The Wolf Of All Streets - How The Big Money Moves In Crypto with Sam Bankman-Fried

Episode Date: December 17, 2020

Sam Bankman-Fried has quickly become a crypto legend. He graduated college as a Physicist but chose to pursue a career in finance, with the intention of making and donating as much money as possible. Sam discovered his innate ability to spot inefficiencies in global markets and transitioned to crypto to capitalize on his incredible skill set. Now he casually manages billion-dollar arbitrage trades through Alameda Research while providing liquidity and endless trading options to crypto traders through his top 10 crypto exchange, FTX. Sam’s insight into crypto liquidity sheds a clear light on the practices of Bitcoin whales and is essential to understand as a crypto trader or investor.  Scott Melker and Sam Bankman-Fried further discuss trading a billion dollars in a day, executing orders in stealth, arbitraging money around the world, looking at 6 monitors at once, billion-dollar capital management, front running orders, injecting liquidity, the golden parameter of trading, preventing a Bitcoin leverage meltdown, scaling the industry for institutional money, dominating liquidity and more. --- VOYAGER This episode is brought to you by Voyager, your new favorite crypto broker. Trade crypto fast and commission-free the easy way. Earn up to 9.5% interest on top coins with no lockups and no limits. Download the Voyager app and use code “SCOTT25” to get $25 in free Bitcoin when you create your account. --- MYBOOKIE In a year unlike any other, you need a sportsbook unlike any other. And if you gamble with Bitcoin, you need a sportsbook that doesn’t just slap the word “crypto” on their homepage and call it a day. Make the right play and sign up at MyBookie.com. Use promo code SCOTT to receive a 100% bonus on your first three deposits.  --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe.This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

This episode is sponsored by Voyager and MyBookie. Stay tuned to hear more about them later in the episode. What is up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast. Today's guest is the CEO of both FTX Crypto Exchange and Alameda Research. Sam Bankman-Fried, better known as SBF, has become a legend in the crypto space, known for his talent in arbitrage trading, building fascinating tech, and creating top-, known for his talent in arbitrage trading, building fascinating tech, and creating top-of-the-line trading systems. Today, my plan is to find out how SBF built one of the top exchanges and grew a trading firm that moves up to $1.5 billion a day. I'm also interested in hearing an insider view on how whales and

big money trade this nascent market and his thoughts on the future of our space. Sam, it's a pleasure to have you on the show. Thanks so much for waking up early for this. Of course. Yeah. Thanks for having me on. So before we get into the questions, once again, you're listening to the Wolf of Wall Street's podcast, which airs twice a week. I talk to your favorite personalities in the world of Bitcoin, finance, trading, art, music, sports, and politics. The show is powered by Blockworks Group, a media company with over 20 podcasts in the network. If you like the podcast and follow me on Twitter, check out my website, join my newsletter. You can do both those things at thewolfofallstreets.io. So Sam, I have to ask you, do you ever get a headache or neck pain from that epic six screen setup you have? Yeah, definitely. I mean, it's not terrible, but certainly some days

it's like, you know, neck doesn't feel exactly great. And I'm kind of like dreading if anything exciting is happening on like the left screen. I sort of like, I'm like, oh God, like, I don't really want to do that. Hopefully I have a copy of that tab open on the right screen. That'd be better. So, you know, obviously you have a lot going on when you're trading actively. What are you actually looking at on those six screens? Yeah. I mean, it really depends, but I think that sort of, you know, the general answer to your question is what are other people looking at? Like, what's the world looking at? And what's the world doing?

And I think that like, you know, maybe something that's worth kind of giving on as a little bit of background is like, let's say that you're doing arbitrage, right? That's your goal, you know? And so what that means is basically you're looking to buy a Bitcoin for $10 and you're looking to sell it for $11.

And, you know, you see it's what if it's offered at or $10,000, whatever, you know, $10,000 on Coinbase, bid at $11,000 on Bitstamp. You buy it on Coinbase, send it to Bitstamp, you sell it, you make $1,000, right? That's sort of like, you know, really kind of the like clearest arb you can do basically in crypto. And then you can ask a question, which is why? Like, why is there an arbitrage? And like, I don't know, maybe the answer is like, I don't know, there just is. But maybe you can do better than that, you know? And maybe you can get some intuition for like, why and when there would be arbitrages. And in particular, you know, what you sort of have to ask yourself is like, who's on the other side of that, right? Who's the person who's buying at $11,000 on Bitstamp, right? Like,

let's say it's 10,000, who's sort of like doing the other side of this? And probably the answer is it's someone who really wants to buy Bitcoin, right? It's not someone who's like, I like doing anti-arbitrage. I like losing money. That's not what's going on. They're like, I think Bitcoin is going to be worth $20,000 in a month. And right now I can buy it for 11. So yeah, I'm going to buy it. Right. And so what that means is that like arbitrage usually comes because of excess demand, because there's some place where there's too much demand relative to the supply. And maybe that's like Bitcoins on Bitstamp, just everyone's buying it. So many of them that there's basically no Bitcoins left on Bitstamp. People bought them all. And then,

I don't know, who's going to be selling? No one can sell if there are no Bitcoins. And just left some stale offer, 10% rich. And that's the next best thing to buy. And that's sort of how it happens. And I think more generally, what you sort of see is whenever supply and demand have a big mismatch, whenever there's a lot more demand than supply somewhere, the thing just kind of blows out a little bit. Because there aren't enough sellers. And what that means is if you're an

arbitrageur, that's where you want to be looking, right? Is to go find where there's way too much demand, because that's probably a thing that's out of line. And then what you do is you provide liquidity to it by selling there. You go pick up some Bitcoins from Coinbase, carry them over to Bitstamp, drop them there and sell. And that does an arbitrage. It also provides liquidity to those buyers, right? Like you're getting more Bitcoins over there for people to buy. And in turn, that sort of starts to close down this spread, right? Like you're kind of relieving this pressure or at least counterbalancing it. And so kind of doing an arbitrage is the same act as providing liquidity, which

is the same act as getting rid of arbitrages, as making it so there are none left. And so then the question is like, what do you want to be looking at if you're doing arbitrage? The answer is in my story, it's Bitstamp. You want to be staring at Bitstamp Bitcoins because that's what everyone's buying. And sort of more generally, it's whatever the crypto world is trading, whatever they're looking at, whatever they're really excited about, that's going to be where all the demand is. And so that's going to be where all the good trading is going to be. And so, you know, like in July, there's a lot of Uniswap. You know, there's a lot of like, you know, having up on-chain metrics, you know, Uniswap, MetaMask, things like that.

Crypto goes through periods where it's all futures, like what's everyone doing? They're all trading Bitcoin futures, right? And like then what you have up, you have like a lot of Bitcoin futures books and you're looking at premiums and liquidations and, you know, things like that. Right. And like, and so to some extent, it's really reflective of what is going on in crypto and what people are doing. In general, sort of beyond that, beyond just the like, well, whatever, sort of looking at what the world's looking at,

when sort of people that are on there trading, often they'll have a lot of tooling. So a lot of like scrolling list of all trades that we're doing, list of balances and positions capital management tooling you know slack alerts um various monitors of our positions and things and basically just a lot of things that like you know seems silly if you're just trading on one exchange because exchange just show it all to you right there on the home page but if you're

trading on 30 it's sort of like it was overwhelming and you need to build things to summarize what's going on. When you're doing arbitrage, I mean, I did it all the time, just even as a retail trader in 2017, I was primarily doing Litecoin just between Bittrex, Binance and Coinbase. Oh yeah, Litecoin and Coinbase was insane in like 2017. It was amazing. And obviously, the opportunities would strike, but if you didn't have both Bitcoin and Litecoin on all three exchanges, by the time you could send the Bitcoin, the spread was gone, that 5% premium or whatever was dead. So as doing arbitrage, do you find that you need to have both either a tether or dollars and Bitcoin

on every exchange? Because as you said, that opportunity is only there for a second. And if you need to actually send them around, usually the opportunity is gone by the time it happens, right? That's absolutely right. And it's a big difference between crypto and the rest of finance. And in the rest of finance, right? If you're an HFT firm and you see Apple's price differently on NYSE and NASDAQ, right? You just like buy NYSE and sell NASDAQ and you're done. That's just the same thing. It's not like, did you have the Apple on NYSE? It's not even a meaningful statement.

