We Study Billionaires - The Investor’s Podcast Network - BTC159: Binance, GBTC, FinCEN and More w/ Joe Carlasare & HODL (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. On today's show, I have back legal expert Joe Carlisari and Good Friend and Bitcoin OG American Hoddle. And we're talking about all things Bitcoin. This show encompasses a wide-ranging, candid conversation about all the events happening in the Bitcoin ecosystem. We cover the Binance CEO's potential jail sentence. We talk about the massive FinCEN proposal and what people need to do to take action. here in United States. We talk a little bit about the incoming bull cycle and much, much more.

Starting point is 00:00:35 This was a really fun and thought-provoking conversation, and I can't wait for you guys to give it a listen. So with that, here's my chat with Joe and Hoddle. 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 Hoddle and Joe. And we did this. in the depths of the bear market, probably what, a year, a year and a half ago? What was it? Something like that? A year.

Starting point is 00:01:18 I was already that long ago. Yeah. And that sucked. I was, secretly, I might have been crying in my Cheerios. I'm not going to admit that publicly on this forum, but it was tough. That was tough time. It was a difficult road. But I think we all agree that things are looking pretty spicy right now and pretty exciting.

Starting point is 00:01:38 And I'm sure we'll get into all that. Before we go in that direction, which will turn into a very bullish conversation, I want to cover some of the shadier stuff that's been happening. Anytime I have a chance to kind of ask Joe some of these questions, it's just, I enjoy hearing your responses to these things, Joe. So I have quite a few, and I'm sure Hoddle has many follow-ons, and he has a lot of questions here as well. So where I want to start is the CZ Binance take down. I didn't see this happening. I mean, I knew the SEC was going after them hard. I suspect you can call it a tinfoil hat.

Starting point is 00:02:18 I think everybody in the community was posting, you know, basically Larry Fink and all these others are don't even want an ETF approved until Binance is taken out. I just didn't know how it was going to go down. And when we all saw this Twitter post with, oh, CZ is admitting to conducting fraud and is, and make sure my terminology here is correct in your response, Joe. And he's now going to pay a $4 billion penalty. He has till, what is it, May of 2025 to pay this, almost as if they're like, hey, we know bull runs coming and we know you can't pay it right now, but maybe by 25, you will have the money to pay it. I don't know. What is your take on this? Because it's so

Starting point is 00:03:03 much more educated than the debauchery I just did leading up to this question. So let's start back, I think really 2022. There was a Bloomberg report that came out that said Justice Department was split overcharging finance, which to me, the very easy interpretation of that is they still need complete some additional investigation that they definitely think there's enough to bring charges, right? But they kind of want to sort of dot all the eyes and cross all the keys. And then the confusing thing came is then in the spring, right, we got those back-to-back lawsuits. And I remember being on podcast with you where, boom, we get the Binance suit and then boom,

Starting point is 00:03:40 we get the Coinbase suit back to back within a couple days. And that's really confusing, right? Because usually what happens in these types of investigations, Preston, is that criminal moves first and civil always takes a backseat. The traffic ticket, sort of civil penalties that the SEC brings, those are never going to be as impactful as criminal charges where they're hauling you away in handcuffs and, you know, you're facing sometime behind bars. So, you know, me and some other lawyers in the space were chatting about this.

Starting point is 00:04:07 We're like, this doesn't make a whole lot of sense. I mean, in the CFTC suit against finance, there was actually an allegation that they knowingly aided and abetted funds being transferred to Hamas and to terrorists. And so if you're doing that, if you're knowingly engaging in money laundering, particularly for hostile actors, for nation states like Iran who have negative views of the United States, that violates numerous international and federal laws. And obviously, you're doing that knowingly catering to U.S. customers, which gives the DOJ its hook. What was happening? Why did, why was the SECC and why was the CFTC given the green light to go file

Starting point is 00:04:43 these charges? Well, we know the answer now. The answer was because even at that point in the spring, they had been in an active investigations, active negotiations, active negotiations, rather, with finance and staff to say, you're going to pay something. Okay, you can come kicking and screaming and we're going to find you wherever you are and extract you back to the United States, even though you claim you're not subject to U.S. jurisdiction. Or you can come with us and come along and let's negotiate some agreement you may not like, you may not be comfortable with, but at least you can live with and you might, you know,

Starting point is 00:05:12 not have the same fate as someone like SBF. So that's an easy calculus, right? That's an easy thing if you're facing certain prosecution from the U.S. government to continue negotiations. And that's why DOJ probably said, we're close enough on a deal that we're going to green light this and say, you guys go ahead, SEC, CFTC, you do your thing because we're going to probably get this guy to plea. So that's what happened.

Starting point is 00:05:34 Good Lord. So then the amount, the $4 billion. So how is something like that even determined? So there's a whole memorandum that's put in place by the government, why they're recommending and it's basically a percentage of the laundered money. I don't have all the numbers, some of it which are still protected by seal, but I think the idea is that you're taking a certain upper threshold of what is in fact, and it's negotiated, right? It's not necessarily the whole full amount, but they're going to say we can agree to this

Starting point is 00:06:02 and we will support this if the government backs the plea. So I think there was some calculation where they said based on some conservative estimates, it was like 25 to 30 percent of the laundered money. That's how they came up with that calculation. Now keep in mind, that's the government's recommendation. Usually the court will defer to the government on sentencing recommendations, but not always. And we do know that there is some dispute still that remains between the government and between CZ's lawyers, right?

Starting point is 00:06:28 Most notably, there was a request from CZ's lawyers where he said, let him leave the country, let him go back when he's pending sentencing. That doesn't come until February. And guess what? The judge said, no, I'm going to look at this issue. And for now, you're about staying in the United States. I think a big question I have and a lot of people have is CZ actually going to to see time inside of an American prison for this.

Starting point is 00:06:51 Okay. So what kind of time will he be looking at at sentencing? Well, the government in some file documents said that they're going to go for closer to the maximum statutory amount. So, you know, it might be, again, if I asked me what's the judge is going to do, I think it's a couple of years at most, probably less. You know, I think 18 months makes a lot of sense, given his cooperative nature. Keep in mind, he did the exact opposite of what.

Starting point is 00:07:17 what SBF did. And if you recall at the time, there's no way SBF doesn't plead. They've got him dead to rights on the facts. Well, CZ's taking the opposite of Roach. He voluntarily came to the United States. They didn't have to extradite him. He showed his face in a federal courtroom, said, I plead guilty. I'm not disputing any of these. He's going out of his way to try and be cooperative with the government. That's a huge factor for the judge. The judge is definitely going to take that to consideration. That being said, you know, he knowingly helped get money in the hands of terrorists. He also knowingly helped Iran evade international rule of law to prevent money laundering. So he does face serious, serious charges, and the government's probably going to,

Starting point is 00:07:57 you know, try to stretch it out a little bit more than he would like. The government, like I said, they're going to go for years of time. I think most likely, though, the judge is going to be very lenient on him. But he didn't donate a billion dollars to all the politicians on both sides. Right. So maybe that, maybe that was the, why the approach was different. Well, remember that text message also, or it was a signal message, I think, that said, LOL, bro, we are literally financing terrorist. I mean, when you have an admission that's that glaring, you just have to plead. There's nothing else you can do.

Starting point is 00:08:29 Right. I wasn't even aware of that. This is CZ that had that. I'm not aware of this text. It was a finance employees on an internal signal chat. No way. Seriously. Dead serious.

Starting point is 00:08:40 Wow. The complaint's stunning. I mean, the amount of text messages. and CZ signal that they were able to get is just amazing. It was a done deal. I think when the CFTC's complaint was filed that there was going to be some charges coming. The only question is, you know, what variety of them, what, you know, plea was going to be

Starting point is 00:09:00 negotiated. But yeah, I mean, it was, it wasn't, there's no defense for that, right? When you, we, there's actually a text, another one that says, you know, we see the bad and we look the other way, I'm paraphrasing, but effectively like they knew that this was money laundering. They knew it was an unregistered exchange and they ignored it entirely. I guess like a tangential question here is like if this is happening on Signal, how in the world are they acquiring these texts?

Starting point is 00:09:26 Dude, I personally, let me go full tinful. Yeah, let's hear it. I always thought that Signal is a cutout for an intelligence agency because I don't know if you remember this, but the FBI put out a list some years ago that we're like, here are all the encrypted chat apps that we don't have access to. And it's like, Signal, yeah, we can't get that one, bro. Go ahead and use it, Grimmy. Like to me, almost like an advertisement.

Starting point is 00:09:48 Yeah, if you have one side of the signal, if you have access to somebody's phone on the other side, you can break the encryption that way. It's pretty easily, right? Yeah. So just nab up a low level employee and take their phone and go through all the mess. On a side note, I see Jack Dorsey and others on Noster promoting simple X. I've played around with it a little bit. And I mean, there's no K.C from what I can muster. I did download it out of the app store. So, you know, I guess there's some type of connection there that Apple would know that I downloaded that app. But the setup was definitely different than a lot of these messaging apps whenever I did set it up. I don't know if you guys have played around with it. I think anybody, I mean, Joe's the attorney.

