We Study Billionaires - The Investor’s Podcast Network - BTC106: FTX Failure, GBTC, Genesis DCG & more w/ Dylan LeClair (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. Today's guest needs a little introduction because he's been the Bitcoin magazine journalist that's been in the center of all the recent exchange bankruptcy reporting, and that's Mr. Dylan Leclair. For people that aren't familiar with Dylan's work, he's a brilliant writer and on-chain analyst that's often the first to break some of the biggest stories in the space. On today's show, we talk about the recent FTX bankruptcy, Silvergate Bank, GBTC,

Starting point is 00:00:30 Genesis, Ethereum, counterparty risk, and much more. So without further delay, here's my chat with Dylan. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey, everyone, welcome to the show. I'm here with Dylan. Dude, we have so much to talk about, I don't even really know where to start, to be quite honestly. I have a whole bunch of things written down, but I guess I'm just going to throw it over to you, like, where do you want to start? Because there's so much going on. Like, what do you think is at

Starting point is 00:01:15 the top of your radar? Well, I mean, the last two weeks have been crazy. It feels like the crypto crowd gets hit with the Black Swan seemingly, quote unquote Black Swan every two months here. And, you know, no one could have seen this coming when all of this is just obfuscated leverage and balance sheet impairment. And the things that we've seen with, you know, the casino style, Wall Street for the last three, four, five decades, I mean, way farther than that, right? Like financial history is littered with these lessons and the existence of no lender of last resort in this space, you know, 24-7, 365 unregulated securities market, at least to some interesting results.

Starting point is 00:01:53 And, you know, somewhat paradoxically, just implosion of all of this paper Bitcoin is taking the price. And so, so anybody that actually understands what's unfolding here with the greater macro picture and the existence of this open neutral protocol, digital bearer asset is just laughing to themselves. Because, you know, I'm not a position to be a fourth seller. You're not in a position to be a forced seller. And like, you know, I have all the time in the world.

Starting point is 00:02:17 So burn it down, you know, like I have no problem. Amen. Market leverage getting liquidated. And you know, like especially with this macro cycle, the fed's in a position where they're not going to be able to keep this thing duct tape together at 5% or 4% rates when this monetary policy with a lag, that kicks in. That's a different discussion. But, you know, Bitcoin, here we are, 80% down from the highs, hash credit, all time high, all these on-chain metrics that we've been

Starting point is 00:02:43 sharing back and forth with each other for the last year, eight years. Yeah, as crazy as I've ever seen them, I will say one, maybe not flaw, but I overestimated in my analysis in 2021 was, look at the supply, this thing is so inelastic. Yeah, there's no, there's no real sellers without really realizing or maybe I overestimated. In fact, that 20% of that supply, if there's just more marginal sellers and buyers, obviously can tank the price. And so as we've seen, you know, the macro cycle turn and the long bond starts to sell off. And then all of these implosions and fraud and the crypto land, Bitcoin just has this liquidity gauge, both for legacy markets and, you know, beta and the crypto casino has gotten pummeled. So I kind of threw a lot of you there,

Starting point is 00:03:28 but I mean, this is nothing about a thing. And it's going to be a hell of the next 18. months, 24 months after this. Man, I just want to bottle up what you said and just pump it into my veins because you're exactly right. Like, Caitlin Long has been jumping up and down about this for at least a year, more than a year, more than a year. On the way up, she was kicking and screaming. She's just saying, like, there are companies out here creating paper bitcoins and they are

Starting point is 00:03:55 totally manipulating the price action. When she was saying it, I was like, yeah, I'm sure that's how. happening, but how much, you know, I really wasn't quite sure. But now it is becoming so abundantly obvious that what we're watching is just just a straight bank run for real Bitcoin. Everybody is saying, show me a real Bitcoin. And like FTX, they had a negative balance on their balance sheet. I mean, Dylan, I'm just thinking about all these people that are watching a commercial with Tom Brady or Steph Curry or any of these people, they're downloading the app. They're smashing by Bitcoin, right?

Starting point is 00:04:38 And they're looking at their FTX app and they're thinking, I mean, how, if you took all the people that had that app that had bought Bitcoin, that thought they had it in their account, only to find out that FTX had a negative balance of Bitcoin on their books, it's insane. It's insane. Yeah, and really more so, Preston. I think the paper Bitcoin thing, 100%, but also this Bitcoin exchange rate is taking a hit

Starting point is 00:05:09 because you had Alameda and FTCX run upon Z and pump, you know, what was the total Solana ecosystem market cap at the top of the 2021 cycle? Yes. Like $250 billion of a liquid, like some of these Solano coins, Preston, 40 billion dollar market cap, fully diluted market cap.

Starting point is 00:05:26 Yeah. With, you know, a $1 billion current free float market cap, right? And so like this whole, and Alameda and FDX stuff that on their balance sheet and, you know, pumped it into everything else, right? You had the L1 trade. It was just a liquid levered beta, like for lack of a better term. And it's all unwinding. And the crazy thing was I knew that there was, and I was an advocate, not an advocate, but it's an interesting exploration into, you know, over collateralized Bitcoin borrowing. And the reality that at 365, 365 day 24-7 market, an over-collateralized.

Starting point is 00:06:01 Bitcoin and if it gets less follicle, you don't have to collateral as much. That's a really interesting form of collateral for a lender of last resort, for a lender rather, I'm sorry. But these guys were levering against GBT, against AVAs, against Luna, the amount of risk-taking on, and it's all the same trade, right? To the downside, it's all the same trade, and there's no natural buyers of these things. And so FTT imploding and FTX not selling you the 70,000 Bitcoin, paradoxically tanks the price because their casino implodes. But what's happening as a response because of the general lack of trust left in the system,

Starting point is 00:06:38 which is great. I mean, this is a shock that the silver lining is that this is what we needed, or this is what Bitcoin needed rather, to kind of separate itself from like this, you know, fraudulent pump and dump unregistered security space that is crypto. Let's be real here, right? I had, I'm seeing arguments about, you know, Ethereum and how it enables all this financial,

Starting point is 00:06:58 innovation and it's none of its innovation. It's just all, it's all the traditional systems slacked on a protocol. Oh, with governance tokens that somehow have a market cap because you're feeding some of the protocol revenue back into the thing. And it's like perpetual motion machine financial leverage that's obfuscated. It's none of its innovation. It's all, you know, these token values like, you need a break, right? Like, why are we here? Why are we talking about this magic internet money in the first place? It's like not repressing. We're not interested in a casino. Like, I mean, casinos are fun, you know, go burn a thousand. bucks, sure, right? Like, why you spend every single day talking about this space is because we think

Starting point is 00:07:33 it can solve the biggest problem in the world, which is a, like you like to say, mutilated cost of capital. Right. Like, if the cost of capital is broken, everything's broken. Like, as investors, you started your podcast talking about Warren Buffett style investing. Why are you talking about magic internet money? Yeah. And it's because the cost of capital is just destroyed. It's, it's, it's centrally planned. It's, and it's garbage. And it's leading to its centrally planned economies at scale and it's going to collapse this whole thing. Like they're the Fiat system at 120% federal bet the GDP. And so, you know, the financial, unregistered financial securities and, you know,

Starting point is 00:08:07 governance tokens and all like NFTs for God's sakes. That's cool and fun and cute. You know, you can have your cool profile picture. But like I'm really fascinated in the possibility of probability that we can fix global money or actually not fix it. But there's only really one thing in the world that's purpose built to be, you know, money for enemies, global neutral money, you know, a settlement network for enemies, and Ethereum and Solana and all of this stuff that happened in the bull market.

