Unchained - Why Swan CEO Cory Klippsten Is Still Convinced That Bitcoin Is Headed to $1 Million - Ep. 584

Starting point is 00:00:00 And all I can say here is like I will stick to my long-term target that I've been giving since 2020 in 2020, in $2020 a million dollars a coin by 2030. And everything else is just a guess, but like I'll stick to that. And I don't know what that's going to be in nominal terms by then. It'll be at least, it'll have to be at least 1.3 or 1.4 accounting for inflation over the course of the decade. But yes, in $20, my 2030 prediction is a million dollars a coin or sat cent parity. Hi, everyone. Welcome to Unchained, your no-hype resource for all things Crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto eight years ago, and as a senior editor of Forbes, was the first Mainstream Reader reporter to go up a cryptocurrency full-time. This is the December 19th,

Starting point is 00:00:49 2023 episode of Unchained. This episode is brought to you by Uniswap. You may know Uniswap is one of the largest decentralized protocols, but it's so much much much more. more. From Uniswap Labs' self-custodied wallet to zero gas swaps with Uniswap X, Uniswap is building protocols for seamless swapping across D5. Visit app.uniswap.org to get started. Arbitrim's leading layer two scaling solutions can provide you with lightning-fast transactions at a fraction of the cost, all while ensuring security rooted on Ethereum. Arbitrim's newest edition, Orbit, Enabels you to build your own tailor-made layer three. Visit Arbitrim.io today. Streamline your Defy with VaultCraft, the ultimate on-chain toolkit for deploying custom automated

Starting point is 00:01:36 defy products on any EVM chain. Join Volcraft's referral program, unite with the community, and supercharge your crypto. Details on vaulcraft.io. Hey, all, a quick clarification before we dive into today's episode. On Friday, James Seaford and I discussed how the cash creation and redemption model for Bitcoin ETFs could affect the Grayscale Bitcoin Trust. You'll have to listen to the full episode for an explanation on those terms. The reason we were discussing this is that multiple issuers have now revised their applications to say that they will follow a cash creation and redemption model rather than an in-kind model.

Starting point is 00:02:14 This likely reflects an SEC preference for that structure. Then James said that if GBT does convert to an ETF and follows a cash create a redemption model, for U.S. federal income tax purposes, GPTC might be true. treated like a mutual fund. If so, that would create a taxable event at the time of conversion for all the investors. Grayscale, however, published a blog post on Friday saying that it takes the position that GPTC would be taxed as a grantor trust. If the IRS agrees, that would mean, quote, cash redemptions by grantor trusts are taxable events for the redeeming shareholder only. They are not taxable events for the ETF itself or for non-redeeming shareholders.

Starting point is 00:03:00 And now onto the show. Today's guest is Corey Clipsden, founder and CEO of Swan Bitcoin. Welcome, Corey. Hi, Laura. Thank you for having me on. Excited to chat. Bitcoin seems to be a big winner in 2023, with the price starting at below 17K, and it's now trading above 40K. And I'm sure Swan Bitcoin, which offers Bitcoin financial services, has been a big

Starting point is 00:03:24 beneficiary of that price increase. So tell us about Swan. What does the company do? Yeah, well, first off, it certainly has been an exciting year and definitely a welcome bit of sunshine after all the crypto collapses of 2022. So nice for all of us to be wearing smiles and seeing a bright orange future, as we often talk about in Bitcoin space. But yeah, thanks for the layup for your audience that doesn't know anything about Swan. We are a Bitcoin-only, Bitcoin-centric financial services and technology company. and we started with brokerage,

Starting point is 00:04:00 so very simple retail app that lets people buy Bitcoin either spot or set up savings plans. And then from there, I think because we had an educational content, media, go-to-market plan from the very beginning, that lets you have a lot of conversations

Starting point is 00:04:19 with a lot of people. And then you also have a channel through which you can add additional services and products into a large audience that you sort of own your own audience. And so we've expanded tremendously since launching in March of 2020. So we're not quite, boy, we're not quite four years old and we probably sell 12 different things. We have the Swan Vault, which is a multi-sig. We have Swan Private Client Client Services for global high net worth individuals and small and medium-sized businesses.

Starting point is 00:04:50 We have Swan Advisor for the Wealth Channel here in the United States. We have Swan institutional, which does big deals in the nine figures with institutions and minors, and these are credit and debt deals. We will have raised and deployed a little over 400 million through that unit just in 2023 by the end of the year. Have another deal closing here in the next couple of weeks. And yeah, we're just looking to expand into Brazil, most likely, possibly get to Europe next year as well on the retail side, looking at Australia as well. So kind of the first three extra U.S. retail markets for us, and again, still serving private clients globally already. I think we have clients in 75 or 80 countries. And just from a revenue standpoint, right now we're

Starting point is 00:05:42 doing about 135 top line run rate revenue and have a pretty clear path to getting over 200 before the end of Q1. Wow. Yeah. I mean, for, you know, for a company that, as you pointed out, is relatively young. That's quite the story. But you personally also have a very interesting story in crypto. So tell us about your journey and then how it is that you eventually came to launch the line. Yeah, sure. So I'll start at the very beginning because I always have a strong affinity for journalists, having been a trained journalist myself. I went to Missou for undergrad after growing up in SF in Seattle. And I have a broadcast degree. And I was a really crappy local NBC TV news reporter 25 years ago. Luckily, moved over to the business

Starting point is 00:06:31 side. I went to work for Microsoft and then Morgan Stanley got a University of Chicago MBA 20 years ago next year. I can't believe I'm going to a 20-year grad school reunion next year. That's embarrassing. By the way, I love how you throw in the like, luckily you left journalism bit. Well, because I was bad at it. That's all. Okay. Okay. No, this is why I have a strong affinity for journalists. And, you know, it really is important to me. And I think people that follow Swan know how strictly I try to adhere to journalistic standards, even when I tweet. So if I have the goods, I state it. And if I don't, I'm asking questions. And I'm very, very careful about that. And I make sure that everything that goes in our publications and out through our media, to the best of my ability, basically run it according to, you know, AP style and journalistic standards and the whole thing. So it is actually very important to me. So yeah, B-School. Then I went to McKenzie and then private equity consulting.

Starting point is 00:07:33 Ended up consulting for about seven years post-B-school. And it wasn't until the global financial crisis in 2008, 2009, that I realized kind of how shaky the ground was underneath the whole economy. Like we certainly saw that the dot-com era that that was shaky. and that kind of made me flee tech a little bit and go to, you know, B-school and consulting and thinking that that was solid. And then you realize, oh, wait, it's all sand all the way down. And anyway, that just made me really want to get into early-stage tech, because then I figured you could at least control your own destiny a little bit more. You know, if you're diversified across a bunch of companies and you're operating, at least it's your own mistakes that you can live with and you can kind of control your own destiny. And then I had a lot of friends that had been in, early stage tech in the late 90s, early 2000s, that it stuck it out and, you know, wrote it all the way down with the dot-com bust and then wrote it back up. And we're having big exits in the late aughts and retiring and buying helicopters and things. And so I kind of knew that I could come in, at least network-wise, at a level that was probably

Starting point is 00:08:40 helpful to getting my career off the ground and went to Google specifically for, I just called it, internet business school and being able to network with VCs and founders from a Google.com email address was really easy. So that was 2011 to 2013, got married, transferred from the Chicago Google office out to the Los Angeles office, started taking surf air when that was cheap, and then downgraded to the Southwest bus.

