Unchained - The Chopping Block: Arthur Hayes on Why Crypto Needs to Ditch the Banks - Ep. 466

Episode Date: March 11, 2023

BitMEX founder Arthur Hayes, fresh out of home confinement after settling charges with the U.S. government, joins “The Chopping Block” with Haseeb Qureshi, Robert Leshner, and Tarun Chitra. The early crypto pioneer pulls no punches in his assessment of SBF, TradFi’s failings, and how crypto traders lost the plot in trusting CeFi middlemen. Show highlights:  why Arthur travels with stuffed animals, and what his favorite brands are what factors led Sam Bankman-Fried to success how Bill Clinton seems to be related to many multibillion-dollar downfalls whether everyone in crypto thinks that prices are eventually going up what’s the thesis behind Maelstrom, Arthur’s new investment arm why he’s bullish on decentralization but also game to trade “dog shit” what the impact of Silvergate’s failure will be on the crypto industry what would Arthur have done if he was the CEO of Silvergate the role of rising interest rates in understanding Silvergate’s downfall why holding Tether’s USDT is not so different from USDC why crypto needs alternatives to dollar-backed stablecoins the real reasons why the U.S. Treasury is worried about stablecoins Hosts Haseeb Qureshi, managing partner at Dragonfly  Tarun Chitra, managing partner at Robot Ventures Robert Leshner, founder of Compound  Guest Arthur Hayes, cofounder of BitMEX Twitter Medium Disclosures Links Unchained:  ​​Silvergate to Wind Down Operations in ‘Voluntary Liquidation’ Silvergate Confers With FDIC to Avoid Closing Down: Report Silvergate Shuts Down Crypto Payments Network Bloomberg: Silvergate Had a Crypto Bank Run NYMAG: Arthur Hayes, the Original King of Crypto, Is Back. Arthur’s posts:  White Boy Dust on Crust Learn more about your ad choices. Visit megaphone.fm/adchoices

Not a dividend. It's a tale of two quond. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. D5 protocols are the antidote to this problem. Hello everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insider's perspective on the crypto topics of the day. First up, we've got Robert, the Cryptoconassur, and Captain of Compound.

Next, we've got Turun, the Gigabrain and Grand Puba at Contlet. Today we've got a special guest, Arthur Hayes, the black ghost of Bitmax. And then you've got myself, I'm the Steve, the head hype man, a dragonfly. It's a thing. It's a thing. Arthur, do you want to explain the black ghost? It's a phrase in Cantonese, Hukwai. It means black ghost.

It's like a derogatory. It was not derogatory. It's a term for foreigners. There's Guilo, which is a white ghost, and Hukwai is the black ghost. I'm pronouncing that terribly because my Cantonese sucks. So I'm Guiloh. You're Guiloh. Okay.

You're a guilo. You're a guile. Yeah, exactly. So I didn't just make that up. I just make that up. It's a deep reading. Anyway, the four of us, or yeah, the four of us are early-stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see chopping block that XYZ for more disclosures. Arthur, it's great to having my man. I have never seen you with that much facial hair. What is going on? Are you okay? I am perfectly fine. I am in the mountains of Japan. And as tradition, I usually don't cut my hair or my beard of or they've one to two months that I'm skiing. So this is my last day of skiing, actually. So I will be chopping all this off once I return to the steaming hot Southeast Asian jungle because having fish alerts is too fucking hot. That makes sense.

That makes sense. So Arthur, there was an amazing expose on you and your life and travels in New York magazine that dropped just about a week ago. I recommend everybody read it. There's a beautiful photo, a cover photo of you with a stuffed animal sitting on like a, like a luxurious shez in your shirt. shorts. And one of the things that they detail on this piece is that wherever you travel, you always carry stuffed animals with you. And you have a tremendous collection of stuffed

animals. Please explain this for our audience. What's the significance of these stuffed animals and what do you have on you in Japan? So, yeah, I like collecting stuffed animals. My two favorite brands are Jellycat. I probably have close to 100 of those. I probably should own some the stock, to be honest. I've seen them grow in terms of prevalence in globally. I see the underwear now. And this French brand called Big Stuff, they make these like really big whales and octopuses and crabs. And my standard go-to baby gift is like one of these toys. But I actually collect them as well. So yeah, so today I have two of my oldest toys. I have my, my frog and my zebra. I think I got these guys back in like 2009. So they're chilling here. There's about another 10

toys that I brought with me. Again, half a suitcase to a suitcase full of toys wherever I go. Wow. And, you know, across my different residences around the world, I have rooms full of them. Wait, so is this like, is this like people who collect wine where it's like a combination of consumption and investment? Or is it just pure, like, I definitely not investment. And I don't think anyone is purchasing this frog from me, even if it was like the, uh, the most rare frog ever. you love saying the word Muppet, so seeing you with the frog I feel like is just fitting.

It's fitting to see the frog. Amazing. Okay, so the other thing, if you read this, if you read this expose, there are a lot of really striking tones in this, in this expose. One of them just seems to be, I'll just read it aloud for everybody.

There's a couple choice sentences in there. They describe meeting you in, in some of your travel. Hayes, who had just returned from stretching out his hips in a yin yoga class was not sweating. He spent much of his sentence lifting and stretching, and his chest was so broad. His soldiers so built and sculpted that they gave the illusion he was wearing armor. And it's like, holy shit. This journalist is doing overtime.

That is very, that's quite a sense journalist. Yeah, that's. Yeah, journalist was going on. It was great. I mean, I can't, can't lie. Okay. Okay. I'm glad to hear that.

But a lot of the piece was about, in a way, the contrast between yourself and SBF is, you know, almost all of the news cycle over the last couple of years, like all the people who came in in 2022 and 2023, well, I guess I don't know, anybody came in 2020, but people came in 2022. The only name they know is SPF. SBF is like the exchange bad guy.

