The Wolf Of All Streets - Where Will Crypto Investors Put Their Money In 2023 | Lou Kerner, Mark Yusko, Bill Barhydt

Episode Date: January 12, 2023

My special guests are: Lou Kerner: https://twitter.com/loukerner Mark Yusko: https://twitter.com/MarkYusko Bill Barhydt: https://twitter.com/billbarhydt ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Bitcoin #Crypto #trading  Timestamps: 0:00 Intro 3:00 How contagion affected Abra 4:44 FTX and Genesis 7:25 Davos 8:30 Depth of crisis 11:20 Capitalism 12:00 Elephant in the room: the Fed 15:50 Dead people are the best traders 17:00 Indexing 18:00 Trading is a job 24:00 The best time to start investing is now 31:00 Collateral 32:30 Faith 36:00 What is crypto 39:00 Community 41:20 XRP army 45:00 Timing the market 49:00 Becoming entrepreneur 51:35 Blockchain gaming 53:29 Ledger Stax 55:09 Final words 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.

2023 is off to a somewhat incredible start for the crypto market, for Bitcoin, and for all markets in general, which I think has taken a lot of people by surprise. Of course, we got a favorable inflation print today and markets have continued to rise. days, which obviously is somewhat irrelevant, and is even looking just at 2023 noise and not signal when you actually zoom out and consider the power of the crypto asset class. I'm going to discuss this with three of my favorite people today. We have legendary investor, storyteller, and probably the king of the one-liner, Mark Yusko here today. Bill Barheit, hopefully the first Bitcoin banker on the planet, if all goes well. And of course, my favorite unicorn whisperer, the guy who tried to buy YouTube and Facebook first, Lou Kerner. You guys do not want to miss this. It's going to be epic. Let's go. As I mentioned, we have an absolutely epic panel. We probably should have called it boomers talking about Bitcoin or the four oldest guys in the entire crypto space that we can get together to talk about this cool new asset

class. All four of us are like the Steve Buscemi meme. Hey, fellow kids, you know, rolling in with the skateboards. But I find that talking to people who actually understand, I don't know, markets and investing tends to generally be a very, very impactful exercise. And we're going to do that today. All three of these guys are legendary investors, legends in the crypto space, and probably have their own unique perspectives on what to look for this year and beyond. I'm going to go ahead and bring them all on right now. I've got Mark Yusko, Bill Barheit, and Lou Kerner.

What is up, fellas? Happy New Year, Scotty. Hey, Scott. Happy New Year to all of you. Bill, how's the becoming a bank thing going? I have no gray hair. Neither do I. I wear the gray Abra shirt to kind of hide the effects of becoming a bank on the head.

But I'm still alive. Never gotten so many compliments in my life for not being dead. I changed my name to Harry Potter, the boy that lived. But we live to fight another day and our clients are happy. And so I'm happy. And, you know, here we all are trying to do it again. Obviously, right. You, you're progressing towards becoming a legitimate bank, getting licensed. How much has 2022, we'll just call the, you know, the 2022, the contagion, how much has that impacted your efforts?

Well, it's vindicated it. I think, you know, we started this effort long before the, let's go back to Terraluna Three Arrows, which probably started the contagion. We had already started the process. We had been negotiating with regulators for quite a while. When the last straw kind of FTX and Genesis happened, our lawyers had a discussion with the regulators and it basically went along the lines of, hey, this puts you guys in a great position. Nothing changes. You know, you're committed to transparency. That's what the rules require. And, you know, hopefully this will help all of us. And so if anything, it unfortunately vindicates what we've been saying all along. I think not only on your show, but others where I've gone and said, hey, look, a lot of the companies with poor risk management are going to die. And here's why. Now, I didn't think it was going to happen in 90 days.

The whole the whole thing. But I did think it was going to happen. And here we are. So I think for Abra, it's it's you know, it's basically what we've been saying all along. If you are a trusted third party in a space that is decentralized and was based on the idea of no trusted third parties, you have to basically be fully committed to transparency. DeFi is the easiest way to do that. But as somebody who's providing access to DeFi, we're going to leverage regulators and eventually public markets to just be over the top about both. You mentioned that FTX and Genesis were the last straws. Mark, do you think that those are actually the last straws? Or do you think that we've got more hits to come? No, look, I do. Although I wouldn't use straw, I'd probably use, you know, they're the last honeypots that turned

out to be honeyless. You know, I mean, Genesis, and actually that's not fair. Genesis is very different situation than FTX. I mean, Genesis is a victim. Now, did they make some mistakes? Did they have risk management errors? For sure. And I'm not even and again, I don't want to go too deep into this. I will argue it ain't the people you think it is who are bad. It's people way, way, way up higher than the useful idiots of Caroline and Sam. They are the masterminds of nothing, full stop, just no way, no chance. So that's a long-winded way of saying, Scott, that I think the FTX debacle is far from over. We snipped off one head of the Hydra. The other six heads are going to go party in two weeks at Davos and plan the next attack. So we got more problems coming there.

Genesis is just a banking problem. They were victims of theft. One of their counterparties stole money and isn't going to pay him back. Now, it gets really messy. And again, I don't know. I don't know how to pronounce his name, Su Zhu or Zhu Su. But no one really cares. I mean, everyone cares about him because of three arrows. But, you know, he's the one saying that that there was fraudulent conveyance of two point six billion dollars from Alameda to Genesis slash DCG.

