The Wolf Of All Streets - Is Bitcoin A Safe Haven? DeFi Wins Over CeFi | Live Panel With Aya Kantorovich, Steven McClurg, Matthew Sigel, and Matt Hougan

Episode Date: April 20, 2023

Today's guests are: Aya Kantorovich (Fractal), Steven McClurg (Valkyrie), Matthew Sigel (VanEck), and Matt Hougan (Bitwise). https://twitter.com/aya_kantor https://twitter.com/matthew_sigel https://twitter.com/matt_hougan https://twitter.com/stevenmcclurg ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget    ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Bitcoin has seen a bit of a correction over the past few days with altcoins obviously suffering a bit more, leading a lot of people to believe that we are once again back in a bear market. Price is going to $10,000, it's over, it's all going to zero and that we should pack it in. But I have a feeling that myself and our guest today have a slightly different view on that. We also saw Coinbase make a threat to move offshore and now already getting licensed in Bermuda and beyond to open other exchanges. Is it over for crypto in the United States at least? Well, if the House Republicans have anything to do with it, it would seem not because Gary Gensler got absolutely eviscerated on the congressional House floor two days ago, which inevitably we will talk about

today as well. We have a big panel today. Steve McClurg, Matthew Siegel, Ia Kentorovich, and Matt Hogan, some of my favorites, all who have been here panel today. Steve McClurg, Matthew Siegel, Ia Kentorovich, and Matt Hogan, some of my favorites, all who have been here many times. So really looking forward to this roundtable today. Let's go. Let's go. We've got Matt, Aya, other Matt, and Steve. I know. We'll do Matthew and Matt today, I think, just to keep it less confusing. And we had my producer on, and it looked really good with six tiles. But five tiles looks pretty good here. Hope that all of you are having a great day. We have a lot to talk about.

First of all, Aya, congratulations on helping the unemployment numbers. We know we've all been watching the macro and you disappeared there for about six months. So thank you very much. But it was a big announcement this week. So I'll give you the quick chance to tell us what you're doing now after obviously leaving your last position.

Thanks. Yeah. So we're building Fractal. It's an infrastructure provider for institutions to allow them to clear, settle and manage their collateral on chain. And so to simplify what that really means is to take more of the settlement between digital assets on chain, anything that's OTC as well, and really create non-custodial solutions in a post-FTX world to rebuild that trust trust in c5 and so we're calling it on-chain Finance not necessarily DeFi it will be fully permissioned and excited to to see how that takes off how relevant is that also with sort of the failure of signature and silvergate now yeah I

mean listen uh the the banking providers it's going to be a big bottleneck across the board for anyone looking to bring fiat into the space. It's, you know, definitely we're not going to look to get a banking license. I think that in the United States today is going to be a very tricky uphill battle, but we'll stick to stable coins for the meantime. And our hopes is that, you know, and I'm sure we'll talk about this, but the attitude in the U.S. changes and becomes a little bit more optimistic. Let's talk about the attitude in the United States and if it can become more optimistic. Any of you can jump in here. Obviously, I mentioned Gary Gensler somewhat getting eviscerated. I think we all know that was a dog and pony show and it probably doesn't mean much, but at least it felt good. So do you think that the tone

has changed there at all? Or do you think that we're just going to continue to see this regulatory uptake? Steve, you and I talk about this actually offline kind of quite a bit. I know that you definitely have your concerns. So what do you think? Well, look, it's very real that there's a coordinated effort between the Fed, the Treasury and the FDIC. The FDIC is working to debank any companies in and around blockchain, but not just blockchain. Also, companies that are focused on money transmitting. So that's something that we don't hear about a whole lot because we're in our crypto Twitter echo chamber. But money transmitting companies, anybody that's doing back end processing, even for health care companies or anything along that line,

is also in that category, which I find very interesting. It's not just it's not just Bitcoin. So so you have that. And and it seems like a couple of senators are leading the charge. You know, I actually thought it was a conspiracy theory when everybody was talking about it six months ago and I was wrong. Yeah. Like I said, you and I have sort of privately texts and you're like, I've had some meetings and this seems kind of much more real than I anticipated. I mean, either Matt, Matt or Matthew. I mean, what do you think? Matt Hogan, go ahead. Yeah, I mean, I think we've all woken up to the reality that it's not a conspiracy theory. It is a reality. I think the question people are asking is sort of can they get done before the clock expires on their on their time frame? You know, what I took away from yesterday's hearing, not surprised with what Kentsler said,

a little bit positively surprised at the sort of broad based assault from multiple Republican senators attacking him. We knew about McHenry. We knew a few others. But there were many more that embraced that message. So sort of two entrenched camps. And now I think the question is, you know, can they get it done in the time they have or will we run out the clock and then see the, you know, the industry rebound in the U.S. in a year or two's time? But even if the clock runs out, don't we just then get a new regime and they flip it all anyways and make new laws and we call it a day? I mean, can we even count on anything remaining consistent for more than two to four years? Matthew, I mean, you can jump in.

Well, you know, the clock will count down on some of these court cases that will have a determining factor. And in the meantime, I mean, I think it was encouraging. There were a couple of Democrats on the House Financial Services Committee, like Rep Torres, who have some open mindedness. I don't think that this is a primary enough issue to get legislation passed in the middle of a debt ceiling debate as we approach an election. It's just a chance of any bill is like one percent. So, you know, pick your stable coin legislation handicap, but it's somewhere, you know, pretty low. So, no, I don't think there are any real surprises from from this week. Yeah. And people kind of miss that there was actually that entire stable coin congressional hearing yesterday, a day after the Gary Gensler one. I only was able to catch a bit of it. I thought that Dante and it was Jake. Right.

