1
00:00:00,000 --> 00:00:09,920
You've had a dynamic where money has become freer than free.

2
00:00:10,780 --> 00:00:13,040
You talk about a Fed just gone nuts.

3
00:00:13,500 --> 00:00:15,700
All the central banks going nuts.

4
00:00:16,380 --> 00:00:17,880
So it's all acting like safe haven.

5
00:00:18,360 --> 00:00:23,920
I believe that in a world where central bankers are tripping over themselves to devalue their currency,

6
00:00:24,440 --> 00:00:25,260
Bitcoin wins.

7
00:00:25,340 --> 00:00:28,460
In the world of fiat currencies, Bitcoin is the victor.

8
00:00:28,460 --> 00:00:31,360
I mean, that's part of the bull case for Bitcoin.

9
00:00:31,900 --> 00:00:34,240
If you're not paying attention, you probably should be.

10
00:00:36,380 --> 00:00:37,280
All right, take two.

11
00:00:37,500 --> 00:00:38,640
I think we're good to go here, Scott.

12
00:00:38,700 --> 00:00:39,600
Thank you for joining me.

13
00:00:40,360 --> 00:00:41,500
It's a pleasure to be here, Marty.

14
00:00:41,580 --> 00:00:42,320
Thanks for having me.

15
00:00:43,080 --> 00:00:49,620
Well, I'm really excited about this discussion because, as I was telling you, I had drinks

16
00:00:49,620 --> 00:00:52,980
a couple of times over the last two weeks with Puncher down here at the Jersey Shore,

17
00:00:52,980 --> 00:00:59,740
and he was singing your praises and trying to explain your thesis around the big long,

18
00:01:00,060 --> 00:01:03,620
which is what I would like to dive into during this discussion.

19
00:01:03,760 --> 00:01:07,620
But before we dive into your thesis around the Bitcoin big long,

20
00:01:09,140 --> 00:01:12,360
how about we jump into your background, introduce you to the audience?

21
00:01:13,900 --> 00:01:14,620
Yeah, sounds good.

22
00:01:14,780 --> 00:01:22,360
So not to date myself, I started on the Philadelphia Options Exchange in 1989 as a market maker.

23
00:01:22,980 --> 00:01:34,560
And I did a 25-year sentence on Wall Street, trading Philadelphia, then out to San Francisco on the Peak Coast, eventually landing in Chicago at the CBOE.

24
00:01:37,080 --> 00:01:43,820
Finally moved upstairs towards the internet bubble and was trading sort of an upstairs hedge fund, for lack of a better description.

25
00:01:43,820 --> 00:01:52,060
and then after 9-11 kind of took some time off, came back to the business on the brokerage side,

26
00:01:52,140 --> 00:02:00,120
which was very interesting, and eventually leading into the construction of Dash Financial.

27
00:02:00,120 --> 00:02:08,380
So I saw the writing on the wall with the extensive electrification, for lack of a better term,

28
00:02:08,380 --> 00:02:14,740
of the options markets, everything going electronic and digital, and began to develop algorithms

29
00:02:14,740 --> 00:02:21,440
really focused around transparency in the options market and founded a firm by NIMP

30
00:02:21,440 --> 00:02:25,620
Dash, Dash Financial, which I think today is one of the largest options executions house

31
00:02:25,620 --> 00:02:26,280
on Wall Street.

32
00:02:28,180 --> 00:02:33,060
2013, I was on a flight to Spain to visit our clients at Banco Santander.

33
00:02:33,860 --> 00:02:37,280
And on that flight, I happened to grab a bunch of computer magazines.

34
00:02:38,440 --> 00:02:42,840
And funny enough, one of the center cutouts of the magazine was the white paper.

35
00:02:43,380 --> 00:02:45,480
And I remember reading it the first time.

36
00:02:45,480 --> 00:02:51,380
And then I think seven consecutive times on that flight, landed in Spain and downloaded

37
00:02:51,380 --> 00:02:57,480
an app called Local Bitcoins, met a random Spaniard behind the hotel in Madrid, took

38
00:02:57,480 --> 00:03:05,700
500 euro out of the ATM machine and I became a Bitcoiner in October of 2013. Then two weeks later,

39
00:03:05,760 --> 00:03:12,480
retired from Wall Street and set out on a journey to really explore distributed ledger technology,

40
00:03:12,600 --> 00:03:17,940
blockchain technologies at a deeper level. Started a firm by the name of Alters Software Solutions,

41
00:03:18,540 --> 00:03:25,760
really focused on database security using distributed ledger technologies and built

42
00:03:25,760 --> 00:03:32,420
that firm into quite a nice size. I exited in 2019 and have been traveling the country with my wife

43
00:03:32,420 --> 00:03:39,640
for the last five years in a 45-foot RV. Really set out to explore the country and

44
00:03:39,640 --> 00:03:44,280
touch grass and get to meet the local people. It's been an amazing experience.

45
00:03:45,200 --> 00:03:52,520
But yeah, now we're kind of retiring formally from the RV life and just living my best life, Marty.

46
00:03:52,520 --> 00:03:54,720
I'd love to hear that we're very

47
00:03:54,720 --> 00:03:58,660
I don't want to say similar

48
00:03:58,660 --> 00:04:00,360
I wouldn't say similar because I think the

49
00:04:00,360 --> 00:04:02,480
pedigree and the degree to which you dove

50
00:04:02,480 --> 00:04:04,780
into options

51
00:04:04,780 --> 00:04:06,320
and Wall Street is

52
00:04:06,320 --> 00:04:08,500
way different than my

53
00:04:08,500 --> 00:04:10,520
experience but around the same time 2013

54
00:04:10,520 --> 00:04:11,900
fall of 2013

55
00:04:11,900 --> 00:04:14,540
is when

56
00:04:14,540 --> 00:04:16,520
I graduated college

57
00:04:16,520 --> 00:04:18,440
earlier that year and got my first job in a

58
00:04:18,440 --> 00:04:19,880
managed futures fund in Chicago

59
00:04:19,880 --> 00:04:22,400
sitting in an

60
00:04:22,400 --> 00:04:27,120
office with a bunch of ex-CBot traders, and they were talking about, reminiscing about

61
00:04:27,120 --> 00:04:29,780
the days on the floor before the servers took over.

62
00:04:30,920 --> 00:04:34,680
And that's when I got into Bitcoin in earnest, too.

63
00:04:34,820 --> 00:04:39,040
It was that fall, winter, getting my first bonus check from the firm.

64
00:04:40,240 --> 00:04:40,920
And it's just funny.

65
00:04:40,980 --> 00:04:48,260
I always find that traders, particularly with options and commodities experience out of

66
00:04:48,260 --> 00:04:50,700
Chicago, get Bitcoin almost intuitively.

67
00:04:52,400 --> 00:04:59,480
Yeah, it's funny, right? I think there's a natural skepticism of the system that comes with having traded the markets.

68
00:05:00,480 --> 00:05:06,340
You know, I like to think of options traders, commodities traders as the grease that makes the engine turn, right?

69
00:05:06,340 --> 00:05:14,180
You know, we're so hands on every day and we see all the shortcomings and the failings of the system.

70
00:05:14,180 --> 00:05:22,980
So that naturally, I think, is an inclination to get involved in Bitcoin, which is in a sort of an off ramp of traditional finance.

71
00:05:23,780 --> 00:05:31,120
Let's dive into that. What are some of the boogeymen that you see up front and close and personal trading options and commodities?

72
00:05:31,120 --> 00:05:35,540
Well, I see a lot of big boogeymen, unfortunately.

73
00:05:36,440 --> 00:05:44,300
Look, the modern system as constructed is what I call a debt-based fiat policy scheme.

74
00:05:45,780 --> 00:05:55,300
The way the system is constructed puts the banks and what I'll call the banking cartel above the people.

75
00:05:55,300 --> 00:06:13,580
But, you know, having lived through 08-09 and being on the floor during that time period, you really got to see how the system moved to save itself at what I would call at the expense of the ordinary man.

76
00:06:14,260 --> 00:06:22,000
A perfect example, and I think Larry Lepard touches on this beautifully in his book, The Big Print, was the banning of short selling.

77
00:06:23,340 --> 00:06:25,780
Markets require a short selling in order to function.

78
00:06:26,400 --> 00:06:27,900
You have to have two-sided markets.

79
00:06:28,420 --> 00:06:31,640
But all of a sudden, with one day's notice, the rules changed.

80
00:06:32,300 --> 00:06:37,940
And the system morphed into something that really was anything but free markets.

81
00:06:37,940 --> 00:06:47,020
the money printing, which at that time seemed large by today's scale, extremely small.

82
00:06:49,040 --> 00:06:55,960
Yeah, I mean, everything I witnessed and even going back well before that, we can go back to

83
00:06:55,960 --> 00:07:03,580
the Russian default, long-term capital management. I've lived through these things

84
00:07:03,580 --> 00:07:09,240
and I've seen the system kind of lurch and struggle at times.

85
00:07:09,940 --> 00:07:11,660
And that's the way the system is constructed.

86
00:07:12,260 --> 00:07:15,780
The system is constructed to be an inflationary system.

87
00:07:16,200 --> 00:07:19,600
And when there's a problem, the only way out of it is to print more money.

88
00:07:20,260 --> 00:07:23,880
And now we've sort of achieved escape velocity in the system

89
00:07:23,880 --> 00:07:27,160
with money printing that I would call out of control.

90
00:07:27,160 --> 00:07:36,460
And there is really one real off-ramp, non-centralized off-ramp, and that's Bitcoin.

91
00:07:37,460 --> 00:07:42,860
And I would add, I was a gold and silver bug long before Bitcoin came around.

92
00:07:42,860 --> 00:08:00,320
Right. You know, I was I was stacking gold and silver and staying out of markets as early as 2002 after the Internet bubble and seeing what Wall Street did there with the just mass printing of paper companies adding dot com to their name, you know, simply to try to get a valuation.

93
00:08:00,320 --> 00:08:08,920
So, yeah, you become so skeptical of markets and of the status quo.

94
00:08:09,560 --> 00:08:12,380
And then Bitcoin comes along and you see something that's peer-to-peer.

95
00:08:13,040 --> 00:08:19,660
And probably most important and least talked about is the bearer asset that is Bitcoin,

96
00:08:19,840 --> 00:08:21,880
the ability to take self-custody.

97
00:08:22,560 --> 00:08:29,620
I remember back in the late 80s, there was still bearer bonds floating around Wall Street.

98
00:08:29,620 --> 00:08:32,580
People would buy bearer municipals, right?

99
00:08:32,700 --> 00:08:37,040
And they'd have little coupons on the bottom of them and you could clip them.

100
00:08:37,560 --> 00:08:40,280
And then interestingly enough, the government did away with bearer bonds.

101
00:08:40,840 --> 00:08:47,140
Again, in the name of, I guess, terrorism or whatever the term du jour is.

102
00:08:48,360 --> 00:08:58,200
But yeah, the ability to take delivery of Bitcoin is what really separates itself from any other asset.

103
00:08:58,200 --> 00:09:05,080
and in turn is going to create the big problem or you know to touch on the big long we'll touch a

104
00:09:05,080 --> 00:09:10,540
lot about talk a lot about the bearer nature of of bitcoin and why that's going to present a real

105
00:09:10,540 --> 00:09:18,620
problem yeah and while i haven't heard you explain the thesis in depth yet i imagine

106
00:09:18,620 --> 00:09:24,960
it ties into the big long because it's a bearer instrument and i believe your thesis revolves

107
00:09:24,960 --> 00:09:32,620
around derivatives markets, which are essentially paper synthetic positions on top of underlying

108
00:09:32,620 --> 00:09:36,800
commodities, which become extremely popular since the 1980s.

109
00:09:36,800 --> 00:09:41,780
I think famously, at least a couple of years ago, there was rumors swirling around that

110
00:09:41,780 --> 00:09:45,460
Deutsche Bank alone had something like a quadrillion dollars worth of derivative exposure,

111
00:09:45,940 --> 00:09:50,020
which seems crazy to me that that's even possible.

112
00:09:50,020 --> 00:09:57,560
And so I think diving into the nature of derivatives and how they've evolved over the years is probably a good jumping off point.