I can't confirm or deny, but if that did occur. That's going to get recalled and that's going to cause huge stress at, at the Genesis DCG level. So. Lou, he mentioned everybody's going to Davos to figure out the next big move. You're going to Davos tomorrow. Are you not? Yeah. Thanks for that, Mark. And by the way, yeah, I'd like to start also by congratulating Bill on surviving because it turns out not so easy. And I would say that's really 50 percent of any entrepreneur's job is just surviving.

Right. Because eventually, right, it'll be the right time if you can survive. You know, I am going to Davos. You know, I like there's something actually quite fun about being at the center of the universe. And I think for those few days, certainly of the business and government world, that's the center of the universe. I'm doing Crypto Monday Stavos there. They give me some free space. And there are certainly lots of interesting people there. The vast majority of who don't go into the official WEF event. Mark, you mentioned- So I guess we need to give, we need to send Lou overnight a giant sword

so he can attack the Hydra and lop off a couple more heads. If anybody could do it, he's our guy. But Mark, we've spoken quite a few times in the last six or seven months. You sort of made the argument, and this was pre-FTX, that crypto is in the spring, not a winter. People kind of talk about this ice age. I think that without FTX, we'd be trading much higher, and you would be proven. But interestingly,

as we sit here talking today, price is back to where it was before FTX for Bitcoin. Right. We're back. Spring doesn't mean straight up, right? Spring, as I described it, is not your favorite season, right? It's muddy and wet. And you got, if you're in California, you got landslides and winter, but it's better than winter. But what it means is this choppy kind of up and down, no movement until you get to summer. Summer is where the fun happens. And that's the anticipation leading up to the halving.

And I still think we're on track for that. And look, I didn't see Hurricane Sam. Look, I never met the guy. I never met her. I just no idea that it was going to be a fraud of this proportion. So, yeah, that's I always describe that as I live in North Carolina. And about once every decade, we get a big Nor'easter in late February, early March. It sits off the coast and it dumps a foot of snow in North Carolina.

And we're paralyzed for a week because we don't know how to deal with it. So that's what happened. Right. We had Nor'easter Sam or Hurricane Sam or whatever you want to call it, since he's from the Bahamas. And that put a dent in the recovery. But if you actually step back and look at the breadth and depth of the fraud and the relatively muted impact, right, there were some, you know, distressing days when we were touching 15 and We were at 18 before the news. And I still think we're in spring and summer's coming. And there'll be another wave of speculative frenzy. Actually, you're already seeing the speculative nonsense back in the traditional markets. I mean, freaking Best Buy up 100% in the last three days. I mean, not Best Buy. I'm sorry, Bed Bath & Beyond. Not Best Buy. Best Buy is a good company. Bed Bath & Beyond is going bankrupt. The equity is going to be- Mark, I have a word that I use to describe the tendency of markets to swing between bubble and crash and bubble again. I call that capitalism. That's just what it does. And and it's like the sun going up and down.

And it's and it's nighttime. And the crazy thing, though, is people like during nighttime, during winter go, oh, my God, the sun's never coming back up again. And, you know, sometimes the sun doesn't. But, you know, most of the time the sun comes back up again. And, you know, sometimes the sun doesn't, but, you know, most of the time the sun comes back up again. And, you know, it looks like, I mean, I think in the long term, the whole FTX thing will be a very modest blip. You know, I think the industry survived Mount Gox, right? And I think Mount Gox will, you know, nothing will touch Mount Gox and we survived that. Yeah. But the psychobabble elephant in the room is clearly the Fed. Right. Still. And nothing's changed. You know, we've looked at like historical guidance versus historical reality. And the reality is they may as well not speak. There's generally there's genuinely no value to anything they say.

And we would all be better off to lose point if we let the capitalist pig bond markets drive us forward because they've historically been right. And the Fed has historically, the people have historically been wrong. Right. So whenever they say, oh, rates are going to be here for X time frame, they are wrong 100% of the time. So it begs the question, are they making it up? Is it like Trump said, you know, you can't have mass hysteria, right? Because people can't handle the truth or I forget how he said it. But you know, I'm sure he didn't say that eloquently. And, and, and, you know, now we have the Fed saying, oh, it's going to take X years to get to 2%. That's bullshit. We're at disinflation. If you factor out housing, we're at zero now.

OK, and it's getting worse. And we're going to be in a disinflationary environment, which means they're going to be cutting rates and quantitative easing is going to win. And I would assume that at some point, you know, the unemployment is going to go to shit. But I don't know how long that's going to take. But that really shouldn't be the primary driver. I mean, if, you know, if we're in a in a recession and ISM basically goes where it looks like it's going to go, everything that they're telling us is just pure, pure, unadulterated bullshit. I have to laugh every single day.

Obviously, I write a newsletter in the morning. So I check Bloomberg market wrap and the headlines are just hilarious. To your point, it's like markets slightly up on fears of inflation this and then the next day markets panicking because of inflation and it's schizophrenia and none of it matters. Why does it matter on a day to day basis what the status of inflation might be or what the fed might say or what they might do it really feels like it's but but that's that the problem is we're all still tethered to i guess i shouldn't use that word um it's kind of like you're not allowed to use the word trump like this trumps that you You can't say that anymore. So you can't say tethered to these things that we used to believe were markets, right? The S&P 500, the Dow Jones