Starting point is 00:09:06 And I would often go up to San Jose and SFO like three times a week and still come back and sleep at home. So I would just do day trips constantly going up, networking, setting up meetings. And I left Google to get into start. startups full time in summer of 2013, so about 10 and a half years ago. And it's been a great run. I'm involved in, you know, 65, 70 startups over the years, had 16, maybe 17 exits historically. And, you know, Wifi was very happy and we were going to have our second kid. And I was, you know,

Starting point is 00:09:40 working 25, 30 hours a week, just kind of cutting checks and having lunch meetings and investing in startups. And this, this dang Bitcoin thing started creeping in. And it was really, it was a lot of crypto because I was in the VC circles and, you know, the noise was coming from people that I considered to be high signal, like Union Square Ventures and Jason Horowitz and, you know, the blogs that I would read and the people that I would know, a lot of them were leaving and getting involved in crypto at 2017. And so that sucked me in and I was like, okay, let's see what this is. And I was all on, you know, tokenize the world and, you know, ICOs are non-dilutive capital for marketplaces and like the whole thing. I was writing 50-page

Starting point is 00:10:20 documents and just really thinking this whole thing was, you know, crypto, crypto, crypto. I think I even had like Corripto 23 or something was my telegram handle back then. Like I was, I was all in. I just thought it was the bomb. And but I didn't really, there was always something that I just didn't quite yet and what it really boiled down to was this is, you know, this is people printing money, which is the whole thing that Bitcoin is trying to get away from. And so little by little, the Bitcoin truth and my understanding about Bitcoin started to creep in. It started when I met Jimmy Song at a blockchain conference in like November of 2017. And that kind of started me watching his YouTube videos a little bit, which led to Andreas Antonopoulos,

Starting point is 00:11:03 which eventually led to Stefan Levera and Tales from the Crypt and some of the Bitcoin podcasts. And by March or April of 2018, I had a firmer understanding of Bitcoin. and at least economically and rationally believed that that was the only one of these that I knew for sure was going to be around for a long time. And I started trying to move my career over toward Bitcoin as fast as I possibly could. First, by trying to start a Bitcoin ecosystem fund in the summer of 18 with Dan Held and Steve Lee, who's over at Block Spiral now. Couldn't quite get that off the ground. It wasn't the right time. It was too early.

Starting point is 00:11:41 It was no way to make sort of the economics work for. a GP doing something. It was just too small. There were no Bitcoin-only funds at the time in summer of 2018. Then the fall, I was working with Steve McClurg, who's now, I think, CIO at Valkyrie, but he started Valkyrie basically. And we were working on a closed-end Bitcoin fund. It was like 80% Bitcoin, 20% levered treasuries that I realized the only thing that I would do if we actually got it off the ground, he ended up selling it to Galaxy. The only thing I would be doing is like talking to portfolio managers in New York about getting off zero, which is not a satisfying conversation. You're not changing anybody's lives. You're not really like exciting

Starting point is 00:12:22 people. It's just kind of also I like being home with my kids. So I started to kind of think about what could I do that was direct to consumer that would be much more marketed by media and internet instead of hand-to-hand combat. So totally counter to most of my professional experience, which is almost all growth and revenue and marketing for enterprise and very little consumer. I realized that the only thing that fit with the life that I wanted to have in Southern California, working on Bitcoin, I'd have to learn how to do something for a mass consumer market. And the angle that I saw that was unfilled was basically solving the problem that I had, which was I wish that my 11th month, let's call it the Shipcoin horse shoe where you start with Bitcoin and then explore

Starting point is 00:13:07 crypto and come out caring about Bitcoin, which a lot of people go through. I wish that it had been more shallow and shorter. And so I figured if I could get Bitcoin in people's hands through a gift from a Bitcoiner that cares about them. And then it was escrowed for a year. And then in that year, we would give them monthly lessons about Bitcoin so that by the time they actually took control of their Bitcoin, they had a better chance of understanding it. So that was the original product. we actually launched this in, started it in summer of 2019, and it was Give Bitcoin. And that's what we launched in November of 2019. And what was hilarious is in the first month, 90% of the volume was people giving gifts to themselves and giving recurring purchases, essentially recurring gifts to themselves, because it was cheaper than Coinbase and cheaper than Cash App. And Cash App didn't even back then have the feature of the recurring purchases. And that's when I realized, okay, we have something, there clearly is space for a Bitcoin-only brokerage or on-ramp, and it needs to be education-focused, and we'll get rid of the gifting for now and bring it back later and did the

Starting point is 00:14:16 Swan rebrand in January. Already had the backend launched essentially, right? We kind of just needed to re-skinned it and get rid of the gifting and just make it, you know, buy for yourself since that's what clearly everybody wanted to do. And yeah, launched in March of 2020. And at this point, I mean, are your customers still mostly retail? Because just from looking at the products and services that you offer, it seems a lot of this would lend itself to institutions or high net worth individuals. So tell me a little bit about your client mix. Yeah, so the vast majority are obviously individuals at the account level, but obviously the vast majority of the revenue is coming from private clients and institutions.

Starting point is 00:14:58 And by institutions, you mean what like family offices, hedge funds? More like multifamily offices, Bitcoin miners, insurance companies, players like that. Okay. So something that's interesting is obviously one of your services is advisor services where I guess you talk to financial advisors and, you know, help them, help their clients, you know, allocate money into Bitcoin directly. And I wonder what those conversations are like right now, now that spot Bitcoin ATFs are going to be launching soon.

Starting point is 00:15:34 Yeah, I mean, it is a very, very exciting time to be talking to the wealth management industry because they have, what did we used to call it, C-Y-A? Let's call it air cover. Cover your, ask for those people who don't know. There you go. I didn't know how blue we could get on your show, Laura, and being conservative. We decided we'll allow people to swear because everybody does. Okay, fair enough. So yeah, so there's air cover now for anyone that's managing money to have the,

Starting point is 00:16:04 conversation and to share educational information with their clients because if it's good enough for fidelity and BlackRock, then it's good enough for them. And I think that is the big dramatic change that we're staring into as an industry right now is, you know, the top of funnel for people getting into Bitcoin for the last six years has been noisy crypto and you have to wade through all of that. And, you know, luckily, if you're lucky, find that Bitcoin signal in the noise. And now that's being replaced with the top of funnel being hundreds of millions of dollars of advertising and marketing messages spent and sent by the largest, most credible, most trusted financial services firms on the planet talking about Bitcoin and extolling the virtues of Bitcoin. So it's a much

Starting point is 00:16:49 easier top of funnel, obviously, to be able to talk about Bitcoin. And then the pitch for companies, I mean, first of all, they're they're frenemies. Like, I'm glad they're talking about Bitcoin and we're helping and we're doing internal trainings for some of the biggest companies in the world. And a lot of the experts that they're looking to are full-time employees of Swan. It's kind of what we're known for. So we're doing a lot to help them. And I've been doing internal presentations for BlackRock employees for three years. So I think we sell real Bitcoin and you only pay for it once and they sell paper Bitcoin that you have to pay for every year.

Starting point is 00:17:25 So I think that alone as you as you get deep. deeper down the rabbit hole and maybe value self-sauranty a little bit or just want a better economic deal on your purchases, then you're going to prefer real Bitcoin over ETFs. And this is supported by the data because if you just look at our retail division over the last four years, 50% of customers withdraw to self-custody, but it's 83% of the Bitcoin. So if you buy more, you're more likely to take self-custody. So I think people will dabble in their interactive brokers or their Schwab account and pick up one of these ETFs. But if they get turned on to listening to Lynn Alden or reading her stuff or they go down the Robert Breedlove rabbit hole and listen to the Sailor Series or something like that, they're going to start to value real Bitcoin.

Starting point is 00:18:19 And they're certainly going to understand that they shouldn't be paying a fee every month. I'm sorry, yeah, every month or every year to the ETF holder. So from the advisor perspective, though, are you having conversations around whether or not they recommend that their clients buy Bitcoin with Swan Bitcoin and, you know, custody at their versus when they're deciding to actually recommend that they instead purchase a Bitcoin ETF? Like, are they kind of giving you insight into how they're thinking about that decision?

Starting point is 00:18:50 Well, almost by definition, anyone that was early enough to sign up with us, so the 36 or 38 or however many RAs that we have on our platform, if they've been in for the last couple of years, it's because they understand Bitcoin and they were kind of already orange-pelled. So they're not now turning around and saying, oh, let's go the ETF route. They're kind of sold on Bitcoin and already understand it. I think what will be really interesting, again, is the same. dynamic of welcoming RAs and FAs that used to be anti-Bitcoin. You know, like I'll think of like the Alliance Bernstein and their alternative investments group, which, you know, I went to, I went to one of their conferences. I was invited by one of their senior guys probably in 2018. And the guy that ran the group was just talking about what a fad it was and it's all going to go to zero and it's bullshit and all the stuff. And, you know, now it's 2023.

