The Wolf Of All Streets - Do You Want To Make Money Or Be Right? | Daniel Matuszewski, CMS Holdings

Episode Date: September 16, 2021

Daniel Matuszewski’s mantra for navigating the crypto space is “do you want to make money, or do you want to be right?” He elaborated on this idea, also discussing the future of Bitcoin and the crypto space with regards to regulation and politics. Anyone looking to make money in crypto should be taking notes on what Daniel says. CMS Holdings: https://twitter.com/cmsholdings -- Harmony: Build on Harmony, run on all chains https://thewolfofallstreets.link/harmony Harmony is your open platform for assets, collectibles, identity, governance. Be the ONE to bridge to all blockchains. Harmony is an open and fast blockchain. Their mainnet runs Ethereum applications with 2-second transaction finality and 100 times lower fees. Harmony’s secure bridges offer cross-chain asset transfers with Ethereum, Binance and other chains. -- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWo...

This episode is brought to you by Harmony. Please stay tuned for more information about them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of Wall Street's podcast, where twice a week, I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, art, music, sports, and politics, basically anyone with a good story to tell. Now, today's guest began to see early signs of life in the crypto space back in 2012. As an equities trader at a hedge fund at the time, Dan began to pick up on the early rumblings and decided to go all in. He founded CMS Holdings,

a well-known private equity firm investing in both coins and projects. I'm interested in finding out Dan's thoughts on the current market cycle, the impact of regulation, and how to approach this nascent market as a trader. Dan Matuszewski, it's a pleasure to have you on the show, man. Thanks for being here. Yeah, thanks for having me. So listen, your tagline or the CMS tagline on Twitter reads, do you want to make money or do you want to be right? I love this line and I preach the same idea regularly.

Could you elaborate on what that means to you? Yeah, so I think this is pretty relevant in crypto. I mean, I think it's good for other asset classes, but in particular for crypto, because there's a lot of stuff that I think it's good for other asset classes, but in particular for crypto, because there's a lot of stuff that I think people's initial reaction is like, oh, this is ridiculous. This is dumb. I want nothing to do with this. This is silly. This is not going to have any value. And crypto in particular, I think, has a way of sort of making you eat those words pretty quickly. So I think a great example is this whole JPEG thing, the NFT sort of stuff.

There's a lot of people whose just initial reaction was this is worthless this is silly it's all wash trading whatever like whatever like sort of the tagline we want to be and i think if you're an allocator of capital you can't just be dismissive of stuff right so like you can't just be like this should be dumb like i'm right like this is not having any value you got to kind of listen to market right like if people want to trade this like they're going to trade it and like there's going to be an ecosystem around it and it like grew and it like made like look personally like i kind of didn't get it either but like i wasn't just going to ignore it right like as soon as it hit a certain point i was like right i'm wrong and like especially like i keep good people here that work that were like telling

me like you got to like pay attention to this this is like a thing um and it's becoming much more so every day um so that's like sort of the ethos is like don't like check sort of your like i don't know like your preconceived notions of like how you think the world should operate for this stuff because it's evolving very quickly and in particular as you start to do it longer you'll have stronger feelings about what you think should be right and those are going to be in conflict with like where the market's going. So like, that's like just a guiding principle. I sort of like tend to think about this stuff. And I think it's helped me sort of like trade.

It definitely, it's becoming harder. I think as like time goes on, I think that's just like a function of like being a human. But I think if you can like keep that constantness of like, all right, like this is, I got to pay attention to what the market's telling me, you'll always be able to sort of be where the money is and going. Yeah, I love it. I always think of it more like, as an individual trader, the idea that people always freak out and move their stop loss or take profit too early, because they can't stand the idea of being wrong. Right? Like, if I stop out, if I stop out of this trade, I'm wrong. I can't

accept that they don't even care about the money. It's all about the ego and just needing, needing to be right. So that's how I sort of always read it when I hear people talk about that. There's definitely a degree to like, if you're public about something, like you have a tendency and a bias to like, like, right, like if you if you go out and you make a call, and like, it's wrong, right? And like, it's clearly wrong, like, you probably don't even believe it yourself but like you sort of married to it in like the public realm like i think that that's like another example of where like you're just trying to be right when it's like like like it's okay like you're wrong you're gonna be wrong a lot and like you gotta just like own it but like it becomes hard like people definitely people become tied to publicly sort of stated trades like way longer than they

should just because like, oh, like now I'm like in it, like it's part of my identity. Yeah. Twitter and the media add that whole element that never existed as an individual retail trader before of where not only do you have to like manage your trade, you have to, if you have a following, manage their expectations and their- Yeah, true. Yeah, you're absolutely right. So let's just talk about briefly what CMS Holdings is, what you guys do and why you started it in the first place.

