The Wolf Of All Streets - The Fight For The Soul Of Crypto And Freedom Rages On! Friday Five

Starting point is 00:00:00 Crypto price action may be a bit boring, but the news cycle certainly is not. And this week, it's really about the fight for freedom and the fight for the soul of crypto, as it says there in the title. That may seem hyperbolic, but the SEC continuing their assault, even in light of the Harris potential administration saying that they would lighten up on crypto and want to work with the industry. And of course, the very scary case of Pavel Durov in France. NLW and I are going to unpack all of it. It's the Friday Five. 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 gonna go ahead bring on nlw right now there's some huge stories this week it was a bit hard to find five really impactful stories, but they all seem to have sort of the same vibe and same tone here.

Starting point is 00:01:09 They're really concentrated. I mean, if we were going to have an honorable mention, there are about a million little world just keeps moving on for the crypto industry stories. There's like a Bitcoin hedge fund that launched and a bunch of institutional news, but it's all small stuff. It's all not big stuff. But for those of you who want to peel back kind of this crazy things, there's definitely a, there's a sort of new normalcy around institutional engagement with crypto that's just sort of quietly going on in the background. I'm sure we'll have context to talk about it in future weeks, but obviously that wasn't the big stories this time. Yeah, I agree. There's a groundswell and it's become normalized that we

Starting point is 00:01:45 just get these huge institutions participating. Even the Morgan Stanley news a few weeks ago kind of came and went. And even a year ago, that would have been the story of the year. Absolutely. I think that BlackRock's involvement and all the other institutions have just made it sort of assumed that all of these will eventually come online. And they don't impact the market directly. But I have a feeling that when the tipping point sort of comes, if it does in the fall, all of those stories, we're going to look back and say, wow, that was absolutely huge, right? Yep, absolutely. Yeah. And speaking of stories that are just absolutely huge, France hands Telegram CEO

Starting point is 00:02:20 Pavel Durov preliminary charges over alleged criminal activity on the app. Of course, he has actually been released since then, although he has to stay in France, I guess, awaiting charges. I don't really know exactly how the criminal justice system works in France, but for those who don't know, he basically landed on his private plane, a rented private plane, we found out, which apparently is relevant, in France was immediately arrested. There was a lot of conjecture as to the reasons because it wasn't originally announced. It took a few days to see the charges. And it, in my opinion, was sort of the worst assumptions came true. He was largely charged for complicity for things users were doing on the platform using the technology and for failing

Starting point is 00:03:06 to moderate that. So I would love your initial commentary on this as we dig into it. Yeah. I mean, so listen, my first reaction with this was very standard, like, let's wait and see what the actual charges are. There's scenarios where it could be, you know, something that we don't think and then scenarios where it could be really bad. And it ended up being the sort of worst case scenario of, or at least, you know, it's seeming really worst case scenario of him being targeted for what's going on in this platform. And so the implications of this are much bigger than just this case. It is a, you know. It represents a very different sort of tenor and tone to the relationship between governments and technology companies that has

Starting point is 00:03:52 potentially dramatic impacts for what people are and are not willing to build and, frankly, where CEOs are and aren't willing to go as a sort of a secondary consequence. But we've long had this sort of sense that the people who create and build platforms are not culpable for what their platforms are used for in general, right? This is sort of embodied in the US in law specifically, but it's coming up now as an even bigger question than it was before. There was a first round of this question that was answered in the 90s. Because of AI in particular, it's back in a huge way. And this feels like the opening salvo of what is potentially a very different approach by governments when it comes to their approach to the speech technology and the complicity of teams. And I have to think that it's all just prelude for a bigger fight as new types of technology platforms come

Starting point is 00:04:46 online. But I think for those of us who have enjoyed the fact of creation of these applications, this is a fairly chilling sort of moment. It's also chilling because these CEOs and platforms now have to be concerned with the global nature of what they're doing. It's much like we've seen in crypto, where you may be completely compliant in one country and completely breaking the law and risking jail time in another. Unpacking this with lawyers this week on spaces like Preston Byrne, he said, listen, everything he's charged with in France would not even be an issue in the United States. So if he was sitting in this country, he would have been completely fine. We wouldn't have that issue. But it's the fact that he landed in France where he has citizenship that they're going after him. So even first world G20 nations that are usually

