Latest / Simply Bitcoin / Caitlin Long | Bitcoin Wins Regardless | Simply Bitcoin IRL

Transcript

Caitlin Long | Bitcoin Wins Regardless | Simply Bitcoin IRL · Simply Bitcoin

• 0:04
  Hello everybody. Welcome to another episode of
• 0:07
  Simply Bitcoin IRL. Today, we have a very special
• 0:10
  guest Caitlin Long and special to us, because we've been
• 0:14
  covering, you know, however, which you'd like, however, which
• 0:17
  way you would like to describe it.
• 0:18
  The moving of the goalposts, like, we say, we've been
• 0:22
  covering this for a couple months now, and we're, we've
• 0:25
  been dying to talk to Kaitlyn. So it's really, really an honor
• 0:27
  for us. Anyways, before we start the
• 0:30
  show, I want to give a shout-out to the awesome, Bitcoin
• 0:32
  companies that make this show possible Possible Swan
• 0:34
  Bitcoin.com, best place to buy Bitcoin built by bitcoiners for
• 0:38
  bitcoiners and of course Bitcoin 2023.
• 0:40
  It's going to be the largest Bitcoin conference in the world.
• 0:43
  Miami Beach Florida. You can use the promo code
• 0:45
  simply to get yourself a 10% discount and we want to bring
• 0:48
  Caitlin onstage Caitlin. Thank you so much for for
• 0:51
  joining us today. Hey they're great to be here.
• 0:54
  Thanks everyone for listening. Happy to have you.
• 0:56
  So before we get into the custodian and what's going on
• 1:00
  there with the banking Charter, why the banking Charter is in
• 1:03
  Gordon in the first place, because I think a lot of people
• 1:06
  don't understand that. Without that, you can't really
• 1:08
  be competitive. So before we get that before we
• 1:11
  get to that, I want to talk about what happened over the
• 1:13
  weekend, right? We saw a bunch of a bunch of
• 1:17
  central banks to be specific, the, you know, the US Central
• 1:21
  Bank, the Federal Reserve, the Bank of Canada Bank of England,
• 1:24
  bank of Japan, the ECB and the Swiss National Bank.
• 1:28
  They made a joint statement, Kalin please correct me.
• 1:31
  If you think I'm wrong but I don't remember that.
• 1:33
  That in recent history at all. I don't think I've ever seen
• 1:37
  this before. Well, now, the central Global
• 1:40
  central banks will coordinate. They often times don't announce
• 1:44
  it like that, but there was a lot of cooperation and
• 1:49
  coordination, especially dating back to the 2008 financial
• 1:52
  crisis. What's different about this is
• 1:55
  that after the 2008 financial crisis, the FED left open,
• 2:00
  What's called swap lines, foreign exchange swap lines with
• 2:03
  other Central. Thanks.
• 2:04
  And for the most part, they've just been dormant, but they
• 2:08
  obviously have ree-ree. They started them up again and
• 2:12
  in a big way and it will be fascinating to look at the
• 2:17
  impact of that. On the fed's balance sheet.
• 2:19
  We've, I've tweeted that I came from Credit.
• 2:22
  Suisse I spent 10 years at Credit.
• 2:24
  Suisse and I worked for almost a year directly for the co-ceos of
• 2:29
  Credit Suisse in 2001 to 2002. So just over 20 years ago.
• 2:33
  And it was back at a time when Credit Suisse almost failed.
• 2:36
  And I remember at the time talking to the team, who was
• 2:41
  advising the parent company, I was working on the restructuring
• 2:44
  of the insurance, him sit, subsidiary that imploded at the
• 2:47
  time, but I was working. I was in Zurich epic
• 2:50
  headquarters in Parada plots. And talking to the team that was
• 2:54
  dealing with the Swiss government on the
• 2:56
  recapitalisation of the company. The stock had gone from 9219 at
• 3:00
  that point in time and and, and, and it was right.
• 3:03
  To the 2001 stock market crash 911 Etc, just to paint the
• 3:07
  picture and long story short. Here's the punch line.
• 3:11
  We figured out that if Credit Suisse ever win under, it was
• 3:15
  going to be a gift being sarcastic there.
• 3:18
  To Federal Reserve because the Swiss National Bank couldn't
• 3:21
  possibly expand, its balance sheet, big enough to bail out
• 3:25
  Credit, Suisse it was that much bigger than the, Swiss economy
• 3:29
  and so most of its exposure was US dollars.
• 3:32
  So basically, it was going to end up being the feds problem.
• 3:35
  Not the not, not just the Swiss National Banks problem.
• 3:38
  And through these foreign exchange swap lines, I think
• 3:41
  we're going to see that. That's exactly what will have
• 3:43
  happened, the Swiss economy and the Swiss currency.
• 3:47
  The Swiss franc is just simply not big enough.
• 3:50
  It's a fraction of the size of the Euro area fraction of the
• 3:53
  size of the US. And as a result, when you get a
• 3:57
  bank, that big dwarfs, the the entire economy of its home
• 4:02
  country, When it goes under, it's going to be felt around the
• 4:06
  world and all the central banks are going to end up having
• 4:09
  having a problem most, especially the Fed.
• 4:13
  So was it a bailout with your what really happened here?
• 4:16
  And then before before we get to that?
• 4:18
  Could you explain in layman's terms?
• 4:20
  What swap lines are for everybody?