Yeah, so I guess the background is me. There's three of us started. It's me, Bobby Cho, formerly of Cumberland. And then I got a Julian Sagan who worked with me at Circle for about four or five years and built sort of the infrastructure. So he's like our CTO. And Bobby and me both came from the OTC trading side of the world, which got really big in 2016, 2017. Like that was like the heyday of like that whole thing. So we'd both been trading at our respective shops for like, God, like four or five years, basically back to the beginning. Like I traded with Bobby at Second Market, which became Genesis and like DCG and all that stuff before it was even, like they were trading, I think auction rate security still at the time, which I never got into, but like, isn't it even like a product? I think. Yeah. I just like, don't think it's a thing anymore

for like that. So anyway, we, we had been very close. Like we'd like talk risk. Like we were obviously like laying risk into each other the whole time. And like the OTC market was becoming electronic. Like it has very much now. Right. So like the high touch trading is, it's a thing, but like the margins came down considerably. And also it was becoming more clear that like taking risk in a proprietary sense was like business that was going to be separate from the sort of agency-like business

that OTC has somewhat become, right? So like if you're a larger trader and you're looking to like get like a price for something, like some of that stuff will still hit risk desk. And when I say risk desk, it means trader and you're looking to like get like a price for something like some of that stuff will still hit risk desk and when i say risk x it means like somebody that's willing to like you face that counterparty you don't face them who like goes and like brokers it somewhere else right but that that model was like evolving in a sense that like these like proprietary trading shops were going to like probably sit separate than like the agency sort of like otc order flow

business so and and it was just like a good time to like circle was going through some pain like the desk was like sort of becoming a secondary effect to what ended up becoming just usdc is the focus so i was like all right like i'm gonna so we transitioned we teamed up and we started this thing it's like early 2019 we got it like up and running officially by summer um and basically hit the ground running and we do two things we do we run a venture book. That's mostly what Bobby is doing. So this is all like longer tail, mostly tokens. And then we do some equity. It's like, we've probably done 115 or so deals to date.

There's probably been like five that are equity only. So it's like very heavily skewed towards like the token distribution. That's anywhere like in the life cycle of the sort of the subway. We've done later stage financing related deals. We've done a lot of angel deals and we run a liquid active trading strategy. So this is like mostly what I'm doing on the day-to-day side.

So this is anything that has like actionable price today, right? Like this is all like our liquid positions that we mark day-to-day and like we're trading around. We do a lot on the basis, which is like basically the curvature of like what the Bitcoin futures look like. So we're trading a lot of different things with the lending market. So we were large bilateral borrowers of sort of coin and cash and like arming those markets out. And we get involved in sort of like the DeFi component of that, which is so the long story

is like on the liquid side, we'll do anything pretty much as long as like we can like stomach the risk and the ball of it um which is pretty high and then on the venture side like we're doing pretty much the whole life cycle of stuff but we don't have outside investors so we're pretty like clear to do whatever we want as long as like we have agreement and buy-in amongst like partners which like tends to be pretty good so and it's it's been a great look we we caught a really good market turn with the whole thing too right we kind of we didn't bottom ticket, but we were pretty close. So it's like, it's kind of been up into the right, like besides the COVID.

COVID was like the first time I was like, this might not work. But after like, we sort of got through that, that was like, that was like dicey. But after we like got out the back of that, like things have been like pretty much through the sailing. So like knock on wood with all that. So on the liquid side, then have you guys been, I guess, heavily exposed to GBTC when it was obviously

when it was trading a premium and not a discount. I'm curious what you think of that discount now. And also if the cash and carry trade has been a big part of your strategy. Yeah, cash and carry has been big. It probably always will be.

There's like, it's going to get more exacerbated if we get our Bitcoin futures ETFf um right because like that's that's basically just going to dive up the back of the curve um so that'll be like probably more of our business but it's it's still like a pretty substantial piece of it the the business on the cmd has gotten barbed out a little bit in the sense that a lot of traditional pools of capital looked at it like we're like this is this is something we can do So we're going to like take advantage of it. But like the stuff that trades on the like more exotic exchanges, right.

Like the offshore venues is still like wide open. But so on the GBTC trade, like we were doing the GBTC and ETH trades, like not for crazy size, mostly because like the edge on it was good, but it wasn't great for what we were seeing sort of in the market. Like us deploying strategies that we were like running internally were like better usually but we were still borrowing to do it right because it was kind of free leverage because we were able to secure pretty cheap borrow to then like do that trade so it didn't like take away from us doing any other activity um we we pulled back on it when it started to get when the size got really big

we didn't think it would go negative. I'm not going to sit here and say like, we knew that it was going to go, but we were just like, look, like the edge in this is going to come down and like what we're paying for and borrow versus what we think we'll make when this all lands. It's just not great. Yeah. It just like, look, like we'll make some money on this. We think, but like, it's not like, it's, it's not worth it. So we, we,

we got out of most of it very good and then the last call it 20 of it probably like we took a bath on relative so like as a as a whole trade like it was good like we definitely like netted a good amount on the whole thing but like we still own some of it like we'll probably just i mean i don't know we'll warehouse it until like there's probably there's no forcing function. We like just paid back to borrow. So we just like own some of our outright positions like via those vehicles.

