The Wolf Of All Streets - Hyper-Bitcoinization: We Don't Need Banks | Macro With Mike McGlone & Dave Weisberger

Episode Date: April 3, 2023

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The future of banking has no banks. Not my words, but the words of an analyst from Bernstein of Alliance Bernstein fame talking about hyper Bitcoinization and how the failure and mistrust in banks right now at this time and moving forward could lead to the hyper Bitcoinization. Pretty crazy to see that coming out of the mouths of Wall Street analysts and not guys like us who talk about Bitcoin hyper Bitcoinization all the time. Today, I have, of course, my co-hosts, Mike McGlone and Dave Weisberger. It's Macro Monday to talk about this very topic, but also everything else that's happening, including, of course, Mike's favorite topic, crude oil. You guys don't want to miss this. Let's go.

What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Before we get started, please subscribe to the channel and hit that like button. I'm going to just go ahead and bring them on right now. I've got Mike McGlone and Dave Weisberger. Gentlemen, how are you doing today? Good morning. Good morning. Still just want Dave's background.

I want to be looking at that view at all times like I used to when I lived in Miami. So listen, as I said in the intro there, a lot to unpack. I was shocked to see this article and this analysis here that the future of banking has no banks. That's literally the quote. I can literally, let me just go ahead and bring it up right now. Any further banking mishaps could lead the way to hyper-Bitcoinization, says Bernstein analyst. The future of banking might yet be decentralized, offering greater freedom to its users. Dave, you've got to love this, right? I mean, look, at the end of the day, you know, there's all the people in the crypto Twitter love to say various statements, you know, suddenly, you know, slowly, then suddenly is one of those. The truth is, I was commenting this morning about people who are talking about the adoption of Bitcoin vis-a-vis the loss of confidence in the banks.

And people forget that economics like Mike and I grew up in a world where we were taught, put your savings in a savings account and the money will multiply and all that stuff is great. And, you know, old habits die hard. People, you know, there are people have there are many, many, many billions of dollars, hundreds of billions, actually, in passbook savings accounts. And the truth is, is if you hadn't looked at it up until about two months ago, you were getting paid way, I mean, not even close. I mean, as I said on this show multiple times, the average, average savings passbook payment was under half a percent, well under half a percent, in a world where you could get four to five percent in virtually no risk, you know, T-bills or T-notes or whatever. And God forbid, you're willing to go take a little bit more risk and do, you know, double and triple A commercial

paper and double or triple A bonds. And oh, my God, you get way more. So now people who by habit had hundreds of billions of dollars in the bank are all like, OK, maybe I shouldn't have it there. Well, the problem with that is, as the Federal Reserve and the reason they put out the beat, you know, this program that is more or less a howitzer is that, hey, wait a minute. If everyone does this, the banking system goes kaboom because there's so many unrealized losses in the system because we allow banks to take positions in treasuries. is the banking system goes kaboom because there's so many unrealized losses in the system because we allow banks to take positions in treasuries. And if they're wrong, not to, basically they don't have to tell anybody unless they have to sell them. So we have this kind of weird situation.

So analysts across Wall Street, and I was in New York last week when you were doing your show, and I'm sorry I missed it, but I was at new york security traders annual event and i will tell you there is a lot or there are a lot of people out there who are looking at the banking system and shrink you know basically scratching their heads saying you know is this like ordained by some deity or are people going to actually do what's economically rational because economically rational people will not leave anything close to the amount of money in the banking system. Now, then the question becomes, OK, what happens next? And all of a sudden you get people in crypto saying, well, you know, there's this other thing that you don't have to take counterparty risk. It's called Bitcoin. And I think that that explains an awful lot of why Bitcoin is still sitting at where it is

despite literal, almost hysteria on the part of its opponents. Yeah, it's been $28,000 for three weeks. It's been $28,000 for three weeks. As of effectively, it started pushing, I guess, that Sunday when the Fed sort of announced that they were going to continue to backstop banks. Mike, I don't know if you might have a different thought on this. I think this is a bit hyperbolic, to be quite frank, and I'm a Bitcoiner. I think Bitcoin does a lot of things. Replaced banks is not one of them. I agree with you. I like, definitely, I agree also with Dave said that key term is economically rational. And that is the bottom line for me in the macro. When you have a minimum of one year, 12 month outlook, just the source.

I mean, I see that as I don't have to read the stories. No. OK. Headline from that source. That's just like I did this weekend. I would have never thought I would. I went to a NFT conference in Miami to see a friend of mine who used to live in New York, who's now head of LATAM Crypto for MasterCard. It's okay. The smart guys get it. We're not going to be a blockbuster or Sears. And we're going to be part of this technology. The key thing I think about, we have to go back to Bitcoin, is of all this FUD that we hear, I spend my whole weekend trying to

listen, study, and read about what I can write about for my crypto Outlook them supposed to be submitting the editors tomorrow tomorrow and there's so much disdain about the You know the regulars regulators pushing back and the whole space and that's the key thing where Bitcoin sticks out this you can't do anything To this thing. You can't kill it. It's just an Unprecedented is untouchable. You could make a case that Ethereum is a security when you hear about all these upgrades and people doing this and people doing that to make it better. I'm like, OK, well, that's kind of scary.

Can't do that to Bitcoin. It's just why it's fine and impressive. But I do want to end with one key note is if I'm right about this tide that I think is really overdue for a pretty significant rollover. I mean, the Fed's still tightening, OPEC's cutting. Why are they cutting? Because they know they're having a major demand problem. Fed still tightening into recession. We had our morning call this morning and our economist, Anna Wong, said, yeah, there are

base cases for that recession to kick in, recession to kick in in Q3. Starting to move it a little forward now. OPEC's helping that. Fed tightening's helping that. It's at all ask, taps to go down. That means Bitcoin too. It's the fastest horse in the race. So I'm, you know, overall certainly relatively bullish, but if I expect the stock market still to drop a third from here, I got to expect that weakness. And that's still my base case. And crude oil now is kind of accelerating that issue. And Saudis are just OPEC's just admitting that they're having they're seeing the global demand problem kicking in. And they're responding as a rational car.

