The Wolf Of All Streets - How Crypto Yields Work | Alex Mashinsky, Celsius

Episode Date: August 5, 2021

One of the most popular catchphrases of the crypto community is “unbank yourself,” because banks are simply taking rather than giving. One of the greatest use cases of crypto is earning fair yield on the assets you own. Many crypto companies have tried to offer interest, but few have it figured out like Celsius, who were the first to offer these products to the mainstream. Led by visionary CEO Alex Mashinsky, they are leading the charge to replace legacy systems and bank the entire world with crypto, the world's only true free market. Alex Mashisnky: https://twitter.com/Mashinsky --- Build on Harmony, run on all chains. 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. https://thewolfofallstreets.link/harmony --- 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/TheWolfDen/members

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 personality from the worlds of Bitcoin, finance, trading, art, music, sports, and politics, basically anyone with a good story to tell. Now, in the crypto world, we often use the statement unbank yourself to describe the endless possibilities that the sector has to offer for people who are sick of legacy systems or lack access to them in the first place. Today's guest is actually making that catchphrase a reality. Alex Mashinsky's company, Celsius, is providing many of the services that legacy banks are completely lacking, like interest and

yield, zero fees, fair loans, and lightning quick transactions. By having Alex on today, I hope to better understand how his business is competing with legacy banks and what he thinks the future of finance looks like. Alex Mashinsky, thanks so much for coming on the show for a second time. Yes, Scott, thanks for having me back. And thank you for all the work you're doing, educating the community and people who are new to the space. So love your work. Thank you, man. I really appreciate that. So listen, as I touched on, you were here before. Last time was in October, so nine months ago. Can you, I guess, first just give us a quick, brief intro to what Celsius is for those who might not know, and then

get us up to speed on what's changed for Celsius in the last nine months. Sure. Yeah. So we do two very simple things. We earn yield on 42 different assets. So we pay you interest on Bitcoin, Ethereum, Litecoin, whatever your favorite asset is. And we've been doing that longer than anyone else since 2018, basically. And you can earn, for example, 8.8% on your stable coins, 6.2% on your Bitcoin without having to do anything. You don't have to farm. You don't have to move stuff around. Every Monday you get interest payment and you can withdraw at any time. There's no lockups. Also, we provide margin loans. So instead of selling your Bitcoin paying taxes, you can basically borrow dollars against your Bitcoin. We charge 1%. That's the lowest fee that anyone in the industry charges. And you can use those dollars to pay off your credit cards, pay your mortgage and everything else. So those are the two key services. We do other things, but those are going to cover

most of the stuff that our customers, we have almost a million customers, 17 billion in assets. So definitely a much bigger numbers than the last time I was on the show. Well, it's been quite a run since last October, which you foresaw at the time. You were looking for that to happen. So anyone who wants to play it back, I think we'll find that you were very much expecting a serious bull run and even that you were expecting a correction afterwards, correct? Yeah. So I hit the right on the button $30,000 for Bitcoin at the end of the year. And this year, I'm calling, again, a peak of about $140,000 to $160,000. But I expect us to close the year.

We're going to have a big spike, and we may close the year a little bit below $100,000. So there's a second coming. Right now, there's a little sideway movement, but there's definitely going to be another run up in prices for Bitcoin and Ethereum. And what makes you think that that's so likely to happen fundamentally? So yeah, so we're basically the Celsius community is the HODLler community. And most of us on the news cycle talk about the traders. We talk about the 10%, the tail that wags the dog, and not the 90%, which is the mass. So when I look at the behavior of my community, I see us, like last week, we've added $300 million in net deposits, which is one of our best weeks ever.

And that tells me that my community, which is almost a million people, is going to push prices higher, faster. So, yes, we are reducing leverage in the system. Yes, we are getting rid of all the tourists, but the hardcore guys, the guys that are just accumulating Bitcoin, the letting it earn interest, are buying more faster than ever before. So we're also predicting that there's going to be a flippening, meaning that Ethereum is going to have a higher market cap than Bitcoin. Why? It already happened on the Celsius network. So I think we are a leading indicator. And I'm not a magician or what do you call it, a fortune teller. I'm just telling you what the community is already doing.

I was looking for a crystal ball behind you somewhere in your beautiful apartment, but I couldn't find one. And on-chain metrics actually are supporting what you're saying. From what I've seen, it really has flipped when you look at the size of wallets and the active wallets that really the speculative ones who have been holding for a short period of time are selling, while the large wallets that have been around for a long time and have huge balances are buying and are not selling. And that's a clear indication in any market that weak hands are selling into strong hands, right? Yeah. And that's a clear indication in any market that weak hands are selling into strong hands, right? Yeah, and the events that brought Bitcoin down, like the crackdown in China, the miners moving, all this FUD, the Fed, this, that, all that, they're all one-time events. So I think as we flash through that, we're going to see rapid accelerations in new highs. And we haven't, on Bitcoin,

we haven't had that blow of top that we've had in every other market top in Bitcoin history. So I don't think this cycle is different. And the side movement is just an accumulation and we'll see new all-time highs. Something that I have noticed that's different at this point in the cycle is the

rates being offered by various yourself and your various competitors. Notably, it's been somewhat of a drop across the board I've seen. Obviously, some like yourself have maintained or even raised their rates. But it's made a lot of people, I think, scratch their heads to see interest rates or yield rates dropping so much as the market has turned. Can you explain why that's happening and how you've been able to avoid that? Sure, that's a very good point. So when Celsius created yield two years before DeFi, first, everybody told us, you guys are crazy. This must be a hat trick or it's a scam or it's some kind of a Ponzi scheme.

