Blackrock CEO: Crypto a 'Flight to Quality' | Round Up

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another Roundup edition of B Curby got Michaels one and two Vance and Yano fellas in a minute full Squad all right let's talk about um let's just let's start with Bitcoin and there there were a whole bunch of different uh angles that we could go with this week but I

think the the big story that we got this week kicked off with was actually a bit of a false start on a story which was coin Telegraph tweeting out that a spot Bitcoin ETF had been approved or the ey share spot Bitcoin ETF had been approved uh the market started to move immediately uh Bitcoin ran up about 10% in the span of 20 30 minutes um then people started to ask for sources the two Bloomberg analysts over at uh the two ETF analysts over at Bloomberg James safeer and Eric balunas start first responded positively then said hey what about the source here then coin Telegraph added reportedly to their own tweet but they were the ones who broke

the story and then it very quickly I think the I haven't even looked into how this ended up happening but it was basically a a telegram chat that someone just saw that it was like a Post in a telegram chat that I guess no one fact check and it got tweeted out across the main Channel this is the dissemination of media at its finest it was a Post in a telegram chat coin Telegraph picks up on it coin Telegraph writes an article I think it was either Baron's or Reuters saw that they posted about it that feeds into the Bloomberg terminal goes out over the Bloomberg terminal Bitcoin ETF people at Bloomberg or excuse me ETF people at Bloomberg start tweeting about it boom Off to the Races Bitcoin pumps uh shorts it's also funny because like the ensuing journalist beef

like journalist beef is very serious like there's a Code of Ethics you're supposed to do things a certain way there's a supply chain like you were saying y know people were pissed like you know as as they should be then there was some sort of like sort of half-hearted explanation afterwards and then there was also some like panel interview where it was basically blamed on social media and the need to move fast and Hyper competitive news environment and it was too much apologizing um I think they just have to be better it was an interesting week for media actually not I know this isn't what we wanted to talk about but decrypt also res sended a story uh this week and then the New York Times Like changed their headlines a couple times related to Israel and Hamas and stuff um it did get me thinking about the like 2017

blockchain use case that didn't end up happening like there's you know there's the there's the blockchain news cases that go to die like supply chain on the blockchain healthcare blockchain putting media on the blockchain there's definitely still a market for that or need at Le thing that like I trust unilaterally and and I think that's like you know a hopeful version of what media looks like in in 10 years but I think for now we're we're stuck with coin Telegraph and and the cartoons and all of it but uh the the the the funny part is one of the things that I always find fascinating you know one of the the most accurate and timely news sources for any sort of like up-to-date current events but also up-to-date you know events is Wikipedia every single time you know

whoever wins a Super Bowl whoever wins a game whoever you know someone breaks up with someone like they are on it every single time within like 15 minutes it's crazy how do they do that I would actually like I was even thinking because there's because there's because there's hundreds of millions of people who contribute to it and then they I I don't know if there's hundreds of millions but there's definitely a ton of people and there's people who are just like really deeply in sconed within the community and I I don't know like I've actually talked to a couple Wikipedia editors and there's like a whole hierarchy to it if you want to be editing something that has a certain number of page views here's number 120,000 editors in the last 30 days now we're really going down a a rabbit hole here but have you heard this story about

this Chinese woman who spent years just editing fake stuff spent like a full decade you know the way that it works is when you actually edit Wikipedia you build up something like a credibility score that's like oh yeah this person has editing for a long time it's verified by the community that these things are actually right so she actually spent it was like a decade or something like that creating small edits that were accurate to build up her score and then like like falsifying all of this information that went back you know hundreds and thousands of years uh in Russia no more Wikipedia rat holes let's talk about the ETF yeah let's talk about the the the I guess the one interesting thing to point out other than the uh the journalist Mal practice was the price

action of Bitcoin post the ETF at like FAL start announcement and so basically if you're following Along on video here it did run up um to just over $30,000 it retraced some of that move but not all of it and actually post this sort of Fall start back on um back earlier this week that price action has been sort of bullish and um actually running up it's just under 29,000 at the time of recording and you know I I'm this is like outside of my area of expertise but if I had to summarize the the general explanation for this it would be something like people were surprised that the market reacted as strongly as

quickly to an a headline that was pretty false so the thinking now is actually if a spot Bitcoin ETF does get approved and that's looking pretty likely by February then the market probably is going to move and judging by how people reacted there are some folks that are off sides hence it's probably a good thing I I I think the bigger thing to note on this graph is not necessarily what happened um you know in that morning runup uh but what happened on the 16th when there wasn't any appeal from the SEC to your point I think that's kind of the big moment over the last week the SEC decided not to appeal n bank and I'm not

exactly sure what the details mean uh per se but now I think we have seven days basically until tomorrow uh to see what the final ruling is or or see what the final decision is from the judge and then it's kind of a question as to where we go from there and you know to your point M uh I think January 10th is the date or the arc uh the next decision deadline for Arc and then 14th is Black Rock I mean they're all they're all kind of lined up for mid January um but it seems like you know because they're not going to appeal um you know something will happen in that period of time and it could happen sooner who knows but yeah I think there's there's positive sentiment on on the ETF yeah in addition to that maybe this

was also pre you unrelated to this ETF announcement but you you do have a couple of the sort of blessed folks from macro or trafi this happened last week we talked about a little bit um the Paul tutor Jones came out saying that he likes what he calls the barbarous relics being gold and Bitcoin this week you had Larry fin going on CNBC and talking about crypto being a a flight to Quality asset um some sort of geopolitical hedge which is I mean uh Vance I saw you tweet it out about this I mean I had to like do a double take watching that I mean that's a that's a guy who's very serious uh understands the impacts of his words you know I feel

like that's significant and there could be a maybe a changing of the tides is too too much too soon but I think it is important for trafi buyers who we want to unlock here they need people that they respect and look up to essentially blessing this stuff so feels significant but curiously your guys take yeah I think um on on on one hand like the expectations are so high for this thing that you know almost anything will be viewed as like a disappointment other than like tens of billions on the other hand you have Larry who not only is positive now but has called it a index of moneya laundering in the past uh where like you know if you make it

