Grayscale Victory: Another Spot of Bother for the SEC? | 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-hosts 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 thanks all right everyone welcome back to another Roundup of bell curve you got Michael's one and two Vance and yenno all the fellows are back welcome back the boys are back you guys just want to launch right into gbtc it was a big week big legal uh Victory week for crypto overall continuing a trend I think that

was set by the xrp decision and we actually had two big wins this week one was gbtc and the other was uniswap which flew a little bit more under the radar but I think was almost equally as important so maybe just to kick things off with the gbtc decision so the high level is the U.S court of appeals struck down the sec's denial of a Bitcoin spot ETF so what this doesn't mean is that we're in immediately getting a gbtc Bitcoin ETF and that conversion is definitely going to be successful but what it does mean is that the SEC now has to go back and review grayscale's proposal again with the Court's ruling in mind and what was specific about what was uh what makes this a win I think for

crypto is that the SEC was or the court rather was incredibly specific about the rationale for why the SEC had to go back and review the sec's decision and you know from my understanding not a legal expert here but they really boxed them in and in particular what they focused on was the link in between the spot and the Futures uh markets so that close link they pointed out in kind of plain English something that I think many people had been thinking about all along which is how does it make any sense in the world to have a Futures ETF approved but not a spot ETF there's a great line somewhere in here which is that the future is our derivative of the spot market after all so it feels very

unlikely at this point that the SEC is going to appeal I guess that would go to the Supreme Court but that seems unlikely there are still Avenues open for the SEC to deny a spot ETF but what do you guys make of all this spot Bitcoin ETF is coming at some point just depends when they they just uh this is breaking news that will be old by the time this is listened to but they just delayed on Wisdom Tree and Galaxy so like they're not just coming out and improving these and I think the timelines that like James Seifert and Eric Bell Tunis from Bloomberg say or Jan 1 2024 so it's going to be a minute um but it's positive and it was 3-0 and

it was I think it was a trump judge an Obama judge and a Biden judge and he lost 0-3 and what's interesting kind of outside of that is just if you look at the recent descents into SEC settlements especially the nft one that was I think this week you have there's five Commissioners on the SEC um you have two of them it used to only just be Hester Pierce kind of issuing a letter of descent against the the different kind of judgments that the SEC is putting on these these people that they're going after and so it's it's like the courts it's also like the commission and you only need three out of five for something to kind of or for something to get approved by the SEC so you already have two and I

think this case is just kind of like another it may be the straw that broke the camel's back in terms of okay now you probably have three SEC Commissioners that are saying this just isn't reasonable anymore which it isn't and you saw that in the court opinion yeah only thing I'd add um James Seifert and uh Eric um be sorry yeah balkanus um from Bloomberg uh they upped their odds I believe to 75 chance that has spot Bitcoin ETF gets approved in 2023 and a 95 chance that it gets approved in 2024.

so I think you know it's really Financial gravity at this point as to like what direction we're going what does that do actually to you know Bitcoin markets um it's probably you know positive uh to say the least in terms of you know where Capital will ultimately be flying I did see some interesting tapes um you know what what the ports hammered on was the difference and you know the the manufactured difference between um uh spot and Futures and uh really what this ruling says as we've been talking about is you have to go back and tell us another reason or you have to go back and give us a different reason as to why you're denying the spot uh Bitcoin ETFs the other way that James Seifert was

talking about it is he said well you know they could also just go back and rescind the the Bitcoin Futures ETF uh approval um so I like once again this is not done I don't think that's going to happen frankly um but there is still a lot of stuff that's gonna have to go through for us to be able to get to that spot Bitcoin ETF the other thing which I think is is also you know starting to pile up is what's going to happen with ethereum and I think a week ago or maybe 10 days ago there was there was a Bloomberg article that talked about um the the fact that the SEC is apparently open to approving a eth Futures ETF which um I I think would be you know massively

bullish for a number of reasons number one obviously uh you know the capital formation that happens when you have an ETF like that no matter whether or not it's futures or spot but what it also implies is that it would be the first time that you have the blessing of the SEC around ethereum um because it would effectively mean that it's not a security um so I think that if that goes through and that would happen sometime in mid-october um that is also one of the most bullish things for the entire industry I just wanted to give a quick shout out to permissionless this is the biggest and best conference in all of D5 it's the one that we do with bankless who's a great partner for us last year we had almost 7 000 people there in West Palm Beach we are moving this year to Austin

Texas from September 11th through the 13th and if you're a listener of bell curve any of these last five seasons this conference is basically custom made for you we're going to be talking about liquid staking the theme of this season we've got a bunch of great panels on Mev if you listen to the app chain thesis we've got a bunch of Cosmos folks out there in full force we're talking about the converging architecture of Solana the roll-up space in eth and Cosmos so I would love to see all of you there and to reward you for being such great listeners to bell curve you get a special 30 off code it's bell curve 30 that'll get you 30 off tickets click the link in the show notes and then head over over to the permissionless site and make sure that you get your ticket today

again that is bell curve 30 click the link in the show notes so the three pass forward right now is so we don't have a Bitcoin ETF right now the three pass forward or one gear it kind of depends on how hard Gary Ganser wants to fight right so one is you want he really wants to fight he wants to go to the mat and they so they have 45 days to figure out whether or not they want to appeal or not that's one option second option is they don't appeal this but they come at them from a different angle they can't use the argument of hey this is not a market of sufficient size to prevent manipulation but there's a different reason we want to say no or the third is that they um that they were seeing the Futures it does feel like the um the

difference between now so the first Bitcoin ETF I've got to introduced what 10 years ago with the Winklevoss twins it feels like the difference not not that long but I think 8 27 or 17. so you sure all right whatever however long it was to go like several years ago um the biggest difference is that blackrock's now in the game I think and now there's like there is a pull uh there's a real wall uh there's like a real player from Wall Street I think who's not Wisdom Tree and something like that like there's I think the uh the appetite is there but also the political influence is there now so I don't I don't see them or sending the this Futures ETP I don't know what you guys think of that about that but no that

