1 00:00:00,160 --> 00:00:04,920 In December 2024, the laser eyed crypto enthusiasts were taking a 2 00:00:04,920 --> 00:00:07,600 victory lap. Bitcoin had just crossed 3 00:00:07,600 --> 00:00:12,600 $100,000 milestone and even the skeptics at FT Alphaville were 4 00:00:12,600 --> 00:00:16,400 forced into a somewhat brittle public apology for their years 5 00:00:16,400 --> 00:00:19,040 of doubt. At that moment, the narrative 6 00:00:19,040 --> 00:00:22,960 was that crypto had finally been freed from its regulatory 7 00:00:22,960 --> 00:00:27,360 shackles, Wall Street was finally in the game, and those 8 00:00:27,360 --> 00:00:30,880 who were once nervous about the technology could now invest 9 00:00:30,880 --> 00:00:33,440 through a convenient suite of ETFs. 10 00:00:33,800 --> 00:00:37,160 The institutional grade liquidity this was supposed to 11 00:00:37,160 --> 00:00:41,600 bring was meant to smooth out the volatility, finally etching 12 00:00:41,600 --> 00:00:45,800 the digital gold pieces into the granite of the global financial 13 00:00:45,800 --> 00:00:48,560 system. Over the years, I've learned 14 00:00:48,760 --> 00:00:52,320 that whenever someone tells you that a new era of stability has 15 00:00:52,320 --> 00:00:55,600 arrived, it's usually a good time to start looking for the 16 00:00:55,600 --> 00:00:59,280 nearest exit. Fast forward to today, and 17 00:00:59,280 --> 00:01:03,760 digital gold has behaved a lot less like actual gold and more 18 00:01:03,760 --> 00:01:07,040 like a high beta tech stock on a very bad day. 19 00:01:07,400 --> 00:01:12,080 Bitcoin is currently trading down around 23% year to date, 20 00:01:12,240 --> 00:01:16,840 and it has shed about 45% of its value since its October peak. 21 00:01:17,440 --> 00:01:22,240 To put the severity of this move into perspective, the 13% plunge 22 00:01:22,240 --> 00:01:26,080 that we saw on February 5th was the largest one day drop in 23 00:01:26,080 --> 00:01:30,320 Bitcoin since the collapse of FTX back in 2022. 24 00:01:30,680 --> 00:01:34,920 One of the most fascinating aspects of Bitcoin is it's hydra 25 00:01:34,920 --> 00:01:37,840 headed narrative. Whenever one claim of its 26 00:01:37,840 --> 00:01:41,440 utility dies, three more sprout in its place. 27 00:01:41,760 --> 00:01:44,440 Over the years we've been told that it's an alternative 28 00:01:44,440 --> 00:01:49,520 currency, a ticket to life changing an inflation hedge, and 29 00:01:49,600 --> 00:01:53,320 a digital gold that would rally during geopolitical shocks. 30 00:01:53,600 --> 00:01:58,200 Yet while actual gold and silver hit records this year, Bitcoin 31 00:01:58,200 --> 00:02:01,560 has languished. Stocks are up and geopolitical 32 00:02:01,560 --> 00:02:05,720 risk has certainly increased. Inflation isn't under control 33 00:02:05,720 --> 00:02:09,800 yet either, but Bitcoin simply isn't doing any of the things 34 00:02:09,800 --> 00:02:15,840 that we were told it would do. The Dow is over 50,000 right now 35 00:02:16,560 --> 00:02:22,520 and P at almost 7000 and the NASDAQ smashing records. 36 00:02:22,720 --> 00:02:26,800 As as what the motor and of NYU points out, Bitcoin can be 37 00:02:26,800 --> 00:02:30,240 priced, but it can't be valued the way assets are. 38 00:02:30,240 --> 00:02:33,400 Commodities can. Assets are valued based on their 39 00:02:33,400 --> 00:02:36,520 cash flows and the riskiness of those cash flows. 40 00:02:36,800 --> 00:02:40,240 Commodities are valued based on their utilitarian supply and 41 00:02:40,240 --> 00:02:43,040 demand. Bitcoin fits best into the 42 00:02:43,040 --> 00:02:47,000 category of currencies and collectibles, which drive their 43 00:02:47,000 --> 00:02:50,560 price entirely from scarcity and desirability. 44 00:02:50,920 --> 00:02:54,440 But there's a catch. Most collectibles, like a 45 00:02:54,440 --> 00:02:58,960 Picasso or a rare bottle of wine, have some utility and are 46 00:02:58,960 --> 00:03:01,840 extremely difficult to precisely replicate. 47 00:03:02,040 --> 00:03:06,600 While Bitcoin is famously capped at 21 million units, the crypto 48 00:03:06,600 --> 00:03:10,160 industry as a whole is a factory for replication. 49 00:03:10,400 --> 00:03:14,400 With over 10,000 active tokens now on the market, the 50 00:03:14,400 --> 00:03:18,760 uniqueness of anyone digital collectible is constantly being 51 00:03:18,760 --> 00:03:22,480 diluted by a sea of very similar alternatives. 52 00:03:22,720 --> 00:03:26,240 If the only thing Bitcoin has going for it is that it was the 53 00:03:26,240 --> 00:03:30,760 first one, that's a very thin thread to hang a trillion dollar 54 00:03:30,760 --> 00:03:34,640 valuation on. A major reason for this current 55 00:03:34,640 --> 00:03:39,040 crisis of faith is that in a very real sense, the crypto 56 00:03:39,040 --> 00:03:42,440 industry has finally achieved everything it ever wanted. 57 00:03:42,720 --> 00:03:46,280 For years, the dream was a Bitcoin president, a friendly 58 00:03:46,520 --> 00:03:50,560 CC, and Wall Street ETFs that would finally bring in the mom 59 00:03:50,560 --> 00:03:54,960 and pop investors. By early 2025, those battles had 60 00:03:54,960 --> 00:03:58,120 all been won. But victory has turned out to be 61 00:03:58,120 --> 00:04:01,120 a bit of a trap. As The Economist points out, 62 00:04:01,320 --> 00:04:04,800 every major rally in recent years was fueled by the 63 00:04:04,800 --> 00:04:07,280 anticipation of these milestones. 