113
00:09:59,000 --> 00:10:06,920
Yeah, well, I think the nature of derivatives is that they are contracts between two parties.

114
00:10:07,740 --> 00:10:13,280
Right now, one of the terms that became very famous during 08-09 was the term counterparty.

115
00:10:13,280 --> 00:10:20,160
Right. Well, what type of counterparty exposure does Bank A have to Bank B?

116
00:10:20,660 --> 00:10:31,700
Like we learned during the GFC that AIG, right, had such counterparty exposure to Goldman Sachs that it turned out AIG had to be bailed out.

117
00:10:31,920 --> 00:10:42,740
If not, Goldman Sachs would have failed. And if Goldman Sachs would have failed, well, probably every major money center bank in the world, not just in the country, but in the world would have failed.

118
00:10:42,740 --> 00:10:47,060
because they have massive counterparty exposure to each other.

119
00:10:47,700 --> 00:10:49,760
And we saw this when Lehman failed.

120
00:10:50,400 --> 00:10:53,320
I was running a self-clearing broker-dealer at the time,

121
00:10:53,900 --> 00:10:58,540
and the day they shut down Lehman and people just walked out the door,

122
00:10:59,000 --> 00:11:01,940
well, what about all the trades that were settling T plus three

123
00:11:01,940 --> 00:11:05,960
that we didn't know whether they were good trades or bad trades?

124
00:11:06,100 --> 00:11:11,880
So the entire street had massive counterparty exposure to Lehman going down.

125
00:11:11,880 --> 00:11:17,080
Now, the government came in and made those trades good. But just imagine if they hadn't.

126
00:11:17,640 --> 00:11:26,980
What does it look like when, you know, you could you could take a major bank like Society General, Credit Agricole, Deutsche Bank, right?

127
00:11:27,060 --> 00:11:31,540
Like right even UBS, right? The large Japanese banks.

128
00:11:31,800 --> 00:11:40,520
If any one of them were to go down, the counterparty exposure that they have to each other is so great and nobody understands it.

129
00:11:40,520 --> 00:11:45,020
Well, you're Warren Buffett called derivatives, weapons of financial weapons of mass destruction.

130
00:11:45,560 --> 00:11:47,920
Ray Dalio touches on the subject quite a bit.

131
00:11:48,500 --> 00:11:55,660
Right. Nobody really understands what the counterparty exposure looks like from institution to institution.

132
00:11:55,660 --> 00:12:06,120
and the way i've understood it because it seems like the potential for mass re-hypothecation

133
00:12:06,120 --> 00:12:13,500
of these positions and these contracts exist in derivatives and so it's like to your point of

134
00:12:13,500 --> 00:12:18,580
the counterparty risks that exist the way i've come to understand it is that it exists because

135
00:12:18,580 --> 00:12:25,040
the banks will sort of get use the same instrument to get multiple points of exposure across the

136
00:12:25,040 --> 00:12:30,200
system. And so you may think you own one thing, but somebody else also thinks they own that as well.

137
00:12:31,200 --> 00:12:36,500
Yeah. I mean, and now you're hitting on the main point, which is that Bitcoin by its very nature

138
00:12:36,500 --> 00:12:44,520
and the ability to verify on chain, the ability to do chain analysis is a game changer, right?

139
00:12:44,600 --> 00:12:50,320
Wall Street's never seen a product like this, right? We, you know, gold, gold, the gold market's

140
00:12:50,320 --> 00:12:58,380
perfect example. Most of the gold is centralized. It's held in large vaults by banking institutions,

141
00:12:58,680 --> 00:13:03,860
bullion banks. And quite frankly, we have no idea how many claims there are, how many times

142
00:13:03,860 --> 00:13:10,920
those gold bars have been leased out to different entities. I mean, some speculate it's 100x,

143
00:13:11,020 --> 00:13:17,380
some speculate it's 300x. But with Bitcoin, you have a different type of security or asset.

144
00:13:18,380 --> 00:13:22,480
Bitcoin is verifiable on chain, right?

145
00:13:22,480 --> 00:13:36,100
So when we get to the point that Bitcoin treasury companies, Bitcoin holdings, ETFs, Bitcoin exchanges hold, let's just pick a number, 17 million Bitcoin, right?

146
00:13:36,180 --> 00:13:39,440
Well, then how are you able to short it, right?

147
00:13:40,220 --> 00:13:46,880
We're going to reach a point where you can actually verify and audit the amount of Bitcoin that exists.

148
00:13:46,880 --> 00:14:02,380
And just to kind of step back so the audience understands, any functioning derivatives market, well-functioning derivatives market, requires that the asset that the derivatives are based on is freely available for loan.

149
00:14:03,240 --> 00:14:09,320
That is a fundamental characteristic of any derivatives market.

150
00:14:09,320 --> 00:14:32,560
You know, I would suggest to you that Saylor hitting the ATM so hard in MicroStrategy in the previous year was partly, you know, because he was converting, you know, Bitcoin, converting shares into Bitcoin and capturing the spread between the premium to the net asset value premium to the price of Bitcoin.

151
00:14:32,560 --> 00:14:41,560
But more importantly, he was producing enough shares into the options market and derivatives market that it was freely available to be borrowed.

152
00:14:42,200 --> 00:14:50,760
And that was critical for him to have a freely functioning, well-oiled derivatives market on MicroStrategy or on strategy stock.

153
00:14:51,760 --> 00:14:53,880
Now, with Bitcoin, we have a different scenario.

154
00:14:54,540 --> 00:14:58,840
There's no CEO to turn to and say, hey, we need to print more Bitcoin.

155
00:14:59,600 --> 00:15:04,320
There's a limited amount of Bitcoin, and it's verifiable and auditable on-chain.

156
00:15:04,980 --> 00:15:08,920
So that's a very different asset than I've ever seen on Wall Street.

157
00:15:09,100 --> 00:15:10,520
Nothing like this has ever existed.

158
00:15:11,400 --> 00:15:17,200
And we can just look to two of them, the major short squeezes of the last few decades.

159
00:15:17,440 --> 00:15:19,860
So let's start with Porsche Volkswagen.

160
00:15:19,860 --> 00:15:21,500
I don't know if you remember that, Marty.

161
00:15:21,620 --> 00:15:22,820
It might be before your time.

162
00:15:22,820 --> 00:15:42,228
but there was a large short interest I think 13 short interest in Volkswagen At the same time Porsche was quietly acquiring a significant stake at some point in I think it was a way in that area

163
00:15:42,388 --> 00:15:50,808
They come out and announce that they own 74 percent of Volkswagen and basically taking a controlling stake.

164
00:15:50,808 --> 00:15:57,328
Well, the problem was that the local state, the German government, owns 20% of Volkswagen.

165
00:15:57,908 --> 00:16:04,748
So 94% of Volkswagen, we now know who owns it, but 13% of the float was short.

166
00:16:05,668 --> 00:16:08,668
And if you do the basic math, that means you have a problem.

167
00:16:09,728 --> 00:16:10,548
So what happens?

168
00:16:10,728 --> 00:16:14,908
Volkswagen goes up about 5x in a couple days.

169
00:16:15,268 --> 00:16:19,528
I think a trade was trading somewhere around 200 euro, topped out at 1,000 euro.

170
00:16:19,528 --> 00:16:33,688
But the way they resolved the short squeeze was they got Porsche to go ahead and sell 5% of their stake in Volkswagen to create the shares available for the shorts to cover.

171
00:16:35,028 --> 00:16:37,288
Let's fast forward to GameStop, right?

172
00:16:37,368 --> 00:16:39,348
That's a memorable short squeeze.

173
00:16:40,648 --> 00:16:43,208
GameStop trades, you know, goes ballistic.

174
00:16:44,208 --> 00:16:46,988
The first thing they do is they try to shut down the buy button.

175
00:16:46,988 --> 00:16:49,408
If you remember at Robinhood, they shut off the buy button.

176
00:16:49,528 --> 00:17:05,388
That didn't work. And then the next thing you know, of course, the company has agreed to sell $3 billion worth of common stock. And of course, the stock gets cratered. And then the company sells the common stock.

177
00:17:05,388 --> 00:17:15,428
I believe the same people that tapped Robinhood on the shoulder and asked them to shut off the buy button are the same people that tapped the board on the shoulder and said, hey, we need you to sell stock.

178
00:17:16,148 --> 00:17:18,488
Because if not, you can't stop these things.

179
00:17:19,208 --> 00:17:24,708
Now, in the case, when you look at both of those squeezes, they both came to an end with the creation of more supply.

180
00:17:25,368 --> 00:17:27,928
Right. But that's not going to be the case in Bitcoin.

181
00:17:28,128 --> 00:17:29,708
There's nobody to tap on the shoulder.

182
00:17:30,568 --> 00:17:35,488
Right. So ultimately, you have a derivatives market that's growing exponentially.

183
00:17:35,948 --> 00:17:40,048
And at the same time, you have an underlying asset, which is infinitely scarce,

184
00:17:40,048 --> 00:17:44,088
and you can't print more of it and you can't force people to sell it.

185
00:17:44,688 --> 00:17:49,288
Now, make the situation even, I mean, unlimited.

186
00:17:50,228 --> 00:17:52,648
I don't even know how to explain how much worse this is.

187
00:17:52,648 --> 00:18:12,968
But imagine that in 08, 09, had we had Bitcoin, and as people became absolutely frightened about the stability of banks, imagine they had an asset that they could actually buy and take delivery of in a matter of hours.

188
00:18:14,028 --> 00:18:15,088
What would have happened?

189
00:18:15,448 --> 00:18:20,808
Well, everybody would have pulled their money out of the banks, bought Bitcoin, and taken delivery.

190
00:18:20,808 --> 00:18:40,188
Now, I foresee in the next financial crisis, and we will have the next financial crisis, we at least do, you're going to have this feedback loop where hedge funds, asset investors of all types are going to run to Bitcoin and take delivery.

191
00:18:40,188 --> 00:18:45,628
And when they take delivery of Bitcoin, it's going to be removed from the market.

192
00:18:46,328 --> 00:18:55,348
So the amount of Bitcoin available for loan is going to decrease rapidly at the very time in which they need it the most.

193
00:18:55,968 --> 00:19:06,108
And that's the kind of driving concepts behind the big log thesis is that we have an asset that's infinitely scarce.

194
00:19:06,568 --> 00:19:09,308
There's nobody to tap on the shoulder to print more of.

195
00:19:09,308 --> 00:19:21,008
And worse yet, in a time of crisis, every investor or the smartest investors will immediately take delivery, causing the derivatives market to lock up.

196
00:19:21,548 --> 00:19:34,288
And I can foresee a scenario in which this becomes systemic well beyond just the Bitcoin markets and permeates throughout the entire banking system.

197
00:19:34,868 --> 00:19:35,328
Sup freaks.

198
00:19:35,848 --> 00:19:38,448
This rep at TFTC was brought to you by our good friends at CoinKite.

199
00:19:38,448 --> 00:19:44,068
They make the cold card queue my favorite hardware wallet, the most secure hardware wallet on the market.

200
00:19:44,068 --> 00:19:48,748
As you can see, it's got the BlackBerry form factor, full keyboard.

201
00:19:48,988 --> 00:19:50,548
It's got two secure enclaves.

202
00:19:50,748 --> 00:19:53,388
You create your private public keys offline.

203
00:19:53,968 --> 00:19:56,948
The device never has to go online, never does go online.

204
00:19:57,328 --> 00:19:58,528
So you keep your Bitcoin secure.

205
00:19:59,208 --> 00:20:03,988
If you have your Bitcoin on exchanges and you're looking to get it off, secure it in the best way possible.

206
00:20:04,368 --> 00:20:05,568
Pick up a cold card queue.

207
00:20:06,048 --> 00:20:07,628
Go to coinkite.com.