• 4:22
  Yeah, so it's essentially a way for US dollar funding to make it
• 4:27
  to Offshore Banks. So so Credit Suisse has a big
• 4:32
  u.s. operation. In fact, they have a New York
• 4:35
  branch of the Swiss bank, that is what's called a primary
• 4:39
  dealer. It's one of the couple dozen
• 4:42
  large Banks, Is that is required to buy, and does partake in
• 4:49
  every US Treasury auction. So, when the US government
• 4:53
  raises debt issues debt, they do it through the US Treasury, but
• 4:58
  they actually do it through What's called the primary
• 5:00
  dealers. There are the biggest banks in
• 5:02
  the world and Credit. Suisse was one of those.
• 5:06
  UBS is, as well, by the way, but all the big banks are primary
• 5:10
  dealers, it gives you an advantage because you get access
• 5:13
  That newly issued collateral, which is extremely valuable in
• 5:17
  financial markets. So, so what happens in a foreign
• 5:21
  exchange swap? Is that a central bank can
• 5:24
  pledge US Treasury collateral in exchange for US Dollars.
• 5:28
  And so if there's a shortage of US dollars in the Eurozone, the
• 5:32
  ECB, the European Central Bank can take us, treasuries, and
• 5:36
  pledged that as collateral for an overnight loan, effectively
• 5:41
  in u.s. dollars. So the dollar is make their way
• 5:43
  to Europe and I think that's going to be the method.
• 5:46
  We're going to eventually the bank for international
• 5:49
  settlements, will will publish a heat map that shows the
• 5:52
  directional flows and they did that after the 2008 financial
• 5:56
  crisis, it was extremely interesting because the fed's
• 5:59
  balance sheet expanded from 800 billion to about three trillion
• 6:03
  during the during the 2008 financial crisis.
• 6:06
  Last, I looked as its eight point four trillion, now after
• 6:09
  having been brought down from a peak of just under 10 trillion
• 6:13
  that gives you a sense of the numbers here and and and the
• 6:18
  punchline is that in 2008, the bulk of the flows, the bulk of
• 6:23
  that expansion from 800 million 800 billion to 3 trillion back
• 6:28
  in 2008 on the fed's balance sheet went to foreign Banks.
• 6:32
  It was an offshore shortage of US Dollars and I think that's
• 6:36
  going to end up happening here again.
• 6:39
  Potentially so and then it was this a bailout I have a you know
• 6:45
  for a video listeners I have the FED balance sheet pulled up.
• 6:48
  And what Kaitlyn was describing, right?
• 6:50
  Just, it literally, looks like a hockey.
• 6:52
  Stick got a stick up. It just keeps going out, right?
• 6:55
  I mean, these are the, these are backstop facilities.
• 6:58
  If the, if the banks were solvent, they wouldn't need the
• 7:01
  backstop facilities. Now, a lot of people will debate
• 7:04
  because, oh, this is temporary liquidity.
• 7:06
  It's a loan. It's not an asset.
• 7:08
  That that that that's going on, you know, the feds not buying
• 7:11
  the actual treasuries, which would be technically QE.
• 7:15
  But it's backdoor kiwi. Yeah.
• 7:18
  Interesting, interesting. But it's, it's fascinating how
• 7:22
  they frame it, right? It is getting Arthur, Hays.
• 7:26
  It's a Confidence Game. Arthur Hays, came out with a
• 7:29
  tweet thread to, and he basically was making the
• 7:31
  argument that it's extremely damaged, but it would be
• 7:34
  extremely damaging politically. So they have to frame it in a
• 7:37
  certain way and I thought that was fascinating.
• 7:38
  Well, the same thing happened in Thousand eight.
• 7:40
  So, you know, it obfuscated in complexity what was really going
• 7:45
  on and indeed I think that's happening here again.
• 7:49
  Interesting. Okay.
• 7:51
  So I really want to use the bulk of this time that we have
• 7:55
  together is our that we have to talk that we have together to
• 7:57
  talk about custodian. So first of all, what why don't
• 8:01
  you tell everyone Caitlin? What is custodian Banks?
• 8:03
  The safe bank, it's a bank that doesn't lend a bank that that
• 8:09
  that was proposing to hold a dollar 8 in cash reverie dollar
• 8:14
  of customer deposits in a Fed master account and the FED
• 8:17
  unfortunately denied that Request.
• 8:21
  Why do they do that? Well, the detailed reasoning has
• 8:25
  yet to come out, I think this community is going to have a
• 8:28
  field day when it does but let's see what they what they say and
• 8:32
  what they release but they did call us unsafe and unsound.
• 8:36
  Great irony, a 108 percent Reserve, Bank is called unsafe
• 8:40
  and unsound. While the six percent reserve
• 8:42
  banks that they were calling safe.
• 8:44
  And sound are now imploding. So quite I are quite ironic What
• 8:50
  was really fascinating to us, was the moving of the goalposts,
• 8:55
  right? You know, apparently, the, the
• 8:58
  approval process takes about two to three.
• 9:00
  We did before five to seven days, and then exactly, right.
• 9:04
  And then they just kept along gating it.
• 9:07
  And then to me Caitlin, it seemed like quite a big
• 9:09
  coincidence. The moment in time of which they
• 9:13
  officially denied the application.
• 9:15
  It's almost as if they needed a they needed a great excuse.
• 9:20
  Yeah, I mean I know a lot about what's going on.
• 9:23
  Obviously some of that is subject to litigation and
• 9:27
  there's only so much I can talk about but you're right.
• 9:30
  It is not imagined. This was very coordinated and
• 9:35
  there were a number of process and procedural changes that
• 9:40
  Court Corners cut in getting this done and we're not sitting
• 9:46
  down and taking it lightly. Do you believe that?