Starting point is 00:08:34 I mean, I study it because it has an effect on the Bitcoin exchange rate. And it's why I've been able to point out a lot of these Ponzi's for better or worse. They are pawnsies. But like, why would I be interested in buying that? Like, I mean, I present. I mean, I've shorter to get out of these things on the way down this cycle, which I morally not feel great about, but I have no problem with doing. Like, maybe I shouldn't be giving liquidity to these things at all, but, like, I'm not buying it.

Starting point is 00:08:59 I'm just covering lower because these things are worthless. Mm-hmm. It's just frustrating for me to see people who have a major influence on Twitter, for example, Jason, Chapman, Mark Cuban, all these people, right? They have a massive megaphone to do the right thing, to highlight how broke the existing system is. And you're literally watching videos of them at the top, joking about how they're rugpooling on Solana and all of these activities, all these, all these VCs out in Silicon Valley. And you know what? You had Jack Dorsey was the only guy I could see that was actually shouting

Starting point is 00:09:45 from the mountaintops that they were the problem, that everything that they were doing to pump these scams. Where was the SEC? Where was anybody? And I'm not one of these people that are saying that we have to be saved by the SEC. I'm just saying it's so blatantly obvious that what they're doing is a scam that, and it was like nobody did anything. It's everybody, everybody's just standing there laughing about it. In fact, it was almost like sport. It was almost that these people were being celebrated for being able to scam so many people. And you know what? It makes me sick to my stomach. I am nothing like that. You're nothing like that. I refuse to participate in such ridiculousness, right? The pictures of the monkeys, like, just idiots. People, like, I just could, I cannot,

Starting point is 00:10:36 it was so obvious that we were hitting a high watching all of these things. And now it's, it's, it's like, I can't, like, this thing cannot be torched hard enough. Like, people think I'm joking when I'm online and I'm like, burn this thing to the ground. Just torch it. And if the Bitcoin price, you know, gets punished in the meantime, well, so be it. I truly don't care. Like you, I'm sitting on my coins. I hold my keys. I have nothing to worry about. Absolutely nothing. Torch it. Like, they can't torch this thing hard enough as far as I'm concerned, because it's a total cesspool. Yeah, and there's still a lot further to go in that sense in terms of Whether it's like, you know, the market leverage that's hidden, right, or these exchanges that definitely took an impairment.

Starting point is 00:11:27 Like some of these exchanges had their customer balances on FDX for what reason. I don't know, right? But like obviously doing something wrong. Like eventually there's going to be more exchange and solve because no one's going to say they have impairment. They're all going to try to survive through and they're going to collapse, right? Obviously, because if you announce you are, you're going to bank run immediately. So they just try to stave it off and have to PR and bump their chest out like SBF and Alameda did. right? Like also just Alamedo was just like, let's be clear here. They were a Ponzi since

Starting point is 00:11:53 2019, right? When you look at what they were doing giving Bernie Madoff's tower returns and when did the money stop? You see Suzu literally tweeted this in 2019. We stumbled them on the tweets after. Oh, the guys that run out of money, you know, offering 20% fixed rate loans to run their Ponzi. What do they do next? Spend up a bit next competitor and launch the FTT token. And the white paper literally is like, is like proposing the Ponzi out. It's like, Unbelievable. So yeah, wash it all out, right? Like the Bitcoin only companies, you know, it's obviously tougher when the Bitcoin prices 80% from the eyes. And Bitcoin certainly wouldn't have gotten as high as it did without, you know, it had native speculation as well. Like,

Starting point is 00:12:31 like, let's be clear, you know, but all of that open interest, all of that Bitcoin collateralized, 20, 40, 50% annualized to pay leverage, the whole DeFi ecosystem or stable coins. You could farm stable that 20% APR. Like, none of that was his innovation. People miss, took defy as like this thing that you know cryptography and like the public blockchain and able to get more APR on your on your savings or something. It's like no these are if if I was going to say the only thing that has come out of of all of this cesspool is just immediately clearing dollars or immediately clearing euros like that's value to be able to because let's face it most of the world's debts are denominated in fiat, large fiat currencies. If you can immediately clear those

Starting point is 00:13:23 in one of these third world countries or whatever and immediately send it to somebody and they can take custody of that token and it actually represents, and this is the big if, if the people managing these stable coins actually have the backing that they say they've got, then maybe there's some innovation there to help bridge the transition to this new world where we actually have a free and open cost of capital because we have a unit of account that can't be manipulated. That's the only thing I'll give them. That's it. I don't know what else there is that's come out of it that actually potentially provides any sort of value whatsoever other than a stable coin. Yeah, no, I agree. And it's just like, it's just, you know, bank reserves on a blockchain.

Starting point is 00:14:08 Like, it's a privilege brought blockchain. It's not this, it's not this open immutable thing. Yeah, exactly. It's a centralized ledger that assists an immune. That assist an immediate clearance. That's the innovation. Exactly. You don't have to wait for ACH. So let's go to really kind of, by the time this airs, who knows what the heck's going to have happened here. Genesis, digital currency group, DCG.

Starting point is 00:14:33 This seems to be like the really big next domino potentially to fall after FTX. Also, Silvergate, you have been really kind of ringing the bell on Silvergate and just looking at their stock price and it's just plummeting and they have a major dollar clearing network between exchanges. Talk to us a little bit about both of those two ideas and kind of where you see them stacking up in the grand scheme of things. Yeah. I mean, so Genesis, similar to FTX, it might have been dead in the water already, you know, seemingly, or their loan book took some impairment.

Starting point is 00:15:07 I mean, they literally swapped Genesis did. They swapped a billion and a half of Bitcoin for UST to give the Luna Foundation Guard their Bitcoin reserves. Right. So who knows what they had? This is back. How long ago was that? This was a while ago. This was June or, you know, before the Moon of Ponzi,

Starting point is 00:15:25 May, June or something, everything. It all plans together now. But they swapped a billion-afts Bitcoin for the UST. And presumably, I mean, maybe they dumped it out, but like there was a rush to the exits in the UST, if you remember. And who knows how much of an impairment loss they took there, right? They had 170 million on FTX and, you know,

Starting point is 00:15:44 maybe some link with blog find. And just people should understand. When they say, you know, it's like duration mismatching or, you know, liquidity concerns or blah, blah, blah, blah, blah, blah. If they have to halt withdrawals in this market without a lender of last resort, they're marked to market insolvent. Like, like, I mean, this is a traditional banking system thing, right, where they have a lender of last resort and where they have regulation and whatever. So like these things supposedly shouldn't happen. But we have wildcat banking. There is no lender of last resort.

Starting point is 00:16:13 So DCG, if you have to start, Genesis, if you have. have to stop withdrawals and you're no longer extending credit. You're mark to market insult. And there's impairment loss everywhere in the space. That's why immediately, I think it was a day or two after Luna, UST, imploded, put out a thread. And I didn't think it was a threat immediately. Half the time I post threads, I just post a thought and I link another thought. And I link another thought.

Starting point is 00:16:33 But it's like, get the hell out of yield products. What are you guys thinking? And this whole thing was inflated from nothing, right? It was a financial perpetual motion machine. But there was, you know, $60 billion or however many billion dollars of Luna. And then $18 billion of UST, right? And then the mechanism of like you commit to UST, you burn Luna. So Luna supply shrinks and it increases the market cap and the price.

