1 00:00:05,300 --> 00:00:08,200 Welcome back everyone. I am Caspian Sea and I'm joined 2 00:00:08,200 --> 00:00:11,500 as usual by my partner in crime. Bennett Tomlin I know how he's 3 00:00:11,500 --> 00:00:14,000 doing, he's doing good. I know how I'm doing. 4 00:00:14,000 --> 00:00:18,800 I'm doing that today we are talking about contagion which is 5 00:00:18,800 --> 00:00:22,200 a bad movie and a pretty mediocre book and a pretty 6 00:00:22,200 --> 00:00:25,600 mediocre book but it also is what seems to be happening in 7 00:00:25,600 --> 00:00:29,000 the cryptocurrency industry right now as we speak as we 8 00:00:29,000 --> 00:00:35,000 record this on 16th Bennett, I think contagion is one of the 9 00:00:35,000 --> 00:00:39,000 things that we have long. Feared, this is, this gets back 10 00:00:39,000 --> 00:00:43,100 to the heart of the problem that we see in crypto currency. 11 00:00:43,100 --> 00:00:46,200 Whether it comes to tether or centralized exchanges. 12 00:00:46,200 --> 00:00:49,000 Like, let's say by Nance the most liquid, crypto currency 13 00:00:49,000 --> 00:00:52,200 exchange in the world. I see contagion risks everywhere 14 00:00:52,200 --> 00:00:53,900 right now. I'm wondering how you're 15 00:00:53,900 --> 00:00:56,700 feeling. If you think that like the cold 16 00:00:56,700 --> 00:01:00,000 that has been caught in the ecosystem, the flu, whatever you 17 00:01:00,000 --> 00:01:03,100 want to call. All it, we won't go with the c 18 00:01:03,100 --> 00:01:08,200 word I guess, either c word actually, there's three c words. 19 00:01:08,200 --> 00:01:12,700 We won't go with anyway. How come there's so many bad 20 00:01:12,700 --> 00:01:15,700 Seward's now, what's up with that anyway? 21 00:01:15,800 --> 00:01:19,000 Do you think we're like part of the way through this disease? 22 00:01:19,300 --> 00:01:21,700 Do you think we're like halfway through three quarters of the 23 00:01:21,700 --> 00:01:23,900 way through? The contagion is already worked 24 00:01:23,900 --> 00:01:28,800 itself out of the system or do you think it's just been caught? 25 00:01:28,900 --> 00:01:30,300 Do you think we're just getting the first? 26 00:01:30,500 --> 00:01:33,700 It's of fever let's talk a little bit about where we're at 27 00:01:33,700 --> 00:01:38,500 for that question. So Celsius Network shut off 28 00:01:38,500 --> 00:01:41,800 withdrawals and is brought in Citigroup to help them 29 00:01:41,800 --> 00:01:45,400 restructure. Black fi had to liquidate 30 00:01:45,400 --> 00:01:49,300 assets, they held for three hours Capital tether had to 31 00:01:49,300 --> 00:01:52,700 liquidate assets. They were holding for Celsius. 32 00:01:53,400 --> 00:01:57,100 Darrell Abbott had to liquidate loans they head out for three 33 00:01:57,100 --> 00:02:01,700 arrows Capital, three years, capital is a A crypto Market 34 00:02:01,700 --> 00:02:05,400 making venture capital and hedge fund. 35 00:02:05,400 --> 00:02:08,600 That had at one point about 10 billion in assets, under 36 00:02:08,600 --> 00:02:10,900 management. Whatever that means in crypto 37 00:02:11,000 --> 00:02:16,700 where liquidity can be fleeting has apparently now ended up 38 00:02:16,700 --> 00:02:20,200 insolvent, and unable to pay some of their debtors. 39 00:02:20,700 --> 00:02:22,600 So where are we at in the contagion? 40 00:02:22,600 --> 00:02:26,400 Well, I think that depends on who's exposed to who, and who's 41 00:02:26,400 --> 00:02:29,200 holding on to something that's going to need to be liquidated 42 00:02:29,200 --> 00:02:32,700 still, right? So Celsius Network, we really 43 00:02:32,700 --> 00:02:37,200 don't know what position they're in or who might still be holding 44 00:02:37,200 --> 00:02:41,300 debts that Celsius hose hoping they'll still be able to pay. 45 00:02:41,800 --> 00:02:45,200 There might still be liquidations or people holding 46 00:02:45,200 --> 00:02:48,700 onto toxic debts, three rows capital is an even more 47 00:02:48,700 --> 00:02:53,200 fascinating example because it seems they were offering to some 48 00:02:53,200 --> 00:02:56,900 of the companies they invested in to Services one. 49 00:02:57,400 --> 00:03:02,500 They would take some of the USD I see where you sdt that you 50 00:03:02,500 --> 00:03:06,300 raised as part of your Venture Capital rounds and they would 51 00:03:06,300 --> 00:03:10,000 manage it for you. Promising, you and 8% return. 52 00:03:10,600 --> 00:03:14,200 The other service three arrows Capital was apparently offering 53 00:03:14,200 --> 00:03:17,200 was Market making for many of these coins. 