Starting point is 00:10:29 I'm sure he'll echo this thought. But anybody who's out there using Signal because it's, you know, Air Force encrypted. And you can just like, oh, yeah, bro. Let's talk about financing Hamas over Signal. Probably not wise. I mean, listen, in cases I've been involved with, people think because they're sending it over a signal, there's no way it gets out, which is just nonsense, right? Because there are numerous ways that if you compromise someone who's getting the message, they can preserve it, right? They can take a screenshot of it.

Starting point is 00:10:55 They can take a photo of it and they can preserve it. So it doesn't really get you off the hook. Once something is right in writing, no matter how encrypted or how secure it can always be compromised. But one more I want to give to you, Preston, for the audience here. Yeah. This is from the CFTC complaint. It was actually referencing the government sentencing man. memorandum. In February of 2019, going back to 2019, the chief compliance officer, Samuel Lim,

Starting point is 00:11:18 of Binance says, regarding Hamas transactions, Lim explained that terrorists usually send small sums as large sums constitute money laundering. And then his colleague replied, who they don't name the colleague, which is interesting, but it says, can barely buy an AK-47 with 600 bucks. Like, come on, they are here for crime. We see the bad, but we close two eyes. That's a quote from some message. that they're getting from the chief compliance officer at finance. Wow. I like how even the terrorists are aware of structuring. They're structuring it under the limit.

Starting point is 00:11:50 Yeah. I want to go a little bit outside of this particular topic, but it's tied to the Senator Warren letter that she wrote to the president, which was immediately followed by this FinCEN proposal that like the next day. And in her letter to the president, She was wielding around this Wall Street Journal article that, you know, was claiming that $120 million was being siphoned through crypto to Hamas. And then chain analysis came out. I want to say like four or five days later.

Starting point is 00:12:24 And the number was more like I think it was $450,000, which is like a third of a percent of what she was claiming. When you look at this FinCEN proposal, I don't know how much you've gone through it, Joe, but it is. really substantial, like the ambiguity in this thing. And I guess it's nested under the Patriot Act. Is that correct? The update to it? Well, the proposal to it. Yeah. I mean, it's, it's FinCEN regulations in itself. But the Patriot Act has some internal U.S. rulemaking. But FinCEN at large has also has its own regulatory authority. I'm looking at this. And my concern is they've made it so broad and so overarching that you could pretty much lump anything into it. So if you're a full node operator and they don't like the fact that you have five channels open to other nodes,

Starting point is 00:13:16 like all of a sudden you're now a money transmitter. But like these definitions that they put into this thing and the sheer amount of legal horsepower that it's going to take to fight anything that they want to kind of throw at whoever they want, I think becomes a major issue if it does go through the way that it. it's currently proposed. And I know the comment period is going out to the 22nd of January for people to respond to this. I'm trying to type up something that kind of addresses. They had like 30 or 40 questions that they proposed to the public to respond to in their public record for this proposal. I'm trying to address all of these questions and put it out there on Twitter for people

Starting point is 00:13:58 to kind of look at template. If they like it, they can post it right into the register to respond to some of these questions and some of the points that are being proposed in this FinCEN proposal. I want to hear your point of view on this because that's my point of view. I think that it's just they've taken a million pounds of crap through it against the wall and like it's just going to stick. Like there's no way you can clean it all off. Like it's just there. There's so much to try to respond to and the burden of proof is now on on anybody in this

Starting point is 00:14:27 space to try to defend themselves. I work both in Bitcoin and represent some crypto clients as well. And we've had talks about this at length. And I think what everybody who's listening to, if they're involved in the Bitcoin space, should have in their mental model, is that there will be laws that are passed internationally, nationally, state level, local level that are overbroad, that are vague, that are confusing, that will not withstand scrutiny when challenged from a judicial perspective. What I mean by that is that a government regulator has in their vested interest,

Starting point is 00:14:59 to craft the broadest possible legislation, the broadest possible rulemaking because they don't want to have to be in a situation where they don't have the teeth to do what they need to do. Now, the problem with that, and we see this in many industries, they see this in the insurance contacts with some of my clients, when you have a very broad law that is confusing, that is vague, it is in welcoming challenges. And the way to fight back against this, I truly believe, and two might disagree with this, is the court system. The court system is very willing to strike down laws that are void, that are void for vagueness,

Starting point is 00:15:34 that are overbroad, that basically capture innocent activity. And the court system has sort of a hacksaw where they can cut away at some of these provisions to clean them up. And I think from the regulator's perspective, they'll say, that's fine. We'll take the legitimate challenges. And if the courts want to pare back our authority, so be it. But that's the way I think this goes. I think it goes with overbroad, vague statutes that are passed.

Starting point is 00:15:59 So there's no doubt they have something to use to go after these folks. And then at the end, they say, yeah, all the legitimate folks, they're going to have to bring legal challenges to cut this thing up and make exceptions from a judicial perspective. Have a judge basically make the exceptions to protect the innocent activity. I totally agree with Joe's perspective. And I do think that like this is a serious era of Bitcoin where we're going to have to fight for Bitcoin's existence, not in the shadow realm, not. not in the gray market, but in the white market, in the light, like Bitcoin has to,

Starting point is 00:16:30 basically nobody gets a free pass in America. You have to fight for every right all the time. Like the price of freedom is constant vigilance. Nowhere is that more true than in Bitcoin. So like everybody who thinks they're going to cipher punk their way out of it, I think if you look at the Canadian situation, which we all had some friends get caught up in, yes, your Bitcoin is permissionless and it can cross borders and it can do amazing things. But you are a meat puppet who lives on government land.

Starting point is 00:16:54 And if the government wants to suddenly, you know, retroactively call you a terrorist for sending some money to some, you know, nice Canadians, unfortunately, that's a reality that you have to deal with. And that's a reality that's coming for all of us, I think, with these FinCEN regulations and other overarching regulations that I expect in the future. Because the one thing the government is not going to stop doing is it's not going to stop trying to dox Bitcoiners. And it's not going to stop trying to tax Bitcoiners. It wants to get those two things done. And, you know, it's going to be successful to some degree. And just to think about this, okay, I don't mean to get all political on this, but people should be aware of it in their mental models when it comes to Bitcoin. There was numerous mask mandates that were put in place, okay, by local authorities, by the CDC. Those things were put in place by lawmakers and regulators who thought that this is essential for health and human safety. This is essential for the country to operate. And the judiciary eventually looked at these things, just case law in Florida and many other states, where, they basically struck them down. They said these things violate and exceed your authority.

Starting point is 00:17:57 So the reason I bring that up, not to go down a dangerous path, that's controversial, is because if they're going to do that with health and human safety, with a national epidemic or a pandemic, if they're going to do that with that, what do you expect for Bitcoin? You should expect in your mental model, draconian overbroad legislation regulation that you need to challenge through the legal process. And thank God we live in the United States where there's an active judiciary that will hold the feet to the fire. And this Supreme Court, okay, has displayed consistently a tendency to err on the side of liberty and freedom.

Starting point is 00:18:28 That's one thing that the United States has going forward is the United States Supreme Court has currently constituted is very much focused on individual rights and liberty. So that's one thing from your perspective you might want to consider. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is.

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Starting point is 00:22:54 guess I need your help or just kind of your opinion or point of view. Everything you said is is exactly how I am seeing it play out. So I'm thinking, all right, so if we can put as many, comments into the register when they have the public comment. And we're commenting, hey, this is violating, you know, this particular piece because of this, all these case law that have, you have this precedence, you're breaching my rights as a citizen because of X, Y, and Z. And you're listing it out as, you know, let's say we have a thousand, I think there's already over a thousand comments on this proposal. But like, let's say there's high quality comments that are pulling case law, does that provide ammunition to these businesses that are going to be

Starting point is 00:23:38 battling this on the other side after it's approved because they can point back to the register and say, look, we told FinCEN, this person here, Joe Schmoe on the back in 2023 was pointing out that this case law was violating this right. Like, they knew it, they passed it. Does that help their case or? Yes. It does. Yeah. It helps everyone's case. because here's what happens. When you make a regulation, and there's numerous different regulatory bodies that have a tremendous amount of power,

Starting point is 00:24:09 you know, the sort of shadow government, as people say, like the regulatory state, when they're doing a rule change, and this goes for all levels of government, and you have public comment, you're soliciting public comment, that becomes part of the official record. And what ideally occurs,

Starting point is 00:24:25 and this is not always the case, but what ideally occurs if there are legitimate, high quality comments, like you're saying, the regulator should respond to those concerns. They should say, well, this isn't a concern. You know, these types of legitimate activities shouldn't be affected because of X, Y, Z. So then what happens is when you're actually is a legal challenge and you have a plaintiff who has standing and can say, no, no, no, you were wrong.

Starting point is 00:24:48 Your response to the comments was wrong. It was misguided. You didn't understand the technology. You didn't understand the second and third order effects. Then you have something to literally point to when you're in a legal challenge saying not only were they warned of this by numerous people through the comment period, but their response to the comments was insufficient. They basically glossed over it and ignored it, which to me, if I'm looking at something depending on the type of challenges being brought, if you're a judge and you see that, that they not only, it's not just like an unintentional consequence, this is something you overlooked as a regulator. I would hold their feet to the fire. It would be a little bit, I would apply more scrutiny to them and their process if they purposely ignored legitimate comments made by good

Starting point is 00:25:27 actors trying to be comprehensive. Now, they're going to do it anyway, though. I mean, like, yeah, they're going to do it. Henry, Henry Kissinger just died today. And there's a quote from him I think of often, which is the illegal we do right away, the unconstitutional takes a little longer. That's Kissinger, right? So like, they're going to do it, right?