They're all through clearing firms that clear it to the same thing anyway. But in crypto, a Bitcoin and Bitstamp and a Bitcoin on Binance and Bitcoin on Coinbase are not the same thing. And you try and move them around to make them the same thing by paying some money and waiting some time and hoping that you have withdrawal limits for it and shit like that. But no, like someone's trying to buy a stamp Bitcoin, you can't sell them a Coinbase Bitcoin. You got to get over there first. And so as you said, yeah, it's like often a lot of this is capital management. It's like, oh, fuck, here's like 70 wallets you have to be managing. And you have to have like, you know, a little bit of Litecoin in all of them, or you're not going to have it where you need it. Right. I also found that I tried to get cute and trade on foreign exchanges,

and then I could never get my money out or get money basically anywhere. I even tried with, was it Zimbabwe at the time that had the insane premium, but obviously that didn't work out. Oh, yeah. But yeah, so I mean, I think you kind of touched on it, that the concept is extremely simple, but actually making it happen, especially with size, I would imagine is extremely complicated. Yeah, absolutely. And just everything breaks when you try it for size.

And I think this is like an underrated fact, that like you seem like, holy shit, yeah, I did it. Obviously, if I had a billion dollars, I'd make a trillion dollars a day of profit. Like why isn't like Bill Gates worth more money than the world has? And okay. Partially the answer is like, there's just not that much volume in crypto to support, you know, a quadrillion dollars or whatever. But, but also partially the answer is so many things break when you try and size up, right? Like you try and go from, you know, a dollar to a Bitcoin to a hundred Bitcoins,

start hitting withdrawal limits on exchanges. Banks start getting unhappy with your wire transfers to crypto exchanges. Exchanges start taking forever to process. Your withdrawal is going to happen often enough in the hot wallets. You start having real impact on like the specific exchanges you're doing. You start hitting foreign FX transfer limits from some countries. And just like thing after thing after thing, you realize like to scale it like, oh boy, there's a lot of operational work you're going to need to do. Yeah, it sounds kind of like a nightmare, which kind of touches on the next point, I think is really interesting and something that we don't often get much insight on.

As I said, Alameda, I mean, you're trading sometimes $1.5 billion a day, right? Yep. This market's not very big, right? So if you heard BlackRock or something say that, you wouldn't be surprised, but it's a bit of a eye popper when you talk about it in crypto. So how can you do that without absolutely destroying the market? It's a really good question. And the answer is that you can't just do one thing. You can't just be like, today I'm buying Litecoin on Bitstamp because I can't even do it, let alone do it in a way that's an arbitrage. So really the answer is like, part of this is like cycling back and forth and back and forth and back and forth. But part of it is like finding back and forth and back and forth and back and forth.

But part of it is like finding all the places that there's sort of too much demand and not enough supply and starting to supply as many of them as possible. And you just can't do it all at once. You can't do it all in one place. And in order to scale this up at some point, you have to be doing 12 trades at once because there's just, you know, that's like a few percent of all volume. You know, you're going to have really serious impact if you're 20% of volume. You can't only be's like a few percent of all volume. You know, you're going to have really serious impact if you're 20% of volume. You can't only be doing like a few percent of all trades or something like that. So, is Alameda strictly when you're trading? I know you guys are obviously doing liquidity providing and market making and then arbitrage.

But are you guys ever just sitting around and, you know, taking straight up, you know, buy low, sell high, looking at a chart, engineering liquidity, and really just playing the kind of swing moves? There are some things like this, but I think the thing that really we think about when we're thinking about actual positions and deltas is what's our edge here like why do we think that this is a trade that we would make money doing you know and not just that there's money to be made doing it but that's sort of a trade that fits us that like you know if it's sort of like yeah maybe there's money to be made doing it anyone can do it this is like what everyone's looking at it also sort of just feels like it's like yeah this doesn't seem like a competitive advantage odds are pretty unlikely that there's a

great trade here maybe it's marginal unless we just it seems like okay yeah obviously like someone's buying a billion dollars of this of like you know each classic today yeah everyone should be doing the same trade like yeah of course but but you sort of like put that aside and and it's just you know like uh what's our strength and why do we think this is a good trade and there come times you know there come times and i think kind of the clearest example of this is when there's something we have a fundamental view on you know and there are some tokens that you could imagine doing this for. I think the easiest is like an exchange token, right? If you had some exchange token, if there's like a buy and burn for 80% of the token's fully diluted market cap every year, and you think it's not a flash in the pan,

like this is sustained volume, it's sort of like, I don't know, fuck market sentiment. It doesn't matter anymore. You just buy this token. You literally sell their tokens. It's still good. That's obviously an extreme example. But there are times when we feel like we actually have an edge in analyzing a token. And then sometimes we will, but it's not sort of the core wheelhouse. And those times are not the norm. It's the exception. That makes sense. So I know that you're, I mean, you have a long background and you've told that story before, so probably not worth going through the entire thing, but you did coming out of MIT, I know you were a physicist of sorts and then decided to go into finance.

You're right. I believe you were Jane Street. So what was the experience like trading legacy markets there where you didn't have a lot of these inefficiencies maybe, and it was just sort of a different market? And what did you, I guess, learn there and how is it different, you know, and how have you been able to apply that to crypto? Yeah. So, um, I, it's, you know, there's sort of senses in which sometimes it's very different. But in the end, you're always looking for the same type of thing. In the end, you're always looking for the inefficiencies. And sometimes there are different types of inefficiencies, right? But you're still looking for them.

And so maybe, you know, maybe it's not the things that it is in crypto, right? But that doesn't mean it's not anything. And so maybe, you know, so I've never really worked at an HFT firm, but for people who do, right, the sort of inefficiencies that they think about often are, you know, things like,

oh, okay, like this exchange has a higher maker rebate than this other exchange by a fraction of a basis point and there's not enough size provided on the offer. So it's just generally good to provide on the offer here. The inefficiency I'm exploiting is understanding the microstructure of the exchange latencies and fees and things like

that. And maybe it's understanding, look, all the order flow is coming on Amex right now. That's reference buying. And you have priority if you're providing on the same exchange that the buyer is buying on. Although in equities, you don't need to.

