Peak ETH: Ethereum's Monetary Policy Explained | Roundup

Transcript

before we jump into this episode a quick reminder that everything set on bell curve is a meme and nothing set on bell curve is financial advice enjoy the app all right fellas welcome back another welcome Jesus oh hi boss welcome back another velcro Roundup you're around two uh joined by Michael's we got the row yeah we got the rail curve we got the rail curve I gotta edit that out uh Michael's one and two Vance and Yano fellas welcome back to the show how you doing we're back good to be here after a week off we're back week off that was my bad that was my bad on the timing completely it's all good yeah it's all

good all the time sorry guys I'm really bad about that uh I rugged uh Michael and Vance last week sorry guys um what'd you do with all your time off fancy of walking your dog yeah I walked the dog took him out you know he really appreciated it so it was good all right guys so it's been a big this is like the first week that we've actually had uh markets move in a positive direction in a long time um good move people are pretty excited about it uh it was basically up across the board so you know seven day returns for Bitcoin or 20 eth is up 15 Salon is 35 avax 29 Adam is uh hanging in at just three three percent they never really get the pump do they but uh I'd be curious um just what you guys think

about this and just help like contextualize is this like the beginning of a broader rally in your guys mind is it sort of a dead cat bounce type thing or like what do you what do you think about uh why prices moved so I think if you look at the past week crypto prices are up 15 20 in the aggregate if you want to get some context around that number look at the tenure which today is under three four so it's three three five you know it's nice to get 3.35 yield in a year but when assets are moving 20 in a week you know that that's when the the risk reward trade-off starts to get real um and those bonds start to get less attractive and and what I see is people calling it a bear Market rally an echo

bubble a dead cat bounce like anything except for saying like the other b word the bull market and it feels like the the intellectual window dressing I'm calling this an echo bubble is just a polite way for bearish people to admit they were wrong without actually admitting that they were wrong but the money has to go somewhere and right now crypto is that somewhere and at the aggregate like it seems like the [ __ ] the market is net short a lot of Ethan Bitcoin after all of these major players sold and you have Genesis filing today you have you know whatever that bit Lazo announcement going down uh it doesn't look like binance was fine the two billion dollars that everyone was saying was going to happen on Twitter

like a lot of the boogeyman have been taken out of the equation and it's not really surprising to see you know get off to a hot start after such a bad year last year but if it's a new bull market who knows but you gotta start somewhere yeah the the only thing that I'd add I completely agree with all that um only thing that I'd add generally is when you see over a holiday weekend low liquidity market and something move expect that there's going to be some announcement that happens basically the day after or two days after because these announcements especially something like genesis going bankrupt don't just happen in an echo chamber and and over the course of a few hours they happen over the course of a few weeks and so there's there's going to be some you know swath

of people who at least understand that this is happening sooner than most people will um and usually if if that's the case the markets will Trend in that direction ahead of time especially when it's you know Bitcoin each that are making big moves and so generally I would say the bitlazo um nothing burger and the Genesis filing uh which you know supposedly we're recording this on Wednesday the 18th um but you know expect that those are going to be positive uh signals to the rest of the market and people just got ahead of that you know five days ago so I don't think we're back in a bull market here um my this reminds me of some like I I would probably call I'm probably one of

those people fans who you're pointing at being like dead cat bounce or bear Market Rally or something like that's what I would throw this bucket in and it kind of reminds like if you look back at the charts from 2018 and 2019 like there were I don't know five or six times I feel like when the prices rallied from I remember there's that one rally in like maybe 2018 it went from six or seven K to 11 or 12K they were like set like four or five or six different times the price is pumped like 30 to 50 percent and I think that and then and then fell back down I'd probably bucket this in that camp I think my takeaway though from this is that so so I do think prices end up going back down my takeaway from this though is I was like what one of these

times will will be the real time that you don't get it back and it was just a reminder to me like how quickly narratives can shift and how quickly the sentiment can shift so like for this specific one January 2023 pump I think prices end up probably going back down but it's but one of these won't go back down and the people kind of sitting on the sidelines not exposed to crypto right now will get left behind in that and that so it was just a nice reminder to make that to you know what's back down like one 1K if like 800 East like where would you say like we have a we have a really good friend um who uh will will remain nameless for this story

um who in 2015 I think when eth just launched we're sitting in a hot tub in Hawaii and it had crossed uh a dollar fifty and we're sitting in the hot tub and I remember so distinctly this friend basically being like eh I'm gonna wait till it goes back below a dollar it never did what what's back down I I don't know it's not worth it it's not worth it trying to pick the absolute bottom you're never going to do it you'll drive yourself crazy doing it and there's a better chance that you just end up in cash for the whole rally and just you know kind of generally pissed off that it's all happening it's just a matter of whether you buy it and how much you buy it

I agree with that I'm not a Trader I buy I Auto buy Bitcoin and eth actually I turned off my Bitcoin Auto buy but um I Auto buy eth every two weeks and just always have and just will continue doing it and like I have the middle of the bell curve take like I just don't like thinking about it and I just buy and then like when prices drop 80 I will buy a lot more and that's that's what I've been doing and like I'm I'm buying I was buying I am buying because like I don't know yeah I'm not trying to time the markets I just don't think this specific rally is the one where like we go back into like parabolical mode you know I agree with that I I mean this is what we talked about on the predictions episode like I I still think there's

like some pain to work through and it depends on what you define as a fair market but like my kind of working thesis is that we've seen the bottom in terms of prices like that I think that is the right question like go back down to what I mean there's only so long things can go down and there are also like a bunch of positive catalysts that are out there like right now like the NASDAQ is up you know in the last week and that was because of a CPI report and now you know CPI and inflation has turned and it's probably going to continue to go down which sets up a dynamic for more positive surprises for the market to react to so I don't necessarily think it's going to go parabolic from here but I think it's there's more reason to be bullish than

bearish I think at least from where I'm sitting right now I don't know I think my counter to that might be like you I don't know I'm probably over emphasizing the 2018 and 2019 bear Market but like we did we did we had a real so we in December of 2017 we hit 20K or like 19 and a half whatever it was we had a drastic pullback down to like five oh no excuse me down to like 7K all through 2018 and we're like all right the bottom is in and then there's that like really nasty pullback um to like 4K in 2019 came back up and then in March of 2020 slammed down to 3 000 and then that started the bowl so I'm I'm probably over emphasizing like

that that specific cycle but I think it's tough to say the bottom the Bottom's like forever in but I also don't think you should be trying to time the bottom timing the bottom is is usually a bad plan the other stuff that I'm I'm looking at within the context of crypto is like the the cloud index in January and just like General Tech has just been getting slammed and usually you see like this very tight correlation to all the big Tech names and the medium small sized you know Tech names in crypto crypto and Tech are decorated at this point I think that's pretty interesting and then you know the other thing that you look at if you want to use the 2018 fractal is is your you know starting point is um rates of peaked