54 00:03:17,700 --> 00:03:23,400 So depending on how bad the situation is with three o's 55 00:03:23,400 --> 00:03:27,500 capital and what ends up needing to happen, it could potentially 56 00:03:27,500 --> 00:03:32,600 affect a whole bunch of D5. Protocols and affect the 57 00:03:32,600 --> 00:03:36,600 liquidity, for a bunch of protocols across the entire 58 00:03:36,600 --> 00:03:39,000 system. Now, the final part that we've 59 00:03:39,000 --> 00:03:43,700 just kind of hinted at here is, of course, tether to other, who 60 00:03:43,700 --> 00:03:48,600 is fully reserved by assets of unknown quality that every 61 00:03:48,600 --> 00:03:52,600 single day, maintain basically the exact same assets over 62 00:03:52,600 --> 00:03:54,800 liabilities. No matter what happens to the 63 00:03:54,800 --> 00:03:57,800 bond market or the Bitcoin Market, or any of the other 64 00:03:57,800 --> 00:04:00,200 assets, they're exposed to so tethers. 65 00:04:00,200 --> 00:04:03,000 And Miraculous case where we never need to worry about their 66 00:04:03,000 --> 00:04:06,500 systemic risk because they're managed by a team of consummate 67 00:04:06,500 --> 00:04:09,200 professionals who have never made any mistakes and who follow 68 00:04:09,200 --> 00:04:11,500 every rule. So carefully that, you know, 69 00:04:11,500 --> 00:04:13,700 they're not over exposed to any of these things. 70 00:04:13,900 --> 00:04:17,000 So, I think the contagion stops at three rows, capital and goes 71 00:04:17,000 --> 00:04:22,600 no further. More practically. 72 00:04:22,600 --> 00:04:24,500 We don't know exactly how far they can. 73 00:04:24,700 --> 00:04:28,000 I'm going to go because despite cryptos claims of transparency, 74 00:04:28,400 --> 00:04:31,800 there's a lot that still happens in over-the-counter deals 75 00:04:31,800 --> 00:04:35,000 telegram, groups, dark pools, and other things we can't see 76 00:04:35,300 --> 00:04:38,700 the full extent of what debts can't be paid in, what might be 77 00:04:38,700 --> 00:04:42,400 liquidated is unknown and what assets three hours Capital may 78 00:04:42,400 --> 00:04:45,000 end up committing or needing to sell is still unknown. 79 00:04:45,300 --> 00:04:48,100 Yeah. And so, as funny as that was to 80 00:04:48,100 --> 00:04:52,500 hear there is some level of Truth to that statement like any 81 00:04:52,500 --> 00:04:54,400 good joke. And the reason I say that is 82 00:04:54,400 --> 00:04:58,100 because we've experienced this before we've seen insolvent, 83 00:04:58,100 --> 00:05:02,200 cryptocurrency companies, some of them very large, get bailed 84 00:05:02,200 --> 00:05:06,800 out by other companies in the cryptocurrency industry. 85 00:05:07,500 --> 00:05:10,500 The one I'm obviously thinking about is bitfenix and tether 86 00:05:10,500 --> 00:05:14,600 after they had a bunch of their accounts, Frozen, we saw Arthur 87 00:05:14,600 --> 00:05:20,000 Hays and the lads a bit Max and we saw Xiao dong, and the 88 00:05:20,000 --> 00:05:22,600 company rent. Run bit, which I would have seen 89 00:05:22,600 --> 00:05:26,500 his now-defunct and gone and banked the future, which also 90 00:05:26,500 --> 00:05:31,400 had funds with I believe Celsius or Equity was Celsius, and we 91 00:05:31,400 --> 00:05:35,200 should also remind people that tether was the lead Equity 92 00:05:35,200 --> 00:05:39,800 investor in Celsius has early Venture Capital rounds, correct. 93 00:05:39,800 --> 00:05:43,800 And they have a deep history with them in which machine ski 94 00:05:43,900 --> 00:05:46,800 said that he gets you know, billion dollar loans from them 95 00:05:47,000 --> 00:05:51,600 to nominated in tether, but that is troubling to That would again 96 00:05:51,600 --> 00:05:56,900 point to Contagion risks. I would suggest that's quite 97 00:05:56,900 --> 00:06:00,400 possibly what accelerated the Bitcoin sell-off that ended up. 98 00:06:00,400 --> 00:06:04,000 Pressuring Celsius is wrapped Bitcoin maker V, right? 99 00:06:04,000 --> 00:06:07,100 Was that tether said they liquidated the position. 100 00:06:07,100 --> 00:06:10,100 And so if they're talking about the Bitcoin secured loan that 101 00:06:10,100 --> 00:06:13,000 Celsius had and they sold the Bitcoin that were in it. 102 00:06:13,000 --> 00:06:17,500 They might have been largely responsible for then, ending up 103 00:06:17,500 --> 00:06:20,400 putting Celsius networks, other position there die. 104 00:06:20,800 --> 00:06:25,900 Isshin in danger, which would be funny because tether also owns 105 00:06:25,900 --> 00:06:30,300 equity in Celsius. Yeah, yeah, funny crazy. 