Hell, we do within, as Dave said, the economic rationality. Yeah, I want to definitely talk crude and circle exactly back to those points in one second. I just don't want to lose this hyper Bitcoinization one because I have sort of one more comment or question. He says here, you know, this will lead to hyper Bitcoinization. And in the next breath, the analyst says the future of banking might yet be decentralized, offering greater freedom to its users. That sounds like a Bitcoin maxi arguing with a DeFi maxi within his own statement. Right, Dave? So I think that there's just more to parse there. Hyper-Bitcoinization and the success of DeFi

to compete with banks are two very different things in my eyes. I mean, Dave. I mean, yeah. Look, at the end of the day, hyper-Bitcoinization is a thought that goes beyond, you know, digital gold and towards a world where you kind of back in history. I mean, if you think about where gold is today or where gold was in,

you know, in the immediate aftermath of Nixon closing the gold window in the early 70s, gold went from more or less backing pretty close to 100% of all of the money on the planet to more or less 10%. So it lost 90% of its, quote, backing of money, right? And the numbers are a bit rough, but more or less that that's not so far off. Hyper Bitcoinization is this idea that Bitcoin will represent all money. And that is where you get these seemingly insane price targets in the multiple millions of dollars per coin, you know, to whatever. I mean, you can do the math and say, well, if it represented all money where you get to. Whereas the thesis of many people is Bitcoin will demonetize gold in the same way gold demonetize silver as a backdrop, which will be for more or less representing 10 percent. And then maybe, you know, if you end up with some world where people say this makes sense, we like back currencies,

maybe on economic terms, you know, you can go higher. So, you know, look, the future is unknown. There is some very good reasons to believe Bitcoin will become digital gold. There are actually some good reasons to believe it will go beyond that at some point in the future. But as the expression goes, you know, markets don't move in a straight line. And to expect that is insanity. You know, trees don't grow to the sky. You pick your aphorism. It doesn't really matter. The reality is that, you know, when you start talking about replacing banks, what you're really saying is the ability to have an asset that is accepted as collateral for people who need to buy stuff in their local currency, right? So, you know, at the end of the day, until Bitcoin is accepted by every merchant, by every capital goods producer, et cetera, you need to be able to do something. So, you know, when the World Bank talks about the unbanked,

and, you know, I had the pleasure of having a long conversation a couple of years ago with the woman from the World Bank who oversaw the, quote, Peruvian economic miracle, where they got a significant percentage of their country more to have bank accounts, the reality was the economy as a whole was dramatically helped. Well, why? Because you want to start a shop. You want to start a small business. You want to do anything. You need to be able to accept payments. You need to be able to pay vendors. You need to be able to potentially borrow to have the display cases paid for in your store. So the fact is Bitcoin doesn't replace all that until all of the scaffolding around the economy replaces all that. So it is a misnomer to say it's going to replace banking immediately. But if all the people who do those things accept it as

collateral, and if you can use it as part of a very well might be incredibly helpful. And we've seen this in Venezuela and other countries like that, where people use Bitcoin to remit payments across the world. They use Bitcoin to maintain their purchasing power in the face of a currency that's depreciating rapidly. And so there are a lot of cross currents here, Scott, and you could talk about this literally, you know, for hours. And so I think that's enough in terms of. I mean, to me, the obvious conclusion there is if we live in a world where Bitcoin has replaced banks, it's going to be a really tough world to live in and not one that we probably want to see, because that basically means we're all Venezuela, as you just said. Right. We talk about turning into Japan. I don't think we all want to turn into Venezuela.

But, Mike, I want to circle back, obviously, to Crude. You sort of made the point that Saudi Arabia and these countries are seeing what's coming and are obviously reducing supply because they see a reduction in demand. A lot of the mainstream media narrative has been that this is war against the U.S. dollar. It seems like those things don't square too well. Good luck with that one. And this square too well good luck with that one like okay and then this is like good luck with that one okay so you want to use melting currencies to buy sell transact and pay for things it's like what you're hearing out of brazil and something like yeah good luck i mean there's it's just makes the value the dollar look that much stronger um and when it's been tried in history and it's just more

it's stronger now than ever and cryptos are part of that what's the base layers for cryptos it didn't go for the yuan or the euro for the dollar why because it's just it wins i mean who it wins in terms of every type of business example have the best fractional reserve banking system in the world sure it's got some cracks in it but that's the essence of a modern society. So I think this is a good thing for America to say, sure, you should be able to transact, buy and sell commodities in any currency you want. And by the way, if you want to store any value in the world, what are your choices? The U.S. treasury market's the deepest, most significant market in the world. Sure, go to those China bonds. They might work out for those Russian bonds. There's just no

alternative. I mean, it's nothing even close and it's getting stronger every day. So that I'm not worried about. The key thing I want to point out about crude oil that what's happened today is it kind of took some of my sleep this weekend, but I waited until this morning to really publish on it. And then I just reiterated what I published back in October. If you want a good sign when OPEC cut 2 million barrels, if you want a good sign when the when opec cut two million barrels if you want a good sign of a good bear market and crude oil is when opec cuts and they don't and they do it kind of on a surprise basis because they're acting in an emergency way to what they see is oh okay so prices got to near 130 last year and goldman said it's going to 150

and they're wrong everybody got stopped out around 65 um oops and all that demand from china consensus oh that's not coming darn and the world's shifting evs at the greatest pace of the world the feds are still hiking rates most central banks are still hiking rates into recession and now we got a banking crisis yeah that's a problem if you're old back i mean you gotta you gotta be looking ahead so to me that's the macro so here's the here's the micro the bottom line in terms of all markets are positions. And that's the number one thing. People look at WTI, they see it right now is trading $18 a barrel.