you know pretty convincingly the rates peaked at 4.5 now they're down to 3.3 if you think that this cycle is liquidity and interest rate driven like we are now on the other side of that and so you know it would have been pretty hard to call the bottom in June of last year when rates were rocketing up I feel a little bit more comfortable now that the cycle is is progressing on the other side of of the rate Mountain and it's going down you know that that's going to be a huge boom to the economy versus last year so I'm I'm pretty content for where we are right now and and don't think there's going to be a ton of much more pain to come one one thing that also is um might be worth noting about this rally is that this was a this was the

first Bitcoin driven rally I feel like that we've seen in in some period of time um which like regardless of whether or not you think that's the way that it it should be is like when I see that that just reminds me of like a healthy that just points to more healthy organic sort of rally uh I I'd be curious there was a tweet uh from Ryan Watkins who use the ex-analyst at massari and is now has synchrony capital and is basically something to the effect uh we can link it in the show notes but it's like the the Big Driver right of Cycles moving forward is going to be the eth Innovation cycle right and you kind of listed different platforms there was like he basically implied it's been this way for a while but it was like icos and D5 and nfts um I'd be curious what you guys think

about like catalysts moving forward is that like a worthwhile you know subject diving into like eth kind of leading these Cycles moving forward do you think it's going to be like continue to be Bitcoin or how do you think that whole dynamic is going to play out I I so I I would broadly say I agree with Ryan um on the Bitcoin side not to say that you know there there's anything that could change my mind there's tons of things I could change my mind I just don't know what the catalysts are for Bitcoin right now um you know the inflation narrative was kind of debunked the like balance sheet asset was kind of debunked um like The Innovation and like applications built on top of Bitcoin you know we we have yet to see anything

really kind of come to fruition there um and so if you think about just like from first principles what where is the new narrative going to come from um and I agree generally that in Innovation on ethereum has never been higher than it is right now I actually think that new category I can't remember if he mentioned this or if you know this is something that I'm just making up right now but I think Layer Two is actually going to be that next category of innovation where you're going to start to see real transaction volume therefore Revenue flow through layer twos um eip4844 is going to reduce the the call data expense on on layer one by you know 10 to 100 times like that type of new aperture lens opening is is something that's fundamental for this

entire ecosystem just because it means that there's new applications that previously were too expensive to run that you can now build on top of something with the shared security model of ethereum like that that type of cycle I think is is real and and um I would I would probably say 2023 is going to be based around layer twos and The Innovation Cycles there can I get your guys's take on this the the Battle of the Year right now is shaping up to be at least of q1 is arbitrary versus optimism like those if you've looked at the users and like developers and projects like all of those charts they're basically like every week they go back and forth on who's on who's like quote unquote winning do you have thoughts on arbitrary versus optimism and like who wins that game it's a good question I mean we're so

we're investors in optimism so we're biased um I would say the first thing is that the stakes are very high if you look at optimism it's valued at 8 billion that's that's valued like a an L1 you know and so like it's not at this point there's only two l2s there's going to be a field of new ones launching this year scroll the polygon ZK ebm there's like a bunch of other ones like there's going to be a lot of these and the stakes are very high um the quest that optimism has been doing have been just frankly like incredible they're doing like 50 of each L1 transactions right now it's all at a very low gas cost so like there's less of a you know hurdle to actually transacting but that's meaningful usage on Arboretum you have this very healthy

D5 ecosystem led by GMX I don't think GMX is a great model I think it's going to blow up at some point but like you have this like D5 ecosystem that's taking shape and arbitrum I would say it looks a little bit more mercenary than optimism does like you know the missionary ethereum camp but that's my high level take on them uh it feels like optimism has a little bit more of the ethereum ethos which is what we ultimately want to invest in but I think the you know the open question for each of them is what is the token used for and how does it accrue value and you know what is the long-term roadmap for it optimism is very focused on public goods and distribution of the coin to you know everyone who uses optimism arbitrum kind of hasn't revealed those plans yet but that'll be

the next shoe to drop and I think you're going to see a lot of acceleration on both of those camps as a result I mean it obviously hasn't been talked about yet um it's probably the worst kept secret that uh you know there there are probably fittings for an Optima or an opera Trump token when do you think that launches and and what do you think the differentiation would be between the op token and arbitrum so I mean optimism's token is like you know thinking about it it should be used in some sort of mechanism to option off the role of being the sequencer the sequencer is still centralized they still need to decentralize it adding the token and shifting who sequence is what and when you know based on their token

Holdings is probably the next thing that they do arbitrum doesn't really have that exact same security model and so that's not really as relevant of a token use case but you know the things that we see in arbitrim are uh you know they take a very uh anti-mav approach like they say that things should be sequenced in the order that uh they're requested there shouldn't be that much room for people to you know background or front run or do things like that and so I think that you know they'll end up internalizing the map as well but just in a different kind of way I would say but you know they might look somewhat similar from the outside but they'll be totally vastly different economic models if he has a question just doesn't like not I first of all I also love uh optimism and like Ben Jones

like I totally see what you mean with like the like missionary type Vibe but um I'd be curious as investors in that project like how much do this is like the token sort of structuring play into things because not not meant is like a dig but there's like a decent overhang in terms of like fully diluted valuation of optimism versus like the circulating Supply today so like how much do you guys kind of take take into account that whole structure or is it more of like I guess I'm just I'm just curious like there's a more like an equity kind of player how does that work so I have yet to see and I I think we can kind of uniformly say the same um across the board but I've yet to see something that approves of value to both

the equity and the token um it's really it really does come down to are you a token based company and are you building you know for that type of an ecosystem or are you a company and your value is going to recruit to your equity and you can't really do both um or I've yet to see a model that works for both when we're talking about making any investment the only value that we really ascribe to things is what's the fully diluted valuation and that's how we make investment decisions I would say normally for the most part what we do is is think about you know getting a sizable amount of ownership at a lower valuation and making a more concentrated uh portfolio of Investments as opposed to other firms um you know that's just kind of the way

that we like to invest and so that's a difference with us I would say you know we we invested in a later round of optimism um more you know for the ethos and the The Narrative of you know decentralization and supporting that ecosystem we also have a number of projects that we have more of a concentrated ownership of that are built on top of optimism um and so it you know is uh yeah it just matches with our our thesis um but you know it is a fully diluted valuation um that we are looking at and thinking about makes sense um should we should we talk a little bit this news broke like 30 minutes before we recorded this but there's basically an update on uh Genesis and vcg as our structuring so we talked about this uh in one of our last roundups basically

just talking about what a uh uh bankruptcy might look like so it looks like creditors for this is uh this guy reported by the block but uh Genesis creditors may be negotiating a bankruptcy so essentially there would be a period of like a forbearance period of between one to two years uh under pre-packaged bankruptcy plan and that would be in exchange for cash payments and equity in dcg and basically right now they're negotiating the terms of what the chapter 11 filing would look like so again this is not something that's been you know this isn't in stone this is still like sort of rumor mill I would say but um what do you guys I mean what do you guys think this is kind of exactly what we said might happen right the time to pay