Starting point is 00:25:47 And we're going to have to continue to fight it in the court. And Joe's going to make a lot of money because, you know, we'll fund it. Well, yeah, I mean, listen, this is, this is the biggest, you know, I'll just go on one one digression, okay? The idea that we're going to be able to become the backbone of the global financial system and you won't have Bitcoiners stand up and won't have them fight for it, I think is just naive. Right. You're going to have, and by the way, by the way, the ETFs are a big part of that process, right?

Starting point is 00:26:13 As you have an ETF coming to market, you now have more firepower from a legal and regulatory standpoint, those folks that are going to go in there and advocate because guess what? We have clients now that have this money and it's part of our assets under management. and we have to go fight for it. This is all part of the big process. So aside from the guys saying, oh, everybody should just self-custody of Bitcoin, I get it.

Starting point is 00:26:34 I understand that. I'm sympathetic to that. But having big entities being willing to put legal firepower and spokesman firepower behind these talking points, that's going to be huge. I'm going to prove my psychopathic tendencies here. I've been working on a response to this FinCent thing for probably two weeks. I think I'm at like page 35 on this.

Starting point is 00:26:55 thing and still not done. And I'm just trying to, I guess what I'm trying to do is just create a turnkey template for people that they can kind of pour through this thing. And they're just like, I'm really passionate about this particular right that's being violated. Here's the case law that that backs up why it's being violated. And it just gives them something that they can copy and paste like straight into the register on the proposal.

Starting point is 00:27:20 So I'm not a lawyer. But I'm leveraging AI as best as I. I can. I mean, it's kind of insane to be able to kind of interact with almost like a lawyer in your pocket. Now, obviously, it's not up to Joe's caliber or anything, but it's definitely good at being able to help me digest all the legal jargon in the proposal itself and to kind of be able to go back and forth to like try to find nuggets in all of this. So any advice, Joe? Yes. So I think the biggest advice when you're dealing with regular advice, don't get me legal advice. No, no, no, no, not only you, thank you. I appreciate that. No, but the, the, the, the, the, the best

Starting point is 00:27:59 recommendation I can give you just from a policy standpoint, and this goes at every level, okay? And this will be a continual battle we have over the years, both with state and local and federal lawmakers, is that when, when you start from the position of what the government is trying to do, right? You have to sort of confront that head on. And I think right here, what is the primary goal? I don't think you should ascribe to them that they're really just, even if they are, right, From a persuasion standpoint, that they're trying to crush the technology, they're trying to inhibit Bitcoin adoption. I think you should approach it.

Starting point is 00:28:30 Listen, you want to make sure bad actors aren't avoiding, you know, money laundering requirements, aren't avoiding KIC, aren't committing horrible bad acts. Well, here's how you do it, right? Here's how I would propose a framework that would prevent that from happening. And you try to have a softer touch, okay? So the advice or recommendation I would give to folks on a policy standpoint of doing this and trying to engage with regulators and say, here's the alternative press in that you would recommend because the idea that they're just going to stay hands off when at least, you know, if there's

Starting point is 00:29:02 $40 million that's going to terrorists, I think they still propose a rule. It can be, you know, your argument's spot on about how it's such a tiny amount in reality that Elizabeth Warren and others are focused on. But that's, it could be a dollar. It doesn't matter. They're going to go after it because it's a very easy target and it doesn't have the support of other industries. This was my frustration.

Starting point is 00:29:21 So a month, I think it was in October, the U.S. had sent $6 billion to Iran. Then you'd look at the news that followed this and it was like, no, actually we were holding it back. And then you read, depending on what political bias you had, you could find an article that suggested whether it was sent or that it wasn't sent. And like the irony to me is you had this chain analysis that took place and they're like, no, it was actually 400. $150,000 that was sent. And like, here's the proof because this is a public ledger and everybody can look at it. Meanwhile, you have $6 billion, which is 60 times larger than the lie that was three-tenths of the amount, which was 400,000, right? That we have no idea whether Iran got it or not. Like, the irony of that and that we're dealing with these ledgers, these money ledgers that are behind

Starting point is 00:30:21 barriers that you have no idea what the heck's happening is like the ultimate irony of the entire letter to the president, right? Like, it's just like there's moments like that where I'm just like, am I living in crazy town? Like, this whole system is so corrupted. It's nuts. Like, we can't usher this stuff in fast enough. I think we as Bitcoiners have gotten so used to transparency that when we go back and reflect on the current system, which is largely narrative driven, we look at it and just go, this is bizarre. It doesn't make any sense. I can't. But, you know, we all used to live in that. And that was like the dogma that pervaded our life. And it was just every day. You read the New York Times and the Wall Street Journal. And basically

Starting point is 00:31:05 whatever they said was gospel. And you just said, okay, yeah, I guess that's what's happening. But we now have the ability to check on chain exactly how much money went to Hamat. Now, again, to Joe's point. You know, the old world elites, they still live in a narrative-driven economy. And Elizabeth Warren is like, you shouldn't even exist. We should be able to crush you, destroy your industry. It's just like the Bitcoin mining debate. You can make all these analogies about how little as a percentage of the global energy consumption Bitcoin uses and how it's positive for the grid and all these things. But you're talking to someone who thinks this activity shouldn't exist, period. That is a wasted activity. And so it's not going to be,

Starting point is 00:31:42 in my view, it's not going to be effective when you make the argument. Well, Christmas lights use up more energy, electricity than Bitcoin because they would say, well, we like Christmas lights. They have a purpose, right? Like, we like to dress up our houses. Bitcoin mining is just wasteful. Nobody needs an open, distributed ledger that can't be corrupted and has no single point of failure. That argument doesn't hold water with that. Because most people don't have any savings, right? So if you're not able to retain any savings because you're in debt up to your eyeballs and you're playing the debt game, of course you're not going to understand Bitcoin. You have nothing to save.

Starting point is 00:32:15 Right? And I guess we shouldn't be surprised that that's the majority of the populace around the world because most people around the world are debt slaves at this point. They can't save any money. They have no disposable income. Bitcoin is that technology for people that have disposable income that are producing more than they consume. So, yeah.

Starting point is 00:32:37 Which is why UBI is the most bullish thing for Bitcoin ever. I mean, right? That's why I talk about this. UBI, once we get there, which I think we will, at least many countries will, that's incredibly bullish for Bitcoin, right? Because you're putting money right into people's hands directly, and they can then transfer it into Bitcoin, which is harder than the asset they're being given. Well, and again, UBI is the Trojan horse for the CBDC,

Starting point is 00:33:01 because people will go, why should I accept this controlled? Other way around. The CBC is the Trojan horse. The T B.C is the Trojan horse that comes with UBI. Yeah. I mean, people will basically say, why should I accept this controlled state money that has time decays on it? And the answer is going to be because, yo, you're getting a thousand bucks. That's pretty sweet, man.

Starting point is 00:33:20 Go buy a kayak or whatever, you know, right? So, like, most people are just going to opt for the short-term incentive there and then not going to think about the long-term ramifications. And that's what's going to drive the divide between the producers and the consumers in society. It's because the consumers are going to be getting all the coupons. and the net producers are going to be holding the Bitcoin. And they're like, yeah, I don't, I don't accept that. I don't want that. So let's talk about, there was this post recently by Andrew Abacus.

Starting point is 00:33:52 And every time he posts, he's posting about Barry Silbert and DCG and Genesis and GBT. And recently his post that he just came out with is, I mean, he's not mined. Any words here, he's basically saying DCG continues to run a PR games and a fraud via subsidiaries like Genesis. I've heard people say that there's a bunch of marketing that they're seeing on GBT again. They continue to suck all these fees out of the GBT product, which is this trust, the Bitcoin Trust. But the rest of the entire architecture of Barry's business is bankrupt, and they have huge amounts of liabilities that far exceed their assets.

Starting point is 00:34:39 Either one of you guys, like, do you have a take on this? My real question on this is, if you're Larry Fink or BlackRock or any of these big Wall Street major players on Wall Street, are you trying to convince, and I know Joe's point of view on this is he doesn't think that there's any type of coordination between the SEC and big Wall Street banks, but I know Hoddle, you have a much more tinfoil hat opinion like I do. If I'm those guys, I'm trying to get them to fumble this 620,000 Bitcoin out of that trust so that I can buy it at existing spot prices. Joe's already rolling his head.

Starting point is 00:35:20 I'm going to add some more tinfoil here and then we'll let Joe tell us how stupid we are. But I do think that BlackRock has a big problem here, which is, GBT is obviously the market leader. They have like some ungodly amount of Bitcoin, 600,000 Bitcoin or whatever, right? Yeah. You know, it is the golden goose of Barry's empire. If you remember a year ago, the big fud item of the bear market was, bro,

Starting point is 00:35:44 what if all the GBTC is fake Bitcoin, right? Like, what if they don't have it? What if they lent it all out? That was the big fud item, right? And I actually went through some diligence on that with a friend. And then we both decided, nah, they have it. And then we made buys at the bottom, which turned out to be really good buys.

