The Wolf Of All Streets - This Bitcoin Cycle Will Be Massive | Bill Barhydt

Episode Date: May 12, 2024

In this episode of The Wolf Of All Streets podcast, Bill Barhydt, the founder and CEO of Abra, discusses the evolution of yield over the years, borrowing against crypto, how Bitcoin is becoming the ultimate collateral, and his expectations for a flood of institutional money into the market. Bill Barhydt: https://twitter.com/billbarX ►► Sponsored by iTrust Capital Invest in Bitcoin, Crypto Assets & Gold with Your IRA Using iTrust Capital. 👉 https://bit.ly/itrust-scott ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/ ►►OKX SIGN UP FOR AN OKX TRADING ACCOUNT THEN DEPOSIT & TRADE TO UNLOCK MYSTERY BOX REWARDS OF UP TO $60,000! 👉 https://www.okx.com/join/SCOTTMELKER ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘25OFF’ FOR 25% OFF WHEN VISITING MY LINK. 👉 https://tradingalpha.io/?via=scottmelker ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd ►►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 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 #yield Timestamps: 0:00 Intro 1:09 Abra update 3:29 iTrustCapital 4:27 Mistakes & risk management 6:23 Where does yield come from 7:23 Staking 10:23 Self-custody 12:43 SMA - separately managed account model 15:53 ETF buyers are passive investors 17:53 DeFi works - borrowing against crypto 20:23 The safe way to use crypto 22:23 Bitcoin becomes the ultimate collateral 27:23 Synthetic dollars 31:33 Stablecoin bill is a disaster 33:43 RIA license 36:03 This cycle will be massive 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.

We spent a lot of money on this. This is not cheap, what we did. And what that means in English is... They won't call it an algorithmic stablecoin, it's not, but synthetic dollar. And they're just throwing it all out there and saying... Other parties were doing that, lost your keys. But it's ridiculous and it's dishonest to say there's absolutely zero risk. They literally lost the keys.

So you have one job... You have to do the work. That is insane. They kind of know that our competitors died and they're like, oh, we're glad we picked you. Yeah. Right. OK, fair enough. In the last cycle, yield became a four letter word in crypto because everybody was seeking it and getting it was never safe.

But now we've matured and some platforms like Abra have actually survived and lived to play another day. Bill Barheit, my old friend, and I had a long talk about the state of crypto, the state of CeFi, the state of yield, and what's coming in the crypto world. Last time we were in Dubai, we were bashing through sand dunes in a Land Cruiser, right? Yeah, yeah, that's right. On the desert. Yeah. Well, that's happened in a year and two months. I was going to say, I think that was a year and two months ago.

So let's talk about what's happened in the last year and two months. Oh, my God. Well, we're still what's happened in the last year and two months. Oh my God. Well, we're still alive. We're all still alive, I guess. Some of our competitors are not. It's just actually, we're really happy. We've not only have managed to survive, but I think we've created a service model for our clients that's going to allow us to just have a huge, not only advantage in the space, but really give them what they're asking for. We shut down our retail operations, right, and worked with the regulators for almost a year to rebuild that business, to be able to pay yields, do lending, execute trades, but do it in a very simple, compliant way that appeases the SEC. We're now an SEC registered investment advisor. To my knowledge,

the first one that for consumers can do yield, lending, staking, trading, all via what we call a separately managed account model. And what that means in English is you're getting your own vault. And unlike the models you know, where everybody went bankrupt, where you are a liability on their balance sheet, you actually retain title to your own assets in this model. They don't become assets on Averitt Capital Management's balance sheet ever. So that's the way this should have been done in the first place, in my opinion. It took us a while to get there. And the good news is we've been talking to every single large client we had that

we had. Our clients were upset at us, not because of what was happening in this space, but because they had to take their money back. Of course, the typical response we got was, I don't want this crypto back. Why are you making me take this crypto back? And we had no choice. I mean, that was the discussion with the regulators that we were having. But now we're able to have very clear discussions like the one we're having about why this is the safe way for high net worth investors who don't understand crypto as well as you and I do to have a safe way of storing the crypto, earn a safe yield, borrow against their Bitcoin, which a lot of them are now doing. Trade between Bitcoin and stable coins, bring more stable coins in, buy more Bitcoin. And, you know, like I said, I think this is the future for this business model. Crypto investors in the United