that's more of like a straw man example of like that is possible but it's it's like you know zero percent chance of actually that's gonna happen um yeah I mean the other part on that second Point uh about going back and and kind of figuring out uh a different angle to come at it um you know the SEC has also been really uh really difficult when it comes to custodians and they have this new uh custodian rule uh that they're working through the system for registered Investment Advisors so it is possible that you know that could be the new angle of attack um and that if they were to come at it from a different angle I think that would be the most likely one I I think there's I mean one of the

other differences though Jason even in between 2017 or whenever the Winkle five for supply for that Bitcoin ETF is the market is definitely much larger right now and there's a lot of the original argument that the SEC focused on and why I think there was a Futures ETF allowed before a spot is Market surveillance and it's much easier for them to conduct their definition of market surveillance if there's a futurist that's trading on the CME as opposed to bitcoin that trades on all these different offshore's uh exchanges and that part partially some of those challenges have been solved because there are better surveillance Technologies now and you do have uh this sort of U.S infrastructure in the form of what coinbase has built out since 2017 right so you have this kind of NASDAQ coinbase partnership

um which allows that to be possible the other thing is the political will thing I wouldn't underestimate as well either and I think one of the we can get into the unit swap ruling as well but it does feel like there's a tide that's turned Jim talks about this as well within the context of Fraud and I think the analogy applies here which is when everything is ripping up there's zero demand out there to get to the bottom of frauds right because everyone's making money and it's like don't [ __ ] up the money but as soon as everything turns around everyone wants to know why so the demand for people to get to the bottom of Fraud and bad activities is just much higher and it feels like a couple of months ago the demand for people to find accountability

for why they were losing money was at its highest and we've moved past that point so I think that was the point of the sec's highest demand political will and that's moving back in the opposite direction now and there was actually a an article from The Wall Street Journal there were a couple articles that came out this week but this one comes from the editorial board of the Wall Street Journal which is significant in my opinion the title of this article is the SEC strikes out again on crypto with grayscale and there is some choice you know there's some Choice language here from this is coming directly again from the from the editorial board of the Wall Street Journal it's a it's a big deal I think

it just feels it feels like the uh it feels like the tide is turning to me so a little anticlimactic conclusion there but I think in the quarter of public opinion that SEC is finally looking to start like it's losing and a lot of the rationale that they use to Target crypto crypto firms wasn't actually a solid as they originally thought I think what we're going to hear next uh not necessarily next but what I think we're going to start to hear at some point soon here is uh effectively mission accomplished and the SEC is going to say we did it we regulated it it's now safe we're fine with it here BlackRock is leading the charge they're not going to let graciel get converted before BlackRock gets approved but we've got you know

traditional guys Wall Street involved and I I think they're going to memory whole the losses and basically turn it around and turn it into a positive Mr Gensler is holding Bitcoin spot etp's hostage in his crypto Market power grab until crypto exchanges registered with the SEC he won't authorize spot Bitcoin ETFs arbitrary regulation and Regulatory overreaches are recurring themes of the Gensler SEC and Biden Administration is he trying to match Lena Khan's losing record at the Federal Trade Commission yeah yeah I mean you can kind of see this with Lena Khan too and this probably doesn't mean much to people who watch this podcast but she's been you know very aggressive and losing and now she's been more favorable waving things

through waving thing waving like kind of big you know competitive Acquisitions through um I think at a certain point you just need to stop losing you know stop you know what do you do when you find yourself in a hole just stop digging uh and then just kind of like try to like crawl your way out and maintain dignity but I think the dates to look out for are September 12th is when Gary Gensler testifies before the Senate Banking and house Financial Services committees um then you have October 10th which I don't know why is the day that people put out there for East futures there's some there I think that's like the next approval potential date maybe that gets laid to and then gen one so it's all happening in Q4 for the most

part which is exciting yeah and then the end of the 240 days the other big one is uh is q1 right so I think it's March mid-march basically all of the final so you have 240 days to review the um an ETF if you're the SEC and a lot of the end of the 240 days comes due in March for I think seven out of the eight open uh open Bitcoin ETFs BlackRock Fidelity uh Wisdom Tree Valkyrie whole bit wise a whole bunch of those are in March what if what if we get the spot Bitcoin ETF approval on the same day of the happening right right into the happening right into right into presidential year right into the FED turn in the interest

rates around oh so the the other angle which I think is interesting just because we were talking about it is you know they touched on the sort of the administrative State uh perspective that this has been pervasive across the body Administration you you also had one of the leading candidates for the Republican nomination quote tweet uh Kitty Han about the SEC losing 3-0 I I think you're going to start to see the candidacy uh all the candidates start to build a perspective you got RFK announcing his presidency at Bitcoin Miami you've got the VAC Rama Swami talking about in quote tweeting Katie Han like I I think this is going to

become a new you know rallying cry um especially you know if you want to reach the younger demographics this is going to be a good way to do that vivec foreign what a guy he's got some pretty out there ideas I don't know if we have enough time to get into all of them but some of them are pretty wild we're doing a political app one of these days we'll wait till 24 to do that yeah yeah people are people are going to be yeah fired up but it's good to see you getting the press and it's good to see Bitcoin standing for kind of like the it's gone through a lot of narratives but now I think Bitcoin and crypto are kind of like pushed back against the

regulatory apparatus Nanny state and I don't think there's many other assets that fulfill that role like you could say oil is that in some ways but like I like I personally don't like oil like I I hope we can save the planet at some point I think most people agree with us on that like Bitcoin is kind of more neutral in many senses and it's gotten sort of beat up past couple years but it's a good narrative backdrop to have for it I agree with that I think Bitcoin becomes I think it's part of an overall backlash to um yeah the political movements for the last couple years and it's become sort of beak it's not a it's not an accident that across both sides of the aisle The Fringe candidate that they all support