Starting point is 00:19:48 And once Larry Fank says it's cool, now they. completely changed their tune. That guy's gone. They're all crypto, crypto, crypto, Bitcoin, and Bitcoin, and Bitcoin. And now you can go and work with their various offices around the country and around the world and light them up on the Swan platform. So I think it's, again, they just, they have permission now without risking their careers to talk about Bitcoin to anybody they want to. Well, for your business, though, like once the ETFs launch, I do imagine that there will be a little bit of an uphill battle to kind of convert people over to this, you know, more sovereign form of owning Bitcoin.

Starting point is 00:20:28 Well, I just realized that if they're custody with you, maybe not. Yeah, it's just so much easier to convert somebody from a Bitcoin ETF to real Bitcoin than it is from the Ethereum, Cardano, Ripple, Filter bubble marketing. Right. But how, like, what arguments would you use? Because for somebody like that, they're going to think, oh, I have this wrapper I'm familiar with. My financial advisor can already handle that. I don't have to worry about it. So what, how would you try to persuade them? Oh, well, so we're already on the platform, right? So if they're encountering it through their financial advisor, it's because they're already in their dashboard. So we built all that tech and we show up on the on the FAA's dashboard and they can select us. Okay. Oh, wait. So, but you said you have about. 30 RAs right now. So are you saying that any, which financial advisors have? So like 36 of the top 300, something like that have Swan integrated. Oh, got it. So it's, it's, you start small and yeah, exactly. And so they can they can choose to put end clients. They each have some number of end clients,

Starting point is 00:21:37 you know, could be dozens, could be hundreds that are also Swan users. And FAA has either trade and view access or just view access so they can either advise on their clients or they can control it completely. You can do any of the three. Either both can trade or either of them can trade, but always the client and the advisor can view. And how many financial advisors are in each of these platforms that you're integrated with? I actually don't know the total of the, so the firms I know is about 35, 36, 37, something like that. I actually don't know how many individual advisors is at each of the firm. And just because you have a firm signed up doesn't mean that all of their advisors are using it. That's for sure.

Starting point is 00:22:20 Right. Of course. Well, of course. We usually have a few champions inside that are going around and trying to orange tell their colleagues. Yes. Well, yes. I mean, I'm sure every person in Bitcoin or crypto has that experience in everyday life. So for your asset management business, I was curious how that works because typically the word asset management often is about managing a diversified portfolio with different investments that have different risk profiles or time horizons. And in this case where you're mainly promoting one asset, I presume, maybe I'm wrong.

Starting point is 00:22:54 I wondered if you focus more on trading or if there's some combining with Bitcoin exposed to equity or how does that work? Yeah, absolutely. So our first strategy that we've launched and funded is the fund is called Time Chain Alpha and it's basically a one X long Bitcoin that rotates to capital. cash when our signals expect a downturn. So you basically avoid drawdowns. And the guy that runs it has 20 years of experience doing this. It's all code and signals and actually use like AI and microstructure, market microstructures to determine whether he has enough time window to get in and out of the positions and all this kind of stuff. So very sophisticated. He came from,

Starting point is 00:23:41 used to run North America trading desk for Cumberland and then you traded at Tower Research. He used to run half a billion dollar portfolios in Chicago trading options and things like that. So that's an example of a strategy that we can run. So you're looking at, you know, sort of modified Bitcoin strategies where you're trying to reduce fall and increase returns. You're looking at, you know, maybe a basis trade that's kind of like a level up in risk, but a big level up in returns versus treasuries, something like that. And it also has a lot more capacity.

Starting point is 00:24:10 So there are a few different things that we'll be rolling out. And yeah, we don't believe in diversification, like a crypto index being added to Bitcoin actually reduces your sharp ratio. Adding a bunch of altcoins to Bitcoin doesn't actually help your investment returns historically. And I expect that to continue and probably get even worse for the altcoins over the coming decades. And then we also have a credit fund. So this is just the supply side of our Bitcoin backed loans business.

Starting point is 00:24:38 So that's also something that we have announced with Swan Institutional. We brought over John Melton, who ran asset back loans, Bitcoin back loans at Silvergate from inception through the wind down of Silvergate. And just like unchained Silvergate never lost a penny in the history of that business, because if you don't re-hypothecate and you have the Bitcoin, it's Christine collateral that's Martin Collable 24-7 into a global market gets even easier when you're only dealing with institutions. Yeah, so we're only doing ticket sizes of a million plus. So not trying to do the retail thing. It's not that complex on the operation side because you don't have to be margin calling. You're trying to get some retail investor to send $10,000 worth of Bitcoin in the middle of the night and things like that. It's just it's more about the availability of capital and our ability to recruit capital at a good interest rate that beats the other players in the market.

Starting point is 00:25:33 And to have it available. A lot of folks are just tapped out and don't have any money to land. And so I'm sorry, the lenders are what types of institutions again? Strategics, people who love us and trust us. Yeah. But over time, I mean, it'll be the same. It's, you know, it's credit funds. It's, you know, the lenders historically to this type of thing have been, in large part,

Starting point is 00:25:56 the private wealth management groups or private credit funds at some of the Bowles Brackett banks. There's a lot of private credit creeping into the market because banks had stopped lending. So it's just a matter of trying to blend that down. With, you know, we have some sources of capital that I would say are our strategic and want to supply us with capital that is kind of at market beating rates. And we like to have diversified sources of capital. So we kind of blend that rate up just a little bit by diversifying to some of the folks that can't supply capital at the lowest rate.

Starting point is 00:26:27 But, yeah, it essentially will be in market here in the next few weeks. So definitely by January for the lending, exactly. Yeah, so the funds are, funds are collected. We have a lot of demand for it already. We're just finishing setting up the structures and the operations. And so after the collapses in 2022 of the different crypto lenders, I'm sure you know, you recognize that there's risk there. So like, what do you think are kind of some of the new best practices? Again, there's not, though, because for that model, no one's lost a penny. So if you do not re-hypothecate, we're not lending out the back door. We don't need a risk officer. We are just doing 2x over collateralized

Starting point is 00:27:09 Bitcoin loans. You give us $10 million worth of Bitcoin. We give you $5 million of fiat, and we hold onto the Bitcoin until you pay it back. It's pretty simple. Daily margin calls, you know, and the Bitcoin doesn't move and you can see it on chain. Got it. But have you noticed whether people are more cautious about borrowing and lending at all? Or are you seeing that for that business model that people don't have any reservations. Yeah, I mean, these people understand the difference between, you know, just lending money to a shady offshore hedge fund, which is basically what the whole crypto industry was doing for the last few years with euros capital and FTCs, and an actual credible lender that's regulated and that actually does things right and transparently.

Starting point is 00:27:58 So another area that you're focused on is private equity, and I wondered what kinds of companies you're investing in, also whether you're making venture investments. Yeah. Yeah. Yeah. So we are. So we do credit and equity financings. We are investing in the Bitcoin ecosystem. You know, I personally started this quite a while back, first with Angel checks back in 2019 and then started Bitcoin or Ventures, which was, it still is an Angelus syndicate, but it was the first ever Bitcoin only fund started in January of 2020. Since then, I think you've had probably a lease on. I know she converted her Stillmark Fund over to all Bitcoin, which is great.

Starting point is 00:28:41 Fulger used to do a lot of other crypto things and became Bitcoin only. And then later we had Chris Callicott and TVP, the Trammell Venture Partners, started. And now there's got to be, boy, between ego death and 1031, I mean, Lightning Ventures, there's probably 25 to 30 credible check writing Bitcoin-only ecosystem funds, which is amazing in three short years. So things have changed a ton. We at Swan are also part owners of the GP of Bitcoin Opportunity Fund with James Lavish, Dave Foley, and I hold one of the three IC seats there, investment committee seats. So we've been cutting checks out of that for about a year now. And Swan Ventures is just sometimes our balance sheet and sometimes us raising external capital and just kind of managing the investment.