And like, we'll just like wait on it. But it's not like a material hit to us to like sort of be sitting there. In terms of like that premium coming back or like even just trading at NAV, there's very unlikely that it will, in my opinion, in any like reasonable timeframe. Like Gensler sort of

shut the door on that when he said that we're going to, so I think we're going to have an ETF for the record. I think like the futures ETF is probably going to be the path. Yeah. Right. So this is the key, right? So a futures based ETF is the worst world for GBTC because it means GBTC is going to be living in purgatory for longer. Yeah, it won't be able to convert. And now you have a new vehicle, which is going to soak up the demand that it already had, right? So you have less buyers and an even worse like sort of horizon for this thing. I think eventually GBTC will be rolled into an ETF.

It's just that we're looking at like probably two years kind of like timeframe now, right? So like that's a material amount of time for a lot of this stuff. So I think that's like why you've seen like the, the discounts persist strongly. There's also just a lot of people trapped in the trade. So it's going to take a long time. So you don't think that the discount is an opportunity?

Not, not right now. I, I, I, I would say, I thought it was until Gensler's comments around the futures-based ETF. I, I, I, We were debating putting that trade on when the last slugs of the unlock were going. I think it was like end of August, wherever. There's like that big spike mid-August or early August where a lot of it was mulling off at once. And we're like, all right, you probably want to buy this

into the back of that. But then Gensler, like I said, just made those comments where now there's no horizon for this turning turning around and you're giving people another avenue so it was like this is this is probably a problem i think like the et product if you had to do anything is probably better suited because like if we're six months away from a bitcoin futures etf we're probably a year and a half away from like an eighth one right so like you can you can survive on that feet like soaking up to man in the interim. But yeah, like that was a great shade for years.

There's a lot of guys who cut their teeth on that. It's not a bad do if you're stuck with money in a 401k type product still though. Like if it's the only access, right? Like it's still not like- Better than not having Bitcoin, right? Yeah, sure. Right, exactly.

Obviously you brought up Gensler. I think that there was a sort of sentiment when he came in that he understood blockchain, that he was going to be favorable for the industry. In my opinion, it's kind of taken a different turn than that, right? He sort of seems heavy handed, like he wants to deem everything a security. First of all, what's your take on Gensler for the industry? And also, I mean, what's your expectation for regulation moving forward? Yeah, so it's actually funny.

So I worked at Circle for a number of years, which is based in Boston. And Gensler was teaching at MIT. So he came and talked at Circle a couple of times. And we owned Flonix at the point when it was happening. And I don't know. He was always very upfront with like, some of these things are securities. Circle via Flonix is operating illegally. Like, he's like, no, he was like very upfront about it.

He was like, it's probably securities and it's probably like illegal. And like that, that was always my interpretation of him. So when like the crypto community got like really stoked about it, I was like, you guys like better watch, which was like, yes, like Bitcoin clear. But like, that was already sort of a solid thing.

Like ETH clear, like that's like, like the existing stuff like that we were inheriting from the previous administration like good like i do think it helped the chances of getting an etf material so i was like that's like a plus but i was like the long tail of this stuff like he's just not a buyer of it he's like very he might not be wrong either right like a lot of this stuff like maybe is like a security in the definition and framework and if it is but i'm hesitant that he's going to take a Hester Peirce's type model where we're going to have this sort of incubation zone. I was like, I think he's going to try to sort of come down. I don't know if you listened to the hearing yesterday.

We were heading up the new office. We were going through it. Yeah. I'll say this. What was telling to me about, besides Gensler, obviously, it's sort of known, I think, where he stands on this stuff. He thinks a lot of it's securities. Um, I think the reason he's going after the lending products is because that's

the clearest path that he can take without resistance to like, sort of flex on the industry as a whole. Um, right. Like that's like a very clear path, like that he thinks is able to go do it. Cause like, he's got an existing lawsuit with ripple that may or may not go well.

Right. So if he loses that that then like there's open season but like let's say that that's just going to be in courts for another year but in the testimony what was very telling to me is it's somewhat become a party issue right like the right and the republicans are more for open innovation let the market decide let this stuff like go like we kind of don't care about regulating and policing every aspect of it. And they're pro-crypto if there's any designation. It's definitely not a party issue, but it seems that that's somewhat of a tact, right?