States face some major challenges. One of them is that there's almost no way to get exposure to the asset class inside of your traditional investment vehicles. The other thing is the taxes. They are absolutely atrocious. What if I told you there was a way to solve both of these problems? Well, there is, and it's with a self-directed IRA from iTrust Capital. Guys, not only can you open a new self-directed IRA and fund it with the limits each year, but you can actually convert over from your 401k,

your Roth IRA, any other IRA that you already have, and you can do that tax-free, just transferring over the balance, and and you can do that tax free, just transferring over the balance and then you can go to cash, buy as much Bitcoin than you want and not pay taxes when you sell it. You absolutely have to try this if you are in the United States. Use the link down below. It's bit.ly slash itrust-scott.

That's bit.ly slash itrust-T-T You have to try this now. You were lumped in with all of them, right? I think there was this sci-fi bucket and everyone assumed that everyone would fail, especially stateside. I mean, so look, it was a tough time for everyone. We made mistakes, but we didn't make

the mistakes that were catastrophic, right? I mean, we had loans that went south. I published it on Twitter, you know, that we had exposure to Genesis and FTX and we cleaned that up. You know, we're committed to continuing the positive risk management practices, but now everything we deploy is on a client by client basis

because it's from your own vault and there's none of this pooling of assets the way, you know, I know I've seen some of your tweets about Voyager and the stuff that you went through and my heart bleeds to a lot of those people that suffered. But that wasn't because people were pooling funds, let's be clear. It was because they were making really bad loans or committing fraud in terms of how, you know, they were printing cell tokens in the basement and telling people that they

weren't selling the cell tokens when they were. Shenanigans like that. Right. And so we can debate all day whether the CeFi model is legal or shouldn't be legal. It doesn't really matter. DeFi is a better approach. The problem is that it's not accessible to the average investor yet. Right.

This makes it accessible to the average investor because their assets are protected from a custody perspective, and yet they can deploy into DeFi to earn yield. And Abra is doing the lifting in the background that simply manages the deployment while they retain title to the assets. So you've effectively created a C5 front end for access to DeFi. That's a simple way to look at it. It's not the legalese way because, you know, we're a fiduciary. We're a registered investment advisor. We must act in the best interest of our clients now. The front end may have some similarity, but we are the advisor, the fiduciary, in some ways, the financial coach, helping our investors get exposure to the space,

get back into earning yield on Bitcoin, staking their Ethereum, staking their Solana, earning yield on their dollars, et cetera, et cetera. So it's not lending to Three Arrows Capital to YOLO your money into leverage longs because that's what was happening before. So this is, as you said, it's DeFi. So I'm assuming your yield is coming from staking. Some of it's coming from just straight up staking. Some of it's coming from DEXs and other kind of DeFi liquidity pools. The borrows that we're doing right now are also

coming from DeFi. So clients are lending their Bitcoin into an Aave or Compound and then borrowing USDC. And we're managing the complexity of that for them out of their vaults, out of their separately managed accounts. So they don't have to understand the complexity of what I just said. It's there from a risk disclosure perspective to meet regulatory requirements. They understand what they're getting. It's all written for them to see, but they don't have to understand MetaMask to do what we're talking about. Kraken got in trouble for staking as a service. How is this different from what they've been concerned with, what Coinbase has been accused of but has not been proven, obviously? Two things.

One, we've simply registered with the SEC. You actually came in and registered? You actually went in. Exactly. Okay, now I can't say it's impossible to come in and register anymore. It is not impossible. What's different about how I can't say it's impossible to come in and register anymore. It is not impossible. What's different about how we did it is it's also servicing consumers as opposed to just registering as a fund that's reached the statutory limit, right?

And the second thing is the deployment is not pulled out of a central pool. These are individual user vaults, and we're meeting the qualified custodian rules that the SEC has set out for doing this, such that the clients retain title to their assets. That's different than what my understanding, I'm not an expert on what Kraken was doing, but my understanding is that you're pulling the assets, you're reliability in the balance sheet. I have my own opinions as to whether or not they should be attacked for that. My guess is they probably shouldn't be, but that's not our problem. They'll figure that out. But I think this is a better

approach in the meantime. It's a safer approach for clients, regardless of whether the other model is legal or not. It's almost like a hybrid between a trusted custodian and self-custody. Absolutely. It's as close as you can get to the ledger model and still be able to have a fiduciary manage these deployments for you to earn your yield. You call up somebody, you say, look, somebody put Bitcoin in a ledger for me. I want to earn yield on it, but I don't know how to use MetaMask. Can you help me? Now, the average person is not supposed to be doing that for the people, right? They're not a, you know, they're not a fiduciary. And so we have that model now. So it's like you said, it kind of marries both worlds in a way that's legally compliant.