180 turn like that you gotta you gotta come with more than just like bitcoin's great like you have to call your friends you have to tell them about it you have to like you're putting your reputation on the line and you know your reputation being preserved is some function of like the inflows not maybe of the first day but the first month the first year like I I think that's kind of like where the the rubber meets the road and they have a ton of salespeople and a ton of distribution and this is not going to be the last ETF either and so like you know there there was a good Economist profile on Larry fin about how he went you know Head Over Heels into ESG and he's kind of like a guy that has historically been very good at like reading the temperature of the room which direction

the wind is blowing which assets are likely to be hot next and ESG like for all the it gets it was the hottest investment trend for almost you know 10 years and so like you know you go from that to being on Fox News and talking about Bitcoin um it's just like a huge shift and so I think this is really the super bow you know it's 7 trillion of registered investment advisor assets if you get you know a couple percent of that that's extremely extremely meaningful you know and if you think about how a bull market can come about there's probably two paths one is you know institutionally LED kind of like what we're seeing right now um and that's where we say you know we have regulatory Clarity we've cleaned up the SP space you know Black Rock has the

biggest ETF like it's blessed you can put it in your 401k Etc the other path is like we do a Grassroots um like we build a game you know we scale defi that type of stuff and I think you know the ladder is happening but just like the institutional side is happening first and so that's what the run is going to be shaped by it's going to be like the Larry Fink cycle you know what whatever you want to call it it doesn't matter but like it is about Wall Street getting their fill getting a restart basically on crypto from like three years ago prices against the backdrop of you know frankly gold ripping and gold is like Bitcoin you know the deficits the narratives around you know bills yeah or you know debt not being bought interest

rates going higher just because Supply overwhelms demand like it is a very constructive narrative for him to Pivot into and frankly just seems smart so I think it's cool it's great for the space I would tend to agree with you there um what do you think about I mean there's been I can get the chart up here in a second but but I feel like Twitter loves to to focus quite a bit on eth BTC as a ratio as just sort of a relative I like I don't know how you guys feel about I've never viewed it as super super important but it has been in a downtrend um for a little while I mean I'd be curious like how you guys think about the concept of the eth Bitcoin ratio whether or not it factors into your process in any way at all or I don't

know how do you think I feel like some people make the BTC ratio like their whole person it basically and it's like important not to do that um and if you think about it it's pretty classic like beginning of Bull Run BTC dominance runs you know someone like a sailor steps up and says like this is actually gold for real this time you get that drive down in in alts and like if you look at alts like a lot of them are making there's a few that are doing well but like a lot of them are making like lower lows and like you're searching for like what is actually deep value there and so there is like this Rhythm to all of this where it's like Bitcoin goes you know up because like it's digital gold it has no fundamentals it doesn't need to then you

have progress on the app layer and the reason why we're positive in hold eth is because it's like Bitcoin you're just buying and you're kind of like you know you're along for the ride you hope it happens and and I and you know like the digital gold comparisons are at for eth like I'm I'm more bullish and I think this is probably contrarian on like the long-term fee Market of what happens on chain and mostly just because like real world assets and tokenizing treasuries like those are things that you can stick in an amm you can leave a little bit on the table in terms of Mev or you know yield for people to capture and trafy but like that's like a system that will produce a ton of fees that is relatively price insensitive to the gas costs they just need nuclear grade sensorship

resistance and so like that'll play out probably next year I think that'll be kind of be the defining trend of like what happens on eth like when stable coins hit eth in the last cycle people were like wow you've actually built something useful like a use case now it's like okay if we can bring enough T bills on chain and maybe 10 billion is enough maybe it's like 50 or 100 like you kind of have to start paying attention and you'll have that you'll have the spikes and gas fees but like I'm bullish on what we're building it's much more different than like having this like bullish on like you know almost like bullish Gold View that comes with Bitcoin the only thing I'd add to that totally agree with everything um I think there is also going to be the same kind of a rising tide floats all boats

perspective with eth as well when Bitcoin gets the attention that you know I think it will um eth has a Futures ETF already there's already been two filings that are are for eth spot ETFs I think you're going to start to look at there's sort of the digital gold narrative and then there's maybe like the digital oil and I know that that's probably a narrative that hasn't been used in a couple of years but I think you'll start to see a lot of interest from investors looking at e as sort of the internet oil that's powering these different applications that's powering these different ecosystems real world assets on chain real yield driving value to applications and yeah I mean there there's definitely a Divergence with the

chart that we're looking at right now um and eth BTC is is down but um I historically every single bull market has moved the same way uh which is be moves BC moves first e moves second and then you know all the application protocol tokens move after that that's what I was going to the point that I was going to make by putting these two charts together it's not like a dunk on anything it's just I feel like this is more indicative of where we are in the cycle which is typically around this far into a a bare Market Bitcoin dominance tends to go on a run the trend of Bitcoin dominance over time is lower and lower and lower as more stuff gets built outside of Bitcoin but I don't know I feel like this is It's I feel like it's

that's why I think eth Bitcoin is kind of an interesting ratio to pay attention for me it just tells you where you are in the cycle but it it is less I don't know it's not people like to say like this is the future of these two assets and I I that's not the way that I I mean roll it back all the way you don't you don't have to it's a long chart but roll it all back to uh 2019 you know I had friends that we were looking at making investments in protocol tokens that did exceedingly well and you know their their narrative was H I'd rather just hold Bitcoin and not invest in in one of those assets you know some of those assets did way better than Bitcoin the other asset that did really well over that period of time and much better than