And you were the exchange bad guy before SPF was even, you know, in diapers. So you wrote some amazing pieces, one of them being white boy, I believe it was called White Boy, talking about the strangeness of the way in which SBF was embraced by the establishment and the way in which he fell from grace. Talk us through, just for the sake of, I mean, a lot of people on the show might know your name, but they don't necessarily know the whole saga. What your perspective is, given what you can and can't say,

about seeing what's gone on with the SPF news cycle. So I guess, you know, SBF has been around in crypto since, I guess, what, 2017 is what he publicly proclaims when he had that hedge fund doing sort of arbitrage trades between different countries, which a lot of us started out doing, you know, from, you know, probably 2011 up until today, there's different shops doing these sort of trades. And he was very good. I know he's a very smart guy. He was very good at building this allure that he was a very, very good trader. He went to MIT. He worked at Jane Street. And then he, you know, he's a very smart guy. He was very good. He was very good. He went to MIT. He worked at Jane Street. And then he, you know, you know, started trading crypto. But I guess, you know, testament to humanity and our lack of depth in terms of researching things because we just read the headline of something and take that as gospel, everybody said, oh, okay, yeah, he went to the right school. You know, he worked at some, you know, very successful Chicago prop shop. He was from California, you know, his parents or professors. He must know what he's doing, right? And I think he latched on to that as his thing. But, okay, well,

There's all these other people over here in Asia doing these crypto things. And I'm going to appeal to a particular segment of the world that wants a champion that looks like the people in power we're there from, right? Which is, you know, old white dudes who, you know, grew up in either New York or L.A. or which is similar sort of East Coast prep schools or West Coast prep schools and went to Ivy League universities or a few of the big name tech schools. And so he applied that as his edge, right? And I think that there is two factors here that led to his success. One, the people who are in the establishment, right, restaurant and financial system, see this crypto thing. They know it's not going away.

The individuals who run projects and firms don't look like them, don't have the same opinions on world events as they do. And honestly, you want to make something completely different and don't want to include them at all. and, you know, if we believe that crypto is this like, you know, once in a few thousand years sort of revolution in terms of the way humans communicate about money, at a deeper sense, you know, as much as they sort of poo-pooed in the public, I think these are very smart individuals. They recognize that this thing is super, super important and they need to get a piece of it. But, okay, yeah, go buy some Bitcoin if that's what you want to do. But that's usually not how they want to operate.

They want to co-op someone or firm whatever into their orbit and then use that as a way to, to take over the industry because, you know, Bitcoin is one of the only assets where it started out as a grassroots movement where individual people own the network. It's not like a large firm, like Standard Oil, you know, revolutionized how oil was discovered and drilled. And so you have this very large company that fits within a particular regulatory and nation-state environment that can be controlled from the top down. This is from the bottom up.

Everybody owns crypto or, you know, a small amount of people around the world. It's not like you can go to one individual and say, oh, you're the Bitcoin person. Now I can run Bitcoin because I can control this person. It's just not how it works. And so he was a great spokesperson because he fit what they are used to dealing with. And from what he said, it seemed like he wanted to be ingratiated with them. And so he spent all his time with the, you know, who's who of celebrities. He went to the right conferences, I think what was at the FTX with the Salt Conference,

So wherever the one in 2021, he's on stage with former presidents, you know, supermodels, all the right, you know, climate change, Davos type people were at his conference. And, you know, he looked like, okay, this guy is, he's the one who's going to be our, you know, our establishment dude in the crypto space. And he wants to engage with us. And then the crypto side, it was like, okay, well, you know, it's, we don't really want to fight a real revolution. It's kind of hard.

You know, if we can be accepted by the. the establishment, that's great. So if this SPF guy is out here doing the dance, then maybe he's a good guy to get behind because he can advance our agenda because he's got the ear of the people that are opposing, you know, what the crypto is all about. And so yeah, both sides sort of backing this, the central figure. And obviously losing sight of the whole point of this is that no particular person or company should be the one that advances the crypto agenda. It's all of our job to do whatever we can at a grassroots level. and, you know, decentralized level and all that kind of stuff to make crypto a thing. And so that's why Sam had buy-in from both the crypto side and from the traditional, you know, Western financial ecosystem side. And so he was able to, you know, take his company and not going to diminish the success of what FTX and the really good employees they built over the years. But he was able to take that and leverage it to an entirely new level.

And, you know, as it comes to light, it seems like he was in, you know, secret. conversations with people all around the world to get special treatment for his firm and their products that he was going to roll out and sort of create this juggernaut of a a crypto one-stop shop financial player. And unfortunately, as it appears from what we've seen so far, he basically was bad at trading because his hedge fund that he supposedly didn't run, lost $10 billion in the span of, I don't know, let's call it six to 12 months. And again, it's extremely hard to lose six, no, it's $10 billion, whatever it was. It's hard to lose $10 billion. Like, you, you know, you look at all the financial scammers around the world, like at banks and all these other

different places, like $10 billion, a fuck ton of money to lose in like months, span of months. It just reeks of an organization that was successful because people thought they were successful rather than actually having real trading acumen. And then, unfortunately, they made the bad decision to take customer funds to try to plug the hole and hope the market turned around. And then there are liquid coins that they own would rise in value. And then, you know, then it would have been okay. Right? If the market it went up, he would have been fine. The problem was that the market went down for the Terra Luna. And then it continued falling. And then it put pressure on, on his, you know, sandcastle. And it came all crumbling down.

And now everybody who backed him is super fucking embarrassed, right? Because it's clear from the things that we have heard from the public. I don't really know what actually happened in private it. at FTX in Alameda, that this was pretty much a bunch of people doing bad things from the start. And it's just very good at hiding. And now everybody's got egg on their face. And it's not just, you know, Western establishment people. It's also crypto folks as well who stumped for FDX. And, you know, a lot of people lost a lot of money.

You know, whole funds was it multi-coins on 90%. Obviously, that's part of that's part of the market. And also part of that's part of keeping all your funds on an exchange. It strikes me as absolutely ridiculous. that so-called these decentralized projects raise a bunch of money and then kept it all on FTX and then lost it all. It's like, what the fuck you guys doing? And so, like, it's not just like SBF fucking up.