How does that operate at scale? If you're managing each client individually, does this become something for high net worth individuals exclusively and not a guy with a thousand bucks who wants to participate? So we wouldn't take somebody with a thousand dollars right now because the fees of getting access to Ethereum and even Solana in certain cases, they're just too high for these type of yield products because we're moving assets around a lot on their behalf to earn the yield, capture the yield. Right. And you get, you know, transaction

fees are not cheap. Right. If you're doing if you're doing if you're putting one hundred thousand dollars to work, it doesn't really matter that the fees are five dollars because you're still earning a lot of yield coming in and out. But on five hundred dollars, it's not it's not tenable. So so that gives us kind of a natural floor on who our clients are. It's not an accredited investor issue. It's a fee issue, right? If all of a sudden you're making half a percent because, you know, Ethereum Network is taking fees, it's not really worth your time. You'd just rather just keep the funds in cold storage and call it a day.

And we can do that for clients as well. You can just do custody and not earn yield and basically retain title. And it's as close as you can get to cold storage and still have help on it. Yeah. Right. But yeah, so there is a natural floor

in how much somebody would want to put to work in this model. Generally outside of what you guys are building, we've seen the major issues with self-custody. We all would love to say, be your own bank. Everybody cuts your own assets. Then you fall on your head or you get drunk and you no longer have access to your assets. And then we've seen even registered, regulated,

trusted custodians in crypto for some reason that never got the attention, but the prime trusts and the fortress, I believe, right? I mean, same guy. But losing keys, effectively committing fraud to try to fill the holes, those weren't as big stories as we have text, but those are the regulated, trusted custodians. Yeah. How, like I said, not specific to you, how should somebody custody assets in this environment if they can't trust someone else necessarily and they can't trust themselves?

So it is hard, but it's not as hard as the lead into your question is implying, meaning these mistakes should not have happened. They're not common, right. say if you have a thought through architecture that shards or separates keys in a way where you know you can reconstitute a portfolio it's it's it's it's done all over the place now this is not rocket science in the sense of like oh my god i gotta hire like all these physicists to figure this out right there are tried and true practices now multi-party computation being one of the technologies that we use and and partners that we use and work with that have figured out how to basically separate keys into multiple instances, how to bring them back together, how to deal with disaster recovery. We use third-party disaster recovery solutions for this as well that are encrypted. And then

there's multiple layers of encryption. And the MPC model is super interesting, and multi-party computation model. And you have to do the work, right? If you do the work and you really understand the nuance of the problem and the question you're asking, it is readily achievable. And there's parties that are just cutting corners, not doing the work. I mean, they literally lost the keys. So you have one job, which is to somehow secure private keys. It's unfathomable to me to make that statement as a fiduciary. That is insane.

Right. And so that's just the one thing that cannot happen. One thing. Like you said, you have one job. Teasing a little bit because we have more than one job. They had one job. Yeah. Yeah.

It's interesting you said that your clients were basically frustrated that you had to send the money back. They wanted to be in the market. They wanted to participate. They trusted your platform. That said. They're also not crypto savvy. Right. A lot of them.

We're like, hey, give us a deposit address. Like, how do you send it to me? Right. We need a deposit address to send you this Bitcoin. They're like, hey. You're my deposit address. Hey, by the way, what's a deposit address? And we're like, oh, yeah, that's right.

Exactly. Yeah. That, what's the deposit address? And we're like, oh, yeah, that's right. Exactly. Yeah, that's what I figured. But that leads me to wondering, because you're on the front line, what you're seeing with sentiment. Because you have high net worth individuals. Many of them clearly trusted you and are coming back. But at this point with all of the contagion, did the ETF erase all of the negativity? Are people now gung-ho about crypto? Sure, I want to participate. Or is it still a hard sell?

