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But there's still a mainstream narrative that it's somehow a
result of incompetence and more. So this story should be if FTX
lost 3.7 billion. And before 2020, to even or
like, arrived, during the greatest up only everything
speculative bull market and history never mind for crypto
but just anything and everything where crypto had you know Salon
ago from $3 to 280 $250 and all of these worthless scam tokens
that they gave themselves inside, allocations to serum map
socks. EV Solana ecosystem coins, that
had fully diluted valuations of tens of billions of dollars at
the top and they had all these inside allocations to them.
If they lost 3.7 billion in that year, then they were
fraudulently, losing money, spending it on themselves,
laundering it. However you want to think of
this. It wasn't incompetence and and
it was actually extremely malicious like early on genya.
What's up man? This is gonna be fun.
What's up going? How are you dude?
So did he just see the so FTX and I'll meet a lost 3.7 billion
and yeah on that basis in 2021. I People just, I mean, really
ultimately, it was just a Ponzi ran out of fuel, right?
But yeah, I'm to lose like as everyone had this assumption
that like, you know, they were smartest guys in the room, this
Quant trading firm and mighty wizkid's.
The mainstream narrative is still, you know, hey the j.p.
Morgan guy like got unlucky, you know, you took a big bet, roll
the dice and missed and I think it's more.
So needs to be looked at as like this was a long con not even
long. Like, I mean, you know, started
in 2018, right? 20 2017 2018 and and now we're
just seeing the details of it all.
Just get unraveled. Yeah, let's get it.
It's pretty wild. I mean, you know, the
estimations of the amount of money lost, like, it's funny.
Everyone kind of has their own versions of this and their own
kind of calculations, but, you know, the quick back of the
napkin math. If you just look at kind of bare
bones is, you know, almost what is it two billion in equity
financing from Venture was raised?
Then you have to factor in something in the order of 16
billion in custom closets and actual crypto assets.
Then, Have to factor in all of their pnl from like 2018, right?
So all of that was wiped out as well, plus the pnl of Alameda.
So I mean we're looking at like just those numbers alone never
wanted anything else is like north of 20, 25 billion dollars.
Just evaporated. Which is, you know, that's a,
that's a hell of a number. Yeah, it's pretty, pretty, not
funny, maybe ironic maybe sad that a lot of, you know, we had
this this huge speculative excess crypto bull market in
hindsight right and then Bitcoin Also, let's like let's not
pretend that it doesn't also have we just might I think
everyone you know many people listening me like yeah.
Like this thing isn't going anywhere despite no matter what
the price action does, like big thing is here to stay.
It also has like, like when I like when I say, like, you know,
and I start harping on these Those Bitcoin definitely also
has its own kind of speculative, you know premium at times to put
it, put it lightly but in terms of like, you know, the L1 trade,
defy, summer, 2.0, Soul summer. Yeah.
All of these narratives use crypto hedge funds that were
like a brilliant, you know, quote unquote in 2021 right.
You know. There's there's entity startups
like like like all of these things and then to realize it
was it was basically just like this circle.
Between like three or four counterparties recycling, like,
maybe 5 5 to 10 billion dollars of real money?
It's you know it's pretty wild to think about maybe that was an
underestimation but like that's in a simple simple manner like
kind of what happened. Yeah, and it's funny to us, if I
recall correctly there was there was this, since at the Bitcoin
2021 the conference in Miami, you guys held where there was a
got this juxtaposition between Caitlin Long who was talking
about the Perils of love. Courage.
And then like shortly thereafter.
Sam was like touting Leverage is like the greatest thing ever and
you know, just it's just like a funny juxtaposition given, you
know, kind of how things played out both funny and sad.
But, you know, it's pretty remarkable to see how this
unwinding of these, you know, intertwined relationships
between lenders and exchanges and market makers and token
projects. It's just turned into like the
most insane catastrophe. And like, I've been around this
space since, you know, 2012, 2013 and have had a front row
seat to most of these collapses and, and unwinds.
And like, my God, this is like, the most insane thing I've ever
seen in my life. So Jenny.
Yeah, we we've been kind of talking back and forth on
Twitter for not even know maybe nine months now.
We're so when magazine and bitten ex had had an official
partnership that, you know, we kind of worked out, but I
remember pretty distinctly you, we were dming in jeez.
What was a June or whatever? Right after directly after The
the UST online, the Luna and wind and you, we called me on
the phone and I think I just gotten back from Premier up like
a day before and I was feeling pretty jet-lagged.
We hop on the phone for like, 30 minutes and you were like, man,
it's it's pretty much over and I was like what do you mean?
Dude? And like and I've got a bunch of
like studying and you know, monetary history, Financial
history. Like I think pretty good
understanding of like economic system, but I hadn't really
thought of it in the way of like, oh my God, there's a
massive amount of impairment. It until you sparked.
The idea I had like, dude, there is a days and this was before
3ic, right? This was before all that
happened and you're like there are so many funds and so many
desks. Yeah.
And and there and they're all were dipping their hand in the
cookie jar of the UST anchor protocol Ponzi.
Yeah. And and, and I remember, just
kind of like just being like, Oh my God.
It is and, you know, like I feel like I've been a pretty like,
Pretty pretty much a doom poster since since all that happened,
really, you know, make no mistake, but you were one of the
I remember that phone call just various distinctly and damn man.
It's been, you know, it's been quite the daisy chain.
Yeah, it's, you know, the I think the interesting thing is,
you know, I mean, look, I have a privileged kind of perspective
on this in that. Like, you know, I work at one of
the largest exchanges and I've been around the block and yeah,
have a good relationship to kind of understand the General market
structure of this. So I, it makes Cents more to me
than it does to people that are Outsiders.
But, you know, you have to, you have to understand.
It's like you have, you have a very small subset of actors that
can move size in this ecosystem, right?
And when they're, all moving size on the same bets in the
same trades, you have to wonder, like, what can the collateral
damage be if that trade reverses and goes in the opposite
direction and you know, unfortunately this entire like,
wow, Whatever 8 months, 9 months is been perfect.
Textbook example, of the type of unwind and violent unwinding
that can happen when you have just this interconnected web of
people doing, you know, more or less the same thing, right?
Most of these guys were punting long on, you know, both, you
know, both on bitcoin. And then on like more, you know,
wildly speculative trades. Like, you know, UST and farming,
the anchor protocol yields, which is absolutely insane.
And, you know, and obviously All that kind of came crashing down.
I think, you know, the more, obviously, the more kind of dark
piece of this whole puzzle is just seeing how how desperate
some people get when things start to unwind and they're just
trying to plug holes left, right and center, right?
And then I think FTX obviously was, you know, the on the
receiving end of that the jury still out whether or not, you
know, this was a long con or, you know, how long this has been
going on for, but you have to imagine that like, Alameda 8
shit in May and probably they were punting long on on what's
it called on Luna, and probably a bunch of other things.
Took huge losses and one of the things you guys have to remember
too is that because Alameda is one of the primary market makers
for FTX, they are obligated to provide liquidity for trading on
the exchange and whether or not, you know, things are going up or
down. So they're probably eating shit
on both sides but there were losing billions and then they
had to, they have to Backstop the liquidity and they were
probably using even more in the process.
And so you know, my by my estimation just looking at like
the the rough time lines. It looks like they probably went
bust, you know in may like June at the latest and then, and then
Sam probably, you know, attempted to fill in these holes
that kept getting bigger since then.
And I think, obviously, we've all kind of come to the same
conclusion that, you know, for example, the Voyager and block
fight deals, were were desperate attempt to plug in those holes.
And, you know, it's just, it's crazy this whole thing so nuts.
Yeah. It's I mean it's certainly
something and I, you know, despite how boring Bitcoin is at
a protocol level. I mean, I really don't lie.
Reason I follow half of this nonsense and really only play
altcoins on the short side Lee is because the hole is whole
Industries cross-collateralized, right?
And so like, yeah ftt, imploding.