If you provide on NYSE and someone buys on NASDAQ, they can't buy through your offer. But they can lift up to your offer on their exchange first. They're like, okay, all the order flow is on Amex, so it's a good trade to provide on Amex because that's how we get the order flow. And whatever, it's a different type of inefficiency, but it's still a similar type of thing in the end that you're looking for. And I was trading international ETFs on Wall Street before this, and frankly, they're one of the messier things on Wall Street. And so they're not as messy as crypto, but they're one of the more crypto-like things. And why is that? It's because what is an international ETF? So it's a fund. It's a wrapper that owns a lot of different

stocks. There's, for instance, EWwy which owns whatever you know 53 different korean companies little bits of each um and it's a u.s listed etf that holds non-u.s companies and the key thing here is that as long as you stay on u.s equity exchanges there are a lot of things that just hold you're sort of like it's like regularized in various ways as you say like the whole world anything can happen if you're like big enough about it, you know? And you're like, all right, shit, like now I got to go buy a bunch of Nigerian stocks. I'm like all these thoughts you had about like efficient markets and like Wall Street and all the infrastructure works well. That was not tuned to a frontier markets ETF.

You know, that was tuned to America and like, you know, maybe Germany, you know, or Japan, right? So when you look at more global stock markets, you do get to see things that look a little bit crypto-like. And so I think that there actually were some similarities there. And there's actually some sort of surprising things that some stock markets do, like crypto exchange fees are insane compared to US equity exchange fees in some sense, right? Like crypto exchange fees are like five basis points, right? And then like U.S. equity exchange fees are like, what, like a third of a basis point or something like that. Do you know what like Korean or like Hong hong kong exchange fees are i don't

it's like 20 basis points really so it turns out there's just actually a lot of countries in the world where their actual stock markets like the real official ones actually just charge extremely high fees and um and it really fucking distorts the I mean, it sort of like does what you'd expect, right? Like you'll just get these gigantic markets with like no volume trading because it's like you have to pay huge fees to cross the spread and spot gets super liquid and instruments that don't have those fees get super liquid compared to them. So in Korea, options don't have that same fee structure. This is one of the reasons Korean options trade so much is that you can like synthetically trade the stocks

without paying their stamp tax or whatever. And so when you expand globally, it actually does look more like crypto than when you kind of stay within FANG stocks on US exchanges. Right, of course. High frequency trading always, it's well above my pay grade, but always perplexed me because you would see or hear rumor of these firms spending millions and millions of dollars

just for like a one second or a fraction of a second. Absolutely. And if you think about it, it's absolutely the right thing to do. And here's sort of the toy model is like someone has an offer out to sell Apple at $200, right? And markets are going up and up and up. And like every other stock's up, like every no stocks are up. And like, you know, Apple's like $199.99 at $200 is like the bid and the offer. And at some point, markets tick up another basis point. And every HFT firm in the world is like, okay, now that offer in Apple is cheap. Now you want to buy it because like the whole world's just worth

like two bips more than it was a second ago. Like Apple's now worth more than 200. And there's just a fucking race. And it's like the first person to send the order, take it, gets the order. And the second person gets fucking nothing. And so you often, this isn't true of all the trades that they do buy, but some subset of trades do basically come down to winner takes all in speed. And if you can get, it's not about having speed on human timescales or even on news timescales. It's just having speed that's faster than the guy next to you. And if that's a microsecond faster than them,

if the exchange actually can detect microsecond differences as a match engine, is that sophisticated? Then the guy who's a mic faster might win every time, you know, and get like, you know, 20% of the volume just for that. I mean, I guess if two people are trying to outrun a lion, you don't need to outrun the lion. You just need to outrun the other guy. Exactly right. Yeah. It makes total sense. So you started an exchange. Was that because you saw that there was an obvious picks and shovels sort of opportunity here that the fees were much higher than in other markets and that this was an easy

way to capitalize on what you were already doing? Yeah. Basically, we had a lot of know-how. We had a lot of context. Exchanges are huge businesses in crypto, way, way bigger than in traditional finance. They're conglomerates that do lots of things. Combination of matching engine, risk engine, prime broker, product designer, listing engine, like it's sort of everything rolled into one. Derivatives in particular are like more than half the volume in crypto and in the rest of the world. So it's a huge space. There are actually not very many of them when FTX, when we first started building FTX in

like right around the turn of 2019 there's like three negative sort of it collectively making up half the volume in the world in crypto and so okay so it's a big opportunity not that many players in it we knew the space well we knew the product

well and I don't know if you like remember crypto derivatives exchanges like wait 2018 is not a pretty site no like they they were they had serious fucking issues hundreds of millions of dollars of clawbacks it's like yeah they still i mean they still overload did they still do they're even worse then and it's like at some point we're basically just like all right this is fucking frustrating like these products are not up to snuff and um you know like we can do better than that like if that's the bar we need to meet we can pass that bar we can stay online

when people want to trade yeah right exactly it's like you, what fraction of market moves are we offline for like less than 80%? Like, good job, you know? And so it's sort of like, at some point, we're just sort of like, all right, this is like, we actually think a single customer like doesn't matter what product we build if literally no one ever goes to our website then it's it's useless and like i'd never done a customer facing thing before so it's like a big unknown and basically what happened we just sort of sat there and did some math not a lot not real math like sort of firmware estimates of like how much is this worth if if it goes very well and what are the odds that we can solve this can we ever get a customer problem you know and like when we're thinking And what are the odds that we can solve this? Can we ever get a customer problem? You know, and like, when we're thinking about what are the odds of it, like, you know, we're not trying to say is it 17.3% or 18.1%. Like, we're sort of like, all right, is it like 1% or 10% or 50%, you know, like, just very roughly, and we sort of thought about it. And we're like, one percent is too low definitely more than one percent chance we can figure out how to get customers

70 too high definitely not confident we will um and i think like had a range of numbers between like five and thirty percent um that we like figure out the things we didn't know how to do and sort of like all right whatever take whatever, take 20-ish percent, 15%, whatever, something like that, you know, and multiply that by like how cool it would be if we got there. And just like, all right, that's a big number. And it's sort of like, how big is that number? And we're like, big enough that it doesn't matter if it's 8% instead of 12%. And like, it doesn't matter for a little bit off in one of the parameters. It doesn't change the answer. And the answer is we should go for this. Only a trader would approach opening a business like that or a professional poker player.

You effectively just said that it was a losing, theoretically, a higher chance of losing the bet, but that the pot odds justified the justified pushing. Exactly. That's fascinating. I've never heard someone describe their thought process of starting a business like that. Like we think that there's only like a 15, 20% chance that we'll succeed.

But if we do, it's going to be insane and it's totally worth it. Yeah. Yeah, it's amazing. Yeah, it was. I mean, obviously it worked and we're really excited about that. And I think it also really emboldened us to use that logic going forward and to sort of feel like, look, like, you know, this sort of works.

Like, yeah, you can sort of do this math and it tells you numbers like, are these all bullshit? Like, no, you know, if you do it right, it might tell you, you'll probably fail and you should do it anyway. And, and maybe it's just right about that. You know, that, that when you see that, if you're careful about it, often the answer is just, yeah, you can go for it again and maybe we'll fail again, you know, so be it. Um, but, uh, but that, like, there isn't sort of this mysterious force that means that anything that seems like it's not, that's unlikely to succeed is in fact, definitely not going to succeed. Like that force doesn't exist. In fact, if it seems possible, but unlikely, it's possible, but unlikely.