64 00:04:07,560 --> 00:04:11,440 Now that the forbidden fruit is easily bought in every brokerage 65 00:04:11,440 --> 00:04:15,120 account, there's no big story left to drive the price. 66 00:04:15,400 --> 00:04:19,720 The underdog narrative has been replaced by a reality where the 67 00:04:19,720 --> 00:04:23,760 president's family is hosting crypto conferences in a gilded 68 00:04:23,760 --> 00:04:27,440 ballroom at Mar a Lago and political figures launched their 69 00:04:27,440 --> 00:04:30,720 own meme coins. It's not exactly an underground 70 00:04:30,720 --> 00:04:34,240 asset anymore. We've seen a similar story play 71 00:04:34,240 --> 00:04:37,520 out in the UK. After years have been described 72 00:04:37,520 --> 00:04:41,440 as a total crapshoot by the authorities, the UK government 73 00:04:41,440 --> 00:04:43,960 finally brought crypto into the fold. 74 00:04:44,200 --> 00:04:49,040 In October 2025, the government officially announced that retail 75 00:04:49,040 --> 00:04:52,480 investors would be allowed to hold crypto exchange traded 76 00:04:52,480 --> 00:04:55,640 notes in their tax advantage to retirement accounts. 77 00:04:56,000 --> 00:04:59,840 It was, with the benefit of hindsight, a classic piece of 78 00:04:59,840 --> 00:05:03,360 British top taking. The decision was implemented on 79 00:05:03,360 --> 00:05:08,640 October 8th 2025, almost the day that Bitcoin hit its all time 80 00:05:08,640 --> 00:05:11,720 high. Hilariously, quasi Quartang, the 81 00:05:11,720 --> 00:05:15,400 38 day Chancellor of the Exchequer behind Britain's 82 00:05:15,400 --> 00:05:19,440 disastrous 2022 mini budget, announced that he had been 83 00:05:19,440 --> 00:05:23,920 orange peeled last year and had taken a role as a non executive 84 00:05:23,920 --> 00:05:28,480 director of AUK based Bitcoin Treasury company in November, 85 00:05:28,760 --> 00:05:31,040 not long after the all time high. 86 00:05:31,360 --> 00:05:35,080 Essentially, a arriving at the party right as everyone else was 87 00:05:35,080 --> 00:05:38,360 leaving. According to FCA data, the 88 00:05:38,360 --> 00:05:42,720 number of Brits who own crypto has fallen from 7 million down 89 00:05:42,720 --> 00:05:46,120 to around 5 million people over the last two years. 90 00:05:46,480 --> 00:05:50,040 There's maybe a lesson here that retail investors should take to 91 00:05:50,040 --> 00:05:52,240 heart. Whenever a sophisticated 92 00:05:52,240 --> 00:05:56,120 financial institution tells you that they're democratizing a 93 00:05:56,120 --> 00:05:59,440 cool new asset class, you should probably check for the fire 94 00:05:59,440 --> 00:06:01,200 marshals and head for the street. 95 00:06:01,400 --> 00:06:04,560 It's like discovering that you can finally get a table at the 96 00:06:04,560 --> 00:06:08,480 city's trendiest restaurant. It usually only happens because 97 00:06:08,480 --> 00:06:11,960 the cool people have already left, the chef has moved on to a 98 00:06:11,960 --> 00:06:15,400 new project, and you're just there to pay for the expensive 99 00:06:15,400 --> 00:06:18,000 leftovers. By the time Wall Street 100 00:06:18,000 --> 00:06:21,720 democratizes an investment, it's usually because they need 101 00:06:21,720 --> 00:06:25,320 someone to hold the bag. The Bloomberg journalist and 102 00:06:25,320 --> 00:06:29,280 friend of the show, Zeke Fox, frequently makes the point that 103 00:06:29,280 --> 00:06:32,680 crypto is no longer a young, scrappy technology. 104 00:06:32,960 --> 00:06:37,640 He points out that Bitcoin was launched in January 2009, so 105 00:06:37,640 --> 00:06:42,320 it's over 17 years old today. For context, by the time the 106 00:06:42,320 --> 00:06:46,160 public Internet was 17 years old, we had the iPhone and 107 00:06:46,160 --> 00:06:50,680 Wicca, Wikipedia e-mail was universal, and Amazon put bricks 108 00:06:50,680 --> 00:06:53,480 and mortar bookstores out of business years ago. 109 00:06:53,640 --> 00:06:57,960 Crypto, after nearly two decades, has yet to find a real 110 00:06:57,960 --> 00:07:01,680 world use case that doesn't involve gambling or in some 111 00:07:01,680 --> 00:07:06,240 cases pig butchering scams run out of Cambodian labor camps. 112 00:07:06,640 --> 00:07:09,880 This helps explain some of the current exodus. 113 00:07:10,120 --> 00:07:13,760 It's not that a single exchange failed like a few years ago, 114 00:07:13,960 --> 00:07:17,640 it's that the new believers on Wall Street turned out to be 115 00:07:17,640 --> 00:07:20,600 anything but. They didn't get involved because 116 00:07:20,600 --> 00:07:24,040 they wanted to fix the money. They got involved so that they 117 00:07:24,040 --> 00:07:28,280 could sell a financial product at a markup or take advantage of 118 00:07:28,280 --> 00:07:31,600 the basis trade. An arbitrage strategy where 119 00:07:31,600 --> 00:07:36,080 hedge funds buy spot Bitcoin and simultaneously sell futures 120 00:07:36,080 --> 00:07:38,760 contracts, pocketing the price difference. 121 00:07:38,960 --> 00:07:42,720 Essentially manufacturing a high yield savings account at a 122 00:07:42,720 --> 00:07:47,840 retail traders demand for leverage for most of 20 25 that 123 00:07:47,840 --> 00:07:51,560 crypto yield was significantly higher than anything you could 124 00:07:51,560 --> 00:07:55,360 find in traditional finance. But as the spread compressed 125 00:07:55,480 --> 00:07:58,320 Wall Street moved on to the next good trade. 