Because these guys literally like, you know, pointed out
essentially implicitly that they were levered to the tits against
it at a certain price level, that matters to the Bitcoin
exchange rate. Only enough like UST, imploding
and Luna and floating and I guess they directly sold like
80,000 Bitcoin or so. But like this whole garbage a
liquid, you know, levered beta industry like these
quote-unquote assets, right? Where like people believe the
story and reflexive bull market, where there's no marginal
Sellers and, you know, the the money machine is printing and
people are taking their crypto collateral to buy more crypto
like it works then. But when you know, there's no
structural buyers, any of this stuff except really Like there's
not really a passive investment crowd for anything in crypto,
accept Bitcoin, right? Like the hollers of Last Resort
inspires The Last Resort like the Bitcoin, you know, site like
a Cycle Theory or not Cycle Theory, but like the Bitcoin are
would be like, you know, if it goes to 12 K and you showed it
to him after 2017. And yeah, they comb it down 85%.
It literally does it every bear market.
Like there's no surprises here. And this time, you know, I think
there was there's broad belief and even even personally in the
moment right was like, oh, maybe Time is different, right?
Like corporate adoption all these things.
And ultimately like whether it was the fault of Bitcoin, it is
speculation or the macro. I think it's all really tied and
the crypto kind of collateral and all of the stuff that we've
been covering with the three Arrows with Alameda with f2u,
heck with Luna kind of being like this last gasp that like a
bull market. But if you remember, Luna did
top and November September UST, and Luna whatever they topped in
like April, right? So, that was just like, there's,
like, 50 billion dollars of like, net liquid.
Ade in the crypto ecosystem, that was just basically a
financial perpetual motion machine.
So like that imploded and it just started off this like you
know this like it's like the funny thing is this your script
of people are just you know Market participants in general.
That have said there's been four separate black swans in the last
year. It's like no black swans.
Like is on for seen positive thing that like no one could
have possibly seen coming and the reality is like these things
were all, you know predictable or more likely to happen.
Even after the first one also, just want to.
I seen that is in the speakers. How's it going man?
I'm I know Jenny and I have been back and forth.
How you feeling? Just keep thinking back to
lessons learned that I thought we learned in 2017 and 2018 and
sadly, I guess. No, I guess we did not, you
know, we had that old cliche of saying, the capitulations are
all the same and only the names change or, you know, do
liquidation. But anyway, I'm just saying
that. Back in back.
Then, you know when when you head retail bidding every single
silly Ico, I thought we all learned our lesson that these
are worthless and we're not going to do that again.
And then this time around, no never mind.
It's just the bigger players that are getting higher than
their own Supply and are looking at the market cat going up and
equating that to some sort of success.
And as a Jenny I just pointed out like like they're just
they're just building on top of each other.
But then, at a certain point when they all need, To race for
the exit door, only so many of them can fit through to
catastrophic results as we saw with Luna UST.
And I mean, I feel like I kind of owe 3ac an apology, a slight
apology, wherever they are in the world because we all were
making fun of like, wow, they believe their own Super Cycle
hype and and I'm not giving him a pass on how much fraud and how
much money they stole. But while they all believe
they're super cycle, hype seems like everyone else did, too.
Seems like all these other smaller firms, and funds were,
you know, repeating the same hope, IAM Mantra to.
I'm just so shocked. I'm so surprised, but I don't
know. Here we are again, wearing the
same lessons. Yeah, one one, one quick thing.
Let me just jump in real quick on this point about, you know,
everyone always thinking that there's, there's always someone
smarter in the room and Alameda was always touted as like, you
know, they're they're like top dogs and you know, they're
killing it. And you know, just one of the
best liquidity providers are market makers in the world and
you know what, maybe that was the case.
You know, for some time I remember getting introduced a,
that's the team and, you know, just their names coming across
my desk and 20 18 and 19. And you know what?
I'm sure there was probably some period of time where they made a
shitload of money and maybe they actually did do the, you know,
the, the Japan are been in the kimchi premium are which by the
way is was very hard to do but, you know, that's such a made-up
story. It's three is three years old
how I mean I'm sure they blew that that's the small gains so
long ago. Oh, 100%.
So like that trade in order to, in order to do the kin to you
are betrayed, you would have had to do the, the trade on two
legs. One leg in the u.s. one, like in
Korea, and in Korea to do that in order to have access to any
Fiat, there you have to have someone natively from, they're
executing the trade, right? So that's that was one.
That was one kind of sticking point than the Japan ARB.
Yeah, they're talking about moving.
Tens of millions a week, like, I'm not sure, I know of any Bank
in Japan would allow some foreigners to come in and do
that. That's a drop of a hat.
So, you know, there's definitely questions around how much they,
actually squeezed out of that ARB but the point I'm trying to
make is that like, you know, yes, they may even get Traders
for some time. But for sure the edge wore off
as the bigger institutions came in and the high frequency
trading tribes many from Chicago and many from you or the other
parts of the world came in and just blew their Edge out of the
Water. And that's and that's why they
probably started punching everything, right?
And it's just nuts like the reading reading through some of
the recent documents about the disclosures on the advantages
that they had, you know, essentially trading against
customers. Like it's just like, this is the
sort of shit that would make your head spin, like, lines of
credit, obviously directly, from the exchanges is, that's okay,
non liquidation accounts like totally egregious or I'm
favorable access to apis, you know, with hi.
Your calls and rate limits absolutely insane.
Like looking at the order book and just like in plain sight,
front-running orders, like, this is like outright fraud, right?
So, just just reading these things, just it makes your head
spin. It's insane.
It's like it's, yeah, the thing that I wonder in what I hear,
but, you know, the Japan Arbor that, you know, the kimchi
premium. It's like, okay, it's like ospf.
Gotta start made his first billion doing this.
Like, you know, are betrayed where, like you said, would need
to be on two separate. Eggs and to make, you know, that
lot of size doing an ARB, you need massive size to begin with,
like you can't make a billion dollars trading a, you know, a
spread into separate it. You know to to separate like
exchange rates with you know, a million dollars of capital or
something, right? Like like the whole story was
questionable and then you throw in the fact, I Jenny, I forget
if we message about this over the summer but I came across
these meted Ox from 19. It was just screenshots, wasn't
that full documents of their promotion of their fund
performance, through the 2018, bear market.
Like, literally from like the star of the top 20 17, December,
whatever it was all the way down to, like maybe late, 2018,
early, 2019. And, you know, a lot of
volatility in that crypto bear Market as Bitcoin and a theory
and which were what they advertised their performance
against went, you know, Chopped all the way down 80%.
Their performance was up only know.
Draw Downs, hundred ten percent annualized.
And I saw these and I sent it to some people who, you know, I'd
want to know about and I said, hey got, you know, came across
these but their spelling errors and this is literally the like
the biggest fraudulent Ponzi of ever seen.
There's no way this is real. Like I think someone's just
trying to like, you know, spread fake news or something.
But if it's true, they're running, they're running a Ponzi
and you know, I was just hesitant to stake my like, you
know, personal Ation on the line for like you know what was in
the you know in theory one of the only remaining like you know
exchanges firms hedge funds in the space was like all right
maybe I don't hesitate to stake. My reputation on the line here
but like you know noted this is potentially like I mean that's a
Ponzi. Like look at go look up Bernie
Madoff returns any for 18 years, he made, you know, 10% on, no
volatility. This is what these guys were
showing over, 18 months and crypto markets that were, you
know, 100% hunt, you know, hundred ball.
Hundred fifty ball assets. So that was like, pretty good.
I think I have that original Deputy white paper somewhere.
And you know, after the fact, you look at all these things.
As I know yeah, they meant a bunch of tokens out of nothing.
They use it as collateral but they were literally, like
hunting, other people's liquidation prices and defy
summer with ftt, collateral. Like, these guys were just
basically, you know, they wanted to be sharks, but they were
pretty bad at it as more. So, just fraud and worthless,
you know, like monetary Alchemy in a way in the crypto and the
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Yeah, it was one. Other thing I'll bring up, which
I think is the Salient point in like somewhat relevant to.
