This Week in Startups - Macro picture, Bitcoin’s bull/bear case, DCG controversy & more | E1666

Episode Date: January 27, 2023

Please take our 90-second audience survey for a chance to win a $50 amazon gift card at www.thisweekinstartups.com/survey Vinny and Sunny are back for our first crypto-roundtable of 2023. Vinny breaks down the macroeconomic variables affecting Bitcoin’s price (1:39), plus they all predict whether Bitcoin will hit $30K or $16 first (11:43) (This is not financial advice). They delve into the ongoing controversy involving DCG, Gemini and Genesis (26:54), as well as the news that the SEC has charged both Gemini and Genesis with offering and selling unregistered securities (35:12). We wrap up the show with a great discussion about Porsche’s failed NFT drop and how brands should approach entering Web 3.0 (44:38). (0:00) Jason kicks off the show (1:39) Vinny’s macroeconomic breakdown (10:18) Acquire.com - Sign up for FREE at https://try.acquire.com/twist (11:43) Bitcoin’s price action + will it hit $30k or $16K (17:35) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (18:59) Gluttony and the lack of consumer savings (26:54) DCG, Genesis and Gemini controversy (33:40) Fitbod - Get 25% off at https://fitbod.me/twist (35:12) The SEC has charged Gemini and Genesis for selling unregistered securities (44:38) Porsche’s NFT drop FOLLOW Vinny: https://twitter.com/VinnyLingham FOLLOW Sunny: https://twitter.com/sundeep FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

All right, everybody, welcome back. We gave Lon the Day off today, but we're back with Vinny and Sunny for our first crypto roundtable of 2023. And we have an exciting episode for today. Vinny gives us an update on Bitcoin. And then we have a great discussion about the overall economy. We predict whether Bitcoin's going to hit 30 or $16,000 next. We chop it up about the ongoing controversy involving DCG, Genesis and Gemini. And on top of that, the SEC has charged both Gemini and Genesis with selling unregistered securities. We deconstructed. all that and what's going on there. Plus, we talk about Porsche's NFT job. That got criticized heavily, but we started talking about, hey, what could brands do the next time up at bat when entering the Web 3.0 ecosystem? It's going to be a great show. Stick with us. This week in startups is brought to you by Acquire.com, whether you want to sell a solo project or a booming startup with hundreds of employees. Acquire.com has the tools, experience, and most importantly, engaged buyers to help you achieve your acquisition goals. Sign up for free at try.acquire.com slash twist.

Squarespace. Turn your idea into a new website. Go to squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. And FitBod. Tired of doing the same workouts at the gym? FitBod will build you personalized workouts that help you progress with every set. Get 25% off your subscription or try out the app for free when you sign up now at FitBod.

com. Hey, everybody. I'm alive. Thank you, Molly, for running the show yesterday. I feel like Alive is doing a lot of work here, but we are happy to see you. I'm in Miami. I just had the worst two-week sickness of my life, but I'm coming out of it. It's not COVID.

I took COVID test. No, not COVID, but... Is it the RSV? I think I might have gotten an RSVP. Yeah, RSVP. Unscheduled RSVP, in fact. But somebody wrote a really nice comment. I really like Molly without Jason.

I was like, why read the comments? I was like, oh, it's better. Just have Molly do it. I was, okay. Great. Thank you, YouTube comments. But of course, it's been a couple of weeks. It's the new year, Molly.

And we thought, we got to get back to this crypto thing. It's been like months. It's been a month. It's been a minute. I know. We missed you guys. And there was all this crypto news. Anyway, yes, we are delighted to welcome back the crypto roundtable. Sunny Madra, co-founder of Definitive Intelligence. If you're just joining us here in 2023, we're going to do the full intros because you never know who just stumbled on your show for the first time.

So Sunny of Definitive Intelligence, which lets users view on and off-chain data to understand and grow their web through user base. Vinnie Lingam, co-founder of Civic, a startup that encrypts identity information on the black chain, also, started Waitroom for one-on-one video conferencing at Waitroom.com. We are delighted to break down all the hot goss in the crypto world. There's a lot going on. I mean, the two things, I guess, is this Gemini thing. And then I guess Bitcoin came back.

So where do you guys want to begin? Let's do Vinny do Bitcoin first. Then we'll come around to Gemini much longer. But Vinny, break down the price action on Bitcoin. Yeah, so Bitcoin's a risk on asset, as we all know. So when the market goes risk on, people decide buying Bitcoin. I guess there was some technicals that apply, but the general broader market's becoming more bullish in, you know, just everyone's expecting the fate to slow down, stop the

rake hikes, et cetera, et cetera, maybe you go to 25. I think the market's pricing in 98% chance to we get a 25 basis point hike in next week. Now, I'm not sure that I agree with this, by the way. This is like the market consensus, and the market's often wrong, as we've seen. When you see these big crashes and whatever else, let's just zoom out and talk about macro right now. We're heading into earnings, earnings in multiples. We already had the compression, and now we may have, you know, downgrade earnings. Look at Microsoft's guidance today.

We've got a lot of headwinds because what we're finding is that the economy is actually pretty robust when it comes to labor. It's still growing and inflation is still high and we have to see inflation come down. So PCE numbers come out on Friday. And if those are not very, very strong on the way down, you're going to see Powell, continue the playbook. What is the playbook for Powell? Front load rate hikes as much as possible, higher for longer, and then keep, you know, and when inflation goes down, don't turn off the relief valve too soon because of what happened

in the 70s. he's communicated this over and over again four months. And the last thing he wants to see is a bull market, take the pressure off inflation. And so if he sees stocks running too much, crypto running too much, et cetera, he's going to go out there and not fire a 25 basis point hike. He doesn't do 50. Now, he might do 25, but that's because CPE numbers come on really strong and other parts of the economy start to weaken. The only part of the economy that's really weakened so far as housing because of interest rates. and maybe vehicle sales as well.