106 00:06:30,500 --> 00:06:32,600 I keep forgetting to laugh at the funny things. 107 00:06:33,500 --> 00:06:37,300 Well, it's actually fascinating to me because now we're ending 108 00:06:37,300 --> 00:06:42,200 up in what was already a largely centralized ecosystem? 109 00:06:42,300 --> 00:06:43,700 I don't know what else to call it. 110 00:06:44,800 --> 00:06:48,400 And now, we're seeing players plummet and fall off one after 111 00:06:48,400 --> 00:06:52,200 another really fast. I mean, I think the Session of 112 00:06:52,400 --> 00:06:55,700 Do Kwan. Tara Luna followed by this 113 00:06:55,700 --> 00:06:58,500 Celsius thing, followed by this three arrows, Capital thing. 114 00:06:58,500 --> 00:07:04,700 I mean, this is three incredibly large, I wouldn't say trusted by 115 00:07:04,700 --> 00:07:08,600 most, but trusted by plenty and it's troubling. 116 00:07:08,600 --> 00:07:11,800 And to me, I think three arrows is probably the scariest to most 117 00:07:11,800 --> 00:07:15,300 people in the space, in our tether, papers episode with 118 00:07:15,300 --> 00:07:17,200 David Kanellis. I think we talked about them, 119 00:07:17,500 --> 00:07:19,700 but maybe you can talk a little bit more about them. 120 00:07:19,900 --> 00:07:23,100 They've been in the space. For a very long time, it's Zuzu. 121 00:07:23,100 --> 00:07:28,000 And Kyle Davies they they're the partners who run this hedge 122 00:07:28,000 --> 00:07:29,400 fund. It's a hedge fund. 123 00:07:29,400 --> 00:07:34,100 It was originally based in Singapore is now based in Dubai. 124 00:07:34,400 --> 00:07:38,900 They have billions of dollars under management and they were 125 00:07:38,900 --> 00:07:41,200 one of the top receivers of tether. 126 00:07:41,400 --> 00:07:45,500 But yeah, my understanding is that they were basically a 127 00:07:46,000 --> 00:07:50,000 garage fund initially funded by their own initial appreciation 128 00:07:50,000 --> 00:07:53,100 and crypto wealth. Earlier smaller Investments that 129 00:07:53,100 --> 00:07:56,000 they ended up then rolling over and over until they ended up 130 00:07:56,000 --> 00:07:59,800 with, like I mentioned before numbers say about 10 billion in 131 00:07:59,800 --> 00:08:02,500 assets under management, it's a little bit tricky to get an 132 00:08:02,500 --> 00:08:04,000 exact number for that kind of thing. 133 00:08:04,000 --> 00:08:06,500 But that's what you see commonly cited. 134 00:08:06,600 --> 00:08:08,700 And so, yeah, they were a ten billion dollar assets under 135 00:08:08,700 --> 00:08:11,900 management fund. They were early Venture Capital 136 00:08:11,900 --> 00:08:15,100 investors in a variety of different protocols. 137 00:08:15,400 --> 00:08:19,900 They were a major investor in Tara especially in some of the 138 00:08:19,900 --> 00:08:23,800 more recent Sales which might be contributing to some of their 139 00:08:23,800 --> 00:08:26,600 liquidity problems right now. There was some analysis. 140 00:08:26,600 --> 00:08:29,100 I saw that suggested they might have compounded their problem. 141 00:08:29,100 --> 00:08:32,600 By doing the same thing that Celsius did, perhaps moving too 142 00:08:32,600 --> 00:08:36,900 much eith to steak teeth and then being trapped in an 143 00:08:36,900 --> 00:08:40,500 unfortunate position, which seems to be a common mistake. 144 00:08:40,500 --> 00:08:43,500 But yeah. So there a market making fun. 145 00:08:43,700 --> 00:08:46,400 They do a lot of Market making, unlike crypto.com, which was 146 00:08:46,400 --> 00:08:50,200 something we observed, we're writing the tether papers and 147 00:08:50,300 --> 00:08:53,500 they would And Market make for the very tokens that they had 148 00:08:53,500 --> 00:08:57,100 just invested in. And so yeah they were a large 149 00:08:57,100 --> 00:09:00,500 Market making hedge fund and Venture Capital fund because 150 00:09:00,500 --> 00:09:04,800 they have to do it all in crypto and now it seems they can't pay 151 00:09:04,800 --> 00:09:07,300 back people they're supposed to be paying back and it's more 152 00:09:07,300 --> 00:09:10,100 than that though because these guys they had a stake in 153 00:09:10,800 --> 00:09:13,200 derivatives exchange called daraa. 154 00:09:13,200 --> 00:09:18,100 Bet they had a stake in I think Ave I'm not looking at their 155 00:09:18,100 --> 00:09:20,500 website right now but they had large Stakes. 