And possible sometimes enough. Clearly it was in your case. Yeah. And you've basically achieved it in about a year and a half, right? I mean, since you actually launched the exchange and you built it very quickly. Yeah, it was. I think that's definitely, I mean, obviously building things quickly is sort of our calling card in a lot of senses. And, you know, always has been. And I think that like people sometimes ask us like what's your secret

you know what do you do is you show us this dev but it's just actually five devs in a trench coat stacked on top of each other like like and and sort of the answer like a weird confusing answer is i don't know dude there's no secret it's there isn't like oh yeah like no one else is using rust but they haven't thought of that one like no it's just sort of like why is everyone so slow like why is everyone else not doing this and i think the answer is like you like dig into the organization's like oh yeah of course it's sort of like you know malthusian and dysfunctional and malachian in the way that like big corporations everyone describes mass like everyone who's ever been a big corporation has nothing but mediocre things to say about it you know and it's just sort of

like does it feel like you're operating at maximum efficiency when you're in a 2 000 person organization you just know it doesn't like obviously doesn't then like, what happens if that isn't the case? What happens if you like, get rid of all the bullshit? Like, might it be a lot faster? And he says, yes. Is that just because it's you and you can make an efficient decision and like, you're on top of the market.

So obviously you see something that's bubbling on Uniswap. You're starting to see volume and you just literally walk down to your devs and say, I want this trading in 48 hours. Yeah. Because that's what it seems like. That's what it seems like from the outside. I mean, sometimes it's not 48 hours, right? Sometimes it's like 20 minutes. Right. Yeah. And we have senses of how long things take. And sometimes we're like, shit, this coin just went up a lot. Should we list it right now? People are looking at it.

And it's a thing you can do. And so I think that is a piece of it but i think there's another piece of it which isn't captured by that too which is that like um you know if you try that in a lot of places the devs are like yeah whatever fuck you you know that that's sort of like the response you get and and they're like whatever i got things to do i'll get around to it you're like no it's like well my thing's urgent too and you just sort like, I don't know what you do. Do you tell them they have to do it? And then they're like this. So they're like, like, you know, and like, I think what we sort of try very hard to do is to put ourselves in a situation where that's not going to happen, to put ourselves in a situation where we're all just naturally usually going to agree. And if we don't agree, we'll hear each other out and then say, yeah, okay, we understand all the arguments. I don't know who's right. Let's flip a coin. And it's actually pretty rare that we strongly disagree

and can't resolve it and make whatever sacrifices are necessary to be able to be in that position. And big sacrifices are necessary. And the biggest by far is sacrificing the ability to grow your headcount extremely quickly. Like, if you want to be in that position, you can't have hired 50 people in the last month that you don't know. There's like no chance that everyone's going to be on the same page if that's how your hiring works. And it's a lot easier if there's like seven of you working on something and you've been working together for two years and trust each other. And you both have deep subject knowledge and learn how each other think and communicate, you know. And there are costs to that model. There are costs to growing headcount more slowly.

But there are benefits, too. So the benefit, obviously, is that you're lean and fast. And I would say the downside is probably that you all sleep on the floor in the office for an hour, right? That's yeah. I mean, that's definitely a piece of this. And it's, it's hard to hide. Like there's sort of, if a company is big enough, you can always hide, you know, as long as you're not egregious,

you like don't obviously not be at work when you're definitely supposed to. And like, maybe you're not going to be like employee of the year, but like, it'll kind of be okay. You know, and you can't do that at like, you know, here. Sick of paying ridiculous fees to trade crypto. It's time you try Voyager. It's hands down my favorite place to buy and trade crypto, and it's 100% commission free. Voyager gives you easy access to more than 40 top crypto assets, and you can instantly transfer cash from your bank accounts. You never miss a trading opportunity.

Even better, you can now automatically earn interest on your crypto holdings. Currently, they are offering 6.5% interest on Bitcoin and 9.5% on USDC. Yes, you heard that correctly, 9.5% interest. And there are no limits or lockups, so your funds always stay liquid. Find out why so many people are making the switch to Voyager. Visit investvoyager.com or search for Voyager in the iTunes or Google Play Store and get $25 in free Bitcoin when you use the promo code SCOTT25. That's S-C-O-T-T-2-5. If you gamble with Bitcoin, you need a sportsbook that doesn't just slap the word crypto on their homepage and call it a day. That's why you need MyBookie. They're the only sportsbook capable of taking your Bitcoin obsession and turning it into huge cash prizes. Do you want 100% bonus on

your first three deposits? No deposit fees, huge deposit limits, and withdrawals processed within 24 hours? MyBookie's got you covered. But that's just the tip of the iceberg. Do you want to know what's really going to piss off all those people who told you to stop talking about Bitcoin 10 years ago? MyBookie's crypto rewards program. Receive cashback, free bets, huge bonuses, and exclusive promotions simply for using crypto. One deposit makes you a crypto rewards member for life. That means cash back, exclusive offers, and more forever. But we're still not done. My bookie knows that your love of crypto is matched only by your hatred of credit card fees. So they decide to issue back those credit card fees in the form of crypto rewards, and they're doubling it. So if you

incur $10 in credit card fees, my bookie will offer you a crypto reward of $20. Deposit with Bitcoin, Bitcoin Cash or Litecoin with ease and withdraw with Bitcoin just as simply. Put your crypto where your mouth is and sign up at my bookie. And when you do, use promo code Scott to receive a 100% bonus on your first three deposits. Bet with the best, bet with my bookie. How do you balance both companies? I mean, obviously, if you're actively trading for Alameda and something comes up that needs to be handled quickly on FTX, how is that something that you can possibly manage? So, I mean, I don't really trade much for Alameda anymore. That's, you know, we have a bunch of traders and I'm spending basically all my time on the FTX side. But I think more generally,

there are just a shit ton of things going on here. And there's, I mean, a ton of initiatives within FTX. There's building out Serum. And then there's just like a ton of investments. And like, yeah, there's a lot going on each day. And it's a lot. It can be overwhelming. And it's sort of deal with it.

I don't know. I don't, like sort of my answer is get through as much as you possibly can. And, you know, there's a limit to how much you can get through but it's a lot and you know the more that you put in front of yourself um the more you can take on and i think a lot of this is just about being ambitious about how much you can do not like completely reckless but like you know it's sort of like if if you try and hold yourself to the standard of figuring out how far you, how fast you can push things, you end up pushing things a lot faster than if you hold yourself to the standard of like, are you moving at least okay speed? You know?

Yeah. That, that makes total sense. So you said when you were building FTX, that it was sort of a necessity in the market that you saw that other exchanges were just subpar. You said if we can be online 80% of the moves and that's an improvement. So, okay, that gets you to where we are today, right? But this is still a small market, right? I mean, relative to any other market. And so, what does the future of, I mean, FTX specifically, but what are we lacking in crypto exchanges, crypto platforms that we're going to need to really take it to an institutional grade level to accommodate for the huge money that's inevitably headed our way? So it's a really good question. And I was sort of shocked when I thought through some pieces of this.

There are ways in which crypto isn't as much smaller as you might think. And as an industry, its market cap is not that big. Its market cap is roughly the market cap of Microsoft or something. When you look at trading volumes, it's very large trading volume to market cap ratio. And liquidation to market cap ratio is off the charts in crypto. It's just like there's nothing comparable. There are ways in which crypto has been pushing itself very fast in terms of exchanges in particular and nothing else, basically.

So that's sort of one answer. But what does it mean to scale up the industry? What's necessary? There's just a lot of things. And technology is one, but it's not the big one. That's a solvable problem if you need to. The bigger things are like, well, why are you scaling up? Where is the pressure to scale up coming from? I think often people are like, we want to scale crypto up to the whole financial ecosystem or something like that. And I do too. And I think that's where a lot of the upside is. But you have to have demand for that. I sort of feel like it should happen. That doesn't mean someone's currently offering to pay me a lot of money to make it happen. And it doesn't mean customers are actually going to use it right now just because you kind of think it should be there and that they should want it.