So anything that's interstate specific. But, you know, if you look at what's happening from a macro perspective, there's a lot more onshoreing happening, a lot more production coming into the U.S., manufacturing, setting up chip plants, etc. The China, Taiwan debacle's playing out. You've got Ukraine, we're sending tanks in there today. This is a very dynamic situation. I'm pretty sure Powell is still hawkish and still going out there saying,

we need to keep a little of inflation, we need to be higher for longer, we inflict some pain on the economy, we have to get job numbers up, or unemployment numbers up. And this is an important point, which I saw from, I have a hedge fund guy who showed me a whole bunch of stats. Prior to COVID,

US immigration was about 3 million a year, 2.5 to 3 million a year, net immigration. It's currently sitting on 500,000 due to covert immigration policies, whatever else. So we're short to Yeah, yeah, exactly.

So we're short two million laborers a year coming into the U.S. to build the economy. The labor market, the cuts we've seen to date have been, let's be honest, they weren't really cuts. They were like, you know, sprinkles of dust. Like when a company of, you know, 100,000 drops like a thousand people, it doesn't matter, right? So we're not really seeing widespread job losses and cuts that are going to be meaningful, significant enough to take unemployment to 4%, 5%, where, you know, that's where I think he starts to get concerned.

I think we're in for more pain. I think we're in for maybe a 50 basis. So it's risk on or it's risk off? Well, you're saying it's risk on. The market is taking a risk on approach because they think that Powell is going to is going to. And risk on means buy risky assets.

Everybody, the parties on. Let's buy speculative stuff. Therefore, Bitcoin is part of that. It's speculative. Risk off means, hey, let's buy things that have dividends. Let's buy things that have revenue. Yeah. Yeah.

Bill's. So you're saying people, there's been a flight to blockchain, there's been a flight to Bitcoin on the assumption that it's the year of the rabbit. Things are going to be better. I was telling Jason, I was like, nope, I'm telling you that the sentiment in the market right now is no more of this BS. We want things to be better and we are talking ourselves into it, including maybe buying Bitcoin. But, Vinny, it sounds like you're not buying it though. You know, right now I'm in a low way. Markets are all sentiment.

the sentiment is good the fundamentals are shit this is be frank okay sentiment the fundamentals do not look good I don't think the fundamentals are that bad no no the recession hasn't hit yet we are we are heading for a recession

Manufacturing has been in a recession for yes but over-economic growth numbers are still good the economy is still growing a recession we're still growing two negative quarters right is I guess the definition so now we've got this very weird situation sunny where like even how do we define

what a recession is. And when you're in tech or a capital allocator or a capital allocator in tech, I mean, during something like this, you're going to have a certain viewpoint of that because this is a clear depression. This is a crash for us. But the broader, people seem to be doing okay. They're fine. What's your take on this, Sonny? And you know, I kind of line up with what Vinnie's saying here. I think, like, look, it's very easy to just to maybe take a step back. I think within tech, we're definitely seeing a slowdown in purchasing, right? I saw a tweet this morning where, you know, someone was saying, hey, they cut out 66% of their SaaS services. And so, you know, you think about that. And I think even at Twitter,

Jason, I don't know if you can comment on it, but I heard something about like a big cutout of SaaS services there. And so we're starting to just see sort of there was this mentality, you know, for the last five plus years where, you know, a new SaaS service comes out, break out the corporate credit card, sign up for it, and then it just, you know, runs forever and it's great. And now we're starting to see everyone kind of cut back. And you're seeing that impact through the ecosystem where people are definitely a lot more diligent around the services they're using or they're asking their teams to, you know, build those things internally or, you know, consolidate those type, there we go, exactly, great one. And, you know, so we're starting to see a lot of this, you know, where I kind of

line up with Vinnie, I think this stuff trickles its way through the rest of the economy, right? Where, you know, it's sort of things start at the top and where, you know, if the tech folks were making all the money, and then they kind of use and they use that to then, you know,

go out and buy services, homes and things like that, you're starting to see the slowdown. So I think we're going to really see towards us, you know, maybe the third quarter of this year, like a bigger slowdown in the rest of the economy. I think it's a leading indicator here. My core acquire is, a startup acquisition marketplace that helps you sell your business quickly and easily. And listen,

the acquisition process was never described as quick or easy, but Micro Acquire has changed that, just like they changed their name from Microacquire and rebranded as Acquire.com. Yes, they want to show the world they can help any startup of any size get acquired. Acquire's mission has remained the same. Help founders achieve life-changing outcomes, build tools that make acquisitions easy, and foster a new generation of entrepreneurs, and the stats on Acquire speak for themselves. They've reported over $2.1 billion in combined revenue of all the startups that are listed on their marketplace. Over 500 million in closed acquisition volume already, and over 1,000 deals have closed. So it's the right place for you to sell your startup.

And now you can sell anything from a solo project to a booming company with hundreds of employees. Acquire.com has the tools, experience, and most importantly, engaged buyers to help you achieve your acquisition. position goals. And if you're on the buy side, you can join over 120,000 other buyers who have skin in the game. Biers can browse listings for free. And of course, it costs nothing to list or sell your business. If you're thinking about selling your startup or looking to acquire a business in 2023, sign up now for your freeacquire.com account. Get more information at try. dot acquire.com slash twist. That's try dot acquire.com slash twist.

Moody is apparently is calling it a, predicting a slow session, not all the way to recession in 2023. I mean, there are sort of these conflicting feelings about how bad this could get. There's sort of hope for a, hope for a soft landing. There are lots of exogenous things that could happen, I guess. But I guess when we bring it back to Bitcoin,

there has been this brief rally. I just checked my teeny tiny portfolio, weather bane, I consider it. And it's down a little bit today. Like, are you, do you feel that it's too soon for this rush to Bitcoin, like in terms of that risk portfolio? There's still more winter ahead. I think that it should be a slower grind up than it has been over the past two or three weeks.

I think if Bitcoin goes up by a slow, you know, at an even pace, it's fine. These two big sort of jumps and step-ups, it's, again, it's a risk on money. It's like money going, hey, you know, everyone here is betting on Powell slowing down the rate of hikes. I think there's a 50 basis point hike coming, and, you know, it might be 25 and then another 25.

But he has, like, broadcast this loud and clear. Real rates have to go positive across the entire curve. He doesn't want to have any situation where, you know, we have negative interest rates effectively on inflation versus Fed funds rates. And I don't think he cares about the stock market at this point. And all he cares about is the unemployment numbers and that inflation gets under control. And it's higher for longer. He's said this many times.