So they were always pushing back on Gensler, about a number of things, but on the crypto side, definitely, why are you trying to stifle this? It's going to go overseas. This is something we want to foster internally. And then the left was was besides a couple people like warren's obviously got like beef with it and then um like a couple other random comments the majority of the criticism and talk that they were talking against her was around climate change and human capital related issues right so it's not here's the thing is like there's not a clear voice besides a couple people that seems to be like wanting to make this huge priority in the sec which is probably good right so it's you got to remember like

genser has to like tow the party line with like his administration as well and if they're like look climate change and disclosures is what we care about and order flow and human capital like disclosures from corporates there's like a real forcing function to be like you may want to go do this with crypto but this is like the priority is like sort of we see it so there wasn't there wasn't like a massive voice coming from either side that was shedding a spotlight on which i thought was good uh that doesn't mean that there won't sort of be action in the world but like there's clearly a decision for like resourcing of like where they want to see it come from on the party that would be like most likely to take a more hostile stance to

things so that was my takeaway i thought it was good i i also generally thought that he seemed to be getting very good pushback for specifically around stable coin related things right yeah which is like a good that's a very odd one again i think he's looking for like things that are like very clearly in the wheelhouse that he can tackle and not necessarily run into huge headaches in the courts. But maybe this stuff is just going to end up there anyway, and it's going to have to play it out. So I don't know, cautiously optimistic from what I saw yesterday, as opposed to previous stuff that's come through. Again, there's just a world where this stuff may just have to play out in the court system. Yeah, you make a good point that the Lend products are probably low-hanging fruit.

And I wonder what that means when they're blocking Coinbase at 4% on USDC, what that's going to mean for the BlockFi's and the Nexo's and the Celsius's of the world, of course, at least in the United States, right? But perhaps there's a silver lining, which is if they focus on the Lend products, then the innovators won't be really affected right outside of that, perhaps, and they'll still stay here and continue to build. Yeah, it buys you time. There's also, I think the single biggest thing that like the community as a whole can do to like, push back on like regulatory sort of scrutiny and oversight is just sort of getting more pieces of crypto or

getting it just in the hands of more individuals, right? Like as the industry grows, it becomes more of a political risk to be hostile to it, right? Because here's the thing, historically, nobody cared because how much of your base gives a shit about crypto, like very small historically. And it's becoming bigger, but it's still very small. Right. But if you have a penetration number, that's like 25% of your voting block, like you're not going to just like body bag, like a quarter of your voters, like they're going to get pissed. They're going to show up and they're going to like vote you out. And like, you know that. So the big, big win thing here is like, you just need time because time is adoption. And like, the trend is still

very much in the direction of like, the more people that can get involved in this industry, they don't really leave, right? Like people tend to come and stay and like that gives it more sticking power inside the States. And also like more of this as it gets public, like as crypto corporates bleed into the public equities market, it becomes harder to damage these things because you cause more material financial harm to more people right like coinbase is really the only big big one that we got but if you've got 15 companies that are all worth five to ten billion dollars you can't just like overnight crush this stuff because you're going to hurt a lot of different sort of people with a lot of different financial

interests in it which is somewhat of a thing like i don't know so i think that's the really good thing is like courts are slow and it helps like sort of buy time. And at the end of the day, if the American people want this thing, like our representatives will find it. Like we are the ultimate sort of say and like how this stuff like operates. It's just like we're in this weird zone where we're not big enough, but we're getting there. But there's a lot of money. It's. Yeah, we're in there. We're in there. We're in purgatory. But I mean, what a sad indictment, what a sad indictment of politicians. They'll only care when it obviously hurts their bottom line and affects their chances of being elected, right? You make

a great point. I've made this argument certainly about institutions. There was reputational risk probably until a year ago to even bring up Bitcoin in a meeting, right? Same for a politician. You looked like the crazy guy in the room. Now I think there's reputational risk for politicians and institutions not to be at least informed and be able to talk about it, right? Like constituents are going to be asking about it. And I think the infrastructure bill really showed that because they threw in this line about cryptocurrency that probably nobody gave a shit about, nobody even thought about. It was probably written by some intern as a way to raise taxes or something, right? And the crypto industry with no lobby, no super PAC, nothing like was up in arms.

So now I think when it moves to the House, there's going to be politicians, hopefully, who jump on it as an opportunity to, you know, to win over the crypto crowd rather than alienating them, sort of, as you said. It's funny you bring up the PAC thing because there's a couple of these getting spun up in the background. Like I've been working with Bantam Framework about one. I think sort of I've been having these conversations with the guys that were working on the pack side and the tell from what we got is that if you're organized and there's like a monetary sort of i don't want to say like because it sounds like you're just like buying books but it's not like the there needs to be there needs to be a negative externality to being against crypto i think is the way you want to phrase it, right? You want it to be like, if I'm hostile to this, I have the potential to lose to another candidacy, right? Because they're

going to have either an influx of money or like voters that are going to them, right? So that crypto legislation got drafted as such because nobody's worried about doing anything negative to the industry, right? Like there's no negative consequence to it. And like, look, there's the reality to it. What's the median age of a Senator right now? I don't know, mid 60s, like probably. I think probably 140, 147. Right. Yeah.