Before this week, just the last few weeks, managed money net positions and futures. Stuff I used to go in the morning and get the sheets on 30 years ago. Now that's all electronic. We're the lowest net longs in about two, three years. Why? Because everybody got stopped out because they got long and fat. So you got to reverse that, give them a chance to get short again. And that's what I think they're doing. So that will push the bounce. And then we go back to the fundamentals and what the fundamentals are take some time. So here's the facts of relative prices. WTI crude oil is down about

20% on a 12 month basis. Gold is up about 2%. WTI crude oil is down about 20% on a 12-month basis. Gold is up about 2%. WTI crude oil is an enduring bear market. They had a bounce. I need to remind people, Mike, if you don't agree with me, go ahead, buy some, put it in your own money and trade that real, real money. Don't just talk about it. I mean, these strategies, I say, go ahead, buy some real money, put it in your own account, see how that works out for you. Buy some UNG, that natural gas. I knew David left. Go ahead, buy some natural like natural gas i i knew david left go ahead buy some natural gas it's down 80 it's just it's and now adjusted for it careful yeah and then you get to adjust it for inflation well well there's there's another thing the thing is about the

enduring thing about energy is you can do well buying xle energy producers but virtually never do you do well buying that underlying commodity that has to roll futures because people can create more of it for less of it every day. That's the thing that just struck me about Bitcoin almost four years ago. I said, well, you can't create more of this. It's early days in adoption. Boom, there you go on. But I want to tilt over a little to gold in terms of commodities. On Friday, we had the highest quarterly close ever for gold. OK, well, that's a bull market. That's resuming. The price of crude oil is the same price as 2006.

Okay, well, good luck with that one. The key thing is that deflating crude oil, which is certainly on a relative to money supply and inflation and PPI and things like, crude oil is clearly deflating, and it's helping fuel the gold inflation. So I think we're in early stages of that. And the key trigger is going to be this stock market. It's got to stay strong for crude oil and copper and risk assets to stay up. And the biggest risk is it just does what it normally does. It drives everybody crazy.

It acts as a lag. It follows what the bond market's been warning it's going to do. And it drops as we head towards a lag. It follows what the bond market's been warning it's going to do. And it drops as we head towards a recession. So I'll end one thing with this. Our economist, Anna Wong, this morning just pointed out that recession that's coming third quarter. She's been predicting it's now pushing closer and moving forward. And she's been spot on. And, I mean, everybody keeps calling for it.

But the indications are there. I just look at that two-year note at 4% and Fed funds at 5% and think, okay. Oh, and then the key bottom line is what's this banking crisis? What sparked it? Well, the Fed raised rates really aggressively, messed up the duration mismatch. And what's Fed still doing? They're still raising rates. I mean, typically for these things, and you'd have to say, oh, they dropped 300 basis points and they had a lot of liquidity and we're going to do something about it. We're nowhere near that. Dave, go ahead. Yeah. I mean, I agree with virtually everything you said, except for the first couple of sentences. The fact is, I believe we are at a seminal moment historically. I think that the creation of the

euro dollar market is the most instructive historical parallel that we should have. And I'm reminded of one of my favorite, I love the writing on the old show, The Odd Couple. My wife and I have actually been re-watching it. And that's the first time I ever saw the word assume and what happens when you assume, you make an ass of you and me. And the truth is, is US.S. policymakers assuming a God-given right for the dollar to be the reserve currency is absolutely perhaps the dumbest assumption that a policymaker could ever make. Why do I say that? I say that for a bunch of reasons. Well, let's let's talk about historically. Let's talk about implications and let's talk about desires. So historically, most people geopolitically would say that the vast majority of wars in the Middle East came because the U.S. was defending the petrodollar.

Full stop. We need oil to be denominated in dollars. It causes huge demand for oil around the world. And that demand is why the U.S. is the reserve currency. And the U.S. reserve currency, as you so adroitly noted, increases that strength. The dollar is in demand, in fact, goes into shortage in periods of time when the Fed tightens. And that's one of the reasons it maintains it. We have for 30 plus years imported a higher standard of living from the rest of the world because the dollar is a reserve currency. Make no mistake, it is a big deal. Now, what happened with the euro dollar market was U.S. regulators stopped the U.S.-based multinational banks from competing in the euro dollar market. They were afraid of a variety of things. And so London became the world's largest financial center. That is not a trivial thing. It is a very big thing. The difference is London was the world's financial center, trading dollars, to use your word, make stable coins go elsewhere,

don't allow it to be in the U.S.? Is it certain that they'll stay with dollars at that point? No, is the answer. And that is playing with fire. The fact that Circle's moving their offices to Paris, which I guess came out since the last time I was on the show, is a non-trivial issue. The fact that people are going to push for a CBDC instead of private dollars, giving the government basically the keys to be able to program money, is a very big deal. The Restrict Act, which is nominally being touted as something for stopping TikTok because we don't like its effect on children. And oh, by the way, I'm very sympathetic to that. I don't have TikTok on any of my machines.