I think they did a great job did you guys catch brad sherman did anybody hear that besides me who who came on and said that uh in wyoming that their biggest problem is that they might not be able to get the price they want for their cows did anybody hear that is that true I saw that on Twitter. That actually happened? I watched it. He did his usual mumble, stumble, cobra coin, mongoose coin kind of rhetoric. But he said he basically implied that there's nobody in Wyoming. They only care about cows. And so, of course, they're going to try to get an edge by banking and supporting scams. That's effectively what he said. I mean, that's incredible. That's incredible.

I mean, the way that they compare it to the auto industry, right? You can't put a car on the road without a license plate. It's pretty clear that Democrats, at least in this case, and when you look at the restrict bill to try to create oversight

to ban TikTok as well, like they want authorship of the code. They want to know who that is at the time that it's deployed. And it's going to be your internet service provider, one of the big tech companies who gets to bless it as yes or no. And that's where the fight really is. You know, it's bigger than crypto now. And you can see that in the UK law that is, you know, heavily debated right now on privacy. So the fact that it's so big tells me that nothing is likely to get done. And it's becoming a geopolitical issue, too. I mean, I think now if you look at what's going on to your point, Matthew, around the UK,

but also Singapore, France, Japan, Hong Kong, I mean, these are countries that are kind of opportunistically taking advantage of the fact that the US is creating a confusing narrative for companies. And you're seeing companies go offshore. I mean, it's happening. And so I think that it's almost a national security risk for the US. And the question is, how soon will it take for people to realize that before, you know, we've lost so many entrepreneurs that we just can't get them back? Sadly. Well, let's talk about a bigger issue talking about offshore. So Scott and I were actually in Dubai together and watching what was happening in Dubai and leading into the FDIC issues that happened afterwards. We were there in February and all this happened in March and April. So Dubai is actively courting companies and depositors globally, and particularly from the US and even Switzerland.

If you look at deposits, bank deposits globally over the last two months, about $600 billion in banking deposits has left the U.S. in the last two months. About $300 billion has left Switzerland. A lot of people in other countries that were previously trying to get their money out of those countries, places like China and Eastern Europe, are now moving their money out of the U.S. because they've lost confidence in the U.S. banking system. And those deposits are moving to places like Dubai, Singapore, and even Hong Kong. So people that have spent decades trying to get their money out of China are moving it back to China because they trust Chinese banks more than they trust the U.S. banks. But the bigger significance of that isn't that, hey, we've lost confidence in the U.S. banking system. It goes back to the fact that not only are companies moving offshore, investments into companies are moving offshore as well. So Silicon Valley Bank, First Republic Bank, other banks that are similar, have essentially taken foreign

deposits and have moved them into investments into venture and private equity. With that deposit base gone, you're going to see valuations go down in venture and private equity companies and those companies going offshore to get that investment. Yeah, I think the most curious part that is so unexpected is that Hong Kong, beyond even the banks, I mean, they're wooing the crypto industry actively when China was supposed to have banned this, right? I mean, even quietly, 20% of global Bitcoin hash rate is back in China again. Right. So clearly that at least tacit approval from the government in China to bring this back

in and Hong Kong full sale. I mean, you made the point that this is a national security risk. The Treasury said literally the opposite. They said crypto being onshore is a national security risk, effectively. So where do we draw the line here? How do we get them to understand that they're looking at this backwards? Well, it is backwards. And Scott, I had conversations with some members of the Senate and House that are looking into this. When you look at national security, we had up to 80% of all hash rate going through, Bitcoin hash rate going through pools

based in the US just two months ago. And like you said, that's starting to dissipate and move offshore. If you think about if all that hash rate is either being produced in the U.S. or coming through U.S.-based pools, that means that the U.S. can have influence over Bitcoin. It doesn't mean you can control it, but you certainly have influence. And if that influence dissipates, then that means other places can have undue influence. And I don't think that that's what they really want. Yeah, I think the other interesting thing here too is the regulation in general just is a reaction to whether it's volume or entrepreneurs leaving or a reaction to really whatever it is. And what you've seen is China specific.

So two years ago, crypto markets actually used to be driven by Asia based volume. And so if you worked in crypto in trading, you remember that starting at 6 p.m. is really when the day would start for you because that's when volume started to move. And starting Sunday when it was Monday morning in Asia, like that's when the day would start. And that actually switched to the U.S. two years ago. And you're actually starting to see that movement back to Asia. But that was a reaction, right? When Bitcoin mining was banned in China, you started to see a huge flow of that move into the US. Now you're seeing that move back. And so I think the pendulum swings here and we're just watching it swing, unfortunately, away from the US.

And it'll be interesting to see, like, what's the metric or what's the number that makes it so obvious for regulators to that point where they're like, okay, we have to do something that makes this jurisdiction more feasible for building. I'll just say on a research tidbit, we had a Chinese Bitcoin ASICs manufacturer in our office recently who said that there are a number of large tenders offers being done out of the Middle East looking for ASICs and once Ramadan concludes here today I guess that some of those will start to heat up so I don't think the US is going to do anything there's gonna be certain states that carve out you know favorable regulation but the mining ecosystem moves so quickly so flexible like it's we shouldn't get too hung up on where

the hash rate is at any given moment that said more of it is going to the middle east yeah i mean i would just add from a market's perspective this conversation is super helpful there's so much focus on what's going on in the us right now and it's been terrible regulatory environment in the us and q1 and bitcoin's the best performing asset class in the world and part of that is because there are these other stories. There's the Hong Kong story. There's the Middle East story. There's even MICA, which passed today, which is considered imperfect, but relatively balanced and at least a framework for one way the industry can move forward. And I think that broader global context is helpful in explaining what's been going on in the market a little bit. Yeah, I think it broader global context is helpful in explaining what's been going on in the market a little bit. Yeah, I think it's fair to say at this point, it was a bit of a meme

to say we wanted, we would even accept negative clarity over no clarity, right? In the United States, I think a lot of people, but at this point, like you said, it can be imperfect, but at least you know what you can do. Yeah, yeah. I think the people in the United States would kill for that at this point. I mean, Steve, how much does this impact Valkyrie's business having this level of uncertainty? Oh, it's impacted us a lot. I mean, probably out of Bitwise, VanEck, Valkyrie, it probably impacts us the most because VanEck is obviously diversified across a lot of other areas outside of crypto and Bitwise is too. We're the smaller of the group and we're almost all in. So all of us are registered investment advisors that have to operate within a very strict regulatory environment.