And now we have over 100 competitors, right? But most of these competitors only do one thing. They just do GBTC arbitrage or they just do DeFi on Ethereum. And what Celsius has managed to do is have five different sources of yield, right? We are one of the largest lenders to institutions. So that's still the majority of our business. We lend to exchanges. So all these coins coming off exchanges, coming to Celsius, then the exchanges call us and say, can I borrow coins from you? So the coins they used to have for free, they now have to pay to provide liquidity, to provide cashflow, provide leverage, and so on, so on. Then we have margin lending. We talked about that. Our customers are borrowing dollars. So that's a source of yield for us. We are one of

the largest participants in DeFi on multiple chains. But we both we play on DeFi on both sides. When the rates are low, like right now, we are a borrower. When the rates are high, we are a lender. And most of our competitors only do one of the two. And the fifth leg of the stool is mining. We invested over $200 million in mining. We're one of the largest miners in North America, which effectively is yield on Bitcoin, right? I have a Bitcoin factory that prints new Bitcoin every 10 minutes and I get to pay most of it to my community as part of the yield that they're earning on the assets they contributed. So again, nobody has been able to replicate that. And if somebody is just in DeFi and they're earning two to 3%, because that's what the market is in DeFi right now, they cannot pay the 8.8% that Celsius pays on stablecoins. So you're effectively more diversified in theory than the competitors, which allows you when one spigot shuts off to sort of turn on another one.

And you talked about the GBTC trade. Was that what was driving most yield for most companies when there was that huge premium? Yeah. So I think BlockFi was a one-trick pony. And as long as there was a premium there, most of it was last year. They kept running with that. I think they were still subsidizing it from their venture capital money, subsidizing yield. But this year, the discount right now on GBTC is 15%. It's minus 15%. Add to it a 2% yearly fee from Grayscale and the 4% or 5% you have to pay the customer, and you're now at 22%. That's your cost of maintaining that yield trying to compete with Celsius.

So we're at plus 6.2. They're at minus 22%, right? That's pretty painful. So most of the people who played that just said, I'm out of the game. You fold your cards and you walk off the table. And that's also part of the reason why we've seen record deposits. A lot of coins are coming from all the other guys who just can't keep it up. And our community loves it, right? I'm the largest user of Celsius. I have over $300 million of my own money.

I get to pay myself more. So there's no some there's no some trick here or whatever. Yes. As a shareholder, I earn less, but as a deposit or a user of the platform, I earn more, which is good for everybody else's on the bus with me. It's really so interesting to hear. That means the presumption for people offering those rates, and I'm not singling anyone out, is that those opportunities would last forever. And it's kind of strange because we all know that this is an inefficient market. It's sort of like thinking about hedge funds in the 80s where they would find all these opportunities to arbitrage and make money, but they never last forever. I mean, any major inefficiency is always arbitraged out and eventually goes back to zero.

So what's the long term expectation if a company is only using one or two of these inefficiencies to try to offer yield? Didn't they know that it would come to an end? So, like I said before, we originated this whole category and we continue to innovate while other people just try to copy one or two of our ideas, right? So, yes, we have GBTC as well, but it's low single digits of our assets, right? Where I think BlockFi, if you look at their filings, right? Because they were over 5% of GBTC that to file with the SEC. And they reported, I think, 7% of all earnings, 7 or 8% of 30 something billion dollars, right?

So that was the vast majority of their assets in one strategy. So Celsius has hundreds of strategies, hundreds of strategies. And what we offer, the rate we publish is the blend of all of those things. All the strategies for Bitcoin, all the strategies for Ethereum result in a 6.2% rate or 5.75% rate on Ethereum or whatever. Or 8.8% on stablecoin, which is crazy. Again, almost a hundred times more than your bank pays you. And we do that without taking any risk or taking minimal risk, right? We had zero

counterparty liquidations, both us having to liquidate one of our institutions or somebody having to liquidate Celsius because we didn't provide enough collateral. So I don't think there's any other company in crypto that's doing what Celsius does that can come on your show and say, we had zero liquidations or we did not liquidate any of our customers. So yeah. Yeah. That just tells you Bitcoin just went through a 53% drawdown, right?

Zero liquidations. Show me a bank anywhere in the world that can go through a 50% liquidation and survive a 50% liquidation in the stock market or the bond market or the commodities markets, right? The Fed is going to jump in and have to bail them five times over before that happens. You said, show me who can survive. And I was going to say everybody

because there's an artificial floor. No matter what happens, somebody is going to bail you out, right? And I've pointed out a number of times that that's what's so unique about Bitcoin and so incredible. And what makes this such a clearly a free market is that nobody had to step in to save Bitcoin when it dropped over 50% in a matter of weeks. Nobody had to step in to save the miners when half the hash rate went offline at once. The network continues on, the market continues flowing without a centralized party. You're 100% right. And it's important to understand that it comes at a cost because most people don't understand that the sprinting of $7 trillion

is to be able to put a safety net under the entire US economy and bail out the financial institutions and the banks and the good companies and the bad companies and so on. So all of us are paying for it. It's not for free. All of us are paying because the government on one side takes 50% of our money through taxes, and then comes the Fed and debases the currency and steals another 20, 30, 40% of our money. Just in the last 12 months, they printed 40% of all the dollars ever. So you had a 40% inflation. You lost a third of your money like this in one year. You just don't know it. You don't feel it yet.