Industrial Average, NASDAQ. They're not useful because they're not controlled by humans. They're controlled by machines. And those machines are working against the humans, right? One of my favorite charts, if you go over the last, I think it's five years now, coming up on five years, the entire gain, 100% of the gain occurs after hours. There's no chance for an average investor during the trading day to make money because it's a gap up or gap down from the previous night's close to the open. Well, who trades on that? The bad people, the machines. Okay. This is, it's like the CPI print. Every time there's a CPI print, there there's a big trader there's even a whole thread

on it right there's a big trader who trades in advance 20 minutes in advance 30 minutes in advance who is that okay dark pools whatever people go to wef is it lou i don't know maybe it's lou but if you're staring at a screen all day, doing the right thing, which is nothing, is extremely difficult. So going back to historical data, who are the best performing traders historically over the last 50 years? No, it's the dead people. Why are dead people. a little bit of the learning there and not to be dead, but to actually just walk away from the trading screen and do nothing. I have no problem with day trading and market timing. It's your money. You do what you want with it. I get what your audience does as well. And I've traded. It's fine. I've option traded. I think you can make money there. But my point is, if you're

long-term investing, the single most important thing you can do is let the effect of compounding work over time. And the easiest way to do that is not to be there. And that's... Bill, you're talking about investing though, right? And look, there are four different ways to participate in the market. And I'll argue three of them are fine. But let's just get back to what he's talking about, though, investing just for a moment, because I think it's important to recognize that the most important, you know, by a wide margin,

the biggest financial trend of our lifetime has been indexing. Right. And Bill, you don't even have to pay me a commission, you know, because, as Bill know, people, we don't do this well. And, you know, so that's, you know, so if you're going to invest, the best way to invest for most people is, you know, unless you're Stevie Cohen is indexing. Well, but again, Stevie's not an investor. Stevie's a trader. And he's unabashed about being a trader. Now, he's an investor in other things. He's an a trader. Now he's an investor in other things. He's an investor in art. He's an investor in real estate. But investors buy things that they think are undervalued relative to fair value and they hold them for a very long period of time. That's what an investor does. And they dollar cost average over time and that's how they do it.

Traders, there's nothing wrong with being a trader, but traders, it's work. It's a job. There are actually very few really good traders. I mean, there just aren't that many. It's really hard, but it's not negative. But traders don't care about valuation. They don't care. They just need movement and they need activity.

And the problem is you're competing against Ken Griffin and his machines. That is tough. Don't you need some kind of edge? Well, you can have an edge. Some people have an analytical edge, right? They have a better algorithm or better model. Some people have an information edge, right? They get information from other people.

Some people have a processing edge. You know, Ken's got that in space because he has the biggest computers. But edge is hard to get. And then you have the third sell it in the futures market and speculators take the other side. And we think of speculators as different people, like people who are gambling. But the gamblers are the bad ones. The gamblers are the people who fancy themselves traders, but then they use leverage and they play in markets they don't understand where they have no edge to lose point. And those gamblers are all the Robin hoodies for whatever, I'll just make up that term, that took the stimmy check and thought they were gonna beat the market.

And look, on occasion it works, right? You can become an ape and Adam can make your stock go up or GameStop can come back from the dead. But at the end, it's like going to Vegas. If you win the first hand, walk away. Just walk away. But if you stay at the table. We tried that, Mark.

I know. We proved that theory in real time. If we had just walked away, we had walked away, you would have won a bunch of money. But we all made our donation to the house. Now, there was entertainment value. And I like being with you. I like hanging out and I will contribute a few hundred dollars to, to the Vegas, you know, mafia bosses, but the house is against you.

And that's the same way in, in trading by and large. And if you trade with leverage, you're done. You're done. Citadel did 38% last year in a pretty historic bear market. Clearly, they have some sort of edge. You're talking about, what do they have, $60 billion, $70 billion AUM? My friend is an analyst at Citadel, Newly. And Ken Griffin rented out all of the Disney parks and took everyone there because they had a banner year and their families that's the kind of money that uh citadel is making right now i mean and what's crazy is that they've had bigger percentage years i mean there was a year in the 90s we made you know 48 this is a funny story so we had money with him when i was at

notre dame we we didn't invest when he was in his dorm room, but pretty close afterwards. And I've known Ken for forever. And we were at 48%. But the way their fee structure works is they pass through all of their expenses, like salaries, bonuses, rent, everything. rent everything and our fee that year was eight percent so our net was 40 okay and go to the board meeting and i just wasn't bored memories like that's egregious you need to fire them immediately like well why so we could have bought an index fund for 10 basis points like right and we would have made 23.9 because the market was up twenty four. Instead, we made 40. Isn't 40 better than twenty three point nine? It's like, no, no, it's not. Not if you have to pay eight percent. No, it is. Forty is better than twenty three point nine. Just is.

You know, to get back to the edge thing, because I think it's important. I was actually a Wall Street analyst for a while before I really had an appreciation of edge. And what taught me edge was I got to Goldman Sachs. And my first day as a research analyst, they hand me a piece of paper and they say, hey, director of research says, hey, your job is you call these 10 accounts when you get an idea. Your job is to call these 10 accounts in this order. OK, so get my first idea. A month later, called the first account. He said, thank you so much. Great idea. Called the others. It's went on four or five times every time. The first guy said, wow, that's great. That's great. And like the fifth or sixth time I called him, he said, you know, for the first time he called me, what you came up with. Yeah, I really disagreed with you. He told me why I told him why I thought he was wrong. He said, look, we can agree to disagree. But for the first

time since he started calling me, I'm only going to put on half the position. I go, well, I don't understand if I'm wrong. Why would you put on any position? He says, because you have a piece of paper in front of you with nine other names on it. And they're too stupid to know you're, you're, you're wrong. And that's, I go, wow, that's an edge. That is an edge. So, well, I think it's clear that the big boys have the edge, but you know, to the point of the title, I guess, of today's stream and what we really want to talk about, most people are not Ken Griffin. Most of us are just average people who are trying to get by and who want exposure to markets, certainly more specifically the crypto market.