And I know we all do that. And what's happening is, I mean, a lot of the regulation has affected more of the exchanges more than anyone else in the past. But the banking issues are now starting to affect us, right? You know, we have issues trying to find banks to work with us at this point in time.

And it's become very difficult. So when you're in a very strict regulatory environment and framework and you try to operate within that, which we do successfully, but you can't get banking partners for some of your products, then you're either forced to operate into gray areas or you're forced to not operate at all or you're forced to operate offshore. And those are the areas that we're evaluating. And so, yeah, it's been very tough for us on that side of things. On the ETF side, you know, that's a different animal. That's easy. But on some of these other, you know, private funds, it's become very difficult. Yeah, I just had two thoughts

on the banking topic because I think it's really important. The way that will express itself for crypto as a whole is more risk for end users. People will use imperfect partners and there will be blowups and then the regulators will point and say, you know, that's a problem.

That was actually created by the lack of ability to easily access banks. We saw that with Tether many years ago, having the same sort of issues. The flip side, I'm one of the most optimistic people in the world, so I'm going to give you the optimistic take. The flip side of this is that we've been here before, right? It was super not easy to get a banking relationship in crypto in 2016, 2017. We're sort of fortunate that this banking crackdown occurred now when there are at least more options for people to work forward. So the industry has been here before. People are creative. They typically find ways, but it does introduce risks that didn't have to

be there that's going to harm end investors. I spoke to Fred Thiel from Marathon yesterday for a podcast, which will be coming out soon. And he actually, he kind of echoed a lot of these sentiments. He said now even Texas is becoming a bit aggressive and that was going to be the home of all of this mining. And they've sort of given away all of the benefits that were there for Texans. But he said that the mining industry isn't really having a problem with banking relationships because they somehow qualify effectively as data centers.

So he said they were basically banked by BNY Mellon and it was fine. So our JP Morgan, BNY Mellon, I mean, we knew, we know that they're involved in this industry. Are they going to be reasonable partners or is it just depend on sort of which facet or side that you're coming in from the crypto industry? Bank of New York and State Street are not

serious about crypto right now. Like their custody solutions are not out in the market, their capacity constrained. Neither of them has any interest in doing that and custodying crypto for funds with any scale, right? Because of the combination of SAB 121, which makes them hold those assets on their balance sheet, and then just directed statements from FDIC, OCC, Fed. So we're going to have to wait another cycle for those big guys to get active. Grim. It's pretty grim. Let's talk about, okay, Aya, go ahead. Oh, I was just going to say, there's also a difference between like an operating expense bank account versus transaction bank account, which is super important. No one wants to bank anyone that's doing trading as their prime business.

I mean, that was a big change that came out. So if you're launching any trading operation in crypto, yeah, I mean, it's tough. And to Matt's point, that's exactly where we were in 2016. And you had to go offshore and now you had to get other banking partners that, you know, Deltek's awesome, but are you super thrilled to be banking with Deltek? Maybe not. And so like, you know, banking partners that you are excited about, but because you know, they exist, but maybe not so much on the counterparty risk. And you're going far down the risk curve. So anyway, long story short, operating expenses, those accounts exist, but on the transaction side, it's it's really dried up. Did you guys hear? Yeah, she's absolutely right.

Our operating accounts are fine, but we're an active manager. So everything that's attached to a fund, there's an actively traded fund, has dissipated. And that's where our profit is, right? So it's tough getting our profits into our operating account to do things that keep us operational.

Did you guys hear Gensler in his testimony literally just blame all three bank failures on crypto? Did you hear the NYDFS commissioner yesterday denying that, saying that? Yeah, I mean, it's just incredible. I mean, so I get it. OK, so silver, whatever, that could be crypto related. Then he says Signature failed because of crypto. But when Signature was literally like seized on a Sunday with no evidence, they were even going to fail that I've seen yet. But then he said, and by the way, you know, we saw that Circle had $3 billion with Silicon Valley Bank, as if that's like Circle's fault that the bank failed because

they had deposits. But that, I mean, it used to be kind of quiet. You know, now they're saying the quiet parts out loud, it feels like. They're not really hiding it. I mean, even, you know, the Restrict Act, we talk about that. That's literally called the Restrict Act. They used to call it the Patriot Act or the You're Super Free Now Act or the This is Awesome America Fuck Yeah Act. I don't know. But they're not even hiding it. And it's really sad. And so now I want to talk about Coinbase because, you know, obviously they received their Wells notice. There's no enforcement action yet. But Coinbase obviously being very proactive to get out ahead of this it was only two or three days ago that brian armstrong said hey maybe we'll go offshore if you guys keep treating it this this way 24 hours later they had a banking license in