156 00:09:20,800 --> 00:09:25,400 In very, if not important protocols at least protocols and 157 00:09:25,400 --> 00:09:30,300 platforms that block by block Phi that are important to the 158 00:09:30,300 --> 00:09:32,100 community. Now what we've been seeing 159 00:09:32,100 --> 00:09:35,300 recently who knows by the time this comes out but we've been 160 00:09:35,300 --> 00:09:38,200 seeing a lot of these companies and platforms that they have 161 00:09:38,200 --> 00:09:41,800 steaks in come out and say like this is not harmed us, this is 162 00:09:41,800 --> 00:09:43,900 not disrupted us, we're going to be okay. 163 00:09:44,200 --> 00:09:47,000 I think Celsius was saying that before Celsius collapsed. 164 00:09:47,300 --> 00:09:50,100 I think we saw. What is it deploying more 165 00:09:50,100 --> 00:09:52,600 capitals. He Lads from from do Quan. 166 00:09:52,600 --> 00:09:59,100 So so it is common parlance to say everything is fine, don't 167 00:09:59,100 --> 00:10:02,100 worry. And the best way to avoid a bank 168 00:10:02,100 --> 00:10:04,700 run is to tell people. Please don't come to the bank. 169 00:10:05,000 --> 00:10:09,900 So I think I get it and I'm not suggesting they're doing 170 00:10:09,900 --> 00:10:14,800 anything wrong but I am saying that the waters are very choppy 171 00:10:14,800 --> 00:10:18,600 and it does feel like they're still contagion risks going 172 00:10:18,600 --> 00:10:22,200 around right now to me it Seems like we're just getting sick and 173 00:10:22,200 --> 00:10:25,700 like we're just starting to puke for the first time, you know. 174 00:10:27,200 --> 00:10:29,500 There's a chance that black fight did liquidate their 175 00:10:29,500 --> 00:10:32,000 position early enough and weren't overly harmed by three 176 00:10:32,000 --> 00:10:34,500 rows Capital going silent on everyone, right? 177 00:10:34,500 --> 00:10:36,900 But that's only a partial explanation, right? 178 00:10:36,900 --> 00:10:39,800 Because they were previously raising in a five billion dollar 179 00:10:39,800 --> 00:10:42,500 valuation and we're last reported raising at a 1 billion 180 00:10:42,500 --> 00:10:46,100 dollar valuation in 80% down. Round that's going to basically 181 00:10:46,100 --> 00:10:50,500 ruin their cap table. Like it is unclear that without 182 00:10:50,500 --> 00:10:54,400 in Esther's like 30s capital and liquidity provided their, that 183 00:10:54,400 --> 00:10:57,800 blackface going to be able to close that billion dollar round. 184 00:10:58,000 --> 00:11:02,300 And so, there are long-term risks to blackface business, 185 00:11:02,300 --> 00:11:05,600 besides, just them being so exposed with 3, rows Capital, 186 00:11:05,600 --> 00:11:07,300 they would end up in solvent, right? 187 00:11:07,400 --> 00:11:10,200 Liquidity is kind of like a tide when there's a whole bunch of 188 00:11:10,200 --> 00:11:12,000 liquidity. Things are hidden things can 189 00:11:12,000 --> 00:11:15,800 keep functioning you can pull from the future but when the 190 00:11:15,800 --> 00:11:20,600 liquidity goes out things get exposed and you realize where 191 00:11:20,700 --> 00:11:23,000 People had overextended and we're over levered. 192 00:11:23,000 --> 00:11:25,200 Yeah. It's the classic Warren Buffett 193 00:11:25,200 --> 00:11:27,800 When the tide goes out. You know, who swimming naked. 194 00:11:28,200 --> 00:11:31,300 Another aspect of contagion that I really want to touch on here 195 00:11:31,400 --> 00:11:35,800 is stable coins, in general, which we've seen a lot of the 196 00:11:35,800 --> 00:11:38,900 algorithmic. If they didn't completely deep 197 00:11:38,900 --> 00:11:42,900 egg, we saw their market caps, just completely plummet over the 198 00:11:42,900 --> 00:11:48,000 past. 30 days, magic internet money, is down 83% in its market 199 00:11:48,000 --> 00:11:53,800 cap, Faye is down 20% Five percent in its market cap fraks 200 00:11:53,900 --> 00:12:01,300 is down from all-time highs of 2.5 billion to now, 1.5 billion. 201 00:12:01,500 --> 00:12:05,300 So that is a really large decline in all of the 202 00:12:05,308 --> 00:12:07,800 algorithmic, stable coins. And then we have other stable 203 00:12:07,800 --> 00:12:10,000 coins as well. That seemed to be struggling 204 00:12:10,000 --> 00:12:13,700 with liquidity issues and maintaining their Peg outside of 205 00:12:13,700 --> 00:12:18,400 algorithmic stable coins. And we saw the head of trading 206 00:12:18,500 --> 00:12:22,800 at Cumberland stated now this This is a thought experiment, I 207 00:12:22,808 --> 00:12:26,400 don't want to assign any real value to this thread and thing 208 00:12:26,400 --> 00:12:30,600 they wrote and said, but they did mention that the next shoe 209 00:12:30,600 --> 00:12:35,200 to drop that would really mess things up and drop prices and 210 00:12:35,200 --> 00:12:39,600 screw around with volumes and trading would be a top two 211 00:12:39,800 --> 00:12:43,500 stable coin, I guess failing, something along those lines. 