208
00:20:07,628 --> 00:20:13,628
find the cold card queue use the code tftc for five percent off if you're a power user of bitcoin

209
00:20:13,628 --> 00:20:18,848
like i am if you're running a business on a bitcoin standard if you're just a bitcoin or

210
00:20:18,848 --> 00:20:23,028
wants to secure your bitcoin get the most secure hardware wallet on the market go get the cold card

211
00:20:23,028 --> 00:20:28,448
queue it's a beautiful thing so freaks guess what we launched a browser extension it's called

212
00:20:28,448 --> 00:20:32,748
opportunity cost and it helps you see the true cost of everything in bitcoin convert prices to

213
00:20:32,748 --> 00:20:37,368
bitcoin as you browse the web opportunity cost automatically displays fiat prices in bitcoin

214
00:20:37,368 --> 00:20:45,568
or sats, helping you think in a Bitcoin standard. It works on Amazon, Zillow, X, your bank account,

215
00:20:45,808 --> 00:20:49,588
QuickBooks. You can convert everything to Bitcoin. It's really cool. It's also 100%

216
00:20:49,588 --> 00:20:56,508
open source MIT license. We don't collect any data. All of the conversions happen in your browser

217
00:20:56,508 --> 00:21:02,168
on your local device. It's a great way to recalibrate your life and begin thinking in

218
00:21:02,168 --> 00:21:09,288
sats. Go check it out at opportunitycost.app. That's opportunitycost.app. Well, before we get

219
00:21:09,288 --> 00:21:15,768
to that, it's interesting because I think we've already had like a small example of this happen,

220
00:21:15,908 --> 00:21:21,188
particularly within the Bitcoin space at the end of 22, beginning of 23 with that mini banking

221
00:21:21,188 --> 00:21:26,528
crisis that played out. Like we saw it at 1031, a bunch of our portfolio companies,

222
00:21:26,528 --> 00:21:38,888
They were playing basically bank hot potato after Silvergate went down or was taken, I would argue, taken down unlawfully, forced to close its doors.

223
00:21:39,608 --> 00:21:45,408
Their hand was forced to independently and under their own volition close down the bank.

224
00:21:45,488 --> 00:21:48,828
But then you had Signature, First Republic, Silicon Valley Bank.

225
00:21:49,008 --> 00:21:54,528
Those were a few of the banks that were at the time amenable to banking Bitcoin companies.

226
00:21:54,528 --> 00:22:01,828
companies and particularly when signature first republic and silicon valley um got in trouble

227
00:22:01,828 --> 00:22:08,568
we saw a number of founders and portfolio companies just simply wire the funds they had

228
00:22:08,568 --> 00:22:15,148
from the bank to exchanges like unchained uh and then put the bitcoin into a three multi-sig volt

229
00:22:15,148 --> 00:22:18,988
because like we're just going to wait it out and put all of our cash in bitcoin because we have

230
00:22:18,988 --> 00:22:25,068
this bearer instrument that we can have a high degree of certainty and we can be ultimately

231
00:22:25,068 --> 00:22:29,408
certain that it's not going to get rugged by the bank because we hold the keys.

232
00:22:31,028 --> 00:22:37,348
Yeah, that's it, right? That's exactly the thesis, except it plays out on a global scale

233
00:22:37,348 --> 00:22:46,228
much larger than those three banks. Imagine a major money center bank and we get a cascading

234
00:22:46,228 --> 00:22:49,428
of potential bank failures or bank trouble.

235
00:22:50,268 --> 00:22:53,988
I would see, especially now that Bitcoin, I think,

236
00:22:54,028 --> 00:22:58,788
has crossed the Rubicon from a retail product to an institutional product.

237
00:22:58,788 --> 00:23:04,108
I think so many players, large players are well aware of Bitcoin.

238
00:23:04,288 --> 00:23:06,068
I just think we're in a new world today.

239
00:23:06,808 --> 00:23:11,468
And I don't see how they're going to stop this problem once it starts.

240
00:23:11,748 --> 00:23:13,268
There's no one to tap on the shoulder.

241
00:23:13,808 --> 00:23:14,588
It's global.

242
00:23:15,228 --> 00:23:18,728
There's exchanges located around the world, right?

243
00:23:18,788 --> 00:23:23,188
So it's not just a U.S. or a Western banking cartel situation.

244
00:23:23,808 --> 00:23:26,068
This is a global asset, highly liquid.

245
00:23:26,768 --> 00:23:28,948
I don't see how they stop it once it starts.

246
00:23:29,688 --> 00:23:40,168
Well, let's dive into this and get into the dynamics of the landscape and how this may unfold.

247
00:23:40,608 --> 00:23:43,688
And before we talk about the future, let's talk about the past.

248
00:23:43,688 --> 00:23:56,348
And we've had examples, not necessarily of derivatives markets, but institutions within the Bitcoin economy that have essentially lent out Bitcoin to counterparties who destroyed it or simply lost it.

249
00:23:56,408 --> 00:23:57,948
I mean, go all the way back to Mt. Gox.

250
00:23:58,008 --> 00:24:04,448
When we were first getting into Bitcoin, they were hacked and a number of their customers had claims to X amount of Bitcoin.

251
00:24:04,688 --> 00:24:08,988
But the hackers had stolen Y and they found themselves short Bitcoin.

252
00:24:08,988 --> 00:24:18,528
And so that went under and it took over a decade for the Mt. Gox customers to get any other money back.

253
00:24:18,728 --> 00:24:22,648
Fast forward to 2020 to 2022.

254
00:24:22,988 --> 00:24:27,568
That's when Genesis was lending, Genesis BlockFi, Celsius.

255
00:24:28,148 --> 00:24:38,288
Others were lending Bitcoin out, FTX, to traders who were taking risk in altcoin markets and promising that they would get a return and return the Bitcoin.

256
00:24:38,288 --> 00:24:51,528
I mean, those markets blew up and you found many situations where people thought they had Bitcoin, but learned that their counterparty, their trusted third party, where they were storing their Bitcoin and lent it out and wasn't going to get it back.

257
00:24:53,348 --> 00:24:54,688
So we're scaling up.

258
00:24:54,688 --> 00:25:04,388
And now as a San State 2025, as you mentioned, across the Rubicon institutions getting in, how do you see something like that playing out moving forward?

259
00:25:04,388 --> 00:25:12,288
And what are the different dynamics that exist today that could act as an accelerant to that process?

260
00:25:13,288 --> 00:25:14,408
Yeah, I think it's a great question.

261
00:25:14,408 --> 00:25:25,708
So, you know, today, the Celsius block by kind of thing of today is is now Goldman Sachs, Morgan Stanley, you know, tremendously huge banks.

262
00:25:25,708 --> 00:25:36,548
And now it becomes a systemic issue rather than a localized issue that can be stomped out by regulators and sort of the losses going to the investor.

263
00:25:36,948 --> 00:25:46,808
What happens when the losses are taken by large financial institutions, which then need to be bailed out or bailed in whichever way we head?

264
00:25:46,808 --> 00:25:47,968
I mean, that's another subject.

265
00:25:48,508 --> 00:25:56,848
But ultimately, the game has now gone up upstream of small players to the largest players in

266
00:25:56,848 --> 00:25:57,308
the world.

267
00:25:57,988 --> 00:26:03,408
And that should be a tremendous cause for concern, because if you understand the very

268
00:26:03,408 --> 00:26:10,888
nature of derivatives, like I said earlier, you absolutely need to have the underlying

269
00:26:10,888 --> 00:26:15,408
asset freely available for loan for the derivatives markets to function.

270
00:26:16,148 --> 00:26:17,148
You know, I'll give you an example.

271
00:26:17,308 --> 00:26:21,628
A lot of people view shorting as betting the price is going to go down.

272
00:26:22,188 --> 00:26:24,808
But that's really not how derivatives markets work.

273
00:26:25,448 --> 00:26:27,048
A great example would be this.

274
00:26:27,988 --> 00:26:32,108
I hold just as an example, I hold a thousand Bitcoin.

275
00:26:32,268 --> 00:26:33,368
I'm an old school Bitcoiner.

276
00:26:33,628 --> 00:26:38,448
I go to Goldman Sachs and I say, look, I'd like to buy insurance on my Bitcoin, you know,

277
00:26:38,448 --> 00:26:39,248
price insurance.

278
00:26:39,988 --> 00:26:45,908
I'd like to buy, you know, let's say Bitcoin is now a million dollars.

279
00:26:46,148 --> 00:26:48,228
I'd like to protect it at 800,000.

280
00:26:48,388 --> 00:26:50,408
So I'm going to buy the 800,000 puts.

281
00:26:51,128 --> 00:26:54,688
OK, Goldman comes up with a price where they sell you an over-the-counter derivative product.

282
00:26:55,308 --> 00:27:00,228
Well, in order for them to hedge themselves, they need to go out and short Bitcoin, right?

283
00:27:00,268 --> 00:27:01,868
Because they have downside exposure.

284
00:27:02,328 --> 00:27:08,128
Now, nobody in this transaction that I just explained is betting on Bitcoin going down.

285
00:27:08,128 --> 00:27:11,548
Matter of fact, everybody in the transaction wants Bitcoin to go higher.

286
00:27:12,268 --> 00:27:18,728
However, because of an insurance type product like a put contract or portfolio insurance,

287
00:27:18,988 --> 00:27:21,808
you need to cover your downside exposure.

288
00:27:21,988 --> 00:27:26,668
So in this case, Goldman has gone out and shorted Bitcoin, but they need to borrow that

289
00:27:26,668 --> 00:27:27,668
Bitcoin to short it.

290
00:27:28,268 --> 00:27:33,208
Now, if we end up in a situation where, like you explained, people take Bitcoin off the

291
00:27:33,208 --> 00:27:37,428
market, they take delivery of their Bitcoin, throw it in unchained and a multi-sig.

292
00:27:37,428 --> 00:27:42,528
well, where's Goldman going to get the Bitcoin? Right now, Goldman already has a short Bitcoin

293
00:27:42,528 --> 00:27:48,248
position on, but all of a sudden they get a call saying, hey, we need the Bitcoin.

294
00:27:49,048 --> 00:27:55,188
And now we end up in a short squeeze. So what started out as being a small problem

295
00:27:55,188 --> 00:28:01,608
can quickly mushroom into a gigantic problem that's global. It's not just here in the US,

296
00:28:01,608 --> 00:28:07,048
it's not just Europe, it's all over the world. And as this derivative market grows,

297
00:28:07,428 --> 00:28:12,448
You know, we're adding potential fuel to a fire that could really grow out of control

298
00:28:12,448 --> 00:28:14,048
at a very quick pace.

299
00:28:14,528 --> 00:28:18,668
And again, the trigger to this can have nothing to do with Bitcoin, right?

300
00:28:18,668 --> 00:28:22,468
We could see, you know, some banking problem in Japan having to do with the long end of

301
00:28:22,468 --> 00:28:25,868
their bond curve or some crisis coming out of Europe.

302
00:28:26,188 --> 00:28:31,188
But ultimately, Bitcoin will be the off ramp from the modern banking system.

303
00:28:31,568 --> 00:28:37,168
And that off ramp combined with self-custody will lead us into a crisis the likes of which

304
00:28:37,168 --> 00:28:38,088
we've never seen before.

305
00:28:38,908 --> 00:28:39,828
Okay, a couple questions here.

306
00:28:39,908 --> 00:28:40,908
No, I think it's a great point.

307
00:28:41,908 --> 00:28:43,948
Describe, that's one thing I don't think

308
00:28:43,948 --> 00:28:46,588
most people realize too

309
00:28:46,588 --> 00:28:47,488
is with these derivatives,

310
00:28:47,848 --> 00:28:49,808
like you can literally go to a bank

311
00:28:49,808 --> 00:28:54,448
and if you have your sort of books in order

312
00:28:54,448 --> 00:28:55,648
and your thesis in order

313
00:28:55,648 --> 00:28:56,568
and you present it to them,

314
00:28:56,608 --> 00:28:58,088
they will go and make the product.

315
00:28:58,188 --> 00:28:58,888
I mean, most famously,

316
00:28:59,208 --> 00:29:01,048
the scene in the big short

317
00:29:01,048 --> 00:29:02,908
where Michael Berry goes to all the banks

318
00:29:02,908 --> 00:29:03,908
on Wall Street

319
00:29:03,908 --> 00:29:05,068
and sort of gives them the binder

320
00:29:05,068 --> 00:29:07,108
about creating that credit default swap.