Bitcoin was eth because eth was trading at about 200 bucks at that point um so I I think there is an element of you know history definitely gives us some direction in terms of you know how this stuff will play out um and it's playing out the same way that it did in 2018 2019 and 2020 people also just forget how quickly The Narrative turns right Bitcoin ETF gets approved bitcoin's Off to the Races for one month people will be focused on bitcoin one month later the question becomes what's next and then people start talking about an eth ETF and then people start looking at some of the application uh uh and and different protocols that are Off to the Races and getting users again because the price is going back up and uh Bitcoin leads but but attention moves very quickly and it's really sensible

when you think about it as to why that's the case it's because you know think about what it's like when you're sitting around an investment committee or or hypothetical investment committee and you're saying hey we're gonna go put some Capital into into Bitcoin you know we're going to try this crypto thing I know it's gotten you know fleece you had all the fraud you know this time around it's going to be different but if you can convince people to put money into a Bitcoin ETF let's say then that works then the question becomes okay maybe we should up our allocation maybe this thing actually has legs this time around and you start to trickle down the effects of okay what's next what's working flight to Quality you know narrative is going to be and and by the way Larry f didn't say Bitcoin on that

interview he said crypto yeah which which is very different I think there's going to be it's not not just going to be Bitcoin that that definitely rides last thing like on this like if you take the 50,000 foot View and you think that digital money is important and it's going to be a concept that stands the test of time like I I personally do you know unsurprising but I think the world is also kind of go heading in a direction where that concept is more relevant the question is like can you create an effective self-sustaining can you can you create effective self-sustaining internet money um and like I was you know just thinking about Bitcoin it's like man like you know the Bitcoin future happens and like I guess it is digital gold but like it also has no fees and like in the near

term in the 10year perspective probably that doesn't matter but like long long term like it's like what is the more efficient sustainable money is it something that's proof of stake that burns some of the fees and that has endogenous fee markets from da and uh settlement or is it something that's proof of work you know powered by electricity like I think you construct you can construct Arguments for both one argument for Bitcoin is that you know Energy prices are going to go to zero like may may maybe but it seems like Energy prices are going to go higher and so what are the like the bullish things that eth has going for it it's an extremely lightweight internet money that has a lot of users that people use in different transactions and that is

you know gaining a monetary premium across chains like I I still think about that over the fullness of time um and ordinals are cool and lightning is cool but like it just doesn't add up economically so that that's kind of the last thing that I have to say about it let's go to another story that's uh related to the ETF which is um the new so the New York AG this week filed a claim against um a couple companies where they they argued that one Gemini misrepresented its earned product um they said that the the they said that Gemini marketed their earned product as liquid and safe and that it was not um but even more powerful as they said that Genesis dcg and they kind of called out two folks in particular Barry silbert

and Michael Morrow quote disguised 1.1 billion in losses through a monthlong campaign of misstatements emissions and concealments um would love to get your guys a take on this it's uh it's a big one it's it's definitely that's your big boy right there the uh is it civil yeah the I think it's civil well but but what they're asking for which is probably the you know a huge blow obviously is that the people involved would not be able to sell Securities in New York ever again turning your license and you're done yeah this is bar this is bar giving it

up so I think one of the important things that wasn't really tweeted about was 230 they specifically called out 230,000 investors so this is not I think in like media terms it's not a B2B case this is a b Toc case they're they're talking about the 230 ,000 investors that got crushed from from Genesis and and then inherently Gemini so the yeah it's all via Gemini but Genesis was the back remember Genesis was the only party the only counterparty to Gemini Gemini ear product let me pull up these look at look at these crazy stats 50 billion I know this is so wild Q4 2021 uh market snapshot of genesis's activity 50 billion in loan originations

total active loans of 125 billion 31 billion of spot volume traded and 21 billion of uh notional derivatives traded just a I I was saying this to Santi earlier today like I think people who were around in crypto and 2013 and 2014 remember Mount goau is like sitting at the middle of everything in crypto but people who come into crypto today is like Mount goau is almost this mythological thing that like you can't really put it doesn't really like you can't really like imagine it for people who come into the industry now and forever after Genesis will just be this like thing that like they never really felt but for Genesis sat at the middle of everything in

crypto they sat at the center of everything any CI product that had uh that offered a a yield Babel or gemini or or block fire any of these products Genesis sat behind that um y I mean look at that like so that those numbers fit with the FTX case too right it's you know 13 billion lent by them you know another couple billion from voer another couple billion from Celsius another couple billion from blockfi there's probably 20 billion of aggregate credit created by these you know now bankrupt entities yeah and the uh I read a little bit of the Leticia James uh she's the AG for New York charges against Barry and and co uh at one point

I think it was at this point 60% of all loans were to Alama right you know all of the loans through Gemini were Talam they lent them 2.4 billion between friends you know who knows but like it kind of It kind of punches a hole in the in the Gemini story that we're victims it's like are you victims or are you people that are not doing any due diligence and trying to just offshore that risk to somebody else seems Seems more like the latter and I think to tie it all together with the ETF if you can't issue ities in New York can you issue you know like a GB or gbtc ETF on the New York Stock Exchange so like this let's let's side all

together Gary Gensler interview um you know he's saying like it's not about the security it's about the issuer we're gonna have to go issue by is well he said it's about it's about both you know they're equally as important and so gbtc getting a conversion very different than a general spot ETF being approved and I think the only way that you can say that the institutional phase of if crypto has started is if black rock or a bigger guy has the biggest ETF if it's still gbtc I don't think that's enough of like a mission accomplished type moment so I I would expect the gbtc stuff to get more pushed out somehow do you I don't understand the complex legal Arrangements that the the um dcg Empire had I mean is there a chance that this

is a this is a complaint against Genesis that gbtc and grayscale would be firewalled from that and not impact it or you think no it because it so yes there there is a chance I I don't understand exactly the separation I know they're separate companies dcg is the parent company Genesis was one of the subsidiaries along with grayscale who creates gbtc they're just related entities I I think we don't know you would assume that there is no way that if this happens uh that you be able to convert but it's something that we won't know for a long time and and probably is independent of the conversion itself for now uh I think the bigger point is is this a reason to