And then you sort of have to figure out why. There's sort of this, I don't know, I kind of feel like anyone who's used a sophisticated crypto crypto exchange and then who has tried to trade on like E-Trade comes away feeling like, okay, like whatever, there's a lot of differences and a lot of rickety-ness in crypto. There's just a lot of things it does better also. Like, like it's sort of like, Oh, I like, Oh God, it has like order books and lots of order types. And like, you can get funds on and off in lots of different ways and you have control over all of that and like it's open 24 7 and it's like

all these things that are just like okay obviously you want that you get margin yet like cross whatever it's sort of like actually a lot of ways in which it's like pushing forward and like a lot of fintech tech is sort of like i don't know know, you compare like the FTX app to Robinhood in terms of like what you can do with it. And just like, it's, it's a, so right. So, so then the question is like, all right, like, why isn't like, what's going on here? And I think the answer is like, I don't know, the world's complicated, but, but also there's like, you know, there's a lot of things that have to lock into place.

You have to figure out what the, like, what the role is you're playing, how that fits into regulatory infrastructure is are you trying to appeal to like retail like is this like integrating with businesses or like retail traders or wall street or pension funds or what and so if they each have their own requirements and they each have their own zeitgeist and and for each one you have to sort of like needle at them you you know, and get them to feel like, fuck, we really want to be able to do this. You know, it's not that it's not doable, but it doesn't just automatically happen for no reason, you know? And so I think like there's a ton of potential there.

There's also a lot of things that need to fall into place for many of these like expansions of the crypto ecosystem to actually happen in a big way. I mean, you've said openly that you want to have a billion people trading on FTX, right? Yeah. I mean, that's, that's, that's where we are. It's, it's so far away, but I also think you have to want that. Like, it's like, you know, what's the biggest upside? Of course, it's a billion people.

Like, if it's not, you're sort of like, definitely not it's not, you're definitely not as ambitious as it could be. And then I think you start to ask, okay, what would we need to do to get there? And there's some ways in which it's nothing and some ways in which an enormous number of things. And I think demand is just the biggest piece here, frankly. Throw everything else out. You got to have people who... You have a service and people want to use it. Right. So you don't need to scale ahead of demand. You'll just take it as it comes, basically.

Yeah. And that's not to say you completely ignore the ability scale. That is important too. But one of them is just much more important. The number of businesses that have died because they never had demand is like 99%. And the number of businesses that have died because they never had demand is like 99 and the number of businesses that have died because they couldn't scale is like 30 there's not up to more than one because many businesses it's just over determined that they fail like they can't scale to their tiny customer base um but but it's like almost every story you hear of like a friend starting a

business it's just like they never had a single paying customer. That's a real problem. They just had a shit business. They weren't ready to run a multinational, but also they couldn't get their friend's parents to buy their product first. So let's start there. Yeah, I guess we can throw out the ones that were just patently bad ideas.

Right, okay. Interesting. Yeah. So, I mean, talking about scaling and being a solid exchange, it's just a product that people could use. I mean, we were all here March 12th, right? We saw the absolute liquidation cascade on BitMEX and what happened. How do we avoid events like that in the future where literally we have like $15 million liquidations firing into an empty,

you know, order book. Terrifying. And I mean, it's really terrifying and harrowing. And I think if you're not harrowed by what happened on, on, you know, March 13th, I think you didn't see exactly how bad it almost got. It got bad, but it honestly turned out kind of okay. Right. Oh, look, I'm not saying it's a good day. Well, it went from 6,000 down and was back at 6,000 by the time I woke up and I never even knew it happened. So. Right. So it's like, okay,

things were down a lot, you know, around that time. I'm not, not trying to like dispute that, but, but, you know, crypto made it out and like and without that many scars, all things considered, at least not long-term ones. But if Bitcoin hit what, 4K at the bottom, I think? Nick Neuman Yeah, like 38, yeah. Robert Leonard Yeah. What if it hit 3K? Nick Neuman It would have gone to zero on some exchanges. Robert Leonard That's a problem is that it wasn't that far from going to zero. Nick Neuman

There's no bids. Yeah. There's no bids and the momentum here is fucking terrifying because the problem is that as it goes down, you just liquidate

more and more people and it goes down more and more and that drives more and more liquidations and what happened, sort of the core thing that happened that caused this whole

fucking shit show is that there's sort of this golden parameter that governs a lot of trading not a lot but a number of trading situations and what it is is basically um whenever there's a momentum effect it's like change in selling pressure for every percent that the asset goes down divided by a number of bids per percent and whenever that gets above one it means that you have an exponential effect either way but instead of exponentially dying down like instead of like a you know instead of going up you know sort of like, exponentially tailing off and converging, it just exponentially grows.

And same thing downside. There's this point, what's happening at this point at which going down a percent triggers enough liquidations to cause it to go down more than a percent. And then just diverges. And yeah, we were just kind of in that situation. We actually got there. And it's, yeah, what happens if it goes to zero and the problem is like it's not like everyone can just ignore it because everyone's liquidated like there are things happening in real time and like there are all these businesses that don't make sense if bitcoin's trading at a hundred dollars right like like i don't know like what do you think that the like financial

situation of a bitcoin mining firm was when bitcoin's at 2500? When it was at 8000 the previous day? Do you think they're solvent? Like, do you think that their business, do you think their assets have value when Bitcoin's worth 2500? Like, given the electricity costs, like probably not. They're probably leveraged long, like they may have just like, get to this point, like half the industry just blew out. Right. And like, and like what you think those miners are probably getting liquidated as well on the mining part right so yeah it's just this fucking terrifying position and um i mean yeah i think it came not that far from being a lot worse and so then what can you do to like have that not happen you know and um i okay so so like my first answer i actually think there's like not a great answer to this question

i think there's a lot of shitty answers there's no i mean it's okay you can ban leverage leverage is a cause of a lot of this, right? Because a lot of what's going on is that if you get leveraged long, then you get liquidated. If no one ever gets liquidated, that cuts off a lot of the momentum effects. So you could try and ban leverage, but to ban leverage, you're basically banning trading. I mean, it's like so inefficient if you can't use margin. You can limit leverage. You can limit position size on leverage. You can do things like this. Now, of course, you need to get every single venue in the ecosystem to do it, even though

it's definitely not in their interest. Right. So you can't really do that. And you can try to get more bids, but what's that even mean? You're going to your dad and like, can you please bid for Bitcoin? He's going to be like, no. And if everyone gets liquidated, they don't have the money to buy anyways. Exactly. Right. And so it's like, what, what you do about this?

And really, I think really one thing that you can do, and I think one thing that's really worth with worth noting is like, why isn't this happening in Apple? Now part of the reason it doesn't happen in Apple is like liquidations aren't, aren't really a thing. Like instead you just sue people for their money. You know, instead of like instead of in the real world usually. You don't have to sue them. You ask them to top up and they do.

The other thing is that let's say that Apple gets liquidated down to $5. What happens next is Warren Buffett comes in and just buys all of Apple. He doesn't need to give a fuck about sell pressure or anything. He's like, look, Apple's going to pay out $50 billion in dividends this year from their profits, and I just bought the company for $25.