And the market, by the way, is making the mistake of pricing cuts in Q3. It's not going to happen. There's no way. Well, yeah. So there would be some people, you know, my reading of it is. Some people would like to buy some of these assets ahead of the good news. And so there'll be some more bad news. So if you were going to build a position in some of these companies, which I started doing when I started J-trading,

you know, like as it's bouncing along the bottom, this non-investment advice, would be the time to get in. And so the question is, Sonny, 16,000 Bitcoin or 30,000 Bitcoin, which will we see next? Well, you know, maybe Nick can pull it up. Which will we see next? Before I answer that, I sent a tweet if you can pull it up, Nick. And, Vinny, you have to answer this question too. You guys got this thing for your software. I need to, I need predictions here.

For sure. But like one of the things that, you know, I've been saying, a lot of people been saying, is like reversion to the mean. And so this is just one example. And, you know, I think what would be an awesome chart to create is like look at this like across multiple industries. You know, we're, and I think, you know, Vinny touched on this thing. It was like, we just kind of scratching the surface.

there's been so much growth in these businesses, right? You know, post, I guess, like COVID, we still have to revert back to the mean. And so what I would say, and I don't have the chart in front of me, but I think if you pull up the Bitcoin chart, I would say it really, yeah, great. I think we kind of revert back to where things were before the huge run-up that happened through 20, you know, I would say really 2018, 2019, 20, 21. So I would kind of even pull back there.

I know like that's not going to be a maybe a popular opinion. The 2017 time frame. And I think that's more like. You think we go back to 2017? I think so. Like, you know what? You know, he's kind of pulling it on here. I think it's like, yeah, like maybe five or six thousand.

Like you could end up there before everything resets. But that's, that's, and I'm just going by reversion of the meat, reversion to me. You think we see 16 before 30? What do you think, 16 or 30, which do we see next first? Because that would be kind of equidistant here. So here's the thing.

I don't think that it's independent. You know, like, I don't think Bitcoin flies independently. I think it's linked to the macro situation. So, you know, 26K is the key resistance level to get through here on this run. If we want to see a Bitcoin or crypto bull market start, if it hits 26K and holds it, it's going to run to 30 plus. Okay, so just on the technicals. Sunny is right in the sense that the reversion to the mean could happen,

but that's not going to be, like here's an example. If the rest of the market flies, Bitcoin's not going to 16K or 6K. That's not going to happen. If the market, so it's really dependent on macro. The most likely scenario right now is that how inflation doesn't go away. We get stuck in the 5% percent zone, and he has to jack up rates to maybe 6% and because he has to get it down to like 3% soon.

It's not happening fast enough. I don't think we're going to see it soon enough. And I think it's inflation has just become persistent. There was just too much money being printed guys. Listen to be frank. And they printed even more money this earlier this year. Like there's just more money coming out last year. Like there's too much money in the system.

Households got too much cash. There's too much cash on the sidelines. So you think we said 16 before we hit 30. I think that I think that's more like this. I think we probably see 16 before 30 because I think the 26 resistance is going to be really hard. I'm going with 16 as well. What do you think, Mom?

Yeah. Yeah, I'm going with 16. I don't think I don't see it. I mean, I think it's like too big to fail. I think it is correlated to your point, Vinny, enough with institutional investing that we will probably see moves that are similar to the broader market. But I don't, I don't.

So, and almost as a result, I don't see it taking off and having some like rocket at home. 16 might be too low. It might be too low, but I just think that maybe we'll probably see it go below 20K again. Listen, if you want to be an entrepreneur or you want to do a side project, Squarespace is an amazing place for you to start. Why? Well, it's the platform where you can build or sell anything.

I've been talking about Squarespace for a decade because it is the absolute best place for you to take that first step in being an entrepreneur or starting a project or even putting up a portfolio of your work. We love it at launch. We use it for all our different projects. When we have to put something up like Remote DemoDay.com, man, we can get it up and running in minutes. The feature train from Squarespace just keeps coming. The product velocity at that company is exceptional.

And when they ship, they ship it beautiful, beautiful templates, inventory management APIs, advanced analytics, 24-7, 365 day a year, award-winning customer support. And, hey, it's going to look great on any device. They also have appointment scheduling. So let's say you're a trainer or something, or you're a coach, and you need to manage appointments. Great. You want to take payments for content or for a product. You can do that. You don't need to hire an army. You just need to go to Squarespace.com slash twist and start a free trial. That's all you need to do. Squarespace.com slash twist. And make sure you use the offer code twist for 10% off your first purchase of a website or domain. You can get your domain there at the same time. We love you, Squarespace. Thank you.

On behalf of all the startups, capital allocators and tech enthusiasts who listen to this podcast for being our longest running partner, it means the world to us. Squarespace.com slash twist. Use the promo code twist, please. Now, what I will say is I actually see, I think we are going to see kind of ongoing inflation in some areas. However, and this is where I have a disagreement with the people who think that this was all about money printing, we are about to experience a real glut of goods because we had a shortage of goods.

And there was production, production, production, just try to get it there. And like all of the stuff that's, still on the cargo ships is about to come off. You're already seeing like chip prices as a bellwether starts a tank. You see it in cars. You see it in electronics goods. Yep. You 100% do.

And we produced. And again, this is like, this is all sort of businesses making the mistake of thinking that the pandemic conditions, which were a series of black swan conditions, right, not just a pandemic, but a pandemic and the invasion of Ukraine, a pandemic and the kind of manufacturing, like the China shutdown related to the pandemic. pandemic, the sudden China reopening, a manufacturing made the mistake of thinking that the conditions of the pandemic would last forever also where everybody would just want stuff because you couldn't leave your house. And so you ordered more and more and more stuff. So production has actually

increased to meet the idea that we're stuck at home and not wanting to travel again or not being able to travel again. So I actually imagine a universe in which prices really start to greater the opposite of inflation, at least in goods. It's actually possible for Vinnie to get. get an Urus. Ben could get an Uruz right now. Oroos is haveable. Well, no, he can't. You know why he can't?

