from government surveillance or private sector surveillance. And the country that builds that level of privacy into their digital money, whether it's sovereign digital money or non-sovereign digital money,

that currency will take over the world because the world will flock to a currency where their lawful transactions are rightfully kept private and not subject to either surveillance or censorship. And that can be done in a digital system where we move from a entity based identification system to more of an activity based system. And we can talk more about that. But the point I want to make is. Can I ask you a question? And I probably should know the answer to this given that thought versus a CBDC in the US and our confidence as users, even if the CBDC had built in similar privacy and similar backdoors than say the stable coin, are they the same thing or are they different just based on the perception that the government has your data

versus the data is out there hidden on a public blockchain? Right, that's a great point. So I think some of that would depend on where you stand on the political divide. I think there are certain sectors of our population that may be more likely to trust the private sector, some that would be less likely to trust government.

And that's why I believe the only way to assure people of privacy is not to say, trust me, I'm circle, or trust me, I'm the U.S. government, and I'm not surveilling you, but to build that, use an open architecture where people can validate for themselves that they're not being surveilled and they're not being censored in their economic choices. And that's why we at the Digital Dollar Project advocate if the U.S. deploys a digital dollar, it should be operationally transparent. So you don't need the government to say, trust us, we're not surveilling you. People should be able to establish for themselves that they're not being surveilled. And the same applies to a non-sovereign digital currency should also use

an open architecture. So you don't have to say that you don't have to rely on them promising you you're not being surveilled. You can vouch for yourself. You can validate for yourself, or you can look to technology experts that can vouch that there's not a surveillance capability built in. Interesting, right. Go ahead. And quite frankly, either the private sector actor or the government actor that develops that type of digital currency will gain global market share overnight because the great fear as we move to digital currency by the way and the same fear applies to private sector actors as government it's the fear of surveillance and even

worse censorship you can imagine right yeah in return just imagine this in return for a stable coin license a stable coin operator goes to the government and says we won't let people buy ammunition you know it's a left-wing government so we won't let people buy ammunition. You know, it's a left-wing government, so we won't let people fund, I don't know, right to life. And then suddenly a right-wing government comes in and the stablecoin operator says, we won't let people fund an abortion. We won't let them do other things. It would be a ping pong ball between whichever government is in control, stablecoin operators would or governments would do it directly the the the risk in the digital future money you know is that the money itself

becomes a tool of state control yeah and and i thought a lot about this when i was giving a a speech uh to the ted community on crypto and like, guys, our data didn't matter nearly as much when it was kept on notebooks. But now that it's so accessible, our data is power. And so you think about what happened in India, where they have this centralized identity. All 1.2 billion people or 1.3 billion people have a centralized digital identity. But Modi decided that he was going to just erase 11, 12 million Kashmiris off the books. Like, they don't exist. And you need the identity to get anything done there. So he literally erased 11 million people.

We saw what Trudeau did in Canada. And so when you have governments that go, I mean, I was teasing Governor Campos in Brazil once. I was like, listen, I just Googled gay and Bolsonaro, and man, he doesn't like gay people. There are 23 pages about how much he doesn't like gay people. That wasn't making that up. I was just reading the articles. And so if you're gay, you don't want the government to have all your data because they just told you they don't like you. And so that's going to ping pong back all over

the place. But, you know, as we've learned from the Twitter files, it's just as likely to be a private sector actor who will restrict your activity or censor your activity as it is a government. And so the sort of simplest assumption that I hear often on the right is CBDC bad, but private sector, non-sovereign government, non-sovereign digital money fine. Well, it's not so fine. Yeah, that's a provocative, you know, I haven't thought of that clear, but I think you're dead right. And so the solution is decentralized and open. And so we all see it. That's got to be the only solution, right? That's the only way it can't be that, you know, we, what we're all searching for, right, is a trustless system.

And it's got to be the same way in both sovereign and non-sovereign money, that we can vouch for ourselves that we're not being surveilled. Now, what law enforcement people say, oh, but wait, we've still got to prevent money laundering and tax evasion. And of course you do. And that's why the big breakthrough has got to be regulators need to move away from an identity-based, entity-based system, which is what we increasingly have in our financial system since 9-11. And we've got to move to an activity-based system. Governments have to be as proficient, law enforcement has to be as proficient at big data analysis as is Amazon or eBay or Facebook to analyze transaction flows. And when there's probable cause that those transaction flows indicate violation of law, then and only then should they be able to gain identity through our centuries recognized process of probable cause issuance of a subpoena and then obtaining

identity. The problem we have in our financial system today, it's identity first. You can't enter into our financial system unless you can present sufficient credential identity. And then every transaction is monitored by identity. We need to move away from that to more of an activity base. And you know what? We use that activity-based system every day in highway law enforcement. We don't identify you at the toll booth before you get on the highway and say, where do you bank? Where do you live?

What's your social security number? You get on the freeway, and then they use pattern recognition to identify lawbreaking, speeding, reckless driving, cars with headlights out. And then they stop the activity, stop the speeding, and then get identity. We can bring that same concept of identity last, activity recognition first, where law enforcement can be nodes on blockchains of digital money and look at pattern recognition. But that will take a sea change because regulators like identity-based, entity-based regulation and are uncomfortable with activity-based, but we can get there. You know, I like to think you learn something new every day. That was what I learned today, so thank you for that.

That's really a provocative idea, and it's actually, you know, sometimes you hear things, you're like, yep, he's right. Because otherwise we're always like, you know, listen, governments have a right to protect themselves against, you know, kiddie porn and nuclear financing and lots of bad things. I mean, you know, you want your government protecting you against that. And so how do you do that in a system where you don't want them knowing that you bought X at the drugstore? And they can be nodes on non-sovereign digital currency systems operated by the private sector where privacy is protected, governments can monitor activity, and then only get identity with the time-proven measures of probable cause and subpoenas. So we can build that kind of system.

It can be done in the private sector. It can be done by the public sector. But we've got to protect privacy. And the country that gets this right is going to win big time. They're going to empower their economies. They're going to protect their citizens' privacy. And they're going to build the money system of the future. Can I ask you another question on CBDCs?

Or maybe this is a statement that I want your comment on. So, you know, I grew up in the currency markets. Banks, I think JP Morgan made like $14 billion on cross border flows last year. They're unbelievably profitable business for our big money center banks. If I'm in Hungary and I want to trade with China, I've got to do a Euro-Hungary trade, a Euro-Huff trade. Then I've got to do a Euros for dollar trade and then a dollar for China trade. So there are three bid asks I'm paying to actually move from my Hungarian foreign to renminbi. And if you get one of those trades wrong, your whole trade is money loser for you. Now I'm

I've got a Hungarian CBDC and China's got a Chinese CBDC and I'm trading direct. And so in some ways, if you're emerging market, is the CBDC forgetting the privacy and all the rest of the issues just from a practical perspective going to, in time, literally cut out this giant foreign exchange middle market business, market-making business, and you'll just trade direct? Does that make any sense? Yeah, it does. So so potentially the answer is potentially yes one of the one of the first hurdles we've got to get over though right now is every one of these cbdc experiments is unique in their own right and there are no yet global standards for

interoperability and so you could have if we don't get them right, and that's another reason why I think we need to have US leadership at the table to develop, even if we don't deploy a US digital dollar, we want to have global standards where the US is a standard setter, as it was in the first wave of the internet. So one of the first stumbling blocks is we need global standards of how they just interact with each other operationally. And we don't yet have that. The second, though, potential is that one currency emerges as sort of the conversion key to all the others. And I think that's a great opportunity for the dollar.

The dollar has served that role. It serves that role today in an analog world where things are priced in dollars. So that's your reference point, even if the transacting parties are not native dollar users. We see that now, although there are a lot of forces trying to move away from that, as we've seen in the last few weeks with announcements between Brazil and China and Russia and China and elsewhere. But if we were to develop a digital dollar as a major conversion mechanism, that would be a tremendous opportunity for the United States. Got it. I learned a ton there as well. But I have to say, sorry, Mike, I didn't mean to interrupt.