321
00:29:07,168 --> 00:29:09,208
and they go and make a market for him.

322
00:29:09,288 --> 00:29:12,248
So you're saying similar sort of dynamics

323
00:29:12,248 --> 00:29:13,428
will come into play with people

324
00:29:13,428 --> 00:29:16,808
who want different sort of derivative hedge products

325
00:29:16,808 --> 00:29:17,448
for their Bitcoin.

326
00:29:18,328 --> 00:29:19,348
They're going to have to go to the bank.

327
00:29:20,088 --> 00:29:20,628
Yeah, absolutely.

328
00:29:20,908 --> 00:29:23,408
You know, look, as institutions pour into Bitcoin,

329
00:29:23,788 --> 00:29:25,008
they will manage risk

330
00:29:25,008 --> 00:29:27,028
because that's what institutions are paid to do

331
00:29:27,028 --> 00:29:28,428
is to manage risk.

332
00:29:28,428 --> 00:29:31,128
So they will be looking to create derivatives

333
00:29:31,128 --> 00:29:34,208
to protect against downside price moves, right?

334
00:29:34,208 --> 00:29:41,128
That's the way the system is built, is to manage volatility, to manage risk.

335
00:29:41,488 --> 00:29:43,828
But Bitcoin wasn't designed for this purpose.

336
00:29:44,548 --> 00:29:52,868
And therefore, we kind of have the immovable object hitting the immeasurable force at some point.

337
00:29:53,108 --> 00:29:55,328
And it becomes a really scary situation.

338
00:29:55,328 --> 00:30:05,588
Add to that again, and I think this is the part that most people take for granted, is the ability to self-custody in a matter of hours or even less.

339
00:30:06,308 --> 00:30:08,488
That changes the entire game.

340
00:30:09,348 --> 00:30:19,328
Because all of a sudden, in any type of crisis, people will pull their money out of Coinbase or out of any of the major exchanges or even out of banks.

341
00:30:19,328 --> 00:30:21,768
And they will move it to self-custody.

342
00:30:21,768 --> 00:30:29,008
right? Untrained will see their balances explode. And what does that do to the derivatives complex,

343
00:30:29,408 --> 00:30:35,008
right? It only puts it under more stress. And you can almost see the feedback loop, right?

344
00:30:35,008 --> 00:30:40,828
The worse it gets, the more people will pull money out of the system. And that will just

345
00:30:40,828 --> 00:30:46,008
create more and more stress. So, yeah, when I look at this from a derivatives perspective,

346
00:30:46,008 --> 00:30:50,948
What I see is a potential disaster brewing right now.

347
00:30:50,948 --> 00:31:08,616
Right now it not a problem because Bitcoin is freely available to loan Funding rates are very low Add to that Marty that we now have futures perps right All different types of paper Bitcoin ETFs iBit right Like imagine what happens when all of those

348
00:31:08,616 --> 00:31:15,216
markets lock up in a very short amount of time. So futures will trade at a discount to the spot

349
00:31:15,216 --> 00:31:20,196
price, right? Funding rates will go through the brief. Perps will become extremely illiquid.

350
00:31:20,196 --> 00:31:23,816
I-BIT puts will trade at an extreme premium to the calls.

351
00:31:24,456 --> 00:31:26,116
I-BIT will become hard to borrow.

352
00:31:26,736 --> 00:31:32,096
All of these things will happen in a very short period of time in any type of a financial crisis.

353
00:31:32,756 --> 00:31:40,176
And everything just becomes, again, I'll keep repeating the term, it becomes a negative feedback loop where you just can't stop it.

354
00:31:40,476 --> 00:31:41,936
And there is no solution.

355
00:31:42,436 --> 00:31:46,476
You're not going to be able to turn to the regulators to solve this problem.

356
00:31:46,676 --> 00:31:49,176
You're not going to be able to turn to governments to solve this problem.

357
00:31:49,176 --> 00:31:59,276
I don't know how they're going to solve this problem. Once it starts, right, I don't see how it resolves itself. And that's why I call it the big law, right? The inverse on Michael Berry's big short.

358
00:31:59,276 --> 00:32:08,736
and i think there's two important things first thing is really highlight the point that this

359
00:32:08,736 --> 00:32:13,716
doesn't necessarily have to manifest within the bitcoin economy can be an external factor an

360
00:32:13,716 --> 00:32:19,516
external crisis in japan europe here in the united states within the banking sector whatever it may

361
00:32:19,516 --> 00:32:24,336
be and it does seem like some of the banks are are beginning to weaken materially i've read some

362
00:32:24,336 --> 00:32:30,016
reports on wells fargo bank of america uh morgan stanley and others even though some of them have

363
00:32:30,016 --> 00:32:35,276
had uh an increase in earning per share and revenues if you look into the balance sheets

364
00:32:35,276 --> 00:32:41,456
it's really driven by um trading which isn't a sustainable revenue line if you look at like

365
00:32:41,456 --> 00:32:47,236
loan origination deposits all are trending in the wrong direction which is a long-term

366
00:32:47,236 --> 00:32:52,556
sort of revenue drivers, consistent revenue drivers of those companies.

367
00:32:53,476 --> 00:32:56,176
And then the follow-up question,

368
00:32:56,176 --> 00:32:58,376
I had like, we're led to believe,

369
00:32:58,516 --> 00:33:00,656
and I led to believe being,

370
00:33:00,996 --> 00:33:06,096
led to doing the most work in that sentence

371
00:33:06,096 --> 00:33:11,636
that Wall Street finance types are some of the smartest people in the world.

372
00:33:11,996 --> 00:33:15,156
And it is just baffling to me that none of them can,

373
00:33:15,156 --> 00:33:20,116
would be able to recognize that Bitcoin is this digital bearer asset

374
00:33:20,116 --> 00:33:24,276
with this ability to take delivery within minutes to hours

375
00:33:24,276 --> 00:33:26,116
if anybody so wanted to,

376
00:33:27,056 --> 00:33:32,796
that they wouldn't understand that these knock-on domino effect risks exist.

377
00:33:33,316 --> 00:33:38,696
So I guess what I'm trying to get at is how does that not recognize on Wall Street

378
00:33:38,696 --> 00:33:42,016
or is it simply a product of their mindset as we're going to go

379
00:33:42,016 --> 00:33:44,716
for as many products as possible because that's how we're going to make money.

380
00:33:45,156 --> 00:33:48,976
in the short term and there's just like no avoiding it this is what we're here to do

381
00:33:48,976 --> 00:33:56,076
yeah with you know it's such a great point um the capital uh structures the incentive

382
00:33:56,076 --> 00:34:01,936
the incentive structures of a wall street employee haven't changed since 08 or 09

383
00:34:01,936 --> 00:34:08,816
right they're still paid on a quarterly basis or annual basis bonus and it's based on the amount

384
00:34:08,816 --> 00:34:13,716
of money you made this year or the amount of money you made this quarter right and and all

385
00:34:13,716 --> 00:34:18,676
of that is misaligned incentives, right? So people are incentivized purely to make as much money as

386
00:34:18,676 --> 00:34:24,236
they can today. Today, Bitcoin is freely available to borrow. The derivatives market is exploding.

387
00:34:24,956 --> 00:34:29,496
Companies like Susquehanna, Jane Street are making fortunes of money in the Bitcoin complex.

388
00:34:30,336 --> 00:34:36,516
So we're in. The other problem, and we learned this through O8-0809, and I've experienced it

389
00:34:36,516 --> 00:34:41,436
personally, is you're stuck in this situation when a large client comes to you and says,

390
00:34:41,436 --> 00:34:47,616
I want you to build this derivative for me. You have the problem that if you don't do it,

391
00:34:48,156 --> 00:34:54,896
another bank will and you'll lose your client. And we saw that in 08-09 and we see it today.

392
00:34:55,436 --> 00:35:01,456
So why would somebody write a derivatives contract that could potentially become extremely

393
00:35:01,456 --> 00:35:06,336
dangerous two years from now, a year from now? Well, because if they don't do it, somebody else

394
00:35:06,336 --> 00:35:11,356
will and they'll lose their client. And I think that's the incentive behind, you know, getting

395
00:35:11,356 --> 00:35:17,016
yourself into trouble and maybe trouble down the line. But what choice do you have when your boss

396
00:35:17,016 --> 00:35:22,016
taps you on the shoulder and says, come up with a structure. We need to keep this client happy.

397
00:35:22,396 --> 00:35:24,576
What do you do? You come up with a structure. You do what you're told.

398
00:35:25,176 --> 00:35:29,616
Serious about your Bitcoin? Start acting like it. Unchained just launched the Financial Freedom

399
00:35:29,616 --> 00:35:34,236
Bundle, a curated pack that includes a premium Bitcoin book, a new hardware wallet guide,

400
00:35:34,236 --> 00:35:37,236
and access to a private macro event with Tur Demeester.

401
00:35:37,616 --> 00:35:38,016
Legend.

402
00:35:38,616 --> 00:35:40,576
It's time to take control of your generational wealth.

403
00:35:40,876 --> 00:35:44,616
Go to unchained.com slash TFTC to request yours.

404
00:35:45,096 --> 00:35:47,496
That's unchained.com slash TFTC.

405
00:35:48,056 --> 00:35:49,156
Pretty hot package freaks.

406
00:35:49,256 --> 00:35:49,856
Go pick it up.

407
00:35:50,176 --> 00:35:52,276
Yeah, you can see it getting crazy pretty fast.

408
00:35:52,876 --> 00:35:56,736
And I guess that begs the question,

409
00:35:56,856 --> 00:35:59,336
is this ultimately good for Bitcoin?

410
00:35:59,976 --> 00:36:02,016
Is this a hard lesson everybody needs to learn?

411
00:36:02,016 --> 00:36:14,856
Is it said could it potentially snowball into such a big event to become, like, as you mentioned, systemically a systemic risk to the global financial system that people will be pissed at Bitcoin?

412
00:36:14,996 --> 00:36:16,556
Or is it how do you see this playing out?

413
00:36:17,656 --> 00:36:19,876
Well, again, Bitcoin is money for your enemies.

414
00:36:19,876 --> 00:36:28,316
Right. So I don't think Bitcoin cares whether the global financial system detonates itself through derivatives.

415
00:36:28,316 --> 00:36:32,936
I think that the seeds for this problem have long been sown.

416
00:36:33,676 --> 00:36:37,036
But yeah, I do think that at some point it could become systemic.

417
00:36:37,836 --> 00:36:42,476
And that's probably I mean, please don't take this the wrong way, but that's probably a good thing.

418
00:36:43,076 --> 00:36:48,156
Right. Look at the system we have today and realize just how toxic it is.

419
00:36:48,676 --> 00:36:55,676
You know, we could go into suicide rates and all of the all of the metrics around, you know, where we stand today.

420
00:36:55,676 --> 00:37:00,736
hey, young people, you know, not being able to afford a home, you know, multiple jobs,

421
00:37:00,916 --> 00:37:06,256
the fertility rates, right, the birth rates, everything is pointing in the wrong direction.

422
00:37:06,676 --> 00:37:13,416
And that probably has a lot to do with broken money. That's probably a full show of its own.

423
00:37:13,996 --> 00:37:21,376
But, you know, are we better off having the current system, you know, implode? Probably.

424
00:37:21,376 --> 00:37:25,416
Does that mean in the short term it wouldn't be an extremely painful event?

425
00:37:25,496 --> 00:37:26,376
Of course it would be.

426
00:37:27,016 --> 00:37:32,576
But out of the ashes of that old system would be born a new system based on hard money.

427
00:37:33,276 --> 00:37:35,836
And abundance would flourish, right?

428
00:37:35,956 --> 00:37:39,596
You know, I just think we'd find ourselves in a better world, right?

429
00:37:39,636 --> 00:37:44,596
So ultimately, you know, you never know how much pain you're in until you get out of that pain.

430
00:37:44,856 --> 00:37:48,256
And sometimes it just feels to me like it just continues to get worse.