Starting point is 00:36:00 But, you know, if you're Black Rock, if you're Larry Fink, you've got to get your hand on some significant amount of Bitcoin to be the market leader here. And there's really no way you can do that without running the price. So, listen, I'm not alleging that there is some sort of a conspiracy here, but it's a big club and I don't think Barry Silbert is in it. You know what I mean? And I don't think they want to let Barry Silbert in it. I agree.

Starting point is 00:36:20 I don't know the kind of massaging and, you know, unspoken agreements that go on, you know, we're in the smoky room. Okay, now Joe can tell us how, you know, the logistics actually are. I agree with you, Hoddle. I'm with you. Let's hear Joe's point of view. Okay, Gray Scale is probably most responsible for the ETF that's going to come in January. And you have to start with that position because Grayscale defeated the SEC under a very high standard that was difficult to meet, proving that their treatment of the spot product was arbitrary and capricious.

Starting point is 00:36:53 Gray scale met just a few weeks ago, actually, just at the same. the, I think is the later part of October and into November maybe, they actually met with the SEC. And they pointed out to the SEC that they had something called the transfer agent agreement with BNY Mellon, which will allow them to convert to the spot ETF. And there have been other, well, I got to be careful about what I'm saying. There are other indications that Grayscale will be launching its conversion at or near or potentially even before some of the other. their players in the market. What?

Starting point is 00:37:29 So the notion, yeah, yeah. So the notion that they're going to be somehow sidelined from this process when they're meeting with the SEC where they have effectively, and this is a public document that's become available where they've effectively talked about an uplisting. That's the term they're using an uplisting date for the exchange traded product. That is massive, right? That just shows you from my perspective that this is going to get greenlit with all the others. And, okay, so if you're going to give them the same treatment as everyone else,

Starting point is 00:37:57 they've got a massive multi-billion dollar advantage structurally because they have all these customers and they have this huge pot of money and they're going to be lowering their fees. Why would anybody move and incur a taxable event potentially when you've already closed the discount? What advantage does BlackRock have? I mean, BlackRock has the name, right? But assuming this is correct, right? Obviously, we're just making predictions here and that's always dangerous.

Starting point is 00:38:21 But assuming they all launch at the same time, I hope you guys will admit then that there was no secret sauce or preferred entry for Black Rock because what entry do they get? What advantage will they have structurally if it all comes together at the same point? I think what me and Preston are wondering together out loud is, is there a way they can turn the screws on Barry so that he no longer has ownership of GBTC? That's like, I think that that's exactly what we're what we're saying. Well, you guys know that the New York AG is suing him, right? Right. New York AG is. And there's a lot of rumors about criminal activity. I don't know what he did or didn't do, but there's a lot of rumors. So the ongoing interviews with the Southern District or Eastern District of New York,

Starting point is 00:39:05 potential prosecutors looking at this as well. The New York AG is suing him for making false statements. They're also suing Gemini, for that matter. And they're suing Gemini, they're suing Genesis, and they're suing grayscale for them knowingly making false statements about the Earned program and the other lending activities. And so you've got a whole host of allegations. And with all of that, the SEC is still meeting with them to talk about potential conversions to the ETF. So, Joe, help me with this.

Starting point is 00:39:34 What type of timeline do you think they could charge Barry with all of these entities by? Could it happen prior to this ETF date that I know you've posted about being early January? Could something happen between now and then where it's like, oh, hey, Barry, it's going to me $2 billion and then you're off the hook, right? And then he's forced to sell the GBT product straight into the hands of call it Black Rock. And then he has just enough to pay the bill because of the premium that he would get for his 620,000 Bitcoin. When you say charge, there's an active suit right now by Letitia James of New York, right? She's suing that $1.1 billion dollars in losses related to fraud committed by Gemini, Genesis, and DCG.

Starting point is 00:40:27 And the product, if he was going to sell the GBT product, is worth a billion, a little bit more, a billion and a half, somewhere in that ballpark. You're talking about the actual, the trust? Yeah. The trust. The brand. Yeah, yeah, yeah. Okay, because he can't sell the trust.

Starting point is 00:40:44 I just don't want anybody who's holding GBCC, I think that he can, correct. He can reach into the trust. and get the Bitcoin. But if he's going to sell it, if he's going to, if he's going to sell it, these were the numbers that I had heard. It was around a billion to maybe a billion and a half that he could sell it for. But why would he? Well, why wouldn't he if, okay, let's let's put on our thinking caps here for what we would do if we were.

Starting point is 00:41:06 Yeah. If we were him, okay, the most important thing he can do right now, free advice, right? Not giving advice, but free, you know what I mean? The most important thing you can do is do whatever is necessary to ensure. ensure when the ETFs launch in January, that he is right there, right in the mix of things, that he gets his conversion done day one. If he does that, you, number one, get a bunch of new inflow, which means your fees are going to be coming through.

Starting point is 00:41:33 You can string the litigation along for as long as possible. And again, this New York AG suit was filed just in October. And you guys know how slow litigation moves. It can take years, potentially. There haven't even been charges abroad from the feds, right? So that answer is from the- Yeah, that answers my question. That, see, I don't know, I don't understand that timeline of like how long that would take the shake out.

Starting point is 00:41:55 You're suggesting it to take a long time. Oh, okay. Yeah, it could take years. I mean, you know, that's why you want people. That's why the feds always go for, we want you to plea. We want you to plea. We bring the hammer because we can get justice and we can make headlines and we can get money and we can do it instead of years. We can do it really quickly.

Starting point is 00:42:14 I mean, look, they ran this SBF case. That was like rocket docket, right? That was filed last year and they just got a conviction. When did the conviction come? Last month, he was convicted like in two hours or something. His sentencing will not be until March. Ironically, CZ will be sentenced in February before SBF. How was that possible?

Starting point is 00:42:40 Because he pled. Oh, yeah. Yeah. Okay. No trial. I have a friend who was given a private audience with Barry a few months back. and basically the view from the inside there is that Barry is in fight like hell mode defend the empire like he's not he's not giving up easy he's not going to roll over so they're going to have

Starting point is 00:42:58 to come with everything they got if they you know if that is the outcome like tinfoil hat and then you know I also think Barry's a pretty smart guy and if he did things that were unscrupulous I would imagine they were papered in a way that was legal that's just my personal feeling about him he's also got a suit against him by the Winkle Vi right the Winklevi are suing him directly He's saying he personally misled them about the Genesis and DCG and committed fraud on them. He's a big blocker. Like, how smart could he be hoddle? Oh, geez.

Starting point is 00:43:34 So good. By the way, I am a GBTC shareholder from way back. I've been holding GBTC in my retirement account since 2015. And my God, that's been way more of a roller coaster of emotion. than I ever thought it would be or should be. Yeah. By the way, one little nugget from the AG suit, she alleges in New York that Barry and Gemini, both of them,

Starting point is 00:43:59 both of them knew that Genesis's loans were unsecured and at one point concentrated as much as 90% with Alameda, obviously SPF's operation, 90%. So those folks, you know, if you're blaming Sam and everything, rightfully so, blame him, right? But there were many actors that knew of the extreme concentration. concentration at Alameda. And they looked the other way. You know, who got caught without a chair? Doquan, Mishinsky, SBF, CZ, right? But there were other players who found chairs and are going to

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Starting point is 00:48:06 he's getting away with something where he'll be a free man at some point, you know, not too long from now. And he's getting away with, what, how much he, what is he worth bottled? Billion, a couple billion. Yeah, it'll, it'll diminish him quite a bit, but he'll be a multi-billionaire still. Right. I mean, how many people would take that trade? You know?

Starting point is 00:48:27 Yeah. And by the way, by the way, in making that plea, right, he's basically gotten protected against future criminal prosecutions, right? Yeah. Okay. So, so like if the monitor gets in there, which we haven't talked about, but you guys, that's the biggest thing about the finance plea, right? There will be a government independent monitor in there that will have access to all the books and records for a period of three years following February. Which there's been a lot of talk online about that particular point and them having access to all the KYC and just being able to see everything that's happened on that platform. Right. So if they go in there and. find the bodies that are buried effectively, they're not going to be able to do much, right? They've kind of already done the plea.

Starting point is 00:49:12 I got a question here for Hott, if I can go. Yeah. Or actually, both of you. I really want to know. So I think this is coming. I think it's a done deal with respect to the, the, the ETF. I think it comes early part of January, if not January, then at the latest you're getting it by March.

Starting point is 00:49:28 I think you're going to get a host of them. I think this is going to come in and it's going to, you know, I read something today that close to 60, 70% of FAs said it would be, they would be more likely to put some money into Bitcoin, some allocation with an ETF product that they can offer to customers as opposed to the products that currently exist. So let's assume this is all happening. And it's assume we're talking next year before Christmas. And I always like to think like, okay, we've got that there. We've got the ETF taking care of. That was a huge thing for years, you know, five, six year battle. what's next?

Starting point is 00:50:00 Like what's the next big, you know, mountain that Bitcoin has to conquer? Because there always is one, right? Like on this progression, what comes next in terms of a big thing we need for the industry looking forward after the approval of an ETF? Something we need for the industry, or are we talking about price appreciation?