But doesn't the inevitable question then become what the timeline would be and if the United States is actually interested and if that could possibly happen under this regime? I mean, you look at things like the Restrict Act that are happening right now, and a CBDC that protects the privacy of the American citizen seems like a very far-fetched idea. Right. I agree with you. Now, there are proponents of CBDC, strong ones, smart ones in Washington. I would include Leo Brainerd in that category and others. There's a lot that get the opportunity. Whether they get the importance of privacy fully or not, I don't know. But there are a lot of advocates for the U.S. And there are those very strong opponents of CBDC who simply say the danger of CBDC is too great to even contemplate, so let's just say no, in the words of Nancy Reagan,

just say no. The problem with the just say no approach, it sounds a lot like the 1970s when the fear of a nuclear catastrophe, a la Three Mile Island, was so great that folks said, just say no to nuclear power. And we didn't build nuclear power in this country. And we stopped a lot of nuclear power development. And as a result, countries like France went ahead and built a great and safe nuclear power system. I think just saying no to CBDC misses the opportunity that we could design it right. With our development power, with our Silicon Valley, with our brainpower, we could develop the world's foremost CBDC and protect privacy at the same time

and dominate the globe for the next three generations in the way the dollar dominated the globe for the past three generations. Well, and the other thought process is, listen, we have the largest deficit in history to fund. Traditionally, if you lived in Nigeria or Venezuela or one of 200 countries, and you were worried about your local currency, you kept wealth in dollar bills stuffed in pillowcases, right? There are more $100 bills in circulation overseas than there are $1 bills in circulation in America. And so as that moves digital,

if you don't have an access point for them, they're going to put it into renminbi digital or euro digital. And we've got a huge deficit to fund i used to argue with mnuchin i was like you should like we should care about terrorist financing and we should care about you know the things that that maybe impact our country but we should care a lot less about chinese trying to break their own currency controls um yeah you know if they want to put their money in dollars and their government doesn't want to, like, who are we to say no? Yeah. And I'll give you another reason why I think ultimately the United States should be at work developing a new CBDC and digital dollar, because we should also

do it alongside private innovation, because both sides will keep the other honest. If we develop a digital dollar that complies with the First Amendment, complies with the Bill of Rights, complies with Fourth Amendment right to privacy, then so will private sector developers as well. And if private sectors develop it, that will only make the development of the digital dollar even stronger because the innovation will come out of the private sector. The best future for American people is one of choice, where they can choose between different instruments,

digital instruments in a digital economy. I mean, first of all, I mean, it's clear that we already effectively transact digitally anyways, right? But couldn't you make the argument then that USDC, an already existing private stablecoin, could effectively, with some sort of partnership or cooperation with the government, become sort of the de facto central bank digital currency, or that it already is? Absolutely. One path forward is for the US government to basically lay down the standards for what digital currency should work like, and then allow the private sector to build it. I would argue that one of those currency should work like and then allow the private sector to build

it. I would argue that one of those standards should be privacy and freedom from censorship. It all should be interoperability. It should be financial inclusion. It should be open architecture. Those are the standards that the government could set down and say, we will deploy a central bank digital currency. We'll leave it to the private sector to do so. But right now, we don't have that activity going on either, which is unfortunate, but I think that would also be a very smart course. Right, and it should have some way, you know, for the creators of it to gain some of the interest, right?

And now you have this whole security coin versus non-security coin nonsense. But at one point, you're not going to let Circle, if it becomes, if USDC becomes the premier stable coin and rates stay at 5%, and, you know, next thing you know, there's a trillion dollars in assets. It'll be the most valuable company in the world, right? Like that, stupid things don't happen because people are like, okay, that makes no sense. And so at one point, figuring out how the participants, not the people that own the stable coins, because I can buy it in the secondary market,

I can deposit it, but the people that create the stable coins, that initial buy, how they share in the interest for tying their coin up, for tying their cash up, and how in some ways the stablecoin producer, if it's the government or a private sector, really just becomes a utility with a regulated margin. Yeah. And as money serves as a sort of architecture upon which a private economy or a both private sector, public sector economy is built upon, you think about your digital currency as almost like an operating system upon which the economy is built, upon which transactions take place and which companies are financed and which enterprise is conducted is built upon it and and i think if we can build the right type of both sovereign and non-sovereign digital currency of the future upon that we build the digital economy hopefully a much more networked efficient less silos less monopolistic more open more financially inclusive economy of the future built upon

both sovereign and non-sovereign digital money. Chris, how much do you think this is actually important and on the radar of the federal government versus it being the crypto echo chamber and us being hyperbolic about the future? So let me be fair to many in government today, some of whom are my former colleagues, some of which are my predecessors, some of which are my successors. We're going through a period of profound change. The notion that the analog financial system that we're coming out of is a system of informal networks. You talk about a eurozone, a dollar zone. Those are zones of relatively informal networks

of influence, but also of regulation of frameworks. We're going into a completely different architecture. One that's built upon the internet, you know, a network of computers using distributed ledger technology to create a connectivity. It's almost as profound as when we went from a world where information was hand-described and then the printing press was invented and suddenly it democratized the system. This is a tremendous, profound change. And it shouldn't be surprising that many people are grappling with this.

You know, this is almost the first revolution we've seen in a while that doesn't have an R or D naturally attached to it. I think both sides of that political divide are struggling with this. Some of the divide is generational. I grew up in the late 60s, early 70s, when there was something called the generation gap. There was a generation, a real difference between the views of my generation and my parents. It was a divide over civil rights. It was a divide over the war in Vietnam. I think you've got a similar generational divide here that's as deep, but it's all about, you know, financial independence, financial freedom away from intermediaries and central controllers. But we're, it's,

so anyway, the point I'm making is, we have to be a little bit patient, this is going to take it may take as long as 50 years to play out how this is going to work. But the one thing I can tell you is there's no going back. You know, we can try, some people can try to hold back the tide of this innovation. But to think that the internet somehow won't do to finance and banking and money, what it's done to social interaction, what it's done to information gathering, what it's done to transportation, leisure, arts and entertainment, is just naive. Of course it is. It's just going to take, I think, longer to play out because of the hierarchies that exist in our analog financial system and

the complexities of it. But it will play out. The digital change in finance is going to happen, and it's going to create a lot of disruption in its wake, but it's going to happen. I want to be conscientious of both of your time. You're welcome to stay, stick around, speak for as long as you want. I am going to have to jump. You're also welcome to. It's been so much fun, Scott. I lost track of the time, but I have to stay. Stick around and speak for as long as you want. I am going to have to jump. It's been so much fun, Scott. I lost track of the time, but I have to jump for a call.

Yeah, and Chris, we're going to do another podcast soon, the two of us. And Mike, great talking to you. Overdue for lunch. Let's get together soon. Perfect. Take care, guys. And Mike, I don't know if you want to stick around because I do have more questions for you, but you're welcome

to obviously leave as well. I'll give you five more minutes. Fire away. Yeah, well, And Mike, I don't know if you want to stick around because I do have more questions for you, but you're welcome to leave. I'll give you five more minutes. Fire away. Yeah. Well, this is what I want to know. How much of what's happening right now, I guess even for you, operating in this industry is a fiduciary responsibility to investors, all those things. How much of this concerns you long term or how much do you think this is just a road bump? I mean, as an investor in the United States specifically, because I think that offshore most of this will just move and continue to exist. Well, I think in the long run, the U.S. will have to get it right. You know, for the businesses that are operating in the United States. You know, you've got to have some path to oxygen or you're going to suffocate. And so luckily, we're pretty diversified and we have a big balance sheet.

And so when crypto goes up, we make a whole lot of money and we can kind of self-fund. But if you're in a business that's much more reliant on having domestic participation and you're not getting any rules, it's going to hurt. And so I'm really positive I know where the end game is. And I just am working my ass off to navigate the galaxy ships to make sure we actually win and make it to the end game. You know, I think Sam set us back two years, period. And I think it's as simple as that. I think Congress was moving towards bills. They weren't going to be perfect, but they were going to get us a framework to then operate off of. And, you know, the sting of FTX, I mean, it wasn't just in the U.S.