Right. Like, it's just like, I don't, I don't, like, I don't think there's a ton of interest in learning about this stuff, let alone knowledge of like what existing is. Like there's, there's definitely a massive information gap and like Coin Center is doing a great job

at like figuring stuff out and the Blockchain Association. But at some level, you have to like take home to these people that it matters and that's not going to like resonate unless there's a real threat, either from money

being funneled away from them or because you're in like sort of constituents are up in arms about it. So I think that's starting to happen or at least like the industry as a whole was like, all right, like,

do you see matters and like we care now a little bit more so that this doesn't like keep becoming an issue. Guys, I'm really excited to be sponsored by Harmony. I know all of us have traded their coin one in the past, but what they're fundamentally doing is a game changer. Harmony is your open platform for assets, collectibles, identity and governance. Think of it as the one to bridge all blockchains harmony is open and insanely fast with two second transaction finality and a hundred times lower fees than ethereum their secure bridges offer cross-chain asset transfers with ethereum binance and almost every single other chain maybe most exciting is that harmony in cooperation with sushi will be providing four4 million in incentives for liquidity

mining. Find out more about this program and build something yourself at thewolfofallstreets.link slash Harmony. That's thewolfofallstreets.link slash Harmony. Build on Harmony, run on all chains. So putting all of that aside now, more as I guess a trader and investor, where do you think Bitcoin is now in the cycle? I mean, I never asked people for monetary targets based on timeframes, but do you think we're still up into the right and drastically? Do you think we're early in the middle late? Where do you think we are? Yeah. So I think, I think we're up into the right, but I've said this like a bunch of times, like quasi randomly throughout like Twitter and stuff like that. But look at the amount of money that's flowing into two things. Like one later stage financing of like corporates, right? Like how

many billion plus deals have you seen done in the last like month? Like, I don't know, at least five. Right. Yeah. Right. Like you get companies going from like nothing to unicorn in like two months. And the reason for that is there's, there's an absolute colossal amount of money pushing through the private equity space. Right. And like money that needs to be deployed. And that takes a while till it gets comfortable moving at the risk curve and like owning coins, or maybe it doesn't at all, right? So the money you're seeing pushed through there, you're also just seeing everybody that's like raising a fund getting massively oversubscribed

and like tons of money pushing through the pipes there, right? So like, as far as I see it, the inflows are very much positive and not accelerating, but keeping at a very steady pace going in. And there's a reality of there's a lot of money just in the system, in the world right now, especially in the US economy, that it's trying to find a home. And some of that will find its way further out the risk curve. And that's where crypto has won. It's the highest octane asset class you can probably be in. And like some of that incremental dollars is like getting pushed there, right? Because you're like, I can't own fixed income. So I own stocks. And then you're like, your stock guys are like, I don't want to own stocks. Like I own

crypto. Like it just like, it bumps everybody out sort of where their like comfort level is. And this is just like a function of how much money is like in the system. So I don't know. I think that that continues. Look, I think the stuff in China was real, and it was negative. Like, I don't think anybody looks at that and goes, that's like a good adoption thing. Like that was a harsh, right? Like, and but we've seen this before, like the Chinese government comes in, they crack down hard, and then they sort of just like lay off it for a couple years. And like, it like sort of slowly builds back up in the background. I think we had to like work through that. I think we have worked through that. And like, we're just continuing to see like the effect of like inflows coming off the back of that. Right. Like, I don't, I don't think you're going to see like a massively vibrant regrowth of

like crypto industry in China in the next like year, but like maybe 18 months, like maybe two years. Like that, that's going to be like damp for a bit, but we went through it. Right. Like they can't ban it again. Like that's like the other thing, right. Like where we're through that as like a risk thing. And like, it always happens. Like when we run up, like 2017, it happened, 2015, it happened or whatever the heck they did. Like, it's just like a thing, right? Like we like know that it comes and like, we move through it and we go, but like, as long as there's a ton of money trying to move into the system via either equity

based investments in the industry or like via funds that are looking to like deploy into it i just think this like continues as like a trend and like that's also freaking like there's like a ton of retail participation that's like growing sort of every day as well so i don't know i'm i'm a buyer that the trend is your friend and all this stuff right like i don't know i don't see a reason people are suddenly like oh like i'm not interested in this anymore. It's like, all right, that seems unlikely. So yeah, I don't know. That's my overall thesis.

So it's a fun narrative because it says money printing is really good for the industry first. You say that they obviously, there's this huge amount of dollars looking for a home, right? And then someone goes into the picks and shovels approach, right? Because they're afraid to go into coins, as you said.