back the debt and some conversion Equity so I think this this the reason why this could be interesting is just removes one of the things that's sort of seen as an overhang or something another shoe that might drop so I think it kind of seems like good news but what do you guys think that's exactly what we talked about right you know Barry Barry payment program where he works it out they put Genesis under um they don't have the protracted fight over is dcg Genesis is Genesis dcg and he just gradually pays them out um it feels like this is a plan where they get access to a lot of the cash assets and Equity of dcg without actually having to fight them for it um or you know when you put dcg into bankruptcy having lawyers and people like that and Liquidators administer it just mean

you're going to bleed value so I think this is generally a best case outcome for everyone uh my question is like what happens to Gemini uh like they still have 900 million hole in their balance sheet like I've said before they do very little spot volume if that is a you know even like 100 million or 200 million dollar haircut I'm pretty sure the equity value of Genesis is negative so unless they're planning on you know giving portions of Mars Junction ticket sales to creditors or like you know selling some of their Bitcoin like I don't know what the twins do but yeah it's good to just see everybody you know formally taking responsibility putting it under drawing up a plan to payback creditors and kind of putting this to bed

so the the thing that I would note and let's just assume that you know the reporting that exists right now is what will be the actual outcome uh probably gonna find out in the next day or two um what I think is important to note is this is fundamentally different from basically every other bankruptcy that we've seen so far in the crypto space because you're coming into whatever chapter 11 chapter 7 chapter 15 proceedings with a plan and you've already come to basic agreement with the creditors um whereas you know when you look at Voyager Celsius FTX all the others that are that are currently going through the process right now you just frankly are hoping and planning and waiting for for some type of resolution

and looking at you know and I think fans had to jump to a call the looking at just like how everything else was working out if you look at you know the Twitter feeds of Voyager unsecured creditor committee um like it's just a complete mess and that mess is going to take a long time to unravel um no one not everyone is going to be happy like there will be people that are favored or or disfavored in the process um because it's not an easy clear-cut example and so if this proceeding is coming to you know the actual filing with a plan in place not only to Vance's Point does it save time and therefore a ton of money but it also just makes it

really simple for everything to process and it'll process a lot faster than the others that are currently ongoing is this a save time or buy time type of deal because when I was reading I mean the deal just drops I've been reading about it but it seems like the tldr is that Genesis is in default um but really they're trying to buy time to work out the issues with uh but as they try to buy time creditors want to get some value in return for the time so to get a deal done with the creditors one of the things that dcg the parent company is offering is equity in the parent company do I understand this correct or am I way off here no no you're right it's in and you know I haven't kept up on it as it's happening in real time since we've been

on the call but um let's assume it could be both buy time and save time it could be either or it depends on how it's all structured so if you're able to basically call off the creditorship and have the the creditors not force a chapter 11 proceeded where everything goes on on the balance sheet everything you know kind of Goes Up in Smoke and you just kind of like see where the chips fall eventually this could be a model that saves that chapter 11 official proceeding and in the process that everybody is going through that I was referring to and just buys time for the creditors to not you know force uh you know Force bankruptcy um so it really depends on the details but I don't know it could be either way yeah

it's it'll be interesting to see what happens with Gemini like Gemini is um yeah that's a that's interesting Gemini's got a proposal right now on uh there's a there's a new poll on maker that uh actually has to get voted on by today I think it's tonight or tomorrow morning um but there's a new maker poll that was launched to determine whether the gusd PSM debt ceiling should be reduced um and if you lowered it to zero that would effectively eliminate the gusd PSM um what is the voting right now the last time I checked this morning the option was to leave the the gusd PSM at 500 million um so so if that went through if that one then die would continue to be backed by geosd through

through Gemini um on one yeah I still haven't voted yet and I'm actually I would love to get your guys's take I'm kind of Unsure how to vote here uh on one hand I would like to support Gemini and support like them and uh I think gsds like the Gemini maker partnership has been really strong for a long time on the other hand I'm like do you wanna like why expose yourself to that risk if you're if you're a maker so I'd be curious how you guys would would would handle this if you were me I also really like the Winkle bus twins like they've done an enormous amount for

the space and Gemini is a great company but let me ask you this would you rather hold usdc or Gemini dollars I'm just kind of like what is back what is backing that anymore like I I think it is appropriate to ask like the counterparty risk that you're taking on at this point like this was a really tough situation that the twins had to face I think because I sort of do agree with Vance's take that like they I I don't think they're there's gonna have to be another side of The Ledger for that 900 million dollars basically that's what I think like either they need to make customers whole or they cannot make customers whole but

their reputational capital is going to take a hit and it might not this might be the way that it appears because if it was me and I'm looking at Gemini as an issuer and a creditor I'm kind of like doesn't look quite as solid as it did 12 months ago reputational Capital has taken a hit it's not is going to take a hit already has and and yes I agree they've done a lot for the space you know um been promotional for the space and and representing the space but they took 900 million dollars of customer capital and David's one counterparty the you know that that that decision in and of itself is troublesome there's another thing going on with

maker right now that's actually pretty interesting that hasn't really gotten much news so they did a deal with coinbase um a couple months ago if you guys remember that there's um so right now the implementation is going through and there was a new post that got made um that like kind of did not get much attention I didn't see it anywhere but there was a bullet that I was reading last night that says um coinbase retains the ability to veto a withdrawal of usdc by maker governance so that just didn't like and okay so like so someone asked a question like why does this have to happen well I'll read it and uh uh Seb on the Strategic Finance core unit at maker was like the veto is needed for coinbase to

follow their their custody procedures it and then it goes it is what it is and that like that I've been thinking about like their deal with coinbase and then makers deal with you know gusd and Gemini and I'm like I'm not originally I like the coinbase thing but I'm like man I I'm not sure these are the right this is the right way to be going to be like putting more and more stuff in these centralized exchanges even though coinbase is very uh reputable it's like I don't love that they have this ability to deny any withdrawals I don't know maybe I'm over emphasizing that one bullet point here and I know it's probably the legal team at coinbase needs this to happen but no it's it's kind of interesting like what you know not that this really is

that but this is ultimately where this is going like what ends up trumping something a governance vote a company's terms of service or a law you know what I mean they're kind of like ships passing in the night right now and some people like wait those very differently I don't know at some point rubber is going to need to meet the road is like thous if they continue to interact with companies like there has to be some way that these that they can talk um I'm kind of I'm kind of on your page I well you know what I don't really know the financial situation of maker but I think this was going to represent what like 30 million dollars worth of Revenue so I guess I guess I would kind of like weigh the revenue against how much runway I have as an organization and then I would try

to get some amount of like Risk right like what's the risk that the PSM gets disrupted and I need to pull those funds to stabilize it and I can't because coinbase might be in trouble right because the reason why you'd have to defend the peg is because there would be some Market trouble and then maybe coinbase is in trouble at the same time but actually just talking that out loud I probably wouldn't do it unless they need the money yeah my first person with it is that coinbase never they weren't up front that this was the case so like this should have been in the original their their original proposal was great super thoughtful really well baked out maker we asked a lot of good ques I think we asked a lot of good questions they had really good responses this was never mentioned so