We have this little run right now. We have 2023 to look forward to. The Fed, as you discussed, how, and I think the answer is going to be dollar cost averaging, but how should your average person be approaching this market now? Anyone can jump in. I think your allocation is your allocation. I mean, if you're trying to time markets, you're going to lose.

As Mark said, the house is stacked against you. And the only people that consistently make money over time is people who add to, you know, risk on asset positions over time and get out of the way. And that's what our clients want and that's what they're doing. And I suspect this is a great time to be doing that. Obviously, there's the best times to be starting and the worst times to be starting. And the worst time to be starting apparently was October of last year. But the best time to be starting is probably now. And so but you're still going to get to the same place. It's all it's all a little relative, right?

Whether you start, you know, whether your investment is worth X now or Y a year ago, it doesn't really matter in 10 years. And that's the key. And nothing's changed in that regard. I'll still make my predictions, which are not as worthless as the Fed's predictions, in my opinion, but I'll still make them. But that won't change my investment strategy and my overall lack of a trading strategy. And every once in a while, I'll take a small, let it ride money and trade, but nothing's changed for me.

But what are you buying? Is it Bitcoin and ETH in this market, or do you go further down? I mean, we've talked, you and I have obviously talked about this at length. I know that you like both, but is there anything else at this point that seems less risky than maybe it did before? Less risky? No. I would say, look, the high vol stuff is going to remain high vol stuff. I keep about 10% in a basket of alts, particularly Solana and some others.

And I'm considering rebalancing some of that, but that stuff I'll rebalance just because of the network effects and things attached to those alts. But the 60-40 allocation I have between Ethereum and Bitcoin isn't changing. And other than the fact that Ethereum's gone up faster the last month or so,

which is what I would have expected, it is what it is. That's, yeah. Mark, what do you think? I'll chime in on a couple of things. So one, no one should, and I don't actually think anyone does, invest all at one moment, right? So every year, it's like New Year's resolutions, right? All these New Year's resolutions get made. I'm going to work out. I'm going to eat right. I'm going to quit this. I'm going to do that. And it lasts, you know, less than 18 days because if it lasted 18 days, then it would be a habit and you'd actually do it. But it lasts less than 18 days, then it's over.

And if you do anything for 18 days, it's a habit. But it doesn't. And the same thing's true here is everybody's going to talk about, oh, what's the market going to do for the next 12 months? And what's the bond market going to do? What are interest rates going to do? And like Bill said, I have my predictions. As you know, if you ask me a question, I'll give you an answer. And I always tell the story about the media consultant who said, okay, I'm going to train you on how to be a media guy. And so he asked me a question. I started to answer, what are you doing? I said, I don't know. I'm answering your questions. You never answer the question. You deflect and redirect and talk about what you want to talk about. You don't ever answer the question, but I'm a dutiful firstborn. I will always answer

your question. And my wife says, right, I shouldn't give answers because people believe you if you say it forcefully. And I said, what's wrong with that? He says, what if you're wrong? I'm like, I'm wrong all the time. Just changed my mind. But to Bill's point, the Fed's wrong 100% of the time, which is hard to do. Think about that. To be wrong 100% of the time, it's almost as if it's intentional. So I have to go with that. If you flip a coin, you're right 50% of the time. So you don't have to be right all the time. What you have to do is make more money when you're right 50% of the time. So you don't have to be right all the time. What you have to do is make more money when you're right than you lose when you're wrong.

So that's the really tricky part of investing. But ultimately, in digital assets, look, I had an existential mini, mini existential crisis over the holidays. This FTX thing, it's big, right? I mean, it's a big, hairy fraud. I will argue it's beyond that. I believe it's an intentional attack to try to slow down the disruption of digital for the incumbents. That's my argument. And so I was like, good. Five years ago, I made a choice to move from the nice, stable, steady, boring, you know, world of traditional assets into this, you know, glorious new world of digital assets. And I was like, what the fuck did I do? It's like, all of a sudden,

you know, we're pariahs, markets are crashing, bad guys are, you know, getting all the glory. I'm like, you know, maybe I don't go back to, you know, the old world and just, you know, do my old stuff. And then, you know, I talked to a couple of people. I read Dara Albright's essay, which if you haven't read it, read it. It's amazing about decentralized future. And I got my mojo back. And look, I'm not sitting here saying that we're going to the moon tomorrow. I think that digital asset ecosystem is going to grow.

I think we're going to take share. I think, look, the then you fight, you phase. I've been talking about this for two years. It's real. And the incumbents don't want us to survive, but we will. Just like the incumbents didn't want the internet to survive. They didn't want the mobile net to survive, but they did. And this will too. So I think the one thing though, that's changed for me at least, is there are certain projects I actually am concerned about because after an initial wave of activity, there's just not a lot of there there. of Sam coins were complete fabrication, pump and dump, like bad people doing bad things. That's tough because if, you know, Salon is a great example. We were early, we made a bunch of money and I was all excited about it. It looked like it was taken off. Now the activity level's

gone. Developers are fleeing. Projects are fleeing. It turns out a whole bunch of it was bullshit FTX manipulation. That bugs me. And so I've actually been a net seller of Solana here recently, which is the first time in a long time. Love, you know, still love Bitcoin. I actually do hate to say it. I like Ethereum. Oh, you're such a shit coiner. Stop. Please stop.