bermuda and they're talking about launching an offshore derivatives exchange i mean is are we gonna have anyone left where am i gonna trade i think i was in the works for a while i'll be honest i'm sure i'm sure i mean i think where i struggle with coinbase is like their their meat and potatoes is here in the u.s their presence offshore like really doesn't exist they have closed jurisdictions like japan uh in the last six to eight months um and you know no longer present in those markets so i think it's going to be really tough for them to compete with Binance in some of these jurisdictions where Binance is now, you know, not only do they have their own stake, but also majority of what was FTX. I agree. Yeah, it's kind of a defensive move. They have to do it. The returns will probably not be as high because it's more crowded space competitively. But what else are you going to do? That's exactly my point. I'm not saying Coinbase is going to go to Bermuda and become a successful offshore derivatives exchange. I'm saying, are they

literally that terrified of what's coming, that they're hedging their bets and we're going to need to have some sort of business somewhere, so we better go register? I think it's beautiful political theater is the primary driver. They want to put pressure. They want to make the point that we're all making here, which is people are forcing crypto abroad. And they're the perfect vessel to make those points. So I love the photos of them in London, you know, palling around with British politicians. I love them timing the launch of this offshore derivatives exchange to right now to amp up the pressure. They're the best knight we have to lead the battle. They're Braveheart at the front of the line, yelling freedom. And I think it's a beautiful

thing. I mean, I think all of us in crypto are happy that they're the one. They're taking the SEC to court. They're not entering into a settlement agreement. We need a well-funded adversary to the SEC to stand up to them. So I think it's beautiful. I love it. Anything I can do to cheer it on, I'm ready to go. Yeah, if anything, the action from the SEC and regulators has certainly, I think, galvanized the crypto community to some degree. I mean, you know, I think a lot of people even who despise Ripple are super excited to see Ripple potentially win.

I don't know that'll happen, but but it seems that, you know, people are really coming behind these court cases. And it should be mentioned, which we mentioned all the time, just because a regulator says it doesn't mean it's true. I mean, the SEC is getting a lot of pushback in the court cases. And it should be mentioned, which we mentioned all the time, just because a regulator says it doesn't mean it's true. I mean, the SEC is getting a lot of pushback in the court system. Yeah, go ahead. I was just crypto does well in courts, because generally speaking, the law, logic and common sense is on our side. I mean, you know, you mentioned the spot Bitcoin ETF. I studied philosophy in school, I still can't figure out the logic that allows you to settle to a price and then call it manipulated. So I think crypto does well in lawsuits. I think

they'll continue. We'll continue to do well in lawsuits. It's a nice thing we have in our corner. Thank God. I'll just throw in that since 1934, the median SEC chair tenure is two years. So he just celebrated his two-year anniversary. And it's not all that pleasant to hold that position during an election, time to get out and make some more money before the next cycle kicks off. So I have a contrarian call that he'll be gone before the election. The question is, will he be in Janet Yellen's job? And should we cheer that because she's so awful? I don't even know at this point who I want, who I want, where. But Steve, Matthew, both of you, he just obviously alluded to the spot

ETF and sort of how confusing it is that that hasn't been approved. You guys are two of the very few companies who have applied for those are still pushing for them. I think we all agree it's not happening with Gary, but is that still something that's on the docket, A? And B, at this point, how important is it? I mean, it's very important because there's a lot of regulated entities that want exposure through their traditional brokerage account, obviously. Given the approach that the SEC has taken, I think we're all kind of in a position where we have no choice but just to keep filing because they're going to end up picking the winners and losers. And so you can't be at the back of the line when that happens.

So very frustrating experience. I'd also add, it's important for investors because it's going to collapse the cost of investing in crypto and save people billions of dollars and raise protection. So whether you like it or not, whether you're a self-custody person or not, you should generally root for it in the crypto ecosystem because it is going to be a forcing function for lower costs for investors. And that it trades at NAV, we wouldn't have had the grayscale discount and all of the unwind associated with that. So not too many people are making that point out. That's not top on the list of priorities for this regulator. So I don't think it matters. Well, I don't think it also has to do with Gensler so much. I mean, Gensler's doing his job. He's doing what he's told. It has more to do

with the Biden administration. And, you know, know, if, if, if it's something that you, you know, if it's something that you believe in, you know, there's, there's alternatives out there. Um, you know, Kennedy jr is now, uh, putting his bid into a primary, uh, Biden and, uh, he's, he's probably somebody we should get behind. Um's, he's pro pro Liberty, pro Bitcoin. And, you know, he just announced his, his, his run for presidency this week. So he's, he's, he's, he's a good candidate to get behind and whoever the Republicans put up, we'll have to, we'll have to see and, and probably get behind them. But I think it's time for political action in the next two years. I haven't dug into Kennedy, but I do know that he's also extremely anti CBDC.

So I and maybe we should talk about that. I mean, do you think that the CBDC is a realistic expectation in the United States? We have a lot of tin hat theories in the crypto space, obviously, that much of what's happening with the banks and FedNow, that was, he got that one wrong, right? FedNow is not a CBDC and he did write about that. But do you think they're clearing a path for that? Or do you think that's something the United States will kind of sit on the sidelines and watch everybody else blow up first to figure it out? I think they're absolutely going to pursue that. And I think it's inevitable. I think there's nothing you can do to stop it. i i think they're absolutely going to pursue that and i i think it's inevitable i think there's nothing you can do to stop it um you know the the fact that that currency is moving from from paper form to digital form it's already happened um how many how many times to use cash

to make a transaction whenever possible uh we buy a car we'll get a bag of cash from the bank and take it to the dealership. It's possible. Yeah. Everything is digital and we're moving very fast in that direction. I'm actually surprised that the printing presses haven't stopped and that, you know, everything is, you know, moving even faster to electronic. Second of all, I've been following Kennedy for years. Both him and his sister, Carrie, I think are fantastic people. They're kind of that classic liberal tilt, which I really personally like,

a bit more on the libertarian side, and just wonderful people that are always out fighting for whether civil liberties or human rights. And he believes that financial freedom is a basic human right. Just to throw a wrench in here, again, going on the geopolitical side. But I think one interesting angle against CBDCs, and I personally think they should exist, but even Janet Yellen hold a U.S. denominated currency because of the risk that, you know, tomorrow's just turned off and you can't use it. And so I think that that is going to be a very dangerous side of CBDCs that you don't necessarily get from Circle today. You get it at a high level from a private company, but, you know, this is a little bit different. And so it's going to be interesting to see the other side of that,

especially internationally. Yeah. You trickle that down even to the individual and it's terrifying to turn off your wallet. I mean, you know, everybody sort of points to the China social credit system, but you know, they don't like your behavior. They turn off your wallet, right. To take that to an international level. It's pretty terrifying. Go ahead, Matt.