This is, you know, I remember back in the day, one of the one
of the kind of value propositions that people from
that team, we're touting was What do you know?
Look at Alameda there on the there on the max leaderboard,
right? And back then, you know, we have
like some obscene amount of market share like 60 plus
seventy plus percent and so you have the leaderboard obviously
mattered and they have like, two accounts or something on there,
which is, you know, by all accounts.
That's that that's relevant. And it makes sense however, you
know, one of the someone pointed this out to me recently where
it's like, okay, so you're you're on the leaderboard on one
exchange, right? Which is fine.
The dominance change at the time and so your Directionally
correct on most of your bets on one exchange but you could also
just be hedging that out somewhere else and you could
actually be completely neutral on the trade, right?
And so the leaderboard, the leaderboard kind of sticking
point may not have actually been as valid as most people thought,
right? Because you don't you don't know
the other side of what someone else is trading, right?
They could just they could be going long in one place and they
could just be hedging it out another place and they're
actually not making any money or they're making very little
money. However, the leaderboard shows
that your Of in a top position. And so, a lot of this was back
in the day, was kind of. It was touted as one of the big
value problems. Like, look at us, we're doing X
Y & Z. And, you know, we're topping,
you know, we're top dogs in the top market.
And, and, you know, you start to wonder, like, how much was that
was actually true. Like, yesterday, you have to
call everything into question at this point, right?
If everything was a lie or a lot of things in the recent past or
a lot, it could be, you know, it could also be true that
everything else was a liar. Most other things were like,
right. So, you know, You have to start
to question, you know, kind of that all the historical data
around the stuff and you know it's just yeah it's just wild to
it started digging into that. Okay, so let's pivot a little
bit but still kind of on the same point.
It's, you know, everyone I've gotten a bunch of people ask me
like I like, I like I have some have a good answer like, what's
the next Domino to fall? And the reality is, I mean,
we're not really sure there's been plenty of domino so far
and, you know, logically many people and I think it'd be
personally Reasonable. Like, if this was that was the
last of it, although I will say I'm extremely skeptical.
We have the dcg stuff, right? Rumors flying around.
Radio Silence from Barry. I don't think I think the
Bitcoin is there. I don't think it's it's
questionable. The Friday tweets were
questionable. I will say it was just weird
language, you know. Hey guys.
Like we have the power to like it.
I mean, it's the frame one, that's not aware.
It's extremely trivial to just and I guess if you from privacy
reasons, wouldn't want to do it, but it's Reveal to just sign a
message across an address or multiple addresses.
I can do it in five seconds on my on my full node, you know,
and Bitcoin core. Like this is the most simple
thing ever. Then actually competing trust
which is very small Osprey Bitcoin trust, who is coinbase
custodian publish their address today, right?
So it's not a coin based thing and they probably could do it in
30 seconds, which is a little weird.
But I think grayscales fine. The real concern here is for you
know, next dominoes Genesis is a really big player or at least
was a big player. They've halted their loan book
and they halted withdrawals, Gemini but also the real
question for me is does dcg and Genesis and they said, you know,
Genesis Global does not have a liability or any relation with
dcg. But I mean, take a look at the
Alameda, corporate entity chart, right?
And you understand how easy it is to make a statement like
that, that's technically true and there's some form of like,
you know, loan or credit line or No between the two firms under
another entity, or somehow connected, right?
And I think, obviously, it's in their interest to be, you know,
kind of quell that fear. But is there, is that, is this a
domino? We shouldn't be talking about?
Is it all useless Fudd? Like, what is your thoughts
here? Because I'm trying to actively,
you know, work my thoughts around it.
Yeah, so so look, I think I'll preface this by saying that, you
know, because we've gone through these, you know, consecutive,
you know, Black Swan events and Endings, everyone is a little
bit more hyper Vigilant about, you know, what's the next thing?
And you should, we keep our eyes open, you know, for the next
disaster in this sort of thing. I get it.
People are very sensitive to this sort of thing now, and as
we should always be not just in times of Crisis.
But here's what I'll say on this ccg is one of the oldest
organizations in the entire ecosystem.
They've survived like three or four Market Cycles.
You know, they've grown in size across every Possible vertical
you Genesis training, does spot into ribs, their lending
business, which you mentioned, which is in a crunch now, they
were, they were one of the largest lenders, they were
basically kind of the lender of Last Resort for the whole
ecosystem, for the last, like, four years.
And, you know, it's kind of like, a dirty secret.
And, you know, they have other things like Foundry, which says
my name, they own Lou know which is an exchange.
Like there, are they own coin desk?
They want a bunch of shit, right?
So they're they're extremely embedded everywhere, all over
the place and they also do a ton Adventure.
So you know dcg as a whole definitely not worried.
Also Barry silbert is an OG operator and you know say what
you will and you know we'll always crack, you know, jokes
about Barry you know, on Twitter about it being a big week and
it's all fun and games. But, you know, if anyone's going
to figure out a solution to this, it's going to be very
silvered straight up. This guy's been around the
block, he knows, literally everybody, from every part of
the ecosystem, he's trusted, he's legit, he is the man.
Librarian with this isn't an excuse, you know, the whole in
Genesis which you know, from the sounds of it is quite big and at
least a billion dollars, you know.
It's a big deal, right? Like there's that's not an
insignificant amount of. Yeah, I think the gray scale
stuff is a bit of a red herring coinbase custody.
Put out that notice today, you know, verifying that they're
that they're actually in control of the assets which is great.
I'm sure that kind of takes the edge off for some people but,
you know, look, here's the thing I think if from from the sounds
of it, if you believe the rumors on Twitter, you know, there was
this You know, supposed fundraiser over the weekend for
Genesis and it didn't go so well, for whatever unknown
reasons. And, and so, they're kind of in
a crunch right now. You know, if Barry's Silver
cannot raise money from the obvious kind of players that you
would typically go to for this sort of thing.
I suspect, you know, there, there will be a, you know, if
under of Last Resort could be CZ.
Could be another big player, you know, Barry can configure this
out and I think this will be sorted in the next little while.
So, I'm not necessarily worried about it.
I mean, it's definitely a little bit of cause for concern, but I
wouldn't, I wouldn't lose sleep over this.
Yeah, I'd be really shocked if you know, I think there's a
nonzero probability for everything and that's the market
this, you know, crypto market, and the history of Legacy
markets should tell us that but chances of dcg very, you know,
having this like you know large-scale SPF style fraud, in
my opinion is zero or close to as close to zero as you'd like.
It's just a matter of the Dcg Genesis balance sheets, and then
and I don't think anybody knows that.
And the Silence has been kind of weird, I think, you know, to
counter your point or to maybe play, you know, Devil's,
Advocate in terms of like how bad it could get right.
Like I mean I I think gbtc is fine and the worst-case scenario
is that unless you know, the like this, you know, nonzero
chance like very very, you know, small small chance that there's
like something real wrong under the hood.
I do not think this whatsoever but it's nonzero.
Gbtc is, you know, in a bad spot otherwise even if grayscale or
GTG or these other firms and I'm no expert.
But I think that the the trust would just get bought by another
participant problem, maybe even a track 5.
So I think that's fine. But when I, when I look at like
and I posted it today coinbase is like you know the for in
terms of crypto companies and public markets, it's like the
most. It's it's a sterling example and
maybe it's not Sterling, but it was, you know, like that the
IPO, all this stuff and My field at the top but like coin basis,
poster child. And when they're when they're
seven year, I guess now like six year, five year, secured debt is
trading 50 cents in the dollar. Right?
Three point three seven five percent coupon is training with
a 17 handle, right? So like this is coinbase and if
coinbase like that thatis that to me, tells me it's less about
coinbase, like it's not and I'm not trying to thud coinbase or
anything, like some people in my replies, think it's more.