So I think crypto proving that it can run on its own, proving that it does not need a bailout, does not need a handout, will force many, many people to migrate from the fiat world to the crypto world because they're going to understand that, okay, my assets are safer in a limited supply, completely independent infrastructure than on one that depends on the Fed or depends on the Treasury or somebody bailing me out. Because you can bail out as long as the dollar still has its power. But the minute the dollar loses its power, you can print out as long as the dollar still has its power but the minute the dollar loses its power you can print all the money you want it's not going to help you do you think that will happen it's definitely going to happen because every empire in history right the roman

empire the byzantine empire you name an empire i'll show you that they collapsed very, very quickly after they debased their currency. Right. And the I can give you many, many examples of 700 fiat currencies, actually, that all are worth zero in history. Right. And all of them. There's enough. There isn't one example of a fiat currency that maintained its value. So the experiment we're running here has been proven 700 times. The Fed has to prove to us that they can pull a rabbit out of a head and not end up just like the previous 700 fiat currencies. Ironic, because we talk about a black swan event, like the collapse of a currency would be the black swan event. But in this case, the black swan event would be

if the currency doesn't collapse. Right. Right? I mean, in context. And we are already inside the event horizon, inside the black hole, because we can't. The Fed cannot stop printing money.

It cannot stop buying the debt. It cannot stop supporting the markets. It cannot stop supporting the markets. It cannot basically withdraw. And you're seeing, I don't know if you saw, but there's a thing called reverse repo. This is where banks basically take all the cash they have and they say, I don't want cash. It's too risky. I want to give it back to the Fed, which is the opposite of what the Fed wants. The Fed is throwing money at the banks and say, give it to everybody. Go issue loans. Give it to the broker dealers, right?

Do anything you can to create GDP in the economy, to create acceleration in the economic activity. And here banks are taking a trillion dollars, right? Huge amount of money and throwing it back and saying no i don't want it so so uh uh so there's definitely tremendous uh uh market uh fluctuations market power that's going on that is happening under uh the surface that people just don't see they don't know about it and the consequences of that are not yet known. So this is a giant experiment that has never been tried before. A version of it worked in Japan for the last 30 years, but Japan is not the reserve currency of the world.

And we have to see what happens to the United States when it floods the world economy with tens of trillions of dollars and thinks that there's not going to be any consequences. Yeah, recently there was a, one night was an 800, roughly $800 billion reverse repo in one night, which effectively erased six months of quantitative easing in one night.

Of course it goes back in, but it really is astounding when you dig into what's happening after hours when nobody's watching. Yeah, and the repo market, look, what started this whole thing, everybody thinks it's Corona. But if you actually go and dig into the numbers, the repo market froze in September of 2019. That was a few months before Corona. And the Fed had to inject over $600 billion in a few days, right? And then commit to provide a trillion dollars of liquidity at all times because banks just did not trust each other.

So we already have cracks in the system. We already have mistrust, distrust, because institutions don't know who is solvent and who's not solvent. And at the same time, the Fed chairman goes yesterday in a hearing and says Bitcoin has proved itself as something as not a form of payment. So I tweeted this morning, I said, that's right. And the dollar has proved itself as a horrible store of value. 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.

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harmony, run on all chains. To me, the story wasn't what the Fed chairman said. It's that the Fed chairman had to talk about crypto. That's right. Did you ever, even a year ago, I would have in a million years not thought that we would hear Jerome Powell having to cautiously tiptoe around crypto and talk about it over and over and over again in a meeting. That's right. So, you know, calling the cow black is definitely tells you that there is a problem. And again, look, I'm a proud American. I'm sure you are as well. And we are not saying any of these things kind of trying to push the dollar off a cliff and make it disappear. We're trying to save the system. And we're ringing the bell and saying, look, we're about to make the

worst mistake in the United States history by debasing, by taking this golden goose called the US dollar, right? And thinking that you can just keep plucking feathers out of it and thinking that the goose will keep flying. No, it will not fly. It will crash and it will stop laying golden eggs. Okay, this is a very bad experiment. So let's stop it. Let's protect the goose. Let's stop printing money.

And if companies have to go out of business, that is the cycle. That is the economic cycle that the United States does better than anyone on the planet. We know how to recycle all these companies and all these employees and all this infrastructure better, faster than anyone else. That's what created America. Now we look like a socialist or communist country where we are telling, we're basically saving the entire economy, putting a safety net under the worst companies,

the zombie companies, who's going to benefit from that, right? Not the guy who's got hurt from COVID and lost his job, right? So we're enriching the rich. And like you said, instead of unbanking the banked and banking the unbanked,

we are enriching the people who are already rich, who have access, who are close to the pool, to the plate, the political plate, close to the financial plate. And this Cantillion effect is just going to destroy this country. Can the Fed stop now, though? Some would argue that 2008 was the chance, right? You could have said, okay, the banks fail, there's gonna be a lot of pain. But maybe in 2021, we're in better shape in that scenario than we are in 2021. After the other scenario, hard to know, right? Because hindsight is 2020. We don't know what would have happened. But is it too late for the Fed to stop printing? I mean, some would argue that at this point, there's just no option. Well, this is the fourth Fed chair