Starting point is 00:05:34 aligned on things now are starting to see cracks in the facade of what they're willing to accept in terms of obviously free speech and who's culpable. This is just terrifying to me because it's really not, I say it all the time, but it's not that different than Tim Cook being charged for drug dealers using iPhones on iMessage, right? If you view this as a technology or a platform, is the CEO, is the mayor of a town going to get arrested for every single crime committed in his town because he failed to moderate his citizens? Are Elon Musk and Jack Dorsey in trouble? We obviously had Zuckerberg this week coming out and apologizing for caving to White House

Starting point is 00:06:16 pressure on content. It seems like you play ball and you're fine and you get to be a billionaire and you get to stay home. You don't play ball, you're going to end up in jail somewhere. Yeah. I mean, yeah, the, the, I think that the, the, the, the lines changing or they're being, look, the, there has been a gap between how the U S thinks about these issues and how Europe and the UK thinks about these issues for a while, right? Free speech in the UK looks very different than it does, for example, in, uh, in America folks have run into contact with that around Craig Wright, basically, and lawsuits therein. But it's clearly calcifying in a harder way. right? Like Europe is now actively pushing to be sort of the harsher regulator of all these sort of things. And you start to see it playing out in terms of European citizens actually not having access to certain services because American companies are not willing to deal with it. Again, not to keep bringing it back to AI, but this is, I think, where that battleground is shifting in a

Starting point is 00:07:21 big way. Meta has chosen not to release certain parts of its multimodal models in Europe because it doesn't think that it can comply with the EUAI Act. Apple has said that it's not putting Apple intelligence out or big parts of Apple intelligence out in Europe. And so Europe has created a situation for itself where, you know, good job, you're the first to regulate things,

Starting point is 00:07:41 but you don't have any sort of homegrown industry. You know, companies are going to, you know, largely have to sort of homegrown industry. Companies are going to largely have to move out of the jurisdiction. And this is just raising that to a whole new level. If platform owners are culpable for what's going on, it's a very nervous thing. And the likely first losers in this are going to be European citizens who just have access to fewer services. They're going to have access to fewer services. I think it's very interesting, though, that they have more access to crypto services largely than people in the United States do. I mean, this is obviously a crypto adjacent story because anything that happens for freedom

Starting point is 00:08:16 or privacy eventually affects us. But Mika, and of course, Telegram has an adjacent token, but Mika was applauded by people all over the world for Europeans getting ahead of regulation in crypto and the United States being so far behind. So there's this kind of strange bipolarity here. Sort of. The weird wonkiness there is that the freezing effect in the US is not based on how rules have been defined. It's based on a lack of rules being defined and the clear antagonism of a particular administration towards crypto. So it's not that the US and Europe sat down and each went through their own processes to figure out where it landed and Europe came out of pro-crypto than the US. It's just that the particular situation has been so frozen and antagonistic in the US that the net impact is

Starting point is 00:09:15 even more dramatic. However, it is ironic and I think is not a particularly nice sign for US regulators that Europe of all places is ahead of us when it comes to citizen access to services. Absolutely crazy town. I mean, and that wasn't the only sort of bad news for Telegram this week. Obviously, Tan, blockchain went down, I believe twice. This article was for six hours. I think there was another short outage afterwards. And that's largely because of the launch of a meme coin, of course, which they called here a memcoin, Coindesk doing their best to edit. But a meme coin launches and in the midst of all of this, their chain basically goes down for hours. I mean, rough week for Telegram. Yeah, it's brutal. Obviously, this is sort of

Starting point is 00:10:02 very secondary in terms of the pain stories. But, you know, look, what happens next is going to be very weird. And I think we're going to see some strange bedfellows here. You know, the Russia dynamic of this is one that we haven't touched on yet. But that's actually weird, too, because Russia is basically going out of its way to sort of point and say, look, you know, this guy was a Russian citizen. He decided to turn his back on Russia and choose sort of, you know, the freedom dynamics of other places and, you know, then got screwed for it. So it's a weird situation where, you know, Russia's out here, you know, squawking and defending free speech. And I don't know, it's a strange time and we'll see what happens. There's also the UAE dynamic where basically the UAE is asking for him back, you know, because he's a citizen of the Emirates as well. So it's a very strange geopolitical moment where a single person and their product represents a lot of fault lines that have a lot more to do with