Oh, I was just going to say, I agree. It's inevitable. But the design choices of what it looks like i think to what i said are not inevitable and still very much in debate and so that's what what we should be focused on but yeah if we all close our eyes i mean a useful exercise in crypto on almost every news front is to close your eyes and imagine what it looks like in 10 years and if you close your eyes and imagine 10 years forward of course there's a a CBDC. And so the question we should be debating is what does it look like? I find that useful when you think about what's going on from a regulatory environment. And which AI is controlling it. I think crypto folks are in a tricky position when it comes to CBDC because the policy question, one of the main policy questions is, is it available to retail or does it continue this two-tier banking system that a lot of us object to

fundamentally, right? And then if it's going to be retail, then the surveillance aspect is almost inevitable. So I don't have a strong call too early to say, you know, we should, I agree with Stephen, get behind all the politicians who are against it for now, because that's in our interest. Yeah, I mean, I know I joked about AI, but now that I've seen how fast that's advancing on a day-to-day basis, I've given up on making future predictions about anything. Because I just, I literally have no idea. But let's actually talk about the topic at hand in the title is Bitcoin a safe haven asset. So let's talk about the fact that we saw the silver silver gate. Obviously, we saw these banking collapses, collapses, but specifically Silicon Valley. The Fed came in on Sunday, closed signature. They closed signature FDIC. But then

they basically came in with the bazooka and said endless liquidity to backstop these banks and Bitcoin went basically straight from $19,000 to $28,000 $29,000 is this truly people moving into Bitcoin as a safe haven asset is it a bunch of people who own Doge saying maybe I should own Bitcoin right now because I'm a trader is it a low liquidity move because there's just no volume and it's easy to move what do you make of shooting up to 30 000 still you know hanging out in that area after seeing the banking collapses and everything that's happening nobody wants to jump in on that one i see it's foolish i mean okay here's how I think about it is in Bitcoin wasn't around in 2009. But in 2008, when when Bear Stearns failed March 2008, the first big bailout, and the VIX was at 60, and the market made a low and then over the next like, three months, the S&P rally 15%, the VIX collapsed from 60 to 20. It was like the calm before the

storm. Are there more bank failures coming? And then there was in September. And I think a lot of folks have that narrative for this year as well, especially given that two-year yields are still rising, deposits are not flooding back into the system. And then if that is to happen, does Bitcoin crash like it did in the COVID march or does it hang up on this narrative of resilience? And like I think it's the latter. And that's where everyone's going to be surprised is that this bull run can continue. Because in 2008, 2009, when Bernanke came in with that bazooka, we had the rest of the world that was really cohesive. Like U.S. was stuffing our debt down everyone's throats, and they happily took it. And now the geopolitical environment is just very, very different. And that should continue the narrative that Bitcoin is

neutral and resilient with a lot of volatility. But that's my bet. And then if the tape is good, then you know, we've got no issues. So risk reward is positive where, you know, we're buying. Yeah. I mean, I actually think that the price has gone up because of speculation that it's going to be a safe haven. I mean, it's the same thing that happened with gold in 2008, 2009 as well. Right. Speculators, speculators assume that that's going to happen. And by the way, it is happening. I know several companies that don't have any other choice but to use Bitcoin or USDC as payments to their vendors. So there was a knee-jerk reaction moving into Bitcoin,

but speculation is always higher, coming as a former trader. But when reality catches up with that speculation, that's when you, you know, that's when you see the consolidation, you know, Scott, you're a chartist, you're probably seeing consolidation in the charts right now, where, you know, we, we, we achieved 30,000 that we're coming back down to 28. And you're, you're, you're getting your, you know, your, your, your cute little lines on the chart that you always talk about, you know, a little triangle, that's consolidation.

That's reality catching up with speculation. And once that happens, then that's when you see markets move up again. And I truly believe that that is happening right now. And that's when we see a move higher throughout this whole cycle. Got some bulls here. Yeah, I mean, I would just add all available evidence

suggests that the answer is yes, in that if you look over the history of Bitcoin, every time there's a major banking crisis, Bitcoin rallies, and that was true in Cyprus, it was true here, it was true out of the financial crisis, it was true during some of. It was true here. It was true of the financial crisis. It was true during some of the other European tremors. So I don't know. I mean, the evidence would just lay out that way. I don't think this move is solely explained by that. I think one of the worst things crypto Twitter does is find single point explanations for every crypto move.