Can I just look, I see, I agree. But anyone can create a token. A bunch of kids can fork Bitcoin and call it MIT coin. And it could be just just as nothing as if they had done nothing, produced nothing. But if you consciously take this token, SAM token, FTT, whatever you want to call it, as collateral for a loan, you're dumb. Dumb. Dumb. It turns out that there are a lot of dumb, dumb, dumb. It turns out that there are a lot of dumb people in the world. Yeah. I might say irresponsible. Okay. But you know, there are also companies with huge balance sheets that you can take something

worthless as collateral from, and you might be doing them a favor for another reason. It happens in the prime brokerage world all the time. But if, if, if you don't know the financials of the company you're taking the collateral from, that's the point of taking collateral in many cases, not all by the way, but many, right? Then you have a major problem. And I have a bigger problem with that than I do with even them creating the collateral in the first place. The bigger issue with them creating the collateral

is them front running the price via the exchange that they own, right? And so if you want to create a stupid, worthless token and have fun experimenting, go right ahead. But pumping it on the public via your exchange and then dumb primes taking it as collateral, that's a much bigger concern to me than most of what, you know, the public is talking about. To me, quite honestly, I mean, I think it was terrible what Sam does, and I feel bad for people who got crushed. But I was aware that there were dishonest people. And I think that actually the biggest impact that he's having on us is that we, it sucks

all the air out of the room. We spend all our time talking about something that I think is, you know, is going to be completely inconsequential, you know, in the long run of what we're all here trying to build. And Mark, you know, wow, it's weird to hear me, to hear you, me hear you talk about losing the faith, because to a large degree, you know, when I hear people, I lost the faith, I'm leaving. I really think that they never had it. Because I couldn't imagine, I mean, I saw something other than me seeing something that says, oh, this isn't a thing,

I was completely wrong. You know, I, you know, or maybe vitalic rug pulling. I don't think anything's going to happen where I lose the faith. Well, but, but Sam, I mean, Nice audience level. Lou, here's the thing. So you got me, you got me totally focused on that. That clip's going to live. Yeah, that clip's going to live. That was terrible.

Sorry, Lou. No, here's the thing. When I said I had an existential crisis, I agree with you, right? That if you lose the faith, then you never had it. I didn't lose it, but I went through a questioning period where, like know, you've talked about the crypto light. And I use that all the time when I'm talking to people about, you know, when did you see the crypto light? And, you know, it goes back to when we were with Dara on stage in Dallas and you told your story and I told my story. And that was a long time ago. Pardon? That was a long time ago. I know, it was a long time ago. But my point is that there is a pattern of events that happened over the past couple

years, most of it tied to FTX, and we can also tie it to Tether. And again, I don't want to go down that rabbit hole, but there's bad people doing bad things in the Bahamas. It's been going on for a long time, right? This goes back to savings and loan crisis. And even before then, bad people do bad things, money laundering, all kinds of bad stuff happens. The fact that the same banks, you know, Deltec and et cetera, are involved, that got me thinking. And so I went down the thinking hole of saying, to the point, Vitalik, okay, what about a Vitalik rug pull? Well, people do know that

Peter Thiel, like the darling of the Republicans and Trumpsters, is the eighth largest donor to the Democratic Party. People know that, right? They do know that Vitalik was a Teal fellow, right? They know that, right? They do know that there are links to intelligence in a whole bunch of projects. And for me, it's like, well, wait, wait, wait, wait, wait. What if that apparatus that's gathering in Davos is really got it out for this area? And that's the existential part for me, that if this is bigger than bad person did bad thing, dumb people did dumb stuff, that happens in markets. But if this is a concerted effort, and I always use this, Google Satoshi Nakamoto. Just plug Satoshi Nakamoto into Google.

And what do you get? You get Intelligence Central. Because Nakamoto is the surname And what do you get? You get intelligence central. Because Nakamoto is the surname of the people from the central part of Japan and Satoshi means intelligence. That's too damn close to, you know, central intelligence. I'm still troubled because personally, one of the reasons I'm here, a major reason I'm here, because it doesn't matter what these people at Davos do, ultimately. If it matters what they do, then crypto isn't what I think it is. Well, and that's a great point, Lou, in this that for Bitcoin, I don't think it does matter what they do. I really don't. I think it is fully decentralized. I think it is resilient.

I think it's proven. I don't think it matters what they do. But for a whole bunch of the other swath, unfortunately, I think it does. I agree with you. Certainly, look, at the margin, it does matter, right? Google would be a lot bigger if it were in China, right? But Google is not in China, but it's still a friggin big thing. And there are lots of countries like one of the amazing thing that we already see going on is all of this regulatory arbitrage, all of these smart people moving out of the United States and starting their companies. They're moving to, you know, to Singapore. Right. They're moving to Dubai. They're moving to Lisbon because they can

build these companies there without this draconian government. I mean, they don't even, they're not even telling us what the rules are. They're saying, hey, go do it. Don't raise your hand and ask, because if you do, the answer is no. Do what you want to do, and then we'll arrest you down the road if we want to. To your point about the existential crisis, Mark, I have experienced largely the same thing. And I think that what I came to, probably your same conclusion, is separating the asset class from the crypto industry. And I've had a major crisis about the industry. Listen, I've platformed SBF. I've had Alex Mashinsky here. I was friends with Steve Ehrlich. I lost money on Voyager. The hits keep coming. Steve Ehrlich. Haven't heard that name for a while. Well, yeah, me either,

but he's still got a whole lot of my money. But to the point, I think that a lot of it, for me, I have to show up every single day. I have to still cheerlead it. It's embarrassment, right? And once you get past, I think the personal embarrassment

of what the industry has done, how it reflects on us, who's been on the show, really brings you back to Bitcoin and self-custody and maybe Ethereum and nothing's changed. And so I've had the same existential crisis, but I think I've hopefully come out the other side. And I continue to do what you guys are doing, which is just buy Bitcoin and Ethereum. But Lou, I want to ask you a question because I can make the argument right now that if we're talking about 2023 and given most people don't have access to it in both legacy markets, but in crypto, this, I would argue, would be the year for seed round early venture capital.