I guess that's really the question. All right. So let me break that down. I would say part of the premise of your question is predicated on this idea that everybody out there is knee-deep and understands all this stuff and is watching what's going on. Right. You'd be surprised how little people really know about what's gone on in our space the last three years. Right. And that includes our clients.

I mean, and they're, they're happy. They kind of know that our competitors died and they're like, Oh, we, we glad we picked you. Yeah.

Right. Okay. Fair enough. But they can't really articulate what's been going on. And, and so they, they see the ETF news. And what we tell them is this is fantastic marketing because it basically uses Larry Fink and BlackRock and others to establish credibility. Right. Exactly. But remember what happened last weekend with Iran

attacking Israel? What happened? Bitcoin price tanks. And my friend Vinny Lingham posted, like, this is a bug in the ETF system because it's the weekend. You can't do anything. If you do need to sell for whatever reason, you probably shouldn't. But if you did need to, you can't do that now because it's the weekend, right?

The ETF markets, stock markets are open, what, 35 hours a week. We're open 144 hours a week for our clients, which is how Bitcoin works. So there's a massive disconnect there. So it's great marketing tool. And then we come in and explain to our clients, but this is the right way. This is the way you should be doing this. The SMA model, the separately managed account model of having your own vault and actually holding the crypto is the right way to do this. And that resonates. And our clients, the high network clients, they're naturally libertarian leaning.

So they already buy into this and they get why the volatility happens more or less. And so that's not the problem. The problem for them is how do I safely, right, and securely do this? And I want to make sure that you're not going to come back and make me take this crypto back again. I love Vinny.

That's great perspective. I think there's more nuance to that. A, when you need something to sell on a weekend, you sell spot Bitcoin anyways. Sure. Right. And that's why we always see when something happens on a weekend, it's the only thing people can sell. When something happens at 11 p.m., if it's 10% of your portfolio, you need to get liquid

2% because of your risk model. You have to sell Bitcoin. I think maybe the nuance there is people who are buying Bitcoin in an ETF are passive investors that are checking their portfolio every three, six or 12 months, having a conversation with their IRA every six months to rebalance. And what you said earlier, they literally have no idea it even happened. They don't know when Bitcoin goes up 5,000 or down 1,000 or down 20%. They're not tracking it. How often do you check your

passive equity portfolio? Literally never. So if Bitcoin is being treated like that, they're not trying to sell on the weekend. But for an IRA, 401k, what you're saying makes perfect sense. And I agree. But this to me is more about rights. I have no right to sell the securitized version of my commodity outside of those 35 hours a week. And that doesn't make sense to us. And for our high net worth investors, it makes no sense and they won't do it. It's institutions that are managing the ETFs, but it's small dollar retail that's buying right now. It's not institutions. managing the ETFs, but it's small dollar retail that's buying right now. It's not institutions. The institutions are coming because they're getting permission. The funds are basically, you know, looking at the RIAs are looking at this for trusts, et cetera, et cetera.

And that flood, in my opinion, is going to come. Right. And that's what that's the big money that we're not even seeing yet, independent of what's happening with the grayscale liquidations. And so, yeah, that's mom and pop stuff going into 401ks now, IRAs. And that's great. I think having that in a tax-efficient model, all for it. And I'm also all for the marketing, right? Every time I see a BlackRock or grayscale at the airport, I'm like, yes, keep spending the money, right? Because my clients, keep spending the money, right? Because my clients, when they ask us, should I just buy the ETF?

And we say, this is the pros, this is the cons. If you have a 401k, probably makes sense to take advantage of the matching and IRA, the tax advantages. But if you're all in on this space, here's the nuance that you need to understand of owning it yourself, right? And retaining title to the underlying. And the fact that you can borrow against it, for example. If it's Ethereum, you can earn yield on it, natural yield on staking. And they get the difference. When you talk about borrowing against it, what does it look like now in 2024?

How much do you have to put down? How much do you get out? What's the ratios? Obviously, it was always over. The front end was always safe. You were over collateralizing for whatever you were getting on all these platforms. The problem was what was happening in the background. The money wasn't there.