Bitcoin and I think it does you know when I talked about this example a little while ago remember when Spotify was uh faced with deep platforming Rogan or facing all that backlash for having Joe Rogan on the platform so all this eventually boils down to a business decision for a company like Spotify so imagine if they make the decision which they did to side with Joe Rogan maybe they lose a little bit of business so now that you have that audience of Rogan like what impact if any do you think supporting Bitcoin would have on Spotify as a business probably Pro right like that probably moves into the yeah this is probably a plus EV thing for me to do and you know I don't think that's the the core

driving force for crypto or Bitcoin but marginally I think it actually ends up mattering it becomes a part of these political movements and things like that going into the future if I had to guess so I like and it's not just domestic it's International it's the guy from Argentina it's like it's kind of it's the narrative is starting to form and it's starting to form right before the happening right before interest rate cuts and then the ETF baby and the ETF like if you in January of this year if you could if you could draw out like a plausible you know how do we recover the industry from a macro perspective it would be like somehow some banks blow up you know there's an ETF that somehow gets approved and like we get back in the narrative from a political standpoint

those those would be like the narrative things that I would care about other than use cases and things and Dodgers the industry it's happening what do you make if anything of the price action post post uh this new the gbtc news so originally there's a big move up right from I know like 25 to 28 or something like that looking today it's basically giving everything back also the the discount on gbtc got it jumped like 12 in one day something like that but it's basically given up most of its gains do you think there's anything is it just a little bit of a knee-jerk reaction or what do you think about the price action broadly speaking is just so slow right now uh you know it's the Thursday before Labor Day

um nobody wants to be buying or selling right now like there's basically zero liquidity um I think people are just looking their wounds waiting for some of these things to to happen um but yeah I mean the this fall will be I think a lot of positive uh you know new new catalysts but people are like waiting for that right now is my opinion it's also it's also the slowest day or the slowest week of the year two weeks for tradfi like there's no liquidity in traffic everyone's out you know it's like the skeleton crews are Manning the desk like I wouldn't look too much into it I think people are preparing to come back from vacation and settle into whatever narrative they're kind of force-fed when

they sit down at their Bloomberg terminal let's Beat It yeah I think the first two weeks of September will dictate what the market like the macro Market trajectory is for the rest of the year hmm do you guys think Bitcoin ends over under 40. 40. is that Financial advice yeah it sounds like it sounds like this might become a financial advice podcast of which we can't participate but it's an interesting philosophical question um that we can't answer but I I think I think like what the price action on one hand like people were trying to price it in

and on the other hand it's like not possible to price it in because it's like the variables are accessibility interests macro but also I think I heard on an Eric Bell Tunis podcast that registered financial advisors control somewhere between 10 and 10 and 15 trillion of wealth yeah dude a lot yeah a lot and hits too yeah most has Boomers too and like he's basically saying like if if they even get like a percent or like a tenth of a percent you know that's 10 to 25 billion of flows and if you get those amount of flows it's probably good for you know the best uh opening year other than like QQQ but it'll be a substantial part of

the market cap of Bitcoin and ethereum and everything else so like I don't think it's really possible to price it in um but if there's any even the sliver of Truth to that data I don't know this this could be far Larger Than People anticipate Tom Lee from fun Strat says that it's the spot Bitcoin ETF gets approved bitcoin's going to uh based on the data and Analysis that they've performed 180 000. that's good we love them I love his predictions he stayed bullish predictions and his rigorous analysis yeah he didn't fold yeah they're fun shots legit I mean they do actually have rigorous analysis the piano notes I've been banging the drum of Ries for like

five years in Block works because these guys control an enormous amount of of money in the US I think it's I think that's a global stat 15 trillion I think in the US it's like three or something like that but trillion with a t and from my understanding there's a there's a basic and incentive problem with Ras that you guys you guys probably know which is that rias get comped on the amount of assets that they're managing on your behalf and the way that they track those assets is Partnerships with brokerage right so it's all hooked up the back end infrastructure is like hey um you have your assets on TD Ameritrade or Fidelity or whatever and I can track the amount that I have control over and that's the fee that I clip if an Raa today would recommend you put some of

your assets in Bitcoin it would take them off of The Brokerage move them onto something like coinbase then they're not getting paid on that it's like the silliest incentive misalignment but it's so real not only that so there's there's a disincentive issue or an incentive issue uh it's also I don't know if anybody has tried to do this but has anyone tried to actually put like Bitcoin into an IRA it is so hard to do it is like there are now a couple of products but you have have to seat them out you have to sign up you have to get a self-directed IRA you have to fund it by transferring money in from your existing IRA and then you have to start uh effectively a Prime account with like a coinbase or any of these other platforms that you know like

it is so hard to do I haven't even done it and you know I we should be the poster child's children for you know being able to do this but yeah my I was talking to my uncle uh recently and um you know a number of funny things always happen whenever I talk with him but um you know he was he was telling me the process of what it was like he was like yeah I was thinking of buying some Bitcoin into ethereum and putting it in my IRA and he just walked me through the process he's like I don't even know how to start uh you know not not like actually how to do it but how to even start um so I think the Bitcoin spot ETF is huge I also think broadly like there's not going to be a silver bullet it's going to be a bunch of lead bullets

and so you know the the like writing and and putting everything into one one event one approval one Catalyst I think isn't accurate but I think it's just gonna be a slow drive upwards my dad's financial advisor is this guy who used to play in the Canadian Football League the CFL what he golfs with like why are you with this guys like he's a nice guy all right that's probably not how you should manage your money gotta access to some clubs yeah exactly but like it needs to be a dead simple and it needs to have a bit of a narrative behind it and I think we're building both like BlackRock ETF you can just close your eyes and and buy it the other thing is it only takes one basis point to trade these things

it's [ __ ] wild that's gonna be so liquid for the rest of crypto yeah agreed I do think we'll see when gbdc converts I think it's at what 17 today 18 percent man that's that's like a high vote of confidence and Barry converting like soon I don't know how I feel about that very soon out of all this honestly I would love another year of people getting just turned up and wrecked on the gbtc trade before before the Widow trade continues huh dude people people get excited about it my dad my dad or actually is my uncle texted me he's like all right like uh gbtc trade back on I was like all right

exactly well we're back yeah here's the question here's the question when you've got all of the likes of the black rocks of the world and you've got Grace Gail and you know everybody else like bit wise Etc um do you think it's actually net positive value for Barry to convert or to keep it with the the two percent AUM fee I think I think he'll keep it with the two percent AUM I don't think he's gonna decrease that why because you won't be able to you won't be able to do it with me yeah if the competitors will be yeah no no you won't have a two percent AUM fee on the ETF that'll be like 10 basis points yeah I mean he will probably keep the two percent is my point