212 00:12:44,900 --> 00:12:48,000 There's a lot of hedging in the statement they used if wood and 213 00:12:48,000 --> 00:12:51,000 top to stable coins. So they didn't name any Names 214 00:12:51,400 --> 00:12:56,000 and they said top to which yeah, sure. 215 00:12:56,000 --> 00:12:58,700 Okay. Could be the one that just got 216 00:12:58,700 --> 00:13:02,500 an audit, could be the one that once partnered with the money 217 00:13:02,500 --> 00:13:04,400 launderers. For the Colombian cartels, 218 00:13:04,500 --> 00:13:06,600 either one is Annie. Who knows option? 219 00:13:06,600 --> 00:13:07,800 Yeah. Yeah. 220 00:13:07,900 --> 00:13:09,600 Who knows. But yeah. 221 00:13:11,500 --> 00:13:15,600 Yeah, I think that's the contagion risk that you and I 222 00:13:15,608 --> 00:13:18,100 have been talking about for a very long time that a lot of 223 00:13:18,100 --> 00:13:20,600 people have suggested is simply Black Swan. 224 00:13:20,700 --> 00:13:23,200 Sense doesn't feel that way right now. 225 00:13:23,200 --> 00:13:25,100 I guess this happens every bear Market, though. 226 00:13:25,400 --> 00:13:29,200 It does. And like, well, again, we say 227 00:13:29,200 --> 00:13:33,200 that, but like last bear Market tether was doing a lot of shady 228 00:13:33,200 --> 00:13:35,100 shit, right? That was 2018. 229 00:13:35,300 --> 00:13:38,000 That's when all the worst of the self-dealing was happening and 230 00:13:38,000 --> 00:13:40,700 all the stuff, they were hiding about their insolvency not being 231 00:13:40,700 --> 00:13:43,500 backed. And so we say that like we just 232 00:13:43,500 --> 00:13:46,700 do this every bear Market, but like last bear Market tether did 233 00:13:46,700 --> 00:13:51,300 some pretty bad things and so like it's tethers, Changed, how 234 00:13:51,308 --> 00:13:55,900 there's a new company, they're focused on transparency now but 235 00:13:55,900 --> 00:14:00,200 their asset composition that we know of now is like 236 00:14:00,200 --> 00:14:04,200 substantially worse than what we imagined years ago. 237 00:14:04,600 --> 00:14:08,100 And there's still the risk based on the fact that Bloomberg 238 00:14:08,100 --> 00:14:11,100 reports they've gotten Target letters for bank fraud and like 239 00:14:11,100 --> 00:14:14,200 we know there's other ongoing Federal investigations that 240 00:14:14,500 --> 00:14:19,000 tether could end up doing the Black Swan things, which aren't 241 00:14:19,000 --> 00:14:20,500 Black Swan, if you can predict them. 242 00:14:20,700 --> 00:14:23,900 M-my end up doing the Black Swan thing, where it gets shut down 243 00:14:23,900 --> 00:14:27,400 and wear that pool of what still 70 billion dollars worth of 244 00:14:27,400 --> 00:14:29,700 liquidity, right? They've done like 12 billion in 245 00:14:29,700 --> 00:14:33,200 redemptions or something, but yeah, still like 70 billion 246 00:14:33,200 --> 00:14:37,200 dollars isn't lot of dollars. That's like reserve primary Fun 247 00:14:37,200 --> 00:14:41,500 Size from 2008. It's a really substantial thing 248 00:14:41,700 --> 00:14:45,700 that would fundamentally change the liquidity and the faith in 249 00:14:45,700 --> 00:14:49,100 the system as a whole. Like, that's the ultimate 250 00:14:49,100 --> 00:14:52,100 contagion risk rate, that's The Cumberland people are mentioning 251 00:14:52,100 --> 00:14:56,800 it is because that is the thing. That fundamentally destabilizes, 252 00:14:57,100 --> 00:15:00,300 massive portions of the ecosystem, which is not to say 253 00:15:00,300 --> 00:15:02,900 that no cryptocurrency would ever Survivor that, no, 254 00:15:02,900 --> 00:15:04,700 cryptocurrency company would survive. 255 00:15:04,700 --> 00:15:10,000 It just that many, many people are exposed in Myriad ways to 256 00:15:10,000 --> 00:15:13,300 stable coins, and that's what makes them such a broad 257 00:15:13,400 --> 00:15:16,700 systemic, and contagion risk for the ecosystem. 258 00:15:17,000 --> 00:15:19,800 And that's why it's so important that if you're going to have an 259 00:15:19,800 --> 00:15:23,100 ecosystem based, Based on stable coins that they are well behaved 260 00:15:23,100 --> 00:15:27,600 and trustworthy because they are so fundamentally important. 