that I think that's where my frustration is coming from with coinbase is like that this should have been super clearly labeled that this was a requirement uh yeah the not not saying in you know big fans of coinbase they're you know uh you know are uh we work with them in a number of different ways um and not saying that this is the case but it does remind me that you know what we're seeing on the Venture side and uh you know what we're uh talking about with a lot of our portfolio companies is we're kind of entering the the market phase of like you tell you showed me the valuation I'll show you the terms and it's it's really you know one of those models of um and we've seen this with a number of portfolio companies that are going back

to Market to raise you know continuation or Bridge financing you know been it's not the same Market that it was 12 months ago and they raised their seed round or their series a and and you know they're having to negotiate on you know the finer details and it's not you know the typical YC safe that they're that they're using it's you know a rip down and and you know um deal Point negotiated conversation every single time and it just feels like one of those um continuation examples of this is just where we are in the market and um yeah maybe I'm over indexing on the Venture side but it does feel like that's the case on the Venture side as well this is exactly what I mean by you know I'll show you the terms kind of perspective um which is if you want to raise at the

same valuation so in a lot of these Market Cycles what what actually does matter in these fundraising events is what is the valuation because not only does that set you know the the structured things like or or the typical things like uh you know stock options for for employees or what the strike price is on those stock options but it's also just like narrative building where if you have a Down Round that could be you know a morale hit um it could hurt you in terms of you know the executives that you're trying to recruit um you know there's just a lot of like bias that goes into whatever the valuation is and if the if the if the valuation is trending up or if it's trending down like there's a lot that's baked into that um and so for Founders there's really a strong

um prerogative to uh maintain or increase the valuation at each round but what that comes with with um you know a market like we're seeing right now is that's just not where the market is going to be especially if someone raised in the last 12 months um or or frankly the last 24 months um it's unlikely that you're going to be able to see the same valuation unless business metrics are really increasing and so what a lot of investors will do in times like these when you're talking about you know a continuation or extending financing is they're going to bake in controls and and um you know it could be governance it could be Financial it could be you know business oriented controls that enable um just the more security from an

investment perspective so this could be liquidation preferences um this could be um you know Superior convertible debt to everything that exists so far it could be um uh Superior Pro router rights where they get actually more ownership in the natural or more opportunity to invest in the next round if there is a next round um it could mean yeah a number of different things uh and and you can kind of get you know really creative if you really want to in terms of what goes in but um you know these controls can ultimately hurt the founders and the employees of these companies if and when there is some liquidity event if let's say you know the series a investor has three times liquidation preference then means that they get three times their

money out and then they participate in in whatever is left for from the liquidation of the company um and that could you know really really hurt in terms of you know what value is left for anyone that's been working there um so it's it is kind of entering that cycle we've seen it a couple of times with some of our portfolio companies that are coming back to Market um I think it's probably going to continue for the next year as well um so just as a you know cautionary Tale yeah and um what would you say Michael like in terms of like liquidation preference that that's super helpful I think it's kind of non-intuitive for a lot of Founders out there like what if you become like what's kind of like a standard right it's like 3x or 1.5 x or is there a standard at all or like

what's crazy versus so like the market or or what is considered Market terms will change with I would say the broader Market what is typical is you know one times liquidation preference so um basically what that means is uh you know if if there is a liquidation and um you know there's 10 million dollars that are put into the company investors get their 10 million dollars back is is kind of like what is standard um once again some sometimes these liquidation preferences could be multiples where it's two three times and then it's participating preferred shares where you're getting the liquidation preference and then you're participating Pro rata with your ownership of what's left

um so these can get pretty pretty dicey pretty quick Michael do you guys have a standard like you always do one one times liquidation or something like that or is it based on the valuation so if it's a really crazy high valuation that you think is too high you might go to 1.5 or like if it's a pretty low valuation you're really happy with it you would do like no liquidation preference or is it more standardized it's very standardized for us I mean we we as I was describing with the optimism example that's it's an atypical investment for us because of the size and it was more of a it was more of an ecosystem investment um and and because of that most I would say 95 percent of the Investments that we make are at the earliest stages so seed or series a um and because of that the valuations

aren't out of whack relative to where the business is or the product is or or where the founding team is um and so we just have a very standard you know one times uh non-participating preferred shares interesting so yeah Founders out there just be be aware right like they're uh you know people need money but also like you can lock yourself into a structure that's like tough right uh on the event like a successful exit the window gets like smaller and smaller the more you add these sorts of things um Michael I'd be curious to get your and I know Vance has a lot of uh perspectives on this but one thing that we haven't really covered very much on the show let's talk about eth in like two buckets here like maybe we could talk a little bit about like deflationary eath which like starting to

make the rounds on on Twitter and then maybe we could talk about the Shanghai uh upgrade which will allow people to take their money out like we've taught their eath out of the unstake their eat basically we talked like a little bit about this but there's been a lot of confusion about like how the queue kind of works and all that sort of stuff um so maybe just like frame the the context of the debate around oh maybe we could use this as jumping off point first of all there's been pushback from the Bitcoin Community right I think it was uh Alex oh gosh last name um but he tweeted out like eth is advertising a 7.5 yield which like I I like Alex a lot like had him on the show a number of times but like also I don't think that was a super in good faith kind of tweet

so maybe you could describe a little bit Michael about like where that 7.5 yield is coming from and then like it'd be good to just get your thoughts on like this whole like burn and having eth have a deflationary monetary model and like why that why that's a good thing totally um so I'm not exactly sure where seven and a half percent comes from um what we usually track is just like what are the general staking providers uh um you know actually providing so Lido is one of them uh coinbase uh with CBE is another one um it seems that those are in the light and then there's like rocket pool they're Statewide there's a number of these providers right

um and uh it seems like most of those over the last 30 60 90 days since the merge have been on the order of about four and a half to five and a half percent on average um there was that period of time I think in in early to mid-october where you saw the amount of activity on Eighth really ramp up pretty drastically um and those staking rates I think Lido actually hit above 10 um and and that's just like you know because of the amount of uh um you know Revenue that's flowing through the protocol in the form of gas fees that people are using to pay for transactions on the at all you know it really ramps up you know the amount of percentage uh

return that you can get from staking so what what's advertised I'm not sure but you know that that's basically where it comes from um and what's different about this versus just about any other protocol that's generating you know quote unquote revenue is that this is real yield as opposed to nominal yield um and the difference is you know how much eth is needed to be created every single block that this revenue is flowing through to be able to actually get to that yield percentage and and um you know that I think is a major difference between you know ethereum or any other protocol but that's you know one of the reasons why we believe that you know the the nominal uh yield is something that you probably shouldn't