There were like eight or nine or 10 factors that aligned, including the natural cyclicality, including the massive sell-off in 2022, including the down rating of interest rates. I could go on. But is it a safe haven asset? It's an emerging safe haven asset. All the available data suggests that's true. Its essential design suggests that's true. It's essential design suggests that's true. It's a hedge against extreme tail risks. And when the likelihood of tail risk occurring, when that tail widens, crypto tends to do well. It always has. It probably always will. I just think that's what the tape shows. Yeah, I'll be the bull on the back of that as well, too. I'll just say that I think it's always hard for people who sit

in the us to understand why bitcoin's a safe haven uh but definitely with all of the geopolitical issues going on overseas um you're gonna see a lot of that roll into crypto now it's not always gonna roll just into bitcoin a lot of that may also go into tether and other stable coins um and then also in the last week because because of the Chappelle upgrade, you saw a lot of Bitcoin also move into Ethereum. And so like you're going to see a lot of that activity. To Matthew's point, though, there will be a lot of volatility because there is no liquidity on exchanges. After FTX, you saw the largest exchange withdrawal in the history of crypto and a lot of that also being taken into

self-custody. And so assets aren't being left on exchanges. And so liquidity is really dry. And really what that means is just you're going to get large moves up and large moves down. And the narrative may line up and sometimes it may just be there wasn't liquidity. And so the price moved drastically. And so I think that's a lot of that, too. You've also been tracking DeFi. I know the DeFi volumes, obviously, as we see that liquidity dry up on centralized exchanges for obvious reason. Are we seeing increased interest in DeFi? Do you think that they could be the winner here? Or is that yet another echo chamber celebration? Listen, on chain data, DeFi is up 30% TVL year to date. From Jan, you saw that Uniswap surpassed Coinbase and spot volumes in two months in a row, with March being the last month to

surpass Coinbase. I mean, that's just crazy. And I think that's really important to know. There are times where it is cheaper and it is always easier to just use some of these decentralized exchanges to execute. So I think regulation is going to be the biggest overhang there. And I think that's what really lines up the narrative for some of these more permissioned on-chain applications. The infrastructure is just easier to use

and the liquidity is there. And so that's where you're going to get just better pricing in the long run. Yeah, I was just going to say one more thing. And just on the safe haven narrative for Bitcoin, I had Josh Frank from the tie on yesterday and he was showing how the we had the high correlation, obviously, with the Nasdaq and Bitcoin, and that's dropped dramatically as the correlation with gold has increased. I think it's 0.4 right now with gold and sub 0.2 with NASDAQ. I mean, whether that's just another data point, but that's a very good indication that it's now trading more like gold or a store of value than it is like a risk asset. Right.

Absolutely. Yeah, that's that's certainly true. There are a million of value than it is like a risk asset, right? Absolutely. Yeah, that's certainly true. There are a million of these data points. I mean, even to tie back to our earlier conversation, if it weren't a serious alternative emerging store of value, emerging safe haven, it wouldn't be 12% of the president's economic report. This is an asset that's the same size as Louis Vuitton. They're not devoting 30 pages in the economic report

to like purses and champagne they're focused on this asset because of the potential scale of it so i think those purses have had their held their value though they they i was gonna say a birkin bag the best store of value maybe on the planet is uh those high-end luxury goods and that that's why they're so rich uh what have you brought up, obviously, I think, the Chappelle upgrade and what's happening with ETH. And we saw ETH actually options futures volumes well surpassing Bitcoin over the past week.

Now we're seeing massive net inflows versus the outflows that many people feared. Even in this sort of global macro wobble, it seems that Ethereum just continues to win here. I mean, what are your guys' positions on where Ethereum now falls in the market? We've been kind of talking about Bitcoin, but I think ETH is almost an equally big player now. I'll take that. I've been staking Ethereum all week, and it's encouraging to watch the withdrawal times come down. So it's down to 10 days on my calcs at least.

The other thing about ETH is I lost my train of thought here. So someone else can take it. I mean, like, why wouldn't you stake that? That's exactly, it's a great point, Matthew. Why wouldn't you stake your Ethereum if now you know you could get liquidity coming out and you have this 4.2% yield bearing asset, you know, you can get leverage on that with certain counterparties.

On top of that, it was like less than 10% of the ETH that was staked was being unstaked. And of that 10%, majority of that was just rewards. So people were just unstaking their rewards, leaving the underlying ETH staked there. I mean, just taking a step back, it blows my mind how well the Ethereum Foundation is able to manage these transitions without glitches. I mean, last year, it was a buy the rumor, sell the news moment where everyone thought that ETH was going to crash. And so you bought the rumor and the price dropped immediately afterwards. And what you were seeing in this upgrade was that institutional investors, again, were shorting ETH, or actually

the opposite. They were shorting ETH into the move, had to buy the underlying afterwards, to your point, Scott, on the open interest, and that really pushed the price up. And it's just astounding, the amount of development foundations. I know what I was going to say. Sorry, like I was looking for the chart.

If you look at the fee generation of BTC versus ETH since the start of the year, like BTC was growing much faster. And then in the last like week or so, given all these on-chain movements, like ETH fees have caught up. So the case for like BTC outperforming is less than it was. Go ahead, Matt. I was just going to build on what Aya said. I think it's poorly understood how important ETH executing on its roadmap is to crypto as a whole. Pre-EIP 1599, it was like the gang that couldn't shoot straight, right? Any deadline that they announced,

you would push forward in your mind 18 to 36 months before you expected it. You just write it off. But it's been 1599. It's been the merge. It's Chapellalla 4844 is coming it's executing better than any centralized software company in the world and what that means is the core technology that all of us are talking about sort of public blockchains are going to get better and better and better faster than any traditional when's the last time you know apple had a perfect upgrade that went according to plan on deadline with no bugs or issues. Never. We all know that because our computers shut down on Friday and reboot because they have to upgrade again. This ability to execute on a roadmap.