prevent an issuer I mean there's literally a charge multiple charges is there a reason to prevent an issuer from you know being the first out of the gate and obviously not a lawyer this feels like a reason the argument that they're separate entities goes out the door when you look that when you when you see that Genesis had a$ 1.1 billion loss and then dcg is giving them 1.1 billion at a one at a 10 10 year 1% rate like that's that argument is nullified now in intuitively yes that makes sense and that's exactly I'm sure what the what the prosecutors will be arguing I I just don't know what you know the legal standards are for for piercing the corporate veil in that respect and saying these are all one eny they were also forced to Halt deposits like last week or the week before that

that was kind of like under reported I thought but my my first instinct was like who is still there like who is still trading on a bankr like you know theoretically bankrupt exchange I I honestly thought I honestly thought that that was a fake fake tweet yeah I I saw that too I was just confused like how many times has Genesis been shut down at this point either I I don't know but let me ask you this what do you think the implications are if gbtc can't convert like what is the impact on inflows into the spot ETF because then you sort of have this trapped how I don't know how how much AUM do they still have is it like 20 30 billion something like that in gbtc it's a lot something like that I

mean you would imagine yeah it's it's sort of I don't even know how to game that out really because theoretically he would have converted that into an ETF now you're gonna have that money just trapped there does that impact other ETFs at all or is that just sorry why I mean why is that trap there if if assuming that it's still at a discount to net asset value people won't want to redeem yeah but it's been at a discount for so long like people probably bought it and getting charged 2% a year yeah why would you just get out if you bought it at a discount you're probably up you bought it a discount I think if you owned I think probably a lot of people didn't buy it a discount I I don't know but I bet a lot of people didn't um a lot of people

bought at a premium actually and uh I think the the fact of the matter is the people who are are getting sold this product or this hypothetical product from Arc and black rock etc etc are not the people who put in the gbtc uh fund I think they're net new so I I don't know I don't know if that has any effect whatsoever maybe it actually has the opposite effect which is people will be more incentivized to move over faster so maybe the redemptions of gbtc will happen if you know that conversion doesn't happen versus just sitting there as Laten you know ownership of a Bitcoin ETF versus the fund and you're happy because a the spread closed and B you're not getting charged 2% anymore um but if GBC doesn't get approved or converted

maybe that will actually flow into a new ETF faster it's impossible to buy gbtc right now like you like you literally can't get a broker to let you do it especially on the retail level so assume assume everything is net new sorry why is why is it difficult I mean just like from the Brokers we've talked to it feels like there's been this like deao ban on offering this to clients you know it's like it's you have you have to be sort of grandfathered in um so yeah I mean I I I think most of the people probably don't even notice it's trading at a discount um it's probably stuffed in their retirement account somewhere like that that would be my guess I I guess they do run a lot of ads but like to what end like you can't

really access it how would you look at the spot ETF as a catalyst there are sort of two benefits from from my vantage point which is you're theoretically opening Bitcoin up to a whole new level of buyers um depending on how how many people just haven't bought because they've been wasting waiting for it um or it's just sort of the idea that this is people would feel safer buying Bitcoin or crypto overall because it's a part of the US regulatory apparatus and there's a big issuer like Black Rock like those are kind obviously those are related things but I mean is it the buy pressure that is the bullish thing here that's the major part of the Catalyst or is it just like yeah this is a legitimate asset now I

mean like I said the expectations are super high so I think crypto Twitter is so uh you know Discerning that anything less than a billion dollar of inflows is probably going to be disappointment um and there's like also this you know Redemption Supply Catalyst which is like not immediately great but the whole thing is you know the winlos filed for this ETF like 13 or 11 years ago like this is what but what the space has been building up to for like over a decade is the final institutionalization of at least one coin which would lead to many more and so I think it's just the beginning of that journey

and I think if if gold and macro is cooperative which could be a various range of scenarios it could be a big recession hits and they start easing it could be you know some sort of other Financial accident it could be gold just starts ripping um but I think you know the setup is is favorable like you know all the doish talk from the uh the FED Governors this week it's clear that you know they're kind of spooked by the long-term bonds going going down and the yields going up so it it kind of feels like you know if it's going to be anytime it's probably going to be now I don't think this would have mattered last year honestly it would

have been too much noise and not the right macro you want to buy Bitcoin with rates going up and they're probably going to double like no no one would want to do that um but I I was thinking about this today like you know if you're like some guy sitting in an investment bank and you're making like eight or nine% on your on your your cash because you're connected like what price movement of Bitcoin gets gets your attention from from from 30k you know probably gets to 40K and you're like all right I missed the first leg I'm not going to miss the second like like the the burden is higher because the interest rates are higher but like it is possible just because of the setup the only thing I would add is the down the downside perspective here is that I mean as we saw with what happened the the

ramp up to 30 the ramp back down and then kind of the slow creep back in that chart is that this is going to be priced in by the time it happens and there's going to be a kind of sell the news moment um and I think you know I could see an argument where people who wanted to buy Bitcoin even if it's in their 401K have been able to do that with Fidelity for a long time people who wanted to buy Bitcoin not in a 401k have been able to do that with coinbase for a long time time like maybe there isn't as much demand as we think there is um but the only way for us to figure that out is if it launches y so I was what I was going to ask you guys is how would you gauge the overall sentiment out there

and what what I'm kind of wondering is I think it's I think it's a little bit mixed actually because there I think there are actually quietly a lot of PE especially businesses in crypto it's been tough sledding for the last 18 18 months going on two years and there are definitely a lot of companies out there that're just like hurting and they're like hey we need a return to the bull market and I think a lot of them are hoping more than anything else for an ETF or having or Catalyst or whatever but I also think there's been a lot of emotional damage and scarring over the last like two years which also tends to happen around the last legs you know knock on wood of bare markets where you know we can't just believe Obviously good catalysts