No, you can't. Like, no jokes. I've been looking for, I've been looking for a new SME and I looked across the range. And the wait list on those things are like 18 months, 24 months still. Wait, we're talking about a Lamborghini SUV. Yeah. Yeah. Anybody who buys a Lamborghini SUV is a fool.

That is like. Oh, the Urus is the jam. I was just looking. I was just looking. I'm just trying to pressure on a Lamborghini. You buy a Lamborghini. You don't buy a Lamborghini. You don't buy an end of Urus.

It's like when they made the Porsche Cayenne. I mean, it's not. Which is awesome. I mean, honestly, it is awesome, but all the Taekan, that isn't awesome. That is a hot car. There's one of my street. And I'm always like, coming back to reality, guys. I'm not.

If you pull up a chart for a second that I just shared around savings, it's just highlights Molly's point. I think Morgan Stanley put this out this morning, which is savings are declining across all income groups, right? And basically, you know, this is this combined with that glut that you were mentioning, Molly, I think this is when we're really going to see the, like, an actual impact on the economy. So this is starting to unfold. What's misleading about this, by the way, and I'm misleading. It's in front of us, excess savings, right? So we haven't started digging into the existing savings.

this is excess savings from income. And so when people started losing their jobs or salary cuts happened or inflation goes up, this excess number goes down, which is what we've seen now. There was no savings before. But people still have reserves. Well, there were savings before. There really wasn't. There was like that stat about how 70-some percent of Americans could not come up with

$400 in an emergency. It just came out yesterday. There was not savings. I know, I know. There was credit card debt before. And then credit card debt went down and people were like, hot damn. finally I'm in the black for a minute. Let me go by a couch.

The Fed believes that households are sitting with a trillion dollars worth of X-A savings. I know. Rich guys think that and it pisses me up. That's what they believe. That's what they believe, right? And they manage and managing policy. It might be true in aggregate, but it might not feel that way.

So when people answer a survey, the survey came out today. Yeah. When people answer a survey, I discount that information a little bit. I think, you know, how they feel. They're looking at a lot of different. buckets of expenditures, and there's a lot of emotion that comes into that. And I think that's why the spending is actually going to come down, as people are fearful right now.

And when they see the layoffs happening, even if it's not impacting them, they're going to just kick in austerity measures. And I think that's what's happening is all at once. People are starting to just say, you know what, maybe I shouldn't buy this Lamborghini. What did you call it, a zoo, a Rizu? Urus. Orus. Orus.

Maybe I shouldn't be driving around in that. Maybe I get an F-150. maybe I get a cyber truck. Maybe I'll be reasonable and I don't want to have... That's ridiculous. Nice. They're not buying.

Fannie, please don't buy that. If you, I'm not trying to buy it. I'm not buying it. I'm just giving you a fact point because I was, you know, if you're not buying it, why did you make this image of yourself in it for your vision board? Yeah, yeah.

That was me a few seconds ago. That's Salana 150, right? When Salonah hits 150, for the record, I drive a, of course yeah all right for the rest

I know I think I've come to to the conclusion he wants an ice car he wants a nice car I've come to the conclusion that Bitcoin actually has

utility in the world for some group of people and that's why it's got this foundational um kind of a longevity it has like some

foundational value for people. People like to keep, just like some people like to have gold or a home, they'd like to have a store of value somewhere. And for some people, this one is the one that they trust most. And that seems to have put a floor into it in terms of value. Totally. And I maintain there's still a lot of institutional money in it too, which is why I think that, I mean, I think it will always be propped up on seven level because there's so much institutional investment there at this point, like potentially counterintuitively to the ultimate aims of Bitcoin. but 100%.

Except Peter Thiel was passing his bag the whole time he was telling everybody that Bitcoin was the one, you know. So you're the thing. All this marginal excess savings goes somewhere, right? People buy stocks that buy whatever. They invested. If marginal savings, excess savings is going down. People aren't buying things.

They're selling things. They're going to sell some Bitcoin, which is some of these savings, whatever in there. They're going to sell some crypto. So that's why I'm embarrassed because I don't think that people who are living, on the sort of breadline, even with like small amounts of savings, can withstand, you know, anything right now which takes money out of their pockets and they're going to have to have expenses to meet. So I'm like, you know, you want to be in a situation where there's, where there's economic growth and jobs are, you know, the job market's pretty tight and economies. People don't

feel like that. Like people are losing their jobs and losing money. The free money is over. So what do you do when you don't have money? You sell stuff. What about, this is where I wonder. This is where I wonder if we will see an uncoupling and institutional's will then head to Bitcoin because we are likely to see more stock drops. Like if the stock market itself is not performing, could we see as opposed to, you're talking mostly about retail investors. I wonder if we start to see institutional say, actually, we're going to flee to Bitcoin because the stock market is not the producer we thought it was. We can get our like 4% in treasuries, but Bitcoin has worked. in the past.

Well, that's only if it's a risk on asset because, remember, the marginal bias for Bitcoin are going to be retail, right? It's always retail. Like, institutions will get in there first, and then the retail comes. You get the retail hype, you get the blow off top, you get the whole cycle. So if retail doesn't have money, where do you, where do you like, look, this is what I'm saying. I'm just saying maybe institutions go there and it's no longer volatile and it actually spread. Like, you start to see it as a, it's a good, this is a good segue, Molly.

if you guys want to do it, because we can use this to jump into the DCG Genesis and now Gemini. And so the last time we spoke, the story was still unfolding and it's gotten a lot more interesting. And it actually plays into your point around the demand around Bitcoin and we can get some thoughts around the table here. So should we run through a quick update on where we're at? So we recall DCG, you know, kind of digital currency group, a big holding, company of a bunch of digital assets or crypto-related assets from a coin desk to GBTC to Bitcoin miners. You know, they, one of their entities was a prime broker called Genesis and Genesis

basically got caught in this FTX scandal. And their big issue is that they had a bunch of loans that they had put out. one of the more interesting ones, which we'll dive into today, is one that there was a product called Gemini Earned, Gemini different business, is one of the ones set up by the Winklewoss Twins, a product that was, you know, you'd put your savings there, they would guarantee you, I think, you know, 8 to 10%. And how they would generate that would be,

they would go and take advantage. We talked about this before, about this GBT ARB that existed, right? The price between GBT and Bitcoin and Bitcoin and, There was an arb there that existed for many, many years. The fountain of life. Exactly. The perpetual money machine, as some people have been calling it online. And so now what's happened is Genesis has filed for bankruptcy protection.