You know, Sam was the speaker at one of my buddy's runs, one of the biggest trade groups where every central bank is there. Every big, you know, money center bank is there. And Coinbase and FTX are the only two crypto people out of 300 members of the group. And he was the keynote two weeks before, you know, you know, the blow up. And so you had, you know, Madame Lagarde there and Chairman Powell and all the and so everyone felt stupid. And I think this is, we're still in that fallout zone. And, and, you know, I do think the crypto haters are taking advantage of that. Um, and so there's not a lot we can do other than, you know, fight in court, advocate with and educate politicians, uh, and build, you know, build good businesses. Uh, time will, time will heal. And I'm just hoping that time is

shorter, not longer. Thank you, Mike. I appreciate it. I appreciate your time. And hopefully, we'll be able to sit down and do this again in the very near future. Thank you really so much. All right, guys. So now, obviously, we have some other speakers joining Dave Weisberger, Simon Dixon, Sven. Sven, man, how are you today? I know you probably got to listen in to some of the end of that. You were one of the most popular people to become a Bitcoiner, I think, last year. Has anything changed in your opinion as you've seen all this nonsense sort of continue on through the last few months. Hey, Scott. Good to speak to you. Usually, you and I are both drowning in bots. That's one of our little side issues that we're trying to survive on. No, I mean, look. The bots have gotten worse.

They've gotten worse, haven't they? They've gotten worse. Yeah. Okay. Just checking. Go ahead. They've gotten worse. I don't know.

It's just part of life on twitter these days i guess listen on bitcoin specifically um last year at the beginning of the year you know i had multiple conversations with mike sailor back then uh in 21 i was skeptical then we started having this insanity with the money printing bitcoin obviously went to near 70 000 I was still very skeptical and then obviously we started entering into the bear market and by the way I'm for for those listening I'm I'm I'm an equity strategist deal with indices mostly uh always from a trading perspective and for years I've been very critical of the entire monetary game that is imposed on us because none of us have any input into this. This is like the least democratic institution on the planet, not only Federal Reserve, the ECB is the same thing. about the policy error they were making by continuing to print into the supply chain issues,

the excess of the fiscal policy that took hold. It all screened inflation. They kept, obviously, rallying on about transitory. And it's come to bite everybody in the butt. And now they've been on a train to correct that error. And unfortunately, this set up for a major bear market in everything. And the monetary excess has led to valuation excess in everything. And last year, we saw the fallout from that.

So when Bitcoin started correcting, I think at the time it was about 50%, it was coming out of a philosophical point of view and discussing with Mike Saylor to recognize, A, that wouldn't it be nice if we had some independence from the citizenry in terms of the monetary aspect of life and Bitcoin as a technical solution certainly was appealing in this regard however certainly cognizant of the correlation that we saw with everything i mean at some point bitcoin and the s p were you know almost 90 correlated it was basically just a liquidity flow game

and so my view last year was that as this bear market would unfold in equities, Bitcoin would see weakness with it along the correlation. And that ultimately, however, as in the Nasdaq crash of 2000, when we saw some of the biggest high flyers completely collapse at the time uh some of the winners at the time the long-term winners would emerge from the rubble victoriously we saw that with amazon apple everybody gets completely hammered down 90 drawdowns at the time and so my view was not from a trading perspective, rather from an investment perspective to say, okay, expect a bear market in 2022. And what used the drawdowns that we see as entry opportunities, that was my view with a 10year investment horizon. And that's exactly what I did.

So we talked again in the summer, and obviously Bitcoin got down to $17,000. And at the same time, a really important point I want to highlight here. And that is one thing I even acknowledged back when I was a skeptic in 2021, that Bitcoin was trading technically very clean. It's always impressed me from that perspective, even during the blow-off phases. You can use technicals very well to ascertain your points of support and resistance and technical patterns completely apply to that. And so for me, as a technician,

as a market technician, 2022 was great, because I was able to say, okay, here's the point where expect more downside, here's a point where expect support. And that helped me kind of then shift more into Bitcoin, because my initial entry was was too early, I think it was about 32, 33. But then, of course, we got the larger drawdown. And my point was to patiently scale in on weakness. And here we are at 30,000. So it's been a good run from that perspective. However, you know, the threats are not over. One of my contentions back then was also that we needed to see some real clarity on regulation. And we still don't have that to the extent that I would like to see. And I think that's

continuing to pose a risk. And, you know, was it last week I saw somewhere the headline, you know, it's now a matter of national security. And once they start throwing terms. That was the Treasury. That was the Treasury. Yeah, that was the Department of Treasury put out a report. You should probably listen when they start saying things like that. Yeah, absolutely. It seems like it's pretty clear what they're trying to do. Absolutely.

Once that term is used, anything goes, right? So I'm not of the view here yet that everything is in the clear. By everything, I mean equity markets. We've been, and people who follow me on my feed know this, I've been probably to the consternation of many being very bullish on equities since the October lows and every dip was a buy. But I'm starting to slowly shift my view on this

because there's a lot of macro issues looming ahead and technical as well. In fact, on Bitcoin, I can just point out that this rally, and let me put a post on my chart on my Twitter feed real quick. I think you guys may want to be interested in seeing that. Just a quick Bitcoin chart. Bear with me so you guys can see this. This is really interesting, actually, the way the chart has been evolving.

Yeah, if you tweet something something i can pin it up top yeah i just tweeted it out a second ago all right give me one second you keep talking and i'll go ahead and pin it in a moment yeah so when you have it let me talk to that sorry it's gonna take a second i'm working on it no worries no worries well i'll start talking i'm still a boomer so uh you know it's a little slow for me to uh to to get these every time i try to do it i hit a wrong button or all right we got bitcoin chart okay it's been up top you're good okay good well it looks like a bunch of lines but i'll try to make it simple i mean the the key trend lines that we've seen over the years they've been quite

uh powerful and last year we saw that if you look at the middle blue line that was kind of a key uptrend line i was following and that was the breakdown ultimately that we saw right we had uh initially high the highs and beginning of 22 came on a negative divergence on the on the weekly rsi that was a sign of trouble uh and then it just continued to break down in the lower uptrend line very key uh that was initial support in the summer it bounced over there and then it failed and that And that was a sign that things would get a little bit worse. And then something really interesting happened in this context. And that is Bitcoin formed a bullish falling wedge. And that new low that we saw, along with equity markets and everything, if you look on top, the RSI turned into a positive divergence.

We saw the same thing on the S&P. That was kind of one of my warning signs in general for bears to pack it up in October because all these new lows came on positive divergences. They were just massive oversold signals. It was clear that something was coming. And since then, what we've seen, not only the breakout out of that bearish or bullish falling wedge, excuse me, but also a break above that pink descending line that you see, that was the downtrend. It broke above it, it back-tested it here in the spring

and now moved higher from there. In process, it's for the first time since the bear market started it has recaptured the weekly 200 ma and the weekly 50 ma that's big that's solid that's that's kind of that's what you want to see that's what you want to see so that's that's positive and as long as that holds it's it's going to continue to be positive. Having said that, that red line, that uptrend line going back to 2015, that was tagged during the COVID crash. It was tagged on the initial low in spring last year.

That is now resistance. And as you can see, if you look at the rather tight range action that we've seen over the past few weeks it keeps tagging that line it just tells you it's resistance that's just a piece of evidence shows you how respectful bitcoin is of of technicals right and so it it is resistance and of course this price zone now is also approaching the 21 spring lows right so you got price resistance there as well and we're still below the weekly 150 ma so I would I would generally say we're at a key point of resistance as you can see the weekly RSI is getting overbought as well and my general view on this here is that

the you do not have a confirmed new bull market in Bitcoin until it's solidly above the weekly 150 in May and stays above it, meaning that on any backtest, it would defend it. So you've just got to be cognizant of that. Yeah, I agree. We haven't really seen the backtest of any of the key levels. I mean, if we're talking technicals for me 25 000 212 was really the meaningful one because that's when the market made the first higher high uh from the drop down

from from 69 000 um and so i i agree i think right now though things are looking quite quite good no they they're looking much better and and we see that in equity markets as well i mean i've been you know, these falling wedges, we saw it on the S&P, we saw it on NASDAQ, we saw it on the German DAX before anywhere else. That actually broke out before everything else broke out. So that's all been really positive. The question I have, and I'll just throw that out to everybody. Part of the bullishness we see now in everything, part of it was, I would argue, clearly the chart patterns that we've seen,

but it's also driven by negative sentiment. We had a lot of short positioning. Then we have the just enormous liquidity that's been thrown at these markets as a result of the banking crisis that we just recently saw to the tune of over $400 billion, specifically bank reserve balances just shot up sky high. If you overlay a chart between bank reserves and the S&P, it's fascinating. It's been going tick for tack last year.