261 00:15:27,600 --> 00:15:30,500 I was thinking today about, you know, the broader markets and I 262 00:15:30,500 --> 00:15:33,800 think this is an old cliche, but at the idea that like, everyone 263 00:15:33,800 --> 00:15:36,700 is a good Trader in an upmarket, right? 264 00:15:36,900 --> 00:15:40,200 So, I think there's some truth to that and I think part of this 265 00:15:40,200 --> 00:15:43,200 contagion risk that I'm talking about and that we've been 266 00:15:43,200 --> 00:15:46,600 talking about it, relies on this idea that, well, everyone's a 267 00:15:46,600 --> 00:15:50,500 good Trader in an up Market, but in this industry in particular, 268 00:15:50,800 --> 00:15:53,300 Everyone's trading with each other and getting Equity with 269 00:15:53,300 --> 00:15:58,000 each other and getting tokens for loans and this and that 270 00:15:58,000 --> 00:15:59,300 right? Like it is. 271 00:15:59,300 --> 00:16:04,200 So inside baseball that the contagion risk is super 272 00:16:04,200 --> 00:16:10,200 Amplified because they've created it really Jenga like 273 00:16:10,500 --> 00:16:12,700 ecosystem. That is easy to break. 274 00:16:13,100 --> 00:16:17,500 And now we see this and I think one of the best questions that 275 00:16:17,500 --> 00:16:21,100 people have asked for a long time about tether for Instance 276 00:16:21,100 --> 00:16:24,500 is, how are they making money? How are they making money? 277 00:16:24,700 --> 00:16:26,000 It's like a very simple question. 278 00:16:26,000 --> 00:16:28,900 How do they make money? They get their 20 bits or 279 00:16:28,900 --> 00:16:33,900 whatever it is on each transaction, back to redeem or 280 00:16:33,900 --> 00:16:36,300 mint? It's, that's nothing. 281 00:16:36,400 --> 00:16:39,200 How do they make their money and nobody can answer it? 282 00:16:39,600 --> 00:16:41,900 Nobody can say, where, how they're going to do it. 283 00:16:41,900 --> 00:16:45,200 I mean, Zeke Fox did. What did he say in his reporting 284 00:16:45,200 --> 00:16:47,500 when he was chasing down the story for Bloomberg 285 00:16:47,500 --> 00:16:50,300 businessweek? He said that John bet. 286 00:16:50,700 --> 00:16:54,000 That one Carlo Divas, cini was desperately interested in 287 00:16:54,000 --> 00:16:58,000 finding ways to earn more yield unto others reserves and that's 288 00:16:58,000 --> 00:17:01,300 why they've fundamentally restructured themselves in their 289 00:17:01,300 --> 00:17:04,599 promises and that's why like when you say something like 290 00:17:04,599 --> 00:17:08,599 tethers reserves fairly valued or probably less than they're 291 00:17:08,599 --> 00:17:11,400 circulating market cap. A lot of people in 292 00:17:11,400 --> 00:17:14,800 cryptocurrency won't disagree with you because there's this 293 00:17:14,800 --> 00:17:17,700 like implicit understanding that for tether to make money, 294 00:17:17,700 --> 00:17:20,500 they're juicing it, they're finding places to do that. 295 00:17:20,599 --> 00:17:23,099 Things which aren't fully legitimate so that they can get 296 00:17:23,099 --> 00:17:26,500 that kind of yield and so, but I think, what's important to note 297 00:17:26,500 --> 00:17:29,400 there is that when you say they're looking to places to 298 00:17:29,400 --> 00:17:31,100 juice it. Well, there's a lot of places 299 00:17:31,100 --> 00:17:32,600 you could look to juice those numbers. 300 00:17:32,600 --> 00:17:34,900 There's a lot of Industries you could look to juice those 301 00:17:34,900 --> 00:17:37,100 numbers. They're not looking without 302 00:17:37,100 --> 00:17:41,800 their looking with it. And again, these are inherently 303 00:17:41,800 --> 00:17:46,200 huge issues. If tether were to hypothetically 304 00:17:46,300 --> 00:17:51,600 fail, for some random, who knows what reason, I mean, I guess, I 305 00:17:51,600 --> 00:17:55,500 don't know anymore. I keep my feelings change on on 306 00:17:55,500 --> 00:17:58,000 the odds for tethers as time passes. 307 00:17:58,000 --> 00:18:00,600 I just never know. I just never ever know. 308 00:18:00,600 --> 00:18:05,300 Sometimes it's a coin flip. And sometimes it, I think what 309 00:18:05,300 --> 00:18:09,600 seemed like they're only risk being regulatory has transformed 310 00:18:09,600 --> 00:18:14,900 to Serious market and liquidity issue, risks, that are now being 311 00:18:14,900 --> 00:18:16,400 posed. Yes. 312 00:18:16,500 --> 00:18:20,400 Yeah, I have upgraded, those risks in my head. 313 00:18:20,600 --> 00:18:23,700 More recently and I think what you're kind of getting it is way 314 00:18:23,700 --> 00:18:27,100 back in our first episode on Tara before it crashed. 