126 00:07:58,600 --> 00:08:02,120 We can see the fingerprint of this retreat in the Coinbase 127 00:08:02,120 --> 00:08:04,880 premium. This metric looks at the price 128 00:08:04,880 --> 00:08:08,640 difference between Bitcoin traded on Coinbase and Bitcoin 129 00:08:08,640 --> 00:08:11,960 traded on Binance. It helps you track US 130 00:08:11,960 --> 00:08:15,760 institutional demand because large professional American 131 00:08:15,760 --> 00:08:19,280 investors mostly use coin base for their trades. 132 00:08:19,440 --> 00:08:23,240 When it trades at a premium or is positive, you can interpret 133 00:08:23,240 --> 00:08:26,840 that as meaning that US institutions are buying or 134 00:08:26,840 --> 00:08:30,720 accumulating Bitcoin. When it's negative, it indicates 135 00:08:30,720 --> 00:08:34,640 selling pressure in the US For months it's been deeply 136 00:08:34,640 --> 00:08:38,039 negative, which tells you that the selling is coming primarily 137 00:08:38,039 --> 00:08:41,880 from the United States. It's not just the arbitragers, 138 00:08:42,039 --> 00:08:45,240 it's a general loss of interest in the very market that was 139 00:08:45,240 --> 00:08:47,440 supposed to be crypto's new home. 140 00:08:48,200 --> 00:08:52,480 As Bitcoin slides, it's dragging the rest of the ecosystem down 141 00:08:52,480 --> 00:08:55,240 with it. Most other coins, from ether to 142 00:08:55,240 --> 00:08:58,600 the board ape NFTS that people used to pay hundreds of 143 00:08:58,600 --> 00:09:02,680 thousands of dollars for, are essentially just high beta bets 144 00:09:02,720 --> 00:09:06,080 on Bitcoin's price. When the king of digital gold 145 00:09:06,080 --> 00:09:09,600 falls, the digital cartoon monkeys tend to follow him 146 00:09:09,600 --> 00:09:13,280 straight into the basement. If you think the mom and pop 147 00:09:13,280 --> 00:09:16,760 investors are having a tough time, you should spare a thought 148 00:09:16,880 --> 00:09:19,320 for the digital asset treasury companies. 149 00:09:19,560 --> 00:09:22,640 We've talked about these a few times already, but they're 150 00:09:22,640 --> 00:09:26,400 publicly traded businesses that decided that their actual 151 00:09:26,400 --> 00:09:29,800 operations, whether it was selling enterprise software or 152 00:09:29,800 --> 00:09:34,040 mobile chips, were far too boring and instead pivoted to 153 00:09:34,040 --> 00:09:36,840 becoming a giant leverage bet on crypto. 154 00:09:37,120 --> 00:09:40,800 The most famous one is Strategy, the company formerly known as 155 00:09:40,800 --> 00:09:44,080 Micro Strategy. Its chairman, Michael Saylor, 156 00:09:44,200 --> 00:09:47,800 has been dubbed the Bitcoin Alchemist by Forbes for 157 00:09:47,800 --> 00:09:50,880 seemingly discovering an infinite money glitch. 158 00:09:51,160 --> 00:09:54,680 The trick was simple. As long as his stock traded at a 159 00:09:54,680 --> 00:09:58,880 premium to the Bitcoin it held, he could issue new shares, buy 160 00:09:58,880 --> 00:10:02,160 more Bitcoin, and the value of the company would magically 161 00:10:02,160 --> 00:10:04,160 increase. At least on paper. 162 00:10:04,440 --> 00:10:08,240 It was a virtuous circle of hype, unhinged tweets, and 163 00:10:08,240 --> 00:10:12,600 orange tinted memes. As it turns out, alchemy only 164 00:10:12,600 --> 00:10:15,760 works as long as the audience believes in the magic. 165 00:10:16,000 --> 00:10:19,800 With Bitcoin sliding, that premium has evaporated, and The 166 00:10:19,800 --> 00:10:23,320 Alchemist is now facing the harsh reality of financial 167 00:10:23,320 --> 00:10:26,560 gravity. For the fourth quarter of 2025, 168 00:10:26,760 --> 00:10:31,480 Strategy reported a staggering $12.6 billion loss. 169 00:10:31,720 --> 00:10:34,880 Driven by the requirement to mark its Bitcoin holdings to 170 00:10:34,880 --> 00:10:39,640 market, Strategy is now in the awkward position of running what 171 00:10:39,640 --> 00:10:41,640 looks like 2 two different businesses. 172 00:10:41,840 --> 00:10:46,200 One is the Bitcoin alchemist we all know who picked up another 173 00:10:46,200 --> 00:10:52,360 2486 Bitcoin just last week. But the other business is a bit 174 00:10:52,360 --> 00:10:55,640 more traditional and a lot more expensive. 175 00:10:56,160 --> 00:10:59,640 To keep the game going, the company has issued billions in 176 00:10:59,640 --> 00:11:03,880 preferred stock with names like Stretch, Strike and Strife. 177 00:11:04,160 --> 00:11:06,560 These come with high yield dividends. 178 00:11:06,800 --> 00:11:11,120 The Stretch shares currently pay roughly 11 1/4%. 179 00:11:11,720 --> 00:11:15,880 Usually, the plan was to sell stock and use 100% of the 180 00:11:15,880 --> 00:11:19,720 proceeds to buy Bitcoin, but this month's strategy announced 181 00:11:19,880 --> 00:11:24,200 that they'd established a $2.25 billion cash reserve. 182 00:11:24,560 --> 00:11:27,840 They raised this money by selling equity, but instead of 183 00:11:27,840 --> 00:11:31,240 buying Bitcoin, they're keeping it in a bank account to cover 184 00:11:31,240 --> 00:11:35,520 the dividends on those preferred shares for the next 2 1/2 years. 