It's, we also fucked up too by like not actually living the thing that we're trying to build. So that's my monologue. You know, your story reminded me of one thing, which is somehow Bill Clinton seems to be associated with so many decadillion dollar losses. Like Mark Rich, SBF, like, he's somehow always there near the top, the crescent of when people are about to have their fall from grace, which maybe is a representative story

that whoever the hero is, whoever's chasing them is usually about to also fall with them. But somehow, I guess Clinton still keeps getting new gigs. Well, it's an interesting perspective that SBF was sort of this, Faustian bargain between the crypto world and the kind of, you know, the elite, the powers that be that wanted to find some way to kind of shape crypto into some kind of organism that they could manage and which they could effectively assimilate. And unfortunately, you make a deal with the devil and you're hanging out a lot with the devil. And it seems to be

basically the story of what happened with FTX. It's funny because actually, Arthur, you reminded me of something that Sam old me at one point that, did you tell me, maybe he maybe said on a podcast. remember actually, but he said at one point that the thing that's weird about crypto is that it's the only industry he'd ever seen where everybody was long. Like usually in most industries, like there's some people are like, yeah, it's going to go up. Some people, yeah, it's going to go down. It's going to go sideways. But in crypto, like, fundamentally, you don't come into crypto unless you actually believe the number is going to go up eventually, right? You might believe, oh, it's going to be, six months of this and that, but then we're all, you know, Bitcoin's obviously going to be eventually

with 100K. And that leads to a lot of weird decisions. and a lot of weird positioning, relative to most industries. Ironically, this was basically the description of Alameda strategy, right? An FTC's strategy, which is that they basically assumed the same thing that he found so strange about crypto. Like, as a Jane Street guy,

like, he's always like, I don't know what Bitcoin should be worth, I don't know what ether should be worth, like stuff goes up and down, who the hell knows what's supposed to be worth. But at some point, like, when the number just keeps going up and you keep making more and more money, you just start to believe that maybe these people are right, Maybe number always does go up.

And you should just build your business with that assumption in mind. And that seems to have been the formula that created Alameda and that created FTX was this idea that prices only go one way. And when they went the other way, the whole thing collapsed. Yeah. I mean, and to be honest, maybe the market recovers in the next six to 12 months. And he literally had, if he lasted another 12 months, then we wouldn't be having this conversation, right?

It's literally a function of the price of Bitcoin and the associated. illiquid things that he had on his balance sheet is which undid him. It's not that anyone actually asked any uncomfortable questions of how he did his business, right? This is all predicated on the price, which is true, you know, good and a bad thing. It's good that it's a free market and, you know, the market punished someone who took too much leverage and it punished Genesis. And it punished the list goes on and on and on of the people who built these businesses built on leverage and hope the prices went up in one direction. So thankfully that we don't have people bailing anyone out. We've expunged bad business businesses from our ecosystem and the decentralized products that are around.

They flourish and they show why we're here and what we're doing this for. Well, so Arthur, you're one of the few exchange founders that has survived a tussle with the legal system and with U.S. regulators. It's hard not to notice that as the, basically the only black guy who has basically built anything of substance in the exchange world, you're the one person who's actually. went through that before collapsing. But you recently, you know, you recently exited house arrest and you're now starting your own family office called Maelstrom, which I believe there was a headline that announced Maelstrom. I believe the quote was, is ready to fuck shit up. So tell us, tell us about Malstrom. What made you decide to start your family office and what you intend to be investing into? Yes. I mean, I guess the family office is a big, grandiose term.

It's basically a pot of money in crypto that we do a lot of early stage stuff, right? And so I've hired one person who used to work at Bitmex with me. I really like the work he's done and sort of Bitmex has wound down its corporate venture stuff. And so he was able to pick him up. And the thesis is, okay, this pot of money is already long crypto, right? So it goes up, it goes down, whatever. Can we beat Bitcoin in East return profile by investing in very early projects, particularly we like tokens because I like liquidity of a very, very strong liquidity preference. I don't

really like equity because I don't know how I'm ever going to get fucking paid. Okay, I can wait seven years and maybe they could do IPO and the stars have to align and then I finally get my money back versus, you know, tokens go in a cycle, right? This is the time, this is, in my opinion, the time is now to be putting money to work and then you harvest it in two to three years when, you know, the project does a TGE and the tokens unlock and you can actually sell them. And we actually we have knowledge of what's going on versus the equity processes. It's an opaque process that's run by a bunch of banks. And the market is the market and you take what you can get.

So that's kind of our thesis. And then decentralization, right? The whole point of why we're excited about this and why things have these traded these ridiculous multiples, like a team of no product can raise tokens that, you know, 50, 60, 70, 80 million dollar fully dilute evaluation is because everybody, whether it's, you know, the establishment or it's the native. crypto folks understand the decentralized things are better, right? They are worth more if you have a network that has a lot of different participants that

might not agree on everything, but they agree on enough things to make something happen. And it's really, really, really, really hard to build truly decentralized products that solve things. You know, as we've seen, a lot of products start out with the great ethos, and then they start taking shortcuts because they want to achieve a certain thing with their product that maybe the decentralized way wasn't the right way to go in the first place. But that being said, our goal is can we find enough of these projects at an early stage who actually are living this value that are creating real things that people are going to use

in a big way in the next two to three years? And thankfully, I have this megaphone. And so that lets us get into deals that otherwise you probably shouldn't be in, given that we're just a no-name family office. There's lots of family offices in the world. It's a lot of people. You are not a no-name family out. There's some no-name family.

family offices that invest in crypto, yours is not one of them. Right. And so that's, that's sort of our value add to projects. Like, hey, we can come on board. If you're doing cool things, we can help amplify them. And so that's why we're, you know, mostly the guy in his Akshot, he's running around at conferences and speaking to founders and trying to find the cool things that are really going to, you know, move this forward so that we do have a truly decentralized computer in Ethereum or some other O-1 or the Bitcoin ecosystem, you know, continues to flourish. Like, these are the things that we want to support by investing in teams that are actually building real stuff. And then also, you know, in the time of the cycle, when dog shit flies, we'll invest in dog

shit too. Like, we're here to make money. So we're not going to be dogmatic about like, oh, it has to be this like, you know, deep tech, pure, whatever, blah, blah, right? If you're, if it's, if it's, if it's, if it's time for, you know, $10 million on a PBT and it goes to TGE and it goes up 10x, like, I'm there. I'm in. Let's play.

So we're, we're playing in all points of this. cycle. For the founders listening, what's your average check size? 50 to 100K. So we're very angel. We're not trying to be leading around or anything like that. So we're just coming alongside some of the other major funds out there that are going to be putting in the majority of your round and the token, the pre-sale tokens. Do portfolio founders get stuffed animals? I don't know. Maybe they will now that it's just becoming a such a thing. There's definitely has to be your thing. This definitely has to be your thing now is that you ship a stuffed animal for each founder. I'm a fan.

So, all right. That's enough of a commercial. Let's jump into the meat of it because it's been kind of a harrowing week. One of the big stories this week, and I want to get your take on this, has been the collapse of Silvergate. So Silvergate, for those of you don't know, it's a regional bank in California. And it made a name for itself basically in the last five years by being the bank of crypto. So most people know that if you're a crypto company, it's generally difficult to get bank. There are a few banks such as Silvergate, Signature, a few others that have been positioned is quite crypto-friendly.