and just hope that people like forget about it but I mean that's that that's amazing she's got it yeah although you might make that's an interesting you know what I think the road for him is like usually on commodity ETFs like this there aren't 10 options there are two options right for gold it's GLD and iau and that's it really so this is my point this is my point when you've got 15 applications and you're going up the likes of you know BlackRock to try and get one of these approved and build the AUM meanwhile you're charging two percent you're clipping two percent on bitcoin ETF or Bitcoin you know trust uh like it probably is a question as to

whether or not you actually want to convert if people want honestly one of the best podcasts I've ever listened to is Eric balcunas actually went on invest like the best years ago like maybe 2018 or 2019 and he did this deep dive on ETFs and how they end up growing and he was like the strategy it sort of barbells into either like very stayed uh kind of boring thing or the shiny new thing like the Arc was just taking off at that point and um and he also said it's a silly but like the ticker really matters the ticker matters a ton in the ETF game um [Laughter] one of them had Burr as the ticker like a valkyrie or something yeah does

anyone have BTC is it ticker oh that's the winner right I mean it's got to be so yeah the the other thing that I'm noticing is just there's going to be a lot of marketing that happens around these things yes like I remember I remember in the last cycle when FTX and coinbase turned on their consumer marketing in like q1 of 2021 and it was like FTX on the basketball court and coinbase on the uh the rim and it was like you know like literally everywhere and Sam's face all over [ __ ] San Francisco on those stupid billboards like I mean great I mean it's still yeah even in this bear market like I was in JFK this weekend and and uh and grayscales up on like when you walk

through JFK it's just grayscale Grace Justin's son Justin's a face yeah out of JFK one of the terminals that you go there's like an overpass thing and it's just like a Tron ad with just Justin's son's face it's like how honestly probably millions of people have seen this because it's been up for almost I think it's been for almost a year so what a guy I'm gonna meet him in Korea shout out shout out Justin's son he's excellent yeah yeah whoa my president that's my president that's so good all right I've got a random question for you

guys uh I was thinking about this and I I kept like kind of an answer but not really a great answer um so crypto has stuck to these four-year Cycles right and people sort of hand wave about like why that is and the having and things like that and it was it was a pretty common argument that you heard last cycle that there's gonna be no eventually this will this will not be the case and suzu obviously he's the super psych of the super cycle all right so the super cycle is wrong but I actually was thinking about it and I I'm now a believer in the four-year cycle but I can't come up with a great first principles reason for why there should be a cycle so other cyclical Industries there are cyclical Industries and

usually those are industries that are either really capex intensive uh or I guess and have like a long time Gap in between bringing Supply online to meet demand so housing is kind of the great example of this right where demand kicks up in housing it takes a long time to build the houses and by the time all the housing inventory comes online the demand has rolled off and demand is rolling off at the same time supplies coming online and like boom so these Cycles sort of go uh gold is a really cyclical industry semiconductors uh things like that crypto is really cyclical but it it's not that capex intensive it's harder to come up with a a good first

principle's reason for why that is do you guys think it is or or no I haven't is it like the anchoring point that everyone is like this is happening but it also just happens to like business Cycles kind of tend to move in like five year increments yeah you know and like it's like it's real because everyone believes it's real but that's that's not just apparent in this industry if you if you've ever hung out with real estate Bros they're like they're trying to get a happening going like every other year and they're just building like [ __ ] that people don't need in places that are already way over built but like they're they're either five years too early or

five years too late every single time yeah yeah a lot of our friends are too late but we're we're there for them but but Mike to your question I think you know the the first principle's answer is that it starts with the happening and I think when you see those types of cycles and I mean that's the only thing you know implicitly that goes every four years and then there's everything else that comes with it there's the 2013 cycle you know Bitcoin goes from like five dollars to 1200 then it goes back down you have different infrastructure build out you have different companies then you got you know the Ico cycle and all everything that happens in 2017 2021 I mean we're gonna see if it all happens again I I think it will the one variable

that is obviously very different this is going to be the first cycle that also has interest rates and we're not going to be in a zero interest rate perspective um how that will have an effect I don't know um will it have an effect it'll probably have some but it's not going to be you know the the massive 10x 100x you know changes that we see in historically just because we're going off of the bigger base at this point this is a Morgan Stanley report they published last last month that one of the Morgan Stanley folks sent to me it is um it is literally about the Bitcoin having and they're basically telling their clients that after the Bitcoin having the price the price goes up

10 pages but the I'll give you the tldr every four years crypto goes through cycles and after the Bitcoin having it takes a little bit of time but then the price always goes up that will be half a million dollars for that research please foreign as someone who used to make these presentations I know exactly what these people are doing yeah summer historically results in the highest Bitcoin returns let's go so this is summer 2024 we are ripping I mean vanak is calling for what was it there's something insane 130 000 per eth it's free their base case was 38 000. in

conclusion it looks like we have entered a typical crypto spring it's time to get educated I mean hats off to Ms yeah they did a great job on that the other part of this is like there were articles written about like uber at a billion by like academics saying like here's mathematically why this is a scam and it's for zero and like sometimes these things just end up being far larger than you can anticipate when I see like the 180k target from Tom Lee thrown out it kind of doesn't seem that crazy honestly for Bitcoin not for youth when you see people gunning for for eth you know 50k maybe take some size off so

we talked uh we talked tornado cash last week uh or maybe it was two weeks ago and that was a pretty kind of depressing thing that happened but uh I think the flip side of that happened this week with uniswap right so Mike you want to take us through that um yeah so there's a uniswap class action lawsuit uh that got also thrown out this week by a judge in the southern district of New York uh judge feila we're gonna butcher that name but it the the Crux of it came down to the notion that um software platforms can be held viable for damages caused by a third-party misuse of that software code obviously that has huge implications for crypto writ large but also defy it's probably worth noting that that same judge is