I don't like the data side of it. I think that there's all sorts of reasons why it's an issue. But allowing all software to be restricted and be able to put someone literally in prison because they use a VPN to use a piece of software that the government doesn't like. You put that in with the CBDC and you're looking at a level of totalitarian control that would make Orwell blush. Now, in America, we don't like those things and we don't like them for a reason because freedom is good. But my point on the dollar is if you go down the route of pushing the entire crypto ecosystem offshore, in addition to the millions of jobs you're going to lose, you also run the risk of losing what you

just talked about, which is a very big deal to America. And it would take a serious kick to make it happen, because you're right, Mike. The entire crypto world wants the dollar to be behind Tether. It's why it's there. The entire crypto world wants to have, you know, whether it's Circle or whatever, to be issuing dollars that they can transact cheaply and globally. Don't take that for granted. That's literally the only point I want to make. I talked to Paolo Arduino from Tether on Friday so that that conversation will be out probably later this week or early next week. And our title here is hyper Bitcoinization. But he said exactly what both of you are saying. He said that Tether, more than any other thing, has helped the hyper dollarization of the world. People, which to me makes it insane that the government would want to fight it because it's giving people all over the world who otherwise wouldn't have it access to dollars. And every single time someone wants to use Tether, they need to back it with a dollar. It has to be a dollar in reserve.

Let's not miss what makes America great. And that's the fact that we have the discourse about this. We consider all the stupid options until we come to the right conclusion. That's not my quote. That was Churchill. Not exactly. And so we're considering it now. But virtual guarantee we're going to get this recession come next year during an election, which means the party in power is going to be pushed out and we're going to tilt completely the other way. So even Gensler is up in 26, 2026. So this is all tilting. That's the benefit of this system.

So what you're pointing out is these are fears of the U.S. pushing back on crypto dollars. The U.S. did push back on euro dollars. It didn't matter. The world said, sorry, but we're taking your currency because there's nothing better. And so, yeah, this is short term. It's bad. I agree with you, but it's all just speculation of what might happen. These are all if statements. What's the current state of play right now? The U.S. dollar had this massive run last year over time if you measure it historically i look at the federal reserve trade weighted broad dollar going back to like 1958 it only goes down after it goes up because

it's versus a basket of other currencies there's no comparison there's only one potential comparison history and that's gold that's gone away and bitcoin's becoming that way but any other currency any other country single country look what euro is trying doesn't even get close so that i'm not worried about we can that's the macro we can debate forever but the key fact is these are if statements let's remember where we are here it's not it's tilting that way but usually um cooler heads prevail and people like elizabeth warren prove that they will go down in history as people like Aaron Burr. And seriously, they'll take that risk. But I look like like David said, it's the key

thing I look at for simply and simplistically is Bitcoin. If you're a money manager, why take the risk of not having some of this revolutionary asset, particularly because it's so controversial, you want to have at least some in it because you don't want to look like an idiot over history. But shorter term, to me, this is back to markets. And what's really happening now, the macro is there. I'm sensing way too much bullishness in the biggest global macroeconomic reset ever in my lifetime. And just the fact I'm still looking at things like money spike plunging, deposit rates at banks just

collapsing, and central bank rates still going up, and people looking and markets looking at backward-working inflation numbers and very much lagging unemployment numbers. It's just classic mistakes of history that actually might come in the future within a year or two. I think we might have those people coming back to abolish the Fed because they did help spark the inflation, rightly so. We had a massive, pretty significant, unprecedented pandemic. And then they were baited in to keep folks in inflation

when we had this massive pump in commodities with invasion. Now everything's tilting over. The biggest pump in liquidity is tilting over, is going to a dump. That's the bottom line with everything. We're beginning of Q2, and we've had this massive rally in the stock market. I heard another Goldman analyst this week, and, oh, it's all good. And people point out these historical cycles.

They always come after booms. And we're in the middle of a bust. The key question is, what stops stops us it's only been a mild correction in a bust i think that well i mean look i between the two of us on this show i've been more bullish than you have on in particular right on bitcoin uh i share your angst with regard to the stock market in and i hate it's not a monolith, right? The stock market consists of individual assets and there's all sorts of cross currents going on. But the absolute reality is, is the equity markets are still at some point tethered to expectation of future earnings or at least future revenues or growth or future something. In some cases, it's future story time, because, you know,

there are some story stocks that happen that you just kind of look at and go, Oh, good. Tell me a story, daddy. You know, whatever. But the reality is, I love my car. But I thought similar things to you in terms of the overall market cap and what needs to happen. But the truth is that you could see a mass delinking, at least of Bitcoin, from the stock market. I'd say most of the rest of crypto is hard to see the delinking because it really is. I kind of group it into two pieces. There's a third.

The two pieces that I care about are Bitcoin as the base layer of money in the digital world. The technologies that are going to enable DeFi to compete with the financial system to support, you know, artists taking over responsibility for an ability to get monetized their own work, et cetera. You know, the whole, you know, NFTs, et cetera. You know, so there are there's technology there. And then, of course, there's stories there too. And a lot of it is complete and unadulterated crap. And I've said that from the beginning. And there's a lot of need for a lot of things. But the truth is, is that