• 9:52
  You know, of course I want to kind of tiptoe around this.
• 9:55
  Do you believe that this was politically motivated?
• 9:58
  Of course. Absolutely.
• 10:00
  Yes. Which it, which is, what is so
• 10:03
  interesting. I say with a smile, on my face,
• 10:07
  in the in the sense that each applicant under administrative
• 10:11
  law is to be afforded certain due process rights and we had
• 10:19
  its this is publicly disclosed we've talked about it before.
• 10:23
  Two days before the application was formally denied that we were
• 10:29
  getting leaks from Our media Outlets telling us that our
• 10:33
  application was about to be voted down.
• 10:35
  It was a foregone conclusion. It was preordained, and that was
• 10:40
  two days before the vote took place.
• 10:41
  And we hadn't even made a decision yet whether to withdraw
• 10:44
  our application or not withdraw and have it, presumably be voted
• 10:50
  down. But wait a minute, this was
• 10:52
  supposed to be a fair process and so there shouldn't have been
• 10:57
  a presumption at all. That the vote was preordained.
• 11:01
  And the reporters were telling us that the FED Governors vote
• 11:04
  was preordained. This was supposed to be an
• 11:06
  independent entity and each they're supposed to be process
• 11:10
  and procedure around it. We also have in writing from a
• 11:14
  reporter that all of the applicants at the OCC and the
• 11:18
  fed the OCC is the National Bank chartering Authority.
• 11:22
  Were simultaneously asked to withdraw their applications.
• 11:24
  Again, applications were supposed to be judged on their
• 11:28
  individual merits but apparently that didn't happen.
• 11:31
  Here. Interesting.
• 11:33
  Very interesting. So, you know, we're bitcoiners
• 11:37
  after all Caitlin. So, we're Believers and
• 11:39
  incentives. What is the incentive for you?
• 11:42
  No. Denying this application.
• 11:45
  Oh, anything new. Anything Innovative?
• 11:49
  You know? It's interesting because like I
• 11:51
  alluded this was a long process. And towards the end especially
• 11:55
  we spent a lot of time with folks on the ground and a lot.
• 12:00
  Again there's only so much I can talk about.
• 12:02
  Technically, the way that the Fed works is they control
• 12:05
  something called confidential, supervisory information, and
• 12:09
  that cannot be disclosed without their permission.
• 12:10
  And of course we're not exactly in a friendly position with them
• 12:15
  right now from the legal perspective because of that
• 12:17
  litigation. So there's only so much I can
• 12:20
  disclose. But once it all comes out, it's
• 12:23
  going to be clear. You know, how much work we did
• 12:26
  with them from in the last several months and and how much
• 12:31
  progress we made And I know we had our supporters among the
• 12:35
  staff. This was a political decision
• 12:37
  that came, unfortunately, we know from the White House, very
• 12:40
  surprising, that the Federal Reserve would politicize a vote
• 12:43
  like this, but it did. Interesting and speaking about
• 12:47
  the White House, we know that the current Administration has
• 12:51
  been. You can't even say they're doing
• 12:54
  it under the rug right there. You know, they're definitely
• 12:57
  publishing it, you know, in there whether it's, you know,
• 13:01
  the digital assets framework the, the one that I find
• 13:05
  hilarious Caitlin was a report by the treasury and the reports
• 13:10
  name was the future of money and payments, right?
• 13:14
  And then entire report they mentioned Will coins.
• 13:16
  They mention payment. Platforms course.
• 13:19
  They mentioned their favorite Central Bank, digital
• 13:21
  currencies, but they never mention Bitcoin and I thought
• 13:24
  that was fascinating well for me.
• 13:28
  I've done a lot with mainstream again.
• 13:29
  I came from the mainstream world, right?
• 13:31
  So I have one foot in both worlds and definitely am
• 13:35
  comfortable talking to people in both worlds and have done a lot
• 13:39
  of talking with you know policy makers including former fed
• 13:42
  officials about our world and virtually none of them.
• 13:48
  Think Bitcoin should have value. They just dismiss it because
• 13:53
  nothing back sit and of course, nothing backs.
• 13:56
  The US dollar either. Either accept something
• 13:59
  ephemeral, the full faith and credit of the US state of the
• 14:02
  United States. Well, what does that actually
• 14:03
  mean? If you really stop and think
• 14:05
  about it, money's ephemeral, the whole thing, it's a confidence
• 14:10
  game and but the whole concept of it being backed by the full
• 14:15
  faith and credit of the US government people put a lot of a
• 14:18
  lot of stock in that as opposed to being backed by math which is
• 14:23
  and and hash power proof of work which is it's just a harder for
• 14:27
  people. Get their heads around.
• 14:28
  But I would say the vast majority of people inside of the
• 14:32
  mainstream Financial Services regulatory apparatus, don't
• 14:36
  understand Bitcoin because they can't get their heads around
• 14:39
  subjective value. What about Caitlin?
• 14:44
  So there's two components when we've been going down this, we
• 14:48
  always say we're slaves to new cycle because we're a news
• 14:50
  channel primarily. And one of the things that we
• 14:53
  say is are we ever going to get a friendly environment with I
• 14:58
  know on a state level? That's a different story.