So they'll obviously invest in exchanges and platforms and anyone who's building in the space. And so you get this huge influx of money that's existing and sitting there coming into the space. So we rail against money printing, but in the end policy of the last 18 months is like irrelevant to like where we are i i'm just like i i don't know i'm like skeptical of that right like i mean downstream like all this money like is all connected and like the more free flow of sort of cash you have moving around like i think that matters so i don't know i think that's like a big portion of this like is it all of it no like i mean like a lot of it's self-sustaining right like higher prices beget higher prices like in markets to a degree so like that maybe it wasn't all of it but it was definitely a contributing factor in like the momentum of it all so i don't know but i don't see that changing right like i i don't see like there's suddenly being an about face of all this stuff me there i mean coin coin biz just tried to do a 1.5 billion raise on a junk bond

right you got 7 billion in interest in a day. It's not, yeah. Like, well, because like people, so Saylor doesn't do himself any favors a lot of times, like when he says like crazy things, but like ignoring that for a second, like I think he's gotten unjustly sort of, people are always like, oh, he's going to get stopped out. He's going to blow.

Like, first of all, he's not. And second of all, like he's taking care of this like immense arm that exists like in the world right now, where he's taking care of this like immense arb that exists like in the world right now where he can basically borrow unlimited for like the worst terms on the planet. And people keep giving him money and he's like, all right, I'm just going to see where like the end result of all this is going to be. And I'm just going to effectively put this trade on. So like, look, he's kind of the proof that this isn't going to slow down, right? Like he keeps raising more and like the market is more than willing

to continue financing this sort of stuff. And Coinbase arguably can do 10 times that, right? Like, I mean, they have like a massive business that throws off cash. Like, so there's stapled this thing onto a company that's like a little mad. Like Coinbase is just proof that like, there's just too much money out there.

Like there's just way too much money looking for a home. Yeah, buying cheap debt, obviously. Saylor hashed that out on my podcast, actually, because that was the first question that I asked him the second time I had him on. I was like, everybody says you're going to get stopped out. It was price. And we were around 30 at that time. He was like, and he hashed out for like 45 minutes.

Dude, this can go to 10. Doesn't matter to me. I'll raise more debt. Like people don't understand. I'm not selling this Bitcoin. Yeah. I think the problem is like people think like he's just like trading on leverage yeah it's like this is not this is not like there's like some level where they like just like

oh it's over like we go home it's like this is like the corporate like debt market that he's like touching is like a much different like beast so no it's good it's good that like there's been some clarity on that like that was some of the most ridiculous tastes i've ever heard i think when we were down in the 30s don't understand and it's fear and angst they well you know i'm wanting to see him fail obviously plenty of people yeah i mean i will say this like he has put his money where his mouth in and he is taking that thing for the ride like power to him everybody like everybody knows what's going on too. Like there's full disclosure of it all. Yeah, he has more Bitcoin than I think I saw.

They reported yesterday that then almost every top 100 S&P company has in cash. Crazy. 2021, man. It's the most 2021 crypto thing you'll ever hear. So for you personally, and for you guys, does it start at the top of Bitcoin and trickle down? You told obviously in your liquid side, you said you guys will trade anything, but is there anything that you're really excited about? Like does ETH get you going? Are

there things that you're looking at? Where do you think the market's headed in general, like as a split from Bitcoin and everything else? Yeah. So I've sort of been of the assumption that the asset class will continue to grow horizontally in the sense that like more value will continue to accrue further out the tail as time goes on. I mean, like there's also just like a law of large numbers like issue to a degree, right? Like Bitcoin is so big, like if it were to double, that is a material amount of money that sort of like needs to move into it versus like say, look, like, I mean mean we we were in that financing like we were very probably bad like we took that position in solana about uh whatever like a year ago now almost like whatever back in january but you don't need a lot of money necessarily to move into something like that for like the sort of compounding to like really matter very quickly so like i think there's going to be more things like that that you see like continue but i guess i i think they're going to continue

to see on a like a notional basis more continue to flow into Bitcoin, but on sort of like an opportunity basis, like more continue to happen like outside Bitcoin, mostly just because and ETH because like ETH is getting really big too. So it's like starting to suffer from the same like issue in that like the opportunity set is just greater further out the risk curve. And like I think you're seeing a lot of money deployed there because they're thinking, like a lot of the new funds and stuff that get raised, like that's where they're deploying to. Like that's like where they're looking to take opportunity. I mean, look, that might bite you. You get a long bear market, a lot of this stuff gets toasted

and it just like doesn't stick around. But- We saw that even in a short bear market. Yeah, it was quick, right? But we just saw that in a short bear market if you're talking about things further down the risk curve. I mean, a lot of obviously the smaller newly launched projects down 90, 95%. Right, they're out. And like things further down the risk curve i mean a lot of obviously the smaller newly launched projects down 90 95 right they're out and like that's the risk like

it's but like you get the upside at least has since we've been like in operation been so much greater than the ones that win right they're like yeah like look you take a lot of zero it's the venture capital sort of like model of the whole thing right and pray yeah to a degree and like that's like i mean i don't know like spray praise one or two things it's either like you're lazy or you're just like you're or of the opinion that like you don't know any more than the market like i don't know there's like two ways you like go to sort of that whole thing so i don't know they think that's like how we continue to see like things sort of evolve um the money's gonna be in dollar terms of largest like definitely just for bitcoin like that i don't

know that'll that'll materially accelerate i think if we get an etf um yeah for sure yeah so that's that's going to be a wild sort of like ride when that like all plays out so i it's funny like because that futures etf is like in my opinion even worse than gbtc like for retail to purchase because the role is going to be fierce like it's going be, it's going to be paying so much a year just to like keep his exposure. Like, I don't know. It's, it's a bad model. It's like, it's just, I don't know what the hesitation is to like get a physical, I think it was Fidelity had a conversation last week where they were trying to like urge. Yeah. It's like, well, I mean, like, I don't know.