Starting point is 00:16:57 And it's like, and on the way down, you had $18 billion, poof, gone, right? And there was basically three kind of drivers to the yield thing. Dylan, this is really important. The $18 billion was like never there. It was all capitalized, right? It's all capitalized, which means it can contract just as fast. But what happens is they go out after they've capitalized this and materialize it out of nowhere, they then go and fractionalize lever it by borrowing and saying that this is,

Starting point is 00:17:29 people are treating it as if it's actually there when it's not. It's been capitalized. And so that's the thing that I think is totally lost in these games that are being played is they are fractional reserve games from the old system. And people are coming over into the world. this new system, and this is what Caitlin keeps beating the drum about. They're playing these these fractional reserve games from the old system, fully not recognizing that they are now playing in a space that is equity-based. And the two are, they, it's like mixing oil and water.

Starting point is 00:18:05 They do not go together. And for people in the future that think that they can step in and play these games really cute, like Sam, he would have told you he's the smartest guy in the room, right? And he steps in and he's so brilliant. He was doing all these strategies from before, but you know what? He was a total moron. He had no clue what he was stepping into. He didn't even understand the basis of what this is all about, right? And he got absolutely annihilated, like annihilated, looked like a total idiot. Sorry, keep going. It's just important because people don't understand how it gets capitalized. They don't understand the multiple and then how those receipts are then gone out and traded against. It's just, it's crazy.

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Starting point is 00:23:03 Yeah, I mean, it's literally like just leverage the entire thing up. And people that took this as innovation. Yeah. It's like, they probably've had for like currencies and currency pegs. Like this is an age old economic thing, like the currency trilemma and managing this. You know, the capital flow is setting a fixed interest rate, setting a fixed exchange rate. And Luna and UST basically back the stable coin with volatile collateral. And then as this Luna, basically a liquid token increase in value, people would exchange that to go farm U.S.

Starting point is 00:23:32 it decreased the circulating supply, increased the price. You had $20 billion earning 20% yield from what? Subsidized from her ICO. They realized it was a shell game and said, what? We're going to buy 80,000 Bitcoin, $100,000 Bitcoin. We're going to be the biggest Bitcoin holder in the world. And it was interesting, Preston, because before I really understood the mechanisms, the mechanics of the Luna Ponzi particular, do you remember, like, stocks and bonds were

Starting point is 00:23:55 melting down and, you know, post-Ukraine invasion? And Bitcoin was getting bid really hard. And as it turns out, in hindsight's 2020, but as Bitcoin went from like 32K to 30 to 46 or whatever it was, it was like the kind of the basically the crypto market cap, Luna like Ponzi. And that was kind of like this last gas of juice, this last gas of inflows. And since then, right, Bitcoin is really the only thing in this entire space that has actual passive inflows and hodlers of last, last, last resort. Right. The rest of it, you know, like maybe say E, but they don't even know what they're buying is the fundamental.

Starting point is 00:24:30 thing here. There's a reason that Bitcoiners have seen this thing over and over again go down 85%. And so, yeah, I don't even know the original point here, but I agree, earn it down. The fractional reserve gains, the yield farms, like, you know, how are you getting, where is the yield coming from? Like, the shout out to Alex Barrington. Where is the yield on your 6% Bitcoin, on your 8% stable coin that Gemini Earn was offering last week, right? Like, where is it coming from? And no one asked the question. And maybe it's a predatory model because the exchanges are And this is yield, right? And it's, it's, by some disclosures.

Starting point is 00:25:04 Isn't that Genesis's main thing? Is there the ones out there creating the yield? And now they, you know, if you were, if you were using their product via Gemini or wherever, you can't withdraw your funds right now. Yet Barry is going out there, you know, making these claims that he's going to come back stronger. Meanwhile, nobody can even withdraw their funds. Like, talk to us a little bit about some of that.

Starting point is 00:25:29 Yes. I mean, it was a pretty wild day today. I was recording a safe actually, and news is dropping at the time about, you know, Genesis is, you know, it's all of them and declaring for bankruptcy. And then they're like, no, we're not. And then Barry's like, you know, everyone's like, he's in trouble. By the way, like, can we just acknowledge that, you know, Barry Silver has been in the space for a while? I mean, surely knows what he's doing somehow.

Starting point is 00:25:50 You can't just stumble into being that successful and big and large. And, you know, DBDC was a good product for a while. It's since turned into a total nightmare due to market forces. but regardless, like, I mean, the guy was punching into Zcash and coins at the absolute top. Like, yeah, there's some lending bets that went back here, but like, you're buying 10 figures of a liquid alt coins via venture deals or, you know, OTC or whatever the heck you're doing. Maybe you're just bidding on exchanges. And now we're kind of questioning with, oh, we got wrecked. Well, yeah, like, I think a lot of these guys got high on their own supply, the cycle, things that other, like that weren't built on any strong foundation.

Starting point is 00:26:28 That's why Three Arrows blew up. Smart guys in the room, right? Three Arrows Capital. They're punting into all these liquid levered beta alt coins. And there's some innovation here. Like the reflexivity of these cycle have people think that there's something genuine. And it's all just lies essentially on the way down when Tide goes out. And they're all swimming naked.

Starting point is 00:26:48 And so, I mean, I don't even remember the original point. Well, there's just I agree with them. I'm Brandon. It almost seems like they're access to the printing press. Like a lot of these guys that you just named, their access to the printing press was very accessible. And it almost sets them up for the failure because they start going out and getting too fancy because they've got so much money to move that they're getting so fancy with it that it just opens them up to a major fall. The tide goes out like we're seeing right now. I mean,

Starting point is 00:27:22 and this tide's going out hard. And it doesn't seem like it's going to let up anytime soon. So, like, now if they're trying to raise, whether it's $500 million or a billion or whatever it is, this is kind of a tough environment to go out and raise half a billion or a billion in the face of everything that's happening in this space. I just don't know that they're going to be able to get to go out and get it. Now, I know in the note today, he said that he has raised $25 million, which is a start. But what are your thoughts on GBTC? because that also falls under this DCG, the digital currency group.

Starting point is 00:27:58 What's your thoughts on GBTC? I don't know, I may or may not buy it for a trade, but I guess maybe it'd be at that attractive level. People have been buying that dip for the whole year. Since basically February of 2020, looking at close that arm and the ARP keeps arming them to the downside. I mean, it's a terrible product, not terrible product, but 2%.

Starting point is 00:28:17 2% leach on your Bitcoin holdings every year. It's not on Bitcoin Rails. It's not self-sovere. It's not immutable. We know those things. I guess you're in a Roth or something else. There is some upside at that 50% discount to nav. Like that's a pretty juicy trade if it ever comes even halfway close.

Starting point is 00:28:34 But I think convertibility is a long, long way away, especially after all the fraud that has happened in this ecosystem. That's PC or whatever, you know, three-letter agencies are going to clamp down real hard and they're going to probably, they're not going to want to unleash this flood that is a Bitcoin spot settled ETF, right? with I imagine some form of transparent wallet address, which is weird because Getscale was like, hey guys, we had this revolutionary technology. That's the future of finance. And we're putting out Bitcoin versus gold commercials on CNBC for the last three years. Oh, but the trivial thing,

Starting point is 00:29:06 the thing I can do on my MacBook that I'm recording this Zoom call on, Preston, with software that I downloaded in three hours where I can sign a message with my keys. And we can't do that because of security purposes. When a competing ETF, that's much smaller. Admittedly, they only They had one address at Niddeley posted their address in a day. They posted yesterday. Hey, we're with CoinBased custody. Here's our address. We're a big, off-free Bitcoin trust.

Starting point is 00:29:29 Any small trust, okay, but show us the keys. And never mind that, the real question for me with Genesis and DCG was by the looks of it, it seems like there's some form of liability relationship. And they came out and were like, we have no official, you know, there's no liability with Genesis global or Genesis Capital or whatever it was. It's like, okay, but how easy is it to create another entity and, you know, or some special purpose vehicle and do that. I mean, look at the Alibeta FTX org chart.