• 15:00
  But on a federal level if The Regulators that, you know, our
• 15:05
  task to, you know, regulate this industry also have a tremendous
• 15:09
  amount to lose if this industry succeeds and the reason I'm
• 15:12
  saying that right is that we know that the federal government
• 15:16
  gets a tremendous amount of power from, you know dictating
• 15:20
  the monetary policy and basically having a money
• 15:23
  printer, right? And that's how they get away.
• 15:25
  Way, with all the deficit spending their spending money.
• 15:27
  They don't have because they have, you know, they have a
• 15:29
  printer. They're not really incentivized
• 15:33
  to be open-minded for something that could potentially threaten
• 15:37
  that. Yeah, you know what?
• 15:39
  It's like, I'm sorry. I just kicked my stand here.
• 15:43
  The, it's like a taxi and limousine commissions when Uber
• 15:46
  came along. They weren't incentivize either
• 15:49
  but people voted with their feet and this technology is so much
• 15:53
  better for multiple. Reasons that people will
• 15:56
  continue to vote with their feet.
• 15:58
  I'm quite sure. And you see it actually.
• 16:01
  I don't even need to to submit. You can see it.
• 16:04
  Objectively and confirm for yourself.
• 16:06
  A lot of mainstream thinkers don't understand why Bitcoin has
• 16:10
  any value at all and they still think it's going to 0 and I
• 16:13
  think it's hilarious that Bitcoin has gone up in their
• 16:15
  face and there are multiple reasons for that but they have
• 16:21
  to eat crow and they will there's a there's a Website, 99
• 16:25
  Bitcoins.com. It keeps track of verified
• 16:28
  Bitcoin obituaries and I haven't looked at it recently, but last
• 16:32
  time I looked at it was a couple months ago and they were up to
• 16:34
  467 Bitcoin or obituaries. The coin has died 467 times and
• 16:40
  in some cases died at the mouths of the same people who swore it
• 16:45
  was dead and then two years later, they swore it was dead
• 16:48
  again, you know, so you just have to laugh.
• 16:50
  I love the irreverence of that website.
• 16:55
  Site because it documents for posterity, just how many people
• 16:59
  can't get their arms around the concept of Bitcoin.
• 17:01
  And yeah, as a result, here we are.
• 17:07
  As a result here we are. So Caitlin, I saw your pictures
• 17:11
  on Twitter, it seems like you were spending some time in the
• 17:14
  Imperial City or some people do. That's what this one.
• 17:17
  However, which way you like to describe it, what is your gauge
• 17:22
  on you know, the average Congressman or congresswoman?
• 17:27
  What's their take on bitcoin and a troubling pattern that I've
• 17:31
  seen in to me? It's heartbreaking because I
• 17:34
  really believe that Bitcoin is bipartisan the sense you No it
• 17:37
  doesn't lean left or right. It's helps everybody equally but
• 17:40
  the troubling pattern that I've noticed, and of course, is not
• 17:43
  monolithic, is not black and white but you know it seems like
• 17:46
  the more right hand side. The Republican party is a little
• 17:50
  bit more open to bitcoin. While the Democratic party has
• 17:52
  been a little bit more hostile so it does is that Trend
• 17:56
  continuing or am I seeing something that's not there?
• 17:59
  Well, the White House has all the power and force that's in
• 18:01
  Democratic hands. So right now that's I think more
• 18:06
  of a perception. And then a reality because
• 18:09
  again, you know, the, the anti crypto wing of the Biden
• 18:13
  ministration is that hardcore Progressive Wing?
• 18:16
  Although there are progressives who are pro crypto because of
• 18:21
  the ability to deliver Services through technology through a
• 18:25
  phone that the traditional banking system is not
• 18:29
  delivering. So it's you cannot make
• 18:31
  generalizations and even in Wyoming which is a red state.
• 18:37
  The most active legislator in support of all of the blockchain
• 18:41
  bills. Is the Senate Democratic leader,
• 18:44
  so it doesn't cut across party lines.
• 18:47
  Some of the biggest critics of the Wyoming initiative are the
• 18:51
  hardest core. Conservatives because there I
• 18:55
  would say they're probably more Neo cons there in some ways.
• 18:58
  They're there they're more. Hey the you know it's kind of
• 19:02
  like what Trump said you know when he attacks Bitcoin in
• 19:07
  Summer of 2020. I believe it was just you know,
• 19:11
  he said hey why would we need anything other than the US
• 19:14
  dollar? I'm a big fan of the US dollar
• 19:16
  and there are there is a big component of the right that
• 19:19
  thinks that way as well and is anti Bitcoin as a result.
• 19:22
  So it just doesn't cut across traditional party lines.
• 19:25
  You can't you can't draw those conclusions.
• 19:29
  Well that's really refreshing to hear because I do believe that,
• 19:33
  you know, in my heart, right? This is not a left and right
• 19:36
  issue and I would hate for it to become one.
• 19:39
  So you mentioned something about the you know the hardcore
• 19:42
  Progressive Wing in the bottom. Ministration that are anti
• 19:44
  crypto. Why what why would they you
• 19:47
  would think, right? That they would be for the most
• 19:49
  inclusive, you know? Equal money.
• 19:52
  The world has ever seen that. Those are progressive values.
• 19:55
  So what do you think their motivations are well.
• 19:58
  You know, it's again, it doesn't cut across party lines, but
• 20:01
  there are authoritarian streaks in both political parties and
• 20:05
  they, when they're called out on it, they don't see the hypocrisy
• 20:09
  and saying, oh, that the, you know, the other side's
• 20:11
  authoritarian streak is what you really have to be afraid of.
• 20:14
  But, my sides authoritarian. Streak is just fine, right?