Starting point is 00:29:35 So we did a $20 million investment over the summer into someone in the Bitcoin ecosystem that we haven't announced for strategic reasons. And then we are just closing our second investment that will be announced should close this month of December and we'll be a little bit more vocal about that. But yeah, we have a head of Swan Ventures now. He's a 20-year Silicon Valley GP that's come over to run it for us. We'll make that announcement probably in January or February, kind of staffing up the team. So far, it's been me, our president, Yerme, and Hafer, CIO have had to do all the venture stuff as a second gig. So it's definitely nice to be able to professionalize it and bring in someone who actually knows what they're doing. And Swan will soon be launching the U.S.'s first Bitcoin-only trust company.

Starting point is 00:30:24 Explain what that means and why it's significant. Yeah, so from the get-go, when I looked at how Bitcoin was being done in the USA and around the world, it seemed really obvious that one of the things I wanted to see with custodians always blowing up throughout the history of Bitcoin, it was just too tempting to steal the Bitcoin. From a marketing standpoint, I just wanted to prove to people that we couldn't rug them. And so the best setup that I saw, the best model that I saw that could be done was the separation of custody and brokerage by using a trust company and actually having the assets legally owned by each individual account owner in an individual trust account that was individually segregated, bankruptcy remote. And so that's the route that we went from the very beginning. unfortunately, the dominant partner in that space that was able to offer that model was prime trust.

Starting point is 00:31:23 So that was a little bit of a hairy situation. For people who don't recall. Yeah. So they had the misfortune of, I can't remember if it was early 2020 or early 2021. I guess they didn't discover it for almost a year after, but they sent like $11 million of Ethereum, I believe, to an address that they didn't have the key for. again, I don't know if this is alleged or proven or whatever, but the, they had a management change at about the same time. And allegedly, the new management that came in tried to, it amounts to try to trade their way out of the hole and basically blew an $85 million hole instead of what was an $11 million hole. Anyway, so they tried to get out of the, just kept on digging deeper, deeper holes.

Starting point is 00:32:10 Anyway, that was not a good situation. I certainly believe in the model. The inputs for that model have not historically been great operations, and they certainly haven't served the B2B to C model where you are serving a customer like a swan that has a lot of end clients that has hundreds of thousands of clients ourselves. We just want that to be done right and to not have the distraction of crypto. I just wanted to be focused on Bitcoin. And it's something that we would have done four years ago if we were big enough

Starting point is 00:32:45 because trust companies are expensive to run. Now we are big enough and it's not a big deal for us to suck up that cost and to be able to offer this. And it's going to be spectacular because we, you know, I talked to our partner on this as BitGo. And I'm sure you've probably talked to Mike Belchie over the years. And, you know, obviously he serves crypto industry. But man, that dude really loves Bitcoin and has always hired insanely good technologists to take advantage of what's in the Bitcoin code to push the envelope on Bitcoin custody and what

Starting point is 00:33:15 you can actually do with Bitcoin that's unique to Bitcoin. And they've been hamstrung historically because it only made sense to take advantage of the things that you can do for Bitcoin that you could also scale to the hundreds of other cryptos that they also custody. And so they don't do all of the things they would want to, whether it's time locks or PBSTs or whatever it is. The stuff is above my pay grade. But our team understands all this stuff. So we're going to be able to do a lot of that. And we're, instead of having to beg a prime trust, for instance, to integrate lightning so that our customers can use lightning, when we own trust company, we can do whatever we want.

Starting point is 00:33:50 We can experiment with liquid. We can do lightning. We can, you know, kind of play however we want to and at the speed that we want to, which is going to be great. So we look like it, I'm pretty confident in Q3, maybe late Q2 to have that launched. And I think that's going to be a big deal for the institutional market as well because they're going to have an option. You know, if you're if you're the decision maker and you really care about Bitcoin and, you know, we'll be competitive on pricing and probably lower than Coinbase on this stuff because just does not a place that anybody really needs to make money. It's low multiple to customer your revenue. You know, I think we'll get a lot of the companies and governments out there that would rather work with someone that's not.

Starting point is 00:34:37 confused by and just sort of distracted by all the security and noise around 10,000 other assets. All right. So in a moment, we're going to talk about Bitcoin and the wider industry. But first, a quick word from the sponsors who make this show possible. The scorebed app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston game? Well, statistically speaking. Nah, no more statistically speaking. I want hot takes. I want knee-jerk reactions. That's not really what I do.

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Starting point is 00:37:24 tech stack. Designed with you in mind, Arbitrum empowers you to explore and build without compromise. Propel your project and community forward by visiting Arbitrum.com. I.O. today. Back to my conversation with Corey. Swan had to announce recently that it has to close accounts that have interacted with mixing services, although your company did make it clear that you are supporters of financial privacy. So I wondered how you plan to continue supporting privacy, even if you cannot service accounts that interact with privacy services. Yeah, so to be very clear, we warned people that banks may close their accounts specifically, and that banks may, banks that are partners with the trust vendors that we currently use may force the closure of

Starting point is 00:38:12 their trust accounts. So it's not Swan doing anything proactively. In fact, we're trying to make sure that people don't trigger that, which has been the thrust of our communications on the subject. Again, it sucks. We coordinated massive media push against this and letter-righted campaigns and we've had multiple thousands of letters submitted against this through our efforts. And again, it's something that we can mostly do away with with the launch of the Bitcoin Only Trust Company because that will be our own business development going and explaining Bitcoin to lots of partner banks. And so we will have a much broader, diverse set of partner banks that we're dealing with.

Starting point is 00:38:54 Wait, just to clarify, so you won't have to close accounts that interact with mixers? Is that what you're saying? When's the trust company launches? What I'm saying is that some banks are concerned with that, because there is no law here, right? This is just banks getting overzealous and saying that on the backs of the false reporting from the Wall Street Journal, some Congress people jammed through a bill before the retraction six days later. So false story, two days later, bill, four days later, retraction, but the bill is still moving forward. and some of these banks are jumping in line and saying, hey, I just don't want to deal with this potential risk in case that bill passes

Starting point is 00:39:32 or I just don't want to trigger anything because it's bad for business. What's great about being the company that next year will actually have the direct relationship with the banks is we can actually explain our risk profile. We can show what our users actually do and we can actually have those conversations directly, not having to go through a middleman being the trust companies that we've used historically. it'll be us having that conversation with the banks. And again, we're already having these conversations. We're explaining things as simple as, does it make any sense whatsoever to go to 7-Eleven and when you hand over the $20 bill to buy some gum, your bank balance is written on the $20 bill? No, that's a violation

Starting point is 00:40:15 of privacy. It shouldn't be mandatory to write that down, right? So it's really the same thing. Bull Bitcoin has been successful up in Canada, making the argument that mixing is required to comply with financial privacy roles in Canada, which makes sense. It actually should be required. In fact, every single exchange should mix the coins before distributing them if they want to comply with privacy rules. So those are the types of things that we'll be pushing for and we'll be starting a policy office instead of Swan, and we actually have that job rec written and we'll be participating with all these other groups trying to explain how things actually work and what a horrible overstep and tyrannical panopticon. They're trying to set up with these idiotic rule proposals.