Bitcoin is not related to whether or not there's going to be future cash flows in grocery stores, right? Whether or not the financial system is going to survive, but a lot of the rest of DeFi certainly is. And so it's fascinating to watch how this plays out. I mean, the old expression in the long run, you know, the market is a discounting machine in the short run, all bets are off and fund flows and liquidity trumps all. So, you know, we kind of have to understand that there's all sorts of things that go So, you know, we kind of have to understand that there's all sorts of things that go on in markets. But I kind of have this feeling and I did and we all know this because I've said it many times when Bitcoin was languishing in the early 20s. And I

kept saying, if we breach 24-5 in any sustained way, we're going to move back into the 28 to 32 range, which is exactly where we are. I don't think it was a particularly brave call. I thought it was pretty damn obvious. I think it's equally obvious that unless Mike is right and the market decides to take a collective dump significantly, I don't think it's terribly brave to say that Bitcoin is going to reach back up over 40 to that range at some point into the summer. But obviously, if the S&P does drop 25%, all assets are going to sell off. Correlation will go to one, and all bets are off. And so it's one of these sorts of things that are pretty obvious. The simple point that I like to make on this is there's a question of psychology. And when you

look at indicators, like a lot of people in this, in the, who are making the same prediction on the stock market that Mike is, and by the way, I'm not so sure I disagree. I don't really have an opinion. So I'm not, I don't have a strong one. They look at the bond market and what it's saying. And they say the bond market is smarter than the stock market. And they look at these things. And we've seen this before in 2007, the bond market was saying, holy crap. And people in the stock market. And they look at these things. And we've seen this before. In 2007, the bond market was saying, holy crap. And people in the stock market were ignoring it until all of a sudden the dominoes started falling with Bear Stearns and then Lehman later in the year. I mean, CS spreads were going crazy, et cetera. Well, those things are flashing red in

many places now, too. So there is there's definitely a disconnect. That said, if you look at Bitcoin and you want to understand demand and what people really think, all you have to do is look at the hash rate, which is still which is now an all time high again. And just for context is more or less triple. It was then after the actually more than triple the bottom after China banned Bitcoin mining a couple of years ago. And boy, do I think Xi wants that mistake back. Well, it seems they're unbanning it. Mike, I know you got to go, but if you have a thought, and then I know you're coming back. So go ahead. One thought real quick. Did we just hit the tape on the ISM numbers? They're all weaker than expected. Rates this morning were up. Now they're down interest rates. So just like the ISM, let's see, the most significant is manufacturing. It was expected 47.5.

It came out 46.3. The key point is everything's still below 50. That means recession. So some of these numbers came out stronger than expected in China. But even the global manufacturing came out weaker, 49.2. So this is stuff that I look at. You get these aberrations in these things. It's the trend that matters. Like what's the trend in crude oil?

It's been going down since 2008. It's peaked and it's still going down. And what's the trend in the economy? Okay, well, what's happening with equity? Dave pointed out. The Fed's tightening that as much as possible. And things are tilting downward. So I don't see how we're going to get out of this without a normal historical bear market in equities that really makes you.

The only time they really bought them is when everybody gives up. And we remember that in 2002 and then we remember it in 2009. That's what you typically need. And of course, other examples. So that to me is most relevant in what's it's the noise in between there. So, yes, I have to admit, I'm overweight, my bearishness on equities, but it's all everything's pointing that way. And the things I look in for looking like this collapse in commodities that was complete against consensus a year ago. And I just like to point out is you have this historical things coming on where you never get a pump of that velocity in crude oil and commodities without an equal recession. Now, our data goes back 100 years, and that's kicked in.

You never get a bottom in unemployment at such a low level without a recession. Now, that's kicked in. You never get, hardly ever, the yield curve, this inverted without a recession. Now, that's kicked in. And all these things are lining up, and it's supposed to happen very slow. But it's the classic thing, I I think about human nature is that's the lagging nature of what our authorities are looking at, i.e. the Fed versus the leading nature of markets. And it's normal human nature to never price for the worst case. I want to hop off and

I'll get right back on. Hey, Dave, he invoked in his previous little rant there, your favorite person in the world, Elizabeth Warren. He said the name. That means that we have to talk about her anti-crypto army that fears to fear. You know, here's the thing that really, really bothers me. And, you know, if I was doing a Peter Griffin, what grinds my gears? The fact of the matter is, I think Elizabeth Warren is a very smart individual. I think that she has her North Star is she wants to control the economy. She believes she can because this time is different. And if only she were running the show in communist China under Mao, they wouldn't have killed, you know, tens of millions of people in a

Stalin wouldn't have caused mass starvation because she'd be smarter. I mean, I actually think she genuinely believes that. I think she genuinely believes she can control the economy. And I think she is smart enough to understand that the single biggest threat to her ability and enduring control over the economy is Bitcoin and DeFi, both of them. Bitcoin, because it creates a measuring stick against which out of control money printer. And she's a big adherent of modern monetary theory, which, you know, you know, everyone knows, I think is complete and unadulterated crap. And given the opportunity to debate Stephanie Kelton on any stage at any time, anywhere,

as long as it was fair, I would do so. The reality is that she believes this. And so she fears Bitcoin. She's smart enough to understand and see the hash rate and see it. And her attacks have gotten increasingly hysterical. And so there is that. And that's something that is important. I thoroughly disagree with her on policy. I thoroughly disagree on many, many things. But we agree, actually, on the goal, the goal to help and broaden the financial inclusivity of the financial system, to help working class people, to help people get banked who aren't banked, to allow people access to a financial system that has literally been exclusionary almost by definition. And so the goal is the same. And all my friends who are more progressive than I am in the sense of

political and politics are really hard because it's really you're trying to capture a three dimensional space with basically on a line. I mean, you can't do that. But the fact is, is her anti-crypto army to me is a sign of desperation and hysteria. And that's a big deal. But I want to make something also very clear that everyone always links her and Gary Gensler together. And Gensler may very well be doing a lot of things. And, you know, given Citadel's letter this morning, I am hardly in the camp of being the most histrionic about Mr. Gensler. What I would say is the goals of what he wants to achieve are literally the same goals that I want him to achieve. I just don't like the way he's doing it. The goal of having a regulated environment, I just got through saying, what is it, 20 minutes ago, that I think a huge percentage of what classify as crypto assets are crap and they don't have proper disclosures. Risks, as you know, from Voyager and Celsius were not disclosed. I think

those are big deals. There are issues in the market. I have chronicled on our website, on our YouTube channel, I did something called Masterclass of Manipulation, talking about the fact that there's manipulation in the market, that it would be great if regulators could actually do something about. So there are things that we have in common. The issue is, is if you steadfastly refuse to propose rules that are workable, then you leave people like Brian Armstrong with no choice to get up and say, listen, and call bullshit on the notion of coming in and registering. So when you start talking about the political situation, let's be really clear. Most people in the Bitcoin world are actually on board with the stated goals of both Elizabeth Warren and Gary Gensler.