Starting point is 00:11:02 sort of the way that the world is organizing and being reorganized than it does with just him himself. Yeah, I didn't have on my bingo card, Russia defending free speech, right? Yeah. It definitely makes you wonder how much the United States knew about any of this. I'll tell you one thing the United States definitely knows about, it's sending Wells notices. The SEC has sent a Wells notice to open C, warning of enforcement action. Important to note, a Wells notice is not the enforcement action itself. And we've actually seen the SEC not take enforcement action against a few companies of late that had been sent Wells notices. But either way, this is a relatively huge development because this is alleging that NFTs are effectively unregistered securities. To me, this is like going after eBay for being a marketplace for unregistered

Starting point is 00:11:57 securities because people are selling their Jordans and their used t-shirts for a profit or anything else that they're selling on there. People who believe that NFTs obviously are art do not understand this at all. So this is symbolically, I think, very big. And then, of course, there's the political side of it, which is there's rhetoric coming from the Harris campaign that we're going to see changes, that they're going to engage with the industry while Gary Gensler and the sec clearly have no intention of stopping these sort of abrasive tactics. Yeah. I I'm pretty firmly in the camp of this one is a scorched earth sort of a thing. You know, I think that this is, um, it is, uh, no matter where this lands, no matter if on the other side, we have distinct legal clarity that affirms what everyone believes right now. This is exactly the type of thing that can significantly gum up the works for an industry for years.

Starting point is 00:12:57 And I think that this is now a spiteful part of this administration that wants to grind the gears of this industry to a halt even farther than they have. I think that they are perceived that they are losing power, but they still have power right now. No one's going to rate limit them from a power perspective in the middle of this election campaign. It's just not going to happen, I tend to be a person who looks to Occam's razor as the simplest explanation for things. What I find interesting here is that we obviously have a little bit of precedence for this. Obviously, we had stoner cats, right? And impact theory, I think, being the biggest. But if you looked at the impact theory case, Tom, who's a friend of the show, but he did say, listen, you're going to put this much money in and it's going to turn into a hell of a lot more money. Right. And he sort of did the promoter part

Starting point is 00:14:05 of the investment contract that they pointed at. But even in that case, where the CEO of the company outright came out and said, you're going to make a profit. We had two SEC commissioners, Yeda and Peirce, of course, come out and say, this still doesn't qualify for the Howey test.

Starting point is 00:14:20 You might as well be doing this with baseball cards, like I said, and used tennis shoes. It doesn't make any sense. So going to the marketplace and not even the people launching them now and going after them is a huge, huge escalation. I tend to agree with you that this is scorched earth. I also tend to agree these things take a long time and this will probably be dropped if we see regime change or even a different chairman at the SEC. I think these are just symbolic gestures, but this is a huge symbolic gesture. Absolutely. No, it is a fireball if it's scorched earth, right? This is not a small thing. I think that we're seeing, if you look at these legal cases, the middle ground kind of space that seems to be getting articulated is tokens not being

Starting point is 00:15:08 securities in and of themselves, which we'll get into in a minute, but there being the potential that an offering of a token, especially an initial offering of a token, or an offering of a token by a centralized entity can represent an investment contract, which will unsurprisingly to anyone listening, make a lot of sense intuitively as where these lines might get drawn, right? That there are, you know, you could sell things in such a way that they sort of start to constitute investment contracts. This is not what this is accusing. This is actually saying outright that NFTs are securities. It wants that fight, even if, again, it gets smacked down in court, which is the particular reason that I think that this is scorched earth, because I think

Starting point is 00:15:50 that if they couldn't even get the idea that tokens were securities through, I think it's very unlikely that they get the idea that NFTs are securities through. Yeah, it's a lot like Ripple, to your point. When Ripple initially sold them to investors, that was a security offering, but everything that happened after that was not. This is, again, this is the marketplace that is selling them. It's insane. So maybe impact theory could have been a security offering based on the specific things he did to mint and launch those. But once they're being sold on the open market, that open market being liable to me is just absolutely crazy town. There was some conspiracy theory that there is a interesting

Starting point is 00:16:31 timing here because Trump obviously launched his fourth NFT collection, I believe the day before the Wells notice. But I spoke to Sheila Warren about this yesterday and she said these Wells notices take forever. There's no way that meaningful timing. It's just coincidence. But it is somewhat ironic that within 24 hours of Trump launching an NFT, the Democratic lead, I guess, of the SEC says NFTs are security offerings. The silver lining, by the way, is that if Trump's in office, you know, he's not going to deem NFTs security since he's launching them.