And what this has done is they've had to publish some creditors. And we can now see all the monies owing. And we can see the hundreds of thousands of people that either directly or in, directly in the case of Gemini that are sort of creditors to Genesis as this all unfolds. And so this I think continues to be very interesting because this has its kind of a reach back all the way into DCG and the GBT, Grayscale Bitcoin Trust. And I think that's an interesting factor when it comes to institutional money, demand for Bitcoin, and what ends up happening with all that Bitcoin?

because the question of the, you know, the week now is, as Genesis has filed for bankruptcy, there was a lot of loans between DCG and Genesis. And do those loans allow for a reach into DCG to, were they callable? Now, I think the consensus is they weren't callable, but, you know, I think we have to see how this plays out. So I'll pause there and kind of let you guys ask questions. Well, let me just see if I can understand this. You got the Winkle Valley twins. Yes.

They run something called Gemini. Correct. They take a bunch of retail people's money to buy Bitcoin. Correct. They take that Bitcoin then, which they are the custodians of, and they give it to something called Genesis, which is run by Barry Silberts DCG. Genesis gives them an incredible return on that Bitcoin. That Bitcoin return is owned by the Winklevite.

The Wingo Voss twins get that money. They're sweeping that. while they're holding all that Bitcoin for consumers. But Genesis takes custody of that Bitcoin because they're giving the loans against it. Then DCG gives themselves loans against that same currency. And then it's a matter of who gets the remaining Bitcoin when this holding unwise. Well, let's make a couple of clarifications there, J-Cal. So the money you were putting into Gemini, which is the,

the company run by the Winkovost twins. It could be cash. It could be Bitcoin. It doesn't have to be Bitcoin, right? They basically had a savings account saying, hey, we'll pay you this high APY. So you could put your cash there. You could also put your Bitcoin. And that was like 8%.

Exactly. How do they give that to you? Well, they went over to Genesis. And Genesis says, hey, we have a pretty cool trade. If you give us Bitcoin, we will base. basically return you, you know, let's say 10%, we don't know what the exact numbers were. How they were doing that was they were then taking that bit,

they would take Bitcoin. So either Gemini would turn into Bitcoin or they'd collect Bitcoin from their customers. It would go over into Genesis. Genesis would then work to get it into like GBT. GBT had this premium that we've previously talked about. And that's where the yield would come from. And everyone's great.

when that has all stopped and there's loans that Genesis has made which has made them insolvent because they were making loans to people that were also trying to do so not only were they taking the money in they were lending money out to folks as well

that were trying to do this trade very clearly they were lending it to like three euros capital and a bunch of other folks the big big one that ended up on the DCG balance seat is they had lent I think they had sorry they had lent $2 billion to three arrows capital and they were only able to get one billion back and there was about a billion

left outstanding and that had created a hole on the balance sheet of Genesis and then DCG picked that loan up back into the parent entity and basically made it repayable over 10 years. And so there's a lot of this kind of back and forth that exists between these companies and now since these bankruptcy proceedings are starting. We're going to see how, like, how far into these companies are people going to reach to go and get their assets? Right. And at what point are they going to discover that they were, in fact, all the same company?

This is how it's increasingly starting to feel. That's what it's starting to. At minimum, it was all the same pool of money that was sort of being like me, morm, morm, but. Well, in that pool, again, being the GBTRBTC Arb trade that everyone was going for and all the Bitcoin that's locked up in there. And so that's the, that's sort of, you know, everyone keeps circling around that. And I think that'll have some serious price action on Bitcoin because if,

let's, it will come up with a hypothetical scenario, if through these bankruptcy proceedings, it makes it all the way, it makes it all the way to GBT. And it's determined that the only way to get people their money back is to sell that Bitcoin. Well,

that's going to create a lot of sell pressure on the, in the market if that's, if we get to that point. You know, I've been on a health kick over the past year. And part of that health kick is the greatest fitness app in the world, FitBod. And if you're listening to me right now, you probably care about optimization, saving time, doing things perfectly, and data-driven solutions. You know what? Fitness hasn't had

these things until FitBod. FitBod is a data-driven workout app. It blends machine learning with exercise science. They create a custom dynamic program for you based on your fitness goals, based on your experience, and think about this, your available equipment, right? Maybe you're in a hotel, maybe you're at an Airbnb, maybe you're out of blue ground, and you need to use the equipment you have. They're going to maximize your fitness gains by varying the intensity and the volume between sessions as well. And they make these beautiful visualizations of your body and how utilized your muscles are. So let's check out this demo. Let's say I want to get a 30-minute workout in.

And I want to work on my chest, triceps, and my abs. But I'm staying at some, you know, rental. And there's no equipment. Well, they'll create a perfectly optimized workout based on those parameters. Let's say I'm in another, you know, hotel, and they got a bunch of kettlebells. Well, you go to another location and you got those pulley machines. They're going to make a perfect workout for you. It's amazing.

It is one of the most beautiful apps ever made. They get featured by Apple all the time. FitBod takes the guest work out of fitness. Just open the app and start making progress. Get 25% off your FitBod subscription or try out the app for free when you sign up now at FitBOD.m.com. slash twist. That's F-I-T-B-O-D dot M-E-slash-Twist for 25% off. Here we should probably note that also, as all of this is happening, on top of this back and forth,

and they've been like smack talking each other on Twitter, Gemini and Genesis, and the Winkle Vi are coming out, shooting, and whatever. But on January 12th, both entities were charged by the SEC for the unregistered offer and sale of, ding, ding, ding, things to retail investors through the Gemini earned crypto asset lending program. Yeah. And, you know, the SEC is never very, in my experience, a very principled group of individuals. I saw this quote from Tyler Winkle Voss, but the lawsuit is manufactured parking tickets. Yeah, I, the SEC in their complaint alleged that the earned,

program constitutes an offer and sell of securities under applicable law and should have been registered with the commission, obviously. So there's that. What's your take on this, Vinnie? These two guys are fighting with each other over customer deposits, and the SEC's coming in and saying, hey, what you're doing here may be illegal. So this is a very, very, like, I want to be careful. I'm friends to Thailand, Cameron in particular as well.