Rehypothecation, money disappearing out the back door. So the beauty is the DeFi model is working. So if you remember when Celsius went bankrupt, they had some exposure through some DeFi loans. And those were the ones that got paid back immediately. Why is that? Because DeFi works. Because DeFi works and they were going to have a choice. Exactly. As the Bitcoin price was falling, they were afraid they were going to get liquidated if they didn't do that. And they had principal payments to make in order to keep from getting liquidated and they had no choice. It's working. And so that is the only way that we're facilitating loans through the SMA model

to end clients right now is through DeFi. And we tell them that up front, look, this is the way we do it, right? You can do anywhere from 10% to 70% LTV. We highly discourage you from doing anything over 50% loan to value ratio because your chances of getting liquidated on a strong pullback are very high. They generally listen to us, right? And the interest rates have been somewhere in the 8% to 10% range, regardless of LTV. And you don't even have to pay back the interest right away because it just accrues to your principal and increases your LTV, your loan to value ratio. Assuming price is going up. If the price is going up, you never have to pay back the loan

because your LTV is actually going down. But if the price is going down, then you run the risk of either having to post more collateral or getting liquidated. And that's the same in all collateralized loans. If you're loaning stock, it's exactly the same. But you're basically saying if you have a million dollars worth of Bitcoin,

you can get $, 200 grand safely. Correct. In dollars, you don't want to be the guy taking 700 or 800 thousand dollars in stable coins. But let's define safely because I think that's the operative word, right? You're not taking counterparty risk to Abra or any other named company. You are basically borrowing from a network protocol. Right. And what happens is automatic. There's no negotiation. It just happens. That's why, to the other example, Celsius paid back the loan. They were going to get liquidated, period, full stop. No broker to call and say, give me a day.

Give me a day is not a concept. You look at the code, right? And you can look at the code, if you're so inclined, and you can see the deployment on chain, right? Because it's your vault. It's not a pool of funds that Avra is managing for you. We're not a bank here. We're literally your fiduciary taking the assets out of your vault and putting them into the contract per your instructions. That is the safe way to use crypto and Bitcoin, especially as like Saylor says, the pristine assets to borrow against. You don't want to sell the appreciating assets. What's

the safe way to do it? This is this, in my opinion, my humble opinion, this is the safest way in existence today to do that. Does it become a more mainstream model for that? It does. Is it when State Street and BNY Mellon are custodying? When services like ours at scale hide the complexity to the end user, which is what we're doing. I have end users who we've explained this to. They don't care or know. They do because to a degree. But it's like when you're getting, if you have a money market account at a bank, do you know how reverse repo purchases work and what drives money market rates?

You don't know. You don't care. You know that FDIC insurance is the backstop, which, by the way, is 1% of bank deposits. Right. Okay. This is no rehypothecation, no leverage. If you don't make the payments and the price falls enough, we simply sell the underlying asset. And it's that simple.

Clients understand that 100%. So if you get liquidated, what are you left with? It depends where the price goes, right? So I think on Aave, you get liquidated at something like 80% loan-to-value ratio. And it just depends on how fast the price is falling. Because if the price keeps falling, you'll keep getting liquidated. And if the price goes back up, you'll stop getting liquidated, but you'll now have a higher LTV to deal with. It's such a superior model. It's incredible.

This is the future of banking. We're just doing it in a securities regulated model as an investment fiduciary. I'm not using all the legal terms correctly, but that's the basic idea. This is not a bank. We're not pretending to be a bank. Although separately from Abra and our Abra Capital Management Group, I do believe that is the future of banking. That's a separate issue, right? I do believe that.

Speaking for yourself. Speaking for myself, I believe that the traditional lending model, in Ghana, and all these places where Bitcoin is taking off? In Argentina now, which I'm super excited about what's happening there. And I think Bitcoin becomes the ultimate collateral for borrowing and lending. And you're going to see an entire banking system, especially now with the Bitcoin DeFi protocols coming out. That's what I was going to ask. Because right now it's like you find a way to get your Bitcoin into an Ethereum based protocol and Taproot, whether on purpose or not on purpose, that upgrade really opened

an entire world of doing everything that's being done everywhere else on Bitcoin. We're super bullish on it. It's not liquid enough yet for what we're doing. We don't want anything we're doing to be a significant percentage of. You don't want to be the test net. That's even worse. But, yeah, so not only do we not want to be the test net with clients' money, which you would never do anyway, you don't want to be more than like 5%, 6%, 7% if you can of a protocol's deployment