315 00:18:27,300 --> 00:18:29,700 One of like kind of my fundamental arguments against 316 00:18:29,700 --> 00:18:32,200 algorithmic, stable coins is that the entire value 317 00:18:32,200 --> 00:18:34,500 proposition is self-referential, right? 318 00:18:34,500 --> 00:18:37,200 It's valuable because it's valuable and like if you lean 319 00:18:37,200 --> 00:18:40,100 into that, you can get it to a large enough sides, right? 320 00:18:40,200 --> 00:18:44,900 It's an entirely of faith-based episode and in many ways so much 321 00:18:44,900 --> 00:18:49,200 of crypto value is so self-referential, like where we 322 00:18:49,200 --> 00:18:53,000 know tether is partially Backed by Bitcoin in partially backed 323 00:18:53,000 --> 00:18:56,900 by equity and crypto companies and that the loans for tether 324 00:18:57,000 --> 00:18:58,700 the secured loans. They're extending to a whole 325 00:18:58,700 --> 00:19:01,100 bunch of different places are collateralized by 326 00:19:01,100 --> 00:19:04,200 cryptocurrencies. So much of the value proposition 327 00:19:04,200 --> 00:19:07,600 ends up being self-referential in that same kind of way where 328 00:19:07,600 --> 00:19:11,000 it's valuable for as long as it's believed to be valuable and 329 00:19:11,000 --> 00:19:15,600 that when things get bad when liquidity draws out that faith 330 00:19:15,600 --> 00:19:19,400 is harder to maintain, which brings me to the final contagion 331 00:19:19,400 --> 00:19:24,400 risk which I Think is the bleeding into actual markets 332 00:19:24,400 --> 00:19:28,100 that this knock-on effect could present if enough liquidity and 333 00:19:28,100 --> 00:19:31,000 volume dries up from crypto currency markets. 334 00:19:31,300 --> 00:19:35,400 I know Michael sailor is said that microstrategy seems to have 335 00:19:35,400 --> 00:19:40,600 very little risk for Liquidation on all their stuff and that's 336 00:19:40,600 --> 00:19:42,700 fine. I'm not, I'm I'm not going to 337 00:19:42,700 --> 00:19:46,300 try to suggest he's wrong. I know that coinbase is now 338 00:19:46,300 --> 00:19:53,300 trading at around, I think. And I know that they're 339 00:19:53,300 --> 00:19:58,600 definitely companies larger companies and Banks listed 340 00:19:58,600 --> 00:20:03,400 publicly, that could definitely suffer consequences for crypto, 341 00:20:03,400 --> 00:20:07,900 currency issues, like liquidity, drying up and so I wonder if 342 00:20:07,900 --> 00:20:10,000 that's the last contagion that we are. 343 00:20:10,000 --> 00:20:14,700 We would see if this oh does actually run through the system 344 00:20:14,800 --> 00:20:18,800 and hit as hard as some people. Expect it to Fed says it's not 345 00:20:18,800 --> 00:20:20,400 systemic in the FED. Never. 346 00:20:20,500 --> 00:20:22,700 Gets that wrong. It's transitory. 347 00:20:23,000 --> 00:20:25,800 I don't think it's broadly, systemic. 348 00:20:25,800 --> 00:20:29,200 I think that there are certain companies that could get hurt in 349 00:20:29,200 --> 00:20:32,600 certain scenarios, right? Like you named microstrategy, we 350 00:20:32,600 --> 00:20:36,000 can talk about coinbase, we can talk about a lot of companies 351 00:20:36,000 --> 00:20:38,700 which are currently Aunt, dedicating resources to these 352 00:20:38,700 --> 00:20:41,300 things. I don't think it's probably 353 00:20:41,300 --> 00:20:43,100 systemic to the financial system. 354 00:20:43,400 --> 00:20:49,100 I think it's still relatively isolated and so I think that 355 00:20:49,200 --> 00:20:54,100 were not yet At the point where crypto is broadly systemic to 356 00:20:54,100 --> 00:20:56,900 the financial system. But like part of the reason the 357 00:20:56,900 --> 00:21:00,000 Federal Reserve has written papers pushing for stable, coin 358 00:21:00,000 --> 00:21:02,700 regulations, and part of the argument behind, many of the 359 00:21:02,700 --> 00:21:06,200 stable, current regulations, is that at a certain scale, they 360 00:21:06,200 --> 00:21:09,200 become systemic, right? They become like the reserve 361 00:21:09,200 --> 00:21:11,600 primary fun breaking the buck in 2008. 362 00:21:11,700 --> 00:21:15,000 They become a real risk to the financial system because that 363 00:21:15,000 --> 00:21:17,800 liquidity matter so much more, there's two ways. 364 00:21:17,800 --> 00:21:21,600 This episode goes, I guess which is unfortunate for Us either we 365 00:21:21,600 --> 00:21:25,300 look silly because in a week and a half or whatever. 