So, just the reality that like it, You are a crypto firm or an
exchange or a mining company or whatever the crypto native risk
Premia or maybe it's just a liquidity crunch right?
Because all these lending desks are screwed, Genesis is group
block, five screwed, like all of them, right?
If you need to finance or roll or refinance.
Anything in the crypto ecosystem, like a lot of people
are very familiar with like, you know, the theory of like credit
impulse in the macro economic cycle, right?
Like, thanks for Lending acid. He was ranked are increasing
collateral values, increasing and it's a feedback loop and
like these are kind of why we have short-term economic debt
Cycles, right now. Like if you think about the
crypto native sense, where there's no lender of Last
Resort, but this is the reality is there's no lender of Last
Resort. So any so any kind of impairment
or, you know, they'll call it a liquidity issue but if a, you
know, a loan book can't step fire sell its assets and cover
its liabilities. It's mark-to-market insolvent.
Like there's no way around it, right?
Because there's No lender of Last Resort.
So in that, in that case, when all these length, like literally
every lending dusting, the space just took out behind the shed
and shot and coinbase. If it needs to refi its debt and
maybe wouldn't be a seven-year term and maybe the terms could
be, you know, senior secured or like like it would be somewhat
different rather than the current structure but they're
trading at 17 percent and that's like Mega Ultra trash junk level
rating. So I think people should just
understand like From this ecosystem perspective you can
either fire sale your Equity at bottom Barrel valuations.
I don't care if your firm's private and last raised in 2021
and you're like yeah we're five billion dollar company.
You're not right like it's it's 80 90 percent down across the
board. Bitcoin, 75% down, right?
So. So then I just I ask myself, how
does this get resolved? Wow, right.
The vix is that. 2222 Equity is only 20% from there.
Heís, right? Like this can get materially
works and I'm not trying to be a Doomer, but I'm just saying you
have you have Jeff Bezos come out and be like hey guys, save
your money like don't go by bike ride a stuff, save your money,
don't buy the spare TV or fridge and people are like, yeah, like
maybe the bottoms in and maybe it is again.
But all of these things are pointing to like more pain and
you know, not the like you know, buy the dip up only that some
people still seem to be kind of condition towards I think it
like camera. And Pete Reiser here.
I've said this a few times on Spaces, it's just it's just a
hilarious analogy. He's like saying you know right
now you're getting the shit kicked out of you in and out in
a dark alleyway B by, you know, a few guys.
So you got jumped but what you don't realize is after they you
know beat the hell out of you you have five or six hours where
you're alone in the dark beat up and you realize that no one's
coming to get you. You got to pick yourself up and
get out of the alleyway and it's like maybe this is the worst of
it, right? Right.
But even then, we got, we have some time of just, you know,
basically building and and, you know, it's just like it's gonna
be a grind for a while. So what I'm trying to say, I
think I've just, it's important to manage expectations about
this, and, you know, if it takes, if it takes a while, and
it does, and that's fine. Yeah.
Totally, I think like totally spot on.
I think it's going to be an absolute grind.
We're basically going to be a goblin town for a long while,
right? And and like realistically, I
don't think we know you know how many more bodies are going to
wash it to your point done. I think, you know, you could be
looking at coinbase, you could be talking about Genesis, you
could be talking about any of these these public and private
companies to me. It's the market saying we Aren't
sure, you'll even survive the next six months, let alone a
year to see our money back and so we want, they're just they're
happy to sit on their hands and they want to see like prove it
prove it, you're going to survive, like prove, you're
going to be able to cut costs enough, sadly, layoff enough
employees, you know, cash at least somehow conjure up cash
flow positive. Most of these aren't profitable,
but yeah, why everyone wants to know why should we pause Ably
throw good money after bed. When probably part of her own
book is melting somewhere and we've got to protect our own.
So yeah, it could be coinbase. It could be any of these dozen
plus mining stocks. It could you know you name it
and to me now we're all just talking about the rumor mill on
Genesis and they're and they're trading firm but to me This is
this is what should have happened with Alameda.
This is what they should have. Just let it try to get their own
loan, get their own bailout. And if it can't get its billion
dollar bailout than it has, then it dies.
Like that's that's where FTX went wrong.
That's where Sam sann one of Sam's, many failures.
But as soon as he's like, well, you know what?
I'll just dip into the customer funds and the customer cash flow
and will give you a sweetheart behind the scenes.
Three billion dollar deal bail out.
That's not happening for Genesis dcg isn't going to do that for
for Genesis it'll be a big black eye.
It'll be really embarrassing for Barry.
It'll you know everyone know everyone will you know get to
tap dance and I told you so's but it's also necessary and
that's how it's supposed to happen.
If they're, if they're lending, if they're trading desk, if
they're lending firm and their Venture desk go under, then it
should go under and the contagion stops right there.
Great points about I was wondering, if Matt, it can you
hear? Jenny and when he was you
speaking we kind of started talking same time as him my bad.
No no it's all good. I just did like a Twitter spaces
thing but if space is I see ya. I can't hear him.
I'll leave and come back. Yeah, justjust she taught me.
An invite guy, do you want to continue your point?
I forget what you were riffing on.
Yeah, first I'll find my Goblin Town and how we're going to be
all are going to be ready for the next?
Yeah, yeah. So I think there's a few more
things that are worth considering.
It's about number one, obviously, everyone's Focus this
week is on Genesis and dcg, which is, you know, the correct
thing to be focusing on. However, you know, just from the
conversations I've had internally and with some of our
clients and partners and whatever it look, everyone's
been hit by this really bad, and if you want to understand, who
might be next, or, you know, who's taking a lot of damage,
you need to Understand, you know what the market microstructure
of exchanges is right? And so, it's pretty simple.
You have, you have really two broad categories.
You have retail Traders and institutional Traders, and on
the institutional side, a lot of the lifeblood of exchanges is
market makers. And you know, if you look at the
size of f, the FTX operation both on the offshore exchange,
and on the u.s. entity, you'll start to realize that there's a
lot of liquidity providers. Our and not all of them, very
few of them got their money off in time.
And you know, I know folks with you know, seven eight nine
figures stuck there that they're never going to see again or
they'll see 20 cents on the dollar in five or ten years once
the bankruptcy proceedings are you know completed.
So you know it's really bad, right?
And people need to start thinking about how is this going
to impact overall liquidity? Because you know just taking a
taking a few steps back you'll quickly start to Realize there's
going to be a very negative impact and there's going to be,
you know, a lot of liquidity drying up in certain places, you
know, certainly for especially for some of these, you know,
liquid shit. Coins were Alameda was either
the primary Market maker or one of very few, right?
A lot of these projects, you know that took money from
Alameda, we're tied up in these long-term deals where you know,
they would keep the the funds on on ft x and I'll meet it would
mark, it makes so they got fucked in two ways and it's just
you know it's going to be Be it's going to be really bad, you
know, there's going to be I suspect before the end of the
year. There's going to be way more
bodies washing up and I think some people are not being honest
about their exposure right now but time Reveals All and you
know, I think I think it'll be pretty clear before the end of
the year, you know, most of the bodies that that got affected by
this. So you know, it's just, it's
kind of a waiting game right now.
Here's a here's a catalyst or, you know, another body that no
one's really talking about it. And I know I kind of say say
this and post this kind of stuff from time to time as a joke,
being sad Tire like hey like you know what's the use case of of
entities and defy that offer 2% yields on stable coins that
again may or may not like do I am I a tether truth or no?
I'm not and I you know believe long before the peg breaks
you'll see a run. On on a circulating Supply.
And we're not really seeing that any worrisome level regardless
of all that like defy yield yield farming, all this stuff
but like supposed Innovation, you know, kind of just slap slap
Trad Phi into like a wildcat banking era into a protocol and
you know that's all gone, right? Like like the D Phi, D, Phi,
summer, defy, yields all this stuff.
Why would I do that? When I can go by 4% you know
I'll get four point seven percent on short-term t-bills.