Starting point is 00:17:02 I think it's symbolically notable. I agree with them the mechanics of this basically ward out that uh that particular theory for how it came to be but so going back to you know gensler not doing his party any favors in that assessment that's our assessment as we sit here viewing all of these actions as negatively impacting uh the democratic party and that's there's certainly an argument to be had. There are many Democrats who feel that it's negatively impacting the party, including elected officials. However, I think that there is a strong counter argument for many that, especially now with

Starting point is 00:17:39 how aggressively Trump and the Trump campaign have moved in on crypto. I think that they will argue that if they don't win, it's a repudiation of crypto, right? That in fact, everything that Trump stood for will get bundled into, we won and so America validated our opinion, not theirs. It is very rare that a party that loses goes through its platform and kind of point by point figures things out. It's even rarer that a party that wins actually through its platform and kind of, you know, point by point figures things out. It's even rarer that a party that wins actually understands how they might have lost if they, you know, and which are their positions were a liability. They're just going to say, look, we won scorecard says, you know, us one, them zero. And that means all of the stuff that

Starting point is 00:18:19 we stood for, right? Like this, this election does in some ways become a referendum, or at least you could see how Gensler wants to make it a referendum. People like Elizabeth Warren, Brad Sherman want to make it a referendum on their view of crypto as just another money thing that's, you know, for bad people and for rich people and for assholes. So I, you know, I think that the gambit here is that Gensler is part of a wing of the Democratic Party that wants to win with their antagonism of crypto as a plank so that they can be validated in that. So my title is not hyperbolic, the fight for the soul of crypto and freedom reaches on. Very real.

Starting point is 00:18:57 Because it's very real when you describe it that way. And you sort of alluded to the next story. So we'll go ahead and move there, which is SEC's case against Kraken will proceed to trial, California judge rules. Now, this was largely viewed as a huge negative when it came out for the industry. You guys might remember, you know, Coinbase also, most of their case was pushed forward. There shouldn't have been an expectation that this would be thrown out. But it does speak very specifically to the securities offering side that you mentioned before.

Starting point is 00:19:24 So go ahead and talk about that. Yeah. But it does speak very specifically to the securities offering side that you mentioned before. So go ahead and talk about that. Yeah. I mean, so basically, so one, to your point, it was always going to proceed. It was almost no chance that this wasn't going to proceed to trial. This process is legal de rigueur, and it's part and parcel of trying to figure out, you try to piece out parts of the argument in advance, right? So to figure out what the SEC can and can't argue and what the, what the, basically what the stakes in terms and context of the actual court battle will be. And one of the things that, that came out in this,

Starting point is 00:19:53 uh, in this decision is the judge effectively, you know, kind of once again, making this delineation between the tokens themselves and, uh, and the way that they're offered and in what circumstances they're offered. In fact, he went out of the way and basically said that he called the SEC on their use of the terminology crypto asset security. He's basically saying it's confusing at best and outright lying at worst. So to the extent that you didn't actually think that there was a chance that this was going to get the case dismissed, there was a, to the extent that you didn't actually think that there was a chance that this was going to get the case dismissed, there's a lot to be pretty positive about in here as well. Yeah. That's how I read it as well. I think that these cases are going to be

Starting point is 00:20:37 big trouble for the SEC if they end up going through, I mean, after the ripple sort of, uh, the ripple decision, the Coinbase case had already sort of lost all of its teeth as far as them selling unregistered securities. And this is just going to be follow up in that. I wouldn't be surprised if these never get to trial by the time we're done, if these just get thrown out depending on the regime change or not. But our last story, kind of crypto adjacent, I think, but it's obviously NVIDIA. It was the top talk of the town for markets this week. They had earnings. They beat earnings. But apparently now when you