What they are against is the anti-crypto army, the presumption that there's no value, the notion that you could just enforce, make every celebrity, you know, feel, you know, write you a check because they supported a crypto. I mean, that's where it really is. So it's not a question of ranting about this. It's a question of cool, rational analysis. And the fact is, her notion literally risks millions of American jobs. That is the issue here, right? If you banned crypto in America, everyone's going to leave. So, you know, my co-founder spent the last three weeks in Europe, and I'm talking to a lot of people. The amount of companies that are looking to leave American shores and find new domiciles, whether that be in Hong Kong, which is, you know, you don't have to go back very far in history

when China was talking about banning it. There are a lot of companies out there looking to open offices in Hong Kong. There are a lot of companies who are very hopeful that the UK will, the FCA will, will come out on the right side of their consultation. There are lots of people looking at Europe, et cetera, et cetera. This is not a good thing for America. And I think that it's very interesting how, how, you know, you mentioned, you know, Elizabeth Warren, how she tries to make the assumption that, well, crypto is just going to steal everyone's money and there's no value. And that's her belief. And maybe she's right, although I don't think so. But should governments ever be singling out an industry and saying, no, we don't want it on our shores? That is a serious problem. And that's really, I mean, I know that that's not the kind of hyperbolic rant that people like. It's not as much clickbaity. But the truth of the matter is, there's a lot of value here. There are tens of thousands of brilliant people, you know, present Bitcoin, that if you basically want to make a statement like she's made or like Gensler's made and say, well, all these people are just, they joined a cult and we need to deprogram them. That's more or less what they're saying. I'll take the side of the tens of thousands of really smart people who see the potential

rather than the side of people who just kind of dismiss it because it does it runs counter to their own narrative and their own self-interest yeah i keep people keep hearing people say how sad it is for the united states myself included we need sensible regulation we need sensible legislation for this to exist on our shores i would make the argument that it's already over. Yeah, I don't know. Industry, you don't have to. But this industry moves so fast and I can't find a single person willing to try to make it work in the United States outside of maybe Coinbase and Kraken, who are incumbents here. But nobody who's building something new in crypto right now has any

reason to attempt to do that in the United States. And knowing how fast the adoption curve happens and how exponential this technology is, I would say by the time we get anything sensible, the next five years worth of innovation has already been built offshore. See, maybe I'm an optimist. You can disagree. There's no doubt it's, it's, look, I run a company and we're a software company. We don't, you know, we don't trip either of the two very, very laser sharp, bright lines out there. So companies that are other than us, which either handle customer assets or arrange trades, we don't touch on either of those things. So the reality is there are a lot of companies who do those things who are finding it very, very difficult.

They're finding it difficult because of Operation Chokepoint 2.0. And I know you've talked with Nick Carter about this. They're finding it difficult because of worrying about various Wells notices and the so-called flood that's coming out. There's all sorts of things that are going on. The truth of the matter is America is a pretty resilient place. I would feel a whole lot better about the future if the political system wasn't this three ring circus that it is today. And I don't really want to go down that rabbit hole, but it's a two ring circus. Sadly, we only have two rings. We need a third

ring in our circus. Yeah. Yeah. Yeah. I mean, that's part of it, but look, you know, if you watched Tom Emmer's talk on the bankless podcast last week, or you see any of the things coming out of house financial Services, you know, or Cynthia Loomis or even or and Loomis and et cetera, Loomis, I don't know how it's still a brand. Yeah. Right. There are clearly rumblings of people who get the joke. And there's a lot of innovation in this country. The things that I am most concerned about have to do with the hysteria. When the hysteria ramps up like it is now, the possibility of the administration doing something unbelievably dumb that will end up at the Supreme Court or end up causing significant issues such as the Restrict Act or whatever. That's where my concern is. But I think that America is pretty resilient. And the fact is, is if we get anything sensible in the next two or

three years, yeah, I think that we can claim back a lot. But I agree. I think some IP, some innovation is irrevocably lost. And the longer we go down this garden path, the more likely it is that we could lose our financial markets primacy. Now, I use those words a lot, Scott, but let's be clear. I've studied this ad nauseum. In the equity world, it used to be, and it probably still is, but I haven't studied it in the last five years, it used to be trading costs and the velocity and the ability to raise money because of America's ability to have a more efficient financial market in many ways was dramatic. And so as a result, company American issuers had huge advantages compared to other issuers. We know that. Now, what happens if we lose that? Because the digital system and digital assets takes over and America is lagging.

Well, it literally has the look and feel financially of what happened to Great Britain when they lost the primacy of the pound sterling. And that to me is the biggest fear. But I mean, Mike is even more optimistic about Americans' resiliency than I. So, I mean, Mike, what we were talking about when you were gone was the, you know, Scott's kind of more, you know, he, it's, he, it, we'll call it his maudlin Monday musings. Let's, let's go to that or that America has already lost in the digital asset space and we'll never recover from all the craziness. And I I'm basically taking your, saying that our resilience and our innovation will win if we can correct that ship and right that ship.