I don't care about anything else. That's a good trade. And so because equities are kind of tied to this future expected value of dividend stream thing, there's just like lower arbitrage bounds at the point where it just makes sense to ignore order flow and just buy it and get the dividends. And there's upper arbitrage bounds too. They're all tricky because you can't, like if you short sell it and it just keeps going up, you get blown out. But there is one upper arbitrage bound for equities, which is the company itself issuing new stock and selling it. At some point, the company is like, okay, our company're like theoretical economic fair value, that means that these like complete liquidity crises have less impact than they do. And like, what is Bitcoin worth? It's sort of, I don't know, like, it's not like you can redeem it for the end of like, for the dividends. There's no Fed. I mean, if you're

going to make the comparison is that there's no floor, clearly, like we just talked about it, it could have gone to zero. The Fed is not letting the stock market go to zero. Yeah. And you see that with bonds also, where when bonds- They almost went to zero. They almost went to zero. But then what did the Fed do? The Fed announced they're going to buy like a trillion dollars of bonds, and they all just recovered in 30 seconds. The Fed didn't buy any bonds. They never needed to. Yeah, they just had to tell people that they were going to. Yeah. And that was enough. And people are like, all right, they're backstopped. Junk bond,

double A rating. But that's not happening with Bitcoin right now. And that's the thing that it's missing. And I think that the real answer to this long term is getting in a position where it has, you know, the sort of use cases that make it or the sort of buy-in from enough countries or places or something like that, that it just has value that you can't take away. And it doesn't matter what price it's trading at on Huobi. Like what matters is it's a Bitcoin and it's worth something and if you can buy it for a low price you just fucking do it so it's somewhat a divergence between what you would call the the price and the value right i mean is that uh regardless of what the price is and i think that's what we're seeing this time i mean maybe you know the obviously the most dangerous words

in investing or this time it's different but 2017 2017 was basically what we're talking about, right? I mean, it was a lot of speculative FOMO. This time we have hold FOMO, right? I mean, people are FOMOing into Bitcoin so that they can hold it and remove supply from the market because they actually see it as a hedge or they actually see it as a deflationary asset and important. So it really is a different situation this time. And it kind of is what you're talking about. Yeah. There's definitely a lot of difference.

And I certainly feel a lot better about PayPal buying a chunk of Bitcoin for their business than I do about the fact that I just passed someone on the street who was asking their friend where you get the Bitcoin. Shares of Bitcoin. Right. Which one of these do I think is like, I sort of like a, you know, real long-term buy-in for the, for, for the thing. That being said, there's some weird stuff going on. It's not nearly like 2017 and there's a lot more institutional buy-in. It's also a lot of whales. There's a lot of like,

it's a lot more concentrated than it was in 2017, a lot less super retail-y, but I mean, people who are like real crypto believers, they're not short right now. They're not hedged. And they're not long. They're really fucking long. Like they're, it's like, it's been a long time since I've seen like crypto Twitter be this bullish on average.

And it's, you know, it's sort of like, here's a hundred people who are just moving the market along, you know? And I mean, it's sort of like, here's 100 people who are just moving the market along. And I mean, it's an interesting dynamic. And I think to some extent, part of me is like, yeah, I think they're right. But part of me is also sort of like, I don't know. That's like, you can't just have like, what if the world disagrees with them? Like how strong are their hands really here, right? How leveraged are they? you know, how, how, you know, how, how,

how strong are their hands really here? Right. How leveraged are they? And I think like it's, it's, it has some elements of that as well of this. Um, but, but also has real elements of, of sort of sturdy institutional buy-in in a way that's clearly increasing rather than decreasing. Michael Saylor isn't hurting our cause, right? Oh, yeah. I mean, boy, did that one come out of nowhere also. Yeah. I mean, specifically today that they're going to issue like 400 million to buy more

Bitcoin. Yeah, it's a lot. I mean, how much does 400 million move Bitcoin out? It should probably be up, I don't know, what, like 5% or something. I don't know. Like you'd be up in package by $400 million. Yeah. I guess the question is, when do all those people decide it's time to sell? The whales you're talking about,

because there's a point regardless of your belief in an asset or whatever, where it's just logic, you logically take profit, right? Look, if Bitcoin trades at $80,000 today, I'm going to fucking sell Bitcoins. I mean, I don't,

it's just like, I don't think it's going to be that high of a price in five days. Like, you know, at $80,000 today, I'm going to fucking sell Bitcoins. I mean, I don't... It's just like, I don't think it's going to be at that high of a price in five days. At some point, even regardless of what you think it's going to be at in a year, you start just like, all right, this is not an efficient market move going on right now. There's

a complete lack of liquidity, and someone's got to be here selling. Yeah, the market needs it. It's interesting. I've noticed that you guys have done some interesting moves with, with FTX as well. And like other exchanges, I'm very friendly with the guys at Hero. I had Dan Gunsberg was literally the pilot of this podcast.

They submitted to Apple and Spotify. I met him at a wedding. And I mean, I saw like this amazing integration that you guys did with them. I would love to hear more about it, but also just the kind of thinking of the strategy of working with other exchanges, you know, to. So I'm going to tell two tales and like in one, it's just like fucking obvious that this should happen and it should happen way more right and sort of like all right you you have customers and you don't know

what to do with them we have a matching engine and like crypto technology suite what you think would happen if like we put those two together you know and there's like obviously that should happen so like no doubt right and and i think that like there's just a lot of examples of this and i think that like obviously they didn't have no monetization they did have some and they did have technology but there's also technology that they didn't have and that we did and so it was sort of like you know whatever there's this economic question but if you're on the same page you can find some way to feed to find out you know you find some way to find the efficient like a fair price to do whatever the splitter trade or

whatever is that and then if it's positive some it should happen and like it's like yeah their customers wanted some products we had the technology for it uh so we should all you know and and they had the customer experience and and the product sign anything you know let's combine those and so i think like in some sense, it's just like supernatural. And it's just like, yeah, that seems like a positive sum trade. And in some sense, the question is like,

why isn't that constantly happening? Why aren't there like a thousand places doing this with each exchange? And the answer is like at once, extremely compelling and very unsatisfying. And it's sort of like like here's what often happens when we we've tried to this like 10 times and i think they're the only ones who are live right now maybe there's another one going live soon but i think they're the only ones right now

sort of impressive like it's like a 90 failure rate like what the fuck um and it's always, they always die the same death. And that death is basically like, you know, we're like, great, white label our platform. That sounds great. And they're like, cool. And then they come back to us and like, we need you to build some stuff for us. And we're like, you're

going to build the GUI, right? And we have the backend. They're like, well, we need more from your backend. And already, we just get this thinking sitting there and the problem is that like the ftx front end it's there's no back end it just calls our api like the ftx front end is just a gui on the ftx api and so we're sort of like so here's the thing dude the ftx gui has can find everything it needs in our API. And that just, like, okay, so we're already pretty skeptical of

where this conversation is going, right? Because it's sort of like proof by example. And then, you know, we're sort of like, all right, like, let's talk about this, what you want. And they're like, you don't have P&L. And we're sort of like, all right, so here's a few things.

First of all, if you have everything else, you can reconstruct P&L. You can compute it on your side. But putting that aside, even, we do have P&L. Here's the endpoint. And they're like, yeah, but that's over REST. We need to go for WebSocket. And we're sort of like, just to clarify this, WebSocket, the point of this, this is, so REST is when you basically send a message to the API and you're like, hey, could I please have this information?

They give it back. You know, like I want to know the last price of this. Why do I want to send an order? WebSocket is a streaming data feed. And it's great if you want to like get all pricing updates for a market and just streams. Anytime there's a trade, it'll tell you about the new updates. All right, so P&L, to be clear. You're this monthly P&L, and you want it every 50 milliseconds.

Is that right? Like your complaint set, you can only query your monthly P&L every second instead of every 50 milliseconds. And they're sort of like, we want it over WebSocket. And we're sort of like, I don't get why you would want that. This is not helpful. Just use the REST endpoint. It's fine. And they're like, we need you to work with us.