• 20:17
  That's hypocritical. And, you know, for whatever
• 20:22
  reason, it evolve that way, it's when I say, for whatever reason,
• 20:26
  it's obvious, the reason actually It's all about personal
• 20:29
  power of the people in charge, unfortunately.
• 20:35
  That's what it stems down to its terms down to.
• 20:37
  We can't control this thing. So, therefore, it's bad.
• 20:40
  Does it matter how, how aligned it is with the goals that we
• 20:45
  tell everybody? Yeah, correct.
• 20:47
  And it isn't controllable, right?
• 20:49
  And, you know, I mean, that's why I'm not a fan of the
• 20:53
  centralized protocols, because they really do have individuals
• 20:59
  who whether in reality or whether in perception.
• 21:04
  Have a kill switch you know I mean it when Charlie Lee stepped
• 21:07
  away from the Litecoin protocol that was a big deal because he
• 21:12
  decentralized it at that point but you haven't seen vitalik do
• 21:16
  that with their him ever seen. Charles do that with cardano.
• 21:19
  I mean when they do step away and truly decentralize it and
• 21:22
  hand, the protocol control away from their foundations that they
• 21:30
  arguably control in some cases. That's, that's a big deal.
• 21:34
  That's the big deal that's and if then it continues to
• 21:38
  decentralize thereafter that's a really important aspect as well
• 21:42
  as is the degree of how much other people step up, you know.
• 21:49
  I mean you know in the beginning Bitcoin wasn't decentralized
• 21:53
  either so she was pure by not doing a pre mind but the way if
• 22:01
  you look at centralization in, The in, in an open source
• 22:05
  protocol by definition, whoever's creating the very
• 22:08
  first 1.0 version of the software is controlling it.
• 22:13
  And so, at what point did it become decentralized?
• 22:17
  You know, I think in Bitcoins case it took a while, but it's
• 22:20
  very clear that it did become decentralized and I don't
• 22:23
  disagree with the assessment of the US.
• 22:26
  Government asking the question, whether ethereum especially
• 22:29
  after it went off proof of work towards proof of stake.
• 22:32
  It had given up its descent Oh ization.
• 22:35
  We haven't had an official answer from that on that
• 22:38
  question from the US government yet.
• 22:42
  Yeah, interesting know these are these are definitely definitely
• 22:46
  interesting. Time to say the least.
• 22:47
  So Kailyn I would I want to get your take on, you know, Nick
• 22:53
  Carter wrote a great piece. Operation chokepoint 2.0.
• 22:57
  Are those things happening. We have frightened you already
• 22:59
  touched upon this earlier, right?
• 23:00
  That there's elements of the US government that are hostile
• 23:03
  towards this movement. So what's your take on that?
• 23:06
  Is it accelerating or decelerating?
• 23:08
  I think they've done a lot of the damage already.
• 23:16
  You buried the lead there. He just said they took down the
• 23:19
  too big. It was it on purpose.
• 23:21
  I mean, but they said they said it was for the people.
• 23:23
  They said it was for Consumer Protection.
• 23:25
  Well, no, look. I mean, obviously, we're weren't
• 23:31
  involved in this week. We were at the time.
• 23:33
  The tip of the spear, it did seem that way to us.
• 23:35
  We weren't sure how far it was going to go.
• 23:37
  It may not be done yet but of course, look at look at what the
• 23:40
  the wrecking ball has Right? It took the applicants,
• 23:43
  including custodia, paxos and party, go off the table and
• 23:45
  then, you know, the SEC, sent Wells notices to all the US
• 23:49
  based exchanges. And then, and then obviously
• 23:52
  Silver Gate, and signature started to have their problems.
• 23:55
  And I'm not saying that it was black and white, in the sense
• 23:57
  that there was one cause for this because, of course, the
• 24:01
  management teams of those Banks took way too much interest rate
• 24:04
  risk, right? I mean I pointed out before that
• 24:07
  at the peak of the bull market, right before all of the
• 24:11
  Bankruptcies started in the crypto industry.
• 24:13
  Silver Gate, had one point four billion of cash to redeem.
• 24:18
  Thirteen point three billion of demand deposits.
• 24:20
  That's according to its March, thirty first twenty twenty two
• 24:25
  SEC, filing its 10-q. So again thirteen point three
• 24:28
  billion of demand deposits, it could be withdrawn in minutes
• 24:30
  and only one point, four billion of cash, they were rolling the
• 24:33
  dice, they should not have sat in anything other than pure
• 24:38
  plain old boring old cash. They should have had thirteen
• 24:42
  point three billion of cash to back that thirteen point, three
• 24:44
  billion of demand deposits. That could be withdrawn in
• 24:47
  minutes and if they had had that, would they have been less
• 24:50
  profitable during the good times?
• 24:51
  Sure, but they would still be alive today.
• 24:55
  So the end all the bank's did that we're seeing in in, you
• 24:59
  know, in the huge increase in interest rates that took place
• 25:02
  but the the Community Banks and and the regional Banks were not
• 25:08
  hedged. And as a result, if you mark
• 25:11
  too, Market their bond portfolios because of the bond
• 25:13
  portfolio. Losses stemming from the big
• 25:15
  increase in interest rates, guess what?
• 25:17
  It might not actually be solvent.
• 25:19
  That's what we're seeing in the case of of, dozens of banks that
• 25:23
  are under under Bank, Run pressure today, Interesting,
• 25:28
  interesting. Okay, so I'm going to tie this
• 25:31
  up with your bank, right? Fully Reserve.