Starting point is 00:40:59 So also next year, we're going to have the bulk of the bull run. I don't know how to express it, but Bitcoin will probably be in its bull run, which has already started. And that's obviously because of this expectation that Spot Bitcoin ETS will launch as we discussed. So what do you think the impact of the spot Bitcoin ETS will have on the industry? Look, it's going to be big, you know, and there are pros and cons to it. Obviously, you've got a bunch of Bitcoin going into third-party custody and, you know, kind of U.S. government kind of having a little bit more control over that pile is what it is. But at the end of the day, if you want to have Bitcoin and you want to use it privately

Starting point is 00:41:45 and you want to have it in self-custody, you can. and that's still the law of the land, and it's still going to be the law in many jurisdictions around the world, regardless of what the U.S. does. So it's definitely not an existential threat for Bitcoin. And it is a massive pro for price development. Yes, I expect this to usher in a ton of capital flowing into Bitcoin. I expect Super Bowl ads. I expect NBA playoffs to be papered every golf tournament next year. It's just going to be advertising Bitcoin ETFs. I mean, it's going to be a massive land grab for these guys because, you know, as you know, like, when you want to trade NASDAQ, it's the Q's. You know, most of the liquidity is in one ticker,

Starting point is 00:42:25 right? And the spreads are tightest with the one ticker. And that's just how it goes. So they're going to really, really try to battle it out as much as they can and try to get as much of this market share. And it'll probably end up being, you know, 70% to one of those tickers and 20% to the second. And everybody else will split the last 10 is usually how it works with these category ETF. So, yeah, they're going to go nuts next year trying to win that. Do you have a projection for how much money you think will come into Bitcoin ETFs in that first year? I don't.

Starting point is 00:42:57 I don't know more than what you see on Twitter, billions and billions of dollars. But I have to say, though, I just want to say, like, don't trade this. Like, buy Bitcoin that you're going to hold for 10 years. There will be a vicious pullback. At some point, there will be what feels like. like a crash in 2024 because there always is. It'll pull back like at least 40% on the way up to wherever it's going. Mark my words, there will be at least a 40% drop in the Bitcoin price at some point because there always is. And so if you don't understand Bitcoin like anything,

Starting point is 00:43:32 buy what you know. You should invest a lot of your time and effort trying to understand Bitcoin so that you have the conviction to hold for the five or 10 years that you're going to need to make it worth all of the pain of the volatility along the way. And your family calling you an idiot when it's down 70, 80% after the next crash, whatever it is. Be prepared to steal yourself to weather the storm. We weren't all smiling last year. Yeah, definitely not. So between the ETFs launching, then the halving Bitcoin also reaching his 15th birthday, I wondered kind of like what additional milestones or developments you're excited about or expecting to see in Bitcoin? Yeah. I mean, we're still waiting for that party on Sailor's Yacht at 100K, so that'll be a

Starting point is 00:44:22 nice one. Do you expect that to happen next year? Oh, 100K in 2024? I'll be happy with a new nominal all-time high in 2024. Honestly, like, that would be fine. I don't mind it building slowly over the course of the year. And I think there is going to be some ugly regulars. At least some news and they'll probably try to jam through and like ban on self-custody and an appropriations bill or whatever we're worried about with Warren right now. You know, there's always something out of left field that quashes the unblocked just rocket ship ride up. It never just quite happens that way.

Starting point is 00:45:01 There's always something that pops up. So there will be something that pops up. I don't know what it is. But yeah, I think it's certainly possible that we see an earlier bullmark. it, if you sort of look at the four-year cycles, you know, reaching some kind of high in 24 would be super early. Usually, according to the previous ones, it was end of 13, end of 17, end of 21. So we'd be looking at like end of 25. It does feel like it's off to an early start, and it does feel like maybe that means it'll burn out early.

Starting point is 00:45:32 You know, there's certainly a lot of folks, myself included, that think, you know, based on the data, the real high in the last cycle was actually April of 21 and that the second one was just a leverage fake pump, mostly for salonah holders to try to get out of their bags. So they had to drive Bitcoin up falsely. There was just no retail interest, basically, after May of 21, that was all institutional. It was all leverage. And it was all just the Ponzi's last gas, essentially, that drove the November 21, 69K high. So yeah, I mean, four years after that would be April of 25, and if the cycles are getting shorter because people are kind of more attuned to the dynamics of the having and kind of the decrease in marginal supply because of the reduced block rewards each having. You know, you could see the,

Starting point is 00:46:28 you could see the bull peaks pulled closer to the halving each cycle. One thing I am pretty sure of is I think that the diminishing returns per cycle, will probably be broken this cycle. Diminishing returns, meaning that the increase in the Bitcoin price will be higher rather than lower. Two to $1,100 in 2013, like a $2 low to $1,100, that was $5.50x. And then you went from like 180 to 197 in 2017, which interestingly was 20%, was 20% of the rise that was 110x. And then you went from 3150 to just shy of 69K, which was actually 20%. Again, it was 22x. So you literally geometrically went 550, 110,

Starting point is 00:47:21 122. There's no way we're going to see like a 4.4x rise off the bottom of 16K. It's going to be higher than that. Right. So at least that, that geometric reduction in the cycle load high is definitely going to break. I don't know what we'll see. So that's roughly like what, 90K or something? So you're saying like you think the high will be? It breaks if you get through 70K. So if you get a new all-time high, you've broken the geometric diminishing returns. Oh, okay. Sorry. I thought you said four and a half. Or I guess that'd be more like 80. 4.4 times 16, yeah. Okay. That's 70. Yeah. And all I can say here is like I will stick to my long-term target that I've been giving since 2020 in 2020, a million dollars a coin by 2030.

Starting point is 00:48:14 And everything else is just a guess, but I'll stick to that. And I don't know what that's going to be in nominal terms by then. It'll be at least, it'll have to be at least 1.3 or 1.4 accounting for inflation over the course of the decade. But yes, in 2020 dollars, my 2030 prediction is a million dollars a coin or sat sent parity. Okay, well, it'll be kind of hard to come back. In fact, check seven years for now, but if I remember in seven years, I will try to do that. You're going to have an empire by then and you'll be producing 15 podcasts and you'll be like the Dr. Dre of, you know, and you'll have Eminem working under you and then they'll be 50 cent over here. It'll be great. Oh, wow. Wow, that would be hilarious if that happened. No, I meant that I don't know if I'll remember seven years from now to come back to you. Your audience will remember. They always find it on Twitter and they just like

Starting point is 00:49:06 rake you over the calls for your false predictions. Well, it'll be you, not me. But anyway, okay, so I do want to talk about something that is kind of talk of the town in Bitcoin world these days, which is the debate in Bitcoin about the use of the blockchain for inscriptions. Some people are calling inscriptions spam. Some are saying that the Bitcoin blockchain is uncensoredable, therefore any activity is legitimate. What's your take on this? Why not both? Like, there's always been spam, and it's also a legitimate transaction. So to explain your position, yours is not the typical position. I think it's much more typical than you would think. I think it's actually the mode. I would say it's probably the

Starting point is 00:49:51 majority position is like, eh. You know, like we look at things like I was just looking at, I think it was in 2021 or even early 22, monthly revenue at OpenC was like $400 million a month. And last month it was $1.7. I mean, some of that is like they've lost their dominance. It's the one, that one platform has... Fair enough, but I think these themes come and go, though. And, you know, I think most of this is just pump and dump hype.

Starting point is 00:50:23 So you expect this craze around inscriptions and ordnals to fizzle out. Is that what you're saying? Yeah, it'll just right size. It'll be, you know, it's just all these people jumping in with their hype projects trying to, you know, not dissimilar from all the money you're going to see spent by 12 to 15 ETF competitors. And there's going to, you know, a few years later, there's only going to be one or two actually spending the ad money because everybody else kind of died out and small. Similarly, everyone that did NFTs in 2021 and 22 is jumping in trying to do BRC20s and they're spending venture. your money, you know, not their money, or they're spending their ill-gotten crypto gains trying to do another pump-and-dump. And, you know, as soon as they are not profitable and there's no more suckers at the table, they'll move on to the next grift. So that's basically what's going to happen. And I'll tell you what's definitely not going to happen is any of these promises about

Starting point is 00:51:20 ordinals somehow bringing about the promise of the same type of promises that blockchain promised in 2015-16, that NFTA is promised in 2021, literally taking all of the same documents and the same decks and just finding search replace, replacing blockchain with NFT. They're doing it with ordinals now and saying that somehow this is going to put records on the blockchain and all this crap. Like, of course not. It's so stupid to use horizontal storage and store documents on everybody's note. It's idiotic. And so what you'll see is rational heads prevail and they won't try to do that. And that was ludicrous to begin with. And you'll basically basically see things that actually do scale like open time stamps and basically keeping the documents offline,

Starting point is 00:52:02 but at least being able to prove that they weren't altered since the time of the time stamp. That's how you actually do this sort of thing. And you don't need tokens and you don't need ordinals, NFTs or blockchains other than Bitcoin. Was you say that the workaround to enable inscriptions is an exploit and that it's something that should be, you know, like patched? No, but again, Bitcoin changes sometimes. and sometimes what I think should be done isn't what ends up happening and that's okay. And I don't understand it as deeply as the people that really, really care about this thing.