Starting point is 00:21:13 beat earnings, even though your expectations are really high, if you don't beat earnings by quite enough, it can dump your stock. So Nvidia beat earnings beat earnings after hours, NVIDIA stock dumped, stocks went up, Bitcoin went up. Then 24 hours later, all those things went down and man, I can't figure out what is good news and what is bad news anymore. So let me try to sort of give you my framework for this. There's two things going on. One is sort of AI specific and one is a larger framework. NVIDIA has, I mean, NVIDIA more than any other company has, you know, driven the last two years of stock market performance. It has been the sort of indicator of the generative AI explosion. It's been the place that has sort of

Starting point is 00:21:56 benefited most as well as represented most. NVIDIA has so aggressively beat analyst expectations every single time that it's no longer a question of whether they beat expectations. It's a question of how much they beat expectations by. So one, there's a little bit of that that just, you know, it was only a couple percent that they beat expectations by. I think expectations were 28.7 billion in revenue and it's like 30.4 billion in revenue or something like that. So that, you know, sort of marker negative one against NVIDIA was that they didn't beat expectations by enough.

Starting point is 00:22:29 Marker two was that the, their projected quarterly earnings were a little bit lower than analysts had wanted to see. So, you know, there there's the, you know, the great looming fear is that at some point this has to stop, right? Question mark, question mark, question mark. And so any indicator of that is going to spook people a little bit. So that was, you know, the second negative thing. And then that fact of the second negative thing also sort of triggered a different look at some trouble that NVIDIA has had in terms of delays with its new Blackwell units, right? So NVIDIA does have these tiny little things, but you know, but relative to their performance, they wouldn't freak anyone else out in terms of other companies.

Starting point is 00:23:07 But again, they're being used as a barometer and a benchmark for the entire AI space. Now, there's another thing going on, though, which is that for the entire period of the rate hiking cycle and then the hire for longer part of the cycle, AI enthusiasm has been the counterbalance that Wall Street has clung to, right? It has been both a legitimate thing that they're excited about, believing that this technology actually will get big productivity gains and GDP increases, but it's also been a life raft in an otherwise gloomy period for markets of decreased liquidity and worse performance and all that sort of stuff. Now, I don't think it's surprising that we're starting to see bigger questions around AI hype and AI pricing and all these sort of things right as we're heading up into the

Starting point is 00:23:55 beginning of the rate cutting cycle. It's just that the narrative need for AI has decreased a little bit. Now, I don't think that we're going to see some massive flood to the exit because it wasn't that AI wasn't real for people. It's just that maybe it was 20% higher priced or 30% more excited that people should have been. And I think we'll see some amount of sort of repricing on the basis of that. So that's what I see going on. But I do think that weirdly, NVIDIA is telling as part of that process. Totally agree. I don't think there's much more to say there. That was our five stories. I just want to take a look very quickly as we end

Starting point is 00:24:28 at CoinMarketCap here and remind people that Bitcoin is still $59,500. And as boring as the summer is and as bad, quote unquote, as price action is, I would guarantee that if you zoomed back six months, certainly a year, and I told you that at the end of the dull summer that comes after every halving cycle or coming into the end, we'd be sitting around $60,000 Bitcoin, you guys would be celebrating your asses off. I pretty much only look at the price of Bitcoin right before we jump on, because I want to make sure that I know. And if I close my eyes the entire summer, it would have been roughly what I thought it was going into the summer, around 60K. When we look back at 2024, it'll be the year of

Starting point is 00:25:12 60,000. That's what we'll mentally associate it with. Maybe 59,000 for the glass half empty people. Yeah. Well, it's been 10 above or 10 below and hovering around it basically since february right on the way up to 74k in march so i just tell you guys listen it's fun to come here and talk about these things don't worry about the price chill it'll change eventually uh and uh for now you could be uh touching grass uh at least after watching this show for 27 minutes of your life on friday so that's all we got for you guys today follow nlwW, of course, on X and his YouTube and podcast channels, The Breakdown. It is the single best show for that quick 10 to 15 minute update on everything that's happening. That's why he's so good at this by Friday, because he's already done it all week.

Starting point is 00:25:59 Thank you so much. Really appreciate it. We will see you guys next week. Bye, everyone.

The Wolf Of All Streets - The Fight For The Soul Of Crypto And Freedom Rages On! Friday Five

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