And we're sort of like, look, we can make this endpoint, but I don't get why you want this. And I'm kind of worried this is not going to be the last time we are in this position. Like, what are you going to come back to us with tomorrow and of course there isn't and and and and then you're sort of like how did we get here like there's a positive some trade to do if you just use our rest endpoint for pnl so like why why are we where we are and like you know what's going on and

i don't know there's a lot of answers and some of it's just communicating is Some of its externalities, like they don't give a shit if we have to work. And like, we don't give a shit if they have to work. I don't really think that, but there's like a little bit of that. So we're trying to, you know, but I think part of it also is sort of like, well, what are you selecting for? You're selecting for people who could do something great if only they had exchange infrastructure, but don't have exchange infrastructure. Like there's some selection for people who can't do it. And then you're like, why couldn't they do it or hire someone to do it? And now you're like, oh, I see.

Like whatever is stopping that might stop this too. You know, like, are we sure this is solving their actual problem? Their problem might not have been that they didn't have a matching engine. Their problem might have been that their management had no idea how what to like what they need to do to build a system that can provide you know like like the problem may have come way earlier than that and um and so then you're like okay so what where does it make sense and like what you're left with is just like the most natural white label thing is just like kind of narrow slice of like sharp, really reasonable on the ball and like savvy enough

to kind of know what they need and don't need, but like not experts at building an exchange because then they would just build it themselves. I think that's where you see a place like Hero come in, right? Like they sort of had enough context on this process that they just had real instincts on all this. And they're like, yeah, obviously we don't need fucking WebSocket P&L. We can just, whatever, query REST as much as we need, or calculate our end or whatever, but didn't actually have a matching engine.

It seemed daunting to build a whole Exchange product. And so you're actually kind of like selecting for like, you know, not that wide of a slice of, of sort of companies that are going to be like good to work with on something like this, but also want to partner. So someone like the Pareto principle, right. Is that 20% are going to waste 80% of your time and, uh, and vice versa. versa so but i mean

i just don't see the ceos of a lot of it i can't see like arthur jumping an opportunity like that maybe i'm wrong that that is another thing it's just like it's sort of like you know you have to get like you have both sides have to be flexible you know it's messy and you have to get like, you have both sides have to be flexible, you know, it's messy. And you have to like find a way to make it work. And you have to be like, not too protective. And, and you have to be like a little adventurous. And, you know, that's not how a lot of companies work. Yeah. Speaking of Arthur, obviously, I mean, we've sort of seen what happened with BitMEX, right? Yep. I don't know if he's on the lam at this point, who's been arrested, but it's not a pretty picture over there.

How much, I mean, I'm sure you're doing everything right, but how much like is the fear or dealing with regulation and the changing regulatory environment and the varying regulatory environment from country to country? How much, you know, sleep do you lose at night if you get any anyways? Do you worry about remaining compliant and making sure that everything you do is... It seems like you would need more lawyers than employees. It's a really good question. And I've two responses to that. The first is that you definitely don't want more lawyers than employees.

If you have too many lawyers, that's terrible. And the reason is that it's not like you have too many lawyers that's terrible and the reason is that like it's not like you have a regulation question so you go to a lawyer and then they give you the regulation answer and then you solve your regulation problem like you get a 12 lawyers and you hear 12 answers and you're like you guys just not agree right it's sort of like they just don't agree with each other and it's like oh whatever it'll be fine now it's like you're definitely going to jail and you're like i don't even know what to do now. You guys just can't, like, you guys are the experts. You just contradict each other.

I don't even know how to proceed with this. Like, that's not how experts are supposed to work. And it's sort of like, what's step two there? You know, like, step two can't be start implementing suggestions if they're contradictory. And so, like, really, step one was a problem. And's just it's i mean it's a pain but you have to try really really hard to find the right people and find the people who will give you the right answers and give you the answers which have like the right context the right knowledge the right instincts right calibration, people who are willing to express their uncertainty. Like it's really like the thing that you hear a lawyer say the least,

but that's like, I find it often a good sign. It's like, look, I see, like, I don't know what the answer here is for sure. It's like, honestly, it could go either way. My best guess is that this is the way that's going to go. And I think that it's going to, but I think there's some chance it goes the other way. And I think it's like actually a pretty non-trivial chance. And so I wouldn't do this thing because I think that's just too big of a risk given what I think the odds are. You know, a sentence like that is just like, so not what you're used to hearing from a lawyer, right? And it just like violates so many things that lawyers are supposed to do. First of all, you're not supposed to, you know,

you're not supposed to say you don't know the law. Even if the law is unclear, you know, you're kind of supposed to have an answer. Second of all, you're always supposed to be conservative. You're never supposed to, like, suggest that your client could do something when you don't know the answer for sure third of all um i you know you're like it's sort of like it's just like this very different way of thinking than like make sure you don't have liability here as a lawyer to your client you know um and uh but it's what you need because frankly when when the answer is it's unclear you need, because frankly, when, when the answer is, it's unclear, you need to hear that. Like, you need to hear that it's unclear, because if you hear it's clear in either direction, you're going to fuck up. So that's the first thing is just like being really loathe to say, but they just really matter, which are like, you know, a lot of these things,

like people try and think of it in terms of like, this is the line, like these are the things you can't, like they try and think of it in terms of like succinct definitions that classify things that are okay and not okay. And that's not how it really works. Like everyone in legal world understands that like the laws can't exactly explicitly cover everything that could possibly happen. And there's always some amount of trying to read between them and figure out what they kind of basically mean. And that like, you know, there's like a big difference between like, look, I mean, this is kind of unclear, but like, yeah, that's basically what we're going for there. Like this is, you know,

maybe we'll get some feedback on it, but like, that's basically fine. And like, Oh, come on, dude. Like what the fuck? Like I understand you're trying to claim you have this technicality, but like, this is obviously fucking bullshit. And this is egregious. Like it is exactly the thing we want to stop. And it's like exactly the way we want to stop it. And it's like way bigger than we want to stop it and it's like way bigger than we're comfortable with and like you know your sort of excuse is not worth a whole

lot here and this sort of sense of like um and you really get this sense also if you read some of the uh you know some of the things that the government files in these cases you read through them and you see paris like oh come on dude really this is what you did come on you know and paris like you can't fucking do that you know you can't do that everyone knows you can't do that we told you you couldn't do that you did it again we're not gonna file this like so it's a different between like a brazen you know breaking a law that they know that exists and at least looking like you're you know making your best faith effort to be compliant exactly it's like yeah we don't know exactly how to interpret some laws in some cases because they weren't written with this in mind like you can you can take a guess you know and

and so i think that's like that that's one piece is and then another side of this is like the goal really the goal is not to lose is to stay up late instead of losing sleep so to speak like the goal is not to be shocked to have done your homework and done whatever you need to do to get yourself in a position where you know where you are you know and where you're comfortable with where you are and that might need to change regulations change then you need to change and that happens but like um you know it's sort of like i you shouldn't be surprised by things you shouldn't be shocked by things you know like shouldn't be like where the fuck did that come from and if you are then you should either got very unlucky or should ask yourself whether you're really thinking about this. Right. You know,

and you should like, feel like you're in a pretty decent position. Like, look, is there a chance of regular reaches out? There is, but I've sort of thought hard about this. I'm pretty sure if they do, they're going to say like,

Hey, here's like either thing we want your advice on, or like, here's some feedback for you. We're thinking about how we interpret this, you know, provision with respect to you. And I go,

thanks for alerting us. Let's have a conversation here about like what, you know, provision with respect to you. And they're like, Oh, thanks for alerting us. Let's have a conversation here about like what, you know, what you feel comfortable with, what you don't. And, and, and, and, and like, you know, if instead it's, if the first conversation you have is like extremely harsh and there's like, all right, we're filing tomorrow. Like something went wrong a long time ago. Yeah, it makes sense. I love that.