because then you have concentration risk and you become a target. It's less of a risk in DeFi than it is in CeFi. Like if you basically are 80% of Alameda's borrow, for example, that's bad. But it's still something that we pay attention to. Bitcoin-based DeFi, I think, goes a long way to addressing some of these, like you said, wrapping and unwrapping issues for using Ethereum, which we do, but it adds some it adds some less steps is better. And it's also cheaper. It costs like six or seven basis points, I believe, to wrap and unwrap Bitcoin on Ethereum. And that

just eats into our clients returns because they have to pay. And it's one more step. It's one more thing that can go wrong. Right. It's like, you know, how do you fix an engine and make less things go wrong? We'll have less moving parts. Well, if we have less moving parts and we can access Bitcoin network directly for yield, and I've seen some stuff even on Lightning where they're retooling the discrete log contracts that Lightning

uses for things like yield, that I'm pretty bullish on long term. This feels like, I'm really excited about it as well, but it feels like one of those things we get so excited about. And then it's like next cycle. You know, DeFi summer was years ago now. And we're barely now scratching the surface of real DeFi.

We're not trading yams and tacos. I want this to be a little boring. Yeah. Because this is the future of money. That in and of itself is exciting. I want people to get excited when I stand up and talk about why they should care about Bitcoin. I want people to be convinced that this is safe and ho-hum and they should just do it. Not that they, oh my God, I'm so excited about earning yield and borrowing to a degree. I'm like, I don't really want you to be that excited, but I just want you

to trust that it's going to work and that we know what we're doing and that it's regulated and we have oversight from the SEC and whoever else, right? That's where I think, especially for us, because we don't market to DJs, right? We're marketing to real, you know, people with real money who want exposure to this space. They believe in where it's going, but they don't want any of the BS, right? They don't want exciting. They just want it to work and they don't want to have to deal with the complexity of it. You said you disclose all the risks, obviously, are regulated by the SEC. In your mind, what are the biggest risks to someone who participates? Well, sure. There's always the network risk. Smart contract risk. Exactly. That's the number one is the network risk of a DeFi protocol failing. And, you know, we obviously go to great lengths to make sure that

we're using tried and true DeFi protocols. But the space is still less than 10 years old. Right. Right. But, you know, using Aave, using Compound, using some of the newer protocols or the DEXs that have been proven with, you know, maybe a few billion dollars in TVL, that mitigates some of that risk. But we disclose all that. Right. We disclose, you know, the fact that you're using an MPC wallet and, you know, this is how we do it. But, you know, there's always a custody risk. There's, yes, we have a long discussion about why you shouldn't do what other parties were doing that lost your keys. But it's ridiculous and it's dishonest to say there's absolutely zero risk. Right.

That's just not honest. And so even last time when, you know, when we were a different company operating in the C5 world, I would go on spaces or what was the precursor that everybody was using? Clubhouse. Clubhouse. And, you know, chastise people for not, for basically saying that this stuff had no risks. And I would say, we're in this space and it's not true. You did it on my show a hell of a lot of times. Yeah. And so, I don't know, we've prided ourselves on trying to be transparent about risk. Now we have no choice because it's legally mandated in the way we operate. And that's great. We're all for it. In hindsight, it really kind of was the Wild West. And in hindsight, actually, risk disclosures, which is the SEC's mandate, were one of the biggest problems. I mean, SPF was a fraud. We shouldn't keep the fraud. Yeah. It has nothing to do with risk disclosure. But Steve Ehrlich, I don't know. They haven't been charged with fraud.

Maybe it was a fraud. I don't know. But I will tell you that if I had gotten an email from Voyager saying we've given an uncollateralized $700 million, whatever number it was, loan to Three Arrows Capital, I would have pulled my money. Fair enough. Because I would have said that's irresponsible. Right.

I never got that choice. Right. So listen, I'm not saying what it did what i i would love to see a real the real investigation into that as a creditor yeah but i what i have noticed this time is even with the riskier things in defy ifina being the big talk of the town right guy arthur those guys are out there they're like this is risky as hell man right yes we're doing this it's not luna but here's all the risks. And I'm not even 100%- Luna, Doquan, Doquan was out there saying, this is risk-free. And if you question me, you're an asshole, like going after you. He said that on Money Talks. I'm not even convinced that Arthur believes that.

I'm convinced that they're 100% convinced they need to say that and need to say it loudly. Yeah. Right. You better say it. Right. Yeah. I think that having, specifically as it relates to Athena, it's a little complex, but I do think having liquid perp markets greatly reduces the risk and complexity in making that type of synthetic dollar work. We didn't have that five years ago.