Signature is probably one of the most central in the industry. Silvergate, they run a network called Sen. The Silvergate Exchange Network, I think, is what it's called, where basically they allow you to 24-7 move deposits or balances at Silvergate. So if you and the counterparty also have a balance of Silvergate, you can basically, you know, transfer funds instantaneously. So Silvergate, they've basically experienced over the last six months what you might call a bank run. They were the banking partner of FTX when FTX went under. A lot of people got scared that bad things were happening across the board. A lot of FTX's deposits were coming from Silvergate.

And so when FTX ran for the hills, everybody else ran for the hills, a lot of people started pulling their money from anybody who's associated with FTX. And that caused Silvergate's deposit base to shrink very rapidly. Now, there was a little bit of a scare about them soon after FTCS collapsed, but then things kind of normalized. They were sort of around. They were okay, seemingly. And then they had some regulatory filings that noted that they were potentially under investigation and maybe kind of sort of slightly undercapitalized-ish. We will let you guys know shortly, which just caused everyone to freak out.

The stock to tank over 50% in a single day. They're now trading, I think, somewhere in the order of about 200 million market capitalization, which is very thin for a bank. Less than that now. So it's, things are, things are looking bad. Pretty much all of their banking partners in crypto. So Coinbase, you know, the big desks, circle, they've all pulled their relationships with Silvergate,

no longer accepting deposits from there. Now, Silvergate is not dead yet. You can still withdraw a deposit from Silvergate. And actually, Matt Levine did a great write-up on the situation at Silvergate, basically saying that actually, you know, they didn't have anything that weird on their balance sheet? They had just, you know, a bunch of bonds. They had a giant

bond portfolio. They had a little bit of Bitcoin lending. But the Bitcoin lending actually was fine seemingly. But it was just that as they were getting more and more withdrawals, they had to basically firesell a bond portfolio in a time when liquidity was not amazing. And as a result, they just have experienced more and more of a drawdown. And kind of, it seems really that there's not a story at least yet of malfeasance or something, you know, them doing crazy things. Like, it's not an FTCS situation. It really, it really, really just seems like a good old-fashioned, all-American bank run. And that might spell the end for Silvergate. If it does, it seems like it's going to be really bad, not necessarily because people aren't going to get their money back.

Like, very good chance that, you know, the balance sheet is actually pretty reasonable. It's more that banks don't fail very often. And if a bank fails because of crypto, that looks really bad. Well, the news that came out after hours on Bloomberg, maybe right before this show started, was that Silvergate announced. that they are going into liquidation. Oh, game over. Oh, wow. Go to Bloomberg. I think it's like the number one.

I did not say this. Yeah. Okay, wow. So somebody gets going to liquidation. This is how fast the industry moves, you know, right before the show started. Okay. Well, all right. I did not have a chance to prep for that.

All right. Well, so somebody gets going to liquidation, guys, guess what? This is what we got to talk about now. It's over. That's really bad. That's really bad. I was looking this up the other day. So banks, the last time a bank failed was in 2020.

There are very few bank failures in the sort of modern era. Bank failure generally is a big story. It's like national headline kind of thing. And this is going to be even more so because they were banking crypto and they were associated with FTX. So this is probably going to play out of the news cycle and also accelerate some of the, you know, anybody who was claiming that crypto has systemic risks. I mean, in reality, nobody else was using Silvergate, right? Like this was really a crypto bank.

But the nominally, the story of, hey, a bank got to destroy. because of crypto is a really, really bad headline. Yeah, that goes straight to the arguments of the industry's, you know, most scared critics who rightly or wrongly believe that crypto is a threat in some way to the traditional financial system. And being able to point to a bank failure directly resulting from crypto is just going to give them ammunition, whether it's a fair argument or not, that they're going to continue to hammer the industry with.

Arthur, what's your take on the Silvergate one? So, I mean, I guess first of all, I think people need to understand what banks are there to do. Like a good bank CEO. Okay, let's, I'll back up. Probably the best bank CEO of our, you know, last few generations is probably J.B. Diamond of a commercial bank. Right. And Jamie Diamond, for all his, you know, goodness and greatness as a banker, fucked up real bad. I forget what year it was.

It must have been maybe 2012 or 2013. Essentially, J.P. Moore was just accumulating all these departments. And they didn't really have a lot of good people to lend the money to. So they had this massive, just pot of money just sitting there. So they had this group in London run by, it was called the London Whale. I forgot his name. And what he did was he was able to use essentially free funding from the J.P. Morgan commercial arm to punt credit default swaps in massive notionals.

He was the market for the particular indices that he was trading. And he was responsible when he was good for a large, for a meaningful percentage of quarterly net income for the bank because the bank didn't have anyone to lend to. And he ultimately blew up because he timed the market wrong and a few things. And J.B. Morgan lost billions of dollars. And this was a massive scandal. At first, Diamond came out and said it was a tempest in a teapot. There's nothing to see here. And then as he had to write down two to three billion dollars of loss due to the thing, he had to eat a bunch of money.

humble pie out there. Now, essentially, his job as the CEO is to manage duration, right? I have all these deposits that are short term. I need to lend them out long term, right? And if everybody wants their money back immediately, then I need to be able to make good on a certain percentage of that book. At his level, with the trillions of dollars that they haven't managed, he's managing these massive numbers of what's the strategy in the bank going to be for what we're going to take these deposits and move them into. There wasn't anywhere loans. So we started punting derivatives, right? They survived, obviously because they're a much larger bank and, you know, better managed. But Silvergate had the same issue.

They said, okay, we're going to be a crypto bank. All right. So we're going to get all these deposits that are very flighty, right? Because we in crypto, we don't trust anyone with our money. You're like, okay, we'll give you a centralized entity, whether it's a Bitcoin exchange or a bank, our money, but any hint of trouble, we're fucking out of here, right? Because at the end of the day, we know that we can go back to Bitcoin, is a centralized, knock on wood, ever since 2009, things have worked.

and there hasn't been any issues, right? And so surrogate has this deposit base that literally in a day's notice, say, I want my money back, give it all to me right now, right? And they built a whole business on this. Now, what they did was they raised the majority of their deposits, and I haven't done the research on this, but I'm assuming that the delta of change in deposits was the highest after COVID up until probably late 2021, right?