Starting point is 00:50:18 Both. Let's go. Both. Okay. Yeah, I think the ETF is really interesting. I've thought quite a bit about it for a long time. It's been, you know, me and Preston are like same class, that Bitcoin have been in almost 10 years.

Starting point is 00:50:28 and the ETF has been talked about the entire time. So the fact that it's finally going to happen is pretty wild, and it's the end of a pretty long road, right? But I think it signifies Bitcoin going through a maturation phase, but also the potential for sort of a shadow prohibition era of Bitcoin. Because if you end up getting quite a bit of Bitcoin in the public markets that's all under custodial control, you end up with weird incentives and things can get,

Starting point is 00:50:58 get perverse from there. And really like the revolution here or, you know, the evolution, whatever you're going to call it, is self-custody. It's being able to keep control of your own wealth. And so if we end up in a world with, you know, middlemen and custodians who are controlling our wealth with permission to access, right, request granted, you know, like, no, I don't ask anybody's permission, free men don't ask, I don't ask anybody's permission to send Bitcoin. I just send it, right? So if we're in a world of custodians, we, we, we, we, we, we, we, we, We end up having something like, I don't know, five million Bitcoin in the public markets or something like that. And then there is some sort of coordinated campaign, some sort of a contentious fork.

Starting point is 00:51:38 Like, I don't know. I think all the options are on the table. And then at the same time, you got, you know, nation states coming in. I just heard somebody the other day, I don't know if this is true or unsubstantiated or whatever. They told me the nation of Bhutan has as many Bitcoin as Michael Saylor, right? I've never heard that before. I just heard this for the first time yesterday. Maybe that's true.

Starting point is 00:51:56 Maybe it's not. Who knows? And then after nation states, you got central banks, right? So the ETF will unlock pensions and, you know, it'll take place of gold and investors' portfolios. If you look at fidelity and the sharp ratio and all this stuff, like it makes a lot of sense. Gold is not performing well. You know, digital gold is what you're going to want to have in a digital era, et cetera, et cetera, et cetera. But then, yeah, you got the dominoes of like nation states and central banks are like the next big ones after this.

Starting point is 00:52:24 And the game is changing and it's getting much more serious. and there's much more big money here. And so I don't know, man, it's TBD on the outcome whether Bitcoin is captureable or not. We know for a fact that gold is capturable. We have a good feeling that Bitcoin can resist capture, state capture. But we don't know that for certain. And so we're going to have to see the game play out. And I'm excited for the next 10 years, you know, because that's what I think is unfolding.

Starting point is 00:52:51 I agree with Hoddle. And I actually really like that he's not just kind of waving his hand and saying that it's ordained. that it's not going to be capturable, right? I think that it's important for the community and for the builders and the space and everybody just to continue to refine this thing to try to make it as foolproof as possible. Now, obviously, you know, if you ask my opinion as to do I think it's capture, I don't think that it is. And I've obviously given many reasons through all the shows and time as to why I think that it's not. One of the things that I think is also going to be important is when you look at who's going to have the incentive to kind of move to this first

Starting point is 00:53:31 from like a payment standpoint, it's going to be all the countries where they've just been decimated by dollar dominance. I think you're already starting to see some of that play out where they're moving towards this. And I think that on this next bull run, once we make a new all-time high, it's going to be, hey, how can I get, it's going to transition from, hey, how can I get my hand on some tether dollars, exposure to dollars. And I think it's going to more and more people around the world are going to be like, hey, how can I get my hand on some sats? And then people are going to be willing to accept that as payment because it's running. And I think this next bull market is going to run really hard just because of how much compression we had on this last

Starting point is 00:54:14 cycle because of bad actors. By the way, I think in terms of price appreciation, those scenarios, is in my opinion, if Bitcoin is capturable, you have kind of a cap on it at $1 to $2 million. If Bitcoin is not capturable, then sky is the limit. It's infinity. Yeah, in Fiat terms, yeah. This is one I wanted to bring up here. Joe, you had a post recently. You said the plaintiff's bar is thirsty for blood. If you're an influencer with a decent amount of followers and promoted alt coins, I'd be preparing for litigation. So you say this, and there's this really strange video of Charles Hoskins. Is that how he say his last name?

Starting point is 00:54:58 Floating around where he's like going something like that. Well, you heard about Charles Scamp. You heard about Ronaldo, right today? You heard about that class action that got filed, right? No. No, really? Oh, yeah. No, I'm breaking news here.

Starting point is 00:55:14 It's not breaking news. But no, there's a class action lawsuit. over his promotion of finance, $1 billion is what's being sought. Okay. And, you know, he was in, I think he was on social media ads talking about a partnership

Starting point is 00:55:28 and now they're going to change the, the NFT game. And, you know, there are, there's other suits that have been filed recently about, I think, ones against the MLB for their role with FTX. And, you know, there are folks that associate,

Starting point is 00:55:41 this is what finally, finally you're getting what I think is far more equipped to deal with the, alt-coin market, the private litigants, the private plaintiff's bar, which has a lot of resources. Think of how many lawyers are in the private sector versus the SEC's, you know, few hundred that can take care of this industry. And by the way, they also have to police Treadfi. The plaintiff's bar finally is realizing you can file class action lawsuits against these

Starting point is 00:56:08 entities. You can group a ton of people who have lost huge pots of money betting on all these different assets that, you know, aren't Bitcoin. And you can haul them into court. Lord, make them answer for why they did what they did and why they made representations about things. And even if the cases don't all stick, enough of them settle because of the extreme defense costs that are involved in some of these things, that that is in some ways difficult for folks. So it's not the DOJ. It's not criminal, right?

Starting point is 00:56:38 But in many ways, it is on par with what the SEC can do. Because this is a big thing. I think Hottle and I've had a lot of discussions on Pub House and elsewhere about this. At the end of the day, what the SEC can do is they can go in there and do really two things. They can get an injunction, which is a court order that says you cannot do this in the future, or they can effectively issue a speeding ticket, that you have to pay X amount of fines. You have to pay such a disgorgement of your profits that you made money on. But that's it, right?

Starting point is 00:57:07 That's the end of, I think people were under the misapprehension that Ripple executives were going to end up behind bars or something. That's not what the SEC does. the suit is a civil enforcement agency trying to recover sums of money. So to me, if you equip the plaintiff's bar with thousands of tens of thousands of potential litigants and they file class actions over anyone who's issuing these types of things, in many ways that's going to be, you know, transformative because you're really going to have to be on guard for the variety of different suits they're going to come. I mean, the SEC's got to find you first, though, Joe.

Starting point is 00:57:41 And they can't find Richard Hart. If anybody's seen him, let the SEC now. They can't find this guy. On that guy, I just don't know how anybody could watch this guy, like, decked out in, like, the Louis Vuitton gear. And it's like, it is the most vibrant, like, weird stuff. Like, how could anybody look at that guy? I figured this out. Take him seriously.

Starting point is 00:58:07 Like, I can't. You know how the Nigerian email scammers will misspell. words as a filtering mechanism, the full Gucci tracksuit is a filtering mechanism for anybody with an IQ above 100. So if you're taking financial advice for a man in a full Gucci tracksuit with a male purse, you know, that's a filtering mechanism. Oh my Lord. People like that, like I just can't block them in my Twitter feed fast enough because it's just like, it's like toxic chemical that

Starting point is 00:58:40 you pour into your brain. Like I can't even look at that kind of stuff. It's just, it's amazing to me that people still buy the thing and still think it has some value. That's the even crazier part. Well, here's a question. Here's a big question. Is there going to, I mean, there's a lot of actions, you know, enforcement actions, like Joe said, like the private sector is getting wise to what's going on here. Are we going to see another, you know, celebrity endorsed and, you know, fueled shit coin bubble? Are we going to see another one?

Starting point is 00:59:10 Is there another alt season? Yeah. What are they selling this time? I mean, last time it was monkey pictures. Is it dog pictures? Like, what do you pivot to when you had that sheer amount of insanity on the last cycle of like literally? And it wasn't even like they were different monkey pictures. It was the same monkey with like different teeth or different sunglasses or like somebody

Starting point is 00:59:36 just went into like an AI bot and was like here, just bang out like 10,000 pictures of this same monkey with like different hair and different whatever. And we're going to sell each one of these things for like a, they were doing it with rocks. There was JPEGs of just a rock and they were selling. I mean, it's all money laundering. It has to be money laundering, right? There's no other rational thing that would say that a JPEG of a rock could be $100,000 or whatever the crazy amounts were.

Starting point is 01:00:02 It's money laundering, right? Well, I mean, some of it's coming to Bitcoin, right, with this ordnals and inscriptions thing. Like that I keep seeing people on Twitter all the time talking about how they're purposely going to try and drive up the cost of transactions with, you know, these things put on chain and that that's where the money's going to be and that they can give use cases for Bitcoin beyond, you know, just a store of value. What do you guys think about that? That's going to be a weird cycle, right, if you've got a lot of this stuff on Bitcoin. You know, here's where I'm at on that is I came up with the analogy that putting an, like, you know, sending a super high transaction

Starting point is 01:00:39 fee to put an ordinal on the blockchain is kind of like, paying for a first-class Emirates ticket to fly your Beanie collection across the Atlantic. You know, and it's like, I'm a capitalist. If you want to do that, that's your prerogative.