overseeing the SEC versus coinbase class action as well so again this is I think this is significant a it just feels like a victory for the good guys but B these sorts of things that legal precedent and the southern district of New York is not messing around either so I mean what do you guys think about what do you guys think about all this it was a nuanced and intelligent perspective uh coming out of the court that I've frankly just hadn't seen before um there are a lot of really really good quotes that came out of it like they quoted Hayden's tweet you know basically saying that the protocols and protocol uh effectively like our front end unit swap dot I think it's.com

um uniswap.com can block an asset that doesn't mean that the protocol blocks an asset um yeah it just felt it felt like a very kind of um aligned perspective with all the stuff that we've been talking about whereas a lot of the other perspectives that we've seen coming out of these courts is just unfortunately uneducated yeah the I think the Judge called Etha commodity explicitly which is not something that the SEC has been willing to to do before uh some of those quotes include like this is a great quote it defies logic that a drafter of computer code underlying a particular software platform could be liable under Section 29b for a third party's misuse of that platform as discussed smart contract platforms are self-executing

self-enforcing code so yeah lots of lots of agreed just very Nuance perspective coming out of this yeah the court the court said trying to go after them is like trying to go after the developer of a self-driving car right after the a third party had used the car to rob a bank it's like you would never go after the the the developer of the car obviously I mean the other example they gave was it'd be like if somebody went after cash app or venmo for you know paying for illegal drugs you said this this is the woman that's handling the coinbase case too right yeah which is like I realize that that's amazing yeah that's like the bank shot double win it feels like I'm talking about like ripping on that

then I I honestly think it's misunderstood vacation yeah like yeah if that's the type of answer that she has for this case the coinbase case is just going to go terribly for the SEC yeah that's crazy granted there is you know there are elements that are different this is a protocol that's a company they make decisions about what assets they list but I think you know uh fortune favors of the Brave here I think we'll be uh wow Matt Damon Channel it yeah I don't think I don't think we'll see him again [Laughter]

Matt Damon oh yeah I forgot about that one feels like he's the one and done on the crypto Cycles but it's good to have yeah that what whatever is speaking of do we know whatever happened to that lawsuit against uh you know everybody including Shaq who was evading uh who's evading The subpoena forever yeah I think it's a big win for you to swap and I think one one of the more damaging uh impacts of of this regulatory Crackdown has been entrepreneurs and developers feeling like they could get prosecuted being based out of the U.S and I don't think this blanket solves that concern but it's definitely a step in the right direction uh I will say

we're just in conversations that we have with either our existing portfolio Founders or or a new you know potential portfolio companies um what happened with ripple and what is happening with a lot of these other rulings is changing the tide in their perspective previously it was there's no possible way for us to do this in the United States or you know how do we how how do we possibly do this in the United States uh now it's more when will we will be able to right um and and I think that perspective change is it's big I mean what what is also happening we've talked about it before but the two bills that are working their way through the House of Representatives and committees right now the fit bill and the stablecoin bill um you know they're were a part of it through the blockchain association but

there's a lot of work going on uh behind the scenes to make amendments before those actually go up for vote a lot of positive you know conversations with the staffers that are actually writing these bills um they're they're taking the industry's feedback and you know putting you know changes in um so I think not only are we going to see the courts you know favoring the industry uh more and more over time I think we're going to see some positive movement on the regulatory front too and that you know potentially indicates or potentially changes a lot of the perspectives that people will have in in the courts if the rules change I mean we're going to have Clarity only other thing I would add is like as this Bill gets feedback and gets changed like we should not be children about this as an industry like there's going to be

things that we don't like that get changed there's gonna be things we don't like that end up in there but like ragging on the people who are trying to pull it all together is not helpful to the cause good should never be the enemy of perfect yeah the three advocacy groups that we have in DC uh coin Center chamber of digital Commerce blockchain Association they're like the least I mean people do appreciate them but they just should get way more credit for the work that they do I mean like slogging through the legal battles in DC they're slogging Heroes you know there's also not a lot of industries that are as Dynamic and as interesting as crypto maybe like AI from a legal perspective policy perspective but like

these are the two cash cows for lobbyists you know and political type I mean I would argue it's the two cash cows for the United States Innovation Hub Jesus U.S needs to get it together every every single day I read just more crazy political [ __ ] like today I read the Dianne Feinstein stuff about about her estate do you read this no I was I thought you're inside do you see Mitch freeze up again oh my God I mean I just feel bad for him he's just like he's old you know yeah old guy too uh someone on Twitter said this it's just like it's sad for Mitch it's sad for It's just sad for everyone yeah you know the unfortunate ironic part is the question that he froze on was whether or not he's gonna run again in 2026. well

you don't want to you don't want to nail that and miss that one yeah she is somehow worse with her husband over a billion dollars I mean you know her house fans yeah it's pimping yeah literally on the line Street steps it's like the nicest house in billionaires row but now their whole family is Knives Out fighting each other for this money and she's like this frail old person who doesn't know what's going on it's just a bad look we need to get it together how's she worth a billion dollars it's a good question just made a few good trades on High level a couple of Trades man the story didn't get into that but that also felt like the biggest unanswered

question I mean it's also the same situation with Nancy Pelosi I mean that all stems from Paul but you know he ran an investment bank for 35 years as one does anyways these are these are our local settings I would love I would love to be a fly on the wall when Paul gets asked like Paul what's your Edge what's your Edge in the markets like what do you know that other people don't he's just like I got Nancy got Nance locked and loaded um all right one one thing I want to moving back to crypto I wanted to get your guys take on uh so starkware had an interesting situation this week so start where like like many of these Alters or even ethereum or any

blockchain frankly goes through a series of upgrades right so um software updates that have to get pushed through to a bunch of different users and a couple of months ago they they put out the notice that there's something to the effect of hey um you know if you're on this this standard of wallet you need to upgrade and they push through an upgrade um because again the the thing that governs uh starknet is a multi-sig um and a bunch of people lost access to their funds now this isn't this isn't it wasn't a huge amount of money it was 550k they I think they they made changes pretty quickly that allowed users to claim those old funds so no one lost any money I think the uh it was a gaff just in terms of pushing that forward and I