431
00:37:48,256 --> 00:37:54,956
so you know that that's my my take you know a lot of people will say well what you're presenting is

432
00:37:54,956 --> 00:38:00,636
a doomer thesis and and i think it's the exact opposite right i think the doomer is the one who's

433
00:38:00,636 --> 00:38:04,536
sitting in a burning building telling everybody to stay put we're going to put out the fire

434
00:38:04,536 --> 00:38:09,316
right and what i'm saying is get out of the burning building there's a better way to do this

435
00:38:09,316 --> 00:38:16,036
completely agree i think uh that's what we have outside of our studio in austin texas

436
00:38:16,036 --> 00:38:23,936
currently not there but it's fix the money fix the world and i think i've been labeled a doomer

437
00:38:23,936 --> 00:38:28,736
as well many times and i think that's like the big question because i remember in 2013

438
00:38:28,736 --> 00:38:34,636
my wife my then girlfriend she would come to chicago we were long distance and we'd go to

439
00:38:34,636 --> 00:38:40,596
brunch and i got in trouble the first long distance trips because i was so obsessed with bitcoin

440
00:38:40,596 --> 00:38:45,356
and the financial system i was convinced in 2013 i was like this is there's not sustainable they're

441
00:38:45,356 --> 00:38:48,096
printing too much money, too many derivatives out there.

442
00:38:48,756 --> 00:38:50,896
Like Bitcoin exists now, like people are going to funnel in.

443
00:38:51,396 --> 00:38:56,296
And I was convinced back in 2013, 2014, that it was going to happen rather quickly.

444
00:38:56,296 --> 00:38:59,436
Fast forward to 2020, 2021, same thing.

445
00:38:59,616 --> 00:39:05,476
But every time post-2008 specifically that a little crisis has bubbled,

446
00:39:05,716 --> 00:39:12,656
2023 with the banking crisis, the system seems to be able to temporarily self-repair itself.

447
00:39:12,916 --> 00:39:15,136
And that's always a question of my mind, I'm sure.

448
00:39:15,356 --> 00:39:22,176
many others minds like you know that's why i think lawrence larry wrote the big print like it seems

449
00:39:22,176 --> 00:39:28,096
like the big print could be on the way like how confident are you if at all that we're on the

450
00:39:28,096 --> 00:39:32,696
cusp like is there a timeline to this or is it is it one of those things where it's like you don't

451
00:39:32,696 --> 00:39:37,576
know when but you know it's definitely going to happen at some point yeah i think i'm in that

452
00:39:37,576 --> 00:39:42,196
latter camp i i don't know when it could be next week could be next month five years ten years

453
00:39:42,656 --> 00:39:44,096
I doubt we make it 10 years.

454
00:39:45,856 --> 00:39:48,036
The metrics are just really bad.

455
00:39:48,236 --> 00:39:55,456
I was talking to a good friend of mine who's a mayor of a town, Thomas Young, who's a mayor of a small town in New Jersey.

456
00:39:55,756 --> 00:39:59,656
And he said currently they're having a tough time hiring police officers.

457
00:39:59,796 --> 00:40:06,916
And he was pointing out that a young police officer, I don't know, cost their town $50,000, $60,000 first year.

458
00:40:07,096 --> 00:40:11,336
But the health benefits and all the other benefits cost above $60,000.

459
00:40:11,336 --> 00:40:14,096
They're $60,000 to $70,000 a year, right?

460
00:40:14,116 --> 00:40:16,476
And that number is going up towards $100,000 a year.

461
00:40:16,516 --> 00:40:18,516
So at what point does the system just break?

462
00:40:18,936 --> 00:40:25,316
I don't know, but we're probably a lot closer to that point today than we were at any point.

463
00:40:25,316 --> 00:40:30,836
Plus, I'll just add, I think the Fed used to back, let's go back to 08, probably owned,

464
00:40:30,936 --> 00:40:34,436
I don't know, small single digits of our balance sheet.

465
00:40:34,516 --> 00:40:38,576
They're now up to, I think, 26% of our balance sheet is owned by the Fed.

466
00:40:38,576 --> 00:40:42,336
So, I mean, at what point does this become a problem?

467
00:40:42,836 --> 00:40:47,296
Then just add in Japan, which we all understand is a complete train wreck.

468
00:40:47,796 --> 00:40:59,916
But ultimately, they are, Japan, Europe, right, they are held afloat in any type of financial crisis by the U.S. government and the Fed's willingness to provide them dollar liquidity, right, swap lines.

469
00:41:00,736 --> 00:41:06,856
If you look at where we're headed with a new Fed chair, assume it's someone like Scott

470
00:41:06,856 --> 00:41:10,736
Bissett, I don't think the willingness is there to bail out the world.

471
00:41:11,416 --> 00:41:15,636
I don't think the willingness, the political will is there to bail out the U.S. banks.

472
00:41:16,456 --> 00:41:20,896
So I think we go more into a bail-in scenario than a bail-out scenario.

473
00:41:21,296 --> 00:41:25,716
And that's the most scary, the concept of the great taking.

474
00:41:25,716 --> 00:41:29,736
I don't know if you're familiar with that, Marty, David Rogers-Webb's piece.

475
00:41:29,916 --> 00:41:41,476
You know, if we go down that road with the DTCC problems, you know, failures at the banks and the DTC recapitalize itself through great taking, you know, that that's absolutely catastrophic.

476
00:41:42,096 --> 00:41:48,016
But you just get the sense that the willing the political will will not be there for the next bailout.

477
00:41:48,016 --> 00:41:55,256
yeah part of david's thesis right like he's read all the legal contracts that exist and in the

478
00:41:55,256 --> 00:42:02,476
the sort of small print details of the contracts that everybody has with the dtcc it's like you

479
00:42:02,476 --> 00:42:10,396
actually don't own these shares at all at the end of the day correct yeah yeah no we live in an iou

480
00:42:10,396 --> 00:42:14,876
world you know you don't own you can go out and buy apple stuff today but you don't own it

481
00:42:14,876 --> 00:42:19,676
right? What you own is a claim on the broker dealer you bought it through. So let's just

482
00:42:19,676 --> 00:42:25,396
assume you use Charles Schwab. Okay. So I buy a hundred shares of Apple. What I own is a claim

483
00:42:25,396 --> 00:42:32,556
on Charles Schwab for a hundred shares of Apple stock. Charles Schwab owns a claim on the DTCC

484
00:42:32,556 --> 00:42:40,296
and the DTCC owns your Apple stock. Now, post Lehman Brothers, and I think the case that

485
00:42:40,296 --> 00:42:45,596
he's really pointing at was a legal case between J.P. Morgan and Lehman Brothers,

486
00:42:45,896 --> 00:42:51,196
where the courts came and ruled that, well, J.P. Morgan was senior to Lehman Brothers,

487
00:42:51,316 --> 00:42:56,196
and therefore the clients of Lehman Brothers would lose their assets to J.P. Morgan.

488
00:42:56,916 --> 00:43:06,856
Well, that means that the DTCC is senior to your claim on Charles Schwab. So the DTCC's claim on

489
00:43:06,856 --> 00:43:08,356
Charles Schwab is senior to yours.

490
00:43:08,676 --> 00:43:13,456
If Charles Schwab was to fail, well, then they're not your shares of Apple anymore.

491
00:43:13,536 --> 00:43:14,796
They belong to the GTCC.

492
00:43:16,336 --> 00:43:16,816
Yeah.

493
00:43:16,976 --> 00:43:21,716
And so what type of what type of data points are you following outside of like bond yields?

494
00:43:21,716 --> 00:43:27,056
Obviously, this week, Japan's 40 year bonds screaming higher.

495
00:43:27,316 --> 00:43:31,516
You have the 30 year UK guilt hitting 2007 levels.

496
00:43:31,516 --> 00:43:38,496
is this in your mind the beginning like alarm bells going off that something's breaking

497
00:43:38,496 --> 00:43:43,816
in terms of liquidity in the back end of the system well that's the other question too excuse

498
00:43:43,816 --> 00:43:48,116
me for rambling here a little bit but is it like at this time around is it even a liquidity

499
00:43:48,116 --> 00:43:53,276
crisis or is it more of a confidence crisis is i think more and more people are becoming

500
00:43:53,276 --> 00:44:01,436
skeptical of the idea that government bonds are these grade a sort of savings vehicles for the

501
00:44:01,436 --> 00:44:06,856
long term. Yeah, I think you hit the nail on the head. It starts as a liquidity crisis,

502
00:44:06,856 --> 00:44:12,916
but quickly becomes a confidence crisis and made exponentially worse by social media,

503
00:44:12,916 --> 00:44:17,896
where you can actually explain to people what's really happening, right? People are able to get

504
00:44:17,896 --> 00:44:22,616
information outside of the traditional media, which would tell you, oh, this is just a small

505
00:44:22,616 --> 00:44:27,236
problem. We're going to print money. Congress needs to step in. I just don't think that's going

506
00:44:27,236 --> 00:44:34,976
to happen this time. But yeah, I mean, all of the things you mentioned, right, from Japan to the UK,

507
00:44:35,296 --> 00:44:40,756
obviously capital flight out of the UK is a big one. We've seen all kinds of crazy capital flights.

508
00:44:41,316 --> 00:44:46,016
And then let's just kind of throw stable coins in there since we just had the Genius Bill pass.

509
00:44:46,536 --> 00:44:50,636
A lot of people are extremely bullish on stable coins and they're going to provide on ramps to

510
00:44:50,636 --> 00:44:56,976
Bitcoin, which is all true, 100% true. But I think there's unintended consequences to where we're

511
00:44:56,976 --> 00:45:01,656
headed with stable coins, and that is to destabilize smaller governments and then larger

512
00:45:01,656 --> 00:45:07,036
governments around the world as we look to have dollar dominance. One of the things stable coins

513
00:45:07,036 --> 00:45:14,776
will do is they will get dollars in the hands of everyone throughout the world on crypto rails,

514
00:45:14,776 --> 00:45:20,976
right? So today, if you try to send dollars, let's say to Egypt, let's just use Egypt as an

515
00:45:20,976 --> 00:45:27,416
example, right? It's almost impossible to get dollars to a friend in Egypt, right? You've got

516
00:45:27,416 --> 00:45:33,016
to send them through the SWIFT system. They're going to get taken by the Egyptian government,

517
00:45:33,336 --> 00:45:38,896
and then the Egyptian banks will take what's left. And the Egyptian citizen gets the Egyptian pound,

518
00:45:38,896 --> 00:45:45,636
which is hyperinflating away. Now, if you go ahead and introduce stablecoins into that system,

519
00:45:45,636 --> 00:45:51,476
my question to you would be, well, are we going to create more North Koreas?

520
00:45:52,156 --> 00:45:58,056
Because as these countries begin to see their ability to print money taken away from them,

521
00:45:58,696 --> 00:46:03,896
what do they do? In a world where they can shut off the internet and they can do all kinds of

522
00:46:03,896 --> 00:46:10,016
crazy things to their people, are we running the risk of destabilizing the third world?

523
00:46:10,016 --> 00:46:15,536
They're completely destabilizing the third world. And then what happens in Japan when people can use

524
00:46:15,536 --> 00:46:21,176
dollars rather than yen, do we run the risk of hyperinflating away the yen?

525
00:46:21,736 --> 00:46:36,544
And if we do that as we talked about earlier what are the consequences for Japanese banks and counterparty exposure I can just see how the introduction of stable coins which seems like a great idea right On its surface I understand it

526
00:46:36,544 --> 00:46:48,284
But I think if you look to the second order effects and the knockdown effects of policy decisions like this, they can have lasting consequences, which may not be what we're looking for.

527
00:46:48,284 --> 00:47:01,204
You know, I've learned in my my few years here on the planet that, you know, what looks like a good idea up front can usually when the U.S. government flexes its muscles abroad, it has negative consequences.

528
00:47:02,764 --> 00:47:05,184
Yeah, the whole stable coins thing is very interesting.

529
00:47:06,184 --> 00:47:07,284
I said this yesterday.

530
00:47:08,084 --> 00:47:10,604
I think that's one thing I'm interested to see if it actually plays out.

531
00:47:11,244 --> 00:47:13,724
We got a few points on this topic.

532
00:47:14,444 --> 00:47:17,004
The Genius Act as it's written, it's unclear to me.