and I don't know we've talked about on this podcast but it's kind of like could we just be overthinking it and like the having plus a black rock ETF is like that's got to be good right I I I I don't know and I know Vance you've been in New York a little bit talking with some more trades sort of folks like I'd be curious what the sentiment is around them around crypto I would guess it's rock bottom but I mean at least makes me pretty optimistic is you know crypto is like thoroughly off people's radar uh at least at the institutional you know size and they're like you know call me when the ETF gets proved but they're bullish on things that kind of look and feel like crypto or other high quality digital assets like they're all crowded

into the same seven tech stocks uh they all believe that grow story like that could be a correlator for something like eth you know if you build something really impressive on it they're all B uh they're all bullish on on gold you know people think you know at least kind of in in the Wall Street communities that I've kind of been a part of you know gold could double or triple just because central banks are buying it um you know people it's like a very lame idea but like if you look at the gold chart you want to pull the gold chart up the long-term one and you know it's like there's hundreds of years of price history or whatever but it it does look like you know it's the world's largest asset of 12 trillion but if like if anything looks like it's going to break

out over a long-term time Horizon it's probably gold um and so you know for them it's like do you want something that has a bit more Alpha it's a bit younger uh you know it's a bit more zeitgeisty um you know it's constantly online in a way go gold is not like Bitcoin you know it's it's right there and so I can see kind of the early Innings of of people starting to construct a bullish thesis on crypto um and and you know the the other thing that's kind of interesting about uh gold is the ETF Coral areas the spider gold trust launched in November 2004 so just to the left of where this chart is and look what happened to the price you know like that that's kind of where people's minds are going and and guess who was

the chairman of the cftc when the gold ETF got approved it was it was G Gensler um and there was this same sort of dichotomy of like he's trying to keep the ETF caged up the pric is being suppressed the bankers are trying to get us um and so there's enough cories there's enough evidence there's enough uh of a lack of anything else to invest in also that kind of leads people towards crypto and the Wall Street uh crypto crowd there's a lot of overlap of people who are just doing it nights and weekends um that's been another thing that I've noticed I think a good signal for like when the market is ready to rip is and Mike we talked about this I remember over years about a year ago is when the market goes up 50 to 100% and nobody says a thing and nobody even notices

yeah and bitcoin's the Bitcoin itself is the best performing asset class of all of 2023 right large large cap growth in the US is up like 25 30% an index of Commodities is up like 5 10% bitcoin's up like 60 65% on the year nobody said a thing doesn't feel like that when has that ever happened the top performing asset now has Wall Street like you can build the narrative Legos so at a c at a certain point you can't ignore it and like the two catalyst is like two cat to to go back to Mike's thing is like you can't ignore it when the price goes up 100% especially if you are a financial adviser we just had U Matt Hogan and Hunter from bitwise on the Empire podcast with Santi and um uh uh they

laid out this stat that I didn't know which is retail controls 20% of the wealth in the US institutions control 40% of the wealth in the US Financial Advisors control the other 40% of wealth in the US and right now it's really really really hard for financial advisers to recommend Bitcoin because you're not incentivized on it uh so if you if you recommend that your client buys Bitcoin it yeah like Michael you're saying they can access Bitcoin in their coinbase sure but if you're a financial advisor you don't get paid on that totally what the Bitcoin ETF does is it allows Financial advisers to recommend it to their clients not because they haven't been able to in the past but because now they can get paid on that

and that is a big Catalyst in my opinion totally agree with that we were also uh meeting with a couple of our LPS over the last few weeks and just asking them what the lp Market is right now and you know they're out funding raising funds obviously deploying into other funds they said that there is a direct one to one or one correlation correlation of one to how much money they ra for blockchain specifically funds with the price of crypto the value of crypto which is you know hilarious but think about the psychology of that it's people want to deploy into crypto funds or Venture crypto funds when Bitcoin and eth are ripping and I I think you know the wealth effect or sort of success or

Price action will be get more price action I I think that that's also going to be a huge narrative that takes over so how do you guys remember experiencing 2019 like what were what was your mental state like what do you think the industry where was the industry at like I I remember it as this like Barren Wasteland of like lost hopes and dreams at that I mean people were very I think people were way more beaten down then than they are now I'm starting to see people come out and say this is as bad as it was back then I still don't think it I still don't think itamp the so like the the alt communities that are you know like pick a coin uh I'm not gonna pick on any coin but

all the alts are down like 95 to 99% and like that's a you go in those communities some are building some are having fun but the Vibes are like death march terrible like when you're down that much that just like mentally will do something to you last cycle the all the the majors were down that much Bitcoin was you know peaked at 20K then it went to 3K you know it's down 85% uh you know eth went to, 1400 then it was at 80 you know that's down 95 5% like the sentiment that was in the alts last time or on the alts this time was in the majors last time so think about how desolate that was and there was and there was just nothing really either I mean there was like the beginnings of

some alts that could be something but let me provide a different perspect a similar but uh from a different angle um 2019 when everything blew up 2018 2019 remember the chairman of the SEC basically pushed us off as an industry and was like too small too too irrelevant to regulate and that's kind of what happened you know we we kind of blew up ourselves in this Fringe corner of the internet and nobody really other than us noticed whereas now you've literally got the you know committee meeting after committee meeting on Capitol Hill you've got you know draft bills that are working their way through the house you've got the most popular business story in the world right now

maybe you know business story maybe not total story in the world right now which is which is a you know case against one of you know our our former Superstars and now everybody knows about it it's kind of you know negative in that respect but the positive sentiment of that is that everybody knows about it so when things come back everyone will be like okay it's back you know they've cleansed themselves I know about it I know what it is and the the market just gets to be 10 times W 10 times larger I'm so over the case I'm so over thef case just like a reality TV show like just it's it's I don't think anybody cares more than the reporters themselves look look at this is what happened this