And what it means for what's going to develop down the road was why Bitwise was originally really excited entering this year. The collapse of transaction costs, the rise of Layer 2. I just think it's very different than a year ago. And I don't think crypto has woken up to what that means if you allow that pattern forward for three or four more years. on missed that are missed. I should say that when FTX collapsed and Bitcoin dove down to 16,000, 15,700, whatever it was, it made a massive new low from what it had hit in June. And ETH didn't even come close to making a new low at that point. It didn't even crack a thousand. I think it had gone down to around 800 earlier in the summer. So to me, even just looking at that as sort of a trader, there was clearly a

substantial floor buyer of last resorts, whatever you want to call them for ETH. It wasn't necessarily even there on Bitcoin. I found that surprising. And that's going back a few months. Right. So I think that that also contributes. When we talk about ETH too much, I get very angry text messages from my Bitcoin maximalist friends. So I'm not sure if I'm allowed or if I'm going to get canceled from their club. But maybe that's a good time to talk about this since we have four more perspectives. I view Bitcoin as its own asset class and Ethereum as its own sort of asset class. And I don't really understand why anyone cares which one has a bigger market cap or if there's going to be a flippening or which one is harder.

I don't know. I don't get it. Do you guys like. Come on, Scott, that's naive, right? Because don't we all think that like central banks are going to be acquiring these assets for their reserves over time and like depending on what the resources of that country are, if they're energy resources, then they're more likely to adopt Bitcoin. And if their resources are more like intellectual property and human ingenuity, then maybe that's ETH. Like ETH isn't liquid enough for those purposes yet. But if we're thinking about like 10, 20 years down the road, central bank reserve assets, much more diversified. What will they own? What will they own first? You know, I think they're legitimate questions to compare them.

I would have never thought for a second even about a central bank buying ETH. I mean, maybe I just, I never even got there. That's what I'm saying. Like, I always thought that that was just Bitcoin's thing. I think it's like gold and real estate. You know, Bitcoin is to gold, ETH is to real estate. Real estate is a store of value that has utility and i love gold and i love my house too um and i can hold both of those thoughts in my mind at the same time i don't see why it's why it's any different than that i always went with gold and like google stock or amazon stock right it's like investing in a tech company or having a store value steve you look you look unconvinced. Yeah. I mean, I'm not too dissimilar to what all of you said. My analogy is just a little different. I see Bitcoin as dollars or gold,

and I see Ethereum as really data. It'd be like buying a cell phone tower, right? Because you're essentially buying data that powers applications. So it's two entirely different things altogether. But I, but I do like the IP analogy a lot because it's that, that that's right. There's a lot of IP built on top of ETH, whether you agree that it's actual IP or not, it is,

it's IP. And so, yeah, it's two different things and there's no reason why it can't coexist. I don't think you've rung in yet. Now you have to. Yeah, I know. I was going to say, I agree with all of the above.

I have no other great metaphors to give for you. But no, I mean, listen, I don't think it's one versus the other. I think you have to own both. I don't know anyone who just sits on gold or just sits on tech stocks. And if you do sit on tech stocks please diversify um because that would have been a tough tough year uh but you know that's exactly why uh you do so you tell the swiss uh central bank to buy eth there i diversify from their fang stocks i'm hoping they're gonna buy pepe or whatever the meme of the day is. By the way, I haven't looked into it that deeply, but I saw that there were people who bought like $100 worth of this coin.

It's now worth a million dollars or $500,000 or $600,000 or something like that. Every time we see that, maybe this is anecdotal, I feel like that's the exact top of whatever cycle we're in. Local top, maybe. I mean, we're 20% above the 50-day. Things have gotten a bit extended, yeah. But I think maybe, let me correct that. That's the signal that we're going to get a mean reversion and a retracement and a correction, right?

I mean, but we're doing it again, guys. Not us, but like crypto GPT, Pepe. I mean, these are things that now have like $100 million market caps or more. Did we learn anything? Is this, I mean, is this a concern for anyone here? Steve, you're shaking your head. I've never bought an NFT and maybe I'm stupid for not, but it's just, you know, I kind of get it, but it's not something I'm going to invest in. And a lot of people are going to disagree with me, but that's just, you know, you invest in what you know.

And I know physical art pretty well, but I don't understand JPEGs, so I don't buy them. I do right-click and save them sometimes. No! You're one of those guys. No! No! Look, a lot of people have made a lot of money.

No hard feelings for people who have made money on it, but I don't know how to make money on it, so I'm not going to try. Defend the JPEGs. But I definitely don't own them to make money. I think I just own them to be a part of whatever community

they are a part of. But typically like female founded ones, because I always think those are really cool. But yeah, I mean, I think on the like NFT flipping, that's like a whole nother category, right? But even if you look at like NFT New York City that happened last week, it was a smaller conference, but the brands were bigger. And so you are getting the attention. I mean, look how much Nike made on Artifact. There is a sense of belonging from Gen Z who want these type of JPEGs in order to, you know,

compare with their friends. So I think there's something interesting there. By the way, you said JPEG. Congratulations. Yeah, it is the community side, a hundred percent that sort of developed. I think it started as sort of, you know, flipping for profit and the same people who are trading Pepe. But I have heard a lot more people speaking in that language. I had that, you know, you buy it. To me, though, that means you could just have a membership card and have your community and it doesn't need to be a volatile asset necessarily for that to work but that's a membership card that's exactly that's the thing when people ask like well what is it and and you know and and when i try to explain it i always refer to golf clubs right you know people people will join a golf club they'll

play pay a crazy amount of money to be a member they'll play golf sometimes but more importantly they sport the cool little polos that have the golf club on it so that everybody knows that they're a member of that club. It's the same thing. You got a JPEG that shows that you spent a lot of money

to be a member of a club. And, you know, it's a thing. It's definitely a thing. Go ahead, Matt. I was just going to add my 10-year view. I mean, the thing about digital things, if you look through history, is people always discount them. We discounted ads they're not real ads no one's ever

going to watch a digital ad no one's ever going to pay attention to a digital ad we've discounted digital content no one's going to ever look at self-generated content typically discounting the future value of digital objects and digital ideas has played out poorly i think that's probably true in nfts too most of them is garbage going to zero but i do think uh there's a large and growing community who really does identify primarily digitally and for them owning an nft is just the same as owning a piece of art on the wall you know doesn't mean I have to, or you have to. Yeah. Steve, you said you understand art. I think I just saw our, our, our buddy. I think I just outed you that we met with Kyle, obviously in Dubai,

Kyle from three arrows capital. But I think I just saw that their collection is being liquidated or going to be auctioned on Sotheby's. Cause I said, he, he like tweeted, like goodbye, sweet girl or something really weird. But yeah, so I mean, but theirs was the fine art side of it in theory, right? I mean, do you buy into that at all? That some of these could be fine art in the same way as the things you hang on your wall? I don't know.