Massable market, FTX is booming. Everybody's making money. Sent is ballooning. All the major exchanges are on it. And so their dollar deposits are going through the roof. And so they have a few issues with that. Number one, a bank gets charged money. You know, I think it's Basel-free regulations after 2008, these global things. They get charged money for the quality of their deposits.

Meaning if the regulator thinks that you have really, really flighty deposits, they're saying, if you have a dollar of deposit, I'm going to charge you. you need to have five cents of equity versus that deposit. So taking a deposit is expensive, especially one that you know is going to, can go out the door within a day's notice. And so they have this issue. Okay, we have these billions and billions and billions of deposits. We need to put millions or hundreds of millions of dollars against these, you know,

per our regulator, whether that's, you know, equity capitalization or they have to raise money to back that. And then at this time, there isn't really any good risk-free options that are going to cover that cost, right? So back in 2020, 2021, interest rates get taken down to zero. So, you know, you park your money with the Fed. You're getting on five or ten basis points, reverse repos, five or ten basis points. It's not really going to cover the charges that they have to take on all those debt that they have.

So what do they do? They reached for yield and took more risk. Now, they didn't take more risk in the sense of investing in junk credit. They took more risk in investing in mortgage-backed securities in longer dated treasuries. And if you do your bond math, you'll know that the longer the duration of meaning the longer to maturity of the asset, the more sensitive it is to interest rates. If interest rates are zero or close to zero, five thousand year low in human civilization, I mean, anyone would probably say, well, the most obvious thing is I probably going to go up in the future, right?

So if I buy, if I raise deposits at a time when zero interest rates are booming because everybody wants to get into crypto and all these crypto companies and making a much money, the only way that I can cover my cost is to invest in longer duration paper at 5,000-year lows and interest rates, I'm setting myself up for a massive failure because as interest rates rise, the debt becomes worth less, even if it's liquid. It doesn't matter how liquid it is. If I'm buying a 10-year bond at zero, and then it re-rates to 4 percent a year and a half later, I'm sitting on a massive capital loss. 2002 was one of the worst years for fixed income securities, right? Because the whole world moved off of zero interest rates. And everyone who had bought a lot of bonds in 20 and 21

reach for yield took more risk either by having a longer duration or taking more credit risk was massively down. Right. And Silvergate was no, it was in the same position because they put all their money in this stuff, which is, you know, safe-ish, right? It's U.S. government, you know, securities, treasuries, mortgage-backed securities, safe from a credit perspective, not stay from a interest rate and duration perspective. And so in comes the FDX drama, the crypto meltdown, all these issues. And understandably, their cost was like, give me back my money. And when they went to go and sell their portfolio, they're sitting on these massive,

unrealized losses. Now, the funny thing about Tradfai accounting is Tradfai accounting has all these little quirks and rules where you get to hide things legally, right? And so they were, I'm sure that they've reported their accounts in a very legal fashion. And they probably marked a lot of these debt security that they held as held to maturity, which means if I buy a bond at 99 and it's worth 100 in 10 years, I just to mark that bond at 100, even though it might trade down to 70. It doesn't matter.

I don't need to book that mark to market. But if I have this bond as available for sale, then I have to mark these to market. That's what a lot of games at banks play is, oh, okay, market's going down for fixing. security these are all health and maturity now we're not going to sell these don't look at it don't look at that massive loss that we have right underneath the surface and so everyone's oh okay cool yeah you're in an income is you know positive net income when you're sitting on these toxic you know debt pieces of shit that you bought at the at the height of the market now they're down 20 points this is how how people game their accounting statements so that we think that they're solvent when if they had to

liquidate these things at the market they'd face some issues and obviously that's what happened to Silvergate. Now, as a hypothetical, I think that what the CEO should have done back in the day is said, okay, interest rates are at 5,000 year low. I have all these flighty deposits. I'm going to take a bet. And he can communicate this very clearly to his investors of what he's doing. I'm going to take a bet on interest rates funded by crypto deposits. I know that these crypto deposits are super, they want their money back immediately. So what I can do is I can say, okay, I'll take these crypto deposits. And at my bank, you get your money back not in T plus 1 or one trading day. You get your back and say T plus 2 or T plus 3, two or three days,

which is, and I'll explain why you do that in a second. Then I take all this money and I get stuffed at the Federal Reserve. I say, hey, Fed, here you go. The Fed is risk free. Essentially, they basically print money to pay me back. And the Fed's going to pay me interest rate on excess balances. Back in 2021 and 2020, it was close to zero. But you're taking the bet that they're going to have to raise interest rate.

rates at some point. And therefore, as they raise rates, I'm essentially going to participate in that. So, you know, interest rate and excess reserves went from close to zero. The last time I checked is like 4.6 percent, right? And so the Silvergate CEO and a lot of these CEOs where I run these crypto businesses could say, okay, I'm going to lend my money at the Fed. I know that if I ever need it back, the Fed's going to give it back to me within one day. I told my customers, I'll give it back to them in two days so that I'm sweet, right? There's very, basically no risk of default on this loan because it's at the Federal Reserve, the person who can print money. And then I'm going to take a long industry rate bet.

And to fund the charges on my balance sheet for all this excess cash, I'm going to sell stock at a premium because I'm viewed as the crypto bank, right? Silvergate stock and a lot of the other stocks are flying in 2021. They were probably trading at, I haven't looked at the chart, egregious price to book multiples versus JPMorgan City and a lot of the other global commercial banks who usually trade slightly below book. And so they could issue stock at a much higher valuation than their peers because he reviewed as crypto when crypto was going up.

They can take that cash, put it against their deposit base, satisfy their regulators, and take this massive bet on interest rates. I think that's what he should have done, as opposed to knowing that he has this problem of, I have these deposits that could leave in a day and then buying debt at 5,000-year lows, right? And then, you know, unfortunately, the market turned at the time in which this customer's wanted their money back and now they bankrupt. One thing I want to add about the timing, because I think, you know,

Husti brought up this point that like, why did it happen now versus like a month ago? So we have this crazy yield curve inversion over the last month, which is like at the record yield curve inversion since 2020. And that means like the long out of the money bonds are sort of like lower and interest rate than shorter term duration bonds. Like the yield curve is not strictly increasing. I noticed all the Silvergate news is actually extremely. correlated with that. It seems to have happened around that time, like, February 9th or 8th

was like when inversion was around 2%. And between the 30 and the 10. And it sort of seems like they, they walked into this like cascading spiral where like they had to keep selling into this thing that was like constantly widening against them. And there was no way of getting out. And I think the timing, timing is like extremely close to this like the last month of really crazy on market fluctuation. Because when FTCX happened, it was probably, they were probably able to do enough to get out of this. But to some extent, what you're pointing out is like the rest of the market just would completely eviscerated in February. And I can imagine that. Well, I think the issues go back earlier.