was the price action for Bitcoin in 2019 which was like this if you just if you just looked at this and you didn't know the the backdrop or the context of what we were just talking about you'd be like wow this is a really good year this you know Bitcoin more than doubled and I'm just picking out Bitcoin no that year sucked that I can I can I can tell you every dot on that chart how I was was feeling and it was not great yeah it was a brutal year but I'm just saying like if you looked at that chart in isolation you'd be like that looks like but you look like you look at Bitcoin and E now and you're like they're like not that like from from their all time they're like not that far down like Bitcoins was like 68 it's at like 30 basically you

know eth was at 4,900 it's at like 16 it's like that's not that's not trying to go from 80 to 1400 like like like that like that is insane like I remember joking about people at e eth Denver in like 2019 like eth to 1K it's like I hope so it's it's just not that bad anymore so I I think the one thing we're still looking for is like what does deep value and SS really look like you know how bad can it really get because there's just you know there's only 21 million Bitcoin alts just have a lot of unlocking Supply uh so that's more situation dependent

like seeing blur price action has just been pretty wild to see it just drop like a stone um and that's like a well-regarded primitive backed by a well-known firmm with well-known Founders uh some projects are on the tail end of those lockups some are frankly just starting like apos and S and all that stuff like those are like years long emission schedules we're gonna have to just sort that out at some point one thing I love i' um just outside of just Market commentary I'd love to get your guys take on on the uni fee switch um thing that happened this week which was this was not the fee switch that we'v been talking about which was going to be actual fee switches on like V3 pools where the funds would flow to the Dow and

theoretically acre to the Token this was put into place by Unis swap labs and sure most folks who are listening on this podcast know but there there is a dow entity which governs the protocol and the token and then there's a Labs entity which is a much more traditional centralized ized company which is funded by VCS and they uh and they are like a for-profit much more traditional and the the overall relationship is that there's the Unis swap um protocol which is governed by the Dow and token and then Unis swap Labs builds products on top of that namely the front end and the wallet so the distinction here is that this was a 15 basis point fee that got added on some tokens only on the Unis swap Labs created front ends so

I frankly I'm surprised that there was surprise here the second that they raised money for UNIS swap Labs whatever that was like six months ago you everybody should have known that this was coming like you're not just going to throw money into a company because you expect them to be you know good stewards of the protocol they're going to build products that are going to be able to make money and that's the whole hopefully that makes you money if you're a token investor but I mean I I do think it is a travesty just like the US you know rules and regulations around this stuff where you haven't been able to turn on the Fe switch and people are just left there like holding the bag I I I think it's like not dissimilar to like a gbtc or you know some other like eventual promise of value or redemption

or something like that but they have every right to charge a fee on the front end that they maintain and that they fight you know tooth and nail with regulators and all sorts of people for so if you don't like it just use it different front end keep in mind I mean the way that the at least it seems that the regulations are trending there will have to be a lot of things that Unis swap labs and the front ends that they maintain in centralized way they'll have to do which is like kyc AML they're going to have to maintain you know suspicious activity reports they like they're they're going to get regulated in a pretty deep way and and so I think you know that's an element here too that people need to remember um you know if you want to use the clean Apple

supported interface to trade or or to buy or swap tokens it's gonna it's going to come with extra bells and whistles than just using a defi interface yeah I think that's both said there there were some I saw some of the the competitors to UNIS swap try to dunk on the fee as if they weren't also charging fees just in a even less transparent way so I you got to give this to Unis Swap and it was sort of an L for I won't name any names but yeah there were a couple of other protocols that were like hey we don't charge fees come over here and then it was like yeah those those protocols should not be named internalized basically all of the fees so like yeah I I uh I think we got to be affirming each other and building each

other up not trying to like piss on someone's parade when they're trying to build a sustainable business that's that's poor form Vance you were sort of talking about um I mean do you think there's this there's the opportunity for this to actually be the first real institutional cycle for crypto and I don't know one thing that I was thinking about uh with the benefit of hindsight is a significant moment for stable coins in the last cycle which was also in the in the doldrums was Libra coming out and saying or Facebook coming out and saying we're going to build a stable coin and you know it's obviously wasn't 100% because of Libra which ended up falling apart but that did catalyze this insane bull market in stables and I do wonder I

do wonder if there could be some similar effect here I don't want to overstate it because it's one CNBC interview and I know I'm biased and I want this to be the case but we've never had anyone like Larry Frink come out and say you know crypto is a qu flight to Quality Safe Haven type asset there's even a big difference between Paul tutor Jones saying something like this and Larry because Paul tutor Jones yeah he controls money but it's really mostly his money and he's a hedge fund guy he'll get in and out of Trades Like Larry V is at the very top of the world of institutional Finance he through Black Rock controls I don't even know what it is eight or nine largest asset manager in the world yeah largest asset manager in the world I don't know I mean this this could be the first cycle where

we get real institutional money that isn't just kind of web two VCS taking big punts or you know Vol like not knowing what they're doing or um I don't know like last cycle was kind of institutional but kind of not really at the same time so just to tie it all together like a lot of the people who use Genesis in you know last few years were based in New York like it was known as like the New York City like Wall Street style Investment Bank and a lot of those people are stuck or know people who are and so that only leads them to kind of be more and more like this is a scam and that's just like a group of people we can't afford to isolate they literally control all the money just like not a good idea so whether you like

or don't like Larry Frink having him as the cheerleader as the world's largest asset manager mobilizing his Salesforce telling his friends um you know is it going to be a disappointment on day one depends on where expectations are and if Bitcoin rips like 30% higher of course it probably has that chance but it's about the first year uh or the first few years and also what the macro backdrop is doing and I think it was like we had this coid sugar high all the arguments sailor was making at that point in time were like this could happen we we hadn't experienced any of the inflation when he started buying in late 2020 we had an idea that it might happen but now it's like all those chickens have come home to roost and it's it's kind of chaotic

feeling and Bitcoin and eth and other currencies that are sustainable are probably going to do you know decently well if there's institutional adoption so I think it's the beginning of you know a journey that has taken 10 years to start when the lnlos filed this um and it's yeah like this is kind of what you play for as an asset manager the the number one thing that I would say is holding back the industry and I know we've talked about this ad nause in before is lack of regulatory Clarity and we're not going to get it anytime soon like it's not going to happen in the next three months but the first thing that will happen it seems like is a Bitcoin spot ETF which is in itself sort of regulatory Clarity on one aspect a