I'm not going to discount it. I mean, anything could have value in the future. I mean, look, I was done for discounting Beanie Babies. I thought everybody was crazy, and a lot of people made a lot of money off of it. Not long-term. My mom saved my DI Joes up in the attic and thinking they're going to be worth money one day. And they never got sold, and I think they ended up melting, right? Because, you know, you keep things in the attic in Texas, and they eventually melt.

So I don't know. I mean, anything could be worth something in the future. Right. And if you have an eye for it, you have an eye for it. We're using NFTs internally. We have a VanEck community NFT on Ethereum that we've used to just kind of engage with our clients and offer them access to events. We rang about the NASDAQ, invited our NFT holders, et cetera.

But on the investment side, we're more interested in the functionality. Can you use an NFT to prove your identity and make KYC easier or to subscribe to some recurring payment? So more thinking of it from that perspective. I just have to read this. I never read comments, but I just happened to read this. I never read comments,

but I just happened to see the craziest comment in the chat. My ex-wife signed off on leaving me with 50K worth of coins, and I gave her a 350K retirement account in return during divorce. A year later, it was worth 13.5 million, and she wanted to reconcile. The power of crypto, ladies and gentlemen. That's just crazy i'm sorry i i i had to read that that's that's absolutely my blood that i caught that so i guess then the i never even intended here to talk about nfts we only have a few minutes left but do you think that they're going to get deemed securities as well and that that's going to be the next huge narrative here i mean it could be if the if if the narrative that the Democrats put forward over the last two days in the House and Senate ever becomes how legislation is drafted, then yes.

Like anyone who publishes a large language model or a piece of content that then gets distributed and monetized, if it's valuable enough, it could be a security, right? And yet at the same time, right? And yet, at the same time, SEC chair is saying, not your keys, not your coins. So there's a lot of contradictions to work out, but yeah, they could be securities. So what's the reporting requirement, right? If it's below a certain level, then can you just have a de minimis exemption on what type of information needs to be revealed. And that's how you could eliminate all this friction, even if they are securities. I agree. That's sort of like the Lummis-Gillibrand view on anything under 400 bucks or whatever it was, 350, go have fun, right? Go buy your coffee. We're not going to tax you. It's not going to be viewed that way.

That seems like that should be applicable across the entire space. Apparently, we're going to see that bill reintroduced, by the way, within the next month. You guys heard anything about that? We need it. The comprehensive framework? Well, you know, they proposed last July this massive thing that we all knew would get shelved, obviously. But apparently, I heard a leaner and meaner version of it is coming within the next month. And I think that will probably end up being a stablecoin legislation that we see.

Are you guys encouraged at all about what we might see, at least from stablecoin legislation? It seems like that's so obvious and easy. Steve doesn't think so. I can tell he's shaking his head. I'm not encouraged. Yeah, OK. That we could get something? I think we have a better shot at that

than anything else in the short term, for sure. And it would be net good. And I think there's a small chance, but you can't make a bet on anything getting through Congress right now, right? The likely path to crypto legislation is either a change in political regime that makes it easier to pass things or

the regulators losing aggressively in court, which then creates a necessary condition for legislation that both sides can agree on. So there are three pathways, either that or that, or we just get massive regulatory crackdowns that work and the industry flees abroad. Those are the three paradigms that we're going to exist in. My guess is it's one of the latter two, but you shouldn't discount the third either if that's possible. Sure. And the most important question with one minute left,

are any of you guys going to consensus next week? No. Everybody? Steve, you're not going? No. Very disappointed. We'll have some folks there. I'm not going there, no. All right, Matt you're not going? No. Very disappointed. We'll have some folks there. I'm not going there.

No. All right, Matt. We're going to connect. Aya, are you going? I am. You have to go everywhere now. You have to go everywhere now. Yes, I'll be there.

Awesome. All right, guys. Those of us who are there, I'll eat some barbecue next week in Austin. I'll reach out to you guys offline. I'd love to. I'm a connected person. Thank you guys so much for this awesome conversation. It was more serpentine and went in more directions than I necessarily anticipated,

but that's what makes Thursdays fun, especially when my ADD kicks in really hard. Did any of you guys, by the way, God, get the alert on your iPhone at 4 o'clock this morning? Did that happen to any of you? No. So they tested their emergency alert system. No, it happened to like millions of people. It's all over the place. So all of our phones in the house went absolutely blaring at four o'clock in the morning. Like, uh, okay. Anyways, glad that didn't happen to you guys. Everyone else. I will be back tomorrow at nine 30 AM Eastern standard time. I know some of you guys in the chat, it had to happen to you. They were not just trolling me. Uh, I will be back tomorrow at 9.30 a.m. Eastern Standard Time. I know some of you guys in the chat had to have to.

They were not just trolling me. I will be back tomorrow and the rest of you guys. I'll see you all next week at Consensus. Thank you, everyone. Pleasure as always. And Aya, congratulations again. Thank you, Scott. Thanks, guys.

Thanks, guys. Let's go.