• 25:35
  Correct. Why is that thing to?
• 25:36
  Why is that time asked the Federal Reserve?
• 25:39
  It's not only fully reserved, its 106 106.
• 25:49
  What's going on? Go ask them and what you know?
• 25:53
  Wait, it's some point. They'll have to will have to
• 25:55
  reveal the, the detailed reasoning.
• 25:58
  It's the law. They'll have to how much of it.
• 26:01
  They redact is an interesting question and they haven't
• 26:03
  revealed but yet we were expecting that.
• 26:06
  It would be revealed by now, but it hasn't been revealed
• 26:08
  interesting. Question, why haven't they?
• 26:12
  But it, but you said the eventually they're not going to
• 26:14
  have a choice, correct? Yeah.
• 26:16
  But how much of it, they redacted is, is up to them.
• 26:19
  So, you know, some of the things they might in retrospect.
• 26:23
  Find it Vera saying, given everything that happened, maybe
• 26:27
  they'll redact, who knows? Embarrassing to them.
• 26:30
  Not embarrassing to us, embarrassing to them.
• 26:32
  Yeah. Yeah.
• 26:34
  What is the, what is the sunlight is the best?
• 26:37
  Is that sometimes, the sunlight Sign in ways that that force
• 26:47
  their way in. So, in other words a lawsuit or,
• 26:51
  you know, a congressional investigation as opposed to the
• 26:54
  FED Shining Light on itself, So, you know, a couple move, there's
• 27:01
  been a couple, you know, things that I've noticed as of late,
• 27:04
  right? You've seen the again, it's
• 27:07
  still in the fringes, but you've seen the movement of the End,
• 27:11
  the Fed pick up steam that even possible because from their
• 27:15
  perspective, you know the same week that they shut down
• 27:18
  signature was again. Big coincidence was the same
• 27:22
  week that they announced at the FED now payment system that
• 27:26
  they're developing is going to be It'll launch in July so it
• 27:28
  looks like to me, they're putting their hopes and dreams
• 27:31
  on an American CBD. See, well, I'm not there yet.
• 27:35
  You know, there were some people who asked the question early on
• 27:40
  is the reason why custodia was the tip of the spear and the in
• 27:43
  the D banking, Crackdown because we had proposed a digital dollar
• 27:47
  Abbott, that would be issued by a bank on liquid a side chain of
• 27:51
  Bitcoin, and a theorem as an arc, 20 token and there were
• 27:57
  Some who also pointed out custodia because we own the
• 28:00
  patent on tokenization of a bank of a digital dollar taking a,
• 28:06
  the US Bank to accepting a US dollar deposit and turning
• 28:09
  around and issuing a blockchain token for that deposit.
• 28:12
  In other words, stable coins, but it should buy a bag.
• 28:15
  We own the patent for that and it was granted.
• 28:17
  Last July. There's some, there's an
• 28:20
  interesting question surrounding the Federal Reserve which is, is
• 28:25
  it a private entity or is it a public entity?
• 28:27
  And the Or is it's both in it. Kind of likes to play that
• 28:29
  ambiguity to its benefit depending upon the facts of
• 28:33
  whatever the situation is. So the there's no question that
• 28:37
  the Federal Reserve Board in Washington, DC is an agency.
• 28:42
  But then these private entities, nominally, private entities.
• 28:45
  But the, the regional Reserve Banks, which are owned by their
• 28:48
  member banks, they do administrative things.
• 28:51
  Do they actually have the power to do that?
• 28:53
  And if they do or the subject to the administrative procedure
• 28:56
  act, are they Subject to the Freedom of Information Act and
• 28:59
  it turns out the different administrative, the different
• 29:01
  Reserve Banks. Don't even take the same
• 29:04
  position on those very questions.
• 29:06
  They may contradict each other. So there's they like, exploiting
• 29:10
  the, the gray area. And so, you know, the reason I
• 29:15
  bring that up in the context of the question about whether
• 29:17
  there's a cbgc coming, I know there are several who want it.
• 29:21
  Will it actually come or not and does this Crackdown on stable
• 29:25
  coins? Have anything to do with CBD?
• 29:27
  He's you know is it plausible? Yes to they need to get us out
• 29:32
  of the way because those quasi private entities.
• 29:35
  The Federal Reserve Banks might actually be subject to the
• 29:37
  patent that custodia owns. Yeah.
• 29:40
  It's it's plausible, is it the real situation?
• 29:44
  I don't know. But Time Will Reveal that.
• 29:49
  So I sense I sense of optimism, right?
• 29:54
  And you know, we perhaps, you know we're in the thicket.
• 29:59
  We have to read the news every single morning and you know, for
• 30:03
  people we're not in, we're in the ring, in the sense that, you
• 30:06
  know, we have to tell people what's going on, but we're not
• 30:09
  in the ring of, we're not, you know, in the swamp or not
• 30:12
  Imperial City, we're not, you know, on the ground but it seems
• 30:16
  like you're optimistic. Do you believe we'll win?
• 30:18
  In this. Do you believe that, you know,
• 30:20
  you you will get that banking Charter and what needs to
• 30:25
  happen? Is this, a question of we don't
• 30:27
  have enough political willpower. Is this a question of regulators
• 30:30
  or just not educated on the matter is?