major aspect of this industry and I think that there are a lot of people that are waiting on the sidelines for that um and you know hopefully that's just uh the start of the process of getting more Pro crypto regulations done but it'll trickle down just like we've seen with you know the the wealth effect flowing through through the market ecosystem one thing just to note as well on your point Vance about it not being about immediately the inflows versus the year the on the H the at least the last having the price didn't immediately Skyrocket in May when the having occurred it took a couple of months until September October uh from my memory for the price to start running up and so just that just a maybe a point about expectations going into the having

obviously the spot ETF and if and when that approves might would obviously impact that but the other thing that I would say about the the regulatory point is that I I've heard Matt LaVine and Jim chanos talk about this as a framework and I think it's relatively true when price is going up there's not much demand out there in the public to regulate things and it's like oh well maybe this stuff is actually really useful and we should adopt it and do all these things and then when the price goes down people start looking for blood and someone to blame and that's when the SEC and other regulatory bodies are at kind of peak public interest for regulating which is what we've been seeing for the last year or so so conversely I think if

I don't know if it should work like this but I sort of think it does in a sense if the price of Bitcoin and eth and crypto starts to go up there might be more demand for positive regulation or at least less public interest in just getting out the Torches and pitchforks against the space which is what's happening right now and the reason why is because what we're talking about is financial services right the financial services you know next to healthcare is the most regulated industry those are the most regulated Industries in the United States no one can put a dollar into some ecosystem if you work at you know a registered investment adviser Investment Bank etc etc unless it's something that is cleared by compliance there's no way compliance clears things like I I

understand the argument where you know you don't want regulation as an industry is growing I I think the caveat to that is you don't want regulation for your industry while the tech technology is maturing so long as you're not dealing with a regulated industry but because we are I think we need some regulations for people who are you know banking institutions in investment Banks to be able to transact in stable coins like that that would be just like a base case um so I I think you know positive regulation but I also think once again ETF positive sentiment and then that leads to more positive regulation uh just on the regulation stuff so it looks like Jim Jordan is not going to be the house Speaker nor will Steve scales and now it looks like they're thinking about

elevating Patrick McKenry to be the the temporary speaker until January so he'll right you know awesome super hardworking super honest guy um like he's definitely one of the more moderate and reasonable politicians that I've ever met uh and he's going to be the guy who's the you know temporary speaker of the house and he has the ability to you know bring certain things up and there's a lot of stuff that needs to pass by January like we got to give Israel Aid we got to give Ukraine Aid there's border stuff there's probably spending packages I wouldn't be surprised if the stable coin Bill slips into something like that and that's just like a really good bill like it it is super reasonable for anything that you know has been invented before you know it comes to pass they're

going to give it you know a study period it it just is like there's a lot of things that are lining up in crypto's favor the other thing I would say is 2024 is going to be a big transitional year it feels like you know with a presidential election with a lot of kind of the economic problems like a lot of things are going to come to a head at some point in the next year uh so I think people have kind of been in this like happens with presidents you kind of get into this like groove of like yep they's still president you're just kind of like moving along but we're going to decide what the future of the country is for the next four years and that's super exciting but it also get people thinking about the future and what different shapes it can take so I think it's I

think it's positive I think that the stablecoin but stable coins also feel like one of the it's the least thorny areas of crypto to regulate I feels like there are some very common sense things that you can do that would be super win-win there was a Nick Carter created this chart so credit to Nick but this was this was great um basically the idea is that Stables create net new demand for us treasuries because at this point that's basically all that at least USD Circle in usdc is backed by and I I actually don't really know tether but I'm assuming tether as well and you can see Stables are you know they're small but they're the they're the 16th largest Sovereign holder of treasuries ahead of some pretty some pretty heavy Korea

Germany Saudi Arabia I was I was pretty surprised to see Saudi Arabia on there um so I mean it's not nothing this is such a wonderful narrative as we try to figure out who is going to buy all of our debt and we just have this thing like don't worry we invented like the stable coin and everyone all retail globally wants to hold this stuff like that's so perfect why are you trying to ban this and and it like you get the positive regulation you get the ETF you get Larry Fink saying crazy stuff on Fox News 2024 let's see I'm very curious to see how the Bitcoin Corner reacts to this because in one sense yeah I I feel like generally

bitcoiners are very positive on stable coins probably because it's not another token that threatens Bitcoin but I mean this is in theory we're importing into crypto the sort of the mo for why Bitcoin exists in the first place which is US debt that's not theoretic Al sustainable so I like just to be clear I'm super positive about this I think this is a very good thing but you're also kind of importing you know from the Bitcoin frame of view like this theoretically safe asset that isn't that safe because you know XY andz reasons but I just be I think you think of it as like you know lily pads it's like the currency of your country probably is worse than the US dollar which you can

then get to and you can get then get the US dollar to like some high quality more sustainable crypto asset we'll see we'll see it the yeah also also keep in mind I I'm you know looking at usdc or some of the other publicly announced uh Holdings reports we're not talking about 30-year bonds that have gone down 48% in the last two years we're we're talking about six-month three Monon T bills very very different yeah yeah I know this isn't a macro podcast but the thing that's going on in the bond market right now is it's the worst sell-off in US Bonds in all of us history right now so that's inclusive of the Civil War I mean it's a nuts absolutely nuts draw down wh why is that