Starting point is 00:29:55 So you're telling me like, so what's that liability and how big the whole? And I think the worst case scenario for DBDC is that the trust is liquidated. I think there's an extremely small chance, but, you know, 600,000 coin would certainly be quite the, quite the sell. And I imagine it'd be gobbled up the OTC. Yeah, yeah. I don't know how to like quantify these things, but honestly, how I've been kind of on the pulse on some of these things in the last six to nine months,

Starting point is 00:30:23 is just ask questions. But like, I have no answers here. I don't know who has a counterparty with the other, with another like firm, but I'm going to ask or I'm, you know, going to kind of think out these scenarios. And oftentimes,

Starting point is 00:30:34 like, some of these questions have found decent answers. And so, like, I think just preparing for these scenarios. I mean, for the average person, just stack stats, right?

Starting point is 00:30:42 Like, but as someone that's kind of in the weeds of this whole thing, it's certainly been fun to kind of dig through it and piece together the puzzle pieces. If it got sold, let's say that it did get sold because they had to raise funds and they weren't able to do it by borrowing. So they have to sell their cash cow. Because this thing's a cash cow. This thing makes a lot of money for them.

Starting point is 00:31:02 If they thumb on that bag, that would be devastating. Yeah. Yes. So, but if they would sell it, let's say they sell it to a fidelity. They sell it to one of these other big banks. This turns into a major, I guess my question is, do you see it returning back to Nav if the sale goes? through to another bank that then can maybe start buying shares back to try to push it back towards its nav. It seems like they don't have any money to do it anymore. They were trying to do it.

Starting point is 00:31:28 They ran out of money to do it. They got themselves in a bunch of trouble with some other stuff in their parent company. And so they're not able to try to force the price back up to the nav because they don't have the money to do it. But if you get it to another bank that then owns the product. Is that how it gets back up to NAV? Or do you think that there's more to this than that simple deduction? That would be an interesting bidding war. How much would, you know, some of these financial institutions pay for the TBTC product essentially just wrapped on, you know, their institution? And I built like, you know, a lot of money. This thing is spending off 30 Bitcoin a day right now. 635,000 Bitcoin, 2% a year, you know, divided by 365. It's like 30 Bitcoin a day.

Starting point is 00:32:14 I think I did that a few days back. Dylan, I don't understand why nobody else has built another trust. Why is Barry the only one that has this product? Yeah, I think they've been around for a while. I got the first step and then there was kind of this, you know, network effect, I guess, right? Everyone was sleeping on it really until 2020, and that's when it went berserk. And part of the reason I think Bitcoin had such an aggressive upcycle and then kind of faltered was the, you know, three arrows capital, GPTCR, where they were going to be.

Starting point is 00:32:44 going to Genesis, pledging Bitcoin, getting TBC shares back, pledging those shares to borrow more money to do the trade over again. And then they got caught when that, you know, premium got Arb so hard with the six-month lockup that it went to a discount and 3AC eventually blew up. Genesis eventually blew up. And, you know, DECG was borrowing hundreds of millions of dollars to close this Arb and then they got bulldozed. So, I mean, it's like no worry to me. I think there's a extremely small, like infinitesimally small chance that, you know, Barry or Gray scale is doing some form of like, like fraud where they, you know,

Starting point is 00:33:19 a lot of the Bitcoin's gone, right? I think everything after this past two weeks, everything is a, is a non-zero chance of happening. Like people should just, just think what if it does? Yes. But I think, do I think these guys running a buck shop?

Starting point is 00:33:31 No. Like, I think potentially the worst case scenario is, you know, Barry's lever to the hill, right? They had a $500, $600 million credit line. They got a November of last year. since then they bought back a whole bunch of GDPPC shares. They pun didn't. They announced that they bought the MIR, which is another one of these L-L-1 alt coins.

Starting point is 00:33:49 I mean, how many millions did they put into that, right, at like local tops, and they're down 80% cents. So I have no idea what their balance sheet is, but it's probably not pretty, right? And if they're forced to sell this thing, that means they're in deep trouble, which is quite defunble, but I digress. Silvergate. Yeah. So this was one of the things where after the definitive implosion of FTX, once it was clear to me that FTT was imploding, the real question was, who were the counterparties?

Starting point is 00:34:18 Is it was a Genesis? Is it a the night egg or a blockfire? And I couldn't answer the question, who was willing to accept FTT collateral with no natural buyer? And the more that I thought about that question, and we talked, I think, on Wednesday, the Wednesday before the Monday FTCs collapse, I think. Yeah. And I mean, we were both pretty confident. I think you shortly after, shortly before, tweeted out, compared you Sam, SBF to the Enron CEO.

Starting point is 00:34:47 But, like, it was pretty obvious, I think, once you piece it together, that the only people are, you know, firm that was willing to take an FDTS collateral because they were obviously levered as their balance sheet said. And then after they implicitly, Caroline admitted it in the most hilarious tweet of all time. Insane.

Starting point is 00:35:03 The dumbest tweet of all time. The dumbest tweet of all time. So true. Just showed their cards. Showed her cards to the entire table. So dumb. So dumb. A classic speculative attack.

Starting point is 00:35:13 And it was, okay, once 22 broke and you saw, you know, $100 million of open interest on FTX just evaporate. That to me, we wrote to, we published actually, right as the FTT broke 22, we clicked to send on our Bitcoin Magazine Pro issue to like 15,000 people. We're like, this thing's imploding. It's your coins of of FTCX beyond a reasonable. doubt. And, you know, do we know they're in solid or not? No, we can't say this, but like, not looking great. And, you know, they helped the withdrawals within 12 hours. And it was pretty

Starting point is 00:35:46 shocking. Can't say it was unexpected. But just in terms of the amount of trust that a figure like SBF had as the smartest guy in the room, as the savior and the JP Morgan of crypto was, you know, if it wasn't so sad, it'd be laughable. It almost is laughable in a way. And, you know, it's what, one of the largest financial frogs of all time in absolute terms, right? Like, I mean, definitely in absolute terms. What a mess. Absolute disaster. Yeah, I mean, I just, I don't understand the mindset.

Starting point is 00:36:17 And I guess it's maybe people are just so new to the space that they, they don't even know what Mount Cox was. Or, you know, maybe their cousin told them to buy it. And they're just, they think it's like a bank where, you know, they've got a deposit. Of course, it's still going to be there tomorrow. And like, this space is nothing like that. that. I didn't answer your question. It was the Silvergate. Yeah. Go ahead. Go ahead. Hit the Silvergate piece. Well, okay, so I don't really have any answers. But once I really realized there's two main banks in the space, Silvergate and signature. And I go on Silvergate's website. And on, not the homepage, I think it was

Starting point is 00:36:53 on the side pages or maybe it was the homepage. It was literally, I can't make a stuff up. A quote from SBF saying, Silvergate has really revolutionized the blockchain industry. and banking for blockchain companies. It was like, okay. And then the following days, I see people saying, how could we not see the signs? When I wired money, this is what it showed me when I wired money to FTX.com.

Starting point is 00:37:17 And it was Alameda Research, Silver Gay Bank. That is insane. Like, you literally, and they said, they said, like Sam Trubuco, you know, the former CEO who retired to go sailing, you know, two months before this whole thing imploded. You know, like, no, don't worry. guys, like I just like my boat, you know, like rats jump in the ship.

Starting point is 00:37:38 Two months before we was told being imploded, they're like, well, or I guess at the start of 2022, I think it was a coin desk interview or something. They're like, what's the, what's the relationship between you guys and FTCX, I'll meet an FTCX. He's like, there's an ironclad wall between us. And in the meantime, you have people that are wiring money to FTCS sticking into an Alameda Research bank account. And just to think of, you know, for Silvergate's terms, like they're already being investigated for money laundering. I think South America or South Africa. And again, we're talking about security here.