So I want to, you know, and I don't want to be biased either way. And Barry is actually one of my investors in Citing as well. So it's just, you know, this is one of those, those, look, I would like to turn his video off. No, no, no, no. I think, I think like, this is like one of your favorite couples gets divorced and like you're having like the New Year's Eve? You invite one to come to New Year's, one to come to Christmas. The only question I've had since this whole. this whole thing blew up with FTX

and you guys, we were on the emergency, emergency part we did was that the Solana that FTX was holding was hedged most, more than likely by someone. And the question is who, who did the hedging? And no one could answer the question.

And Solana kept dropping and dropping and dropping to eight bucks. And the more drop, the more optimistic everybody was that Genesis was going to come through. The moment Salana spiked to 25 bucks, they filed bankruptcy. Why was that? So someone figured out, in my opinion, this is my hypothesis proving out, that they're short Solana.

And when the price went up so much, there's no way they could save the company because they can't market buy the missing Solana to repay the hedge. And that's my working thesis, which I think is still true. For Genesis. For Genesis. Yeah. I mean, this whole thing needs to. No, they weren't shorting it.

They were lending the soul to FTX or somebody else. who are shorting it against the locks the locks. We don't see this in the bankruptcy filings, Bini. Like, basically, the problem when you look through, like, I mean, when you see it, their creditors are like, they've, you know, they've got a bunch of money out there that they've lent to folks and then they owe to folks, right? Like, so

in the case, like, Gemini's won. Like, it's like $900 million, right? I haven't seen, the one thing I haven't seen yet, there was, at some point, there was this undisclosed $300 million liability, but they didn't say it was denominated in crypto. They didn't say which cryptos. Yeah. But 300 million wouldn't tank them, Vinny.

Like, they've got billions of, they've got billions of. But having to cover a short that's going, could. Yeah. Exactly. So it had to go up 3x from that from eight bucks. That would be a billion dollars. It's a whole thing needs to be regulated, right? I mean, this is what it comes down to.

It's not about regulations. It's about people being, like, being silly about transparency. There's no, the issue isn't, you can regulate as much as you want. moment you take a decentralized network of assets and you create decentralized entities on top of it, and then you obfuscate all the information, like with Celsius and everything else, this is what happens. The matter how decentralized crypto is, unless we're all doing peer-to-peer trading and peer-to-peer transactions where it's fully visible, the moment you add a level of obfuscation, this is going to happen and it's going to happen again and again and again.

I mean, this is what we keep, I think what we keep coming back to is that every time you have something that again, looks like a banking product. That's where it all goes wrong. It's once they financial, I mean, we've said this now so many times it should be like a drinking game with only Don Julio. But it's once you tried to financialize this product, people were like, no problem. We can make a ton of money. I will loan the same asset six times.

And then I will go back to the fountain of life, which just magically produces yield. I don't really know why. I'm not even sure I understand it, but I can make money off of it. Like, it's, it's all of the, none of it actually underlies. And I don't know what at what point that, or ever, or if this message will ever make it through to investors or, you know, future VCs or anybody who's looking at this space. But, like, all of the financialization of crypto is seemingly somewhat different from crypto, ironically, since they're, you know, fundamentally financial products created out of thin air. I think you made a great point, Molly, is that, like, a lot of people. whether it was investing in FTX and we saw the like the looseness around the diligence there,

right? Or whether it was understanding what these products were doing, like people weren't just, you know, doing that diligence to get to the core of like what, what is it that's driving this, right? Like money isn't magically made. Obviously, you know, a place like the U.S., we were talking about this earlier in the pod, but like the U.S. Fed can offer interest, right? But they have lots of things behind that to make that happen, right? I think both faith and credit of the United States. Exactly. When we have like an ARB, which is fine,

you know, we have to understand ARB disappear. And when they go negative, that's a real problem. And the problem, again, people are lending against it, people are putting into it. Like the issue that I see with the Gemini Earn product, right,

is that if you're running that product, and this is maybe where the SEC is coming in, you know, you probably need to fully disclose to your, or I guess the depositors, right? Not just the interest rate, but where is that coming from? Because when we go and buy a T bill or whatever it is, like we know where that's coming from or we buy a stock that has a dividend,

I think in this case. Or something's mortgage backed or real estate back. You have some idea of where the interest, who's paying the interest? If it's a loan to somebody. The asset is, yeah. I mean, it goes back to like, it's a wonderful life when Jimmy Stewart explains. It's like, oh, you know, your money. You see, it's in, it's in Susie's house.

And Susie, you know, how much do you need, dear? Remember that scene? Yeah, that's amazing, actually. Yeah. We should teach that in school. We gave to them for their mortgage. Yeah. Because that scene explains it.

Exactly. Exactly. It's all the same stuff. It will always happen when you have, when you have the opportunity to arbitrage, to earn, you know, unrealistic interest. Like, literally, I don't know why we don't start teaching in second grade that if somebody comes to you and says, you can get a return that's two to ten times the market, you say no. Yeah.

Or you ask questions or you use one percent of your net worth. You know, like you fully understand the risk. Like you can get it, but because you may not get paid back, right? That's the tradeoff. This is where the SEC could really do some great work in the world towards their mission of protecting these retail investors is by having an accreditation or a sophistication test. And if you just had this test where you said to people like,

Like, here is historically what the stock market is returned, bonds have returned, etc. Somebody comes to you with a new opportunity that pays this amount. Here are the questions you should ask. Here's how you should, you know, and if you don't get these questions, maybe you should report it to the SEC at this URL, sEC.gov, report, whatever. And instead of just taking action after people are misbehaving or creating weird things, this to me is starting. to listen, and I know some people are friends with certain people, this is starting to seem like, you know, this is looking very dark.