look at when evaluating any any of these protocols and real yield is really kind of the the core metric that needs to be evaluated um in addition to that there is this concept of deflation um within the protocol itself and and so there's a percentage I think it's about 85 90 of the transaction fees that are going through um each block that are burned in the form of you know the the eip1559 burn mechanism um just this last weekend uh East went officially deflationary since the merge it happened previously I think in October or November and that went inflationary again this is all basically just a byproduct of the amount of uh gas fees that are being charged every single

block for these different transactions and when they reach above a certain threshold you know the each each of these blocks is net deflationary and then if you strain a long enough period of of them together you get to net deflationary perspective as well and so you can kind of bucket this again and credit to how press from North Rock digital who who really kind of coined this concept of you're you're creating the revenue model of the staking returns themselves which is mostly based around people using the protocol and so that's the real yield but within the real yield there's also the deflationary percentage that you can factor in because your ownership in the protocol itself goes up if it's Net deflationary versus inflationary um and so you put these two numbers

together and you know that's where you get to the point of having something that if it's four and a half five and a half percent of of nominal staking yield that you get just from staking the tokens themselves you can bake in whatever the net deflationary percentages on an annualized basis into what your real yield is um so anyways long long uh Babble there but I I think broadly you know that's how you would get to a lot of the the metrics around what the staking percentage is in addition to that there's this concept of Mev boost that I think Lido is is really um supporting right now and as uh more stagers go through the Lido ecosystem you get you know MAV actually flows back to the stakers themselves so you can get yeah that's why you would see somewhat

different staking percentages on these different providers I think it's really it's a super interesting experiment because I forget we talked to one we had some discussion on one of these shows about like inflation and um it's like what you get for the inflation and you know it's been around for almost 10 years now like nine years I guess uh later this year it's hard to think of that many assets that actually haven't net deflationary issuance policy like there just aren't very many examples even like huge very mature companies like have some sort of inflation schedule like if you just looked at stock base comp and uh and you know periodic sort of equity raises and stuff like that so I'm just very curious to see how it all works out I think it's

like amazing for uh eath holders there's also something really elegant about the design of the system if you think about it in terms of like it's a self-balancing like monetary policy which is what I kind of wish existed in tradify right you kind of remove a lot of the human decision making and panic which is basically what the fed's been doing for two years and you just put it right there in the code and honestly it's like a very compelling value proposition I I sort of find it I don't know that's my take I agree I think the the fact that it's deflationary and I think as more activity increases over time you're going to see they continue to get deeper and deeper into deflationary status um just with I think it's like 15 way if

it's over 15 way like it blocks your net deflationary something like that um but it's a massive Financial experiment you know you've got this multi-hundred billion dollar asset class that has a ton of activity flowing through it in a natural way that is now deflationary that that aspect alone is going to be fun to watch there there's a there's a concept in energy markets uh called like peak oil when when people thought that we discovered you know all of the oil that would ever exist and like the world was net short oil relative to like population and economic growth and that like drove like this whole Narrative of like oil going up um it didn't end up being right but like it was a very powerful Meme and

narrative um I do think with eth there's a strong chance that the maximum number of ether will ever exist at the same time is actually in the past like I don't know if we'll ever go inflationary again but there's a good chance that we've already seen Peak Heath and I think that is going to be a meme that drives a lot of kind of the uh the scarcity dynamics of ethereum you know what else is fun do you guys know Paul Ehrlich did you guys see he came out with something recently it was back in the news he's this like academic biologist type guy he came out with something called the population bomb about I think like 30 years ago or something it ended up being extremely influential and it's in its uh

you know a lot of people adopted this idea that the biggest problem Humanity was going to face was overpopulation and you were going to have like famine and starving and we weren't going to have enough food to feed all these people and now it's like the exact opposite like the biggest problem every nation is facing is like they have horrendous demographics and they're like not going to have enough people and they need to fix up their immigration but it's just a funny because I know peak oil is like a hilarious thing too it's just like that was so wrong um I feel like I know people who didn't have Kit who didn't have kids because like either overpopulation or they don't want to you know bring bring kids into this bad world I'm like that that's that's so lame such a lame perspective

dude I that's like okay did you guys do you guys watch light uh White Lotus the second season of course of course okay you know that conversation that they're having and you're like kind of supposed to there's like the new the New York East San Francisco kind of couple there's like Aubry uh what's her face that you know that couple and then there's like the couple that's supposed to be kind of like they're like in an open marriage type scenario like kind of douchebags you're not supposed to empathize with that and and she says something to the effect of like like I wouldn't want to bring a kid into this messed up world and the other couple was kind of like that was a nuts thing to say and I was like I'm on board with you that was a that's an insane thing to say people have had kids

through Wars and like way worse than what's going on right now I just think that's yeah I don't know if you brought up the population bomb because of uh because did you see the Wall Street Journal article about it like a week ago oh there's literally a Wall Street Journal article about like whatever happened to the population bomb and there was a quote in there let me just suspension bomb all right yeah all right there's a there's a quote in this article that says I was a college student when I read Mr ehrlich's the population bomb I took it to heart and now I have no grandchildren but 50 years later the population has increased to 8 billion without any dire consequences I was gullible and stupid I don't believe everything you read

first of all like what you read a book in college you didn't have kids because of it what the hell is wrong with you so maybe maybe like go for a second Source or just like you based your whole life off that like what are you doing I highly suggest uh if you're interested in this topic listening to or reading anything Peter zeihan uh promotes and and discusses um I've I've I know Vance has read the books but he's got a number of great books and I think he just did a Joe Rogan podcast um where he had a couple of interesting perspectives the the first is you know what happens when the population table flips upside down um basically what's happening exactly right now in Russia

um what will happen over the next 30 to 40 years in China what has been happening in Japan since the 90s um is that they're not going to be able to support the economy or basically the population going forward because you don't have anyone in their 20s and 30s that is able-bodied and able to help support the growing population of elderly people in the 70s and 80s um and his perspective broadly is as it relates to Ukraine Russia right now is that this is the last decade where Russia would be able to try to retake any any further territory because they just don't have the population growth to be able to support an army any decade other than right now um so it is something that affects not

just you know the the way that we think about these populations but the economies in the future of which countries are going to be powerful versus not I like I like Peter zahan's uh demographic stuff like that that feels like the best work that he does when he gets like way out there into like geopolitics or crypto like that like you know like he was he was like drawing like battle lines on this map you know I'm like following them like early last year like trying to figure out like okay if like Russia goes here and Ukraine's over here like what happens to crypto prices and I remember like near the the peak of like you know fear around Russia and Ukraine I was like talking to Michael and being like hey we can we can get Peter zihen to come talk to us for

an hour for fourteen thousand dollars should we do it and Michael was like ABS absolutely not like this is too much emphasis on this one thing Peter's great but like he gets a lot of stuff wrong and I don't think he's exactly he sounds really really smart and I know a lot of people I I like him I like listening to him I've heard him on I didn't listen to Rogan but I've heard other things yeah and like read Snippets of the book and I've subscribed his newsletter for years if you go back he's also been calling for the downfall of China since like 2007. and like there was an article there's like many because I've been subscribed to him for a long time like 2008 he's calling he said China will be China will be done in 10 years 2009 China will be done in 10 years 2010