Everybody gets it, but I don't know. And it exists elsewhere and it's, you know, it's even less volatile than some products that have ETFs already. We all know that Bitcoin should have an ETF by now. I don't think we need to really. No, we don't. I think it's wild that the like big ETF products are still like allowed. Yeah, I mean, you see volatility in March of 2020. And I think Bitcoin's a problem.

It's crazy. You mentioned that you guys were early in Solana, which is funny because in this space, that means eight or nine months ago, right? Like not eight or nine years ago. Right, right, yeah. Did you view their downtime as problematic at all or did that change your thesis on them? Obviously, for anyone who doesn't know,

they were down for about 20 hours after Bob sort of spammed the network. Yeah, I mean, it's not great, right? Like if you sit there and you're like, oh, this is like, I don't know, people spin stuff weird. But like, I mean, it's not great, right? Like, if you sit there and you're like, oh, this is like, I don't know. People spin stuff weird. But like, I mean, look, like it's in a vacuum. Like I prefer it not to happen than happen.

That being said, like, I think it's a sign of two things. Like one is that it's probably getting too far ahead of its skis and that's growing quicker than like you can keep pace with for like a ton of different reasons. And this has been an issue for a while, right? Like the RPC nodes go down a lot. pace with for like a ton of different reasons and this is this has been an issue for a while right like the rpc nodes go down a lot like there's like a bunch of different like stresses on the system that like need to get like fixed so that's part of it and then i think like the second thing is just like there's probably like a lot of legacy

sort of like tech debt that's accrued to a lot of different pieces of the system that just like haven't been addressed because like everything's been on fire for like the last like eight months so i think like that that's like part of it but look like i remember doing the icos on eth in 2017 and like you couldn't use each for a day because like status would do its ico and like the blocks were backed up and like everything was jammed for like so like look it's bad it's a growing pain i think it'll be fine like in terms of like our like we didn't we didn't shift any risk around because of it so we're just like all right like yeah, like, yeah, like, look, we got to do better. Like, this is where we got to like put resourcing.

Like, this is like where stuff's like sort of got going. I mean, like we keep dedicated in for internally to like keep nodes up and like run sort of like the whole stack. So like we were telling them, we were like, what do you guys need resourcing wise to like be able to help here and whatnot? So like-

So you're participating in the network. Yeah. Yeah, yeah. Well, it's funny because like our guy, Dave, who like runs's like he's very sharp and i was like i was like when you think this thing's gonna go on and he just like started laughing he's like he's like i have no fucking idea he's like this thing's on fire 20 hours actually kind of fast in context i guess yeah yeah well he was like i don't think it's coming back i was like it's gonna come back i was like just let me know when you like think it up. Right. But I mean, doesn't that speak to sort of the general risk to in this space? Listen,

we all love all this stuff, but you know, people sort of take for granted that this is still new technology and it can go down. Oh yeah. Yeah. I think, I think people don't realize that until like you have it sort of like happen. Right. Like, and then you're like, Oh yeah. Like, forget it. Like some of this stuff's a little like, well can you slap massive valuations on it and you assume that that means

like, it's going to take like, yeah. And it's like, all right, well, I don't know. I think, look, it'll all be fine. I'm not. But these are experiments. I mean, I think it's just important for people to understand that. And it's not a bad thing, but yeah, we're still largely in the experimental phase of crypto. Right. I mean, And this is definitely, this is going to happen again with like other networks. And like, this is like, go into this knowing that like, yes, like at some point, like this

stuff is going to have a massive break or a breach or some like security issue. And like, you just get over your head right now that that'll happen. And you'll be like a lot better, like equipped to deal with it. Like, and also that this is like, this is when you can't be over leveraged in this industry and like i say there's a lot to like a lot of different people i'm like you like you cannot possibly be sure enough to be levered to the gills and think you're gonna make it i was like there's just so many unknown unknowns and like the risk profiles of these things now have just become so large because like the attack surface of like so many different like components of it i was like you gotta like make sure you can like survive but you have to make sure that like you're not

going to become like a force seller because then you like are just out yeah and you're going to be a force seller right before it rockets the other way i'm on play guaranteed so right exactly you're going to stop out on the bounce like that's you know right it's just like it's it's but exactly you're gonna become that bottom now like you got to survive and like like this this has been said by a bunch of other people but like if you have been able to like survive in crypto some whenever you got in like you've been fine right like you've done well so like really just like making sure that you can continue to play the game is like of the utmost like importance.