Right. I'll bite, you know, short-term
treasury bill ETF, or I'll you know you know stick it in a
savings account and get 3%. Write like this is the reality
and so D Phi. N FTS all this stuff like
etherium is still 1,100 bucks. Like what's that?
You know 150 billion dollar market cap or something.
Like in terms of the liquidity right now, you're seeing the FTX
hacker, just just mark it dumped aetherium 444 Bitcoin and doing
all this weird other stuff. I Think that, you know, if PPC,
if we're, you know, if we're in this maybe it's this new
paradigm, right? Like, eat this, deflation Ariel,
don't your sound money, like, like, some of the proponents
say, but I'm not confident in that thing.
And really, it's, it's a lasting support during a potentially
pretty bad. Like global economic recession,
/ depression, right? All of these leading indicators
and the traditional economy are saying, okay, like the housing
just starting to turn employment is just starting to turn Maybe.
Soft Landing, right? But if there's not and we're
just kind of entering the the apathy phase or we haven't even
reached the apathy phase for these you know speculative
crypto coins. I'm actually a lot more
confident in the buyers and toddlers of Last Resort for
Bitcoin just based on the test of time and you know how these
liquid in the games are played, it seems like you know, any
still probably more and even just like a psychological
perspective, right? Like $1000.
Hurry that versus what like 14 and dollar Bitcoin, right.
Like, there's not like there's a pretty big psychological effect
there too. So I'm just in terms of like,
you know, Catalyst for another leg lower.
It's like we've already seen really everything else in the
crypto. You can system deflate pretty
hard, except, you know, actually eith, which is notoriously, like
historically beta, right? And it's really nothing more
than beta often times. And people just kind of believe
the story because of the liquidity cycle, you know.
It seems a little icky PDC at Point o seven.
Not even training like trading it at this point.
I'm just kind of watching watching it all fall fall down
but I think that's probably maybe one of the things to go
Izzy the b2c ratio and also just a famous General.
I think it's going to die. I just think like you know the
hype cycle right? Of what what drove East in the
last bull market is like ico's daps, right?
Like all the the world computer was like an actual sales pitch,
right? And then this cycle is an
ultrasound money. And you know and I FTS and like
and 2020 2021 was defy summer. Right?
So what's where's all that now? Right and I I just think that
it's going the other way. It's kind of just hanging like
Wiley Coyote suspended in the air as people realize that like
no one wants to hold the bag. Yeah, look II.
Think I think the nft stuff is, you know, it's already kind of
proven to dry up pretty badly. You know, you look at you, look
at some of the volumes up, both on, Ethan, Solana and
comparatively a six months ago, 12 months ago.
It's, you know, it's pretty clear where the trend is going,
you know, the other thing too, is you have to keep in mind like
some of these you know more more Fringe, things like nft Zinio
and yield farming. Those are Mostly interesting to
people in, you know, in the good times, right?
And when, you know, when we have all time highs, when everyone's
making money and everyone just throws caution to the wind,
that's the most interesting period for some of these assets
to flourish. And you know, that's the
likeliest time for people to experiment with it.
You know, we've never really had kind of a what's it called a
full Market cycle with entities and Define.
So I think we're going to like this will be the testing ground
for that right. If It.
If it, if it makes it out on the other side of this cycle than,
you know, who knows, maybe there's, there's something to it
and maybe we're all wrong, but if it doesn't then, you know,
the the case will be made for it.
But yeah, I mean like, what's an office?
You have to think about the core of where the market participants
in, you know, in some of these products and particularly on the
nft side like look it's a very it was there's only two major
categories. It's either crypto whales that
were just, you know, rotating in and out of certain Collections
and and Try to hit trying to just climb their way up or it
was just retail hoping to strike it big with, with some, some
rare and ft, and be able to, to cycle their way through that.
But, you know, right now, everyone's poor and liquidated
and, you know, and struggling. Some people have already rushed
for the exits, you know, others. Others are just, you know, your
life right now trying to figure out what to do.
So I don't really think that either of those, you know, kind
of asset classes are gonna They're not going to be
interesting for for a long time. If they if they do survive on
the other side of this, my guess is, you know, just given the
amount of Market participants in both of those, some version of
it will probably climb out the other side of this.
But you know, I think for now the obviously the safe haven,
you know for you know for our ecosystem is mostly Bitcoin.
And, you know, it's it'll play out over the next few months.
So today of the, the lows are being run and we're at 15 or a
15-5, at the moment. So, is the bottom end, jeez.
What a, what a ugly Market? Yeah, we got, we got some chop
man. That's for sure.
I think Bitcoin bottoms before the fitness fed money printer
gobert like, like I maybe that like, you know, the start of the
new bull market per se and I kind of, you know, it really is
a shame that not a shame, but I think it's just the reality that
yeah, this decentralized monetary asset is You know the
exchange rate is at the whims of the you know, whatever they're
doing with the monetary policy because it's a check on the
whole game, right? Like like the fed the FED can't
raise and tighten forever and they're going to break
something. But we have this thing that's
supposedly independent and it is independent.
Its monetary policy is, but its exchange rate is not because one
half of the equation is b2c USD. So but I do think in terms of
like the bottom and the, you know, I've somewhat said and I
don't I really don't care if I miss it or or you know No ticket
to Perfection, which I won't, but I jokingly said, like, yeah,
I'll put ways rise when I think it's the bottom.
I think Bitcoin can bottom and I'll get my best stab at it.
Like, I'm Nora Crow. I'm just guessing like everybody
else, but I really believe that pick one can bottom like, you
know, put it in slow before the fed, you know says like okay
guys let's you know we're going to turn back to music for
turning it back on but in terms of like, you know the winds and
that secular uptrend, I think it's really like what you see
with The broader economy in the next, you know, Lynn Alden like
to say the PMI cycle, which I think is really interesting way
to think about it is like overlay the big one Cycles with
the overlay that with like the growth cycle.
And so yeah we got some we got some wood to chop for a while
and I think as long as you're you know not of Boomer or
someone that's not you know not to hate on the Boomers but
someone that has a portfolio they need to liquidate in five
years and you should be managing your position size.
They're like this is nothing but a thing in his act and it's
honestly like if you're here listening to space right now I
assume you've done some thinking about Bitcoin previously like
this is actually the best thing that could have could happen to
you because this thing is not going away and if you believe it
is and you believe the game is done forever.
Then great, you know, godspeed I disagree with you.
So so like if the market is like, if it goes to 10 K, it's
over. No, it's not over.
Nothing's changed like the, the entire thesis.
Nothing is fundamentally changed whatsoever.
We just get to wipe out all of this.
The layers of fraud, the layers of Lies, the liquid stupid shit
coins. It's the ponzi's, and the
ponzi's were spectacular. The cycle.
They were, you know, God, tier ponzi's, GG Skies, but the
game's over. Pack it up, you know, your
bucket shop is going to collapse.
And the builders that actual meaningful Innovation, and put
like a productive things being built on top of a neutral, a
political monetary settlement layer will remain.
And it's kind of funny to see, you know, despite how locally
bearish I've been. And you know, for much of 2022.
It's funny to see all the traffic guys that that, you
know, proclaimed victory at 3K, in 2019 cheering here.
And so, yeah, well we'll miss Ackers and hollers of Last
Resort will prevail eventually. And in the meantime, you expect
to get your teeth kicked in. That's, and that's the fun part
is because, you know, Bitcoin is going anywhere.
Yeah, totally I think you know, I think one of the things that
people need to always keep in mind when we're talking about
Market Cycles is, you know who are going to be these new
participants and and what is going to catalyze them, you
know, to buy back in, right over to buy in for the first time,
right? Like there's there right now on
the horizon like I'll just be straight up.
I see nothing right. It looks bad.
Global macro is sketchy. There's a lot of there's a lot
of headwinds things are very Uncertain, right?