Starting point is 01:00:53 Like, I'm happy to sit in first class next to your Beanie baby. It's ultimately more, you know, it's more space for me anyway. You couldn't describe it any better than that. Oh, my God.

Starting point is 01:01:06 Yeah, I guess my point of view on it, Joe, is very similar to, to Hoddles. Like, the real, innovation with Bitcoin is it's actually a true free and open market. Whether you'd like inscriptions

Starting point is 01:01:18 or not, like, you can do it. You know, if these people want to pay really high fees because they want to have this raw data inscribed into the blockchain and they want to pay thousands of dollars to get it there so that everybody running a node basically has a copy of it, I guess I'm okay with it. And I think the higher fees are maybe forcing us to really kind of think hard about how layer two functions and like how to keep fees intact and immediate settlement and that type of stuff. So I don't necessarily see that as a bad thing right now. I think that it's actually forcing the engineers and the innovators and the space to really kind of think hard about like what layer two looks like because of it. This is not my view, but I want to bring this out because I had

Starting point is 01:02:04 a tweet about this. And I was kind of surprised because one of the folks on there that I had a similar view, right? You want to pay the money. You want to use up the block space. That's your right. You're burning cash. Go to it. By all means, Luke Dash Jr. commented, and he wrote, and I'm just going to quote him verbatim, he wrote, forcing every Bitcoin user to do something without their consent isn't okay. Bitcoin doesn't support JPEGs. Then Ari Paul responded, clearly it does. I think you mean you want to censor them because literally we can all see it does. So you must be talking about social consensus. And then he wrote, no, it doesn't. You're just lying to people. We need to fix a policy bug. There's no software.

Starting point is 01:02:42 needed and he actually tweets out a GitHub basically saying we can fix this and this is this was never intended it was never part of taproot it's a glitch right and and just like when there was issues with the supply glitch that was out there the you know the inflation bug that was fixed we can fix glitches this is not the purpose of taproot and it's being abused and manipulated so what's you hoddle and Preston yeah i mean listen Luke is uh Luke is always Luke always has very extreme opinions and he's he's a guardian of Bitcoin, you know, and I respect all of his work. But I still am more of the opinion of, you know, I've always been sympathetic to platform maximalism, which is just you can do a lot of different show on Bitcoin if you want to.

Starting point is 01:03:24 But I'm also very sympathetic to monetary maximalism. So, yeah, I just, I can't find myself taking an extreme hardcore stance here. The ordinal thing, just, it's not something that bothers me. I think it's, I think it's a function of fiat itself is, is. is a huge part of this because you have so much just nonsense, just sloshing around and they just add more monetary units into this thing. And there's all these money launderers out there. I think that it's a function that you see. It's so dang prevalent. When money fails, everybody becomes a speculator. So, like, all of these, all these activities are non-value accretive type

Starting point is 01:04:04 activities. And so like when we look at where we're at in this moment of time, which is like, we're approaching peak clown world and it seems to only get more clown like by the day, like I think we should expect these really strange, like if we were 40 years into the future and looking back at this moment and time, we'd be like, how in the world was anybody doing that and not trying to create value for each other and exchange like these monetary units by exchanging performing value accretive things for each other. And so I guess when I look at them, just like, hey, let's let the free and open market sort this out. If you want to fly next to the Beanie Babies, fly next to the Beanie Babies. And I think time is just going to naturally solve it,

Starting point is 01:04:49 where nobody's going to actually have an incentive to do this because everybody's going to be then pretty focused on creating value for each other as opposed to scamming one another in some type of speculative play by selling something that has no value to somebody else by conning them or making them think that it will have value because they sprinkled some social BS on top of it. But so let's play it out. Let's say we're 10 years down the road or 15 years down the road. And like this is still, and I don't even know that it would take that long, but like it's, it's still like dominating and it seems to like maybe be causing other issues that we haven't really kind of figured out with the patterns that are kind of playing out in society, well, then maybe I

Starting point is 01:05:32 might be more on board with where Luke's at right now. I got another one for you both real quick, because I've been dying to hear this. So you're going to have multiple ETFs launch right in January, just going back to that for a second. As Bitcoiners, right, we love to sort of say, this is the Bitcoiners hardware wallet. This is the Bitcoiners exchange, right? I want to know what you both think coming here, assuming all the ones that have applied, the eight or 10 of them that are in market, had come to market similarly at the same time.

Starting point is 01:06:02 What becomes the Bitcoiners ETF? And I'll just say full disclosure, I have said publicly that to me, if you're going to try and cater to Bitcoiners that really are passionate about transparency, openness, that sort of thing, free advice again, not advice to any of the ETF issuers, if they want to cater to the Bitcoin community, they should absolutely be transparent about the Bitcoin they hold, give on-chain addresses, be as open and honest about that and not do the whole, we're going to keep the on-chain Bitcoin hidden and secreted. That's my view.

Starting point is 01:06:32 I think that's what they should do. I think that should be the strategy because you're going to be buying for market share. But what do you guys think? What will be in your view, the Bitcoiners ETF? Is it really going to be Black Rock? Is that going to be the obvious answer here is that there is no Bitcoin or CTF, right? And I think Bitcoin are worth his salt would never buy an ETF. But I will honor the spirit.

Starting point is 01:06:54 of the hypothetical. Yes. And say, yeah, and say that I've always had a lot of respect for fidelity. And I think fidelity has been an early pioneer in this space. They have a great custodial program. They seem to be really,

Starting point is 01:07:07 you know, they really get digital assets and a lot of people, you know, who we all know have come out of there. And also they had like a report that said Bitcoin was going to like a billion dollars by 2038 or something. It's like, those are my,

Starting point is 01:07:21 those are my kind of people, you know. weren't they just citing stock to flow for that? I mean, wasn't that the basis? Hey, whatever they got to that number, that's a great number. You know what I mean? I like to hear it. Yeah, I like that answer.

Starting point is 01:07:33 I think that Fidelity has kind of had their head around the actual value prop from the very beginning. And it obviously comes from a very high leadership level within the organization from the very top that has allowed them to kind of approach it from day one very differently than everybody else on Wall Street. So I will give them props to that. I would like to see them because I don't think you can do withdrawals through Fidelity right now. It's to self-custody if you want to.

Starting point is 01:08:02 So I think they need to get beyond that. And as far as like the ETF goes, this is not something people should be buying. But I understand why they probably will be buying is it's just easier and they don't care about the like for the three of us. And I might be speaking out of turn by saying this, but we're here for the freedom tech. Like, we're here because we deeply believe that this is going to usher in a much fair world for all the participants and that the existing system is extremely corrupted. I just don't think a lot of people, like if you lined up 100 people off the street, that they are going to empathize with that really deep, the hardcore opinion of like that's what Bitcoin means. to them. And so like they're just going to be looking at it as like, oh yeah, I want some, I want some price action to that thing over there. Now maybe they'll get there five or 10 years later

Starting point is 01:08:57 or whatever. And so like maybe where the ETF is a good thing is like using a drug example would be like a gateway drug for people to maybe come to a much more deeper and profound understanding as to like what this is ushering in for society and for humanity by at least having some type of exposure and then maybe they get on the rabbit hole and get a lot smarter on like what it actually is. One thing I often think about is I think about Satoshi's genius with the supply issuance curve of Bitcoin. The fact that so much of the supply came online so early and changed hands so many times and the Bitcoin that mass amounts of Bitcoin did end up with very ideological bitquiners who are really, you know, here for the cause, same way you outline. One thing I worry about, though,

Starting point is 01:09:45 is back to the legal challenges and the regulatory challenges that Bitcoiners are going to face over the next 10 years, it seems clear that people like Elizabeth Warren hate self-custody. They despise it because they realize it's powerful and they don't want you to have personal power or sovereignty or be able to transact in a peer-to-peer fashion. And I worry about them creating such on self-custody, like reporting requirements, et cetera, that it would cause, most people to say, I'm just not even going to bother and I'll just buy the ETF because the brokerage will do all the reporting requirements for me, right? I worry about stuff like that.

Starting point is 01:10:26 And I think that's a likely attack vector. It's much more likely than them banning self-custy because they're not going to be able to ban it from a constitutional standpoint and we'll be able to send guys like Joe to court and argue on our behalf and we'll win. But are we going to be able to get out from under onerous reporting requirements that I don't know? And if there's enough friction there, it'll cause quite a large number of people to just default to say, I'll take the path of least resistance here. Well, you guys, have you followed the debate or sort of the push and pull between BlackRock and some of the others and the essence, about the use of in kind creation for shares?

Starting point is 01:11:04 You guys know about this? A little bit, a little bit. Okay. So you clarify, if any of this is not clear. Okay, Haudle. So basically the debate is this. When you're going to create shares, okay, can you create the shares by using in-kind, right? In other words, I have Bitcoin.

Starting point is 01:11:23 I give my Bitcoin to BlackRock. BlackRock issues me shares. And BlackRock has reportedly pushed for the incline creation as opposed to cash creation, which is different, right? Where cash creation is, I have a million bucks. I want a million bucks worth of shares. I give you my million bucks. You go out and you source the Bitcoin from the private market.