I love that. I've never heard that quote that, you know, stay up late at night rather than losing sleep. It makes so much sense. Basically just get ahead of it, be prepared for anything. And then you're ready to give it. And, you know, you can't prepare for everything in the world, but there are some sets of things that you want to at least be prepared to be prepared for and at least know how prepared you are and make sure that you're prepared enough that if things change and you need to deal with it more, you're going to be able to make sure you can get.

You know, yeah, make sure that you don't like all of a sudden wake up and you're fucked and there's no way you can get out of it. Yeah. So interesting. So I have to ask you, because everybody asked me to ask you the Biden donation. Yeah. What was the motivation behind that? Yeah. So there is, I sort of, I'm a little hesitant to talk about like politics proper in some senses. You do not have to talk about politics for sure. You know, obviously with friends I do, but you know, to some extent, like as you know, I think it's important that like, you know, the, my business is not political and, and that's like, you know, that side of me is not the same side of me as a business. And, and,

but one thing that I think I will say, and that I think is like kind of really interesting and powerful and surprising is, what's the scale of money in politics? How much money matters? And I think there's like a really big input to questions like this right like like there's like are you just flushing my like is there any point in ever donating politics right and i think a lot of people are like obviously no there's so much

money so much lobbying like it's like like that's just a waste like there's no chance you're having an impact no chance you're gonna change anything, change anyone's mind, anything like that. And I think it's sort of a lazy answer. I think it's like really worth putting yourself through the thought experiment and doing the math. And that's weird. So like how much money is spent? Well, let's go back four years when it's even weirder. How much money was spent

on the 2016 presidential election per candidate? I don't know the actual number, but a few hundred million dollars pushing a billion, I would imagine. Yeah. A billion was about the answer. Yeah. It's like the right ballpark for candidate.

Is that a lot or a little? I don't know. What's the way to ballpark it? How much does the president matter? I don't know. What's the way to ballpark it? How much does the precedent matter? I don't know what that means. I don't even know if I'm talking to her about how much does it matter who they are, how much does it matter what happens with them, what they choose. And how much does it matter that it's them or the other person? Not even how much does that individual matter, but what's the relative difference between the two of them?

There's a lot of things this is missing, but let's even just ignore that for now and just say, like, let's get a ballpark here, right? To see where we're coming from. And, like, what's one way to ballpark the importance of the office of the presidency in some sort of abstract sense? I don't know. I mean, this is not a great way to do it, but it gets you the right something. It's like, what's the federal budget? You know? Like, and I don't know, president has like, whatever, you know,

20% impact on the federal budget. Right. Also they do a lot. That's not the federal budget. So maybe you think it's the size of the federal budget is like kind of order of magnitude, but like importance of the office of presidency, whatever, just trying to get orders of magnitude here. What's the federal budget nowadays? It's like 5 trillion. Not diminishing any times. That's right. It's certainly only going one way there. And it's four years, that's $20 trillion per term. And now you're sort of like, all right, so like the order of magnitude of the importance of the office, like 20 trillion, the order of magnitude of the amount of money spent for, well,

total, let's say in the general election, two major party candidates, 2 billion. And now like, are that 2 billion, 20 trillion. It's a factor of 10,000 different.

Like, it's sort of like, like, is that a lot to spend? Or is that like not, it nothing it's nothing when you think of it in relative terms yeah it's just fucking nothing and so now all of a sudden you're like wait you're telling me that like there's like a billion dollars influencing 10 trillion dollars and it's sort of like what gives and? And yeah, that's just the answer, I think.

What gives? Like there's no, there's no gotcha. And, and, and you're sort of like, okay, well, Warren Buffett, like how, how is he? He's got more, like, how is he not finding something to do with money here? Right. With like a lot of money, like a billion dollars. I just don't know. I don't think there's a good answer to that. It's just a mistake.

I mean, you're like, it makes like Bloomberg's like run so interesting, you know, it's so interesting. It puts in a really new light. And you're sort of like, Oh wait, actually it makes a lot of sense. Yeah. You know, it talks about leverage. Right. And then you think about like, how much leverage, exactly. You know, leverage. Right. And then you think about like how much leverage, you know, how much did he spend in the general election? I think it's like a hundred million dollars or something. Right. Yeah. And you're just like, Oh yeah, that's a real amount.

That's like all of a sudden the sort of amount you might expect a really rich person to spend on an election, given the sort of like trillions of dollars at stake, you know? Yeah. And you're still like, well, how about everyone else? Yeah. It sounds like you did a casual $5 million experiment. Yeah. I mean, I, that's, I, it's sort of like my, my response is like, this is so fucking embarrassing for the rest of the world. How was I number two? Like, well, what the fuck?

I should not be number, I should be number like, you know, a thousand. Like where's everyone else? You didn't know you were number two when you gave the obviously when you gave the donation it was just the amount that you want to give it wasn't relative to anybody else's that's right and then it's sort of like like geez like you're telling me that like there's like you know thousands of thousands of people who have massively more than me who like couldn't think of any anything that they thought would be relevant here, like with the money they're never going to find anything to do with. And I think sort of just think the answer is like, like, I don't know.

There's this, this cool post on, so let's start codex, which is just a riff on this, which points out that the amount of money that Americans spend on politics is less than the amount that they spend on almonds. And it sort of just gets out like, you know, okay, like when you really put it in perspective, like, which should we be devoting more of our budgets to like, political campaigning or almonds? And it's sort of like, yeah, I don't know. I don't think it's almonds. $5 million to buy a lot of almonds.

I know, right? five million dollars to buy a lot of almonds um i know right one day and she's like you're just swimming through almonds the uh scrooge mcduck like in his uh gold vault uh of of almonds and i mean i know we're up against it here so so I'm going to go ahead and call and read the talk. I feel like for three or four hours, this is so incredibly interesting to me. And it's funny just to finalize that point. I mean, you can see why you're such a good trader. And the reason that other people aren't giving more money is because they don't have a trading or quant background like you do. And they've never done the mental gymnastics to that point, which seems very obvious when I hear you articulate it, but not something I would

have ever thought of. And I mean, it seemed like ridiculous to me until I did the math. And it's like, holy shit, is that how the math works out? And I just like spent like 20 hours going over and like, am I missing something here I just came away feeling like no I'm not it's just how it works next time I'm looking for your billion dollar donation then really I don't know who it'll be well I certainly hope that they take FTT I hope so too in in your case and because I supported the same guy, so no problems there. So where, where can everybody keep up with you and follow you after this? Yeah. I mean, I, I spend, uh, way too much of my life on Twitter. So that that's,

you know, SPF on Twitter. That's sort of the answer, but you, whatever, FTX.com will be a decent place to go as well. Awesome, man. Well, once again, thank you so much. I'm really glad, like, I think we touched on a lot of things that you haven't spoken about so thoroughly in other podcasts. I'm glad we got to have that different conversation. And for me as a trader, I just really found it incredibly interesting and eye-opening. I had a lot of fun. Awesome. Thank you so much. And since I have like four more hours of questions, we can do this again, hopefully down the road another time.

Sounds good. Thank you very much. All right. Thank you.