So when you, for example, saw the Baker rally from the June lows to the August highs, it was at the time when the bank reserve does the liquidity drain from the Fed, bottomed in June, and then it topped in august that it just the s&p and the bank reserves seem to be going hand in hand we saw that again in december when we had that drawdown in markets in december and early january and guess what happened bank reserves bottom went up and everything flew higher with that. And we just had this incredible splurge coming through the system. And as you as you saw, you know, as soon as the SVB news hit, and Janet Yellen got concerned, and they started flooding the system,

boom, everything bottom, it's markets are a game of liquidity. So we have to be cognizant of this. And to the extent that they start draining this again, that may become a drain on equity markets as well. So be aware of that. And then the final factor that's really been helpful conducive for the rally here is is something called seasonality. April is usually a very bullish month. Now you can counter to it and said, Well, April wasn't very bullish last year, which is absolutely true.

Well, I go back to what I just said about bank reserves because guess what they did in April last year? They drained the bank reserves and everything fell with it. So that's just a dynamic we all need to be aware of. But then when you come out of April, things get a little shakier historically, at least for a while. And tying this to bear markets in the past, I want to just highlight this. Bear Stearns, 2008. And I don't want to make 2008 or 2000 comparisons, but I just want to highlight the historical reference here. It was so ironic that SVB happened on literally the same weekend as Bear Stearns in 2008.

The same weekend. You can't make this up. And guess what happened? Obviously, they bought out the bank, intervened, and the S&P at a 14.5% rally from that weekend low, which was that March 9th, 10th, 11th, 12th timeframe. And it rallied right into the beginning of May and then everything rolled over. Using that example, I also need to precisely point out that there was an important difference during that timeframe. And that is that rally in the S&P that went all the way to May. It stopped right at the 200-day moving average on the daily. I mean, to the tick, it just rolled over from there and that was it. And we went off to make new lows.

This time is different in this regard because we're above the 200 ma we're you know successfully defended s p's above the 200 ma so there's there's a technical notable difference here the other one i want to highlight is 2001 this was after the tech bubble burst which is kind of interesting because the the timeline is somewhat similar right we had a blow off top at at the beginning of 2000 then we had a bear market in in 2000 that extended into obviously didn't bottom until 2002 2003 was ugly it took on several years but intermittently during this time frame you had absolutely mind-blowing rallies. And these occurred in various periods.

And one of those periods was April 2001, when markets just flew higher. The Dow almost went to new all-time highs during that timeframe. And it also peaked then in early May and then rolled over hard. So this is what markets do to us, especially in bear markets. They can give us the sense that the worst is over. Things are getting better.

Hopium, right? And that's when understanding the macro is going to become so important because, you know, if we do go into a recession, which I can't say that we will, but there's many signs that point to it, then the entire equity construct is going to find itself under a lot more stress than we've seen so far. And that's the unknown, obviously, for all of us. And then to the extent that you, again, have corollary factors, i.e. with Bitcoin, you may still see a significant downside at some point. So that's why I'm looking at the Bitcoin chart here. And I see it approaching key resistance into a seasonal bullish period of the year. Again, having the correlation with the S&P and the liquidity that was injected.

So I'm not here saying, you know, okay, great. I added nicely in 22 and I see nice results now. I'm not here declaring victory laps at all. In fact, you know, not to scare anyone, but, you know, I've got this blue line down there on that chart that points into the abyss at some point, which doesn't mean it gets there. But I had always pointed that out last summer as well, that I could see as a risk zone, ultimately, if the global equity construct, or rather the economy goes into a severe recession which i don't know that it that it will but that's would probably be kind of a back up the turk line for me yeah it's been uh interesting and we're gonna kind of uh bring in some some

other speakers here as well what i find interesting is that Bitcoin has become almost for like nine or ten months now. And historically, obviously, we talked about this earlier, has become a bit decorrelated and has continued to rise in the face of all of this bad news. So at least I would say there is an inkling of hope that it can remain uncorrelated and not trade like a risk on asset, even if things go bad. But I think we all be aware of the worst case scenario there. Brad, I see you've got your hand up. I saw you had pinned a tweet, but you can do it again. I had gotten rid of it because he was talking about that chart. Oh, yeah. No, it's just related to that conversation. I was thinking about this the other day. I was having a conversation with Bitcoin Tina, who, if you don't know who he is, he's like a boomer that's been in the equities markets, been trading a long time. He's got a really good understanding of the credit system and the macro picture and all that stuff.

And he's been very bullish on Bitcoin for a while, but he was too heavy in Bitcoin. He was like 100% of his net worth was into Bitcoin. And the emotional volatility you get from being all in Bitcoin kind of took its toll on him like it did on many of us in the past who tried to do all in Bitcoin without having any cash to be able to buy dips. And so he kind of is worried now about this situation where if we enter into a recession and the liquidity is drawn out from the system, then it will drive all markets, all risk assets down because our system is based on stimulus and credit creation. And if you get into a deflationary spiral because of credit crunches and you know interest rates rising and banks not

doing lending because the rates are too high or whatever the reason is why the lending is not happening or qe they don't do qe they keep doing qt then people are worried that assets are gonna crater and i i actually feel pretty confident after the conversation with him and all these macro guys that you hear on Spaces all the time worrying about Bitcoin going to drop, you know, how it's going to go to $1,000 or zero

or whatever if we hit a recession or even worse, a Great Depression 2.0 or something like that. I don't think that's accurate because if you look at the size of bitcoin there's just not enough supply to even drop another 60 70 from here but go ahead yeah even like even like 10k right like i i really think we found a bottom in around the like 65 range to 20 range and i was like like sven i was i was when you know we were at like 60k um i clearly had like identified that this was a bubble especially it's mostly because

of all the crypto stuff and because of the meme stocks and everything so i was like you know like celsius has a lot of bitcoin ftx has a lot of bitcoin Bitcoin. Terraluna is using Bitcoin as a confidence game. So Bitcoin has a lot of risk here for the crypto bubble blowing up. And so I was pretty much confidently saying, we're going to 20K. And it wasn't very popular at the time to say that. But I was able to make some maneuvers and raise some cash for myself to be able to buy the bottom. And then when we were dropped below 20, I just started slowly deploying my, my barbell fund,

the cash that I had raised near the top to buy back and, you know, kept buying all the way down to like 16, 17, whatever it was. And it was kind of stressful to be buying at like 17, 18, but everybody was saying,

we're going to 10 K and tether's 18, but everybody was saying we're going to 10K and Tether's going to blow up and Coinbase is going to sell all the Bitcoin they have and all this stuff. I'm like, we had massive capitulation. Like we had major capitulation. And then when you combine that with looking at the hodler base of Bitcoin,

most of the forced sellers are out already. And the people that have Bitcoin now are the ones that weathered another crazy 80% drawdown in their Bitcoin price. And they're buying more. You look at the on-chain addresses, people that are holding 0.1 Bitcoin or more, it just continually has increased through the bear market. So in a debt deflationary situation, I was looking at the Fed stats the other day. The amount of securities held by households and the public went from, I think it was $29 trillion to $49 trillion in two years just by U.S. households and nonprofits. And then it dropped to like 34 trillion or something. So it's still like the

stock market and the real estate market too, is still overvalued. And so deposits went from 14 trillion to 18 trillion in the last two years. So there's a lot of wealth in the system, phantom wealth, that you look at the trend of people discovering what bitcoin is and how how strong their conviction is and how many people continue to hold bitcoin the bitcoin coming off the exchanges it's only a 500 billion dollar asset so i i really do think that it's possible that bitcoin can have you know know, $2 trillion market cap, $3 trillion market cap in a severe recession because it's so small. And as money comes out of all these other things, as people start to realize what it is they're holding when they have stocks or when they have real estate and just transition some of that into Bitcoin. As long as people are still understanding Bitcoin is the only thing you can have that doesn't have counterparty risk.

It's the only thing that's censorship resistant. It's limited in supply. The future is going digital. I really do think that in a debt deflationary collapse or whatever, Bitcoin can still have a really good year or two. Guys, I also just want to say the floor is open to all the speakers who we have up here. You don't need to wait for me or be moderated. Anyone who has a comment on what Brad just said, please just go ahead and jump in and you guys can feel free to address each other directly. Yeah, Scott.