who's doing the same thing. Jerome Powell inherited the problem. It's not like he created the problem, right? I mean, and every bailout, you just have to add another zero because every bailout since the 90s is 10 times bigger in dollar terms than the previous one, right? So the problem you

have is that the Fed is high on its own supply, and it has to take the medicine, and it just doesn't want to take the medicine, right? And we as Americans, we prefer to get the bailout checks and kick the can down the road and keep tweeting about stuff instead of taking the medicine, right? If we don't take the medicine, our kids are going to have to do a hard bypass, not just a simple take the medication, right? So I'm just very frustrated that no one has a backbone here, not the politicians, not the Fed, not Treasury. No one wants to take the medicine. Right. Everybody wants to just kick it down the road. And that's just not America. That is not how this country was built.

The grit, the innovation, the recycling, right, the ability to come out of the cloudest day and keep walking. So what's not happening in this financial system is happening 10 times over in crypto. So crypto was born because of 2008, right? If you don't believe me, go look at the first block on Bitcoin. It says that right there. It's not about what I say, right? Satoshi has it right there in the record. And we know that the innovation in crypto is a thousand times faster and better than it is on Wall Street, on Main Street. So what's happening is that now crypto is pricing what the real market is. What's like Celsius is pricing the real value of dollars. It says to lend dollars, you can earn 8.8%.

And the Fed is saying, no, no, no, no. It's 0.1%. Right? So who's right and who's wrong? Right? That's really what the question is. I love he said getting high on their own supply. Every rap fan in the. I love what you said, getting high on their own supply. Every rap fan in the world who knows Biggie says,

never get high on your own supply, right? So everybody knows you don't get high on your own supply. So yeah, I'm interested then, you said that you've entered into mining as one of your main focuses. What prompted that move? Because obviously now was a perfect time to have done that with the Chinese ban and the difficulty adjustment and obviously all of that available hash rate. How far ahead of that were you and what made you decide mining was a place

that Celsius wanted to be? Yeah, so we started investing last year, way ahead of the news. We're already mining over 100 Bitcoin every week. So we're not a small miner. We're probably the largest one in North America right now. We're also doing it all with either renewable resources or with basically a full credit offset. So it's credit neutral or carbon neutral. Carbon neutral. Right.

Carbon neutral. Right, carbon neutral. And the issue is that for us, we have over 115,000 Bitcoins from a million customers. I pay 6.2%. Do the math. I have to generate 6,000, 7,000 Bitcoins just to break even with my community, right? So yes, I can get some from institutions.

I can get some interest from exchanges, DeFi, like all the stuff we talked about. Why not build a Bitcoin factory and get at least some of that from a Bitcoin factory? So unlike most of the people who are in mining business who are taking dollars, investing dollars because they want to create Bitcoin and then convert it into dollars.

Celsius is in the mining business to invest Bitcoin and get Bitcoin because our customers don't care about dollars. All of our customers are saying, I'm giving you my Bitcoin. I'm a hodler. I'm not selling it. I want to wait for a long period of time. I just want yield.

Can you generate more Bitcoin on my Bitcoin and show me that you can do it in a safe and continuous and sustainable way? Right. So I saw you interview with Michael Saylor. Again, great job. He's a hodler. We are hodler. We think exactly the same way. Right. There's no difference between the answers. I can repeat every one of his answers and it will apply to Celsius exactly the same way that it applies to microstrategy. So then how, since you were already in the mining business and are one of the largest in North America, what was your reaction when obviously all of the energy fuds started, the Elon Musk, the forming of the mining council, all those things. How did those affect you as such a large miner?

Yeah. So you know what they say? First, they ignore you. Then they laugh at you. Then they try to kill you. No, just kidding. But the point is that we're at that phase. We're at the phase where the banks and the financial institutions are realizing, look, they're seeing billions of dollars leaving their institutions every day, and they're all going in one direction, right? So they tried to say that Bitcoin is not safe. They tried to say that, you know, whatever, right? Now they're basically saying it's not green, right? So the next thing they're going to say, the Fed chair doesn't approve of it, or i don't know what but the point is is that uh fad will always be there and and the funny thing is that uh if you buy a tesla your tesla is less green than a bitcoin because your tesla feeds you think that tesla is 100 electric

but it takes power off the grid and the grid is less than 50% renewable, right? Something like, you know, 40 in the best states, it's like 40, 45%. At the same time, I think Michael Saylor told you that in North America, it's over 67% renewable. So again, your Bitcoin is greener than your Tesla. And the irony is that everybody talks about electricity. They're electric cars. They run on electricity. So what matters is where the energy comes from, not the electricity that it's using.

Exactly. So it's completely false narrative when you consider it in that manner. Exactly. And look, if we want more renewable energy, there is nothing better to create more renewable energy, the new demand, because none of the new dollars, there's no investor in the world that I know that is willing to put money into coal or natural gas. They all want to put money into renewable energy. So you create new demand, we create more renewable energy. So Bitcoin is contributing to this new demand. It's 100% new demand. When China shuts down and gigawatts of power are now being demanded by crypto, that is all new demand, right? That is giving investors incentives to put more wind, more solar, more hydro, and so on, so on, in all the different areas, but obviously also in North America.