think the bigger problem is that there the system even allows them to do something like that um and I think that's the thing that needs to get called attention to and you know I think we we know things like they're you know there are still major l2s that don't have fraud proofs live most of these things are upgradable contracts that are governed by a multi-sig if you're going to store billions of dollars on these chains I know we need training wheels but also yeah you should it kind of should make you think twice a little bit as a user right you should you should make sure nobody accidentally hits the power cord yeah who do you contact if your balance get got deleted is there like a renumeration program or is it your local Twitter influencer with 100 000 followers to post Contact Us

customer support yeah all right so the network so the network upgraded to new contracts which meant that any wallet that was using old contracts were deprecated but then they people freaked out and then they flipped the switch back on so you could re-access those wallets is that right Mike I mean yeah we're starting to move outside of my technical range of knowledge but yeah something like actually I think this calls out another issue so there's the obvious issues like I mean that's ridiculous that they can that they can do that turn that on and off I didn't know you could I honestly didn't know you could do that it also calls out that um I mean there's still no communication layer for crypto to be clear any of the l2s could do that this isn't a starter no I know but it's great I didn't know that was possible and now

I realize that that's possible on on not just Hardware but I think the other issue is like I mean we had this with permes it was like I wanted to tell the permes that like you know we'd launched this nft thing and I was like you know you can you get access to permissionless for free for example and then I was like well we have to drop hopefully they follow us on Twitter already we then have to drive them into a Discord and then post on Discord and hope that they have notifications on for Discord there's like there's no email equivalent for crypto and you've got to imagine like as wallets get bigger communication gets built into wallets people will start checking their wallets daily um or I don't know if that's it but like I think in a lot of these examples of

like the maturation of tech markets um you know we've talked about this kind of before but like obviously Facebook was not the first social network it did not you know originate the idea but what made it enabled what what made it popular photos and what actually made it popular was the ability to have digital photos that were easily accessible I think we're going to look back and like one of these lockstep huge changes is going to be like oh we can actually communicate wall to Walla now but you can on etherscan and there's like hacky ways of doing it I mean people literally send transactions with with the data field um but I I you know until there is something that's canonical and pervasive I don't think I mean this is one of the things that we're we're looking at

thinking about for social crypto you know friendtech is is obviously you know one example of a chat-based application where you know built into the blockchain but you know you don't have this native um right now and I think you know that will actually enable a lot of social functionality frontec has it has the chat it's like really shitty and it's not decentralized but somebody like xmtb is building SMTP right I think they're kind of like the the front runner right now because I think they're coinbase wallets messaging provider too yeah um they're good people for you know what a good source of information just to close it out on on starkware is l2b is pretty good about this they've got a sort of

dashboard of these are the different things that we would like to ultimately see for l2s to be decentralized and other statistics just about each each uh each of the big l2s and you can kind of compare and contrast side by side so shout out l2b or pretty good source of info we talked about bringing back hot takes they won't have any hot takes they wanna share the in the next in the next bull market One Big Brand will drive more transactions than all D5 platforms combined it's gonna be a game I was looking at it I I don't know what it'll either be a game or like I don't know I was looking at one of those platforms it's not l2b but it's like one of those you know like run by a two-person company type thing um

and uh DraftKings drove more transactions than like any platform in crypto in July or June what are DraftKings what's the link they're on polygon they've got like they launched some [ __ ] on polygon they're like 140 000 transactions in a week um all of like you know 100 bucks each or something like relative yeah there's a company called Midnight Society um and they're a game they did a mint I think in uh I want to say like February or March 400 000 in one week broke polygon like the scale of these games and and like whether it's DraftKings I consider

that to kind of be a game like that consumer scale I think is just something that crypto has never even you know fathomed um like uh I was listening to the um Antonio Garcia Martinez interview um and he was talking about dsps and what it's like to actually go through like the Ad Sack and that was you know effectively his team at Facebook was my team at snap um and we built the ad auction at snap you're talking about like 300 000 to 500 to 700 000 transactions a second of just like being able to you know process all of that information in real time like imagine the speed that it takes you to load a web page there's about seven different institutions that that that function just went through to

be able to serve you that ad it's it's absolutely crazy the scale of some of these consumer apps I've got a hot take for you guys um do you did everyone see the airdrop announcement from friend Tech that uh only airdrops have basically only go to people that didn't use clones or forks and it got widely panned I didn't hate it actually um I think I think airdrops are being iterated on right now uh like the point system is the most obvious way to kind of drag it out in general but airdrops are a really good way to solve the cold star problem but I think a lot of Founders woke up on the other side of the bear market and we're like I'm just giving my token away for people to turn around and dump it and that's not

helping anything so points are one part of that solution but yeah I I do think that everyone in crypto or like one of the not great things about cryptos there's this expectation that I just show up early and therefore I get free stuff and I should just be rewarded and I think Savvy Founders and uh good product designers would be like this is the behavior that I want to see if you don't do the behavior that I'm trying to incentivize you don't get the you know get the reward so I'm not sure if it'll play out I can see it blowing up in their face too but I I didn't hate it from a ethos perspective I don't think that's against cryptos ethos or something like that I get a hot take the uh the first protocol not base layer the first application to have a billion

dollars of annualized revenue flowing to a token I mean that's where I think we're gonna hit that in the next cycle and I think it's already been created you think the protocol you're gonna name that are you gonna elaborate no further yeah thank you for your time all right I think like I would call this a lukewarm take but the macro bears are back I I listen to I had a long drive yesterday I listened to like five macro podcasts I I like I feel terrible didn't want to get out of bed today yeah it's too much macro but yeah some guy was like you know Bulls are gonna get

their heads chopped off it's like Dude too much I mean I've been listening predictions of seven percent unemployment in q1 Q2 of next year that that [ __ ] is back like the macro recession calls but can you explain that to me what like they just because they think that the FED is going to basically a hike until they break something I think they their perspective is that it's basically already broken it just is not in the day it like because the data is so laggy and interest rate hikes are already laggy they're like it's all going to happen in Q4 q1 I I told this to Vance so I graduated high school and in Spring 2008 spring uh fall 2007 my like elective class I chose