So this is Dave here. So everything Brad said made sense to me. The one point that I think is often it's assumed by those of us we know I love Mark Yusko's commentary that Bitcoin is a technology of trust as a technology of truth rather than than the idea of needs for trusted intermediaries. a newspaper, digital or otherwise, or watch any TV station at this point without seeing reports of public perception and public trust in institutions and in the financial system writ large dropping for lots of reasons. And what we saw a couple of weeks ago with Silicon Valley Bank and then whatever the hell happened with Signature Bank, is the Federal Reserve realizing that this is indeed the Waterloo moment. And I think Powell was smart. I think he recognized that bank deposits getting withdrawn writ large from people who are getting paid virtually nothing to keep their money there. It would take very little prompting to get people to pull all

their money. And so he basically said, okay, if you need to cover your losses, you can do so via the BTFP. The fact of the matter is trust in financial institutions, Bitcoin is a hedge directly against that. For those who understand it, we get that. And you can see it in the increasing network growth over years with a blip when china banned bitcoin it recovered from and regained it and it it looks almost identical to the chart of the s&p from the 20 you know the from the 2009 low uh to you know, the pre-pandemic, a monotonic up and to the right, while price didn't do that. Price actually got way ahead of itself and then cratered post-LUNA last year and then post-repetitive force selling, waves of force selling from just taking all the leverage out of the system.

The interesting thing about bull and bear markets is, and this has not happened in equities, let's be very clear, but it has happened in Bitcoin. And it's one of the reasons for a delink is when you see bear market bottoms, it generally is a complete deleveraging. I don't think there's a human being on the planet who thinks that deleveraging has happened in the equity markets. But every statistic I've seen in terms of open interests, in terms of funding rates, in terms of whatever, however you want to look at it, you know, hodling percentages, everything looks like Bitcoin got delevered. In fact, it was probably anti-levered because you had billions of dollars of Bitcoin held by people who are waiting to see if their money is going to get anything back from various bankruptcies that happen, and most particularly FTX, most likely not to be returned in Bitcoin, but to return in dollars. So that deleveraging event is very relevant. And I think as we move towards the upside, as people start saying, okay,

we have an environment where the Fed is sort of trapped, is going to probably not be able to continue tightening forever, and trust continues to fade in those institutions, and network growth grows, that's a very bullish setup. Going into the halving in a little over a year, that's why people are excited. But honestly, if you even just look at trading ranges, this bull run is just into the middle of the post-LUNA four or five-week trading range we had a year ago. That first big drop happened and it stayed between 28 and 32, and then post-Celsius, et cetera, et cetera, it dropped, and then post FTX, it dropped again. We've recovered the two of those three. But what happens after that trading range is breached? Well, I mean, you could look at the chart, you can see where the resistance

really is up towards all time highs, if in fact, the macro economy is accommodative. And I don't know that that it will be because everything Sven said is concerns of mine as well in terms of are we going to enter a recession feels fairly baked in the cake as we talked about on Monday. Anyway, I'll stop there. But I think the whole trust narrative is extremely important and the macro side is important, but it's also important to look at the fundamentals of the Bitcoin network and the adoption going on globally. Simon? Hey, Scott, what are you eating?

I caught you in the middle of it. Caught me right in the middle of a bite, Dave. Yeah, perfect. You're standing up and eating. Sorry, dude. Exactly what I'm doing, literally standing up and eating. Yep. Yeah, yeah.

Sounds like a peanut butter sandwich. It's turkey. Yeah. So I think trying to combine a bunch of those thoughts together. So in every cycle I've been through, and I see Bitcoin as a 14-year bull market. And in every cycle, we see a halving, a regulatory crack um all new all-time new all-time highs and um some higher lows on what people call a bear market um and if you look at these longer charts you you just see that every time but every cycle is dominated by i'd say one key feature of why bitcoin should die um and in the first cycle it was you know satoshi nakamoto mining a bunch of bitcoin accumulating a million bitcoins and proving you know trying to trying to prove that everyone can

mine from a computer and then mine from gpus and then specialist equipment came out um and then we had a6 and the whole thought experiment was can bitcoin be decentralized and work without a government and be independent of banks um check it won that and it got through that and it should never have survived that then the second cycle was all about well governments can shut it down can it be 51 attacked can quantum computers come along and take it down um will all governments ban it and so you know 70 of all uh tradable bitcoin ended up on Mt. Gox. Mt. Gox blew up. Everyone lost 90% of their Bitcoin. We had FinCEN say that you need to register as a money transmitter if you're providing an exchange.

We had the Japanese authorities crack down on all of the exchanges. We had Eric Voorhees try and raise money for Satoshi Dice and Bitcoin and the SEC saying, that's an unregistered security. You need to unwind what was actually a really profitable investment for investors. And so the second cycle survived.

When governments could have shut it down, they should have shut it down then. For whatever reason, they didn't. And Bitcoin survived like the second the third cycle was is there really 21 million bitcoins maybe we can fork this thing maybe we can create 42 million bitcoin maybe bitcoin is not bitcoin uh maybe we need to create a new blockchain uh maybe some of these alternative things are actually going to flippen and we're going to have a flippening. And maybe everyone needs their own token.

Maybe we need a currency for everyone and everything and everyone. And maybe Bitcoin's not even Bitcoin, it's a blockchain. And so banks tried to create the technology and eliminate Bitcoin. And all the technology just didn't get anywhere and Bitcoin just survived.

So we then checked the third cycle. Yeah, it can survive money printing. We can have every single person in the world creating an illegal security, trying to copy Bitcoin and no one can create Bitcoin. And there's still only 21 million of them. Most of them get mined. So we're at about 18 and a half million. And we've only got a few of them left and institutional mining and security and hash rate that goes up. And then everyone says, Bitcoin is going to die this time because it's only been alive in the post financial crisis. And in the post financial crisis, we started quantitative easing. And now we're heading into a first recession. And the print is going to come off. And there's going to be quantitative tightening, the Fed's actually going to reduce their balance sheet, and they're going to hike interest rates.

And so that causes the next crash. And it turns out that the Fed can't do quantitative tightening because it destroys the whole economy and it destroys the banking system. And everybody learns that actually Bitcoin is simply a way of owning your own money, spending your own money and having a monetary policy that's 100 percent forecastable into the future. And so this cycle is all about can we get to the 2024 halving and survive quantitative tightening? I think we're going to check that box too. Yeah, Simon, it's really interesting because I think that this time you didn't hear, to your point, in the previous cycles, it was Bitcoin will die, Bitcoin will die, Bitcoin will go to zero. I didn't hear that

in this cycle. Yeah, I think everyone I heard a big narrative. I mean, a lot more and more people in each cycle, there's more and more people that come across to realizing I need to allocate some of my portfolio to Bitcoin. And so this one was heavily institutionalized. It was heavily, you know, the corporate narratives from Michael Saylor joining and public companies and various other things, BlackRock entering the equation. All of the institutions saying, right, let's get rid of all the fraudsters that don't comply with regulations and we'll take over. We'll have an Operation Chokepoint. And then eventually some of the big boys in America will come and do this thing properly. You know, that's the current narrative and tightening and various other things.

So it's about, I guess, the large traditional takeover in America would be the existing narrative. But there's a ginormous world that still needs Bitcoin. So after the next halvingving you'll enter the next narrative which has started already now which is what if um governments need to backstop their entire banking system and large institutions gobble up smaller banks and banks become systemically too big to fail and there's a systemic risk event and so we need to bail out the system with a central bank digital currency and a central bank digital currency will then

make it illegal to trade bitcoin into cbdc and global governments all around the world will coordinate and eliminate bitcoin that will be the next narrative in the next cycle and then the next cycle after that will be well artificial intelligence is disrupting central banks and central bank digital currencies. And artificial intelligence can invent a quantum computer that can break the SHA-256 algorithm and cryptography. And therefore that will take down Bitcoin and the whole world ends and we all need to buy gold

will be the next narrative after that. And it turns out that actually decentralized proof of work with a high level of security was actually the solution to the bank issue, people owning their own money, regulatory issue, the fiat issue, creating more honest central bank digital currencies by having competition where people can exit when your cbdc gets too suppressive um the it was also the solution to artificial intelligence becoming more intelligent than central bankers because you actually needed proof of work blockchain in order to combat. So each cycle you get a new narrative and it just turns out that the whole thing that underpinned was what was proven in the first cycle which was can you create proof of work that means that no government, no authority, no coder, no group of companies trying to take over the blockchain,

no influential VC investor, none of them could change the fact that we don't need to trust Bitcoin. And we do need to trust authorities, companies, exchanges. And every single cycle just gives us a new lesson and new people discover, I need to allocate more of my money to Bitcoin. And I would even argue that less than it's about people understanding that they need to allocate to Bitcoin, what we're seeing right now is that wholesale crisis of confidence that you hinted to in the legacy system. So it's just, I think Bitcoin may get the benefit of a major pushback against all of these legacy systems that people don't trust anymore.