So, you know, the issues that they were experiencing was, you know, when, you know, whatever, $8 billion of deposits rolled off from Silvergate, they had to sell $8 billion of assets that had fallen a couple percent in value, right? You know, long duration, treasuries, because rates went from really low to not really low, you know, they were realizing a couple percent losses on every dollar of bonds that they were selling. You know, they suffer close to an aggregate a billion dollars of losses on the crypto withdrawals last year. And that is a crazy number. You know, I'm sure, you know, Arthur, Turin, you guys can go through the bond math. But if, like, you buy a 10-year treasury, the duration is like eight years, you know, for every percent interest rates move against you, you lose 8 percent roughly on like the value of the instrument in the market. Right. So if rates went up 2%, they could have lost close to 15, 16%.

There's crazy numbers to lose on bonds. If you buy long duration stuff right before rates exceed everyone's expectations due to inflation, blah, blah, blah, blah, blah. So they lost a billion dollars on like close to $10 billion of withdrawals, which are crazy numbers. But in all of that happened last year, as I understand that the thing that's like happened recently is, they had already lost the money, you know, massive losses. It came down to since year-end, since they disclosed that they lost a billion dollars,

the situation was continuing to worsen in that people were still withdrawing their funds from Silvergate to the point where they didn't even have the ability to produce accurate annual financials and submit them. And that billion dollars of losses going into year-end and then January and February, probably hundreds of millions of dollars from money, more of losses. I'm sure the numbers will come out as all of this unwinds, but just,

you know, it didn't really start in February. All of it was last year. And then it's just continued to drip, drip, drip until then. And the real acceleration of its unwind came like a week and change ago when they filed a going concern warning at the same time that they didn't publish their annual financials. Yeah. I assume part of that story as well is that, you know, as they were meeting the redemptions late last year, the part of their portfolio they're selling is the part that's most marketable, right? Like, so as Arthur was saying, you've got the pile of like absolute garbage that you plan to hold the maturity. And you've got the stuff that like, okay, I can like, I can pretty sensibly sell this off and get some liquidity on it. And so what you're left

with is kind of like, it's in a way kind of similar to FTX where like, you know, what they, or Alamedo, what they have left as they, as things are getting sold off is just like more and more kind of toxic waste. That's what's left of your balance sheet. And so, or, you know, stuff that you'd have to basically realize extremely steep losses, and that forces you to basically say, look, guys, we're no longer solvent. Like, we can't, we can't keep operating with the state of our current balance sheet. I mean, what do you guys think happens here? Okay, so they're going into liquidation.

That's bad news. You know, I was scanning the Bloomberg article, and, you know, we have some comments from, I think it was Sherrod Brown who said, when banks get involved with crypto, it spreads risk across the financial system, and it will be taxpayers and consumers who pay the price. what do you guys think happens from here? What's the kind of ripple effects of Silvergate going under? This makes it harder to get a bank account if you're a crypto firm. I think it's pretty, is it going to all stop all together? Probably not, but will it be harder? Yeah. In some respects, I think that removing this crutch of we're going to have all these banks help us out disintermediate them is a good thing

because then people focus on like what we're actually here to do, which is build a financial system that is parallel, not in conjunction with that system. And so the stable quaint ecosystem needs some changes. There's nothing particularly I find wrong with the fact of a tether, a circle, a BUSD. It's just that we have these things that people rely on to trade. And yet these things must have a banking partner to hold the dollars. And so you're saying, hey, I'm going to issue this token that completely destroys your global transaction, bank, in FX businesses because it moves 24-7 and essentially for free versus your 9 to 5 Monday to Friday thing that you can charge egregious spreads on. But oh, by the way, we need your help

custodying all these dollars. Please help us out. Like, are you retarded? Like, why would you, why would you think that they're going to be okay with this? And if I was a shareholder of any of these banks and I'm like, a large big, you're you're banking these stable coins whose entire goal is to basically remove large percentages of our net income. Like, are you fucking crazy? And so I think this fundamental disconnect is finally going, I think makes sense to people of like, this doesn't make any sense that we face all our hope on these things

that require the pipes of the organization that we're trying to displace to help us with. There's an interesting take on stable coins, but at the same time, at the same time, right? Look, I think in an environment of zero percent interest rates, that's basically correct that like stable coins are this like wild banking hack that allows you to just kind of do things that banks can't normally do in an environment of basically 5% you know overnight rates uh that's just not that's just not true anymore right the stable coins don't pay interest

stable coins are right and i guess the thing is that pure debt this the stable coin you can raise a bunch of deposits but you can't lend those out long term we just saw what happened to a bank who lent money to the u.s fucking government and they went bankrupt because the crypto the the crypto the deposit left in one day and they had long-duration debt lent to the fucking U.S. government and they went bankrupt, right? So how are you supposed to lend to a regular business or, you know, to another less credit-worthy borrower than the U.S. government who runs the U.S. dollar? And they went bankrupt. It's not, it's isn't a, like, I take your point, but I will, I will push back because that actually stable coin supply has been surprisingly resilient over the last six months.

It hasn't gone up, but it hasn't collapsed the way that's. Silvergate's deposit-based collapse. Like silver-gates deposits collapse, I think for a very different reason because of their connection to FTCS and all this other shit that's happened. But if you look at global stablecoin supply, it's actually been, it's actually been pretty solid. That's conflating the issue. The thing is that global stable coin, we, people in crypto want a stable coin, right? If J.P. Morgan or City or Wells Fargo or one of these large banks said, hey, here is a token that rise in Ethereum and that's backed by dollars in my bank, there would be no tether.

There would be no finance. There would be no circle because everyone would use that because that is a bank with a Fed that can access to the Fed and they're too big to fail. They're not going anywhere, right?

Why would you use a private company that needs a correspondent bank to put their dollars in? It doesn't make any sense. The reason why stable coins is this is because none of the banks want to launch the product. Why don't they want to launch the product?