channel will be done in 10 years so that's my that's uh that's my pushback you know Tom Lee would tell you uh you don't necessarily have to be right all the time you just have to extend your time Horizon just add some duration add some dirt yeah the the China thing is pretty nuts it's like his estimate of the working age population of China is that it's going to get cut in half in the next like 25 years which even if he's off a little bit on that I mean China's population shrank this year for the first time and I forget perfectly a long time thank you yeah so it is pretty interesting in terms of major

major headwinds but um can we talk a little bit can you guys give us um I'm not sure if you know the exactly there's a lot of confusion on Twitter just about how the withdrawal queue is going to work with Shanghai so I don't know if either of you uh could like give us some color on on how that might work and then how that might translate into it because it's been a good couple of weeks for uh like liquid staking derivatives providers like Lido and rocketpool so uh maybe we could talk about how that impacts their businesses too so I don't know if anything has changed we're not probably the uh the number one topic there would be probably a couple people on our team that would be a better um example to to discuss this um but our understanding is that there

will be a certain amount of um available to be gone going into the withdraw Queue at any given point in time and based on that cue and the amount uh as a percentage of what is state will determine how long it takes for that queue to basically work its way through and it's a decade curve that you know as there's a higher and higher percentage of withdrawal requests it'll take longer and longer for those who would draw requests to happen um and you know off top of my head I think if if it's like 10 of the state so let's say there's 16 million right now 1.6 million wants to be withdrawn it's something like 21 days for 10 to get it's itself worked through um once again I'm not sure if that's

exactly how it will process or if there's you know more fixed terms that go into that but that's our understanding of how it'll work we had one of our analysts Wesley put out a really good thread we'll Link in the show notes about um about the whole execue and how how it all works so we can we'll put that in the show Notes too yeah yeah I think you know broadly speaking um it's probably going to be a [ __ ] show when when you know things are enabled um and it'll be like a few days or a week of like up down sideways who knows um but you know I I think as this stuff usually does once it once it goes through it and Cycles through it'll be fine yeah nice what do you guys uh what do you guys know about bits Lotto

absolutely nothing didn't even know the name I thought it's so funny it's like doj sitting there like all right time to go after the big crypto blobs yes yeah yeah definitely let's go up to the big crypto blobs all right who should we go after probably like three arrows those guys seem like Schmucks Genesis all right FTX Celsius no [ __ ] Lotto baby like where do you I never even heard of this thing I mean if you had used bits Lotto I don't think you'd tell anybody about using it I think that's why you haven't heard of it um because you use it for what I assume is a very specific reason you know if you're in Russia getting money out or something like that I think they also

got the twofer here which is you get you know someone crypto you take them down you also get to bash Russia a little bit but the dead giveaway on the announcement was when it was the eastern district of New York that was doing the announcement prosecution instead of the southern district of New York and our guy Damien Williams who is moving at lightning speed like we generally assume the southern district of New York gets like the highest profile cases but you know I guess if you're breaking the rules and they take you off the map that's not exactly a bad thing so certainly not like a negative development they're just cleaning up the space a little bit yeah I mean like

those Figures it's always hard to tell like how accurate they are like are you counting both the deposit and the withdrawal you know of like one type of currency like you double count in the 700 million TBD but they must have found something that was like The Smoking Gun which said that all right this is facilitating people exiting Russia via new Financial rails into the us or something of the of the like oh this is interesting I just went to bits latte's website I'm definitely about to get hacked or something now um no it says this time so it's actually it's a French notice and it says something in French that I don't understand but then below that it says this service has been seized by the gender Medi National cyberspace command under the authority of the french Paris

prosecutor's office as part of a coordinated international law enforcement action so I didn't realize I didn't realize that I didn't realize it was a the French teaming up with the US I don't know it probably just means that that's where they were using the hosting service from um what when you when you go to a website and you see the this domain has been seized by the FBI you know warning that's like a watershed moment and people using the internet they're like oh [ __ ] like this can get real very quickly yeah yeah you're now on the list speaking of well I guess they kind of did take down the Pirate Bay in one Fell Swoop but

like there really hasn't been any other than Ross like secondary culprits of that like or or like chasing the money trail of where that went and where it ended up like I'm always surprised that we never hear more about that given that that was most of where all the Bitcoin was spent and used during the early years like there has to do something Silk Road so sorry not not Pirate Bay Silk Road yeah you're right um I mean Tim Draper is where it went Yeah Tim cleaned up on that one good for him Firebase still exists right I think pirate base I don't know are there Alternatives I like I think they

were I think that was basically whack-a-mole like they took down one Pirate Bay yeah a bunch of Alternatives popped up you're never gonna be able to stomp that one out at the end of the day people want to access bittorian so you there's always going to be ways to access bittorian my favorite part of that story is Tim Draper paid 40 higher than whatever the market price was for Bitcoin at the time in 2014 because his perspective was that it was clean Bitcoin because it was being sold by the FBI I kind of Follow that logic to be honest these are clean coins Tim Draper also had a Savage call for 2023 Bitcoin

he's calling for 250k and and okay but like dig into his reasoning a little bit his reasoning is that women are going to be uh like they're going to do a I don't know if it's a 180 or a 90 degree turn but like you know women are going to become the driving force in like Bitcoin holding it's like ah man like I would really love for the industry to have more gender diversity but I hang out in crypto a lot all I see is dudes like it doesn't feel like a lot yeah that I heard that CNBC Club he's like women control 80 of retail spending today only one in seven Bitcoin wallets is held by women then that's yeah well that is gonna bridge is gonna be like closed and boom 250. well so so the the reasoning here

if you extended to the furthest understanding is that Bitcoin will therefore be used as a form of payment for e-commerce and while that but but also that we're certainly going to adopt to bitcoin as a new monetary standard in 10 months is really kind of the reasoning for 250k um but I I think this is where like one thing that I've noticed over the years of being in crypto and seen sort of like the trends and perspectives along the way and you know the bodies um that you've passed along the way is that when you got into crypto and your mental model of how you see the world and how you see crypto fitting into it is the largest determining factor of

your investment strategy where you work what companies you think will do well what products you think will do well and the people that are still holding on to this like Bitcoin as the new monetary standard and going to replace the dollar and therefore going to be used for e-commerce payments writ large is still a standard that a standard operating procedure that people are still operating under and it just it kind of baffles me that people are still viewing that it's like have you been paying attention over the last three years like within crypto this industry moves so fast you have to change your mental model like every month basically every every couple of months I would say um just to your better understanding of where things are moving but it really does depend on whatever your mental model is as basic driving force of where

you see the industry going I though I agree with you on that but I also don't understand why those have to be too incompatible mental models like can't you like let's say you think that you sort of believe in the Bitcoin you don't even have to believe it's going to be like replace the dollar you know but you can still be excited by that aspect of it and hold Bitcoin for that but can't you also see everything that's going on with smart contract platforms and daps that are built on top of them and realize that bitcoin's not going to be it feels like people make it this like binary thing that I have to be excited by this or I have to be excited by this like I feel like you could be excited by both of those perspectives now you know what I mean you can be excited