But I want to make it clear that has nothing to do with the value of the assets to me. I'm just saying everything will be built offshore. And if we get sensible regulation and legislation in the future, they'll just make it maybe available to Americans. But those things will not be built here. That's what I believe. That'll last one election cycle. That's it. That's a wonderful thing about this country.

It's all you need to do. First of all, I'm losing money, jobs, votes. You're off. We're going back. I mean, OK, so we'll go that way a little while. We're tilting that way. I'm fearful it's going to continue. But it's the key thing.

This is the American century just kicking in, partly because we're learning the limits of autocratic leadership in places like China. Now, who helped them come out of poverty? It was the U.S., Nixon meeting with Mao. Their average per capita income was $2,000 or less. They're all peasants, and now maybe it's $20,000 or $30,000. Now they're switching back to a complete autocratic leadership and going the wrong way. Yes, they've been a bit positive on Bitcoin and things like that and cryptos in Hong Kong. But they have to because no one wants to touch that currency.

There's no open discourse, no free flow capital and things like that. And you look at the other. What are other competitors? Europe's basket case. Russia, we know what's happening. Maybe India. But I look at it as this is we're in the midst of short term pain before the gain. And what's it going to do for the price of Bitcoin and Ethereum? Is it going to reduce?

I mean, it's from the developer side, the business side, it's a problem. From my standpoint, measuring supply, demand and price, I don't see it as particularly bearish for Bitcoin or Ethereum. Now it's bearish for the whole space. The key thing I have to admit it's bothered me since beginning the spaces when there was only 2 000 coins list and coin market cap and now there's 23 000 that is just silly i mean that's to me an example of way too much money in the system it needs to get purged yeah so they don't go to zero but a lot of those are just worthless speculative machines. Maybe 100 are going to matter. I mean, we learned this before Ben there done that in dot-com bubbles.

So that's the way I see. But from a macro standpoint, this is the American century kicking in. And just the fact we're debating this, you don't do that in China. They're completely – here's what I'll end with. I completely view China right now is similar. And I've been saying this for years, similar to peaks over union and peak Japan. Well, that's possible. I want to make one point first. The equity world has an analog to the coin market cap, you know, whatever.

And that's the OTC markets, the pink sheets, you know, immortalized in movies such as Boiler Room or The Wolf of Wall Street. So it's not like that doesn't exist. And I often make this point, but it's kind of important because if you believe the words that come out of people who I'm tired of talking about, they'll say, if you're a security, you're safe. Well, the reality is there's very little difference between coins past the top 500 on CoinMarketCap and the OTC world of pink sheets and bully stocks. Now, there are many things that have improved that market. And I always give a tip of my hat to Cromwell Colson, who built OTC markets to be a much better platform. You know, Mike Madesky, who, you know, is there and I've worked with for years. They've done a great job and they've cleaned up a lot of that market. But the underbelly of that market is more or less identical

to the to the the idiocy of people who think they can create a coin and get people to pump it and play with it. And because there's slightly less regulation you know maybe they can do it more more to the point uh the only people who can buy pink sheet stocks in america are americans uh whereas with coins you can it's global so that's why you expect it to be bigger but that's just a a personal pet peeve of mine i think the point here is there is undeniable bad policy emanating from certain corners of the current ruling party and administration in terms of trying to shut down or literally make fun of. I mean, last week, we literally had an investor advisory saying crypto was more risky than other things. And it's like, well, OK, it's the SEC's world job to tell people what investment of good or bad.

I mean, yeah, there's tons of investments there that are crap. I agree with them on that. But at the end of the day, they've taken the literal best performing asset class over every single time period and said, don't put your money there. And they spent taxpayer money to actually create this. I mean, that's unprecedented. And I'm picking 2002 specifically had the SEC said, you know, don't invest in tech stocks because they're incredibly volatile and they won't go anywhere. And we think the Internet is is nothing more than a glorified fax machine. And we all know what happened. You know, 2002 was the bottom, yada, yada, yada. I mean, I'm saying that, but that's literally the same thing.

So I was I was appalled by it. I'm not going to lie. I was appalled. And actually, you not going to lie. I was appalled. And actually, you know, probably should have been more professional in my denunciation of it. But the fact is, it is appalling that a governmental agency would take sides and tell people that. It's, you know, it's almost as dumb as Massachusetts saying don't invest in Apple back in the day. And we all know how bad, how well that turned out. They're doing us a favor.

They give us great indications. It's when bureaucratic people and entities like that with a vested interest. It's like banning books in England for like 20 years. Every time they banned a book, I suppose in the 60s through the 80s, it went to the top sellers. Everybody wanted to buy it. It said, thank you. Good for the indication. We're in that right now.

Go ahead. Tell us how horrible it is. That's why I want to invest it. Right. Thank you. I just, just kind of separating out that human nature of what people in those positions say and do, and then how history is going to judge them. It's kind of entertaining. Like, really, do you really not think you're going to be looked upon unfavorably as the world. Just imagine this world 50 years from now. We're gone, right? I look at it simplistically from maybe another aliens or other beings saying, okay, so they figured out flying.

They figured out fission, probably got the fusion. Did they figure out global digital collateral? I mean, at some some point it's just logical yeah i mean the thing that i think that that's true uh you know what we haven't talked about is the the the rapidly advancing you know technology under ai at least in terms of communication uh and how scary that is particularly if AIs are trained on specific data and given specific instructions, uh, you know, it's, it, there's a lot that could happen here. And, and I'm not trying, I mean, Scott already looks, looks depressed.

I don't want to depress him more. I'm not even here. Then that is, I'm actually AI. I'm surfing. Yeah. Well, but I mean, the point that I was kind of alluding to is, you know, you know, when you're researching things, you know, where your sources, where your sites are and a lot of people, people being what they are.