Look, I invest all the time. I'm never trying to time the market myself personally. I don't think I've got the ability to do that. I think few people do. I, you know, Bitcoin is by a margin my largest holding. I buy Bitcoin every day. You swan Bitcoin. It's a great app to do that. I told you I was an equity analyst for nine years and stopped at the end of 99. I put out two price targets in 20 years.

One was on Facebook in 2010. The other was in 2021, January, I put a 10 year price target on Bitcoin of a million dollars. I get there through math. I could be wrong, but if I'm right, I know it gets there by going up and down and it gets there. All that up and down to me is just noise. And I talk about edge. I think for the most part, I index, you know, my money across the landscape. But for me, I think my edge is and the main reason I'm here is because of community. I think that's the biggest difference that's going on between, you know, what happened before and crypto. To me, this is about for the first time in history, we have a tool set to solve for the

community instead of the man in the middle. And I think that's going to be the biggest thing to happen in history. And, you know, I ran a company called Volk, the largest social network in history. It's the largest social network before MySpace. And so I was thinking deeply about community, yeah, 20 years ago. Yeah. And so to me, you know, I go around to the ecosystem summits, you know, and the highlight of my five and a half years, 24- crypto was ETH Denver 2020, because seeing that community, and they're in the pantheon of communities, and there's not going to be an ETH killer, because they're not going to kill the community, that community continues to grow. So yeah, I'm a huge believer in ETH.

Other extraordinary communities I've seen Celo, if you guys know, they're really, it's about financial inclusion, making the world a better place. Huge fan of Celo, a huge fan of Horizon Labs, if you're familiar with that. Tezos, obviously, I think community is kind of the new oil, but to the degree, data's new oil, big fan of the graph and what they're doing. So Lou, how would you put the XRP army in that spectrum? You know, that's a great question, Mark. I have not spent any time with the XRP community. I've actually reached out, you know, I did a fireside chat with Brad Garland House at Davos last year. That was really my first substantial interaction with them. Interestingly, coming back to Solana, I went

to Breakpoint last year because, oh my God, the world had never seen value creation like Solana. It got to 100 billion in like 15 minutes. It was crazy. And I wanted to go there and see what the community was about. And it was at the peak of the mania. It was the. And I wanted to go there and see what the community was about. And it was at the peak of the mania. It was the best, you know, amazing, amazing party. But for me, you know, at the end, the majority of people I met were there for the money. And I don't have anything against the people who are here for the money. I say, come on. But you just have to realize that the people who are here for the money are going to leave when the money leaves. And, you know, eventually the pendulum is going to swing to the other side. And that's what Solana is dealing with today.

You just you just made a great image. So Bitcoin 2021 down in Miami, I, uh, Winklevoss twins party, uh, at Post Malone's, um, uh, manager's house, which is pretty nice. And I was there. Yeah, that's right, Billy. You were there. And, and it was funny in that I, I was trying to make it to when Diplo came, but I'm old. So I was leaving. So 11.45, I'm like, you know what? I'm not going to wait till 2 a.m. for this guy to go on. So I'm leaving. But as I was leaving, boatloads of glamour people were coming in.

I mean, like the most beautiful guys and gals you've ever seen coming in at midnight. And to Lou's point, those people, as soon as the booze run out, they're gone. They're gone. Yeah. My top of the market story also involves Diplo, unfortunately. It was a very similar situation at Art Basel last year, which was December 4th, which is when Bitcoin finally broke below 52. It was arguably the top of the market.

And I was with all the FTX guys, all the Coinbase guys at a party where nobody had phone access. And Diplo was DJing and everybody was screaming that Bitcoin was crashing and nobody could access their phone to see the price. I remember that December 7th, I think it was. Whatever it was, somewhere between 4th and 7th, it went from like 52 to 42. Yeah. I mean, you know, and it really is a perfect analogy. But Lou, back to just really quickly and Mark, all of you guys, this applies, but valuations on everything are so far down. And if we believe that

the future is being built- Prices are down, Scott. Prices are down. Valuations may or may not be down, but prices are down. I thought VC valuations were dropping. Oh, oh, oh. VC. VC. Like down rounds and C rounds are a fraction of what they were a year ago this time as far as like the valuation of new companies. So is this a good time? This really is towards the bottom. I mean, there's a lot of dry powder on the sideline.