People are failing to trust the bank. Certainly, they're trusting the government less. I mean, listen, we can keep talking about Bitcoin. It might be worth talking about the Restrict Act, because obviously that is a massive violation potentially of our privacy and overreach by the government. And I know that you're sort of of that same opinion. I mean, what do you make right now of the massive sort of uptick in, I mean, enforcement against crypto, but general push towards violating privacy and such that we're seeing from the government? Yeah, thanks, Scott. I think that was great what Simon said. What a great recap of all the different attack vectors going off of historical halving cycles. And so, yeah, that just continues. And, you know, kind of what I was hearing with Brad and Dave and Simon as well.

And I just kind of think back to, you know, this old kind of investing adage that I've always kind of lived off of is volatility is the difference between perception and reality. And so we kind of get these overhyped cycles where everybody thinks it's the hot thing. It's going to take over the whole world and it gets way over bought. And then, uh, reality kind of comes crashing back down. It gets oversold. And so this perception of reality, then it's going to die. And it's at 16,000, it's going to drop to 12,000. And so the perception swings to these extremes, but reality keeps moving it forward. But the other thing I'd say is a couple of things just to kind of recap on a few speakers and answer what you said, Scott. A couple of things just to recap is I love what Dave said about trust. I think you can't really

overstate that enough. That was a really a big point I made at the Bitcoin conference last year, because it was right after kind of the whole, you know, Russia, Ukraine thing broke out, Russia had their bank account seized, etc. And once you destroy trust, any of us know that if we've had bad experiences with, you know, a spouse or boyfriend, girlfriend or business partner, you know, once trust is broken, it doesn't just come back. And typically it never comes back all the way. And so really what we're seeing is a disillusion of trust in the financial system. And not just from, you know, the usual suspects like not trusting China, etc. But you know, now the United States, which was supposed to be kind of the leader of the world with rule of law, due process, things like that. And so that's why, you know, a lot of capital comes to America because of those strong things. But now

the trust is lost there. And for all the talk of going to Chinese Yuan, et cetera, there's no trust there either. And so as the world continues to decentralize, that trust continues to get dissolved. And it's almost like you need a trustless system to move forward. And so I think that's apparent. The other thing I just want to say is we haven't seen it in this macro environment, but I think that's a very US centric viewpoint. Typically, most of us humans don't really move until pain is high enough. I believe in chiropractic.

I've gone to chiropractic most of my life. I think we should all do it, but I still don't typically go until my back really hurts. Right. And so the pain has to be high enough. And so, you know so when you live in Manhattan and you drink a $20 martini at the bar, you don't really care why your money doesn't work. But if you're one of 3 billion people living under really harsh authoritarian regimes with double, triple digit inflation, Lebanon, Turkey, Argentina, Peru, et cetera, you don't need to be

told why you need something. So in the US, everyone's like, how do we orange pill people? You don't need to orange pill those people. They're looking for an alternative. And so it's easily found there. And unfortunately, that's the direction the whole world is going into, more authoritarianism from everywhere. And the reason why the authoritarianism is on the rise is, I mean, that's just the natural order of the state. But, you know, as things continue to deteriorate, as the financial system continues to break down, we're at the end of this, you know, hundred year sovereign debt bubble that's bursting right now. They have to try to impose capital controls. It's always the last piece that a nation state would try to use to try to

maintain order. Don't let the capital flee. So they have to seal off the exits and keep that in. And so back to the question that you asked, Scott, the restrict act, you know, a lot of people, well, the media makes it out to be this TikTok ban, which is what it was intended for, but it's also, it's way more scary than that. And ultimately, you know, a lot of people say it's about cryptocurrency, which, which it is. But it's, but it's even bigger than that. a request or anything, to have full control to say what electronic communication methods are allowed to be used or not. And when we talk about communication, obviously that falls into

cryptocurrency. So similar to what we've seen with Tornado Cash, but they could say any of these communication protocols aren't acceptable. They're not, they're not, they're no longer legally able to be used. And then if you try to go around them with a VPN or something like that, you know, you'd be found without even due process, they could just say you're guilty, you lose your property, 20 years in prison, a million dollar fine, etc. But as much as it is an attack on crypto, I think it's even worse than that. And that is it's an attack on really free speech. And so, yeah, the government, you know, they have to control the narrative, but they can no longer control the narrative. I mean, all over the news right now is

the Department of Defense leaked all this top secret information. It's all out there. They're going on to these news outlets saying, hey, stop talking about this. Stop talking about it. But they've lost the narrative, right? They've lost control. And so we have the Joe Rogans of the world that are way more influential than CNS anymore. So they can't control that narrative. And so in a war of information, the only way to win that war is to control the information but the internet's taken that away we have open monetary protocols with bitcoin open communication protocols the internet's mostly decentralized and now with the rise of nostril things like that and so the if

they can't control it if they can't stop it then the only thing they can do is threaten you to kill you right a monopoly on violence and so that's really where this restrict act restrict act is coming in to kind of the point that simon was talking about. This is going to be the next attack vector. But I think going back to like a global viewpoint, taking out your just US centric viewpoint from a global standpoint, the rest of the world doesn't care, man. They need something like Bitcoin and it's going to continue to see demand. The more they try to restrict action, the more they try to censor, the more they try to control, the more they try to do capital controls, the more demand will be back to the pain rising high enough. I couldn't agree more. Jack, you haven't spoken yet. You're the only one up here. I don't know

if you have any particular thoughts there. Maybe it's not with us at the moment. So anyone else have any? Dave, I see you opening your mic. Go ahead. Yeah. I mean, I think that there's some incredibly good points that just got made. And I just wanted to say three things. First, you know, on the narrative side, you know, everyone in Bitcoin loves the, you know, the first they ignore you, then they laugh at you, then they fight you, then you win. We get that. What people always forget is the then they fight you phase has a couple of phases to it. I mean, it is the having to come out, listen to the arguments. They have some quality, et cetera. And then eventually you start hearing retreads and things getting more and more shrill and more and more hysterical. As my mentor from college, you know, Dr. Zarefsky at Northwestern used to say, when people start resorting to increased volume and increased numbers of arguments as opposed to high quality arguments, you know they know they're losing.

And we're seeing that, you know, the New York Times piece yesterday was like ridiculous in so many different ways in terms of lack of data, et cetera. You know, we're seeing that constantly, the anti-crypto army and starting a pack. I mean, that shrieks of desperation. You know, they understand what's on, what's at stake. The fact is that there's two things that are going on and everything that we've talked about. The first is from a pricing perspective. A lot of your listeners want to talk about price predictions. Well, the important thing about Bitcoin is it's still so small that effectively it trades like an option on its future adoption. And you've talked about a couple of things that are very important. If we really believe that the zero outcome is completely gone, and I actually do, but a lot of people don't. If you think that that tail is chopped off, then by definition, the entire value

curve of Bitcoin, where you look towards digital gold and you look towards potential hyper Bitcoinization, you understand what the upside could be. Sorry, there's work people outside my office and I have my dog here, so sorry about the barking. But it does increase the valuation. It makes me more bullish. The other big thing... You still there? Yeah, I'm still here, sorry.

The other big thing that's going on is there's real risk to the United States right now. And people don't like to appreciate this, but the fact is the comment that just got made that the world doesn't care is clearly true. And it's also true that the U.S. has gained enormous standard of living benefits by having financial market primacy. Now, when I talk about that, I don't mean it because we're the biggest and the best and whatever. I mean, because U.S. capital markets have been the most efficient capital markets in the world for decades. And when you're the most efficient, it means more companies come here to raise money. It means it's more investable. It means jobs. If the digital asset revolution does what I expect it to do, and the US doesn't participate, we're screwed. And all of those decades of gains from having financial market primacy could go away. That's

the real risk. And that's what's going on here. It's like, if the rest of the world embraces Bitcoin, embraces DeFi, embraces many of the things that are going on,. It's like, if the rest of the world embraces Bitcoin, embraces DeFi, embraces many of the things that are going on, we lose. And people always need to worry about that. And at the end of the day, I think that cooler heads will prevail and it will get realized. I just don't know if it'll, you know, when. That's obviously the big problem. yeah i think um the the react thing should be um deeply concerning as either an american or non-american um and and i'll bring it back to the quote that you like to that you like i that i often give um scott is that every day america is looking more like china and china's looking more like america and i think they're going to meet somewhere in the middle with a central bank digital currency. I love it. I could hear you say that a hundred times. And the react is certainly an indication of that. You know,

the sorry, restricts react restricts. You know, the... I don't think it's an attack on Bitcoin. Maybe I could be ignorant. I think it certainly is an attack on crypto. But if you can make that distinction, I think the US maybe

has... Either I'm completely ignorant and the US is just going to control crypto know, control crypto, launch CBDC and then come after Bitcoin and claim it's no longer a commodity or something. But I don't see that happening. I think if that was going to happen, it would have happened. But, you know, I always look for the for the events which I can't quite predict or forecast. But, yeah, it's it's a major, major concern.