• 30:32
  It's a question of regulators. Just they want to keep their
• 30:36
  moat, right? So what are your thoughts a
• 30:38
  little bit of all of the above? Although, the funny thing is, we
• 30:40
  were offering them the the ability to expand their moat,
• 30:44
  right to bring all this, inside the regulatory perimeter, and to
• 30:47
  get a friendly and we really It did consider ourselves a
• 30:50
  friendly, we were actively helping them, understand, all of
• 30:52
  us, which is why. When we got blindsided by what
• 30:56
  happened, the, the U-turn in, in January and the denial, it
• 31:01
  really was a surprise to us because we were making progress.
• 31:07
  So, again, a lot of the people on the ground, I think probably
• 31:11
  felt the same on there. And it was a decision that came
• 31:13
  from the very top in Washington, d.c., unfortunately.
• 31:17
  So, how this? Place out, you know, I don't
• 31:21
  know. It would have been the best
• 31:23
  decision for them. To bring us inside.
• 31:27
  The regulatory perimeter have have one of these companies, you
• 31:31
  know, regulated by them working with them, helping them
• 31:34
  understand. It's crystal clear to me that
• 31:37
  they do not understand and let me give you an example.
• 31:40
  Unfortunately, in the January 3rd interagency statement, among
• 31:44
  the three Federal Banking agencies.
• 31:47
  That there was a reference to open public and or decentralized
• 31:53
  blockchains or maybe was open permissionless, and, or
• 31:55
  decentralized block chains and their discouraging Banks from
• 32:00
  using the sorry, the word protocol that was the word
• 32:02
  protocol not blockchain. So is open public and or
• 32:06
  decentralized protocols, open public and or decentralized
• 32:10
  protocols, step back and think about that phrase open public
• 32:13
  and or decentralized protocols. Isn't TCP IP and open public.
• 32:17
  And or decentralized protocol is an SMTP and open public forum.
• 32:21
  And or decentralized protocol. Is it voice over Internet
• 32:24
  Protocol and open public and our decentralized protocol.
• 32:27
  They all are, of course. So inadvertently, what the bank
• 32:31
  Regulators did was technically band, The Banks from using the
• 32:34
  internet. Now we all know that's not what
• 32:36
  they meant, okay. But this, when lawyers draft
• 32:40
  things, and I'm a I'm trained as an attorney so I can, I can, I
• 32:43
  can throw shade at lawyers. So when lawyers draft things and
• 32:47
  know nothing about technology, that's what happens.
• 32:50
  And I think that that's what happened in that situation.
• 32:52
  And, you know, there's there's another example, I won't get
• 32:56
  this precisely right but they defined crypto asset to be any
• 33:02
  asset stored electronically, using encryption methods.
• 33:07
  And I can just almost here the developers listening live
• 33:11
  howling at that definition because every asset On A banks
• 33:15
  valency is stored electronically, using encryption
• 33:18
  methods, right? I mean, he'll What is TLS
• 33:21
  transport layer security? Its encryption.
• 33:23
  So when assets, you know, when messaging messages are moving
• 33:27
  across the internet which is really what an asset is, it's
• 33:30
  just a ledger entry, a digital asset is a ledger entry, they're
• 33:34
  using encryption. That's that's stored
• 33:35
  electronically using encryption, right?
• 33:37
  So I mean, these definitions were so bad that it just goes to
• 33:42
  show you how much help they really need and how little they
• 33:45
  understood. And you know, those definitions
• 33:48
  can unfortunately We be be used against them.
• 33:52
  I don't I don't think anybody's challenge the open public and or
• 33:56
  decentralized protocol piece yet to ask them.
• 34:00
  Are you telling us? We can't use online banking at
• 34:02
  all. I think there's a Wing of that
• 34:05
  group that doesn't like online banking at all.
• 34:08
  They want to slow everything down to analog speeds.
• 34:11
  I know that that's the case. And that's part of the reason
• 34:14
  they went after them, the most tech forward Banks because those
• 34:18
  Tech forward Banks, scared them, and I'm not just talking The
• 34:20
  crypto Banks I'm talking about Silicon Valley Bank as well.
• 34:23
  Those Tech forward Banks, scared them because you can use
• 34:26
  software through an API to direct payments.
• 34:28
  Well, that's a lot faster than having to go down to the
• 34:31
  physical branch bank branch get in line and fill out a form and
• 34:36
  deal person to person with a bank teller that takes hours,
• 34:41
  whereas using software through an API can be done in the
• 34:44
  fraction of a second. So, the settlement times it's on
• 34:48
  the back end. Once the the Receives, the
• 34:51
  payment instructions. The settlement time is the same
• 34:54
  as it was analog versus digital, because it's still analog, but
• 34:58
  you see where I'm going? Everything speeding up
• 35:00
  everything and I think the FED, I think that scares them.
• 35:05
  They would much rather have slower settlement and slower
• 35:08
  transaction. Instructions that that just give
• 35:12
  a lot more time for the system. I mean, one of the things that
• 35:15
  I've that I pointed out and Twitter over the weekend is, can
• 35:19
  you imagine if Now had actually been in place and we had 24/7,
• 35:23
  365 ability to move, our bank deposits from bank to bank.
• 35:28
  Can you imagine the bank deposits?
• 35:30
  It would have been flinging around from bank to bank, over
• 35:33
  the weekend as people panicked, that's just going to be
• 35:36
  incredible. Bank runs are going to happen,
• 35:38
  faster, and faster and faster. They're not going to slow down
• 35:41
  much as The Regulators, I'm sure we'd love to kill the tech that
• 35:44
  enables that it's not going to happen.
• 35:46
  It's like it's like taxi and limousine commission when When
• 35:50
  people kept voting to use Uber, they couldn't stop it.