533
00:47:17,004 --> 00:47:27,324
I think it seems pretty clear that the reason that the act came up in the first place, because Circle was pissed off that Tether is absolutely eating their lunch in the global stable coin market.

534
00:47:27,444 --> 00:47:29,444
So they went to create some regulatory moat.

535
00:47:30,944 --> 00:47:42,704
And I wonder, it's not clear to me the way the bill is written, that Tether can operate in the way it has up to this point outside of the borders of the United States.

536
00:47:42,704 --> 00:47:49,364
And if that's the case, if they can't, like I could see demand for U.S. dollar stable coins falling significantly.

537
00:47:49,464 --> 00:48:01,584
But I think they may still be able to operate an El Salvador entity and do what they've been doing, not trust KYC, AML compliance on their users and just have free floating dollar instruments across the world.

538
00:48:01,584 --> 00:48:08,464
but your point too there like maybe it's like the second order sort of destabilization effect

539
00:48:08,464 --> 00:48:14,304
is intentional in the sense that if you and this is where we get like alex jones like

540
00:48:14,304 --> 00:48:20,684
like this is anybody listening to this is just a theory but it would um would be pretty interesting

541
00:48:20,684 --> 00:48:26,284
it's like you get the stable coins out there you destabilize and in parallel on the back end

542
00:48:26,284 --> 00:48:32,824
And as a government and as a country, individual citizens within that country really leaning into Bitcoin.

543
00:48:33,344 --> 00:48:34,704
And I think that's the big question.

544
00:48:34,844 --> 00:48:39,284
We've had this U.S. dollar reserve system for many decades now.

545
00:48:39,564 --> 00:48:44,844
And that's everybody's talking about fourth turning, just like cyclicality of how this stuff happens.

546
00:48:44,844 --> 00:48:52,004
And if you're the U.S. government acknowledging like, OK, it seems pretty clear the writings on the wall that the U.S. dollar is a reserve currency.

547
00:48:52,784 --> 00:48:53,984
It's on its way out.

548
00:48:53,984 --> 00:48:57,724
Like, how do we extend the American empire into the future?

549
00:48:57,884 --> 00:49:03,744
It's like you push the dollar, destabilize everything else, get them all pissed off at you.

550
00:49:03,784 --> 00:49:08,064
But then on the back end, accumulate as much Bitcoin as possible and be like, OK, we'll go to this neutral reserve asset.

551
00:49:08,304 --> 00:49:10,524
And by the way, we've accumulated a bunch in our country.

552
00:49:10,944 --> 00:49:14,444
It's going to be on good footing coming out of this.

553
00:49:16,624 --> 00:49:19,184
Yeah, I think that's a very reasonable take.

554
00:49:19,184 --> 00:49:27,804
albeit for me to take off my tinfoil hat. I tend to like to wear it. But yeah, I think that

555
00:49:27,804 --> 00:49:34,064
if I listen to the administration closely, what they're saying is they want a devalued dollar

556
00:49:34,064 --> 00:49:39,764
at the same time they want dollar dominance to increase. And those two things would seem

557
00:49:39,764 --> 00:49:46,764
antithetical to each other. But if you look through the clouds, I think you see that stable

558
00:49:46,764 --> 00:49:53,384
coins can accomplish both. But again, I get concerned when we begin to meddle in foreign

559
00:49:53,384 --> 00:50:01,424
affairs to this degree. And you're going to remove the foreign government's ability

560
00:50:01,424 --> 00:50:10,064
to manage their currency, and you're going to push dollars into the wild in all types of

561
00:50:10,064 --> 00:50:15,784
countries all over the world. What is that second order effect? It scares me. I think it's

562
00:50:15,784 --> 00:50:21,264
inflationary. Now, obviously, we'll export as much of that inflation as we possibly can.

563
00:50:21,784 --> 00:50:26,344
But again, how much can you mess with the rest of the world before it comes back and hits you

564
00:50:26,344 --> 00:50:30,724
on the head? I don't know the answer to that question, but it would seem that that's where

565
00:50:30,724 --> 00:50:37,944
this is headed. Yeah, that's a question that has been lingering in my mind the last two years.

566
00:50:37,944 --> 00:50:40,564
is there

567
00:50:40,564 --> 00:50:41,944
I mean it was

568
00:50:41,944 --> 00:50:42,884
basically

569
00:50:42,884 --> 00:50:45,884
trying to think theoretically through

570
00:50:45,884 --> 00:50:48,044
things like running with the meme soft landing

571
00:50:48,044 --> 00:50:49,344
which Janet Yellen and

572
00:50:49,344 --> 00:50:51,284
others put out there

573
00:50:51,284 --> 00:50:53,084
post 2021

574
00:50:53,084 --> 00:50:56,284
stimulus and trying to navigate the waters

575
00:50:56,284 --> 00:50:57,804
of inflation and

576
00:50:57,804 --> 00:51:00,244
Fed interest rate policy and I think it's pretty

577
00:51:00,244 --> 00:51:01,604
clear that you can't really

578
00:51:01,604 --> 00:51:04,084
they can't manufacture a soft landing but I do

579
00:51:04,084 --> 00:51:06,084
and it's part of what we do at

580
00:51:06,084 --> 00:51:10,884
1031 and why I have this show and the media companies to educate people about Bitcoins.

581
00:51:11,044 --> 00:51:15,724
I do earnestly believe that if you can get Bitcoin into the hands of enough individuals,

582
00:51:15,924 --> 00:51:21,144
if you can get it into structured credit products the right way, like that's the way

583
00:51:21,144 --> 00:51:25,064
you manufacture a soft landing because you're going to have to hyperinflate the currency

584
00:51:25,064 --> 00:51:25,784
at some points.

585
00:51:26,384 --> 00:51:27,264
The writing's on the wall.

586
00:51:27,364 --> 00:51:32,984
It's mathematically impossible that that's not going to be the ultimate outcome, whether

587
00:51:32,984 --> 00:51:39,684
that's next year or 10 years from now is is another question but like can you integrate bitcoin

588
00:51:39,684 --> 00:51:44,704
enough into the system where as everything's hyperinflating if you have enough bitcoin exposure

589
00:51:44,704 --> 00:51:51,304
hopefully it's it's rising in value faster than your money's being debased and you sort of get

590
00:51:51,304 --> 00:51:57,664
out of the other side of a a hyperinflationary superinflationary event whatever it may be

591
00:51:57,664 --> 00:52:04,024
and you're somewhat okay because you have bitcoin expenditure yeah look that's that's the thesis

592
00:52:04,024 --> 00:52:10,964
behind bit bonds and for the individual i've been talking a lot about bid annuities um these are

593
00:52:10,964 --> 00:52:17,084
this is the way to improve the balance sheet but you're not going to improve the debt problem that

594
00:52:17,084 --> 00:52:22,364
you know our system is based on creating more debt but what you can do is improve the balance

595
00:52:22,364 --> 00:52:28,744
sheet, you can bring debt to GDP down to manageable levels. If you introduce bit bonds,

596
00:52:28,944 --> 00:52:34,164
I know that theory has been out there for a while now. I think that's one way of taking on the

597
00:52:34,164 --> 00:52:43,304
problem head on. However, that's not without major secondary and knock-on effects. If it turns out

598
00:52:43,304 --> 00:52:48,504
that the real free cost of money is somewhere around 12%, what happens to mortgage rates?

599
00:52:48,984 --> 00:52:50,244
What happens to long-term bonds?

600
00:52:50,284 --> 00:52:52,084
What happens to the existing bond market?

601
00:52:52,844 --> 00:52:52,944
Right?

602
00:52:53,024 --> 00:52:56,324
So the reality is that we're in a box, right?

603
00:52:56,324 --> 00:52:57,904
There is no easy way out.

604
00:52:58,344 --> 00:53:03,424
Yes, if you introduce hard money into the system through bid bonds, bid annuities, whichever

605
00:53:03,424 --> 00:53:08,684
way you want to do it, you're going to solve one problem and you are going to cause probably

606
00:53:08,684 --> 00:53:10,544
a bigger second one, right?

607
00:53:10,544 --> 00:53:13,264
Ultimately, the system is in trouble.

608
00:53:13,264 --> 00:53:19,644
Um, inflation, the inflation boogeyman has just run wild.

609
00:53:19,924 --> 00:53:24,204
The cost of everyday goods is going up, you know, at high levels.

610
00:53:24,204 --> 00:53:30,484
And look, I don't believe the current inflation numbers as they're presented to us, CPI.

611
00:53:30,624 --> 00:53:31,884
I don't believe GDP.

612
00:53:32,384 --> 00:53:34,464
I mean, CPI is an example, right?

613
00:53:34,504 --> 00:53:35,744
We count microchips.

614
00:53:35,884 --> 00:53:38,464
We count things that are, that go down in value.

615
00:53:38,464 --> 00:53:41,564
But how many, how many, how many SD cards do I need?

616
00:53:41,844 --> 00:53:42,404
Right.

617
00:53:42,404 --> 00:53:46,124
But I need steak, I need food, I need beef, right?

618
00:53:46,184 --> 00:53:47,364
The price of steak goes up.

619
00:53:47,404 --> 00:53:51,204
So then they shift to ground beef in the CPI number, right?

620
00:53:51,224 --> 00:53:56,524
Like it's just constantly juggling, you know, the statistics to try to create a narrative.

621
00:53:56,924 --> 00:54:01,744
But in the end, you know, you can't convince somebody who goes to the grocery store that

622
00:54:01,744 --> 00:54:07,684
the price of goods today is only 2% higher than it was last year when they know it's

623
00:54:07,684 --> 00:54:09,004
20% higher, right?

624
00:54:09,044 --> 00:54:10,364
Like that's just a fact.

625
00:54:10,364 --> 00:54:17,684
So, yeah, we're running up against the amount of lying that can happen in a believable society.

626
00:54:17,864 --> 00:54:24,424
At some point, just everybody calls BS and confidence begins to break.

627
00:54:24,724 --> 00:54:27,464
And I think you made the point earlier about confidence.

628
00:54:27,544 --> 00:54:29,724
Look, we are a confidence-based system.

629
00:54:30,304 --> 00:54:33,184
The U.S. dollar is based on faith.

630
00:54:33,884 --> 00:54:37,484
What makes a $100 bill worth 10 times more than a $10 bill?

631
00:54:37,484 --> 00:54:41,344
Well, they're both, the paper is worth the same, right?

632
00:54:41,404 --> 00:54:42,524
So it's purely faith.

633
00:54:42,624 --> 00:54:45,144
I like to say the US dollar is the world's largest religion.

634
00:54:45,744 --> 00:54:52,064
But in contrast, if you own 10 Bitcoin, there's no question that you own 10 times more than

635
00:54:52,064 --> 00:54:53,884
if you own one Bitcoin, right?

636
00:54:53,924 --> 00:54:59,184
So that's the real difference in a hard money system versus a faith-based system like the

637
00:54:59,184 --> 00:54:59,604
US dollar.

638
00:55:01,564 --> 00:55:02,044
Yeah.

639
00:55:02,044 --> 00:55:10,904
And bring this back to Bitcoin and how it reacts in a situation where things begin to unravel in the global financial system.

640
00:55:11,204 --> 00:55:14,564
I mean, you mentioned that it's the big long.

641
00:55:14,884 --> 00:55:16,344
Like how big are we talking?

642
00:55:16,424 --> 00:55:18,544
Like how weird is this like hyper Bitcoinization?

643
00:55:18,944 --> 00:55:20,924
What does it look like?

644
00:55:21,864 --> 00:55:28,124
Well, you know, obviously I don't exactly know what it looks like, but it doesn't look good.

645
00:55:28,584 --> 00:55:28,824
Right.

646
00:55:28,824 --> 00:55:39,384
I think that the existence of Bitcoin and the institutional adoption of Bitcoin will create a systemic problem for the entire system.

647
00:55:39,984 --> 00:55:51,124
The ability to have capital that you're able to take delivery of as a bearer asset through self-custody, that's not something we had during 08, 09.

648
00:55:51,844 --> 00:55:52,724
That didn't exist.

649
00:55:52,964 --> 00:55:56,144
That's sort of why Bitcoin was created, I would like to suggest.