Starting point is 00:38:06 I'm not a banking analyst, not financial advice. But some things ugly, right? And there's going to be a clampdown. And as a bank, like the main thing you have to look out for is deposits. You need deposits to be able to lend out, right? And so you see Falcon Axe as an institutional player, they said we're not working with them. And the send network here, the SDN network, you know,

Starting point is 00:38:26 Circle, Coinbase, Paxos, Gemini, like all of these firms. They have them, that have their tentacles in this thing. are settling dollar balances on Silver Gates network. And so when I see Silver Gates equity, you know, fell 50% a month before our FDX and it's fallen another 50% or something or 30, 40%, whatever it is. And so I don't know what can happen with that.

Starting point is 00:38:50 But all I have to ask is like, how would that be a net benefit or not for liquidity in this space that's already running? This is the thing I just can't wrap my head around. So like when you establish a business, you know, it has its own EIN number. It's like a social security number for the business. So FTX would have had their own business number.

Starting point is 00:39:13 And same with Alameda. They would have had their own business. So then when you open a cash checking account with a bank, you have to, just like an individual where you give them your social security number that open the bank, you provide the EIN number for the business to open a cash account. So FTX would have done that. Alameda would have done that. And Silvergate is literally taking cash deposits and sending them to a different business entity

Starting point is 00:39:41 than the one that's associated with the deposit. It doesn't make any sense. It's ludicrous. Like, I just don't even know how that's possible to do that on these rails. It's not great. And I'm not one, like you said earlier, to call for the heavy hand of the state. Actually, far from it. You know, for all I'm concerned, you know, let it be the Wild West and people just, you know, suffer the consequences for your own incompetence.

Starting point is 00:40:09 I'm perfectly fine with that. Yeah. But, you know, I understand that we live in the system we do today, and probably all this leads to further regulation and whatnot. So, I mean, I think that, you know, the legacy system, never mind the stable coins, never mind whatever the heck they're building over on that monstrosity that is Ethereum, I think it's all going to be top-down, OFAC compliant, you know,

Starting point is 00:40:36 CBDC type of control. The government doesn't give this stuff up. And actually they only steadily encroached upon me more. So like this whole, you know, stable coins are interesting or like, you know, never mind this, the send network and what that would mean. Just like the trend is so obviously, like censorship control surveillance. And when I think of any other option besides something that cannot be controlled, it can be surveilled, obviously the transparency,

Starting point is 00:41:05 see Bitcoin is a feature and to some it's a bug. But the reality is like nothing else. There's no other rail that you'll be able to clear on other than this this orange coin. There's nothing else. Dylan, when you say you think everything's going to an OFAC compliant, clearly you don't think that about Bitcoin, but you do think it about everything else. Is that correct?

Starting point is 00:41:26 Well, yeah. I mean, if you break down in the most simple sense, the people that say security budded, I don't have to roll my eyes because right now the security budget is subsidized by the issuance of coins, right? And that every having that declines. And it goes from your paying, everybody's paying for the security budget, dilution of your, not your stake, but a dilution of your share of the circulating supply. Yeah. Right. So as more coins, 900 Bitcoin a day got, you know, got mine today, right? So our stake in absolute terms, in terminal terms, our percent of the Bitcoin ownership hasn't declined at all. But in, you know,

Starting point is 00:41:58 current terms it has. And that's paying for minor security. But in the future where the block, Like, this is the key point near. In the future where the block subsidy is zero, and the block reward is only fees, where mining is brutally competitive and difficulty is ratcheted up so high and A6 are so efficient that you need free energy to compete with this thing at all. You need free energy essentially. Yeah.

Starting point is 00:42:20 That future, you paying with your private keys and your Bitcoin, you are paying for your security budget with fees. And there will be OFAC compliant pools. And there will be, you know, whether it's like the United States, states and then the Russia and all these others, but you individually are paying for a profit and miner that is nothing but economic incentives at play to include your transaction in the block. And maybe there is a compliant pool or two, but the reality is this black market, you know, guerrilla mining landscape. That's just pure modern warfare and capitalism in the

Starting point is 00:42:55 most pure form. There will be someone that mines your block, regardless of if it's OFAC compliant or not. That's right. Because it's purely a profit game. It's only about economic incentives. And if you're getting censored on a transaction, theoretically, which this hasn't happened, right? Everyone kind of booed Marathon for even proposing the idea. We don't even have to rely on Marathon. That's the thing. Just pay up your transaction fee.

Starting point is 00:43:17 Just raise your tax per bite. This is the most basic thing. There is no security budget. You are the security budget. But your coins, your payment, whether it's dilution because of blog subsidy being issued and everybody's subsidizing this. or it's a purely transactional fee basis where you're paying to not get censored.

Starting point is 00:43:37 And all of the stuff that's happening on Ethereum with proof of stake and minor extractable value. And I mean, I spent 110 hours to be wrote an extensive report about this. I mean, I understood Ethereum before and the basics of it. But I spent hours upon hours, days upon days, putting together this thing on Ethereum and reading about the history of minor extractable value and proof of stake in all the proposals

Starting point is 00:43:58 and all the top-down initiated hard-forks. and difficulty bombs and what a mess. And to think now that, you know, 50% plus of these blocks are OFAC compliant. And two weeks before the merge, you do have Ethereum developer calls say, well, guys, you know, if we do release, if we release this thing, it's going to be OFAC compliant from the start. And their response is like, okay, well, we'll code up a solution. We'll code up a different, you know, block builder.

Starting point is 00:44:26 Or we'll, you know, we can slash your stake. We can. We can slash your stake if they're censoring guys. But we still need to code that part of it. We need to code the ability to unstake. And as, like, I'm not an engineer, but I think I understand that engineering from a basic level. And I've listened to a lot of smart engineers talk, whether it's about computer science or just basic systems. And if all of these things are so trivial, why didn't you release it from the start?

Starting point is 00:44:51 Why not wait until your network was bulletproof and ready for anything to go forward with this? And when I look at Ethereum as an investable asset as a protocol, like as a supposedly neutral protocol, I just think it's obfuscation. And fundamentally, a lot of these people have no idea what they're investing in. You know, you're investing in it's a venture bet. And that's what it. I mean, it can be a high upside venture bet. Sure. I mean, there is a reality where Ethereum is as a, you know, censor network can be worth a trillion dollars.

Starting point is 00:45:28 Sure. Maybe I'll give you that. But, I mean, the price. purpose now, let's be clear, it's building casinos. It's building, you know, speculative, trading, valueless token casinos, or JPEGs, or ICOs, or DAPs, or whatever the world computer narrative changes to next. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates

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Starting point is 00:49:02 slash income. This is a paid advertisement. All right. Back to the show. I think it's so obvious that if you took the whole ecosystem, like every one of these, these alt coins, the Bitcoiners. you took all of them and you lined them up. A majority of people are not here for anything other than trying to make a bunch of money

Starting point is 00:49:25 real fast and they're greedy and they're not here for any other reason. And, you know, I like to think that the people that are just here for Bitcoin are here for what you had originally opened this conversation with, which is if we can fix the money, we can actually create a free and open market and a free and open cost. of capital and we can actually get efficient productivity happening in the world where we get real prices and not manipulated prices. That's why Bitcoiners are in the space. All this other stuff, like when you're getting into the OFAC compliance of Ethereum, I don't

Starting point is 00:50:05 think people in Ethereum give a crap about what we just described there with, you know, fixing the cost of capital in the world and what that brings to humanity. They're there because they want to make a bunch of money. And they'll wrap it around this idea that they're innovating with tech. But when you look at what the innovation is, there's no equity behind any of these tokens. There's no productivity. There's no product behind any of this stuff. They're just casino tokens.