Because they make over $2 trillion a year in FX and transaction services. Why would they put that at risk? by launching a solution that costs a few dollars to move as much money as you want whenever you want to use it. That's why they, in my opinion, that a commercial bank would never launch their own stable coin, even though the first one we did it would make some money. Absolutely, they'd make money. But the businesses of theirs that they completely destroy, that's the outperformers making a few hundred hundred basis points net interest margin lending to the Fed.

I mean, a few hundred basis points net interest margin is a big deal for a, bank. Okay. Like I think, and I'll take the counter perspective here, I think a bank should launch a digital bank account coin or staple coin or whatever you want to call it when it's not, you know, the way we think of stable coins today. You know, if they're paying roughly zero for deposits, you know, that is an incredibly lucrative business opportunity for any bank, especially to do it at scale, right? Like, Silvergate was special in some way because it was paying its depositors, crypto businesses, zero, whereas most banks are unable to borrow money at 0% now. And deposit rates across the whole banking sector have been going up both for retail

and commercial, especially as interest rates have been going up. So if there was the possibility that a bank could launch asset gathering product that could bring in tens of billions of dollars, look at tether, circle, you know, $100 plus billion at zero. expense and then they can deploy that into whatever mixture of interest-bearing things they want. I mean, I think that's unbelievably lucrative. And I think, you know, it's not, you know, oh, it's going to chip away at some transaction fees. If they have the opportunity to make billions of dollars, you know, of incremental profit per year,

I think they should. Well, I would say that's not the case for most of the largest banks because if you take a look at deposit rates, at least, you know, let's say in the West. You go into your large tier one bank, you're getting on a 10, 20, 30 basis points on your, under your deposit per year, right, versus the Fed funds lower bound is, I don't know, at 450, 475, whatever it is right now. Banks are telling the market, we don't need deposits. The central bank solved the deposit issue in 2008.

We said, you all fucked up. So we're going to stuff you with reserves. There's record, I was like checked yesterday, $3 trillion of excess reserves sitting at the Fed, which is the Fed member banks have parked $3 trillion with the Fed because they have no use for it. We don't want to loan it. We don't want to take any risk on any individuals or companies and the aggregate. So we're just going to give it to the Fed. They don't need deposits.

They don't need to launch a stable coin. They generate $100 billion when they have $3 trillion parked to the Fed. As Silvergate does, though, a small, no-name bank from who the fuck knows where they're from, they need a stable coin. Now, that's the bank that should be the ones that are launching a stable coin. that are properly licensed to whatever jurisdiction they're in and going up against their competitors. All right, let me try to come at this from a different angle.

You know, you spent a lot of time in Hong Kong. I remember when Circle and USC first started coming up, talking to a lot of folks in Asia and trying to understand, you know, what would it take for you guys to onboard onto USC? Because obviously, USC, it's, you know, regulated. It's, you know, U.S. compliant, Coin Bay Circle. These are, you know, sort of reputable companies that are, you know, blessed by, or relatively blessed by the U.S.

And everybody I talked to in Asia was like, no, we don't want to, we don't want that. We don't want something that's regulated by the U.S. And I was like, why not? Now you know, you know, it's got access to, you know, a regulated New York bank. Like, isn't that desirable? There's more, there's more visibility and transparency into their deposits. And they're like, well, look, we're in Asia, right? Like, the U.S. doesn't like us.

We actually prefer to be banking with Tether, quote, quote, banking, because Tether is, you know, not that close to the U.S., right, seeing what's happened with, basically, you know, what happened with Russia and basically, you know, the U.S. banks cutting off Russia or the Fed cutting off Russia, Russian deposits, and just the way in which the U.S. uses its banking system as a cudgel to beat senseless anybody they disagree with. You know, if you're a, you know, a Chinese national, your first instinct is that like, well, I want to be as far away from that as possible. I want dollars, but I want to be far as far as I can from the reach of the U.S. government. And I think for those people, that's part of the reason why tether.

is still so desirable is because actually, yes, USTC is growing, yes, it has all these partnerships, yes, you can mint it and burn it on any chain, blah, blah, blah, but that's not what I care about. What I care about is that, like, Tether's my guy. Tether's not going to sell me out. No matter what it is I'm doing, no matter how U.S.-China relations evolve, Tether is not going to have a dog in the fight. Tether is Switzerland. Whereas Circle, you know, from their perspective, Circle is the U.S. government. And they'd rather not hold USC, knowing that Circle can get an order any day to say, hey, delete these guys. addresses because we don't like them anymore. So I think that actually makes it difficult for

that role to be served by a U.S. commercial bank. I'm going to say that they, then whoever thinks that doesn't understand how banks work because Tether is a U.S. dollar stable coin, the whole U.S. dollars, which means that ultimately some bank that has a direct license with the Fed holds those dollars. I don't know the name of the bank that Tether banks with wherever it is, but they have a correspondent bank. I mean, that's the game. Let me get to my point. They don't understand how banking works. So that bank, it doesn't matter where that bank is. The bank could be in Vanuatu for all I care. If the bank in wherever the fuck outside of the U.S. wants to wire money to another country, it must go through their correspondent bank who was a account with the Fed that is going to move these dollars. And so whether it's tether, Circle, BUSD, blah, blah, whoever, their bank, even if they don't have a license directly, they have to bank with somebody who does. And that's why if you say, and a bank transfer to a bank that doesn't have a license with a particular central bank where they are from, you see they have that thing called an intermediary bank.

That's the bank that actually has the clearing license in that currency with that central bank. That's how corresponding banking works in the fiat system. So if you're a Chinese national and you think that you're somehow getting around something because you have a tether wallet versus a circle wallet, you don't understand that they both have dollars with the same institutions. And at some point, that is a... is okay with holding all those dollars on behalf of tether, right? Because all it takes is a few phone calls. And if the correspondent banks doesn't like those transactions, they call up the other big,

they say, hey, who's this from? They tell them, like, well, we don't like that. So if you want to continue to have your Fed license to wire U.S. dollars, you need to drop that client. Where are they going to do? They're going to drop the fucking client, right? And so it, they don't understand what they're trading and they're sending themselves to get wrecked if that's what they believe. I mean, I understand your point. I think it's a, I don't think they're wrong, but I think your point is correct, which is like, look, if it gets bad enough, they are wrong. They are understandly wrong. They are not. I mean, it's true for Euro dollars as well, right? Your dollars are also connected to the U.S. banking system through correspondent banking relationships. But like, but your dollars are still further

from the reach of the Fed. Like, they're still further from the reach. Now, it's, it's, it's not impossible for some say, okay, delete this guy's down. A direct phone call is two phone calls. It's, I don't, I think people are more than one phone call, that. I mean, I'm just like, I'm just telling you, that's how it is. I think the thing, though, is that the enforcement of these things is kind of a little bit weird, right? Like futures contracts on euro dollars are settled completely different than say futures contracts on bonds. And people's speculative second order things to these products, which is effectively most of crypto, we look at most of stable claim using crypto. The second order products are like completely very hard to control.