185 00:11:35,920 --> 00:11:38,880 When Michael Saylor starts hoarding the very dollars he 186 00:11:38,880 --> 00:11:43,040 wants compared to melting ice cubes just to pay his lenders, 187 00:11:43,280 --> 00:11:46,920 the infinite money glitch starts to look like a fairly standard 188 00:11:46,920 --> 00:11:50,600 corporate refinancing scheme. As Bloomberg's Matt Levine 189 00:11:50,600 --> 00:11:54,520 noted, selling stock to buy Bitcoin is a great story. 190 00:11:54,640 --> 00:11:58,880 Selling stock to pay interest on old loans is considerably less 191 00:11:58,880 --> 00:12:02,200 fun. Then we have Gemini Space 192 00:12:02,200 --> 00:12:05,640 Station Incorporated, the exchange founded by the 193 00:12:05,640 --> 00:12:09,800 Winklevoss twins, most famous for their band Mars Junction. 194 00:12:10,080 --> 00:12:13,400 In this photo you can see that one of them has one of those 195 00:12:13,400 --> 00:12:15,640 wallet chains, which I pointed out before. 196 00:12:15,640 --> 00:12:19,840 Makes no sense for a crypto bro. You're supposed to etch your 197 00:12:19,840 --> 00:12:23,280 crypto seed phrase on a stainless steel plate and buried 198 00:12:23,280 --> 00:12:26,360 in your backyard, not chain it to your belt. 199 00:12:26,680 --> 00:12:29,360 I don't get the impression that he's the smart one. 200 00:12:30,040 --> 00:12:33,520 Gemini went public last September, with its shares 201 00:12:33,520 --> 00:12:37,120 briefly spiking to around $46 a share. 202 00:12:37,360 --> 00:12:42,040 Since then, the stock has cratered by over 80%, recently 203 00:12:42,040 --> 00:12:46,760 hitting record lows near $6. It hasn't been a great six 204 00:12:46,760 --> 00:12:49,200 months. The share collapse has been 205 00:12:49,200 --> 00:12:52,640 accompanied by a wholesale flight from the C-Suite. 206 00:12:52,880 --> 00:12:56,000 This month, they announced that their chief operating officer, 207 00:12:56,200 --> 00:13:00,320 chief financial officer and chief legal officers were all 208 00:13:00,320 --> 00:13:03,120 leaving the company, effective immediately. 209 00:13:03,360 --> 00:13:06,440 No successor has been named for the COO role. 210 00:13:06,560 --> 00:13:10,400 Instead, the one with the wallet chain, or maybe the other one, 211 00:13:10,600 --> 00:13:12,960 will assume those duties himself. 212 00:13:13,600 --> 00:13:17,920 Less than six months after the IPO, they're laying off 1/4 of 213 00:13:17,920 --> 00:13:21,640 their staff and exiting markets like the UK and Australia, 214 00:13:21,960 --> 00:13:25,640 according to Coindesk. They've told UK customers to 215 00:13:25,680 --> 00:13:28,960 open an account at etoro so that their accounts can be 216 00:13:28,960 --> 00:13:32,000 transferred out. They've told the press that the 217 00:13:32,000 --> 00:13:36,120 reality is that America has the world's greatest capital markets 218 00:13:36,120 --> 00:13:39,080 and America has always been where it's at. 219 00:13:39,080 --> 00:13:43,400 For Gemini, this is a bit surprising, as I pointed out 220 00:13:43,400 --> 00:13:46,880 earlier that most of the selling pressure seems to be coming from 221 00:13:46,880 --> 00:13:50,160 the USA. Their new grand strategy is to 222 00:13:50,160 --> 00:13:54,080 pivot to prediction markets. They've argued that betting on 223 00:13:54,080 --> 00:13:57,920 things like elections and the weather will eventually outgrow 224 00:13:57,920 --> 00:14:02,040 the entire global capital markets, which would be a bit of 225 00:14:02,040 --> 00:14:05,240 a surprising outcome. I'd never want to get into an 226 00:14:05,240 --> 00:14:08,680 argument with them over this for fear that they'd come by my 227 00:14:08,680 --> 00:14:10,520 house and play their music at me. 228 00:14:10,840 --> 00:14:14,160 I believe that under the Geneva Convention, playing a Mars 229 00:14:14,160 --> 00:14:18,000 Junction song at high volume is classified as a war crime. 230 00:14:18,200 --> 00:14:22,000 While the twins are busy leaning into the vibes of prediction 231 00:14:22,000 --> 00:14:25,680 markets, something much more ominous is happening in the real 232 00:14:25,680 --> 00:14:27,960 plumbing of the institutional market. 233 00:14:28,200 --> 00:14:32,480 You see, while the collapse of a retail exchange like FTX makes 234 00:14:32,480 --> 00:14:35,720 front page news, the cracks in the foundation of the 235 00:14:35,720 --> 00:14:39,520 professional market often happen in total silence. 236 00:14:39,920 --> 00:14:43,960 Earlier this month, Block Fills, a major chicago-based 237 00:14:43,960 --> 00:14:48,040 institutional prime broker, officially confirmed that it has 238 00:14:48,040 --> 00:14:51,160 suspended all client deposits and withdrawals. 239 00:14:51,440 --> 00:14:55,280 Customers can continue to trade, but they can't withdraw their 240 00:14:55,280 --> 00:15:02,440 money. Now, most people have never 241 00:15:02,440 --> 00:15:06,600 heard of block fills, but they act as a liquidity provider and 242 00:15:06,600 --> 00:15:10,080 lender to about 2000 institutional clients. 243 00:15:10,360 --> 00:15:12,800 They don't have a flashy app for your phone. 244 00:15:13,000 --> 00:15:16,840 They deal instead with hedge funds, family offices, and some 245 00:15:16,840 --> 00:15:19,800 of the mining companies that we'll talk about in a moment. 