to take economics in high school I remember writing my end of semester paper on whether or not we were already in a recession in you know December 2007. you know took another nine months for Lehman to fail but I think it like I think of that example just it represents in my mind how long it takes for these things to actually play out and for them to to happen because it's not really like it doesn't move into at crypto speed obviously and things are faster now than they were in 2007 2008 but I I think you know the astronomic data uh jolts this week you know the largest decrease that they've ever had in the recording of jolts was this week yeah like you're starting to see some of these private data points or

non you know classic data points like unemployment rate and GDP and inflation like you're starting to see the Mannheim the the Zillow indexes like all that stuff starting to come down on inflation and growth also is not looking too hot right now uh I I think you're going to start to see some of these things actually break pretty soon the the macro cycle to like drastically simplify it you know to your question like why do people think this is there's like four components and they tend to proceed sequentially so step number one is there's a change in the interest rate environment so interest rates go up or down so they go up the the first thing that that impacts usually is housing

housing is a super interesting interest rate sensitive sector uh because basically everyone is levered to the tits on housing um and then housing goes up and down it has this two-fold effect on the economy which is one like a a ton of different sectors in the US touch housing it's all the things that go into the home it's the white goods it's construction it's like all these raw materials and very like non-sexy industries that employ a ton of people and it's also everyone's wealth so there's a huge wealth effect when houses are up everyone thinks they're wealthier and they spend more so after housing goes down both of those things start to work in the opposite direction and when that's and when that starts to happen you get profit margins contract

and that's when you start to see companies Miss earnings and margins to get squeezed and then what people do is they fire people that's what companies do and that's the that's the general cycle as it plays out so everyone has been pointing to like unemployment is really strong is a sign of the economy being strong it's unemployment is the last thing to turn and usually before recessions start unemployment is extremely low so that's why people think this that's generally the way the cycle plays out I mean yeah especially the white collar jobs try hitting a tech job in a big tech company right now they're like we're not hiring for how long for the foreseeable future for AI did you did you see there was a

there's a headline in the Wall Street Journal it's like uh forget quiet quitting now companies are quiet cutting it's like that's such a cutesy way of saying like yeah they probably watched The Tick Tock videos y'all were putting out they saw those they saw them yeah yeah you shouldn't have had your employer in it yeah I give them the narrative cover to cut those people in the same way that covet gave a lot of people The Narrative cover right yeah yeah I think the question is what is the like this one this one macro pod that Michael and I both do calls for seven percent unemployment like you want that's like a that's like a coveted magnitude event the doubling of the unemployment rate

maybe that happens but it probably directly trends that way and just to be clear like as crazy as that sounds and as terrible as that sounds I ultimately think that that's a very good thing very good thing and here here's my question there will be a bad news is good news period we're definitely in that right now where it's like ooh jolt or down let's ramping video up again but then it's going to be like all right what is bad news does bad news look like and that'll be like you know assumption goes down because unemployment is at seven percent that's what it runs like right right right but I mean also keep in mind you know we'll see what happens in November it's gonna be an election year I think most change which is uh you know positive will come

if the economic factors uh in in the backdrop are not positive um I think you're gonna see interest rate Cuts faster if you have actual negative economic data and frankly like this thing is going to happen I think that's kind of where this like negative macro cycle is is coming from like it's going to happen it's just a question of when and how bad uh and I think you know getting it over faster is going to be better I think the other reason why I think it's good is like in in a low interest rate environment bad decisions get rewarded I think it's really frustrating and like think about how that's played out in crypto in the past I always the there's a phrase I

think from web 2 which is like you're always at the mercy of your stupidest competitor and I I feel like this played out most directly in the case of Celsius and block five and these are just my personal opinions they're not I know both of those companies failed but I've always had a lot of empathy for Block five because I thought that management team had integrity and generally played things really right and one of the ways they got screwed was um one of the ways they got screwed was Celsius just did not offer realistic interest rates I remember talking to their their VP of Finance like a long time before like during the bear Market of 2018 or 2019. like we just can't see how the math adds up for their rates but if your competitor is just taking way too much risk offering way too high of

rates you could say that that doesn't make sense until the cows come home you're just it looks like you're just getting you're [ __ ] rocked for like two or three years at a time you know how long two or three years is to be losing I mean just tough man it's just just tough and and zurp environments reward that type of behavior because you can always get financed you know so you can always get 40 million dollars under the table from a CEO of a big exchange all right here's a question for you for the next 20 years do you think interest rates on average will be above or below three percent for the FED funds rate I think it'll fluctuate but I think the US the only option that they have is to inflate their debt away so it really

depends on where the natural rate of inflation is and interest rates will be like three percent below that I think it's blah he was probably below and also just like the magnitude and Quantum of the debt that needs to be rolled over means that you need low interest rates to do that so I I also don't think it's going to be zero I don't think it's gonna be zero I mean we'll probably find some excuse in our lifetimes to get back down there but like two and a half three percent interest rates a I'm not wigged out about that within the context of evaluation for tech stocks but B that's not exciting for me to like go take my money off of crypto and put it in the bank especially if that shit's on chain like I don't know I would I would call these

interest rates probably transitory in the fullness of time oh 100 words they've been in what what is it 20 years do you you can buy like two percent real rate treasuries like 10 20 years out like that's an amazing deal if you're you know a big pension fund or Insurance Fund eventually they're all just gonna buy those two percent you can buy them for five percent five percent is historically relatively normal though but it but the.com bubble happened at five percent five or six percent interest rates like you asked that question before could crypto happen at five percent tenure like absolutely it could

um I think so I don't know I so the the CBO is the is the non-partisan uh Congressional budget office IT projects out the debt for the US like the and they they blew everyone's socks off and they were like yeah we're we're projecting I think their first estimate was somewhere around a trillion dollars in debt then they came out and said it was going to be 2 trillion in debt per year for the next 10 years so ending the ending the next decade at a 50 trillion dollars plus in debt and like this second half of the year they're now projecting like 1.6 for half the year it's like what what what what is all this money getting spent on yeah so they they have