So the opportunity is there. We're seeing many, many countries jump on it and say, please do it here in my country. Please come over here. And I don't see any reason not to bring some of that mining capacity to North America. I think it helps secure the Bitcoin network. It's a new industry. It creates jobs. It strengthens the grid, the electric grid, because you need to build infrastructure, additional infrastructure, to move all that electricity around. And the beauty of mining is that you can put the equipment

very, very close to the source of the power. You're not going to take a Tesla and drive it 100 miles to charge it close to where the wind is. You're going to consume that power in New York City or in Atlanta or wherever you live, where the power is basically moved hundreds of miles from where it actually was originated. And about 10% of it is lost because it has to be moved over those high capacity lines. I was planning to drive my Tesla up the side of an El Salvadorian volcano to get my power, but I couldn't get straight to the source, right? So it's interesting.

You talk about, obviously, the nonstop FUD, fear, uncertainty, and doubt, right? And it's the same recycled stories every single time. Yes, this time the China situation was much more real. But I think that we would argue that everything that's happening in China is good for Bitcoin and good for the Bitcoin network. Nobody wanted Bitcoin centralized in China, right? So I'm curious, though, it's all fear, uncertainty, and doubt. At what point with all of this talk of regulation, the Fed chairman talking about it, at what point do we have an actual story of something that's a threat to Bitcoin or crypto

as opposed to a narrative? So first, I think every day, more and more major institutions tip over to the Bitcoin side. Like you saw Citi and Goldman Sachs and Morgan Stanley, almost every major institution, Fidelity just announced that doubling their team on the Bitcoin desk. So every one of those tips over is eliminating one more name that supports this false narrative, right? So very

soon, you're just not going to have anybody left. We're all going to laugh when we hear the last guy there say, oh, it might be the Fed chair who might still be talking bad things about crypto. But I think that group is actually to disappear. Now, there is definitely still issues with regulation. There's uncertainty about regulation. There's a lot of money parked on the sidelines waiting for clarity. And I think I have a theory there. I don't know if I'm right or wrong, but my theory is that you have now seven or eight billionaires have applied for ETFs, right? The Winklevoss twins, Mike Novogratz, the ARK, you know, Kathy Wood, you name it, right? I mean, there's like a long, long list of very, very rich people who are knocking on the doors in Washington saying, why is this thing being delayed? And when the Fed chairman or somebody else says, oh, it's because of market manipulation, they no longer accept that answer. They're basically saying, go fix the problem.

So when you see four or five countries announce, hey, Binance is not operating in our country. What Binance does is illegal in our country. That is all derivative of that conversation in Washington, where basically people are saying we want that ETF, which is going to be huge. I mean, the price of Bitcoin is going to go up 50 percent in two days. The second an ETF is announced. So you know we are getting closer and closer and closer to the fact that there's so much pressure on people like Binance, not Binance US, but I'm talking about the Binance offshore, the ones that gives you 100 to 1 leverage, which is what they're really trying to eliminate. When all of that is cleaned up, you know an ETF is going to hit and a lot more money is going to come in. And then the SEC and everybody else is going to be defending the consumer instead of hurting the consumer. Right

now, they're basically all those people saying, hey, it's not a good asset. Don't put your money there. It's not safe. That's kind of the irony is if they approved an ETF right now, Bitcoin would be much safer for the consumer. And the price will be much more stable. So it's kind of like a jumbo shrimp. It's an oxymoron. Right. So so so I think but but I think we're very, very close. Right. So I think we're months away from it. And hence my kind of positive prediction on the pricing of this market. I think a lot of good news are going to happen. And, you know, Bitcoin. Right. I mean, most of Bitcoin appreciation happens in a few days. You miss those few days and you will never catch Bitcoin at those prices again. So don't try to time the market, average in, decide what your exposure is. Like you said before, you need an allocation. Don't put in what you cannot afford to lose.

And then basically buy a little bit every week and make sure that you average in. And sometimes you'll buy to the top of the market and sometimes you'll look like a genius because you bought it right to a Bitcoin bottom. And you'll be like, gosh, why didn't I buy five times as much? Well, because none of us really know.

Never bought enough and you never sold enough depending on the time when the market hits. And this is not financial advice. I'm just telling you how i feel about it and same person yeah each person has to do what they're uh comfortable with and and um you know do not ever take don't do leverage trades do not take margin you can't afford don't borrow money and do the stuff. This is an asset allocation. 10, 20% of your assets is probably the maximum

you should be exposed to any of these. Yeah, I was going to say, what about people who are 90, 95, 100% in crypto? Because it's very common. Some of them are on margin, right? Some of them are 3X, 5X margin. A lot of these people who did this GBTC trade were four to one leverage, right?

So the reason we have a lot of these people who did this GBTC trade were four to one leverage. Right. So so the reason we have a lot of this unwinding because we already flushed, I think, all the retail guys, because just buying this liquidated like a million and a half accounts. It's so crazy. And you saw in the future and now the markets, you saw a huge shrinking of the book. So I think we're at the end of that. We just have probably one more flush to go on the GBTC side, right? We need to get through that. And we need this negative narrative to kind of run out of steam. And maybe Elon needs to say one or two nice things about Bitcoin. No, just kidding. You know, he's a tourist.