Starting point is 00:50:39 And they're just trying to get rich and dump their bags on somebody who's dumber than them. at a moment in time that that Silicon Valley VCs pumped their bags and they're just trying to get in harmony with that pump. Like, it is sick. It is, it's a disaster. And the validation process on ETH, it's a train wreck. Like, and the argument I saw online from a person, they were like, like, well, if people are doing the fairest things, don't you want the government?

Starting point is 00:51:12 don't you want them to be OFAC compliant? And I'm thinking, that's the system you have right now, right? That somebody can come in and censor you. Like, what happens when you're on the wrong side of the censorship? Just like we're seeing with free speech on some of these platforms. Like, how do people not understand that it's only a matter of time until they're on the wrong side of the censorship? It's so simple. It's ridiculous.

Starting point is 00:51:39 I mean, I summarize this and I talk with a Twitter interaction with David Hoffman, who is basically, you know, with a bankless guys, he posted a tweet earlier and said, basically, you know, the last two cycles were just better Ponzi's on top of each other, referring to 2017, 2021 or whatever, and how like the whole thing is just Ponzi's. And I was like, no, the whole thing isn't Ponzi's. The thing that you're promoting as like this innovative thing is purely based on a Ponzi. on creating Ponzi's, right? So Ethereum isn't a Ponzi.

Starting point is 00:52:12 It's an asset. The funny thing is also, you know, the Ethereum Foundation, the guys that spun up this token, this ICO, right? Freemine, they said, originally on the website,

Starting point is 00:52:23 I can't find it. I tried to find it recently with the Internet Archive, but I've seen it on the Internet Archive before. This was like two years ago. Ethereum is not competing to be a money like Bitcoin. Ethereum is purely a gas-based asset to be used for compute, right?

Starting point is 00:52:38 Yeah. And that's the sales pitch, yeah. And then six years later, Ethereum via top-down centralized fork. And it wasn't, you know, the community said, you know, community this decentralized governance architecture said it was fine, right? I mean, the miners said it's fine. Let's be clear. The miner said no.

Starting point is 00:52:56 The Ethereum Foundation for all these changes said yes. Yeah. And all of a sudden, Ethereum via EIP 5559, the mine doesn't say no to this, but all of a sudden Ethereum is ultrason money, right? The theory of the deflationary. It's such a good money. It's deflationary. It was just interesting to cycle what the animal spirits got brought out

Starting point is 00:53:17 in terms of people thinking that there was some genuine innovation here and not stripping it back to, like I keep coming back to a simple point. There's only really one thing here in this entire, I think entire world, the digital age that is purpose built, engineered, constructed to serve as global money, global neutral money for enemies. There's one thing. Never mind the energy market infrastructure and all the things that, you know, the rabbit holes there.

Starting point is 00:53:43 And that's Bitcoin. And your proof of stake token is cute and is really, you know, cool. And I hope you winning a casino trip. And it's probably, if there is any purpose, it's just going to assist governments in making sure that their dollars can immediately clear in a scenario that speed is up. That works on Tron. That works. No, no, no.

Starting point is 00:54:04 It works better on Tron. Dude, I had dinner with Pierre Ushard out L.A. when I was out at the conference. And, you know, we're talking about all sorts of things. And I'm there with him and his wife. And I said, Pierre, you know, maybe the only purpose of these things is to help dollars and euros and yen clear fast enough so that when we go through the eye of the black hole and everybody's trying to move their current. as fast as humanly possible, it provides an immediately clearing mechanism because you're going to need that at that moment in time. And I asked him, I said, I don't know that he was really buying that argument. I'm just trying to, you know, take the other side of an argument to try to, you know,

Starting point is 00:54:53 come to a truth or an understanding of what we think something is. And so I asked Pierre, I said, how much would you pay? Like, if I was going to send you one dollar of tether on Ethereum, I said, How much would the fees be on something like that? And he just burst out laughing. And he goes, he goes, it'd be like $5. I said, come on, man, you can't be serious. For me to send you $1 worth of value on a stable coin over the Ethereum network, it cost me $5. And he goes, he goes, yeah.

Starting point is 00:55:24 He says, why do you think everybody's using Tron? And why do you think they're using the Binance smart chain to do those activities right now? And I said, are you serious? Have they truly tried to optimize for everything and therefore, like, basically solved nothing? Is that what's happened with Ethereum? And he just burst out laugh and he says, that is exactly what has happened. There are no solutions. There are only tradeoffs.

Starting point is 00:55:51 And by trying to do and be everything, they might just end up, and this is not today, you know, they might just end up with nothing in the end here. And, and, you know, maybe if it never dies or whatnot, but whether it's death by a million forks, death by a million copy paste of your coin, you know, of your protocol taking liquidity away, like the Binance Smart Chain, you know, the Solano. A salon was just ultimately a bunch of, a bunch of Alameda stealing after-excuser deposits and pumping into the ecosystem. They're all, they all are. They all are. And yeah, I mean, it's certainly, it's not vindicating because Bigwin is also down a bunch, like, but people believe the, believe in the narrative, whatever it was, whether it was

Starting point is 00:56:38 ultrasound money or, you know, that Luna was this, you know, innovation or what if that Solana was like a productive asset, right? Like, what are you talking about? They're all centralized in some sort of way. And I think that the magnitude of how much they're centralized, people who don't understand the tech just don't have an appreciation for how centralized they are. If the government really wants to come in and shut down a transaction on Ethereum, I think that at this point, they're there. And as far as Binance or Tron or any of them, like if they really wanted to dig in and start

Starting point is 00:57:09 making things difficult, I think they could definitely do that from a technical standpoint. So anyway, all right, let's go ahead and let's talk. How about some of the hacker stuff with the FTX? So there's coins that start moving. I think it was a Friday after the, after everything blew up. There's all these coins that start moving off of the FTX. Like, people can see the public addresses and they're saying, what the heck who's taking these coins?

Starting point is 00:57:36 Talk to us about this story. What was going on? What has happened? Where are we at right now? So I'm not fully cut up in the last day or two, but I know that they, you know, there was some, it was, I mean, it was definitely an inside job in a way. And people said, like, the web app got hacked or whatever. But ultimately, it doesn't matter if the front end got hacked or the front end released the software

Starting point is 00:57:57 update. You need the private keys on your Ethereum accounts or whatever to move to move this stuff. So it was an inside job, right? There's no debate about that. They take all, you know, the state even turn into ETH, I think it was tether and turning into dye, you know, which is a supposedly decentralized, stable and collateralized stable and Ethereum. That 50% of the collateral is circled USC.

Starting point is 00:58:18 But I digress. They dump all of their, you know, centralized assets for more decentralized assets. And I think the interesting thought experiment here is if you know, you have all these OFAC combined blocks, right? 50% of the block production. And then if you just look at like, you know, Coinbases, finances, Crackens, Lido, which Lido's governance token, which, you know, supposedly is decentralized, is held all by U.S. regulated PCs. And you look at, you know, from block production standpoint, what might happen if these people, you know, maybe they stake the coins. Like, I have no idea what happens next. With this, maybe they, you know, I think they're dumping it off for some wrapped asset or something.

Starting point is 00:58:58 But if it's a wrapped asset, right, or if it's like, if there's a pressure choke point, I think that isn't the key thing here. I don't know what's going to happen with the hacker or whatnot. But if there's a pressure choke point and it's not defendable by, you know, basically open source code and economic incentives, it's going to, you know, not whether it's break or be tested, right? And I don't think there has been that test yet. I think the test is coming clearly. And so, yeah, it's clear the differentiation between Bitcoin Ethereum now for me.