You couldn't, because I built a synthetic dollar in Abra based on Bitcoin years ago. That was the first thing we did as a company to do remittances. Now that you have these highly liquid perps that are out there to build this synthetic dollar, I actually think it has a really good chance of working. Why haven't we seen a real stable coin on Bitcoin? Seems like such a layup. The narrative, it's always Bitcoin's for savings, dollars are for spending. Sure. So, so I would say there's two approaches, right? There's the USDC approach of you have dollars in an account and you can use a BRC20, the Bitcoin equivalent of an ERC20. That's going to work.

I'm convinced that's coming. And I'm seeing companies work on that. Here at the conference, I've talked to people who are working on that. I'm sure they have to be. So that's coming. How useful that's going to be, I don't know. I think if Bitcoin-based DeFi works, you're going to need that. Right.

So I'm bullish on that. And then the second is what we were just talking about, which is synthetic dollars using Bitcoin as collateral, which is what Athena is doing. And like I said, this has a better chance. It is highly risky. I actually agree with Arthur, whether he agrees with what he's saying or not, that it is highly risky and super speculative. But I think

it has a very good chance of working this time around with Bitcoin and Ethereum as collateral because of the way they're using perpetual futures to peg the underlying and then creating this yield based upon the futures premium. It's basically like a basis trade to create a synthetic dollar. It's just incredible that they've taken every trigger word from the last cycle. Yield. Yeah, yeah, yeah. High yield. Real repackaged.

They won't call it an algorithmic stable coin. It's not. But synthetic dollar. And they're just throwing it all out there and saying, but it's risky. But, and, and they're saying the cash and carry trade is what works to do this with the staking underlying. And the cash and carry trade, a little different with GBTC because of the premium and discount, but it's what wrecked the entire industry last night. It was the widow maker that couldn't go wrong. But think about it, right?

Arthur, I love Arthur. Yeah, I've had him But he also proved that you can easily create synthetic dollars using futures because why did BitMEX get in trouble in the first place? Because in the early days

when they had no KYC, you could park Bitcoin there, right? Short it 1X and you now have dollars. Yeah. KYC free, right? and if you're paying seven percent premium to short what is money laundering cost i'm not a money laundering expert i don't know

anything about money laundering pure guess 30 40 percent yeah so what's a better deal paying seven percent premium to short bitcoin to peg it to the dollar or you know what mexican drug lords are probably doing burying dollars in people's backyards, paying 30%. Yeah. Don't tell Elizabeth Warren that. I mean, it is what it is. Look, I think having a synthetic dollar that is not based on the banking system, I read

this bill or the highlights of this bill, this Hillibrand. It's a disaster. It's an absolute disaster. I think their intention may be decent, but I just don't think they understand. It doesn't matter whether their intention is good or not. If it passes, it's going to put Paxos out of business. It's going to put Circle, the way they do things now, out of business. Because they're not going to be able to get a bank charter.

Right? And they're already managing it. Which Caitlin has proved. Well, she has a special purpose bank charter. She has not been able to pass her account. She can't use it. Right. So you're going to make Circle get a bank charter they can't use? They're out of business,

which is what she wants. That's what Elizabeth Warren wants. So she's inadvertently giving her what she wants. But I don't think that's what Lummis wants. I don't think so either, but I don't think they understand what they've done. See, I think because Lummis is so bullish on the Wyoming SPDI model, she thinks, oh, we'll just come to Wyoming

and set up a speedy shop. But that doesn't help Circle because they're not going to have Fedwire access and not going to be able to set up a master account. They're going to have to go back to the traditional banking system to get a correspondent bank to basically do what they're already doing. So inadvertently, she's actually making it worse, based on what I've seen so far. And it's taken us years to get to this point. Their first proposal wasn't as bad. I don't know.

It's just not that hard. You've got to have first principles and lay out the first principles and then work around that. I've always said in politics, they don't have a Hippocratic Oath. Do no harm. They don't start from first principles. They start

from politics. They're also not trained. Sure. Hippocratic Oath is for a doctor who's been trained not to kill you. This can be a car salesman from some city who is popular. Absolutely. But regardless, they don't start from first principles. And if you actually look at what the good actors like Circle are doing, I don't like Circle's fee model and the way Coinbase collects fees, but it does work. You can't deny that. You can't deny that Tether works or that Paxos works. So I don't know.