650
00:55:56,144 --> 00:56:02,024
right satoshi's vision was a monetary system outside of the banking cartel so what does it

651
00:56:02,024 --> 00:56:07,324
look like when the banking cartel you know implodes it probably looks really bad but really

652
00:56:07,324 --> 00:56:14,984
really bad and they will um try you know a cbdc of some type you know i imagine going back to

653
00:56:14,984 --> 00:56:21,784
david webb's thesis uh but i i just think bitcoin wins in the end and um i think we'll we'll end up

654
00:56:21,784 --> 00:56:27,144
on some type of hyper bitcoinization what do you think the system looks like on the other side

655
00:56:27,144 --> 00:56:33,724
let's just assume that the big long thesis is correct and it plays out like how do we reorient

656
00:56:33,724 --> 00:56:39,704
the global economy around a bitcoin standard in your mind that's a great question i've kind of

657
00:56:39,704 --> 00:56:47,064
speculated that by at the time that happens and of course it depends on timing um will we have a

658
00:56:47,064 --> 00:56:52,364
fully built out layer two, like lightning and people will live on Bitcoin. And I mean, imagine,

659
00:56:52,884 --> 00:56:57,964
you know, I like to look back at history, right? So we go through the dark ages. How did we come

660
00:56:57,964 --> 00:57:04,324
out of the dark ages? The Medici family in Florence introduced the Florin and the government

661
00:57:04,324 --> 00:57:10,384
of Florence, right? They had a hard currency. It was a standard unit weight measure of gold,

662
00:57:10,464 --> 00:57:16,024
a gold coin that was then adopted throughout Europe. And it came out of the dark ages and

663
00:57:16,024 --> 00:57:21,244
went into the renaissance uh what did it look like i'm sure it didn't look good right uh but

664
00:57:21,244 --> 00:57:26,164
um you look you get to a point where you're in so much pain that the next system's better

665
00:57:26,164 --> 00:57:33,104
right and i think we're we're quickly going down that road i mean the system we're on now

666
00:57:33,104 --> 00:57:35,784
with the inflation rates we have is not sustainable

667
00:57:35,784 --> 00:57:43,424
agreed and that's like the other thing i'd be interested to get your thoughts on this

668
00:57:43,424 --> 00:57:47,624
this sort of flogging of Jerome Powell publicly over the last month. It's really accelerated.

669
00:57:47,764 --> 00:57:52,364
It's really been going on since before the election, even last year, Trump's been berating

670
00:57:52,364 --> 00:57:59,584
him. But now you've got pile on effect from senators and representatives and other academic

671
00:57:59,584 --> 00:58:05,424
economists sort of in the Trump circle. And it seems clear to me that the ultimate goal

672
00:58:05,424 --> 00:58:11,704
is to merge the Fed and the Treasury, just eliminate any illusion that there is an independent

673
00:58:11,704 --> 00:58:17,004
and Fed and just get the people in place that the Fed are going to move in

674
00:58:17,004 --> 00:58:19,864
lockstep with the treasury with whatever they want to do.

675
00:58:20,784 --> 00:58:23,064
And that's my big question, going back to like confidence.

676
00:58:23,284 --> 00:58:24,384
And this is a confidence game.

677
00:58:24,384 --> 00:58:29,624
Like that is like emerging market, like activity.

678
00:58:30,284 --> 00:58:31,584
Yeah, that's crazy, right?

679
00:58:31,924 --> 00:58:32,684
That would happen.

680
00:58:32,944 --> 00:58:38,684
Like I know they have goals and intentions to just really turn it on turbo

681
00:58:38,684 --> 00:58:44,144
and you need the Fed and the Treasury to move in lockstep to effectuate your policy goals.

682
00:58:44,304 --> 00:58:51,944
But is that a step too far in the minds of the public in terms of their confidence in the system overall?

683
00:58:53,204 --> 00:58:56,924
Well, I don't really think the public even understands the Fed nor less has confidence in it.

684
00:58:58,224 --> 00:59:04,464
Look, you know, we're at a point now where we can't even print our own money the way the system is designed

685
00:59:04,464 --> 00:59:08,784
without paying a bunch of banksters interest for the pleasure of doing so.

686
00:59:09,284 --> 00:59:14,144
And so when the Fed goes out into the open market and buys back a bunch of 20-year bonds,

687
00:59:14,724 --> 00:59:17,864
essentially monetizing the debt, we're printing money.

688
00:59:18,124 --> 00:59:20,644
But at the same time, the Fed now owns those bonds.

689
00:59:20,984 --> 00:59:25,964
And we as the citizenry kept the pleasure of paying them interest for printing our money.

690
00:59:26,284 --> 00:59:28,064
That's a ridiculous system.

691
00:59:28,344 --> 00:59:29,924
Everything about it makes no sense.

692
00:59:29,924 --> 00:59:36,164
I would suggest to you, Marty, that we replace the Fed with the difficulty adjustment.

693
00:59:36,664 --> 00:59:37,744
Completely predictable.

694
00:59:38,664 --> 00:59:46,624
Everybody will understand how much money is being created, when it's being created, on what time series it's being created.

695
00:59:47,084 --> 00:59:53,124
And we can get past our monetary issues and focus on creating a better society.

696
00:59:53,124 --> 01:00:01,924
um and as somebody who's been in this for almost 12 years now like how how do you view this cycle

697
01:00:01,924 --> 01:00:08,144
compared to cycles of of years past is it i hate to ask the question does it feel different

698
01:00:08,144 --> 01:00:14,884
question yeah so look i believe that the four-year cycle is dead i i actually think it died last the

699
01:00:14,884 --> 01:00:20,964
last four years but of course choke point 2.0 uh i believe ftx celsius all of these things were

700
01:00:20,964 --> 01:00:28,664
sort of born out of a government's desire to kill Bitcoin. I just, in my heart of hearts,

701
01:00:29,204 --> 01:00:33,964
I have a tough time understanding why at the same time that they were cutting off

702
01:00:34,524 --> 01:00:41,184
and debacking any entrepreneurs in the space, right? At that same time, we had FTX,

703
01:00:41,184 --> 01:00:47,104
all of these things, and they all seem to be in one way or another attached to government. FTX,

704
01:00:47,104 --> 01:00:52,764
obviously giving a tremendous amount of money back to politicians. So yeah, my take is that

705
01:00:52,764 --> 01:00:59,104
those cycles are dead. The four-year cycle is dead. We're in a new era for Bitcoin. That doesn't mean

706
01:00:59,104 --> 01:01:05,444
there won't be better markets in US dollar and bull markets and US dollar price. But yeah, I'm

707
01:01:05,444 --> 01:01:11,944
one of those that focuses on one Bitcoin equals one Bitcoin. And what really is volatile right now

708
01:01:11,944 --> 01:01:13,684
is the U.S. dollar, right?

709
01:01:13,724 --> 01:01:16,004
So when you see the U.S. dollar price in Bitcoin,

710
01:01:16,524 --> 01:01:19,024
focus on the fact that it's really the dollar

711
01:01:19,024 --> 01:01:20,344
that's fluctuating in value.

712
01:01:20,744 --> 01:01:22,544
One Bitcoin is equal to one Bitcoin

713
01:01:22,544 --> 01:01:23,444
and that hasn't changed.

714
01:01:24,644 --> 01:01:26,564
Yeah, and you mentioned a couple of things

715
01:01:26,564 --> 01:01:28,024
like BitBonds, BitAnnuities.

716
01:01:28,384 --> 01:01:30,564
You'd like to see second layers

717
01:01:30,564 --> 01:01:32,904
like Lightning Network mature.

718
01:01:33,324 --> 01:01:36,124
What else sort of tickles your fancy

719
01:01:36,124 --> 01:01:37,844
in terms of like Bitcoin products

720
01:01:37,844 --> 01:01:39,124
going into the cycles?

721
01:01:39,124 --> 01:01:47,004
Just to your point about bit bonds and bit annuities, like that's what like we're the sole outside capital for battery finance.

722
01:01:47,004 --> 01:01:50,004
And that's something that we've been really bullish on for years now.

723
01:01:50,024 --> 01:01:58,964
And it seems like they're really at a point of maturation where they're going to be able to go out and create these structured credit products with dual collateral.

724
01:01:58,992 --> 01:02:01,352
commercial real estate and Bitcoin.

725
01:02:02,192 --> 01:02:05,052
Like, I think that this, in my opinion,

726
01:02:05,412 --> 01:02:08,812
this is the cycle of Bitcoin not only being recognized,

727
01:02:08,912 --> 01:02:12,092
but preferred as collateral in debt instruments.

728
01:02:12,552 --> 01:02:15,492
And when you think about what that does

729
01:02:15,492 --> 01:02:17,452
for the market structure of Bitcoin,

730
01:02:17,592 --> 01:02:20,192
particularly if you get longer duration credit instruments

731
01:02:20,192 --> 01:02:22,212
that Bitcoin is playing with,

732
01:02:22,432 --> 01:02:25,832
and that is like, I think I'm in agreement with you

733
01:02:25,832 --> 01:02:27,832
that the four-year cycle is not going to look

734
01:02:27,832 --> 01:02:32,212
how it has in the past, simply because of products like these coming to market

735
01:02:32,212 --> 01:02:36,592
that allow you to create like a forward looking duration curve of Bitcoin that you can have

736
01:02:36,592 --> 01:02:41,792
certainty is going to be locked up. Yeah. And to that point, look, I think that's what

737
01:02:41,792 --> 01:02:47,972
Saler's up to, right? So when he's introduced Strife, Stride, Strike, the three perpetual

738
01:02:47,972 --> 01:02:54,612
preferreds, Strife is really, I mean, if you really think about what that product is, it is

739
01:02:54,612 --> 01:03:05,112
a high, essentially, he's creating a fiat yield curve on Bitcoin, right? And we saw that come out

740
01:03:05,112 --> 01:03:11,192
at somewhere around 12%. It's now down into the eights. As that approaches the sixes and the fives,

741
01:03:11,592 --> 01:03:17,932
I think that product will absolutely at some point trade better than long-term treasuries.

742
01:03:18,572 --> 01:03:22,472
And boy, is that going to be an interesting time. But the circle back to the big long

743
01:03:22,472 --> 01:03:28,152
and what you were just talking about, structured products, mortgages, annuities, BitBonds,

744
01:03:28,612 --> 01:03:32,512
you know, all of these products require the sequestration of Bitcoin.

745
01:03:33,072 --> 01:03:36,652
You can't have a BitBond unless you have Bitcoin backing it.

746
01:03:36,712 --> 01:03:42,232
If you're going to do a 10-year BitBond, you're going to have to take Bitcoin and sequester it for 10 years.

747
01:03:42,892 --> 01:03:43,012
Right?

748
01:03:43,152 --> 01:03:45,692
Well, that Bitcoin is not going to be available for loan.

749
01:03:45,692 --> 01:03:51,132
But you can see where all of where we're headed with the financialization of Bitcoin

750
01:03:51,132 --> 01:03:59,552
is that it's going to create a lower supply of Bitcoin for the derivatives market.

751
01:04:00,152 --> 01:04:04,232
So when I look at these products, what I see is just more trouble on the horizon.

752
01:04:04,912 --> 01:04:06,792
And I think the BitBonds thing is coming.

753
01:04:07,152 --> 01:04:08,512
I don't know who goes first.

754
01:04:08,992 --> 01:04:10,692
I imagine it's coming really soon.

755
01:04:10,872 --> 01:04:14,012
I know CJ Konstantinos has talked about it, People's Reserve.

756
01:04:14,492 --> 01:04:16,092
I know you guys are working on that.

757
01:04:16,092 --> 01:04:22,332
But when it comes and people are able to get essentially AAA rated paper that looks to

758
01:04:22,332 --> 01:04:24,972
yield north of 10%, what does that do?

759
01:04:24,972 --> 01:04:27,152
I mean, what does that do to our markets?

760
01:04:27,152 --> 01:04:42,580
What does that do to the derivatives market as all of this Bitcoin gets sequestered on chain with proof of reserves And that another thing Like when Jack Ballard and 21 went full proof of reserves you know again these are all of these things

761
01:04:42,820 --> 01:04:49,380
all of these pieces to the puzzle that are going to create extreme tightness in the Bitcoin market.