Starting point is 00:59:28 I think for a lot of people, surprisingly, they haven't made that distinction yet. But I don't really know what happens with the hacker or whether they dump it or whatnot. But I know the whole thing is like we talk about a massive, massive fraud. And, I mean, they should all be in prison for what I'm concerned. Dylan, back in 2021, you wrote an article, and I'm sharing this right now so people can see. So the article you wrote, the conclusion of the long-term debt cycle and the rise of Bitcoin, this is a fantastic article. I know it's a little bit old, but I want to highlight this for people that are pulling this up.

Starting point is 01:00:05 Clearly, you're pulling some pictures and graphics and talking about Ray Dalio's long-term debt cycle, and then you start talking about the end game and you show this awesome, you know, effective federal funds chart where you're really kind of seeing this 80-year cycle playing out graphically. talk to us about this article. What were you trying to accomplish by writing this and any key points that maybe have changed or that you'd like to add to some of the things that you put in here since 2021? Yeah. So the basis of the article and honestly my Bitcoin thesis is that we're at the end or we're extremely close to the end of this long-term debt cycle that we've seen play up throughout history. But essentially there's the traditional short-term debt cycle, you know,

Starting point is 01:00:52 to 10 years, whether you understand economics or finance or business cycles in general, you kind of, people will know that recessions happen for some reason every once in a while. Sometimes things are good and bad, and these things are naturally cyclical in nature. But what's not often understood as like the long-term debt cycle, and that these short-term debt cycles and their own cyclicality lead to these longer-form cycles of money and credit. And if you just look at the interest rate chart, right, we're 51 years in this global fiat experiment. We've done these long-term debt cycles before, but it's been on a gold-back standard, right? And every time these debt cycles go bust, what they do is they devalue in some way.

Starting point is 01:01:30 And that traditionally was, you know, like the U.S. has defaulted on its debt twice, right? They defaulted in 1933. They defaulted in 1971 when they broke the gold peg. Now, right, interest rates went to 20% in 1980, and since then they went down only, right? And COVID-2020, once again, at the zero lower bound and had, you know, how much? many trillions in stimulus globally. And I think the key thing and the thing that, I mean, wrestling, you've been beating the drum on this for for years on end. Mathematically, what's the way out here? Yeah. And Greg Fosk had talked about this for three, eight hours a day. He does.

Starting point is 01:02:04 Shout out to Greg. What is the way out when real debt to GDP, I'm sorry, and you know, debt to GDP is 120% federally and 400% globally and never mind all the off balance sheet stuff? Like, What's the way out here, guys? Because the last time we've been this indebted, or here's a good stat for you, the last time stocks and bonds both fell 20% in the year. Two years, Preston. 1931, 1969. Yeah.

Starting point is 01:02:30 Right? I love that statistic because what happens after these huge bursts and destructions of wealth, especially in a historically over-indebted economy. What happens? And what happens is a real devaluation and devaluation at real terms and creditors in this tites. Creditors and savers get screwed. And so here we are, and the feds raising rates to 5% and we're tightening the belt. And, you know, bonds had a historic drawdown, the greatest drawdown in the 10-year treasury and recorded history into a year. I'm not sure if we're still

Starting point is 01:03:02 there. I think we are. But, you know, stocks are 20% from the highs. And clearly that, you know, the drain is circling. And so what comes in the next 12 to 18 months as the historic bubble? and tax receipts is no longer there, right? The everything asset bubble, this is a thing. The real cost of capital was negative. You had nominal negative yielding debts, never mind real negative-living debts. Across Europe and Japan, I think there's still some short-end debt in Japan that's negative, maybe. You had $20 trillion of negative yielding bonds.

Starting point is 01:03:38 Insane. Contracts guaranteed to lose money. I give you $100. I get $99 back in 30 years. Like insanity, and it was because you had, you know, this dissonance. inflationary environment in CPI for so long. I've repeatedly referred to like I was posting throughout the year as this bond market bubble was unwinding, you know, kind of meme posting like big short clips and stuff.

Starting point is 01:03:58 Like inflation, CPI inflation gets to three to five to six to seven to eight. And they're saying it's transitory, it's transitory, it's transitory. Meanwhile, Russia invades Ukraine and these, you know, this global, these globalization forces, this unipolar world order. I mean, I'm not a geopolitical historian by any news, but I listen. to the really smart people. And they're saying, hey, guys, the structural forces that we had for the last 40 years, they're maybe going any other way.

Starting point is 01:04:24 And so is any of that disinflationary or deflationary? And I don't think, and I still don't think it is. And so what does that mean for bonds? As you're buying 30-year debt at 2% yield, wake up, guys. And so we've seen that cost of capital dramatically repriced. I mean, energy essentially forced it to reprice. And because the cost of capital is reprised, we've seen the valuations reprised. And now I think we see, you know, the real economy in a way reprice.

Starting point is 01:04:55 Yep. And the results are going to be quite interesting for, you know, if we just look at past tightening cycles, past disruptions of wealth at this magnitude, we can forecast some pretty crazy outcomes. So I'm just going to say the recap there is phenomenal. Straight off the top of his head. You've got to check out the article. He does a masterful job laying this out.

Starting point is 01:05:17 depth and then talking about Bitcoin and how it kind of fits into this as well, which he didn't cover right there. So Joe was wanting to hear your thoughts on the bond yield curve in the next six months. I'm just kind of curious because I'll be honest with you, man, I don't know what to really kind of expect in the next six months with the yield curve. I can find a ton of articles, especially over in Europe where things are just dire and not getting better anytime soon. And then, you know, I see some other things that kind of seem like maybe the recession is really starting to kick in. And, you know, maybe some of the demand that they're trying to suck out of the market is maybe going to play out. And maybe we see some of the inflation start coming

Starting point is 01:05:59 down and maybe the bonds start getting bid a little bit. So I just, I don't know what to expect from here. I just expect a lot of volatility. And I expect the recession to fully start setting in here very soon in the next six months. But how do you see the bond? yield curve going. Yeah, I don't, I think there's times and across the asset classes I can say like, I have an edge or maybe I understand things a little bit, a little bit more, especially that, you know, put some financial capital behind. I don't feel strongly one way or another in terms of like, I mean, I'm not, like, let's be

Starting point is 01:06:31 clear here. I'm not a buyer of duration debt for a long term hold here. Yes. Maybe for a trade, but like I'm not going to, I don't really get that cute. Sometimes. Like, I mean, I mess around across asset class. classes, volatility, rates, whatever. But like, I mean, I'm at the end of the day, I'm just trying to buy more Bitcoin. And so for all the year, for not all the year, I mean, really since the

Starting point is 01:06:54 spring, there's just been stacked in that cash pile. And so, I mean, I don't really know where rates are going to go over the next six to 12 months. But, you know, I think, I think Joe thinks they're going to go lower, bonds go higher. And he very well be right there. Yeah, I'll tell you, like you, I've been stacking cash all year, but I've just deployed all of it into Bitcoin. All of it. Chad, Chad, move. Nice bye. Yeah. Now, who knows where it goes, you know, could it go down to 10,000? I think that's totally in the cards if some of these other things start blowing up and who knows what, you know, heck, if GBTC has the liquidator, I could only imagine what that could do to the price. Like you said,

Starting point is 01:07:31 it might happen in the OTC market. I don't know, but I do know that I've participated in markets long enough to know that once you start getting some decent prices and you think that you're within call it a six-month window of things of the tide kind of changing like you just can't be greedy and think that you're going to nail the absolute bottom like that's a fool's errand and so i've just started you know it's i didn't start i've done it i've taken the cash from 2022 and deployed it in the bitcoin and we'll see how close i get to whatever bottom i fully expect that we eventually reach My last question for you, Dylan, is really this, you've been posting some of these charts where on-chain metrics are showing that there's a whole lot of coins that aren't moving.