to inflate it away I feel like that's gonna suck actually that's gonna be us that bears the brunt of that but yeah I mean well I mean if you hold on to the right assets no no if you hold assets we're not going to build a brunt of that yeah it's the social stuff it's the social stuff dude I I just don't think you want to live through that I don't those like if you rewind the clock to like those periods of time even if you come out on top asset wise those are not fun periods of time to live through like countries are miserable when that's going on if it's not like countries are miserable at 50 inflation like if you have like eight percent inflation doesn't it sucks but like if you hold assets you're you're good or tell me I'm wrong there you're I

mean the 70s gold rip 2800 percent you know in that decade well inflation was like 10 I think somewhere around there I don't think it's gonna be that bad for people who hold outside money or like really high quality like here's an example uh you know let's say in a few years you know things are looking shaky for the US government Apple's still chugging along do you want to own Apple bonds or do you want to use want to own U.S government bonds probably like apple bonds do you want to own youth cash flow or like government cash flow probably East cash flow accounting for the upside the plan is to not get worked by this you're a gallery that's where it becomes tough yeah the other perspective here is if you I mean this is just highlighted

with the draft in the whole meeting last week it's like out of all of the G7 countries the U.S economy is still by Far and Away the best yeah and I and while we maybe you know in trouble and in a lot of respects or you know the next 20 years 30 years 50 years is you know we're going to be met with some issues there are much bigger issues basically everywhere else [Music] yeah yeah well I think the way that it uh yeah I don't know I actually I'm not I'm not sure actually that it works I think income people do better in this scenario because what what the US is doing is they're doing a soft default of the debt is what they're doing is saying like we don't actually have enough money to pay

this debt back so we're gonna inflate you know at a rate that's much higher than our debt load so you wake up in 10 years and if um you are a a creditor at that point the amount of debt relative to income is like much what like think about if you had a mortgage right and um it was you know 250 000 or a million dollar mortgage or something like that and you make um and you make 250 000 a year if if there's a rip or an inflation for 10 years you could be making a million dollars a year at the end of that 10 years but then your mortgage is still a million dollars so if you're the income people actually tend to do pretty well in inflation it's the asset holder specifically the bond holders that get

absolutely smoked because that's the explicit objective is to devalue bondholders that assumes that your salary changes every year I think your salary has to change otherwise there would be like riots and and like I mean which is why I think asset holders actually do the best because that'll change with Market depends on the asset I think depends on the asset I I think these problems are fixable though in my mind at least like I think we have problems we know what they are we also have like tools what are they crypto AI nuclear you know technology broadly I think if we put them together in the right order like we can unlock some serious stuff like

I I do think there's a lot of reason to be helpful so I you know aside from the macro Doom I think the US is in a pretty decent position if we keep all these industries on shore I think so too yeah Vance I like your roast of uh this 22 Lido thing right now let's just talk about that for a second these are this tweet I hadn't seen this tweet this is the dumbest tweet I've ever seen so there's we've talked about this a lot so I don't want to beat this dead horse again because it's already flogged but people are like obsessing about you know nobody no validator platform regardless if you use DVT or have distributed node operators or you know anything you can't run more than 22 there's no evidence of

justification given and now you have this guy you know signing up rocket pool stake wise stator Labs Diva staking I've never heard of them and they've all made the brave commitment to never never stake more than 22 percent of all eth guys you have like .001 of all these I'd be like block Works being like I commit to oh to having one percent of the financial media market and Bloomberg's like well it's like yeah so I I also committed to never run more than 22 of all steak teeth personally in the event that I end up owning that much so just you know some are bad takes out here let's let's improve please

the lighter ticks are horrendous there's a really bad light so bad they're also I think it's kind of hypocritical because Lido the first of all the reason I found product Market there are a lot of reasons I found product Market fit but the reason it was originally blessed is because a ethereum didn't provide an in-protocol way to delegate steak and then B the exchanges were gonna take the whole market like they what we didn't want was binance to roll sound or even coinbase as great as they are they're still a centralized company you didn't want them to own the entire ethereum network and so we got a decentralized solution which is a dow and has dual boating and uh or dual governance rather so yeah I just think it's so

hypocritical and it's a winner take all Market these people don't take into account Market structure Dynamics either so yeah having all the people that have like five percent of the state be like yeah we'll never do more than 22 also yeah also like it's so hard to build a company Lido has just executed so freaking well like if you want to compete again you want to get more market share go out compete go execute better no we'd rather sign like the reverse giving pledge for crypto that we won't you know exceed 22. You Love free markets and you love being a Libertarian until like until you're not until you don't have the market share yeah it kills me my bags need to go up um podcast they hit they hit eight and a half million

8.25 today I guess if I did have to take the other side of that do you think if there was some catastrophic slashing event the Eastwood hard Fork on Lido no we've already had that in Lido there's been a couple of slashing incidents nowhere near as bad as the rest of the field but we've already played that game I think the more pertinent discussion we should talk about this on the next one is um like inflation versus burn versus rewards who gets what why who comes to the table who how do they negotiate how do they signal if you have all the steth signaling like the network is going to be a lot more cohesive than like stake wise cult versus Rocket pool cult versus light out like we all are one ethereum in my mind

wait why don't you think there'd be a hard Fork isn't Lido big enough at this point and powerful enough to create a hard Fork there I don't think they're actually big enough yet I think that would be like a 40 50 moment where they could actually swing it it also depends on who shows up or like what governance voting is like or where it happens there's no formal governance of eth right there's I think you can't have your cake and eat it too and I think ethereum's design Choice which is the right design choice is to not have that within the protocol but then you can't complain when someone who's a successful service provider and gives people what they want which is the ability to passively delegate steak does that and there's kind of an irony

actually where Native steak native state delegation works a lot better in something like Solana which has delegated proof of stake and the liquid staking adoptions like three percent the stake rate of Solana is 70 or 80 and the liquid staking penetration is like three and the reason why is because you have in their withdrawal periods really low and you can just delegate in protocol it's super easy so ethereum I I actually kind of think it was the right choice uh they decided to not put that in the protocol another solution popped up and I think the right way to do that is to engage with like one of the few apps this found product Market fit and not just bully them on Twitter that just doesn't seem like the right right that doesn't seem like the right

solution any other team I'd be with you but lydo is so locked in that they like they don't care yeah okay right they they just want to get as much Ethan there as possible and they're and they're winning all right fellas this is a good one peace foreign [Music]