I'm going to leave it at that. This is looking dark because when I think you do the post-mortem on this stuff, I think you're going to see different principles having swept lots of money out of the system. And when people sweep money out of the system and they're doing these kind of arbitrage games, it's not going to look good. Yeah, I mean, I think that's spot on, Jake.

And the other thing is, like, look, I think there was a time in place where, you know, taking advantage of the ARB was okay. Like there was, it was hard to get Bitcoin and, you know, GBT offered that as a real path. And then there was, you know, people that were, you know, doing the work to fulfill the institutional demand that was coming and buying that through their, you know, Morgan Stanley accounts and whatever else. It was great. I think you just have to be fully aware of what it is.

And that's that transparency, that bit. And again, like, you know, this revert to them. We've seen it everywhere, whether it's on hiring, whether it's on interest. rates and all this kind of stuff. And so I think we had a lot of things that were too good to be true, and that's part of that test should be there. Hey, if something is like this, like really understand how long is it going to last? It's not going to last forever.

Right. Yeah. Of course, did an NFT drop? Yeah. Speaking of trying to take advantage of a market that had long since passed them by. Even I know about this. I'm like it's amazing. I've blocked all crypto keywords on Twitter.

I just have like a block list of like, no, I don't. I'm just kidding. You're going to miss the next big thing. No, I mean, I literally saw a bunch of NFT folks deriding this. I don't know why. Yeah. Here's what happened. Which is amazing, just as a level set.

So, Porsche decided to mint an NFT in honor of the 9-11 sports car. So they were going to drop a 7,500 piece collection. Each car came as a blank slate. and over time with user inputs, 3D artist Patrick Bogle would customize each NFT and presumably like a cool new 9-11 would be built even though we all know that the air-cooled Targa is where they should have stopped.

But they just could not have gone more poorly. First, Porsche sent an extremely high mint price. It was like something like $1,500.911Eth, which cute, funny. Then it seems like the sales were not going. going very well. They minted a little over 2,300 of them. They were already being resold for less than the mint price. And then Porsche, it sounds like, came out and said, okay, well, we're going to stop the mint. But then they didn't stop it immediately. So then that caused some FOMO. So then the price went up briefly. And then they stopped. And so people felt like it was like almost like a double rugpole. And also, what do you do we're trying to watch just like a $1,500 NFT in today's market? Do you not even read the news? Yeah, I think great summary, Molly. So let's kind of look at, like, let's look at the positives and negatives.

I think, like, you know, we've talked about this before. Like, from a collectible standpoint, the idea of like a Porsche NFT for, you know, the collectors, and, you know, Porsche isn't a high volume manufacturer is really neat, right? The utility that they were coming up with is it, it'll evolve over time, it'll be some artists involved. I think that was really cool. I think the real challenge that emerges in the space still is that I don't think it was particularly easy for like a Porsche collector or like a Porsche, you know, like a regular Porsche owner to go and get these things.

And then they really sort of run out into like the general crypto market. And I think this is where like the space has to continue to evolve. And we're actually seeing a lot of stuff happen here as like, you know, the infrastructure starts coming from places like Shopify and Salesforce. Salesforce has something called NFT Cloud. Shopify is something as well, where they make it easy for regular people to kind of get involved in it, right? And the actual fans.

And so I think I overall really like the idea of continuing to, you know, for brands to do this, make it a collectible, add some utility to it. I think you have to be careful when it crosses over into like the, the core Web3 market and crowd. And then it doesn't kind of, it doesn't get out to the regular folks. And so that's my take of it. It's a good experiment. I think people will learn from it.

As smart for them to cut it off so that it retains some value, it creates some scarcity around it. It should have to people who bought the car. Exactly. If you bought a car, they should have given you one for free with it. And then they should have dropped some on the public. Exactly. And this is the kind of thinking, well, look, you know, that the data around this will show, right? And so, you know, using platforms like ours, you can look at who the buyers of this were and what happened.

and you can go back and do a post-mortem. And you don't, this isn't have to be the, you know, the first and last time. But I think this really talks about when you're going to do these things, you need to look at who your buyers are, who the mentors are, where is it coming from? How do you get in front of people? What can you do exclusive? I've got an even better idea. Break it down.

Take a picture of your Porsche 9-11, whoever you are in the world. Take a picture of your VIN number. Send it to us. We will make you a one-of-one custom and it'll cost, you know, this amount. But you'll always have it. right? So it could be to be a hundred bucks, like something really cheap, but then you could resell it if you wanted to, or you'd give it to the next owner of the car, or you can just make it your avatar or make it your, you know, profile picture on Twitter or Instagram.

I mean, it seems like, there's so many different ways to do it. Like, this would be a way to collect information on your user base that you don't have. Because what if a portion on 11 has traded hands five times? And then you get that person emailing you, the VIN number, pictures of it, you know, why they love it, you know, you could do something really funny, creative. So, so McLaren did that. I got airdropped a McLaren NFT and I got the option to buy

one as well. But you own to McLaren? Yeah. Oh, okay. That's why he needs to get not the original million dollar one. You own the, uh, it was 720s, but I actually got rid of it a few months ago. So, but I still have been a team. Austerity measures coming in.

No, actually the new Ferrari. The GTS is looking good. Okay. Yeah. I'm switching sides. And then I have a physical NFT, McLaren. Huh.

It's blurring. There you go. Yeah. Yeah. So that's, anyway. I think McClaren did a pretty good job on the way they did this. So if you bought one, you got one. You're saying?

Yeah. I've gotten completely distracted shopping for 1987 portion 9-11 Targus. But I found one in Naples for like 55 grand. these things are usually going for $200. See, that's an investment. This right here... That'll cost you twice as much to keep on the rose. Is the Porsche Superfan investment that I would much rather make than an NFT.

No, what I was going to say, though, is that it sort of seems like brands... Like, people are going to want brands to treat NFTs and they probably should do this, like, to your point, a value ad. But like, roll them out for free or attach some utility in a loyalty way, the way that's Starbucks did, but to try to sell them, to sort of try to operate them as like a little short-term cash grab like this isn't, that's not the vibe. Like, that's just not the right way to roll this out to fans of your brand or if you're going to roll it out, you do actually have to target fans of your brand to your point. Yeah. Yeah. And I think there's some good learning here. Look, I give them

credit for adapting, right? And I think they, what hopefully they do is don't do this as a one and done. That's the worst thing they can do. I think they should do this. They should understand what happened, take the feedback from the pod here, some great ideas, right? Yeah. And look, it's a great aspirational thing. Like growing up, I had a Porsche. Right? Yeah, exactly.