Starting point is 01:08:20 And there's a lot of addresses that are consolidating and buying at these prices. Talk to us about some of these metrics and what you think that they mean. And I think this is a really important thing that people that aren't intimately familiar with this space do not understand about Bitcoin. Yeah, on chain metrics get trolled a little bit because, you know, in 2021, a lot of these things look super, super strong. Yeah. And then price obviously drew down and the whole crypto thing imploded, like we covered for the first half of the show. And here's the thing is that the supply and elasticity of Bitcoin, like, you know, people always just throw out, oh, it's absolutely scarce.

Starting point is 01:08:57 And like the people that aren't in the weeds with all this or don't understand Bitcoin or I think it's just a speculative bubble. We go, okay, it's absolutely scarce. But the supply and elasticity of Bitcoin, the price agnostic buyers, and accumulators of Bitcoin that don't part for the majority. I mean, you know, people would trim tops and we can see this on-taint data, you know, where they'll let some coins go after a thousand percent increase in price. But for the most part, you have a cohort of people that are always acquiring this thing, somewhere on the planet and not selling it.

Starting point is 01:09:27 And right now we're seeing levels of whether it's like, you know, 83% of supply, all-time low hasn't moved in like three months, right? I think it might be higher than that. You have coins flowing out of exchanges at a massive level. You have, this is just going to snap so hard the other way. But I think right now, you know, price is set up the margin, obviously, and you're going to see Wall Street. I'm pretty confident in this.

Starting point is 01:09:50 You're going to see Wall Street step in, you know, like sharks in the water. Some of them will be buyers. But from an institutional perspective, the asset class, you know, the poster child of crypto just imploded. The asset class is somewhat untouchable, paradoxically, despite it being the cheapest it's been in a while. And so I think they're going to really lay into the short end on CME, on Bitto, on the short inverse ETF.

Starting point is 01:10:14 Like, Bito is 600 million bucks of NAV. CME futures in Bitcoin terms is at an all-time high, like $1.6 billion or something. At the top, that was like $4.5 billion, but in Bitcoin denominated units, which it's not denominated, it's in dollars. It's at an all-time high. And so you have a few things happening.

Starting point is 01:10:31 Max S&IS away from exchanges, because everybody doesn't trust anything anymore. You have coins getting accumulated by people that, you know, enjoy getting, you know, kicked in the teeth and just stacking and don't. Yes, we do. Yes, we do. And at the same time, you have the Wall Street guys shorting, you know, anything and everything, EBTC, micro strategy.

Starting point is 01:10:52 Yeah. See any futures as, you know, 30%, 32% short interest on the BTOEETF. And also, like, when you're, the crypto casino is the derivatives, exchanges, mostly Binance at this point, as we go lower and lower more of this open interest, a greater and greater percentage. Like, at the top, it was like 70% was crypto collateralized. Now it's like 30%, and the rest is stable coin margin. And now we see all the things like the quarterly futures, the perpetual futures.

Starting point is 01:11:19 They were paying 40, 50% to long at the top. They were paying 10%, 15% futures basis, you know, perpetual futures funding rate, manualized the doubt. They were paying to long Bitcoin this entire way. And just now, they're not paying, they're not getting too overly aggressive. But just now open interest is going up, up, up, up. And they're starting to get a little walsy on the short side. And I think we can just, you know, whether we consolidate here or where we go next, I don't know.

Starting point is 01:11:45 But I imagine we just chop around for a bit. And as coins continue to get pulled off exchanges and people, you know, the miners have some coins left, but not all that many. You have all these leveraged desks that have puked up. You know, people that are just scared that have just been selling. And if this is 16K or maybe low or maybe higher, if this is where we find that equilibrium, like the 3K of 2018, 2019,

Starting point is 01:12:08 or the $200, the band market before, whatever that level is, I don't know. But there's a level where the marginal buyer is stronger than the marginal seller in this asset class. And the lower it goes, the easier it is,

Starting point is 01:12:20 right? I know for a fact via data and anecdotal evidence that there are passive buyers of this thing every single day that hold it in their own custody. And so at some point, the marginal seller gets exhausted and you have a historic level of short interest that gets utterly destroyed. I don't think we're there yet, but what this thing will do on the other side of this, as preggs reinforces the narrative in the face of potentially global economic Armageddon is pretty wild to think about in terms of what happens next. I mean, I just, you should some of the slides I dropped for you, you should just cycle through maybe in the YouTube or edit on later. people should look at some of this stuff because it's just, it's going to rip so hard.

Starting point is 01:13:02 I mean, it might not happen in the next 12 or 18 months, but whatever the timeline, I don't know, but I'm certain that people don't understand the supply demand dynamics here. And what's going to happen once the price starts to reinforce the story, like it always does? Well, you haven't had any momentum shift. You know, the traditional metrics that a lot of Wall Streeters, a lot of whales use when they're looking at just kind of the momentum shift. whatever cash they have on the sidelines, like none of that's been demonstrated yet, at least not on any type of long duration

Starting point is 01:13:34 where a lot of whales would be, what they would be using this step back into the market. You haven't seen that yet, but I can only imagine when you do have that momentum shift and you've had the supply suffocation that clearly has taken place. You can literally see it on, you know, you can pull that data straight off your node.

Starting point is 01:13:55 It's going to be a whopper. it's going to be a whopper. And I am totally here for it. And God, I love this space. Everything that's happening, at least from my vantage point, it just shows me that we are dealing with an asset that's truly free and open that can actually bring the cost of capital in a free and open way to the world because the bad actors are exploding. What an exciting time to be alive.

Starting point is 01:14:25 That's all I can say, Dylan. and what a pleasure it is to bring a person like you on the show. All right. So, Dylan, thank you so much for making time coming on the Investors podcast. We love having you. If people want to learn more about you or they want to follow your feed or whatever, give them a handoff to where they can learn more about you. Cool, yeah.

Starting point is 01:14:43 Well, I spend way too much time on Twitter, learning and posting. So you can find me there at Dylan McClare underscore. I'm working with Bitcoin Magazine, kind of posting a lot of these thoughts with a newsletter that we put on with Sam Ruel and Jeff Ross has joined the team, and we're putting out kind of all of this stuff from, you know, we talk as a Bitcoin-focused new letter, we talk about bonds and volatility and Bitcoin and the collapse of all these bucket shops and everything in between. So check that out.

Starting point is 01:15:08 There's free tier, page tier. Otherwise, I mean, you know, my DMs are open. I'm sorry if I don't get to them. And I don't really like email or LinkedIn for all for that matter. But, you know, I love this community. It's great to get to meet and talk to some of the smartest people in the world about all these different things. So, you know, find me on Twitter. I appreciate you having me on Preston.

Starting point is 01:15:28 I mean, you've been a mentor to me in many ways. So it's awesome to catch up on a chat and have it blast out to the world. Honored to have you, Dylan. And you always bring just unbound amounts of knowledge and thoughts and critical thinking. And I love it. And it's an honor to call you a friend. So thanks for coming on. Likewise.

Starting point is 01:15:48 Cheers. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use, just search for We Study Billionaires. The Bitcoin-specific shows come out every Wednesday, and I'd love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it's something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening. And I'll catch you again next week.

Starting point is 01:16:22 Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - BTC106: FTX Failure, GBTC, Genesis DCG & more w/ Dylan LeClair (Bitcoin Podcast)

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