by both of those perspectives I think that mental model only works in a world where Bitcoin is the biggest asset if Bitcoin is the fifth biggest asset and people are telling you that it's going to be the new money and like all this stuff what I'm going to say is all right you got to pass those other four assets first that are crypto native and then you can you know think about challenging gold in the larger you know Financial system as we all know it but like you can be excited about that in this current Paradigm but what if it shifts like what if Bitcoin isn't the biggest asset then it feels like you know that is like your core risk I don't I don't think the risk of Bitcoin right now is depreciating in USD I think it's the eth BTC chart and if that flips a lot of

that is called in the question and I would say I totally agree with all that I would say you know Tim Draper you know advance and myself um being wrong about the time is also being wrong and so you also have to factor in like how many years how many decades is going to take for that vision of the future to actually play out and do you want to be spending the next 40 Years of your life waiting for it versus the other micro cycles that are going to happen over the course of those 40 years um so I you know that that's broadly I agree you could be excited about both there's this question of one just speaking of um Random clips that were kind of funny this week did anyone catch the Tucker Carlson clip about Bitcoin this like didn't catch on at all but

this is so funny all right so dude this is I don't I don't watch Tucker Carlson but I saw this clip and I like couldn't believe that it was real so I looked it up so Taco Carlson has this Theory you know there were all those plane outages like back in like end of December beginning of this year so he thinks there were ransomware attacks basically that happened and that these Airlines got held hostage and he goes well what do you pay ransomware attacks in Bitcoin so what if the government is buying Bitcoin to pay the ransomware attacks for the airplane flights and that's what caused this pump I was like that has got to be the weirdest explanation for this pump that I've seen coming out of it anywhere but honestly I'm here for it I'm here for it

yeah Tucker's a crypto guy you know he's a crypto guys guy like he's willing to put out crazy conspiracy theories out there to explain a five percent pump I love that he thinks that the Bitcoin run-up was due to hackers holding the FAA hostage which then forced the US government to buy a bunch of Bitcoin to then pay off the ransomware yeah I buy it I'm into that dude you know what I've had someone it's more believable after the Twitter files when you see like the FBI agents emailing the Twitter customer support people to get like specific accounts banned I can now imagine a world where like the FBI has like a few hundred

million dollars credit on like coinbase and it's like putting in Market buys and limit orders and like you know managing each BTC I can see it do you think they're calling up their coinbase institutional rep and being like all right bye listen I can see it yeah someone pointed this out to me once like Tucker Carlson is not if you don't agree with him he's like kind of infuriating but if you agree with something that Tucker Carlson is saying it's like the best thing to listen to ever you know because he kind of gets on and like knits his brow like this and it's like can you believe they're doing this and you're like get him Tucker you know it's like when you don't agree with him you know it's just yeah all right let's let's uh

let's close on this because we haven't we haven't really talked about this but uh GTX uh so there's a new exchange that's being uh proposed by suzu and Kyle uh just a disclaimer Jason and I are both Angel Investors in this so we're pretty biased yeah just kidding that would be horrendous um all right so GTX I actually thought again I didn't think this was real but I looked into it so suzu and Kyle uh who are you know they were the the founders of 3ac they're hoping to raise 25 million dollars to start a new crypto exchange called GTX what they're hoping to do is basically bootstrap this demand for claims right so there are a bunch of like FTX claims that are going to hit the market uh but also there's like Celsius and Voyager as well so they're

hoping to start this exchange with the founders of coinflex um so they're they're using that coinflex technology basically it's like a base and then they're going to start an exchange where you can trade these claims um and they're going to issue a token again against it or like usdg usdg yeah I think would be the name of the token so are they gonna have their own claims will they will you will you be able to trade 100 100 yes the other the other context here is that coinflex also has a 49 million dollar Roger shaped hole in it and so like that part isn't pristine either so it's kind of like a weird

yeah we we had also heard that they're taking auditions for other co-founders and the only prerequisite is uh having previously committed fraud because all four of the people of GTX or whatever it's called have um yeah personally I wouldn't invest just because the fraud hasn't been like truly huge like if they had Jeff Skilling or something on there like then I would consider it but not quite enough fraud experience honestly for me their advisors SPF let me let me give you okay so like they did something wrong obviously uh potentially very very wrong and like you know unforgivable uh coinflex you know has a hole in it it was giving a

preferential turn to certain customers on no liquidation accounts like that's also bad um and I think we should be safeguarding the space in terms of like you know uh pushing out the Bad actors and all of that and you know so on and so forth I also think at the same time it's hard to permanently cancel someone from like ever earning an economic you know Revenue stream again and so like I obviously don't think this is a good project for them to be going after nor should really people like look at it too seriously but I don't know like how much punishment is enough like after the case is resolved and all of that stuff happens like are we then gonna be okay with these people in the industry or like like what is the exact line that we're moving here

you don't let Bernie Madoff like go start another fun because he's been in prison for long enough like you don't yeah I think but like in you get barred from the Securities industry very easily for committing Securities fraud and that's for a reason you can't be a director of a company you can't be you know affiliated with a fund you can't be a registered investment advisor like there are clear lines and when you cross those lines you can't come back I think the advance I hear the point that you're trying to make and I think there's I I hear you on that level but I also think like there was a there was a video actually that uh Kyle Davies did with um who's that guy he's he's a little bit out there he's an ex Hedge

the surfer dude who's now trying to do an acid Capital I'm blanking on his name Hugh Henry Hugh Hendry and there was like I didn't watch the whole interview but there was a clip I saw which his he was like well you can't make it back in your life right now is like the film rights you know but you can't trade again and like there's Redemption I think for both Sue and Kyle and I also will caveat this by saying I don't know if like under the you know outside of Twitter they're actually working in good faith to like solve this stuff but like it doesn't seem like that outside so like step number one you have to try to repay your creditors right you can't go out and like build more Equity value for yourself while you still have a huge debit right like you got to go through

the proper bankruptcy filings and try to pick that's what I think I'm resisting and also it doesn't really read to me like they're like real Contrition you know every interview that they give is like well a lot of other people lost money too and well we made the right trade but like other people piled in after us which is a ridiculous explanation or somebody or somebody liquidated us you know and it wasn't under our control at all or you know yeah there's no Redemption art for Sue and Kyle um in this industry I agree you know the film rights you know Jordan Belfort Wolf of Wall Street you can go off and do that uh you can you know squeal on all the other people and get a lower sentence if you want as well but there's no way that they're going to have