Starting point is 00:52:36 I would say it's an open market. I think a lot of people don't understand that miners get to decide which block templates they put out in that that is an open market and it's free for them to decide what they want to include in their blocks. So the block production is something that is that they can decide how they want to do it. And again, this is over my pay grade, but I'm just kind of parroting what I've seen filks that I've looked to for signal over the years, types of arguments that they're making. But, you know, at the end of the day, this was something that was enabled or made way easier. I mean, two orders of magnitude easier. Being able to get more than 80 bytes into the code was made

Starting point is 00:53:18 possible by taproot. It was not foreseen. It was not intended. It was something that people who were behind Taproot did not realize that this would be able to be done. It was a discovery that Casey made. Again, I just kind of take like the agitation and the conversations and the interest and the attempts to further it and to afford it and to rationalize it and to, I mean, you see the like it's all good for Bitcoin. Like it's Bitcoin is anti-fragile and the more you kind of hammer at it the more strong it gets. And so I just don't really mind the agitation. I can say I don't like scams that get described in the press that also have the word Bitcoin in them, which is what usually draws my attention. It's why I went hard at Do Kwan, Mishenski, and SBF last year. So I don't

Starting point is 00:54:17 like the scammy stuff, but it's not all scams either. Like digital art is a thing. I've believed that since the beginning, and I totally understand the urge to say that you own a piece of digital art. It's the extra promises in marketing claims and the moonboys that make 99.9% of it super scammy, but the category itself innocently presented and accurately presented, like, yeah, that's a thing. It is. I get it. Well, one other thing that I want to ask about was, as I'm sure you're aware, before ordnals came on the scene, some people in Bitcoin were concerned about the security of the Bitcoin blockchain, because if activity was going to move to layer two, and fees kind of remained where they were, and the block reward would decrease as its program to do.

Starting point is 00:55:08 If the price didn't increase quickly enough, then the Fiat value that miners would earn would drop significantly, and that could put the security of the Bitcoin blockchain at risk. So did you share that concern at that time? Not at all. That's basically altcoin miners pumping that narrative trying to do altcoin things on Bitcoin. So that's not a true narrative. That's not actually how Bitcoin's network security actually functions. Oh, so explain your perception of that.

Starting point is 00:55:37 It's probabilistic. So it's probabilistic, right? So if you have a lot of certainty that there's not going to be a 51% attack over the next three blocks, then that's transaction finality probabilistically for you. And that's good enough for a $10,000 purchase or something. If you're going to pay $500 million for something, you may not want to actually give over the good or the service finally until you have that in escrow, for instance,

Starting point is 00:56:05 and you actually see that thing maybe 10 blocks deep or maybe even 30 blocks deep, something like that. It's probabilistic. You want to make sure that you match your requirement for how deep it's buried in the block. blockchain according to how important and sizable the transaction is and what your measures are for reducing your risk during the final closing of that transaction. So it's more complex than what people generally say and it's probabilistic. There is no concern for me. I just think there's

Starting point is 00:56:38 basically a certainty that there's going to be insane demand for layer one block space in the coming decades. I think that there is almost no consumer or business demand to spend Bitcoin today because everybody expects the purchasing power of Bitcoin to rise dramatically in the coming years. So I don't expect medium of exchange to take off in any meaningful sense until the 2030s. But one thing is, wouldn't the fees be quite high then in order to be able to get into, you know, if you're saying layer one activity is going to be high and block space is limited, then I think certain lower, you know, level transactions will be priced out, basically, and only kind of huge trade.

Starting point is 00:57:24 That's right. Yeah, this is what these guys, this is what these promoters of the security budget problem always twist themselves into a pretzel because basically every other week they switch from saying fees are too high to fees are too low. Fees are too high, fees are too low. And really, they're just trying to figure out some way to market something really, coin, some kind of pump and dump scam usually. But maybe you didn't understand what I was saying, because what I'm saying is like certain transactions below a price point were going to be priced out and only the largest. So you don't view that as a problem. Oh, are you, so you're talking about now. I was talking about like in the future, like when people try to spend Bitcoin much more, that's going to drive. And so what we're doing right now because they're stressing the network by taking up the, you know, rising transaction fees sort of, let's call it.

Starting point is 00:58:15 temporarily and artificially by storing JPEGs on the blockchain, that's forcing a lot of innovation very quickly on scaling, right? So ARC is often running and maybe they'll get something in market in three years or something. Lightning companies are all developing faster than they would and attracting more investment. Liquid blocks are nearing, being full for the first time ever out of block stream. So I think there's a lot of innovation going, trying to figure out how to essentially just batch more transactions into a single on-chain transaction to lower down that cost. So in that respect, I don't really mind it. Again, I don't mind the agitation.

Starting point is 00:58:55 I totally understand why some Bitcoin businesses that rely on low transaction costs are annoyed, and they're fighting for it. And I get that. It's not really a problem for us, even though we've had free withdrawals forever since inception, and we always will because we have enough volume that we can still do a withdrawal really quickly, even batching 50 or 100 transactions or withdrawals into a single transaction. So that's how we basically chop that cost up across all the people that are withdrawing over the next hour or two hours or something like that. And that's how we handle it.

Starting point is 00:59:34 But maybe a smaller business that's trying to provide some kind of off ramp and let their consumers do that. and they're facing a $24 charge, and they have to pass that along. And, you know, somebody was buying a $15 sandwich or something like, that's not going to work. So I get it. They're frustrated and their model is broken and it sucks for scaling. Because if you haven't already hit scale, you know, like some businesses have scale and can handle this, the crypto exchanges or whoever can afford LightSpark or, you know, someone like us that's already large enough, like, we're okay. Lots of people around the world.

Starting point is 01:00:11 You see how frustrated and how unable all of these businesses in developing countries. They're just unable to onboard people on a Bitcoin right now because it's such a bad product when the transaction fees are so high. Like how do you even rationalize, hey, use this instead of cash or use this instead of whatever? It just muddies the argument and makes it impossible to onboard those people without using a centralized service. So in that respect, I just think it's going to cause a spike in innovation, which I welcome. And I also think that it will dwindle down and right size itself once the fast money boys have washed out. Okay. But just at one point in there, it did sound like you were saying the future was going to be people interacting with centralized services to access layer one. Because that's what they're doing right now. So that's the worst case scenario is you just take. all the rails that we have right now. Michael Saylor talks about it as the last mile, and you just sub Bitcoin in for yen, yuan, euro, dollar, right? And it's just Bitcoin

Starting point is 01:01:16 and Sats instead of those things. And you just use the same rails you have now. What I think will happen, though, is that you already have seen this explosion in attempts to scale self-sovereign usage of Bitcoin, both from a custody perspective and from a transaction perspective, and I think that will just continue to accelerate. It was going to anyway, without the ordinal stress. So these problems were going to start being very real in like 2027, 2028. I don't think it was going to be this bull run that caused enough of a mass of people to have over 90% of their liquid net worth and Bitcoin and thus have to start spending Bitcoin in the numbers that require venture capital investment to fund a huge batch of companies to go

Starting point is 01:02:05 and attack that problem, I still think it's probably going to be too early. I've actually placed bets on a bunch of lightning companies and gotten involved in ARC and things like that in case I'm wrong. I put it at about 2% that I'm wrong and that it happens before then. So I spend most of my time at Swan focused on store of value, but in case medium of exchange at scale happens before I think it does, at least I'll have a little upside in some of these other companies. But really, my expectation is that it won't even be, you know, it's not 2024, it's not 2028, it's more like 2032, that enough people have ridden Bitcoin up enough that they demand products and services to be able to spend their Bitcoin at the scale that makes it interesting for venture capital. And so that's