Like just do whatever, like when you're thinking, you're like, this will be fine. I can just push it. Like what's the worst case scenario? It's like, yeah, the worst case scenario is you stop playing the game and then like the whole thing like flies by you.

So I don't know. I think there's way too many people have too much leverage. Right, well, I was gonna say, so like on, I guess on the spot side, leverage side as well, but how much do whales really drive this market? And in your mind, how big is a whale? Like what's the, you know, how much do you have to have to really have an effect on the market? Yeah. So it definitely matters asset, right? Like you can, you can be a whale with a couple hundred grand and I don't think anybody can move Bitcoin anymore.

Like maybe like a couple of miners can build up enough inventory to do some damage. But it is, it's not, I'll say this. If you're talking about moving it more than 10%, I don't think it's possible anymore. Could you move a couple percent for a short period of time? Sure, but there's-

And then you trigger that leverage cascade, right? So that's the way you can move the market is sell it down enough that you send everything cascading down and liquidating. Yeah. The issue now, though, is there's so many well-capitalized S that are going to fade you and be on the other side of you that it's like, look, what probably was a trade that made sense for many years where you could fuck around with things and then cover back. There's people that are going to make you eat that on the other side of it now

so bitcoin and eth is very hard and i really think you need like a billion dollars probably and like capital that you can deploy to like do something like that to like make a dent and then like you have to think like who's the kind of person who's got a billion dollars that's gonna go like fuck around with like stuff like that probably not like especially when you're upside is just hold it and watch it go up like why i mean you're probably you're probably doing much more like sophisticated sort of like things like in it now that being said you see like a lot of fuckery with like the longer tail of assets like that definitely happens right like people know that they can push these things because a lot of stuff trades on leverage that's very thin right

like you see this on a lot of stuff likeance will list futures on stuff like an hour after it has like a spot market. FTX is listing futures on stuff before they have spot markets. So like, look, like that stuff, yeah, that's the wild west. You have to be willing to accept the fact that somebody can just squeeze you just because they want to squeeze you and it doesn't take necessarily like a lot of money. So I don't know, like that stuff you really got to watch. But like the main assets, like the aggregate crypto market cap, I do not think anybody can like mess with anymore. I just do. I do not think that that's possible. It's gotten too big. And there's too many well-capitalized players in like the industry. That's good to know. And just spells a lot of myths for the conspiracy theorists who every time they stop out of a trade, think that

some whale personally screwed them and went after them. If you think some whale personally screwed you on Bitcoin, you are going to have such a rough life because that's just not. It's just like, trust me, man. All the time though. Dude, they saw my stops. They can see my orders, man. It's like, man, there's so much money. Yeah. That's the other thing. It's like this theory of like, oh, I'm so important that some like what will happen is like you'll see financing get really out of whack. And like this is like also why I think people get confused is because the markets, when they're self-correcting, often hurt the most people. Right. And like I think that makes people think that somebody is like hurting them. But it's like, no, that's actually like people putting things back to like sort of fair value.

Right. So like we see you see this the most with let's just take bitcoin as an example right like let's say bitcoin professional financing is really high and the curve is trading at like 25 annualized like financing right so it's very very steep that's gonna get people to come in and sell that down right like that is the natural reaction of a lot of desks is going to be like i can do cash carry i can smush this curve back down and I can flatten it. But in the process of flattening it, you're going to liquidate a lot of people. And then those people get like cascaded down

and they're like, some whale came and crushed me. And it's like, no, like really what happened is like, you guys pushed this thing out of whack. And then when it got reset back to like realistic, like levels that you took you out, it's like. No funding was a few percent to the long side and you just decided to jump in long with 100x left right and it's like oh yeah he went after me and it's like well like no like really like you push

things the wrong way and then somebody else came and corrected it like yeah you happen to be standing on the wrong side and i think the problem is like you you see this when there's an incredible amount of group think on something and they like push it away from whatever it's like steady state value is that it like it reverts and it like hurts the most people so they're like convinced that there's some like magic yeah that magic force that's like working against you is the market and it's like trying to like figure out like the natural clearing price of this stuff and you just happen to be on the wrong side of it because your action in and of itself is the problem not like what happened after so i don't know it's like really hard people. I think you conceptualize that in the beginning. I agree. And then I write the words

of DJ college, you played yourself. Right. So where can everybody keep up with you and follow you after this conversation? Twitter is definitely the best. That's definitely where we're going to be the most active. Yeah. Like that's, that's kind of our only outwardly facing like media that we do besides like podcasts and like one-off like sort of stuff that we talk about there's like we don't have like any we don't publish anything we don't like really that's that's where you'll find us awesome everybody i hope you do check them out there at cms holdings and check them out dan thank you so much for having this conversation it's great it's always nice to get someone who's in the trenches to tell people how it really is

nice