I think I'm hopeful that the message is getting through that this is not the right approach. I have to circle back on one thing. Come in and register. We blew right past it. It's been the narrative of Gensler or whatever you're doing. Come in and register. And the narrative from Kraken and Coinbase et al has been, not only can we not come and register, we can't even get you guys on the phone to make the appointment. And you did it.

How did you do it? But the thing they have to keep in mind is that we spent a lot of money on this. This is not cheap what we did. I mean, lawyering up, you have to file. It's called an ADV, and it's a brochure. And there's a whole process to become a registered investment advisor. You can read it online. And to tee up the compliance manuals, the AML stuff, the brochures that you file with the government, how you train

how you track, you have to install software now as a registered investment advisor to track your slack and email and whatever external messaging systems you use, a three person startup can't do that, it's impossible right, and so you're investing millions, and we're not even talking

about the tech stack yet, you're investing millions of dollars. Just to find out if you can do it. Just to take the first set of money. And if you do it with the SEC, I think you have 120 days to be managing $100 million. Right? And so if you're not managing $100 million, you can't do it at the federal level. You have to register at the state level.

And then you're relegated to registering with 50 individual states. And so pick your poison. Right? level, and then you're relegated to registering with 50 individual states. And so pick your poison, right? So there's no easy answer, but we bit the bullet and took the hard brute force approach of registering and committing to managing nine figures quickly. I love that for you, but I hate it for the narrative. Absolutely. I don't believe in regulatory capture as a business model. I don't want to win that way. But the reality is, is that most of our competitors are gone. We did basically lawyer up and we've given our clients what they want in a way that's legally compliant. And I don't know of another company that's doing

it this way. Could be wrong. I don't know. I'm not, you know, I don't know everything going on. And so it does give us, at least for a time period, a moat. I don't really care whether I have the moat or not, because I know I'm giving my clients what they want in an ethical, legal way. But for whatever reason, we do have a little bit of a moat now. And I don't think it's going to matter long term either way, because I think a lot of companies will do this eventually. Last question. How big do you think this cycle will be? I think it's going to be massive because I think the narrative of the fourth turning, the debt burden, the wars, I think it's spiraling. And I think that people are really believing that the Bitcoin model, the DeFi model is

the future now. I think with robotics and AI, I think you're going to see significant integration of DeFi and robotics and this whole DAO model. And it's going to happen so fast when it takes off. I think you're going to start to see a bunch of startups that try to build robotic AI-based DAOs

that use crypto for payments. So I'm super bullish on this cycle for a lot of reasons. But strong utility-based, not kind of just narrative. It would be nice to see strong utility-based, not kind of just narrative. It would be nice to see strong utility-based rather than boat with sail with dog's hat foot. Yeah, there was some bonk drone display last night.

I saw the drone display driving through the town. It was pretty incredible. I had no idea it was bonk. I just saw it like that. Yeah, and I love meme coins. It's fun, but that's not utility, right? Actually, that's not true. There is a certain utility in meme coins in terms of how the tech works.

It's like Pokemon for crypto. But I'm talking like next level in terms of the productivity of society, right? Like how AI and robotics are going to fix society, how sound money is going to fix society. And I truly do believe that. And I think that the timing for that utility is perfect now. Well, I love that we all truly still believe it after all the bullshit that we've been through over the past few years, man.

I have to say, like, watching you go through it, obviously, like, on a more personal level, of course, like, us chatting and just seeing you survive, it's such a wonderful thing nobody cares and nobody needs to care i mean you know the future is is is here regardless is coming regardless of whether i survived i was attacked you know what people think of financial regulators this all coming regardless yeah inevitable it's inevitable exactly and so i'm super excited that we survived that we can be part of it. And I love doing this.

It's not just about the money for me. And so that part is fun. It really is. I can't say that all the bullshit I've dealt with for the last couple of years has been fun. It has not been fun. But if that's the price of admission and I'm still here, it's all good. End of the day, no matter what happens, you'll still have your Bitcoin. I'll always have my Bitcoin.

I lost on the line, but I'll have the rest of my Bitcoin. You're going to be just fine, I think. Thank you. Always a pleasure, man. Thank you. It's fun. That's dope.