We can do it without him. Well, he tweets about Doge now. Nothing happens. That's right. Even the Doge people say, hey, nothing happens. I mean, he tweeted about Doge three or four times in one day and price didn't move. I'm sure he couldn't sleep at night because he was like, gosh, what happened to my superpowers? You know, all my superpowers are gone. I mean, it's really true, but it's good to see. I mean, it's good to see because that's one of those narratives that needs to die. Yes. I think. So what do you think that the end game is then? You brought up Binance,

obviously, and we've seen it's just like regulator after regulator, hit after hit. Nobody's prosecuting. It doesn't seem like it's just everybody's sort of saying what you're doing here is not compliant with our laws. We're going to stop. And we're seeing their payment processors pulling out and all of this. Do you think that ends in some sort of litigation? Or do you think it just ends, as CZ said, sort of in more clarity and they continue to operate? He likened it to the automobile. He said, listen, when automobiles were invented, people drove around the roads, they started having accidents. So they started making laws to prevent those accidents. And then they realized that they weren't wearing seatbelts. They made laws with seatbelts. Do you think it's like that, that they were just early? Or do you

think that the hammer's going to drop? Well, when you give people 100 to 1 leverage, that's giving them a car and taking away the wheel and saying okay go ahead drive the car right so you you almost like want them to get into an accident because then you get to keep all their coins so look cz proved that he can do uh run an exchange in a regulated way it's binance.us right he's a fully uh compliant regulated platform so. So when you can deliver a fully regulated one and you continue to do all that monkey business, then you can't blame anybody else. You know exactly what you need to do.

And the faster we get rid of all these offshore platforms that are not compliant, the faster we're going to get an ETF, the faster we're going to get mass adoption, the faster Bitcoin is going to go to the moon, right? All those things are tied together. So in a way, we, the community, the crypto community are holding ourselves backwards by not cleaning our own act and by enabling or supporting or empowering this type of behavior. The gamblers are going to gamble, right?

I mean, you talk about the community and a huge part of the community are people who want heavy leverage to gamble on Bitcoin price. And that's why we have regulations and people normally are restricted from doing things, right? I mean, we have a society that has rules

exactly for those reasons, right? Yeah, unless you're in vegas your bar your bar kicks you out and tells you last drink yeah because they have responsibility right they they can't just say sorry you know i gave the guy a bottle i'm not responsible that he he crashed and killed three people no you are responsible yeah you have to take the keys away so i said you talk about the crypto community you guys just came up with a concept called proof of community, correct? Can you talk a bit more about what that is? I think it's a pretty significant move. Yeah, so again, all this stems back to the same kind of things that Satoshi was stressing, right? That Lehman Brothers went

bankrupt, I think it was June or July of 2018. Three months earlier, their auditor proudly stated that Lehman Brothers is a huge, sustainable, and profitable entity. They had 50 to 1 leverage, meaning if they lost 2% of their value, they're out of business, obviously, and the markets moved more than 2%. Boom, they couldn't open business Monday morning. So that leverage, tremendous leverage doesn't exist in crypto. You cannot create that kind of leverage on the blockchain. Yes, you can create it in centralized exchanges, but you cannot go and borrow two Bitcoins on the blockchain where only one Bitcoin exists. So what Celsius has done is really set a new level, a new level of transparency, a new level of accountability that we hope everybody else in crypto is going to do. We're

doing this as an open source project, meaning we want others to join and basically create the standard and hold each other to a much higher standard than what the banking system or the financial system does today. And by doing that, we're effectively guaranteeing that our community benefits, right? Because you're already getting the highest yield, you're already getting the vast majority of the yield being created.

And now you can see through into these institutions and make sure that they are fully transparent and they're acting in your best interest. I think a lot of people think that if you're DeFi, you automatically are good and you're transparent and everything is good. But we're seeing hacks and rug pulls and just pure theft happening almost every day.

And it's very, very difficult for people, even professionals, very, very difficult for them to know which project is a good project and which project is going to steal 100% of your money. And we've seen Mark Cuban and others fall into the trap because it's very, very hard to know what's real and what's not real. So Celsius, just on our security team, right, and we now have over 400 people, just our security team is larger than most companies have in employees, right? And we now have over 400 people. Just our security team is larger than most companies having employees, right? Most of these DeFi projects have employees. And we go into the extreme details of verifying every detail before we put even $1 on that DeFi allocation. So we've looked at over 100 platforms. We've approved less than 10.

And again, we have not had a loss or a hack like most other people. So if you're using our platforms, you actually are probably safer than if you did all this work yourself, even if you have a PhD in computer science. Because again, these things change every day, right? The projects update their code, they issue releases, batches, patches, and all that stuff creates doors there through which money can be lost. So I think the world, if you look at 7.8 billion people who are all vying for yield, most of them, 99% of them are going to look for a CeFi platform because they don't, they're not going to learn all the details of DeFi. They're not going to figure out what

farming is. And even if they did all that, they'll be stuck on Ethereum running two or three projects where Celsius does hundreds of these things and provides you on average, a higher yield than what you can earn yourself. Do you think that platforms like yours can replace banks? So it will replace the yield portion and the loan portion of banks. I think banks still perform a lot of other functions for businesses, for the community, and so on, so on. And so we're not planning, we're not trying to replace banks. We're trying to get people to unbank themselves because banks, again, are not your friends. They don't act in your best interest. What banks do better than anybody else is extract fees and make money on your money and then deliver all of that every quarter to the investors, to the shareholders of the bank, right? We just had all the banks report their quarterly numbers just a few days ago. All the banks reported all time record profit. What do

you think that means? That means they took all that money from you because it's all yield and fees that they charged you. And they delivered all of that as dividends or as bonuses to their employees and their shareholders. With less than 1% yield. With nothing. Nothing. 0%. 0%. The average in the United States is 0.1%.