Redemption art and and just the fact that they put this debt together and that they're going after this opportunity tells you everything you need to know which is that they are not focused on getting any of their predators money back the fact that they are trying to do this again is just par for the course of who they are and what they represent that's fair that's fair yeah I mean I'm not I'm not endorsing a Redemption Arc here I just am like very against like cancel culture especially when it's like economic disenfranchisement but like you're right they do need to pay everyone back they need to make things right before they can do this and like yeah it's it's just a [ __ ] situation I do think the idea is somewhat interesting like if you could tokenize these claims and have people

trade against them everyone who's down bad and Voyager Celsius blocked by Genesis whatever like they would do this like you can get legitimate volume from this sort of type of product and like paradoxically like this is the exact type of product that FTX would have launched had it still been around um I mean is isn't this what business this is what bitfinex did with Leo okay the token right a little similar scheme yeah like every single crypto bankruptcy that has been administered by lawyers and administrators has gone terribly like Mount goffs is still winding up like there's other International exchanges we know that are still winding up bankruptcies I would argue that Leo is actually the best case scenario you know for any of these you know failed

exchangers that have a hole in them yeah it was good it was good yeah right and like yeah you know as much as we all hate SPF and all of that stuff and so on and so forth but like he was advocating for the Leo plan now he's under like the Sullivan and Cromwell plan of like you know we are going to charge you a lot for this you know unwind at the end of the day I'm just not sure which one is actually better for the people that are owed money which is the users who have you know money trapped on that platform like do you want to get 100 cents in 10 years or do you want to get 20 or 30 cents an hour or 40 cents now with some upside like it's not everything is black and white the the other big variable here too that

you know we're is has yet to be figured out with a lot of these different situations is is it dollarized or is it in kind and you know that I think is going to be you know as you see this five percent ten percent whatever pump over the weekend how shitty must it feel sitting there watching your Holdings in kind change but you'd not even knowing whether or not you're gonna get that back or if it's going to be based around some July deadline that's that's the free option right if it goes up it's dollarized if it goes down I'm giving you that in kind like that that's why they do these things yeah that's why they do these things like you know there are games that these people play and like if you have a token that's on chain that has like programmatic rights to cash flows

if I were a debtor or if I were a creditor I would choose that just to be totally Frank Michael let me do a hypothetical here so we all think that Vancouver I think that was fair I think it was good pushback uh just for the sake of the conversation but it sounds like we all think that they should not be able to raise this money and that they should not be able to continue with GTX which is GTX just to play on FTX is that a real thing such okay so I think that should tell you everything you need to know but Michael let's say that um GTX actually is able to raise 25 million and they go through with it and it's a year from now and they've been able to actually somehow just they raise this money they launched the claims are on there and you see a

really really really good opportunity to make some money on GTX but if you do it you're supporting their exchange you're supporting them right by trading or buying things do you do you use GTX or like another hypothetical could be like for my mic blockworks mic like if they came to us they're like we raised this money we want to do a multi-million dollar sponsorship a lot of ton of money big like big big check for Block Works do you take it um the the quick answer is no and I can't even tell you the number of Investments that we've looked at where it's like we can put in five million dollars and we know that we're going to return 10 million dollars and like it's gonna be a quick two to three x and we

can like get in get out and move on with our lives but the fact that over time what you erode by doing so is your brand and whether it's an investment firm or you know a news publication um platform that you guys have with black words over time you will have lower lifetime value of your customers because you will have eroded the brand and you won't be able maybe maybe that means that you won't be able to get the next deal the next time because you were involved in this pump and dump or maybe it means that you're not going to get the the you know the hot star uh reporter because like you're you know sponsoring GTX like there are a lot of Downstream effects that I think are tough to see in the moment that

ultimately you you just there's there's a lot in the sand and you don't cross it um and so we have a very particular investment thesis and we stick with that and um yeah we don't do things that are outside of our out of our boundaries yeah like we we've never taken the easy money and like we're proud of that and I think like you know block works there's a version of that where you don't do like the Click bait you know like articles that you know dissolve your brand over time I would say like if you're an individual who has been robbed of money by one of these large exchanges like you're not thinking about like am I supporting you know Kyle and Sue or like the bad people like you look at these telegrams and these Reddit threads like there are some pretty horrifying stories in terms of

what happened to people who put their life savings in they just want to get some money out they want to trade they want to have some sort of liquidity and so like yes this is a probably bad founding team to product fit but this is a solution that would get a lot of people liquidity in a short timeline and unfortunately you can't do this in the US like I think they would call these Securities they would come after you Europe same you know Asia you probably don't get a lot of uptick there this is a product that's going to come out of Dubai or like one of these crypto friendly jurisdictions if it comes out at all and to be rooting against like the entire idea I don't think is right like we should be looking at their proposal being like you know that's probably not what we're going to be

choosing as far as the team who does this but like you know these lawyers are submitting 10 20 million dollar bills you know every month for these bankruptcies and you know creditors are getting very little value for it and so like we should think about alternative crypto native ways to get people their money back if if we're really kind of the self-contained ecosystem that we claim we are just to be clear I completely agree with all of that but it is the founder product mismatch that you know I have issue with me too that I I agree with that as well like we I actually think it is a good idea frankly like I kind of looked at this and was like you know those guys Kyle and Sue are both smart you know they don't have it doesn't have to be all 100 negative like they made

some really bad choices I think but they are smart guys and I think this is actually a pretty interesting idea but yeah I mean Jason like we're at an off site right now we just gave this whole like we kicked off to our team but like a huge part of what you're just trying to do is uh to your point Michael about brand you're trying to make it through multiple cycles and not like saw your own leg off right and make it so that your brand loses a lot of its value and that's I think it'd be a pretty easy answer Jason to your point of like huge sponsorship just imagine I we just couldn't do that it would I just yeah it'd be a pretty easy decision you have to have a solid foundation if you're going to build anything meaningful like like an example of like a crypto media

you know company that didn't make it across the last cycle remember Ico Michael yeah oh gee OG stuff right there like they just started as an uh an Ico advertising website and then they tried to Branch out into like this full-throated crypto media Empire and just the foundation was rotten and it never worked as a result like it's hard to quantify it but over time it really does add up yeah 100 and and paper cuts that you don't even see just like ways that people perceive you those compound right I agree with you yeah I agree all right fellas this was a really fun one any anything that we didn't get to cover or that we wanted to

chat about I don't think so good to be back hope you guys enjoy the offsite you know get the troops fired up where where are you where is the outside Savannah check it out yeah Michael this one this one was a little perplexing to me Savannah Georgia I don't think I've ever been there nice I did a high school running off the list of the like top you did a historical tour yeah I did a solo historical tour I booked it on Airbnb experiences great 55 for 90 minutes it was phenomenal yeah mentally I was going down the list of top five ski areas expecting you to list one of those for January weekend but uh

no all right yeah we've got a sauce button for Georgia did you guys know by the way I learned this Georgia is uh named after King George you're not now you do wow all right true facts with Yano did you learn that in the history tour yeah yeah 1733 Savannah was the first city in uh in Georgia King George wow really good to uh to be a buffer between South Carolina which was like his his uh prize Jewel and then uh and then the Spanish Army which was in Florida which was the largest army in the U.S at the time now you know should we just do a history Podge next time we all just see each other

yeah cool all right guys later guys [Music]