You know, it's an extension of the Patriot Act. And, yeah, it is a major, major fundamental shift. And even if you see, you know, I always from from culturally taking a step back when when i spent a lot of time in china i saw a very capitalist economy at the regional level um and i saw like shenzhen grow and hong kong which i know is a special region but i lived in hong kong and spent and spent quite a lot of time in China. And I just saw the level of innovation that came from the capitalism. But once the company became a tech giant, it became part of the government. In America, it's kind of the opposite,

that you have the ability to become a tech giant or a billionaire, but then you get to control the government once you get there. And so I think it's pretty interesting that you're seeing even the leaders like Elon Musk wanting to take a step back on AI and try and pause that. That type of thing combined with the types of policies that are coming, that would be a massive movement to America looking more like China and losing the race. And I think that's a really real thought on top of all the de-dollarization.

Yeah, yeah. Mark Yusko, I saw. Thank you. I'm glad you were able to join. Hey, guys. Sorry I was driving. Didn't have a good connection. Jack, one second.

Jack, Jack, Jack. The same point I wanted to discuss specifically. God's talking, Jack. I was driving. You have good connection. Jack, one second. Jack, Jack, Jack. One second. Scott's talking, Jack. I don't think he can hear him. You might want to come back and go down and come back up. Yeah, Jack's muted. I had a chance earlier. Mark, you just go.

If you can hear me, hopefully you guys can hear me. You must have heard Dave Weisberger invoke you earlier because he mentioned you and that you magically appeared. But I know you have a lot of thoughts on what Simon just said. You've had some takes on the Restrict Act and Patriot Act and how sort of out front and obvious it is what they're doing now. I would love your take. No, look, I think it's called Restrict for a reason. It's, you know, I joke that, look, when W was proximate to the Cheney presidency, he at least was, you know, patriotic enough to hide the negative intent of what the Patriot

Act really was, the Surveillance Act, on citizens without, you know, of law applying, to call it the Patriot Act. Oh, we're patriotic because we give up our rights in the name of this war on terror, which was never a war in the first place. Now we've got something much more serious that people just don't seem to be paying attention to. You know, the idea that you can be jailed for the possession, not even the use of, just the possession of a quote-unquote banned app with no due process is really, I mean, it's Orwellian in the worst form. And I don't really think this bill is going to pass in its current form,

but the fact that someone actually wrote it is frightening. And if you're not terrified by this, you're just not paying attention. But look, I love Simon and I agree with most of what he said. The reason I gave him a thumbs down was I actually think they are coming after Bitcoin. I just think it's hard to come after a decentralized network, a global network. You know, Bitcoin doesn't give a shit if the U.S. bans it. It didn't give a shit if China banned it. It doesn't give a shit if Iceland bans it. It is a decentralized network that is not reliant or dependent on any one nation state, irregardless of what that nation state believes its influence in the world. I agree that we are making critical errors because the people who are in charge are not the idiot politicians, but the even more idiot billionaire class, the WEF class,

that has had a plan since their formation in 1971. This goes all the way back to 1971. There's been a long time coming that they wrest control through cross-ownership of all the assets, just pull up the Bilderberg chart sometime. And now they've got a competitor in the sense that a truly decentralized monetary network that allows us to move value out of the corrupt system,

which has been stealing our wealth since 1913. I mean, look at every chart from 1776 to 1913. A dollar's worth a dollar. A pound is worth a pound. Everything was stable. And since 1913, everything's down 99-point-something percent. Why? Well, that was the plan.

It's not – like I said, they used to hide it behind fancy words. Now it's just right out there in plain sight. And, you know, CBDCs, I love the point I think Dave made that we're coming to the same place. And, you know, people say we're becoming China, China's becoming us. China is the most capitalistic nation on the planet, full stop. The whole fear of the CCP is nonsense.

They are capitalists. They have a 30-year plan to be the superpower. The, capital T, capital H, capital E. That is their plan. They believe in the mandate from heaven. They believe in Confucianism. For 1,800 of the last 2,000 years, they have been the most powerful superpower in the world. They had a 200-year experiment with Marxist philosophy that failed, and now they're back to Confucianism. They will achieve that goal. And we're playing catch-up on CBDC and surveillance and 15-minute cities. I mean, some of the most dystopian, crazy nonsense bullshit I've ever seen, and people are eating it up like it's candy. Anyway, I don't feel strongly about any of that, so thanks for having me.

Okay, go ahead, Brad, or Mark, either one of you guys. Go ahead, Brad, and then Mark. Yeah, no, I just wanted to kind of put something out there that you know the way I feel about all of this, Scott. I feel like that there's a real strong bias by a lot of people that invest in crypto companies and DeFi and stuff like that. I can clearly see that you guys really get bitcoin and you understand the value of bitcoin

and the importance of bitcoin but it seems like there's not been capitulation on any of the plod like logic that led to the bubble of the 2021 2022 crypto you know pon-palooza that we saw and the explosion, all the re-hyponzification and all that stuff that was promoted as financial innovation. Did you say re-hyponzification? I did. Yeah, that was the financial innovation of DeFi, re-hyponzification. Yeah, but you know, I made that one up. We should debate this because the backlash against rehypothecation and fractional reserve banking I think is entirely misplaced. In the absence of it, there is no growth.

But that's why I said rehyponsification because okay rehypothecation by itself is not necessarily bad but like this is something also that like bitcoiners talk about you can't have some bitcoiners think you can't have debt in a hyper bitcoinized world because bitcoin is money so in a hyper bitcoinized world there will be no fractional reserve. The distinction to make is, in the existing monetary system, and I did actually write a book on this in 2011, the governments will transition from debt-based money to debt-free money, which is CBDCs. But people, because money creation is combined with the process of issuing loans people think you have to have credit creation in order to have money which is true in a fractional reserve banking system but even in the the crypto space that's called even defy um which was an iteration on top of peer-to-peer lending, which was a 2006 innovation

before Bitcoin. As long as there is sufficient money in a system, you don't need banks to create money. Banks creating money is simply a free market way of determining the money supply by creating money every time a bank wants to issue a loan. And it gives a super subsidy to the private banking system because they benefit from all the interest of the money creation. But it also creates systemic risk. But you can still have a money supply, which is less free market. And I'm not advocating for this. And still have all of the lending without combining the process of creating money and issuing loans. And that's not necessarily that debt is bad. It's combining debt at the same time as issuing a loan that creates this diffractional reserve system. And that was simply because it was really a way of mining fiat currency into existence

based upon the demands of a debt-based system and Keynesian-like stimulus. But you can still have debt without combining. I think this is maybe the most important point. I'm prone to hyperbole, so I will super hyperbolize here. I think this is the most important point of all points that gets argued on Twitter and in spaces. This is, to me, the point, right? Which is, look, gold is money. Money is an asset that exists in the absence of a liability. Therefore, gold has been chosen for 5,000 years to be that.

All of the rest is not money. It's currency. Everything else that's built on top of gold, gold sits in central vault banks, central bank vaults around the world, and all of the other currency is backed by debt. So in the absence of banks and fractional reserve creating that currency and that lubrication for trade, help me understand how we don't go back to the dark ages. If all you want to do is turn physical gold into digital gold, everybody turns their value into Bitcoin, and then we put it on a ledger and we bury it in our backyard, we're fucked, right? We have that.