246 00:15:20,280 --> 00:15:24,160 Their options products are only available to investors with 247 00:15:24,160 --> 00:15:27,760 digital currency holdings of $10 million or more. 248 00:15:28,040 --> 00:15:32,880 Last year, they facilitated over $61 billion in trading volume. 249 00:15:33,080 --> 00:15:37,200 The company's statement cited recent market and financial 250 00:15:37,200 --> 00:15:41,200 conditions and claimed that the freeze was a temporary measure 251 00:15:41,360 --> 00:15:45,600 to protect clients and the firm. Well, the company has not 252 00:15:45,600 --> 00:15:49,440 provided a specific reason for the freeze beyond market 253 00:15:49,440 --> 00:15:52,480 volatility. The timing is hard to ignore. 254 00:15:52,720 --> 00:15:56,280 The announcement followed violent moves in early February 255 00:15:56,440 --> 00:16:01,640 that saw Bitcoin plunge nearly 25% in a single week, briefly 256 00:16:01,640 --> 00:16:06,080 touching the $60,000 mark. For an institutional lender, 257 00:16:06,280 --> 00:16:10,360 this kind of rapid price action is the ultimate stress test. 258 00:16:10,520 --> 00:16:14,520 If the value of the collateral, the Bitcoin, falls faster than 259 00:16:14,520 --> 00:16:17,960 the borrowers can top up their accounts, the lender can find 260 00:16:17,960 --> 00:16:22,120 itself with a liquidity mismatch where they have assets on paper 261 00:16:22,240 --> 00:16:25,760 but lack the ready cash to meet withdrawal requests. 262 00:16:26,400 --> 00:16:30,320 What makes this especially noteworthy is that block fills 263 00:16:30,320 --> 00:16:33,440 isn't some fly by night offshore operation. 264 00:16:33,680 --> 00:16:37,520 They're backed by CME Ventures and Susquehanna Private Equity 265 00:16:37,520 --> 00:16:40,720 Investments, some of the most sophisticated names in 266 00:16:40,720 --> 00:16:44,640 traditional trading. Historically, in this industry, 267 00:16:44,800 --> 00:16:48,720 a temporary suspension has often been a precursor to a 268 00:16:48,720 --> 00:16:52,440 restructuring or a search for new capital, as we saw with 269 00:16:52,440 --> 00:16:55,680 firms like Genesis and Block Fi a few years ago. 270 00:16:56,040 --> 00:17:00,000 For now, Blockville says that they're working tirelessly to 271 00:17:00,000 --> 00:17:03,760 restore liquidity, but this is a worrying development. 272 00:17:04,359 --> 00:17:08,200 If the institutional plumbing is starting to clog, it's worth 273 00:17:08,200 --> 00:17:11,560 looking at the people who actually keep the lights on for 274 00:17:11,560 --> 00:17:15,000 the entire network, the miners. Now, there's a common 275 00:17:15,000 --> 00:17:18,839 misconception that miners are just there to print new 276 00:17:18,839 --> 00:17:23,160 bitcoins, but in reality, they play 2 critical roles. 277 00:17:23,400 --> 00:17:26,480 They're the transaction processors and the security 278 00:17:26,480 --> 00:17:30,240 guards of the system. Every time you send Bitcoin, a 279 00:17:30,240 --> 00:17:34,240 miner has to verify that you actually have the funds and then 280 00:17:34,360 --> 00:17:36,800 record that transaction into a block. 281 00:17:37,160 --> 00:17:40,240 In exchange for doing this work and providing the massive 282 00:17:40,240 --> 00:17:43,880 computing power that secures the network against hackers, they 283 00:17:43,880 --> 00:17:47,800 get paid in two ways, transaction fees and a block 284 00:17:47,800 --> 00:17:50,240 subsidy of newly minted bitcoins. 285 00:17:50,640 --> 00:17:54,560 But lately, being a bodyguard for the blockchain has become a 286 00:17:54,560 --> 00:17:57,760 very expensive and very unprofitable hobby. 287 00:17:58,040 --> 00:18:00,520 The problem is something called hash price. 288 00:18:00,720 --> 00:18:03,600 For those of you who don't spend your time in industrial 289 00:18:03,600 --> 00:18:07,480 warehouses in Texas, hash price is the industry's way of 290 00:18:07,480 --> 00:18:10,680 measuring the daily dollar revenue a miner earns from their 291 00:18:10,680 --> 00:18:14,280 computing power. Since the beginning of 2026, 292 00:18:14,480 --> 00:18:18,280 it's been sitting at record lows, meaning that for many 293 00:18:18,280 --> 00:18:22,160 operators, the cost of the electricity to run the machines 294 00:18:22,280 --> 00:18:25,480 is now higher than the total value of the Bitcoin and fees 295 00:18:25,480 --> 00:18:29,000 they collect. My friend Ben Jordan, who does 296 00:18:29,000 --> 00:18:32,440 spend some of his spare time outside data centres in Texas 297 00:18:32,640 --> 00:18:36,840 investigating the acoustic impact of these places, explains 298 00:18:37,000 --> 00:18:41,120 that the way Bitcoin mining works is often misunderstood. 299 00:18:41,440 --> 00:18:45,520 Many people understand that it's set up such that the network 300 00:18:45,520 --> 00:18:49,040 difficulty regulates itself to ensure that miners stay 301 00:18:49,040 --> 00:18:53,160 profitable, but it's actually an autonomous process with rigid 302 00:18:53,160 --> 00:18:56,280 thresholds. The mining difficulty only 303 00:18:56,280 --> 00:19:01,400 adjusts every 2016 blocks, which is roughly every two weeks. 