We're still fighting inflation. Like, there's Wars going on,
things are terrible and so I just don't see any light at the
end of the tunnel right now. Obviously, you know, that, that
will change at some point. But, you know, just like
comparing told compared to last cycle, like what drove is really
right. You had you know you had a
shitload of money printing yet stimulus tracks, you had you
know, the Bitcoin on on balance, sheets narrative, you had sailor
and you had Elan pumping this. Right.
And then eventually all kind of hit escape velocity and then
We're Off to the Races. But like I'd look around now and
I just I don't see what the next thing.
It's right. And a lot of people were burned,
a lot of people were absolutely decimated by this.
Right. You know, some people, some
people Miss Luna, they got hit by Voyager.
Then they got hit by Celsius and I think I fucked on that CX and
the other completely out of the game, right?
You have a lot of these people, right?
And it's not just retail. It's institutional guys its mark
And makers and and everyone in between.
So, you know, not to be all, you know, kind of Doom and Gloom.
That's, that's not, that's not what I'm trying to say here.
I'm just, I'm just trying to be practical about, you know,
managing expectations around narratives and and right now I
just, you know, quite frankly. I don't see where we turn this
around. Obviously, any of this can, you
know, can change it, a drop of a hat and, you know, some some
wonderful new Catalyst can enter into the picture but, you know,
at the moment it doesn't look Bleak and, you know, I hope the
real building there's our other building stuff to to Really push
this forward when the time comes, I think we might be
overthinking it. We know there's a, there's
millions and millions of big Corners all around the world and
they allocate to bitcoin when they're making money.
So, you know, long story short, when the, when your economies of
your various countries and regions improve then the people
will have more money to save and then you can put more of it into
Bitcoin or your preferred asset. It's really as simple as that.
And as long as the adoption rate, over time for Bitcoin is
going up, then price gradually over time.
We'll go up but you're right as for now I mean I think we just
hit a. Did we just officially crack the
previous month? Low looks like we did Dylan.
Oh no. Yeah I mean I think it's obvious
I guess Genesis just announced that there's a basically in
toxic bankruptcy if because because no one, no one could
give them money over the weekend to make sense, guys, because no
one has any more money. It's, you know, Like there's
just no no one wants to plug a billion dollar hole in a loan
book. I don't really like it was
obviously the fu Xing to like the market you know, kind of
like a pump fake higher when Finance you know, supposedly
bailed out at The X and there was the headlines of which I,
which I shared when I first was announced in that 10 minutes
after Chris was some logical thinking.
And like I was like I don't want to be like a doom doom or here
but like anybody that's like celebrating because they have
funds on FTX and finance has come To bail you out.
Do you really think? She's he likes to donate money
for no reason. It's easy.
Also an effective altruist like you know, there's kind of a joke
there but no, no one has any interest in buying up impaired
assets, right? All that, all that.
Your liquidity problem, quote. Unquote means is that you're at,
there's an asset liability mismatch, which means you would
need to liquidate your assets. Which means selling.
So like you know, Genesis is it hasn't, you know, billion-dollar
impairment and who But DCd has and but they adopted by Nets of
the weekend. It's easy.
Probably did the same thing. Said, alright, cool.
Let me see your book showed in his book and he goes, no, I
don't, I don't want to buy that for any forever, even $0, I've
no interest. And so like, yeah, what's in a
market Without A lender of Last Resort?
This is, like, I'm just trying to stress this in a market with
that. A lender of last resort with all
these lending and credit desks and leverage and what you can't,
and what you can see in which I originally like, I think I
leaned on a Ittle bit too heavy and my analysis.
What you can see is there actually is a good amount of
transparent data in terms of Leverage, on the derivative
exchanges that you can see in real-time.
And some people will say, okay, yeah, that data or whatnot,
maybe it maybe it is. But I think in terms of the
amount of transparent leverage, you can see, you can see, you
know, Futures open interest. See me open interest, you can
see the funding rates for these a quarterly or monthly features.
You can see where they're trading to relative to the spot
market rate and even kind of, you know, give get a pretty good
estimation. Approximation of like the net
leverage in the system, what the collateral value is of that but
what's not? What was what was much more
opaque and prevalent than I originally thought was amount of
time like off-balance-sheet Leverage or private leverage
rather. And so when Genesis which you
know is making tens of billions of dollars of loans and doing a
bunch of derivative volume, and all this other stuff says, yeah,
we're bankrupt, or, you know, we're not bankrupt.
We have liquidity issues because we had, you know, a billion
dollars in the UST Ponzi and a billion dollars of exposure.
With Chibi Chibi DC, collateral with three arrows.
And then, you know what was just a lot of that lateralized loons
to bitcoin miners. But like, why would you collect,
why would you give him money for their machines when they're
correlated assets? Yes, it's Madness.
They also had 200 million on ft x + 4, a window.
Like, I had talked to people with, with a lot of funds on
Genesis, and I was like, what are your thoughts?
And, and they relate to me, they were talking a privately and I
like way, they say they're fine. I was like yeah they'll always
say they're fine and they got their assets off.
They say they're fine for 24 hours.
Yeah. It's like genesis like, oh yeah.
We're making announcement tomorrow morning.
And it's like, they're not going to make an announcement if
things are good guys. So it's, I mean, yeah, I don't
know what happens with our loan Buck.
I don't know their exposure. Like, most of the stuff I almost
honestly use Twitter as of like, a public Journal of my, my
thoughts for things at the time. And and really like I don't have
aside from Jenny. I just dishing out some
occasional out. Alpha at the start of this whole
thing don't really have like any inside connections here.
It's more. So just like okay here's a here.
The things we can piece together publicly, you know, they
publicly announced her relationship with three arrows
or or you know, we know that three hours is going to Genesis
for for you know this gbtc are betrayed and buying and taking
their Bitcoin and getting Bitcoin collateral.
All right? You know pledging that getting
the DVD shares pledging that as collateral to get more Bitcoins
to Pummel into the same trade and like all those things off
with the original Help? What was it 1.3?
1.5 billion in Bitcoin traded for the equivalent in u.s.
UST. Stable.
The Tara lunacy of a coin. It's, there's no way they got
out of that, you know, unscathed, that, that was
probably a huge 100% L and so yeah.
It's like and you know, we could find out that three arrows,
pledged a vax and and you know whatever, hell other altcoins
was collateral. It's like, yeah, I think I
honestly think Bitcoin, collateralized loans that are
very, very responsible LTV with, you know, margin requirements,
it's something that is honestly not bad and is in his good like
that fight like that financialization, for an asset
that trade 24/7. 365 is probably a good thing.
And I think that in the future that those sort of loans over
collateralized in nature, especially if Bitcoin becomes
less volatile will you know, be very entrenched in the global
economy. I mean Bitcoin is objectively if
it's over collateralized much better in Adderall than how
house right, like just but it's just still very mature.
It's still very liquid but, you know, theoretically 24/7 365.
It's all fungible, like this can work, but the amount of shit
coin, leverage and like, gpgc, Leverage and unsecured leverage,
right? Like three arrows, borrowing
from Voyager being like wink, wink, guys, like 600 million,
like all of that, just needs to get wiped and it's and it's in
the process of getting wiped, right?
Like no one, we are well in that process but we're not going to
bother. Them until any of that Mark to
Market. You know, garbage essentially is
just is just utterly white and you know, there's a clearing
rate and we're going to whatever that clearing right is we're
going to find it and and so you know buckle up because it's
going to be, it's gonna be fun one.
Yeah if I had to guess I'd say Post New Year's not before New
Year's for a little context. Remember everyone remembers in
early May when Tara Luna UST absolutely collapsed.
It took a good boy for weeks over 40 Days for a Bitcoin to
find its new bottom. Gotta figure.
It's going to take at least that kind of consolidation for our
new bottom. Agreed D + +.
I see you on the stage. We are.
I think the plan was to stop at five.
I'm down to go a little bit longer.
Chris, I don't know if you have time crunch.
No, I'm good. I like what we're doing.