366 00:21:25,300 --> 00:21:28,900 When this comes out people are like, well obviously it was a 367 00:21:28,908 --> 00:21:32,800 massive contagion event, everything's failing already or 368 00:21:33,000 --> 00:21:35,700 they go. Everything is fine and there's 369 00:21:35,700 --> 00:21:39,600 no more problems idiots. So we're walking a thin line 370 00:21:39,900 --> 00:21:43,200 with this episode but I think it's worth talking about because 371 00:21:43,200 --> 00:21:47,400 I do think that this is the risk of these bear markets especially 372 00:21:47,400 --> 00:21:50,900 with speculative assets like you know, worthless Cans in 373 00:21:50,900 --> 00:21:53,900 companies that don't do anything and Ponzi schemes. 374 00:21:53,900 --> 00:21:57,500 So some of these projects are just yes, straight up. 375 00:21:57,600 --> 00:22:00,300 Obvious Ponzi, schemes or broken. 376 00:22:00,300 --> 00:22:04,100 Protocols. I am still blown away that 377 00:22:04,100 --> 00:22:08,900 dumbass Justin son coin exists at all besides Tron. 378 00:22:09,000 --> 00:22:11,700 It has like 25 fucking really dumb coins. 379 00:22:11,700 --> 00:22:16,800 So I I think there's room for more risk and contagion. 380 00:22:17,000 --> 00:22:19,100 I think we haven't seen the end of it. 381 00:22:19,100 --> 00:22:20,400 Who knows? I could be wrong. 382 00:22:20,500 --> 00:22:23,600 We've seen these people bail each other out and it succeed 383 00:22:23,600 --> 00:22:25,900 before, so they could very well do that again. 384 00:22:25,900 --> 00:22:29,300 And it could totally, just be fine, but I don't know, who 385 00:22:29,300 --> 00:22:31,500 knows? I guess we'll see. 386 00:22:31,900 --> 00:22:35,600 I would tell people to be extra careful on any lending 387 00:22:35,600 --> 00:22:37,700 platforms. Be very aware of your 388 00:22:37,700 --> 00:22:40,700 counterparty risk is just generally good advice. 389 00:22:40,900 --> 00:22:43,400 Yea, be cautious on your centralized exchange is now 390 00:22:43,900 --> 00:22:46,500 that's a contagion risk. We haven't even really addressed 391 00:22:46,500 --> 00:22:49,200 at all. If the beds are somehow able to 392 00:22:49,300 --> 00:22:52,900 shut one of these, Down. That would be Bad News, Bears, 393 00:22:52,900 --> 00:22:55,900 big time. And, yeah, that's more 394 00:22:55,900 --> 00:22:57,600 liquidity. Being drained out. 395 00:22:57,600 --> 00:22:59,900 Exactly. And unexpected and not. 396 00:22:59,900 --> 00:23:02,000 Something anyone thinks is going to happen. 397 00:23:02,000 --> 00:23:05,600 So that's a real Black Swan in my, in my humble opinion would 398 00:23:05,600 --> 00:23:08,800 be one of these big big exchanges getting shut down, but 399 00:23:08,800 --> 00:23:11,400 who knows, man, I don't. It's not like I foresee it, we 400 00:23:11,400 --> 00:23:16,300 don't happening. So I just, I just want. 401 00:23:16,300 --> 00:23:18,200 I think we're talking about contagion because we want people 402 00:23:18,200 --> 00:23:20,200 to be aware. It's like if there's a bad cold, 403 00:23:20,500 --> 00:23:22,000 Hang around. You just tell people like you. 404 00:23:22,000 --> 00:23:24,600 There's a bad cold going around here full heads up. 405 00:23:25,100 --> 00:23:28,900 So it's yeah, it's worth. It's worth talking about. 406 00:23:28,900 --> 00:23:31,200 I don't know if it'll lead to anything and maybe it stops here 407 00:23:31,500 --> 00:23:40,800 but it does. Hey guys, I'm recording this 408 00:23:40,800 --> 00:23:45,800 outro for our contagion episode on May the 1st. 409 00:23:46,200 --> 00:23:49,800 And I just wanted to say that if you've been donating to us, if 410 00:23:49,800 --> 00:23:52,100 you've been watching on YouTube we just got monetized. 411 00:23:52,100 --> 00:23:54,700 So all of our funds, everything you're giving to us. 412 00:23:54,900 --> 00:23:58,500 And in fact, all of my personal income and money, everything I 413 00:23:58,500 --> 00:24:05,700 have is now in Celsius Network, Three arrows capital and I have 414 00:24:05,700 --> 00:24:10,600 a ton of Luna and Tara. So You know, we are going all in 415 00:24:10,600 --> 00:24:12,900 on crypto and so give us those likes. 416 00:24:12,900 --> 00:24:15,400 Give us those. Give us those subscribes. 417 00:24:15,500 --> 00:24:20,000 We're going totally in on this and and fingers crossed. 418 00:24:25,400 --> 00:24:27,000 Like And subscribe. I don't know. 419 00:24:27,100 --> 00:24:27,600 I don't know.