Because even when they published 0.5%, half of all deposits don't earn anything. So you've got to write J.P. Morgan announces that more than half of their deposits don't pay any interest because people are lazy. They don't move it from the checking to the savings or money sitting while it's being moved, right? They keep your money for three days when you issue a wire transfer. All of these games that end up being you not earning any yield, right? Then the real value of dollars, take a dollar, convert it into USDC, put it on Celsius, 8.8% all day long. Yeah, I mean, it really is astounding.

Will you be able to do that forever? Do you think that goes down? Even Coinbase now is 4%. Yeah, exactly. Even Coinbase said, okay, we can't see all this money going to Celsius. We'll pay half of what Celsius pays. So they could have paid you before Celsius existed, but they decided not to.

Yeah, absolutely true. But it's clear that even the slow movers like Coinbase now are moving into yield, that that's going to be the standard. Whether it's 1% or 10%, you will earn something that will be better than your bank on almost every platform. We forced their hand. I can assure you if Celsius did not exist, most of these players would not pay you anything, right? All these people that call themselves Robin Hood, again, they're not your friends and they're definitely not taking money from the rich and giving it to the poor. They're taking money from one rich guy and giving it to another rich guy. Especially the platform that's actually called Robinhood.

Yes. They make hundreds of millions of dollars on order flow, on rehypothecation, on SEC lending, and none of that, not $1, finds its way to their customers. And that's what's so sad is that all of those users, millions of users, don't understand that they created the $20 or $30 billion that Robinhood is worth. Now they're going public, and they're not going to benefit from any of that. They're not going to get one dime of the value created or the revenues that were created inside the company, leveraging the assets contributed by these users. So if CeFi is going to replace the lending and yield side of banks, what are banks going to do to stop that from happening? Because they certainly don't want that to happen. Well, look, it reminds me, I went through all of this with the phone business, right?

So when I came to the United States and AT&T was the most profitable company in the world and 90% of its profit came from international settlements where they charge $3 a minute to call Japan or UK or Israel or whatever. And I said, no, that's going to be replaced with free internet voice over IP, what we're using right now. No one's going to pay anybody anything. And today, AT&T makes zero, makes nothing. They actually lose money on international costs because they can't charge anything for it. So the same thing is going to happen with banks. Banks are going to have to find a new business. AT&T luckily found the wireless business and they charge you $100 a month, whatever, for your 5G phone. Banks are going to have to be reintroduced to their customers and do something for their customers. So that's my prediction. And again, we are unbanking people every day.

Most of our customers, we have a 90-something percent retention rate. As you know, our assets grew more than 10x in one year. And it's not because we're so great. It's because banks are taking their customers for granted. If banks paid 8% to their customers, no one would use Celsius. Right. And interestingly, they theoretically could, right? I mean, all it is is about splitting.

I mean, you guys, are you still 80-20? Is that correct? 85-15? I know you're somewhere in that ballpark for your split to customers. Yes. JP Morgan reports their return on capital. They actually tell you every quarter how much money did they make and they can pay their customers 8.8% and still be profitable. That's the amazing thing is because their return capital is 16-17%. They just don't want to, right? They know that

they don't have to, right? If you don't have to, and you've been doing this for 100 years, why would you change your behavior? So just like Coinbase had to fork up 4% for GBTC, for USDC, the banks are going to start increasing their rates. They're going to have to, because as more and more money bleeds into C-Fi and DeFi, they're just not going to have money to operate. And if they don't have money to operate,

they're going to have to shut down, sell all those fancy buildings downtown, just like the phone company did. You know? Yeah. So it's deja vu all over. Like Yogi Berra says, it is deja vu all over all over again so then you have to feel like we're exceptionally early we are we're still in the first few innings

again most people not just don't know what bitcoin is they don't even know like if even if you told them and they believed you they wouldn't know what to do like they wouldn't know how to create an account how to move their money and how to what is is a private key? What is a public key? And so on. So it's on us about 1% of the population is probably knows what this is worldwide. It's on us to basically go out there. Well, that's what you do every day, right? I mean, I give you a lot of credit for, for every day, there's a video explaining something with the new face and somebody you're interviewing or explaining the news and so on. And, you know, now there are, again, thousands of YouTubers and influencers. I mean, we have great ambassadors like Michael Saylor and Jack Dorsey and others who are, you know, we used to have, what's the name?

We used to have McAfee, right? And those were our heroes. So I think we upgraded all across the board and we have an opportunity to really reach the masses. And, you know, some of them are going to be tourists like Elon, right? I mean, some of them are just here to find 10 million or 100 million followers. That's all they care about.