We can keep running it. Cool.
Let's let's run this for another 15 or 20 minutes.
I'm kind of multitasking at the moment but if you want to get
any other people up here, I mean people ask us, what are your
thoughts on everything? I imagined you just have these
back in and chilling. No, I just wanted to join the
conversation and the truth of the matter is I just woke up
from a nap and I'm kind of Like, what year is it, what price is
Bitcoin? Uh, y-you know, I don't normally
look to the news. I don't normally track the
price, but I do see that Bitcoin has dipped another 5% today.
So I'm assuming it's based on this news that I guess Alameda
already had losses of several billion even before this year,
is that correct? I like I said, I just woke up
from like a coma. I have no idea what.
Yeah. NSS apparently, is that they
requested a billion by Monday as in today, talked to by Nets over
the weekend and there was no interest.
So, you know, whatever that loan book is, I don't know.
But I think the worry is, you know, just that the kind of the,
the daisy chain of, no, no one willing to really burn money to
kind of plug. This lending, desk, this loan
book. That's, you know, toxic waste.
And so, you know, what are the implications there and maybe
it's them. Selling, maybe it's given
front-running. Maybe it's you know, like I saw
Alex relation is just so anecdotal but the CEO River he
always likes to post, you know, the buy sell orders and rivers
the Bitcoin only exchange. And you know that I think is
that high conviction there, you know, signal to noise on a
Bitcoin only exchange like River versus you know, some of these
other casinos and they read a 33% by rate, right?
So like there's just a lot of there's a lot of fear out there
that people are just, you know, just just dumping Yeah, I like
that you said about sort of like what does a saying Lo and look
like, in a Bitcoin world like, you know, a high loan-to-value
ratio over collateralized, High, interest rate and that's like
what they're doing over at Unchained capital.
And I think like that's kind of the only saying version of
lending that I can see and but people didn't want to use those
products because the interest rate of course is much higher
like 11%. But at the same time it's like
would you rather pay 11% or would you rather let go Lose
your loan and so far, they've never lost, they've never had
it. They've never experienced a
single loss of a loan product, for any person in their history
of their operation. So, you know, I know there's
always risk involved with that kind of thing, but I really have
to give it to like the good actors in the space.
Yeah, 100% I think like, you know, kind of, you know,
extrapolating this out in the, you know, whether a couple of
years from now, or when there's more adoption from say the tread
Pi system, I imagine Bitcoin is collateral as just similar to
like, say, you know, if you're a private client at Goldman Sachs,
you can borrow against your, your Apple stock at like fed
funds, plus 50 basis points or something or like, you know,
like you could basically throughout 2020 and 2021, you
know, just borrow it. Zero or like zero, you know, 50
basis points against your against your brokerage account,
right? So like fact that Bitcoin trades
24/7 365 and isn't. As when I say like is more
liquid, I don't mean an absolute dollar terms.
It's far less liquid than Global, you know, even some
single name, Global equities at the moment.
But nevermind foreign exchange markets or or you know these
other these other debt markets but when you think of like you
know what could a world where Bitcoins 10 trillion dollar
market cap, you know how does that like collateralized debt
look like in that scenario? I think.
It looks a lot like the unchain Capital model where it's over
collateralized. Potentially, it's in a
transparent multi sake where they give you a key to so you
feel better but they're not rehypothecation.
It staying in that address, you can see it and then you know, at
some level where it's in theory, this is a no lost business,
right over collateralize, Bitcoin lending if you're not
going and hunting in D5 protocols and UST or engaging
in, you know, directional gbtc Arbitrage that blows up if gray
scale goes from a Premium to a discount for the first time
ever. But if you're not doing these
things and you're just, and I think part of the reason is D
plus Unchained charging 9% is like, unchain could charge fed
funds, plus 20, you know, 200 basis points, like a traditional
bank, but they are a bit coin business, right?
So they struggle with and they take additional financing from
like neidig and other people for their loan business because
they're doing things on bitcoin terms.
And so, they're not really interested in letting like,
lending money for 9%, I guess, maybe.
This past year, that would have been pretty good trade instead
of instead of buying Bitcoin. But, you know, in terms of it
they want to actually buy a bunch of Bitcoin and they're
hurt or it's not nine percent, but it's you know, they're
actually operating on a Bitcoin standard as a Bitcoin business
for better or worse. So I think it could be really
interesting to look at like Bitcoin as and I've done a lot
of writing a lot of thinking about this about, you know,
Bitcoin especially is it, you know, in theory that maybe it
never becomes a not volatile asset.
Maybe it's always a TiVo last set but I think Twenty years
down the line. Bitcoin still probably trades
like a risk asset, maybe it doesn't, but it trades, you
know, much much similar to like equities at a much, much larger
scale and so collateral. Not in that world is a lot
different and the risk-free rate, you know, they're the rate
you get on that on that collateralized loan is similar
to what you get with a mortgage today or something, because it's
just, it's a, it's an if you do it, right.
It's a no-loss business from a, from a lending perspective.
Okay, does anyone else have anything they want?
Simon. Maybe you want to invite more
people up or just riff? I don't don't wanna don't hog
the mic. Yeah, I'll jump in just, you
know, a couple of other, you know, interesting points on this
whole chaotic situation unfolding.
I know there's been, there's been a little bit of speculation
around, silver Gates, exposure /, involvement in all this and
all raise this because I think it's an interesting point and
certainly one that you know, the begs a little bit more
investigation. Yeah, as some of us know that,
you know, that have been in the space for a while that are that
have been wire. Add money across to multiple
exchanges or big counterparty. Silver Gates, a huge, huge piece
of the the internal infrastructure of the ecosystem.
And, you know, one of the, one of the things people have been
speculating about is how much exposure do they potentially
have in the collapse. And so thus, exposure could come
in the form of actual US dollar loans out to FTX or any other
any other Affiliated counterparties.
You know we don't know yet. Luckily they're a public company
and so all the For will surface, you know, in their Q4 report.
So it'll be a while but you know it'll be interesting to see how
that develops and you know potential corollary to this is
you know while this whole kind of FTX bankruptcy proceeding
continues you know it'll be pretty damn clear.
That one of the things that they'll be charged for is wire
fraud because essentially what they would have 2X was doing and
I know from personal experience and And certainly, I can
corroborate through others that when you would wire money into
have TX, you weren't always wiring it to their entities, it
was either an Alameda sub or Alameda directly and and that
is, you know, I'm not a lawyer. And so please don't take any of
this as, you know, legal fact. But that is essentially my
understanding what wire fraud is and and that's that's going to
be a problem. And so, you know, it also opens
up the question too. How many other financial
institutions outside of Silver Gate that were tied into that?
CX ecosystem could be potentially dinged for this sort
of thing. So, yeah, just it's a developing
piece and there's obviously not a lot of info on this.
But I would say this will be an interesting kind of part of the
narrative and the in the coming weeks.
So Jenny I've been tracking a Silver Gate stuff and me
dragging it. I guess to the best of my
ability. But here's what I know, right.
And I'm about to link one second here.
I'm just putting my charger. I'm about to link in the nest.
For anyone that wants to follow, along this thread again.
There's no conclusions here. These are, these are just
questions weirdest asking questions, silver gets a
publicly-traded name and, and basically all this info that
Jenny and I are talking about or that the group is talking about
is, is public info, right? There's, there's no Insider
information, and this is on the website.
So I just pin this to the top of the nest, two people can fall
into thread. And so Silver Gate was - 46%
going into the FDX thing. We're talking to the send
Network essien, Silver Gate. At work.
Some of the names involved here is as FTX coinbase, paxos
crypto.com, Gemini, Kraken bitstamp Circle.
And here's a quote from FTX from sandbag Madrid himself.
This was on the Silver Gate website and I believe it's been
since removed from the Silver Gate website.
But this was the night that I went on the website and saw this
is life as a crypto firm can be divided up into before, so we're
getting after Silver Gate. It's hard to overstate how much
it revolutionized banking for blockchain companies.