Starting point is 01:02:52 what I think is makes it interesting for investors, for investors to build those products, to fund that development. Because otherwise you're just talking about hobbyists and it's really hard to scale things without a lot of capital. That's my framework and I'm happy to adjust if it happens faster. And that is why it actually is kind of interesting to watch because this is like a little trial run of what it was already going to look like in 2028 or 2032. And we get to see it in like 2023, 24 and put that stress on it. So it's earlier than the people that have to overcome that. it's before they want to deal with it, and the meeting of exchange industry in Bitcoin is not as developed as it needed to be to be able to handle this. They don't have the tools and they haven't

Starting point is 01:03:36 built it, but this is actually pulling capital into them to actually make it happen faster. So we may actually be in a better position to handle the blocks being full at the end of the decade from monetary transactions instead of JPEGs because we have JPEG pump and dumps today. Yeah. I mean, I get your point. that they might go away and yet at the same time I'm thinking they might just look different in the future like meaning there might be some other evolution of them and they might again be filling up block space but we'll have to see um so I have to ask you of course because famously you were one of the few people quoted in Ian Allison's article that set off the chain of

Starting point is 01:04:19 events that led to FTX's collapse and your quote in that article was a pretty choice quote It's fascinating to see that the majority of the net equity in the Alameda business is actually FTX's own centrally controlled and printed out of thin air token. So I'm so curious, at that time when you were interviewed for that article, did you, like, what did you think kind of was the state of affairs at Alameda and FTX? Did you expect it to be what it turned out to be? Or just what were your thoughts then? I honestly thought it was over when I saw that.

Starting point is 01:04:53 I couldn't believe it. That quote, that was the only quote in the article, by the way. Everybody else wouldn't put their names on there. So you had to paraphrase them and put it in his own words. I had no problem being quoted for it. But what I'm asking is, did you think it was a fraud? Like, thinking that the business for them was over is a different thing. Oh, okay.

Starting point is 01:05:11 So, yeah, talk about that. So specifically, I just, there's no way that they would have been able to collect the cap table that they had. I mean, when was their, when was their Series C? Wasn't it earlier in 2022? Wait, you're talking about FTX or Alameda? FTX. But I knew all along because everybody that was like in the crypto Bitcoin industry always knew that there was no wall between them. That was completely understood, you know? Yeah, by the way, it was July, sorry, January 2020. January of 22 was, yeah. So, you know, that was a 32 billion dollar valuation and, you know, right on the heels of another big fundraising the year before.

Starting point is 01:05:55 And so if you saw how crappy that side of the business was, it would just freak you the F out. It was clearly not these wonderkins just crushing it. They don't own anything other than things that they printed and pumped themselves. It was just absolutely mind-blowing. But it was weird, though, because then as soon as you see that, You're like, oh, right. Nobody I knew ever believed the kimchi premium bullshit from like 2019.

Starting point is 01:06:29 So that was bullshit. Meaning the trade that Alameda did to get off the ground. Yeah, like that was that was fake, right? Right. They were doing it in Japan, but anyway, it's still called the kimchi premium, I think. So it hasn't. Anyway, sushi premium or whatever. Anyway.

Starting point is 01:06:45 So that was bullshit, right? And then you're like, okay, but I also remember when I was like dealing with OTC desks and trying to set up OTC desks for Swan in like, you know, 2020, 2021. And like their BD team was children and completely unprofessional, right, versus everybody else you deal with. And like at the time, you know, you were like, oh, well, everybody thinks they're super smart. So maybe they're just busy. And these kids must be geniuses. And then you're like, oh, wait, no, it was bullshit. It was always bullshit. And then you're thinking, you know, I knew he was full of shit and talked about it publicly starting in June, July of 2022.

Starting point is 01:07:23 I know a lot of people were on to him earlier than that. That's when I realized it was when he started bidding for BlockFi and Celsius and trying to be the JPMorgan of crypto or whatever. Thanks Jim Kramer for the signal as always. So that was obviously a sign of something rotten and wrong because those businesses had dramatically negative value. right they were bankrupt and their brands were worth negative hundreds of millions of dollars right you'd have to pay me half a billion dollars to launch anything under the name blockfire or Celsius right so there was nothing there for him I couldn't put my finger on what it was that was wrong with it I just knew he was lying and that's why I just started going on TV and calling him scam bankster fraud which I was thrilled to actually see in a New York magazine had a line a few months later. But I didn't know how bad it was. Like I really, I didn't, I didn't have the inside knowledge to know really just how effed up that place was at all. I watched as a spectator like everybody else. But as soon as I saw that balance sheet when Ian sent it to me, I was like,

Starting point is 01:08:33 oh, this is over. So something else that's interesting about you is you've been highly critical of venture capitalists and crypto. You did mention in your story that there was a period when those were the people that you look to for Signal. But I do have to ask that, you know, you've been particularly critical of Andresen Horowitz, which is probably the firm that's most supportive of crypto, especially over the longest period. And I wondered, you know, if you could talk a little bit about why it is that you have such, let's say, you know, intense feelings of dislike for this VC firm. So, I mean, I have friends at Andreson still to this day and I've done deals with them in venture before I got into Bitcoin. I've been in their office a bunch of times. I still

Starting point is 01:09:17 host events at the Rosewood, you know, sometimes 200 feet from their front door. You know, and I still, I respect a lot of what Mark and Ben have done. And I certainly think what they did was very novel, making the founder the star and treating it essentially like a Hollywood agency. I think a lot about what they did, everybody has copied cents, essentially. Like, you have to have a platform to be a big venture firm now. And everybody copies essentially the template that Andrason created starting in the late odds. So in that respect, you know, kudos to that. I think that the incentive to collect massive piles of AUM and to flatten your J curve extremely quickly, which you can do when you print and market your own token and you can sell it without actually having product market fit

Starting point is 01:10:13 or delivering any value whatsoever to the real world. And you can get it for 0.1 cents and sell it for 30 bucks if you market it well enough. That incentive is just too strong and too well matched to the venture capital fund raising, take clip on AUM, take your gains. Like it's just such a, it's like crack. It's like it has receptors in the VC brain that they cannot see what they're doing. So some of them are absolutely nefarious and they absolutely know what they're doing and they are just scumbags and that is 100% true. But it is also true that some of them just can't see the forest for the trees and know not what they do. And I think that is true as well because I've had one-on-one conversations with people that I otherwise believe to be good high integrity people and they're still doing this shit. And so Andresen I generally target because it's the largest and best known of the tradition.

Starting point is 01:11:08 venture firms that has pursued this model and has pumped the most into it. And again, I think they've done a massive disservice to 8 billion humans on the planet by lessening the curve, you know, basically like diminishing the curve of Bitcoin adoption through all of this crypto-scam marketing. So I think they're, you know, the responsible for a plurality of the anti-Bitcoin narratives over the last six years. I don't know if it's 20% or 30% or 30%. percent or whatever it is, but it's their marketing of Solana and Worldcoin. And, you know, the next Bitcoin is Bitcoin. Like, it's not, it's not this other thing that you're trying to pump and promote right now with Sam Altman and Ali Yaya and, you know, Chris Dixon in particular.

Starting point is 01:11:52 I used to read his stuff all the time. It's just been unbelievably disappointing to see him go this way. And then creating the revolving door with the regulators and bringing Katie Hahn over and all this stuff. Like, it's just all so just gross and scammy. So a lot of it is just feeling betrayed because I used to like them a lot. But I'm confused because you just said that they're anti-Bitcoin, but I actually don't think they are. Or like what makes you think they're anti-Bitcoin? The marketing of all the crypto scams by definition requires lying about Bitcoin almost

Starting point is 01:12:22 always because you're usually saying like you need this coin to do some other thing and therefore you need this other money. So monies are all in competition with each other. So by definition, you are sucking away demand from Bitcoin when you're promoting a false crypto token that's going to go to zero in Bitcoin terms over the long run anyway. So that's basically what they're doing. Well, I guess, I mean, I guess the philosophy is that when you have blockchains, there tends to be native assets to them.