You know, growing up, I had a poster of a Porsche in my room. And so, like, I would love to have like a digital version of it, right? And, you know, kind of build that up into your ecosystem. So I think, I think this is like, this is the kind of stuff that we need in the ecosystem. We're kind of ragging on it for failing and the market loves to do that and all the news has been negative. But, like, the more that brands do these type of things, and they start tying into real utility,

that's what'll continue to drive the ecosystem the way we want it to. I mean, we're all talking about it. We are. Yeah, I think it's for a 1.0. Yeah, it seemed like a reasonable attempt. Maybe they price a little high, but you learn and you keep going. I still think NFTs with functionality,

and that really becomes the key thing, because I know the functionality that Tim Ferriss and Kevin Rose put into their projects are what are tracking their fan base to it. You get some sort of FaceTime or even Gary Vaynerchuk, you get some sort of FaceTime or conference time or affiliation with them. And that's why people who are buying it, I think, feel good about it. I'm not hearing complaints from those three people doing it. And I know those three individuals very well.

Well, they're really big on the community side, right? What a lot of people don't see is, you know, proof collective or, you know, V friends. These are big communities. Like, to your point, they have conferences, they have events, they have an act. Discord. They have deals for different folks that are associated with it. Like, you know, actually, you know, Vinnie and I did something with Kevin. You know, we co-owned one of these big three basketball teams. And we brought Moonbirds in as our sponsor.

And we basically would make tickets available through that sponsorship to the owners of the Moonbirds, NFT. So, you know, we were kind of driving that kind of utility that you're talking about there. Yeah. Before, I, I, uh, just a breaking news right now. Kevin Rose's wallet just got compromised and people, it's been drained. Oh my gosh. I felt terrible for him.

Oh my gosh. Hopefully he had multiple wallets though. Yeah, he's trying to salvage it in real, this is that being real time. I'll send you guys the link quickly. Wow, that's crazy. He's always squiggles are gone. It's just like insane. So now are we going to see the hack era begin, like the, the kind of additional fallout?

I guess it was already there. I guess it was already happening. The hacker is always there, Molly, right? In every ecosystem. You know, just, you know, that one is very terrible that this has happened. But like, look, if you, if, can we just say something here, Vinnie, for everyone? If you have crypto wallets, you know, please be careful to have your stuff stored across different wallets. And, you know, use security measures as, as, like, you know, hard wallets as well, like, ledger and things like,

that like, you know, really, really dangerous to have your dot ENS address tied to your hot wallet where all your assets are. Like, it just takes one bad link from someone that can look like a friend. You know, people can send you like an SMS, right? And they can make it happen. I've heard of someone that got hacked through a pretty elaborate scheme where the hacker pretended they were Apple support. And then Apple support has a way to allow you to, like allow your iPad or phone to be controlled. controlled. I've never used it, but apparently this exists. And through that, they were able to basically go into their wallet and drain it out. And the whole thing was legitimate. So it's, it's, it's, like, hacks are very, very elaborate now these days. So even, even like in this case, from what, from just tweets storm we're seeing right now, what, you know, what happened was he signed a, it looks like you're using his hardware wallet. He signed a, um, a fake fishing contract. Yeah. And it just, drained his wallet. And that was, he thought it was, I think he thought it was something open sea, but he got fished. There are a lot. I mean, there are a lot of people in his comments.

And that's worth the hardware wallet. That's worth the hard. So you should, everyone should use revoke.cash, um, to go in and check your, um, permission, check your wallet to permissions and just make sure that no one's got permissions. Like, that's the first thing. Secondly, when you have a hardware wallet, be very, very careful with it. Like, the one thing you should use a hardware wallet for is to transfer from your heart, from, that's it. It's cold. You don't use it for transactions. Exactly. And that's the thing. I mean, I mean, I mean, I mean, I mean, I was ever supposed to be expected to figure this out, honestly.

It's a good point, Molly. And it's one of the challenges that people talk about the ecosystem, right? It's very like, first of all, the whole idea around just a wallet and dealing with all these authorizations and all that is pretty scary. Two, to then say, well, no, really you should have a hardware wallet and store stuff in there and then move it to a hot wallet. and make sure there's only one thing ever in your hot wallet and only sign transactions with that, this is what has to improve in the ecosystem. I mean, I completely agree with you.

And I'm seeing a lot of comments to that effect on this Twitter. Like a lot of the replies on this Twitter thread are we have to figure out Web3 security. Yeah. And I mean, there's no, I don't have time for all that wallet stuff. Like, I'm like, I'm already out. And most people don't. And it's one thing that even Vitalik talks a lot about, right?

I think, you know, from an Ethereum perspective of like, you know, right now there's a scenario, like, It's not a drain scenario, but if you lose your secret key, basically the wallet is done. And we actually have a friend, J-Cal, that has lost his secret key. And he's actually funny enough, any holding render in it, oh, they'll tell you after. And basically, he was holding render in that wallet, lost the key because he never wrote it down. Luckily, he wasn't a giant amount of money, but a decent amount. And that's it.

So this would be the equivalent of you having a Morgan Stanley account for getting your password, Morgan's, I was like, sorry, you can never get your money again. So we really have to fix some of these things. It's really scary. And a large portion of the original Bitcoin is in wallets that have never traded it with the theory that it's lost forever, right? It's a dead money. All right, listen, this has been another amazing episode for our crypto roundtable.

Thanks, Sonny, thanks Vinny. And you heard from them, short Bitcoin. They were explicit about it. No, no, no, no. It's a short Bitcoin, and you're good. Oh, no. I'm a champion. Not financial advice.

If you want to play roulette, do not ask us what numbers to put your money on. You can pick the number yourself. But another great crypto round table. Well, well done, boys. Thanks. Thanks for having us.

Thanks, guys. Thanks, guys.