So, looking at their stock has been pummeled.
That's gets down again. Today, I believe I closed the
day. A down.
I mean, this is not a big-name. It's a 1 billion dollar market
cap, maybe even lower. Let me check with their their
stock did today, like which is, which is fine.
And I honestly believe them in that scenario.
But here's the thing, right? The day before the FTX collapse,
the CEO and the CEO, I'm sorry. The head risk manager of the
firm and who else was it? The Manager in the president or
scrapped. And and those two positions
happened to be. I believe the brother-in-law and
I think the brother of the CEO or family or social son-in-law,
but now, oh, yes, here's our gets real.
I've been digging into it because I'm very, very
interested to and for every for every place that I find someone
saying, oh, they were fired. They were scrapped.
I find another place where it's like, no, this was this was
planned organizational. Promotions and shuffling and I
just don't know what to believe. Don't believe their lies.
Matt, don't believe their lies, but I don't know.
So great is the one that doesn't talk.
It's it's everyone else's talking and Silver Gate,
frustratingly doesn't say a thing.
Yeah. So I think what this is and I've
this is kind of leaning on a Alder a little bit or
what's-his-name. I'm sorry.
Marco Diaz, who's a short sellers, a Wall Street guy, but
he was he was just calling out SPF there.
Definitive evidence. But he was saying for the last
few months like, hey guys, like when you look at at, you know,
financial fraud, this guy's taking a lot of boxes and he was
just highlighting a bunch of questions.
Then basically Came Upon Silver Gate, who their stock has been
getting killed. They just recently got into
money laundering and like South America, I believe, maybe South
Africa, there's money laundering charges that arose and their
stock was down about 14% one of these days.
The real, the real thing here is like Jenia said, when you wire
money to FDX, you weren't even wearing it too.
Fbx. You were wearing it to the
Alameda entity and it's through Silver Gate.
And then there's a video, which is in the thread, but the
original poster of the video just went actually private on
his Twitter account, crushing enough.
So we can't we can't see the video but it's basically same
Trabuco the former CEO of Alameda saying like oh yeah, we
use a u.s. bank to wire money to tether and they're like, what
banking is? Like we can't admit that and I
think if you could connect the dots, you can probably stumble
upon the fact that it was Silver Gate or the high probability
that it was Silver Gate. And so again, like I don't think
they've learned exposure but just you know how fractional
Reserve Banks work, you need deposits to make it work and
your mother. You know, Falcon X is a small
institutional player or I mean they're not small but they're
really behind the scenes, you know.
Some some people say they actually have, you know, quite
quite big size and relevancy across the space.
They just stopped using the inform informed everyone via
telegram that they're they're they're halting Silver Gate,
wires effective immediately due to the abundance of caution.
So like yeah, so that it's not great, right?
True And so, so if it's a depositor story and silver Gates
Equity, I, I mean, I'm not a banking analyst, I don't claim
to be, but a stock getting hammered day after day after
day, basically, just down only and wire fraud, basically, being
a big reason, their stock took a 20% died, a few days ago and
then all of the the Alameda stuff that is yet to come from a
legal perspective and what is what these dollar rails.
When you look at these institutional players like again
this is all public website, look up, send network essien,
network. On Google Images and put into,
you know, scroll and they have a bunch of slides with all these
crypto companies, right? And so these are dollar rails.
So I'm just, you know, all of these things.
Whether it's like the lending desks and bloating or the market
makers, imploding, or the potential.
And this is not a hundred percent certainty and but the
potential for one is basically to u.s. regulated banks that
serve crypto firms. You know, tail risk here.
The others I am signature or Satan's here, right?
Right. And I have no idea how to how to
quantify this probabilities probability.
Violence, none zero. But I know it's nonzero that it
happens. And I am somewhat sure that in
the, you know, event of something bad quote-unquote
happening, or whether the sperm was under or they, you know,
everyone else gets out because of regulatory reasons, or
whatever. It's not probably great for net.
Liquidity coming into the space or, you know, circulating around
the space money sloshing around and and losing those dollar
rails. And, you know, The fact that
Circle banks with these guys, right?
So I, yeah, I'm no conclusions only questions and a lot of this
stuff just doesn't smell great. You know.
It does look absolutely. Absolutely right.
It doesn't, it does not smell great and sure enough like of
course it's a down only Big Bear Market is, what's exposing the
smell? But let me give the other the
other side, we're like okay yeah.
If you, if you had been buying puts or been short Silver Gate,
For this past month. Obviously, you're very happy
ever since FTX, imploded. But if you're just hearing about
this for the first time, in this space, you got to be very
careful because what we've also seen is silver, Gates,
competition, capitulate, and outright.
Go into bankruptcy, as we speak by what happened to block fry.
They're gone. What's going on with Genesis
there soon to be gone, like let's go.
Like all the sudden they're losing their there.
What used to be there? 20, 21.
And 22 a do competition there. They're gone.
Yes, Silver Gate is having his time in the in the in the shed
but if they survived, they might be the only ones Still Standing.
So I don't I feel like honestly there's more that we don't know
them. We do on the flip side, like
when we were watching when the coin desk article came out about
ft x and we all learned a levitas balance sheet and we
learned what a fugazi punsie TT took.
It was I think you could very confidently say short at the
hell. Oh, this thing's going to zero,
I can't say that with Silver Gate.
And I'd be surprised if anyone else can make that claim to
know. Yeah, I'm by no means like
pitching short pieces here that and like, by any means, not
Financial advice. I mean, this is a publicly
traded entity and we're just talking about it in the open.
Yeah, I mean, I definitely wouldn't just go blindly a PIN
to a short of security, because if I talk, you know, banter
you're hearing on Twitter spaces.
And in terms of ftt, imploding, it was much, it was a much more
visible thing. Hey, there's a broad scale.
Speculative attack on an illiquid altcoin with no natural
buyers. This is a Fed member bank.
And, you know, it would be it'd be really, really fascinating to
see what would happen in a bad scenario.
Considering that their FDIC insured.
And considering, or if I'd member Bank, like, I don't know
what would happen. So, that's, you know, one of the
things where, if it does happen, I mean, it's, it would be very
fascinating to see it play out because it'd be much more
critical to the crypto space. But at the same time there's
Trad fi spillover effects. In application.
So I don't know what. I agree with you Matt that, you
know it's not some opportunity to go ape into shorts.
Like this is I mean it was definitely I think you know
pretty good opportunity post implosion of FDX but we'll see.
We'll see what happens I guess. I think I think it's just going
to be an interesting time over the next 6 months, 6 to 12.
Just in terms of like you know, the Bitcoin protocol is not
going anywhere. I think, I think there's still
broadly like under the surface adoption and you know, Tech
being built. Which is, which is, I mean,
there's no denying that in my opinion but the exchange rates
going to get absolutely pummeled.
And a lot of people are gonna, you know, are gonna quit gonna,
you know, leave going to do something else.
Say Bitcoins dead and it's a, you know, I will see, you will
see what happens. I think probably he was a
natural place to end it. I got some work to finish up for
today. I certainly don't want to, you
know, if you guys want to like hand it off to another space
Jenia, I really appreciate you coming.
Matt D plus plus course for hosting.
This is a ton of fun. I guess.
Just maybe I'll give a brief hand off to some something you
guys can check out if you want. We It up some stuff for Bitcoin
magazine. Pro covered, the let the latest
six months I think as well as anyone with a Bitcoin native you
and just kind of, you know, not being passing this for being
rationalist about about the state of things.
So if you're interested in that Vikram magazine Pro.com, it's in
my bio shout out to Jan and bit Max for being a sponsor of us
for a while. No longer.
But understandably had to tighten the belt, respect my
friend and and you know we're all going to make it wag me.
This is going to be a fun bear and I certainly am not going
anywhere. So appreciate y'all.
Perfect. Thanks Dylan.
Appreciate that appreciates his Chad.
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