But is this a good time for people to invest in early stage or is it just too scary? I think it's always a great time. Can you time the market? No, look, Facebook, I bought it on Facebook originally great time. Can you time the market? No, look, you know, Facebook, I bought it in Facebook originally at $6 a share, and then it went to an IPO and I forget $40 a share. And then it crashed to $15 a share and eventually got to 365. So, I mean, if you try to time it, you know, you're going to miss that huge,

you know, people would tell me, why didn't you sell it at 40? I said, because I think it's worth a lot more than that. Yeah. I mean, venture venture. This is the golden age of a venture capital for our space. And I'm stealing that from from Andreessen. And and he's right in that early stage venture to lose point is evergreen. The one thing you can count on, good markets, bad markets, is human ingenuity and innovation as an asset class. That's what my pin tweet is my pin tweet. It is the one thing you can count on.

And in good periods and bad periods, there will be innovation, disruption, new business formation. So true early stage investing, not the late stage bullshit, but the true early stage seed stage investing is evergreen troughs, at the economic and sentiment troughs. When people are getting laid off and companies are getting busted up and valuations are crashing and people are scared and no one wants to invest, what happens is money flees. So you can't raise money. I'm trying to raise my fourth fund. It is freaking impossible. I mean, impossible. And that's the best time to invest. And I'll give you one quick story. So in the 93 recession, bad, right? Real estate

collapsed really bad. There's this little guy, no, single guy that worked for Bell Labs. He's like, hey, you're laying me off. I'm losing my job, but can I take my project with me? And they're like, yeah, whatever. Dense wave multiplexing. Don't even know what that is. Fine. Be gone. So he left and he marched up and down Silicon Valley saying, hey, don't you want to back my dense wave multiplexing company? And all the VCs said, go away. No. He got his retired third grade teacher in Philadelphia to give him 300K. And he started a company called Sienna. And his stupid idea was you take white light that goes through fiber optic cables. It carries X data. You shine it through a prism. You divide it into colors.

Each color takes the same amount of data. People are like, that can't work. It does work. And that company went up to gazillions. And that woman, I love this part of the story, turned that 300K into $300 million. That's the way capitalism works. And that's because he had an idea.

No one wanted to back him. And yet he persisted. He was resilient. And that's what's happening right now. All those people just got laid off at Coinbase. Some of them are going to be incredible founders. All those people are getting laid off at Google, are going to reemerge. Not all people that are getting laid off at Google are going to reemerge.

Not all of them, people laid off at Twitter. And this is the time. There's two sides to the table, right? There's the entrepreneur side, and then there's the early stage investor side. On the early stage investor side, and it's the perfect time for both, in my opinion. On the early stage investor side,

the only thing that matters is, do I have access to capital to invest? And what is the absolute return on dollars invested? Which is obviously going to be relative not only to the valuation that I paid, but the valuation I exit at. So you want to optimize for both. Well, historically, you've now optimized for the valuation you're investing at if you're a seed early stage, 100%. And unless this time is different, I don't think it is. And so the question is, do they have access to capital? And if you've ridden other troughs and highs, you have access to capital as a seed investor. And on the other side of the table, it's exactly what Mark said. I mean, if you have all these talented people who are leaving jobs,

who maybe in the back of their mind have wanted to be an entrepreneur, but didn't have the impetus. Well, the best impetus is, hey, I have no choice. I've been, maybe not no choice, but I've been pushed and backed into this. And now is the best time. My incentive is there. I'm passionate about what I'm doing. And I have the grit. I've learned what grit is. And I've probably learned a little bit about cash flow. Right. You know, if you're starting a company when the money is sprinkling down like mana from heaven, you don't really learn a lot about cash flow. Right. You think money is free and you should get yours. And that's not reality. Right. And so you actually have this kind of really, I think, compelling equilibrium on both sides of the table right now, which makes it super compelling to be starting companies. And, you know, we have an angel fund focused on

crypto at Abra, mostly because it adds value to what we're doing. And some of our LPs in the fund have asked us to do it. But, you know, we're seeing a lot of interesting stuff right now, and I suspect that's going to accelerate. Yeah, I met with an entrepreneur yesterday. I mean, unbelievable. Not pure crypto, but, you know, related to digital assets and gaming. And these guys have a tech that, to me, is the equivalent of that Sienna story. They have an ability to increase the, the throughput of engines by a hundred X. And that's going to be a valuable asset. So it's, it's, it's amazing.

And you guys are, you know, they were kind of put out of work because of a bunch of different reasons. And they're okay. They're not worrying how to make their mortgage, but they're hungry to start this idea on something that they've built. And again, I'm not really a tech person, so I can't evaluate whether they can do what they say they can do, but I'm going to have some people look at it. They can. And if, if they can actually do what they say they're going to do,

it's going to revolutionize gaming. It's going to revolutionize the transition. It's going to accelerate, not revolution. It's going to accelerate the transition into blockchain gaming. I mean, really cool stuff. Yeah. Lou, is 2023 going to finally be the year for blockchain gaming? I know you look deeply at this and obviously study the community. And we have these cycles, DeFi summer and NFT summer and metaverse fall. And they seem to fall flat. So we're going to have some sort of narrative. We will have these little bubbles in 2023.

But can gaming actually break through this year since Mark mentioned it? You know, I think I might have told you the story of when I was running Bolt. We had more than 20 million kids lifted by and three of the largest tiny little videos. Time for streaming was the pipes were finally fattening. Yeah. We bought the largest one and talked to the second largest one about buying them. And about a month later, somebody uploaded a video called Lazy Sunday. It was an Andy Samberg Saturday Night Live video onto the second biggest site, YouTube.