304 00:19:01,760 --> 00:19:06,200 If the price of Bitcoin crashes or if electricity costs spike in 305 00:19:06,200 --> 00:19:10,480 the middle of that window, the difficulty doesn't know, so the 306 00:19:10,480 --> 00:19:14,360 difficulty stays high. As Ben points out, the system 307 00:19:14,360 --> 00:19:18,320 wasn't designed for massive industrial data centers, it was 308 00:19:18,320 --> 00:19:21,920 designed for hobbyists. So while waiting for that two 309 00:19:21,920 --> 00:19:25,160 week window to close and the difficulty to ease ease up, 310 00:19:25,400 --> 00:19:28,800 these data centers have to either eat a massive loss or 311 00:19:28,800 --> 00:19:32,920 stop operating entirely while their overhead costs continue to 312 00:19:32,920 --> 00:19:36,000 pile up. Ben also highlights that these 313 00:19:36,000 --> 00:19:39,840 data centers usually buy electricity in bulk contracts 314 00:19:39,840 --> 00:19:43,360 with fixed prices, which isn't as flexible as your metered 315 00:19:43,360 --> 00:19:46,440 power bill at home. It's a bit like if everyone in a 316 00:19:46,440 --> 00:19:50,440 city bought their electricity in bulk, anticipating a massive 317 00:19:50,440 --> 00:19:53,920 heat wave, and then the heat wave never came, and then 318 00:19:53,920 --> 00:19:57,360 everyone under ordered for the next month and then an 319 00:19:57,360 --> 00:20:01,600 unexpected heat wave hits. The power company can't just 320 00:20:01,600 --> 00:20:03,960 snap its fingers and increase output. 321 00:20:04,240 --> 00:20:07,680 This can create a massive mismatch between the digital 322 00:20:07,680 --> 00:20:11,400 needs of the network and the physical reality of the grid, 323 00:20:11,640 --> 00:20:15,520 especially in places like Texas, where winter storms in early 324 00:20:15,520 --> 00:20:20,200 2026 have already forced miners to shut down to save the local 325 00:20:20,200 --> 00:20:24,880 population from blackouts. Faced with shrinking margins and 326 00:20:24,880 --> 00:20:29,080 a hash price at structural lows, some of the biggest names in the 327 00:20:29,080 --> 00:20:33,560 industry have started pivoting from being crypto miners to AI 328 00:20:33,560 --> 00:20:37,640 data centre developers. Why spend millions of dollars in 329 00:20:37,640 --> 00:20:41,920 electricity to solve arbitrary math problems for a volatile 330 00:20:41,920 --> 00:20:46,200 token when you can rent that same power to an AI company for 331 00:20:46,200 --> 00:20:48,760 a more predictable high margin fee? 332 00:20:49,360 --> 00:20:52,480 Wall Street is already cheering for this change. 333 00:20:52,760 --> 00:20:56,600 Morgan Stanley recently initiated coverage on miners 334 00:20:56,760 --> 00:20:59,320 with massive upside price targets. 335 00:20:59,560 --> 00:21:02,440 They argued that these companies should be valued like 336 00:21:02,440 --> 00:21:06,040 infrastructure reads because they have what AI companies 337 00:21:06,040 --> 00:21:10,320 crave, time to power, meaning that they already have the grid 338 00:21:10,320 --> 00:21:14,320 connections and the sheds that big tech is currently fighting 339 00:21:14,320 --> 00:21:16,960 over. There is a catch, however. 340 00:21:17,160 --> 00:21:21,080 If the American miners all decide that hosting anime 341 00:21:21,080 --> 00:21:25,800 girlfriend chat bots for XAI is more profitable than securing 342 00:21:25,800 --> 00:21:29,400 the blockchain, the network itself becomes a lot less 343 00:21:29,400 --> 00:21:33,040 American. Currently, the US has about 37 344 00:21:33,040 --> 00:21:37,680 1/2% of the world's hash rate. If they stop mining, the power 345 00:21:37,680 --> 00:21:41,160 shifts to Russia and China, which have not traditionally 346 00:21:41,160 --> 00:21:44,480 been seen as US allies. For President Trump, who 347 00:21:44,480 --> 00:21:47,920 promised to make America the crypto capital of the world, 348 00:21:48,200 --> 00:21:51,560 watching the network moved to Moscow and Beijing while 349 00:21:51,560 --> 00:21:55,560 American rigs are busy trending LLMS would be a bit of an 350 00:21:55,560 --> 00:21:59,720 awkward outcome. Speaking of China, while the US 351 00:21:59,720 --> 00:22:03,520 is trying to decide if crypto is a commodity or a security, 352 00:22:03,760 --> 00:22:07,640 Beijing has started reminding Chinese citizens that they've 353 00:22:07,640 --> 00:22:12,040 already made-up their minds. In February 2020, Sixth, the 354 00:22:12,040 --> 00:22:16,360 People's Bank of China and seven other agencies released a notice 355 00:22:16,360 --> 00:22:18,560 doubling down on their total ban. 356 00:22:18,880 --> 00:22:23,040 This time they specifically targeted the latest industry 357 00:22:23,040 --> 00:22:26,560 buzzword, real world asset tokenization. 358 00:22:26,840 --> 00:22:30,200 This is the idea that you can take something useful like a 359 00:22:30,200 --> 00:22:34,600 building or a lithium mine, and turn it into a digital token to 360 00:22:34,600 --> 00:22:39,000 sell to investors abroad. Beijing has explicitly labeled 361 00:22:39,000 --> 00:22:43,880 this illegal financial activity and also banned the unauthorized 362 00:22:43,880 --> 00:22:48,840 offshore issuance of any stable coins pegged to the Chinese Wan. 363 00:22:48,960 --> 00:22:52,560 The Chinese government is fiercely protective of their 364 00:22:52,560 --> 00:22:56,480 monetary sovereignty, and they view shadow Wan token 365 00:22:56,480 --> 00:23:00,440 circulating on global exchanges as a direct threat to their 366 00:23:00,440 --> 00:23:02,720 control. While the rest of the world is 367 00:23:02,720 --> 00:23:07,160 busy democratizing digital assets, China is building a all 368 00:23:07,160 --> 00:23:10,440 around them. As one commentator put it, it 369 00:23:10,440 --> 00:23:13,640 wouldn't be a bear market if China wasn't banning crypto. 