Mike why is that the I mean I'm not a like a bond math person but there's there's an element of convexity which is basically like the lower that you draw down yields on bonds when they move up there the basically the difference in terms of the overall price of the bond is going to be very different if you're moving from a 0% interest rate to 0.5% interest rate than from like five to six even though it's a smaller amount the face price of the Bond Falls more and we had like record issuance of very long-dated debt at super low yields like basically 0% coupons and then we jacked interest rates up and what's been

happening is the long end of the curve is what's moving up right now and that's where everyone's financed so so here I saw a great tweet this week if you would have bought the 30 30 year treasury bill Bond uh on December 31st 2021 and you bought Bitcoin on the same day guess what is worth more right now Bitcoin Bitcoin never goes down remember when pal used to tweet that when like servers servers AWS go down goes down not helpful but it is true like I mean the people who are having the worst time are the people who are heavily rewarded for making two to

three% per year but heavily punished for losing any sort of money and those are all the pond people so can I make can I make like a suggested listening for the Pod so Jeff dlac Michael S me sent me this presentation did a wonderful uh Grant so Grant's interest rate Observer kind of like the archaeologist of interest rates and financial markets and he gave like a 40th anniversary of uh interest rate presentation about the US and debt and the deficit and where interest rates are and where they might go and it is just like the most thorough debunking of the idea that we can print all the money we want and it's refuted just by simple math that you can do on a napkin but I mean the basic point is like stocks not a great idea bonds not a

great idea you know like there's certain things like tips which will probably get like outlawed in his opinion um there's very few investable things that have you know corelation to the basement of the money supply and uh he he he he hates Bitcoin unequivocally but uh he he kind of makes the argument for it without really understanding so I thought that was cool I I don't know I don't know how much I actually really believe this but just as a theory for because there are really smart people out there who say the the deficit doesn't matter ultimately in the long term because the US can print money and my theory about they they're really smart people right so like when really when you know no name people on Twitter say that it doesn't matter I disregard that but when

very smart people I'm I just like try to understand where they're coming from and I think what it actually is is a rooted bias I try to imagine if like I was 60 years old and I had a bunch of interests in this trafi system that was propped up by this unsustainable thing I wouldn't want them to pull the rug out now but I that's not my position this is like Market forces this is this is all this is it's more Supply than demand for various instruments that the government's trying to issue but totally but you at some at some point one of two things needs to happen either you need to like you need to normalize it in one way or the other you need to inflate

everything to such you need to basically run inflation hot and interest rates slightly under that so that you normalize like GDP relative to debt or you just say hey this has gotten way out of whack and you try to you know pull the rug and uh that's has to be through inflation or deflation that you do a reset here and that's if I was if I was a 65-year-old and I had a bunch of trafy assets I would not want them to do the second thing I'd want them to do the first like you say reset like the those people are not dictating the future of like what we're going to live through I think your point is similar to mine which is like there's these various points at history like World War II you know the invention of the printing press

like where you have to rethink like how institutions are built and and rebuild them in and of themselves and like you know Jeff gunlocks classic example is he he's a guy that wants to abolish the fed and replace it with the two-year treasury it's kind of like a weird idea uh and it doesn't give them many levers to like increase or dramatically decrease the monetary Supply but like that's the whole point it's like does it really make sense for them to set the price of money does it really make sense for them to buy or sell bonds or or have a balance sheet to do you know whatever they want to do with versus something like you know like honestly like an eth or a Bitcoin where it's like like you can you know the rules the system's not indebted like this is a different thing

and uh I yeah I mean stand druck and Miller and him are saying basically the same thing like at some point you have to add those perspectives up and it means something and it's like always a shitty idea to call for the end of the world it's never like profitable it just takes like long much longer than you think to happen but uh these are going to be the narratives are in the backdrop and it may not you know there may not be a collapse in our lifetime but people are going to be really worried about this um especially as like things like the tenure just keep nuking and yields go higher that doesn't help I think the bitcoiners would hate this idea but I do think eth's monetary policy the flexibility is like slightly better if there's going to be a money because actually like a totally static demand

profile for money is like not actually great you kind of want it to be I think Dynamic but rules-based I don't to be honest like I don't 100% have a grasp on East monetary policy but you know it's kind of I do think the government largely gets it right it's like when there's a bad economic time you want to stimulate a little bit when was there's a good economic time you want to pull the reins back and create stability but the the pro the problem is it should just be rules based and it should be an equation like the tailor equation instead of like succumbing to panic um right and just like eight people I think of it as like lighter or heavier you know heavier assets over time will sink lighter assets will rise you know what are what are the functions of being

something being light you know having very little new Supply issuance having a strong holder base having some sort of buyback that's more in like trafi not having for sellers that have you know fixed cost to generate your your coin and your security like those are the those are the things that like a good money has and Charlie noise put out a tweet I think two weeks ago that was like you know there's a chance that eth is like terminally like slightly positive in inflation and that's like like the goal is not to delete all the supply the goal is to make the most sustainable internet money that you can over decades and assume that that the lightness of that asset will repel it past heavier assets it's exactly what you're seeing with alts right now there's just so much Supply like the

examples only work in the extreme where it's like if you had all the supply in the world of an Al today it would it would it would dump it would be heavier uh but like you know if you think about it in the 10 20 30 year increments like how much does proof of work actually cost versus proof of stake is it enough to tip the balances it's one of many factors but I do think you know your point is probably right it's it's just like a a much lighter monetary Supply engine I thought you actually had the Tweet of the week by the way which was this the idea of it's it's like hell yes I did it was it was the point that you brought up about um Millennials and Zoomers not being able to afford a house and the link between that and like

basically yoloing into meme coins and meme stocks and all that stuff I just think I do think that's like the key Point like making all this stuff unaffordable means that you just need to like all right I don't I'm not going to have all the stuff my parents had so I'm just going to YOLO into this thing that may go way up or may hit zero and like you know pull the slot machine type thing see I also thought Vance had the Tweet of the week but I would uh actually point to one day you'll be so tired of winning you'll say to me Vance please please Vance can we can we just stop winning can we just take a break for a second and then we'll all win some more that was a good tweet too I think there's there reasons to be jubilant you

know I think I think we're the setup is is lovely um and yeah we'll see I'm just looking at my own tweet it's beautiful that feels like a good place to wrap yeah we can wrap it up all right [Music] guys