762
01:04:49,380 --> 01:04:55,180
And when you're able to actually identify on chain where this Bitcoin lives, well,

763
01:04:55,260 --> 01:05:00,100
we're going to get to a point where, you know, what happens if we know that the Bitcoin treasury

764
01:05:00,100 --> 01:05:04,480
companies own 22 million Bitcoin. Well, that would become a problem, wouldn't it?

765
01:05:05,100 --> 01:05:11,100
Right. So, I mean, this is this is what I mean by keeping the system honest. And Wall Street's

766
01:05:11,100 --> 01:05:17,020
never seen a product like this, right, where you can verify and audit the network every 10 minutes

767
01:05:17,020 --> 01:05:21,840
on average. Like this is something new. And while it's working well and everyone's making money

768
01:05:21,840 --> 01:05:27,360
today, I can see where this is headed tomorrow. Yeah. And that's why I've been a long term

769
01:05:27,360 --> 01:05:34,580
advocate and i really am happy that jack and 21 to prove reserves but like i wanted to go a step

770
01:05:34,580 --> 01:05:42,260
further like bring the unchained collaborative multi-sig model to all of these products just to

771
01:05:42,260 --> 01:05:47,900
basically force the hand of we're not even going to give you the potential to re-hypothicate because

772
01:05:47,900 --> 01:05:53,600
i want it in this two or three three or five m of n multi-sig whatever it comes out to be

773
01:05:53,600 --> 01:05:57,000
and I want to be able to look at it and have certainty that it's not moving

774
01:05:57,000 --> 01:05:58,880
and that you're not rehypothecating.

775
01:05:58,880 --> 01:06:04,940
And if you're trying to give somebody else a claim to that Bitcoin,

776
01:06:05,060 --> 01:06:07,700
they can also see that it's in this multi-sig and sort of assume,

777
01:06:07,900 --> 01:06:10,820
wait, it seems like that's tied up with some other instrument right now.

778
01:06:11,000 --> 01:06:12,240
I don't really trust this.

779
01:06:13,200 --> 01:06:14,500
Yeah, I think that's where we're headed, right?

780
01:06:14,900 --> 01:06:15,780
I really do.

781
01:06:15,880 --> 01:06:17,780
I think that the market's going to demand it.

782
01:06:18,420 --> 01:06:20,060
More people are going to offer it.

783
01:06:20,240 --> 01:06:23,460
And as it becomes popular, these Bitcoin treasury companies,

784
01:06:23,600 --> 01:06:27,780
are going to compete with each other, not just on their ability to buy more Bitcoin,

785
01:06:28,040 --> 01:06:30,320
but also on their ability to show proof of reserves.

786
01:06:30,840 --> 01:06:31,960
I think that's where we're headed.

787
01:06:33,540 --> 01:06:35,240
Yeah, it's a brave new world.

788
01:06:36,380 --> 01:06:41,760
And do you see the, I mean, they're going to compete on that.

789
01:06:41,900 --> 01:06:43,720
And I think that's a big question in my mind.

790
01:06:43,720 --> 01:06:48,340
I think there is a level of complacency that exists in the market right now

791
01:06:48,340 --> 01:06:52,940
that really isn't forcing people to take delivery of UTXOs.

792
01:06:53,600 --> 01:06:55,640
And that's not your keys, not your coins.

793
01:06:55,640 --> 01:07:01,500
January 3rd, sort of historically, but in recent years really hasn't been that big.

794
01:07:01,500 --> 01:07:04,340
Like pull your coins off the exchange and make sure they have it like.

795
01:07:05,620 --> 01:07:24,668
Part of me where is that sort of mentality has been getting weaker over the years and complacency can drive people just to not take custody and allow these problems to become exacerbated or blow up even more than they let the bubbles blow bigger than they otherwise would

796
01:07:24,668 --> 01:07:28,508
If self-custody was taken more seriously than it is today.

797
01:07:28,608 --> 01:07:33,228
And with that being said, I think more than half of all Bitcoin on the market today isn't self-custody.

798
01:07:33,228 --> 01:07:43,628
But you could squint and see the trend going in the wrong direction if people get comfortable with IBIT, with banks, cussing Bitcoin for them, all stuff like that.

799
01:07:44,608 --> 01:07:45,568
Yeah, that's a great point.

800
01:07:45,808 --> 01:07:48,868
And obviously, Bitcoin in self-custody is the gold standard.

801
01:07:49,788 --> 01:07:55,668
I think it's going to take that financial crisis we were talking about earlier to reverse the trend.

802
01:07:55,868 --> 01:07:57,328
But the trend will reverse.

803
01:07:57,788 --> 01:07:58,748
We will hit trouble.

804
01:07:58,748 --> 01:08:03,828
you know one thing i've learned in markets is that there's always there's always troubled water

805
01:08:03,828 --> 01:08:10,408
over the horizon um so yeah i'm i'm convinced that you know the next financial crisis might

806
01:08:10,408 --> 01:08:17,548
be the last one but will certainly lead to a mass exodus from traditional custody solutions

807
01:08:17,548 --> 01:08:23,288
can't wait to see that day take control of your bitcoin it's a beautiful thing

808
01:08:23,288 --> 01:08:28,088
it's a it's a digital bearer asset the first one we've ever had it's fun

809
01:08:28,088 --> 01:08:34,528
it's a bit unnerving at times can can uh can be a bit stressful but practice makes perfect

810
01:08:34,528 --> 01:08:42,048
there are options on the market we've explained uh unchained others out there that'll help help

811
01:08:42,048 --> 01:08:48,508
hold your hand as you're taking self-custody but i think uh don't wait too because that's last

812
01:08:48,508 --> 01:08:53,988
that's the other thing like you you don't want to be complacent because when shit does ultimately

813
01:08:53,988 --> 01:08:59,288
hit the fan, there is a chance that when you go to get your Bitcoin, it's not going to be there.

814
01:09:00,688 --> 01:09:08,748
Better to be safe than sorry. Safe now, as opposed to sorry five years from now or whenever a crisis

815
01:09:08,748 --> 01:09:16,528
may emerge. Yeah, I think that's great advice, Marty. Look, you've got to get out in front of a

816
01:09:16,528 --> 01:09:24,508
crisis. Once the crisis hits, it will be too late. The coin bases of the world will probably be

817
01:09:24,508 --> 01:09:30,548
shut down by the government, as we saw. Let's just go back to 08-09 when you couldn't short sell.

818
01:09:31,408 --> 01:09:37,268
They will do the same thing around taking delivery to Bitcoin. So yeah, the time is now.

819
01:09:37,728 --> 01:09:44,228
Get your Bitcoin into self-custody. Enjoy it. It's an incredibly empowering experience.

820
01:09:44,228 --> 01:10:00,676
and the options that are available today compared to 2013 oh boy I mean yeah for a year Unchained does an incredible job They walk you through the process They create a really safe environment for you to self Bitcoin

821
01:10:01,016 --> 01:10:02,076
And that's just one example.

822
01:10:02,216 --> 01:10:03,296
There's a whole bunch.

823
01:10:03,916 --> 01:10:04,096
Yeah.

824
01:10:04,996 --> 01:10:09,556
Yeah, you don't have to spin up an Electrum wallet on your desktop and save a wallet.dat file.

825
01:10:10,556 --> 01:10:12,536
It's much easier these days.

826
01:10:12,976 --> 01:10:14,896
And only going to get easier from here, too.

827
01:10:14,896 --> 01:10:19,916
So, Scott, thank you for taking some time to discuss all this with me today.

828
01:10:19,996 --> 01:10:25,316
Is there any parting notes, final thoughts, things we didn't touch on that you think the audience should be aware of?

829
01:10:26,396 --> 01:10:28,036
No, look, just thank you so much.

830
01:10:28,196 --> 01:10:28,896
Be careful.

831
01:10:30,416 --> 01:10:33,456
Self-custody or Bitcoin, I think we hit on all those major points.

832
01:10:34,496 --> 01:10:35,216
Be prudent.

833
01:10:35,956 --> 01:10:36,996
Hope for the best.

834
01:10:37,516 --> 01:10:38,976
But it's a plan for the worst.

835
01:10:39,376 --> 01:10:41,416
And you know it's coming.

836
01:10:41,536 --> 01:10:42,516
It's just a matter of time.

837
01:10:42,516 --> 01:10:45,356
So get out in front of it and do the right thing.

838
01:10:46,816 --> 01:10:47,616
Get on it, Freaks.

839
01:10:47,776 --> 01:10:48,436
Get on it, Scott.

840
01:10:48,736 --> 01:10:51,016
I hope you have a great rest of your day and great weekend.

841
01:10:51,316 --> 01:10:53,176
And hopefully we can do this again at some point in the future.

842
01:10:54,356 --> 01:10:54,996
Absolutely, Marta.

843
01:10:55,056 --> 01:10:55,716
I really enjoyed it.

844
01:10:55,756 --> 01:10:56,696
Thanks so much for having me.

845
01:10:57,216 --> 01:10:57,456
All right.

846
01:10:57,556 --> 01:10:58,196
Peace and love, Freaks.

847
01:10:58,476 --> 01:10:58,696
Okay.

848
01:10:59,696 --> 01:11:00,936
Freaks, thank you for listening to the show.

849
01:11:01,036 --> 01:11:01,776
I hope you liked it.

850
01:11:02,376 --> 01:11:05,676
If you did like it, please make sure you subscribe, rate, review the show.

851
01:11:05,776 --> 01:11:06,656
It helps us out a lot.

852
01:11:07,296 --> 01:11:10,556
And also, if you like these conversations, I've come to realize that many people listen

853
01:11:10,556 --> 01:11:11,056
to the podcast.

854
01:11:11,056 --> 01:11:11,976
They don't know we have.

855
01:11:12,516 --> 01:11:17,116
another sort of layer of this media company.

856
01:11:17,176 --> 01:11:17,776
We have the newsletter,

857
01:11:18,436 --> 01:11:18,956
the Bitcoin brief,

858
01:11:18,996 --> 01:11:20,356
go to tftc.io.

859
01:11:20,676 --> 01:11:21,696
Make sure you subscribe there.

860
01:11:22,296 --> 01:11:25,156
A lot of the topics that are discussed on this podcast,

861
01:11:25,236 --> 01:11:27,536
I write about five days a week in the newsletter.

862
01:11:27,716 --> 01:11:30,156
We also have the TFTC elite tier.

863
01:11:30,616 --> 01:11:31,716
If you sign up for that,

864
01:11:31,796 --> 01:11:32,376
become a member.

865
01:11:32,976 --> 01:11:39,496
We have a private discord server for the elite freaks out there where we're

866
01:11:39,496 --> 01:11:41,996
dropping ad free versions of this show.

867
01:11:42,516 --> 01:11:46,836
and having discussions about everything we talk about a day early.

868
01:11:47,376 --> 01:11:50,116
Logan wanted me to make sure if you want to get the show a day early,

869
01:11:50,596 --> 01:11:52,116
become a TFTC elite member,

870
01:11:52,456 --> 01:11:53,496
you will get that.

871
01:11:54,056 --> 01:11:56,116
We have our discord server right now.

872
01:11:56,156 --> 01:12:01,496
It's conversation between myself and TFTC elite tier members,

873
01:12:01,496 --> 01:12:03,176
but we're going to expand that.

874
01:12:03,176 --> 01:12:06,796
We'll probably do close Q and A's with people in the industry.

875
01:12:07,436 --> 01:12:09,416
I may be doing macro Mondays.

876
01:12:09,876 --> 01:12:11,796
So join us at tftc.io.

877
01:12:11,796 --> 01:12:12,936
subscribe

878
01:12:12,936 --> 01:12:14,176
find the button

879
01:12:14,176 --> 01:12:14,876
in the top right corner

880
01:12:14,876 --> 01:12:15,416
of the website

881
01:12:15,416 --> 01:12:16,876
become a TFTC Elite member

882
01:12:16,876 --> 01:12:19,256
thank you for joining us

883
01:12:19,256 --> 01:12:20,456
okay