370 00:23:14,680 --> 00:23:18,400 While the miners are busy becoming AI landlords and the 371 00:23:18,400 --> 00:23:21,480 institutional plumbing is freezing up, the more 372 00:23:21,480 --> 00:23:24,800 enthusiastic end of the market hasn't disappeared. 373 00:23:24,960 --> 00:23:28,720 It's just moved house. The new big thing is, of course, 374 00:23:28,720 --> 00:23:32,040 prediction markets. Platforms like Polymarket and 375 00:23:32,040 --> 00:23:36,640 Calci have seen a massive surge in volume as traders move away 376 00:23:36,640 --> 00:23:39,960 from I'm trying to guess the price of a meme coin and instead 377 00:23:39,960 --> 00:23:42,120 start betting on real world events. 378 00:23:42,320 --> 00:23:45,280 And I don't just mean the next Fed rate cut. 379 00:23:45,520 --> 00:23:49,360 You can now bet on things like whether Jesus Christ will return 380 00:23:49,360 --> 00:23:52,720 before 2027. And because this is the crypto 381 00:23:52,720 --> 00:23:56,200 industry, there's a separate derivative market where you can 382 00:23:56,200 --> 00:24:00,520 bet on whether the odds of the original Jesus bet will go up or 383 00:24:00,520 --> 00:24:03,040 down. Being able to gamble on the 384 00:24:03,040 --> 00:24:06,440 Rapture obviously makes it a bit more exciting. 385 00:24:06,800 --> 00:24:10,240 Platforms like Calci and Polymarket have seen an 386 00:24:10,240 --> 00:24:15,600 explosion in volume recently, logging A staggering 6.3 billion 387 00:24:15,600 --> 00:24:18,040 in trading tied to the Super Bowl. 388 00:24:18,520 --> 00:24:21,840 To put that in perspective, that's nearly four times the 389 00:24:21,840 --> 00:24:26,080 volume of all legal US sports books combined for the same 390 00:24:26,080 --> 00:24:28,720 event. And the most incredible part? 391 00:24:28,880 --> 00:24:32,720 The prediction markets didn't run a single Super Bowl lab. 392 00:24:33,160 --> 00:24:37,800 While DraftKings and FanDuel were spending millions on 32nd 393 00:24:37,800 --> 00:24:41,960 spots Cal, she was becoming the biggest brand of the Super Bowl 394 00:24:42,120 --> 00:24:44,560 simply through the product itself. 395 00:24:45,200 --> 00:24:48,440 Part of the reason that these platforms are booming is that 396 00:24:48,440 --> 00:24:50,840 they found a clever legal loophole. 397 00:24:51,120 --> 00:24:55,000 By branding themselves as financial derivatives regulated 398 00:24:55,000 --> 00:24:59,280 at the federal level by the CFTC, they're able to operate in 399 00:24:59,280 --> 00:25:02,600 many U.S. states where traditional sports betting is 400 00:25:02,600 --> 00:25:05,480 still banned. Prediction markets have become a 401 00:25:05,480 --> 00:25:08,960 way to gamble on football in a state that doesn't allow 402 00:25:08,960 --> 00:25:13,080 gambling simply by calling your bed a swap contract. 403 00:25:13,280 --> 00:25:17,720 This brings us to what Zeke Fox calls the Juggalo theory of 404 00:25:17,720 --> 00:25:21,560 crypto resilience, but with a very important catch. 405 00:25:22,000 --> 00:25:25,520 Zeke points out that on the surface, Bitcoiners look a lot 406 00:25:25,520 --> 00:25:28,600 like fans of the band Insane Clown Posse. 407 00:25:28,840 --> 00:25:32,600 They have their own slang, their own face paint, the the laser 408 00:25:32,600 --> 00:25:36,680 eyes, and a shared sense of being misunderstood by the 409 00:25:36,680 --> 00:25:39,520 normies. But Zeke makes a brilliant 410 00:25:39,520 --> 00:25:42,480 distinction. Juggalos are actually more 411 00:25:42,480 --> 00:25:45,000 honest. If you tell a Juggalo that the 412 00:25:45,000 --> 00:25:47,720 music that they like is terrible, they don't really 413 00:25:47,720 --> 00:25:50,400 care. They aren't trying to recruit 414 00:25:50,400 --> 00:25:53,320 you because your fandom doesn't affect their life. 415 00:25:53,600 --> 00:25:58,240 But in crypto, the subculture is a financial pyramid because 416 00:25:58,240 --> 00:26:00,680 there are no fundamentals to talk about. 417 00:26:00,840 --> 00:26:04,000 No earnings, no dividends, no underlying businesses. 418 00:26:04,640 --> 00:26:08,720 The only way for a believer to get rich is to convince other 419 00:26:08,720 --> 00:26:13,480 people to become a believer too. The crypto subculture isn't just 420 00:26:13,480 --> 00:26:16,240 a community, it's a global sales force. 421 00:26:16,480 --> 00:26:20,160 The moment they stop being able to recruit new Juggalos into the 422 00:26:20,160 --> 00:26:23,920 tent, the price stops moving and the number go up. 423 00:26:23,920 --> 00:26:27,720 Magic trick fails. This is where my friend Dmitri 424 00:26:27,720 --> 00:26:32,040 Kofinis idea of financial nihilism fits in so perfectly 425 00:26:32,360 --> 00:26:36,160 for the younger generation who feel that the traditional system 426 00:26:36,160 --> 00:26:39,640 is rigged and the American dream of home ownership is out of 427 00:26:39,640 --> 00:26:44,560 reach, treating the world like a casino isn't just a choice, it's 428 00:26:44,560 --> 00:26:48,240 a survival strategy. In the financial nihilist 429 00:26:48,240 --> 00:26:52,760 worldview, Bitcoin isn't a hedge against inflation or digital 430 00:26:52,760 --> 00:26:55,280 gold. It's just a high leverage way to 431 00:26:55,320 --> 00:26:57,680 yellow your way into a home deposit. 