It's called gold. Yeah, so if you had a central bank that creates the money supply and you only had one money supply called M rather than M0, M1, M2, M3, M4 and no one in the money supply and having to use open market operations and manipulate the interest rate in order to control how much debt is created in the system, then you can still have a money supply that reacts to inflation and deflation, which is why I think a CBDC is inevitable. Don't like it. It's one of the biggest infringements upon life, liberty and freedom and a radical shift in the way that, but you can still take away the ability for banks to create money replace it with a central bank digital currency you could even let banks go bust if they take too much risk give everyone an

app to download the wallet and and just have technology performing the function of banking but you would still need that that would create currency and currency you don't know the supply and so therefore it would be manipulated by central banks a lot easier and probably a lot more stable and a lot easier to place blame rather than having all these systemic risks in in the system the the fractional reserve banking i i i describe it as a free market way of money creation by combining debt uh issue the supply of new digital currency. But isn't that superior, Simon, to a government-controlled money supply? I think so.

But the problem is that you end up in a system with more debt than money. And so someone always needs to take on the new debt. And so you find a new Ponzi scheme in order to supplement. So you get individuals in debt. Then when they find a new Ponzi scheme in order to supplement. So you get individuals in debt. Then when they're all maxed out on their credit cards, you get corporations in debt. When they're all maxed out, you get governments in debt. And when they can't keep the system alive, you put it on the central bank's balance sheet. And then they deleverage the system by wiping out. Yeah, the Jubilee. Absolutely. We're in 1840 London.

Let me read this little piece from the Bitcoin Talk forums that Hal Finney wrote back in 2010 talking about this specific issue. This is what I always come back to when we get into these debates about fractional reserve or not. And it's 100% accurate what Simon was saying. It's not fractional reserve banking that's the problem when you really dig into it it's it's really it's fictional reserve banking the money itself is the problem and they've bastardized the whole fractional reserve system and the keynesian economic policies because they've just taken the worst parts of everything and and combined it together and then that's why where i was getting to is what all of these defi companies and crypto companies have done is they've taken the worst parts of that and then put that on blockchains and called it financial innovation and really it's

it's like things that blew up in previous bubbles and historical cycles things that were way too leveraged and over leveraged and toxic and derivative. They just found a way to make money with that by adding tokens and yield to it, token mining, and put that on blockchains and called it financial innovation. I think we do a huge disservice to Bitcoin and financial literacy and global wealth inequality when we lump Bitcoin in with crypto. And we've kind of created the problem where Elizabeth Warren is now building an anti-crypto army because, yeah, like you guys were talking about earlier, Scott, with the progressives, why would a progressive be against this? Elizabeth Warren was part of the group that was bailing out Wall Street, not on her.

She didn't want to do it, but it was going to blow up the financial system. She was in charge of administering TARP. And then she created, later on, she was tough on, tried to be tough on Wall Street banks with tough regulations. And it all comes from a place of financial literacy and wealth inequality. So the progressives don't want to see big corporations and too-big-to-fail banks just treating people like profit meat and just leeching value from society without contributing anything of real value back.

And that's what crypto has turned into. Crypto has just taken all the worst parts of what Elizabeth Warren had to deal with in the collapse of the banking system in 2008 and put it on blockchains. And now it's kind of spilling. It has been spilling over into the traditional financial system. So it's no it's no like shock that you would be against crypto. And unfortunately, Bitcoin gets slumped into that. But let me just read this thing from Hal Finney. He says on Bitcoin banks, actually, there is a very good reason for Bitcoin backed banks to exist, issuing their own digital cash currency, redeemable for Bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included

in the blockchain. There needs to be a secondary level of payment systems, which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium and large value purchases. Bitcoin-backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve, while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others. George Selgin has worked out the theory of competitive free banking in detail,

and he argues that such a system would be stable, inflation resistant, that was just an interesting thing to hear from Hal Finney, who many people consider to be one of the people that could be Satoshi. Well, 100%. And I think he's right about 90-plus percent of it. I think the issue is we actually know how the free banking era worked out. It's not pretty. You need a lender of last resort. What you don't need is the fictionalized need for inflation and an inflationary money supply.

That's the problem but the free banking era in the 1860s was an unmitigated disaster and nightmare and it was precisely because everybody did issue their own currency from companies to states to even small groups

so sounds like coin market cash and really what that's funny while I was reading that i was like you know what like all these blockchain layers and all this they're kind of like banks that have fractionally reserved their bitcoin treasury no no and done credit expansion into the crypto crypto exactly and and what if you think about it right gold is is money we can all agree that gold is money.

It's the only asset in the world that exists in the absence of a liability. That's easy. Gold is the base layer, and what Hal's talking about is gold functions as the base layer of money. We don't transact in gold. Banks don't transact in gold. They accumulate gold by trading it for paper. And there's the great picture of the Chinese throwing paper across the bridge and Americans throwing gold back at them.

And we know who wins that. But the key is that we created these layers on top of that. There's Fedwire. There's ACH. There's Visa, the Visa network. Most of us transact using a little plastic card. Well, how often does that interact with the main chain?

Once a month. Once a month, it interacts with Fedwire and money is transferred from the bank to Visa and you settle up. The rest of it's just stored on a COBOL-based mainframe computer, which is frightening to think. But it's those layers. And Bitcoin as a base layer of money, great, awesome, replaces gold, is lighter weight, is more efficient. I quote Hal all the time on that. But what has to happen on top of it is fractional reserve lending to create credit and demand and growth.

And I ask this question all the time. I go into spaces and, you know, everybody, I mean, maybe not everybody, but everybody I know has some portion of their wealth in Bitcoin or other stores of value. Some have gold, some have whatever. But a whole bunch of their money is in the bank. So they're like, no. Well, yeah, it is. OK. So you've given up your rights to that money by putting it in the bank.

But we all do it. OK, fine. Name a country that you would go live in today that does not have or has a poorly formed fractional reserve banking system. I'll wait all day. Yeah, so Mark, that's why I'd say this is such an interesting conversation, I guess, to the core of it. And that's why I'm so grateful Bitcoin came around, because it gave everyone a framework to actually have these conversations that were so hard to have before Bitcoin. But probably, you know, gold people had these conversations.

But that's where I think who is going to create money is the question. And fiat currency, sorry, let's not call it money. You made the important distinction that money you can own is not somebody else's liability. So you've got gold and you've got bitcoin which are the true the traditional and the neo exit from the financial system bitcoin easier to custody and all the reasons why we're here and discussing it and more auditable. But the real conversation about who creates money is simply a central bank versus a bank. The current system is that the money supply is determined

based upon the central bank trying to manipulate how much money a bank creates and filling it with quantitative easing when the system breaks. The new system, which I believe to be a central bank digital currency, which by the way, I'm not an advocate for, I just think it's inevitable, predictable and guaranteed, is that the central bank creates the money not backed by a debt, but just simply based upon a simple money supply of how much money with more transparent inflation, deflation, targeting, and take away banks' ability to create money because it always ends up with the central bank having to bail out the system because of the Ponzi economics of having more debt than money.

And the problem of having more debt than money. And the money, the problem of having more debt than money is a Ponzi scheme. And so it always has to end the same way, which is why every fiat currency has to go through the cyclical nature. And I think the US is at that point. So it's just a question of freedom versus, and I do agree, fractional reserve banking is creating money based upon how much people want to borrow. And therefore, it's more free market than a central bank creating money based upon a transparent money supply, but not that by debt. But you deleverage the system and then everyone can operate a peer-to-peer lending fiat currency and you can even have

if you still, I mean inevitably the rules just break and you end up with fractional reserve anyway, so it's almost like an impossible problem to solve. So I think the conclusion is buy Bitcoin. And on that note guys, I do have to go record a podcast.

So that means that this space is unfortunately has to come to an end. I appreciate all of you. These things are such a winding and long conversations. It's so incredible where we started with Mike Novogratz and Chris Giancarlo, of course, and ended with this incredible conversation about freedom, Bitcoin, and of course, fractional reserve banking, all of our favorite topics. So I want to thank everybody who's still here, Mark Yusko, Simon, Brad. Of course, we had Northman Trader, Dave Weisberger, Mark Moss. Yeah, guys, we try to go big here on Tuesdays. And next week will be no exception. I've got Raoul

Paul joining next Tuesday at 11 a.m. Eastern Standard Time. All of these guests, as always, will be welcome to join as well. I hope you guys all enjoyed this. Once again, the recording will be live both here and on Spotify, Apple Music, everywhere else. So please hit that little arrow button and share this with everyone. Guys, thank you so much. It's been an absolute pleasure. I know I learned a ton. I hope all of you did, too.

Peace out, everyone. See you maybe tomorrow on YouTube and next Tuesday on Spaces. Bye.