And so I guess the question to these banks is like how much margin do they actually really are they exposed to indirectly by the second border products. I think that that's the part the U.S. government's probably going to have to grapple with after the Silvergate thing, because they implicitly have these dollars in a bank account that are backing margin accounts on chain or at particular exchanges. And Silvergate actually sort of is holding some risk to those in the cases that those entities are either all withdrawing at the same time or redeeming. And so I suspect we're going to have this kind of change in banking licensure where these like second order things somehow have to get reported in the sense that like if silver gates say was was holding circles

us d they would basically be having to report where all the USC actually is and that would be a very bad outcome in my mind like if we get to the point where like the banks are actually sort of forcing these second order reporting to be included for if that were true like the euro dollar is basically impossible to report on. Even though it is technically possible to go call your dollars, it's extremely hard to actually know where it's used as collateral everywhere in the world. And I think the crypto version of the world actually has a very similar property. Where the second order pieces of where the dollars end up is just a little too hard to

control fully. You can control a lot of it, but not everything. Well, I think maybe that is, I guess maybe an issue, but I'm just going to go off of what Yellen specifically said, which, and I believe it is a real concern for them, which is, okay, let's call the $100 billion is in stable coin deposits in dollars of the major ones, right? And because, again, these are for-profit entities. What do they do? They buy debt and they earn the net interest margin. Cool.

Nothing wrong with that. They're basically buying treasuries. They're handing the money back to the U.S. government. The issue is that, let's say that a, not a run, but everybody says, oh, I'll, well, want to redeem on my tether USDC and BUSD today, right? And as dutiful custodians, they say, cool, we can do that. And they go and they dump $100 billion of bonds on the market in a day. Market order, give us a fucking money back, right?

That's what they care about. That's a big amount of short-term pressure on the market. The only market they really care about, which is the U.S. treasury market. And this is something that she said publicly of why they care about Sivocoint. It had nothing to do with, you know, banks having this and that deposit. they buy the debt because they need to earn yield and to make good on their customer, you know, promises, they have to liquidate it as soon as a customer wants their money back because that's what they're supposed to do. And if they do that and we see what happened to Soviet, then they have to dump bonds. And liquidity in the treasury market has demonstratively diminished since the global financial crisis and all the regulations on banks that forced them to exit market making and primary dealing responsibilities in the treasury market. And so that's what they're worried about. And so in my opinion, I wrote an article about this coming out, I think now,

is that the upper end of how large an aggregate U.S. dollar stable coins can get is going to be massaged, to be a certain level, whatever they think is the market can handle in terms of short-term stress of selling these bonds. I know that some people have a theory that the crypto, total crypto market cap is positively correlated to the size of, you know, dollar stable coin balances, right? So if you believe that, then you can't have this thing, dollar stable coins being the anchor of the connection between crypto and tradfai from a banking perspective in and out because it's going to get limited because it produces too much risk for the U.S. treasury market for very understandable reasons. And we need to find an alternative. I'll leave that as a plug for reading what I wrote about in my article that came on now, but that that is that's the

essence of the thesis. Interesting observation of that is like if we do look at sort of the history of Bitcoin trading, there was, you know, at first the basis trade and quantum, you know, sort of these weird quanto derivative, but obviously as you are extremely familiar with, quantum trades that have these weird interest rate behaviors and you could kind of scrape percentage points, you know, pretty reliably, but in Bitcoin terms, and you couldn't get out until tethering. The current version of that, which is the main sort of organic source of yield, seems to be, you know, Ethereum staking derivatives.

How do you, how would you feel if that becomes sort of like the natural source of single origin, organic on-chain yield versus, say, Bitcoin basis trades? That's amazing. That's great. We have our own native reason for people to lock up capital, which is, to secure the network. I think that's perfectly natural. You have people with ETH staking ETH to earn more ETH for providing a service.

There's no connection to the, the TradFi banking system. There's no risk. If ETH goes to zero, who gives a fuck, right? From their point of view, there's no like, okay, cool, whatever. They created this new thing and you need to stake this magic internet money, to earn more magic internet money to secure the network that makes the magic internet money move from place to A to place B. Great.

I don't see a U.S. dollar, a euro, a yen, a C&Y, you know, give me a fiat currency involved in that. That's just us in our own community creating value where value needs to be created. That's excellent. What's not excellent is let's believe that our whole entire ecosystem depends on a bunch of banks, allowing some U.S. dollars to be stashed in them so that a few companies can make 300 basis points in interest margin. That's not a good solution for us. That is not, no, that is nowhere near helping the long-term viability of the entire community. It helps some traders, and I understand the reason for the product, but there's some

fundamental flaws in how it's constructed and how the feedback loop between the two systems. For sure, but I will say, I am happy to point out that you did give a compliment to the two-digit shit point, as you yourself called it once upon that. Absolutely. I trade both ways. There you know. Just wanted to point that one out. All right. Well, Arthur, we're up on time. I appreciate you coming on to the world's best banking podcast, as I guess we are now, like Jesus Christ. Hopefully next time. That's right. Hey, hey, hey, this is why I brought up the single origin, organic, holy, on-chain yield of steak to Ethereum.

Yeah, yeah. We almost avoided being the most trad-fi podcast out there, but thank you for bringing it back. I mean, I think people need to understand this shit, because if you're trying to create a system that's doing something different and you don't know how the fucking other one works, then you're just going to do, you're going to make solutions that have already been done that complicate the problem further, which is the problem with a lot of the things in our ecosystem and hopefully, and as we see, as we saw, what failed, everything that was centralized, required a lot of leverage was basically just a play on the Fed recruiting interest rates as zero. I'm just going to go along a bunch of dog shit and hope it never goes down. Everyone in those book on Muppets is out of business, as they should be.

Plus one of that. Very well said. Well, Arthur, it's always a pleasure to see you and your sculpted suit of armor. Thanks for coming on. And we hope that you're going to be enjoying the slopes in Japan. Thanks, guys. Yeah, everyone, go read Arthur's new piece. That's it from us.

Thanks, everybody.