432 00:26:58,040 --> 00:27:01,400 But as we're seeing, the casino might be moving on. 433 00:27:01,680 --> 00:27:05,120 It's more social to bet on the Super Bowl with your friends 434 00:27:05,240 --> 00:27:08,560 than it is to sit alone in a dark room trying to recruit 435 00:27:08,560 --> 00:27:12,000 strangers into the digital subculture that requires 436 00:27:12,080 --> 00:27:15,480 constant new donations just to keep the lights on. 437 00:27:15,840 --> 00:27:20,400 Once the ideological dream of crypto dies, you're left just 438 00:27:20,400 --> 00:27:22,880 with the gambling. And as it turns out, the 439 00:27:22,880 --> 00:27:26,720 gambling industry already has much better content than the 440 00:27:26,720 --> 00:27:29,800 blockchain does. This brings us back to the 441 00:27:29,800 --> 00:27:32,520 warning from NY US as what the motoring. 442 00:27:32,880 --> 00:27:37,080 The great irony of the last two years is that by getting exactly 443 00:27:37,080 --> 00:27:41,320 what they wanted, the ETFs, the institutional respect and a 444 00:27:41,320 --> 00:27:44,360 crypto president, crypto enthusiasts might have 445 00:27:44,360 --> 00:27:47,960 accidentally killed the very thing that made Bitcoin special. 446 00:27:48,360 --> 00:27:51,920 Demotoring points to real estate as a cautionary tale of 447 00:27:51,920 --> 00:27:56,000 financialization. For decades, he points out, real 448 00:27:56,000 --> 00:27:59,000 estate was the king of uncorrelated assets. 449 00:27:59,160 --> 00:28:02,440 If you owned a physical apartment building, it's value 450 00:28:02,440 --> 00:28:06,240 is mostly independent of what the S&P 500 was doing on a 451 00:28:06,240 --> 00:28:10,200 Tuesday afternoon. It was driven by local housing 452 00:28:10,200 --> 00:28:13,360 demand, local rents and physical scarcity. 453 00:28:13,560 --> 00:28:16,480 But then came the financialization of the sector 454 00:28:16,480 --> 00:28:19,360 through real estate investment trusts and mortgage-backed 455 00:28:19,360 --> 00:28:22,520 securities. Suddenly, your real estate 456 00:28:22,520 --> 00:28:26,640 wasn't just a building, it was a liquid, tradable ticker symbol. 457 00:28:26,880 --> 00:28:30,800 And the moment it became easy to trade, it started behaving 458 00:28:30,800 --> 00:28:35,640 exactly like everything else. Today, the REIT market is highly 459 00:28:35,640 --> 00:28:39,360 correlated with the stock market and sensitive to financial 460 00:28:39,360 --> 00:28:42,080 flows, market sentiment, and so on. 461 00:28:42,320 --> 00:28:46,040 By making it part of the system, it became subject to the 462 00:28:46,040 --> 00:28:49,520 system's risks. We might start to see the exact 463 00:28:49,520 --> 00:28:53,520 same thing happened to Bitcoin. For years, the dream was this 464 00:28:53,520 --> 00:28:57,200 idea of decoupling, the idea that Bitcoin would be the one 465 00:28:57,200 --> 00:29:00,080 thing that stood tall while the rest of the world burned. 466 00:29:00,360 --> 00:29:04,160 But now that it's plugged into the plumbing of Wall Street 467 00:29:04,160 --> 00:29:07,280 through ETFs, futures, and options, that dream might be 468 00:29:07,280 --> 00:29:10,440 dead. The moment a hedge fund can sell 469 00:29:10,440 --> 00:29:13,800 Bitcoin as easily as they can sell Apple stock to cover a 470 00:29:13,800 --> 00:29:17,520 margin call, Bitcoin becomes systemically linked. 471 00:29:17,720 --> 00:29:21,560 It's now affected by the same interest rate shifts, the same 472 00:29:21,560 --> 00:29:25,280 risk appetite swings, and the same liquidity drains as a 473 00:29:25,280 --> 00:29:28,400 grocery store chain or a toothpaste company. 474 00:29:28,760 --> 00:29:32,880 Looking forward, even if this crypto winter ends and Bitcoin 475 00:29:32,880 --> 00:29:37,160 finds a new stable level, we have to ask will it ever be an 476 00:29:37,160 --> 00:29:40,920 independent asset again? Or has it simply become a high 477 00:29:40,920 --> 00:29:44,640 beta, non dividend paying tech stock that we've collectively 478 00:29:44,640 --> 00:29:49,200 agreed to call digital gold? If Bitcoin is not a currency, 479 00:29:49,400 --> 00:29:52,920 not a particularly good inflation hedge, and it's now 480 00:29:52,920 --> 00:29:56,200 tethered to the very financial system it was designed to 481 00:29:56,200 --> 00:30:00,440 replace, then what is it? It's a collectible, and as we 482 00:30:00,440 --> 00:30:04,400 know, the price of a collectible depends entirely on the mood of 483 00:30:04,400 --> 00:30:08,520 the next person in line. Right now, that person is 484 00:30:08,520 --> 00:30:11,880 looking at their S&P 500 returns, are looking at a 485 00:30:11,880 --> 00:30:16,200 gambling app on their phone, and starting to wonder if crypto was 486 00:30:16,200 --> 00:30:20,040 just a very expensive ticket to a party that ended years ago. 487 00:30:20,640 --> 00:30:23,760 Thanks for tuning into this week's podcast, with special 488 00:30:23,760 --> 00:30:25,880 thanks to my supporters on Patreon. 489 00:30:26,080 --> 00:30:29,360 If you'd like to support the podcast, I'll leave a Patreon 490 00:30:29,360 --> 00:30:32,120 link in the description. Talk to you again soon. 491 00:30:32,280 --> 00:30:32,600 Bye.