Starting point is 01:11:43 that is a huge issue in my view, not because I think the price is going to be manipulated or anything like that, but it's really important to create as much flexibility from the standpoint of being able to move Bitcoin into the shares and move the shares back into Bitcoin. And that could be a huge thing. I mean, unlike things like the GLD, right, in terms of the ETF where you can't really redeem the gold very easily, Bitcoin could present a novel product that could potentially be very interesting for us. Okay, you want to get a margin loan? Okay, you can do that through your fidelity account. You can put a small portion of your stake of Bitcoin in exchange for shares, potentially not even incurring a taxable event and then get access to margin and liquidity

Starting point is 01:12:28 through the traditional financial system because that's marginal. That's huge, right? That is a massive windfall. And you don't have to sell your Bitcoin, right? Because there's a way structurally to do it without. without actually having a taxable event. It's difficult. You're going to have to get the SEC to go along with it,

Starting point is 01:12:44 but that would be a game changer in my view. That's interesting, too, because you would think that if it was cash settled, that it would have more of an effect on the price, but if it's in-kind settlement, then there are other positive externalities, and it allows you to hold BlackRock accountable should they be a bad actor

Starting point is 01:13:03 because you can more easily redeem the Bitcoin, right? Well, you're just talking about how are the shares created, right? How are the shares created? So can they create shares through just someone turning over their Bitcoin? And by the way, this is what GBDC does, right? This is how they were extracting the premium. People were tending over Bitcoin, right? The sending over their Bitcoin.

Starting point is 01:13:23 They would get shares that would go subject to a lockout period, thereby extracting the premium, then selling those shares. So you imagine an open door sort of where you could get Bitcoin in, shares, use your shares if you want liquidity or margin. and then if you want your Bitcoin out, theoretically, you should be able to withdraw the Bitcoin from the exchange. So how is this not an attack vector that they could re-hypothicate between audits and basically do exactly what happened on this last cycle?

Starting point is 01:13:54 The way you would prevent them from doing that, rehypothecation is open transparency about what Bitcoin they hold and when they hold it and have that number published every day. That's how you do it. If not, your point is a valid one, right? You definitely have windows there where there's less transparency and between audits where you can kind of slip through and not have all the Bitcoin you purport to have. But this should be something if you recognize that an ETF on balance is a positive thing, even if it's not the preferred way of holding Bitcoin, you should push for transparency and you should say, okay, fine. If the ETS is going to come and we can't get around it, have it come. But also have there be very clear accounting and use the latest technology.

Starting point is 01:14:35 The whole point of Bitcoin is that you can see in real time who holds what. Identify your addresses. Make it clear what you hold. Hopefully because there's so many that there are going to be entities that choose to treat it that way. That's my point. Like, right? Like when I ask the question about what's the Bitcoin or's ETF, the entity that does

Starting point is 01:14:54 that will have me publicly say, don't buy from an ETF, hold Bitcoin natively. But, but if you're going to buy Bitcoin on an ETF, go with the Franklin Templeton transparency, ETF, you know, that sort of, I don't know, I'm just, you know, go with that. I think, I think that's a good point because, you know, culturally, a lot of people like to say, oh, Bitcoin Maxis, bro, they're boomers, bro. They don't understand, man, whatever. And culturally, Bitcoin Maxis do have a lot of power. And if everybody is marching in the same direction and saying, like, that's a shit product. Don't use that. It holds some sway, right? So, like, I like that as a market force to keep the ETFs a bit honest or a bit more

Starting point is 01:15:31 honest, anyway. I'm on, you know, when one of them does it, They're all going to do it. If you got one of the ETFs to be transparent about what they're holding, I think it would be a, it's like fees, right? It's like anything else. Once one of them does it, they kind of all have to follow suit to not give a competitive advantage. I'm just going to cut this clip and send it to Stephen McClurg and just tell them,

Starting point is 01:15:52 hey, Joe has some advice for you, Stephen. Well, you guys, he's going to be upset that you didn't promote the Valkyrie ETFs and you went with Fidelder. Oh, yeah, you're right. He's not going to come back on the show anymore. He's going to be very mad at me. You're right. I didn't even think about that.

Starting point is 01:16:09 Yes. Even though he has like the funniest ticker ever. Okay. So let me ask the big question. The big question is all of the ETFs are going to hit in January. That's the Joe seems pretty confident. Approves. He's not just saying January.

Starting point is 01:16:24 He's saying the 5th of January. The 5th of January. The 5th of the 8th. That's right. And there's going to be a lag time. Yeah, there's going to be a lag time before implementation. Right. But like, you know,

Starting point is 01:16:33 GBCC, it will probably be first in line, et cetera. And then all of a sudden, Black Rock has to buy up a bunch of Bitcoin and the price starts to run a bit and, you know, where do we think we're heading over the next like 18 months, 24 months, you know, where what does this look like? Let's be honest here. Last cycle was a bit disappointing. You know what I mean? I was talking to my uncle.

Starting point is 01:16:55 I think it was today. And we were talking about like, okay, so like where are we at in a year, Preston? And like his response back to me, I'm not going to tell you the numbers that I was saying to him. He's like, oh, my God, man, you need to put the crack pipe down. So I'm very, dude, I think the coming year, I think the coming two years is going to just melt people's brains. And so much of it just has to do with how much compression we've had on this past site. And you can see it. You know, there's a little bit of a meme going around on.

Starting point is 01:17:31 line right now is like, oh, yeah, it's 70% of the coins haven't moved in a year. But I think that that is extremely profound. And I think it's really important. And I think that the speculators that come in at the end that bid the price to the moon that last like kind of six month period, at least historically, it's truly because there's no coins left. And the psychopaths that have been stacking it through the 80% drawdowns, their basis is from a cycle or two, even before that. And the fact that it would bid to like mid six figures or whatever the number is, like still doesn't entice them to sell any meaningful amount of their base position. And like, I think it is just so lost on people like how and how important this idea is of like these

Starting point is 01:18:24 hoddlers of last resort, which is a trace mayor term, right? But he's right. And it's just, it's vital as to what causes these price pumps because you're dealing with a fixed supply, terminal supply thing that's like nothing else on this planet. Joe, what do you think? I think that the possibility for Bitcoin going exponentially higher this cycle than the prior one is very high. And I'll tell you why. And let's just step into it.

Starting point is 01:18:53 Just a little bit of a macro conversation here. The Fed has been explicitly targeting a recession. They've almost said that explicitly. When they want the labor market to become more into balance, they want it to rise. Their targets all show unemployment going up. They've talked about specifically how there's going to be softening in the real estate market. And much to their dismay, I think, we've not gotten one. And I think that when you have government spending running currently at about 7% of GDP,

Starting point is 01:19:24 providing a ton of cash, basically running wartime deficits into the economy right now, and you cannot trigger recession despite very high rates. You have two potentials that could come from that. Number one, the Fed is forced to just throw up its hands and say, we try to slow this down. We can't. We can't. We don't have the option.

Starting point is 01:19:42 We did everything within our power, including Q, T, and fastest rate hiking cycle in, you know, 30 years. And we still couldn't slow the darn thing down. But for a variety of reasons, structurally, we can't have the government run these high deficits. So we have to cut in the face of very hot. inflation, right? Still far above trend inflation. That is going to be massive for Bitcoin, right? I don't think it was a coincidence that we had this aggressive sell-off when the Fed began

Starting point is 01:20:09 its rate hiking campaign really in the early part of 2022, right? That was, and Bitcoin took it hit. I mean, it affected some of the weaker players in the industry, so that cascaded down. Well, if you have the opposite happening right now, if you have, we avoid a recession and we have the Fed is easing proactively because they just throw up their hands and say we can't do it in the government a tax burden is just too much with these high rates, that's going to be massive. The other possibility, okay, that I think is very bullish, is that if you have these structurally higher rates moving forward combined with the government spending, and Lynn Allen talks about this with fiscal dominance, right, that is effectively liquidity built in to push to the

Starting point is 01:20:47 packs of push Bitcoin forward, right? You've got a constant flow of cash from the government's continuing to borrow more and more money and pumping that through for the entitlement program. So all of those things show you're in a very different environment than I think pre-COVID. And you know, you got a potential new administration coming in. And if you remember, Hottle, we talk about this all the time. What did the last administration do? I have these tweets. I think they're funny.