But some people like Michael Saylor, I give him a lot of credit for not just investing, going all in on Bitcoin, but then spending tremendous amount of time educating other people and sharing his conviction in the asset class and in why this is really the best assets out there. Interesting. We've seen, obviously, institutions like his start to say, buy Bitcoin, hedge against inflation. When do we see institutions just say, go buy a bunch of USDC and park it on Celsius and earn my 8.8% and call it a day? So we already partnered with amazing companies like Line Japan, 600 million customers. You earn interest in Japan, that is Celsius paying you

that interest, right? They also have a US subsidiary that does the same thing. We partnered with Liquid, which is an exchange, tier one exchange. We partnered with many, many others, Voyager, many others to provide this yield. So we're not just offering it directly to consumers. We also have a full API and probably two dozen partners through which we're kind of getting, like Voyager offers you your stocks and your crypto in one account, right? Celsius doesn't do that.

So it's for people who need that, Voyager is a better option than Celsius. So we're not trying to do everything. We're trying to focus on having the highest yield and then add additional services like proof of community, like the lowest cost loans, right? Everything we do is a zero to one engagement, like Peter Thiel says, right? We invent the category and then everybody else tries to copy it. But that innovation is what drives people across from traditional finance into DeFi and CeFi.

Is there an AUM cap where all of a sudden you have too much money and you just wouldn't know where to put it to earn yield? So I remember doing interviews two years ago and so on. And we had like, I don't know, 200 million in assets. And people said, well, when you reach 500 million, when you reach a billion, when you reach 5 billion, well, we reached 22 billion. Before this crash, we had 22 billion in assets. And so we don't see any slowdown.

We can go to 40 to 50 billion without changing any of our strategies. And like I said, we have several hundred strategies. It's not like one or two or five. And 10x-ing from there, yes, we're going to need to create some new ideas. We already have a variety of ideas we're working on. And the entire industry has to grow. Like DeFi has to be several hundred billion for us to be able to deploy a few

billion in it. Right. So we cannot be a 60% of, of DeFi and that will be way, way too much risk for our community. So, so that's why mining is a big business for us. That's why institutional adoption is so important. We spend a lot of time on that. And again, we have global customers, right? I mean, we have 350 institutions all over the world. We've done loans, single loans, as big as $100 million, right?

You're not going to find anyone else who can tell you that they can do same day, $100 million loans with institutions. So when you need a large transaction, Celsius is your best counterparty these days. So I know we're up against it here with time. I'm curious, what can we look, well, clearly you just said, I mean, the entire industry has to scale for you to be able to scale to that level. Obviously it's sort of a chicken and an egg, but that's most likely to happen. But what can we look forward to from platforms like yours in the coming year, five years,

10 years? What are the big plans that you have before we go? Sure. So we're adding a credit card that effectively has, it's not a predatory card. It's not going to charge you 24% and charge you fees, right? So in the same spirit of not charging any fees, this will be the best card you've ever had. And it leverages the fact that you have assets with Celsius

to really give you a low cost borrowing or you can spend on credit at a very low cost compared to what your bank is giving you today. So that's definitely a very important offering for a lot of people. That is how they want to transact. And we also are going to be expanding our mining business.

We're going to be partnering with top 20 blockchains. So we already announced Polygon. We announced Cardano. We announced, we just, today we announced, we launched our ZK rollups with Verizon. So that's the Zen coin. So we have probably a dozen partnerships with major blockchains in which, again,

we innovating and creating new services that were not available before. And unlike these islands that are created right now in the community, for example, FTX Solana or Binance Smart Chain and all of their pancake swap and all the stuff they're doing over there versus Ethereum versus Bitcoin, Celsius is really building bridges all day long. All we do is build bridges into traditional finance and then build bridges across different blockchains, right? So we're not trying to have our own blockchain. We're not trying to convince people to switch from Ethereum. The opposite. We want developers. We want the community. We want people from traditional finance to be able to do what they need to do across all blockchains. We already support 14

chains more than anybody else, right? There isn't anyone else paying yield that supports 14 blockchains. So, and that's our commitment, right? Like I said, over 400 people and all of that is money we're spending to create all this infrastructure so you can earn more yield, so you can borrow cheaper, so you don't need to use your bank. Perfect. So where can everybody follow you and check out Celsius after this? Sure. So I'm on Twitter at Mashinsky, my last name, M-A-S-H-I-N-S-K-Y. You can also follow obviously Celsius Network on YouTube, Twitter. Those are our two main channels. We're on Medium as well. Plenty of posts over there. And I do a show every Friday. Not like you. I do it only once a week. You're a little busier.

But follow our YouTube channel and you can reach out to me, CEO at Celsius.network. And I'd love to talk to you and hear your ideas. If I was managing tens of billions, I think people would be upset if I was on YouTube and podcasts and Twitter all day, every day. So I think they'll understand that you even get to do it once a week. Well, I think it's important to, to get feedback from the community, to talk to our customers. When you listen to them, you build better products. Again, these products are,

it's not about what the company thinks, it's about what the customer wants. And when we hear the consistent message of, well, for example, we're adding swaps and the ability to buy and sell things inside the app that's launching next month. And so these are all things that came as a result of the community telling us what's important for them. Right. Perfect. Well, thank you so much for your time. Glad we got to do this a second time. I'm putting you on the calendar now for like six months out for round three, if that's OK. That's right. We should compare notes at least every six months.

Thanks, Scott. Thank you so much. Yep.