I mean, I found out last week that you could actually ask for citations from chat GPT or GPT for, but most people don't. And so you don't know if you're missing out or where it is. It wouldn't be surprising to see things like the SEC investor advisory that I was just making fun of becoming part of the AI zeitgeist. It's like, okay, well, telling people that. And that to me is is is much more scary than anything else. But I tend to believe that that human ingenuity will will will will be relevant here. And I think that, you know, digital assets have a lot going for it in terms of the market structure. And we will see those things win over time.

But right now we're in this kind of strange situation where I think we're lucky. I'm going to be blunt. I think that we are lucky that they got over their skis. I mean, the fact is, is Senator Warren did stop pretending. You know, at some point she was like, well, you know, it was all kind of, you know, in the back rooms, you know, you know at some point she was like well you know it was all kind of you know in the back rooms you know etc what was going on but by claiming she wants an anti-crypto army by taking credit for destroying silvergate and then having it bounce back in the faces of that causing this banking crisis these are things that happened and whether the media wants to cover it up or not well i mean a lot of people do but the truth of the matter is you're talking about actions that have consequences and people aren't that dumb and so it's good that it's out it's a lot easier to win an argument against thoughts that are public

than they are that are kept private yeah you rather argue against an opponent who's actually using all their weaponry rather than being surreptitious and pretending that they're on your side. I just still don't understand how the progressive narrative does not support an empowering asset class. I mean, I get it. Like you said, I mean, there's plenty of scams. There's 20,000 coins. We don't need them. We do require some sort of regulation, but this seems like the most nonpartisan issue ever. And it seems like if it was going to be partisan, it would actually be the progressives like Elizabeth Warren that would support it. You would have thought that. But yet here we are. And the problem in this country is once something becomes partisan, people, you know, look, there's so many examples recently of, you know, of both sides. I

mean, vote blue, no matter who, I can only vote Republican, you know, it, there are people, the politics are different today than they were. I mean, 30 years ago, there was a lot of differences. You know, the blue dog Democrats would vote, there's so many things. I mean, I hate, you know, I'm going to get a bunch, someone's in the comments, I'm going to be saying, okay, boomer at me in a second. And, you know, I'm sorry that I actually remember this stuff. But the truth is, we are in a much more politicized, but not really politicized, we are in a bifurcated view, it's become extremely, you know, one, you know, they say this, so I have to say the opposite. And that's problematic to me. And look, I have lots of friends on the progressive side of crypto

who believe that it's in financial inclusion. Hell, I believe in its value of financial inclusion. You know, there was a comment the other day that, you know, Elizabeth Warren talking about, well, the working class people, it's like if she walked around with a CoinRoute shirt in Florida for a week, she would know very closely that she's wrong. Why? Because I get into conversations, I mean, multiple times over the course of a week. Someone will read this and say, oh, what does CoinRoute do? And I tell them and then I hear their story about crypto. I mean, it happens all the time. And I'm not talking to bankers. I'm not talking, you know, I'm not walking around in she-she clubs or top-end

restaurants when I'm saying this. I'm talking about my local grocery store or, you know, this local store, that local store. It is very much a broad-based phenomena, and it is absolutely insanity to say the opposite. In fact, you know, it's only because you don't know. And if you sit in an ivory tower, then maybe you don't. But the truth is that the average person does, there's a lot of people, there's more representation of bitcoin among less rich people than rich people that's just a fact and it's hard for me to understand how and why they've come to this conclusion i just don't understand it which is another way of saying that i just assume that the motive of wanting to have an oligopolistic banking system that the senate can control

dwarfs everything else in her thought process. Every good movement needs a good antagonist. And thank you. What better antagonist than her? Who wants to be like her? So I just don't like to comment. I like to stay away from her. You don't have to. Unless it really matters.

But it's a great antagonist. I think she's perfect. We're going to look back at this and say, thank you. Well, then we'll say thank you. Thank you for making us look how bad and stupid we could be and how we ended up defeating the Soviet Union. I mean, it's just silly. Yeah, so the conclusion here is thank you, Elizabeth Ward.

We love you all. I mean, look. But thank you for making us realize the dark side. So let's all go, you know, forget about it. I mean, it does need to be said that there are things that need to improve. And the thing that bothers me the most and why I get the most agitated is I talk to a lot of other CEOs in this industry. And it is very hard to find serious people in this industry that don't want to see reasonable regulation, that don't want to see better disclosures, that don't want better markets, that don't want to

see things improve. And I know that's a double negative, but that's the reality. So when people make the assumption that that is not true, that's what makes me angry because I know it's false. It's a false statement absolutely and here we are 10 31 it kept you guys for an extra minute mike thanks for popping back in after you guys you're like the media king man it depends today you know when iron's hot you gotta hit it and it's big moves in oil and stuff yeah make makes perfect sense everybody oh and by the way dave keeps mentioning coin routes he showed you shirt. There is a link right under the YouTube video, and it is actually available to all of you at this point. Right, Dave?

We're certainly getting there in terms of expanding. I mean, if you want to actually pay less for your orders and get better pricing, it's a pretty good tool. So everybody, please check that out. Guys, I'll see you again next next uh monday of course both of you i extend the invitation every time but tomorrow everyone i've got uh twitter spaces at 11 a.m eastern standard time tomorrow's anthony scaramucci and melton demers uh which should be absolutely amazing the week after we've already got chris giancarlo the former head of cftc so that should be amazing and the the week after that, I've got Raul Paul.

So that should be amazing. And I'm hoping that both of you guys will join all those conversations. Everyone, until I see you all on Twitter spaces tomorrow, thank you. Peace. Thank you. Let's go.