Starting point is 01:21:12 Sometimes I go back and review them. And you had the former president who looks to be the front runner this time saying we need negative rates. We need rates incredibly low. The Fed should be doing more QE. You've got sort of the political appetite out there to just to the, to the moon, right? Whether that's a good thing, bad thing depends on where you sit. But to me, like, that's huge. I mean, and you really want to try to time that and like try to figure out,

Starting point is 01:21:35 you know, who's going to win the White House, like and decide whether you're going to buy Bitcoin. To me, like I think all roads are going to lead to Bitcoin, like they say, because at the end of the day, okay, we know that debt can only be solved with more debt. That's their only solution to everything. And as the system is constructed now, you can bank on there being more and more debt, which eventually finds its way that liquidity finds the way into Bitcoin. So yeah, I'm pretty bullish. You pumping this opium into your veins there, Hoddle? I'll give you my perspective is, you know, I track the investor's psychology around

Starting point is 01:22:08 the Bitcoin markets pretty closely because I'm here all the time 24-7, 365, and I pay attention to what people say and what the chatter is. And I think there are a lot of people who believe that diminished returns are the rule of the land. And the one thing I know about being around Bitcoin for 10 years is that. whatever everybody believes is absolutely going to happen is categorically not going to happen, right? So, like, I think it's likely that we see some sort of a sell-off right after we break 100K,

Starting point is 01:22:34 like around like 120, 1-20, 1-30, people start to sell, take profits. People go, God, I'm not sitting through another cycle again. It was terrible, you know, I'm finally going to buy that house, you know, that I wanted, yada, yada, yada. And then the price, you know, it sort of evens out for a bit. Maybe it goes down a little. Then it starts to run again, hard. Right. I mean, you can definitely see this scenario playing out. And all of those people who sold are suddenly, you know, these are most of these people will be long term hoddlers who are looking at themselves going, holy, this thing is, it's happening. I'm getting back in. I'm fully invested. Then, you know, the marginal buyer who's bipolar, by the way, goes, wait, these guys are all in. I'm in even more. And then you get the euphoria stage. And like, everybody thinks when they go through the bear market, they go, that you tell yourself a lie in the mirror every morning where you go, I'll never get that greedy again. No, not.

Starting point is 01:23:23 me, no sir. And then price rises and the greed hits you like a ton of bricks and there's nothing you can do about it. You're strapped into the roller coaster again. So to me, I think we're going to see the diminished return narrative get its legs chopped out from under it. And then we're going to see a real run at Valhalla. You know, we're just going all the way to the moon. Yeah. That's what I'm predicted. I think that is, I think you are all over it. I think you are going to have a lot of people from the 2020 cycle that, because that cycle was pathetic compared to the 2017 run. I mean, it really was. You're going to have a bias there with a lot of people that kind of entered that market that I think it's shaken out very early on and what they think is a big move. And it's

Starting point is 01:24:06 just, just another little blip on the, on the radar of where this thing's getting ready to go. So I'm with you. I mean, great time to be a bit coiner. It's going to be exciting. It's going to be exciting, no matter what happens. All right. One final thing to talk about. So let's say that a lot of people are expecting a recession to kind of really we're getting these deflationary wins potentially that are brewing. I'm hearing that we're going to have our first cut in the first quarter. Let's say that we do manifest this. And I know, Joe, you just kind of gave all the reasons why you didn't think that was going to happen. But let's just say that it does. And maybe we see a liquidity event similar to like March 2020 where Bitcoin was. I want to say it was up 10, $13,000 and got punished the whole way down the 4,000 in short order because of this impairment in liquidity, cascading liquidity event that happened through COVID. Who knows whether we could see some type of contagion like that? If that would play out, I'm of the opinion that you would see Bitcoin probably react very similarly

Starting point is 01:25:13 to what you saw during that March 2020 event where it sold off really hard. But the bounce was near immediate. I mean, you were within 30 days. You were back up to a price point that you were at. I think the market is primed for a very similar response if we would see some type of contagion in the traditional markets. I'm curious if you guys would agree with that. Well, I'll just say that it depends on what the contagion is, right?

Starting point is 01:25:41 I mean, in the COVID circumstance, which I think is a unique set of factors where you had a very uncertain situation where there was a mad dash to get cash and you had disorder in the treasury market, which primarily cascaded through every other asset class. Yes, I would agree with you. I think Bitcoin takes a hit. I don't think that's really likely given some of the measures that have been put in place both before and after COVID to absorb those types of shocks. Things, for example, like the BTFP, those measures that have been put in place, they keep trying to perfect and come up with new tools to prevent these sudden quick shocks. I think the far more likely scenario is this slow grind for a lot of traditional assets, kind of like what you've seen

Starting point is 01:26:27 with the bond market. You could have a sell-off in equities. It doesn't have to be a sharp, you know, vicious decline. It can be one of those slow grinding bear markets where things go down further. And in that environment, I'm not as convinced as perhaps some others that Bitcoin's going to really struggle. What Bitcoin tends to very much freak out about, and my research is volatility. Like when volatility goes off the cliff and basically explodes higher, you know, you got a VIX bearing down on, you know, 60s, 50s in that range. Bitcoin really takes it and it gets hit. But you can have plenty of selloffs and plenty of bear markets and equities and bonds where you don't have some explosive thing. And I think that's what everybody keeps expecting,

Starting point is 01:27:06 which tells me that I don't think it's coming, where you basically just get this real hard down. And to your point, like, you know, you could have recession, could have unemployment rise, You could have equity sell off 10, 15, 20 percent or more. And depending on the rate of the decline, it doesn't necessarily mean there needs to be this huge shock to Bitcoin. We have had just this year, right, periods where you had equities or sold, they sold off 10% into the end of October. Bitcoin didn't budge, right? He actually just kept on its train going because of all the things you're talking about, all the coins locked up by the diehards. Unless you get some systemic risk, I don't expect a hard down on Bitcoin.

Starting point is 01:27:44 It's an election year. Hottle, any comments on the? Yeah, the election is, God, can we just skip over these things, man? Like, honestly, it's going to get so brutal. It's just so crazy to me how detached as a society we have become to this idea of free and open markets. Right? Like, people say it and they, and if you tell people they're not free and open, they're like, yeah, I know they haven't been free and open for years. But then it's just like, and I don't care.

Starting point is 01:28:15 And that's just how things are. And I'm perfectly okay with that. And I don't know. I'm just, maybe it's the military background in me. Like, I guess maybe I thought that what I was doing and, like,

Starting point is 01:28:29 defending was this free and open market society that, like, and I guess that's why I'm such a hardcore bitcoiners, because like, it's the only thing I can see that it doesn't matter who the president is. Like, this thing is a force to be reckoned with with respect to actually introducing free and open markets back to society.

Starting point is 01:28:50 Well, free and open markets require transparency for one, but they also require personal responsibility. And the problem we have is that people don't want to have personal responsibility. They may say it until their stock portfolio falls 50%. You're right. Come on. We live in a nerfed world. And, you know, I mean, how many people that are, you know,

Starting point is 01:29:11 investing in their 401ks and just, you know, some passive flow of, you know, index funds, know what is in those index funds. Nobody has any idea, right? And all they know is you throw money at the stock market and it spits back more money. That's all anybody knows, right? There is no capital allocation going on, you know. Charlie Munger just died yesterday, right? So like, you know, I mean, Charlie Munger was one of the great value investors. You know, I learned a lot about from Charlie about how markets should actually work. And when I came to Bitcoin originally, I came from a value perspective lens, which I know Preston did as well and Joe too. And Bitcoin was one of the only places in the world that I actually saw value.

Starting point is 01:29:53 When I first bought Bitcoin, it was $200 and I was like, well, if this thing does what I think it can do, the sky is the limit, a million dollars plus, right? And that was a crazy thing to think back then. But being able to buy something for $200 that you thought was worth a million is, you know, crazy value for money. And yeah, that was the lens by which I first approached Bitcoin. And it feels good to actually be doing capital allocation because if I was wrong, I would have lost all my money, as it should be. That's the way things should be.

Starting point is 01:30:19 That's how you're wrong in an investment. You should lose. You should go to zero. That's right. That's right. That's right. 10,000 was an insane number back then, by the way. Yeah.

Starting point is 01:30:28 Yeah, it was. It was like, could you imagine if this thing like went to 10,000? All right, guys. Let's wrap right there. This was a blast. I love just having these candid chats with you guys. and really appreciate your time and just your thoughtful comments. It's really appreciated.

Starting point is 01:30:45 Do you guys have anything that you want to highlight? We'll start with Hoddle. Nothing to highlight. I think stay humble and stack stats. That's the best thing anybody could ever tell you, the best advice. That's it. You're active on Noster. Is that correct?

Starting point is 01:30:59 I'm still on Noster. Still on Twitter. Just, you know, shit posting. There's not tons of value there. Joe, I always have to plug here. If you want to, my help in any litigated dispute, I'm always happy to have a conversation with you, talk about anything I can. Obviously, if you've been around in Bitcoin or the larger crypto space, you're aware that as we talked about tonight, the space is rife with fraud. And there are plenty of good people that have been taken advantage of and also people that are facing very onerous suits at this point unfairly because of, you know, the idea that whenever there's a bear market, whenever assets decline, people bring out the litigation.

Starting point is 01:31:37 And I'm very busy, but I'm always willing to talk to new clients. So you can Google my name and you'll find my law firm. I'm happy to talk Joe Carlos Ari at Amundsen Davis. And I'll just say, I think next year is going to be absolutely crazy. I mean, I honestly get excited just thinking about all that's coming down the pipe. I mean, where you've got markets at, where you've got litigation. Keep in mind, like, you've got these major pieces of litigation, Coinbase and finance that are still pending with the SEC.

Starting point is 01:32:04 The SEC came out and said the FTX style. fraud was committed at finance. And that's to be determined once you get that monitor in there is going to be providing government documents out to the public. So stay tuned. And also, like Cattle said, that you have to survive until 2025. That should be your slogan, right? Because we're in for some craziness next year. Love it. Absolutely. All right, gents, thanks for your time. 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

Starting point is 01:32:45 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. 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.

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We Study Billionaires - The Investor’s Podcast Network - BTC159: Binance, GBTC, FinCEN and More w/ Joe Carlasare & HODL (Bitcoin Podcast)

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