And that day they became the fastest growing website in the world. And six months later, Google bought them for a billion and a half. And, you know, what a deal. Yeah. But to me, like, I just feel like, you know, I mean, why are we why is the price where it's at? Obviously, Sam didn't help. But, you know, the price is where it's at because we haven't had our lazy Sunday moment yet. You know, we haven't built something that people, you know, other than Bitcoin, you know, Ethereum is awesome, but that the broad public market actually can use and wants to use. And I don't know whether that's going to happen, you know, next week, next month, next year, you know, or, you

know, potentially never. March 15th. No, I'm serious. And why do I pick that day? The announcement was made December, I think it was December 7th this year, this past year, by Ledger. Again, we're owners and, you know, the announcement of the stacks is the iPhone moment, right? The iPhone was released 16 years ago, Monday. I know that because it's my wife's birthday. And it was released on January 9th. And that day, Apple stock fell 40%. Because actually not that day, it took two weeks. But over the next two weeks, stock fell 40%. Because people said no one will ever pay $500 for a phone. You're right. You won't. You'll pay 1500. Because it's not a phone, right? It's a supercomputer. And the same thing happened when Mark Andreessen introduced the browser for the internet is you

need a gateway. You need that thing that makes everybody want to have this. And I believe the stacks is that it's the, you know, they hired the guy who built the iPod, literally the guy who built the iPod, which revolutionized, right? Walking around with a device. And I think that device and HSM with functionality, because you think about your phone, how many, I have what, 200 apps on this? How many do I use every day? Three, four. Okay. I don't need much functionality. I need a camera. I need to be able to see in my email, but I want my wallet. But Apple, Samsung, they haven't figured it out and they're not going to. So someone else is going to have this aha moment. And when everyone has crypto in their hand 24-7, the world changes. So the revolution is self-custody. I like that vision after last year.

I mean, Bill, I want to ask you before I know we got to go in a couple of minutes. Well, A, do you agree that, you know, as obviously you own a company where people custody their assets, so do you agree that self-custody is sort of the future there? And I know you believe in self-custody. And also we talked about the party and people leaving anecdotally, but you probably actually have the data on what is happening there with new signups and customers leaving. So I just want to get some context before we go. Yeah. So a few things. I mean, we've always said that one of the core tenants of a trusted third party should be, look, if you're in a custody trading account, you should have 24-7 access to your funds

and you should be able to process withdrawals 24-7, deposits 24-7. If you're in a nine-month CD-like term product for earning interest on stable coins, that's different. You got to wait nine months. Okay. That's not what I'm talking about. Do I think that the majority of the public is in a position to self-custody? No, I don't. And I don't think that's going to change ever. I think it's going to be relative to motivation. And the motivation spectrum is going to include computer scientists who want to do it because they think it's interesting and they've read that that's what you're supposed to do and they understand it. And then there's people in Argentina and Afghanistan and El Salvador and Turkey and places where either the money's gone to shit, the banking system's gone

to shit or both, or they're in a war zone like in Ukraine, and they're highly incentivized to self-custody. They'll go through the pain of learning how to do it because they need to do it. My mother doesn't need to do it. Even if she believes that when I tell her that this is the future of banking, she's not incentivized to take any device, elegant, beautiful, hard to use or not. It doesn't matter. She's not incentivized to do that. She's incentivized now at 80 to use an Android phone or iPhone because that's what her grandkids are using and she wants to communicate with them. So she'll go through that effort because there's a very strong incentive there. And so, you know, I look at this as this kind of self-custody versus trusted third party as a spectrum.

And that's why it's so important to me that when we have trusted third parties that act as the gateways here, that we have the rules in place to mandate transparency, mandate oversight. But one of the core tenets is, do I have access to my stuff 24-7 so that I can have personal agency? Even if I have my risk concerns, that's fine. I have access to my stuff 24-7 so that I can have personal agency? Even if I have my risk concerns, that's fine. I have no problem with that. Do I have 24-7 access to my stuff?

And I think that that's how this is going to play out for the next couple of years. I don't think there's a single killer app like a Netscape moment for crypto. I think there's too many moving parts. The browser was ultimately about information access. It was very straightforward. I mean, there was a whole bunch of things that were happening on the internet before that from newsgroups to other things. And the browser and HTML model just simplified it for everyone. But it was AOL. And it was one thing. AOL definitely helped. And so crypto and the broader banking system that we're replacing, the monetary system that Bitcoin is trying to replace,

there's too many moving parts to say, oh, we have one aha moment. Every person in every country and every country on the planet is different. And that's why people in Ukraine are doing things very differently than people in the U.S. who are doing things very differently than people in Argentina. WeS. who are doing things very differently than people in Argentina. We have to go. Unfortunately, I would keep you guys forever. But I want to repeat this same panel again in the future. If you guys will agree to do it, I think it was absolutely incredible. I want to now spark the topic for the next one, which is that the Lazy Sunday moment and the killer app secretly is stable coins.

Well, we started and the dark when we started and you can see behind me, it's light out now. So that's going to be my, you have to keep me to it. That's going to be my topic because I think that you can make that argument. Guys, absolutely incredible. Of course, tomorrow I'll be back by myself. I might actually look at some charts

now that things are looking up. And I say that, that means we get a crash and it's all over and whatever. And of course, we'll be reviewing all the news. Guys, everyone in the description, you can find Mark, Bill, Lou's Twitter accounts. You should be following all of them. Guys, thank you so much. I know that your time is

extremely valuable and it's really an honor to have all three of you legends here on a Thursday morning. So thank you once again. Thanks, Scott. Good to see you guys. Happy New Year. you once again. Thanks, Scott. Everyone else. Good to see you guys. Happy New Year. See you tomorrow.

Thanks, guys. Let's go.