Starting point is 01:12:54 And because the Bitcoin blockchain is limited in, you know, how you can use it, there are certain applications that people can imagine being offered in a decentralized way that could not be built on Bitcoin. So personally, as a journalist, I view a lot of the activity in the space is falling into one of two big buckets. One is money crypto and the other is tech crypto. So like would you say that something like Ether is, or sorry, how do I want to phrase this, that it does not have, that Bitcoin could, you know, serve the purpose that Ether serves.

Starting point is 01:13:32 So I think you will just see what's already kind of happening, which is like there are things that actually need real decentralization and those things will be done on Bitcoin or layers of Bitcoin over time. This thing is going to take 50 to 80 years anyway, right? Like this is not an iPad. This is a technological revolution. For this to be spread across 8 billion people and for everyone to be using Bitcoin and for us to kind of, it will change every industry in some way, not just one industry, right? It's not going to just change finance. It changes finance technology and, you know, everything else too. It'll change agriculture and energy in particular.

Starting point is 01:14:09 It's already starting to change energy a ton, balancing grids and accelerating green development, things like that. It's just early. And the alt coins, there's no reason to have money that holds value for a long time. It's just a Chucky Cheese token. If you need to buy some, you buy it, you use it. you use it. And then if you get some back, you sell it back and you go and get your prize or your tickets or your money back, right? And Bitcoin is real money. So I just don't see these things

Starting point is 01:14:41 any of the tokens lasting for the long term. And I see them all dwindling toward zero in Bitcoin terms, as they always have, right? And what about stable coins? Do you also see them? No, asset back tokens I don't care about, right? That's just, it's as good as it's as good as the trusted third party that custodies it and whether you trust them and their regulation regime and then whatever rails that goes over doesn't really matter. I think the best outcome for crypto and blockchain is basically incremental improvements to financial IT. So that's generally what you see if there is some kind of proof of concept that's turned into something lasting with settlement or trade or whatever. It's a permission database. It doesn't require the token.

Starting point is 01:15:30 it may use some of the research on cryptography or consensus or something that one of these alt-coin teams has come up with. Because again, if you throw $50 billion and a bunch of smart people out there, they're going to come up with some interesting stuff, right? Like ZK roll-ups looks like at some point it'll be used on Bitcoin and it came out of Ethereum land and that's a good effect. It doesn't mean that on balance Ethereum has been good for the world, but it's pretty hard not to have some things in the pro column, right?

Starting point is 01:16:00 Like something can be 99% negative and 1% positive, and you can take that 1% and go use it for other things. So you think Ethereum was 90% negative and 1% positive? No, that was an example. Okay. I said something can be. I said something can be. I haven't really thought about what the balance is. I think it's, you know, I think it's been probably the root cause of most of the scamming,

Starting point is 01:16:24 most of these ERC 20 tokens over the last six years. And again, that's been that noisy top of funnel that has. has thwarted the pace of Bitcoin adoption over the last six years, and that's going away in January because the top of funnel is going to be these Bitcoin ETFs to kind of tie this whole conversation together in a bow. I'm really excited to market Bitcoin and teach people about Bitcoin with less competition from the affinity marketing, orange washing crypto scam. Well, I have two last quick questions. I know we're well over time, but I did want to ask you, Are there any projects that you're looking at that you currently think are perhaps like the next

Starting point is 01:17:03 FTX or Tara Luna? I mean, I don't go around looking for scams unless they talk about Bitcoin. Like, I only really became aware of Luna when he started to do the Bitcoin treasury. And it was like, this dude's a scammer. Why is he on Bitcoin podcasts? It took about 45 minutes to understand the dynamics of the Ponzi scheme and go public with it on March 24th of 2022. And that's when I started battling them.

Starting point is 01:17:25 And then same thing. Like the only reason I even became aware of Celsius. basically was because it came right out of the Luna scam when I found out that they had sold half a billion dollars of UST over the weekend before the collapse of UST. I was like, oh my God, I thought you guys were like a savings bank. Why are you, why do you have customer assets in the Ponzi scheme? Right. And then Mishensky went on YouTube and said that Bitcoin Maxi's like Corey are responsible for Bitcoin, 30% of Bitcoin is being lost. And I was like, what is, so he's actually trying to recruit people's Bitcoin and do his Ponzi scheme? Like, F that guy. Right.

Starting point is 01:17:59 So that was kind of, I'm not out there just looking for the next scam of any flavor. It's only if it kind of hits my radar because it's near Bitcoin that I become aware of it. I'm not out here trying to say, I mean, I think all their tokens are going to zero in the long run, as they all have historically. There's only three tokens in history that I've had a new all-time high in Bitcoin terms, three or more years after their first all-time high. Ripple was higher in 2017 than it was in 2013. B&B was higher in 21 than it was in 17 because it only got kind of like half a pomp and Doge was higher in 21 than it was in 17 because Elon was tweeting about it. No other crypto token in history has had a new all-time high in Bitcoin terms in a second cycle.

Starting point is 01:18:44 So I expect that to continue and maybe you'll have an aberration. Maybe it'll be like one popcorn altcoin that like proves the role because Elon tweets about Doge again in 2029 or something like that. or Solana flippins Ethereum because people finally realize, like, centralized is better if you're writing smart contracts and, you know, they're on their March short, AWS as a better back end for all their projects. But, you know, broadly, it's kind of silly, unless you're an insider in the crypto casino where the house takes like a 50% rate instead of a 5% rate in Vegas, it's kind of silly to be in that game. All right, Corey. Well, last, again, quick question. We're going to try to do this in. like 30 seconds or less. Swan raised $205 million in 2023. You plan to raise an additional $150 million.

Starting point is 01:19:32 Any word on how you plan to deploy that money? So the 205 that we mentioned in the Fortune article was for Swan institutional. So that was money that we actually deployed into other projects. We actually raised, I guess, about 40 mil in 2023 for Swan. So that wasn't included in that number. And then, yeah, so we're going out for a Series C of 150 in Q1. So we'll be kind of in market in JanFab, March, something like that. Expect that to close, maybe April, something like that.

Starting point is 01:20:06 You know, you got to select a board member that you're comfortable hanging out with for like seven years. And, you know, we're looking for an institutional investor that runs a big pile of money that also is a bit coiner. It might take a minute to find that person. Okay. All right. Well, we'll have to check back and see how it turns out. But, yeah, that's for an international. international expansion. That's for Australia, Europe, Brazil, expansion of services and products

Starting point is 01:20:29 and building custody tech and payments tech and all that kind of stuff. Okay. All right. Well, where can people learn more about you and Swan Bitcoin? We're Swan, S-W-A-N on Twitter. That's easy. Swan.com. Swan app and Apple and Google Play. I'm Corey Clipsdon on Twitter. And what else? If you want to learn about Bitcoin, my favorite book on the subject is inventing Bitcoin. I think it's the best two-hour intro to the subject that's ever been written, which is why I hunted down the author and then found out that he was a CTO and he became my co-founder, Jan Pritzker. But he's just a spectacular guy.

Starting point is 01:21:07 He did such a good job with that book. I give it to everybody. And we give it away now, which is awesome. So swan.com slash free book would be the number one quick resource that I would recommend getting into Bitcoin. Perfect. All right. Well, it's been a pleasure

Starting point is 01:21:22 having you on Unchained. Yes, absolutely. My pleasure, Laura. Thank you. Thanks so much for joining us today. To learn more about Corey and Swan, check out the show notes for this episode. Unchained is produced by me,

Starting point is 01:21:33 Laura Shin, pulled out from Kevin Fuchs, Matt Pilchard, Juan Aranovich, Meckengavis, Nelson Wong, Shashonk, and Margaret Coria. Thanks for listening. Unchained is now a part of the CoinDesk Podcast Network For the latest in digital assets, check out markets daily seven days a week with new host, Noel

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Unchained - Why Swan CEO Cory Klippsten Is Still Convinced That Bitcoin Is Headed to $1 Million - Ep. 584

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