• 35:54
  It was a juggernaut that couldn't stop people.
• 35:56
  Voted with their feet, to use the better Tack, and that's
• 35:58
  going to happen here as well. Is this is this a question of
• 36:07
  do? Are we waiting for a new
• 36:09
  Administration? That is that is friendly towards
• 36:12
  this, right? And we know, for example, we
• 36:14
  know that Trump has, we know how he feels about Bitcoin.
• 36:18
  We know how to bind Administration feels about
• 36:20
  Bitcoin even though I don't think Biden has ever been as
• 36:22
  vocal As Trump correct about it's correctly.
• 36:25
  But we know based on their movements right based on their
• 36:28
  actions. So even if Is a change in
• 36:32
  administration 2024, right? You would still have an
• 36:36
  admission against not left or right thing, but you'd still
• 36:38
  have an Administration that is not necessarily a fan of what's
• 36:42
  going on. So do we need a Bitcoin or
• 36:44
  president? Is that what it is?
• 36:46
  That what is it's going to say? No.
• 36:48
  Bitcoin doesn't care about any of this, you know, seriously
• 36:51
  Bitcoin just keeps on Truckin. It just keeps adding blocks.
• 36:54
  It is it is immune to all of the the on off ramps, from fiat
• 36:59
  currency into Bitcoin. If if we had to freeze, if there
• 37:04
  was never another US dollar that ever came into her out of the
• 37:08
  Bitcoin ecosystem, we would be just fine.
• 37:13
  Seriously. And to be honest, one of the
• 37:16
  reasons why the Bitcoin price has gone up is because stable
• 37:19
  coins are not as easy to use. There's been a big significant
• 37:24
  burn stable coins now because they're losing US dollar banking
• 37:28
  system access or certainly there's a cloud over that.
• 37:31
  And and as a result, what are people moving towards?
• 37:36
  Instead of sitting in stable coins overnight they're sitting
• 37:38
  in Bitcoin which is the core asset of the secret ecosystem
• 37:41
  and that's increased the demand for Bitcoin and cut and push its
• 37:44
  Pride up price up. So if we never have stable
• 37:47
  coins, we never had US Dollars coming into and out of the
• 37:50
  ecosystem. Would it be harder?
• 37:52
  Yeah, it would be what it slow down the development of the
• 37:55
  ecosystem. Sure.
• 37:57
  But would we be just fine? Yes, you bet would be just fine.
• 38:03
  So let me let me rephrase the question in a way and I
• 38:06
  completely agree with you as a big, you know, Honey Badger
• 38:08
  Don't Care. But would the US government be
• 38:14
  putting in itself, putting itself in a position where it
• 38:17
  is, forcing Bitcoin friendly companies overseas, they are
• 38:21
  doing that. They are, did they want that?
• 38:23
  And I laugh, because I, there's an old famous phrase,
• 38:29
  organizations that make decisions out of fear, tend to
• 38:32
  get exactly what they feared. So that the engineers in this
• 38:36
  industry to whom we all owe a debt of gratitude are
• 38:40
  tremendously I want to tether was created arguably out of
• 38:43
  necessity because of the D banking wave in the last bear
• 38:47
  market for years ago, and two other really started to take off
• 38:50
  at the end of 2017 into 2018. And that was, when there was a
• 38:56
  huge debate, inking wave. So, you know, we've seen this
• 38:59
  becomes in for your Cycles. It's it tends to be tied to the
• 39:03
  Bitcoin having cycle, which is essentially a four-year cycle,
• 39:06
  210,000 blocks. And yeah, I mean, we've seen
• 39:10
  this before R not going to kill Bitcoin.
• 39:12
  I'm not worried about that. Does it change the development
• 39:15
  of the ecosystem and does it reduce the demand from
• 39:18
  Americans? Sure.
• 39:20
  But I mean, hell, even China's opening up to this again, you
• 39:24
  seeing the rest of the world embrace it?
• 39:27
  I do happen to think there's a national security aspect to this
• 39:30
  and that the u.s. is making a terrible mistake.
• 39:35
  Just like I said, China was making a terrible mistake when
• 39:37
  it when it really did crack down and trying to get A couple of
• 39:41
  years ago anti Bitcoin but they're letting it back into
• 39:45
  Hong Kong again. Now, that is not insignificant,
• 39:48
  folks. It's just that the center of
• 39:49
  gravity is not going to be in the u.s. anymore.
• 39:51
  The center of gravity for the ecosystem of companies that are
• 39:55
  building that infrastructure to to help increase Mass adoption
• 40:00
  that's center of gravity is not in the u.s. anymore.
• 40:02
  It's off its off shore. But the feds going to
• 40:05
  continually have to find ways that this leaks into the
• 40:09
  financial system and they're going.
• 40:10
  To be playing whack-a-mole because there will be Intrepid.
• 40:14
  People enterprising people who find ways to get US dollar
• 40:18
  access to it in spite of everything, the FED does to try
• 40:21
  to block that and this is fascinating.
• 40:28
  I'm really enjoying this conversation Caitlin.
• 40:30
  So to me to me it just sounds like they don't they're not
• 40:34
  going to have a choice like it's like, look, get on the Bitcoin
• 40:37
  train benefit from it. Yes, you're not going to benefit
• 40:41
  from a lot of the powers that you had.
• 40:43
  When you had a total Monopoly on on the money and you had it, you
• 40:48
  had basically use the dollar, you know, and now people have
• 40:53
  have a choice but That's a very tough pill to swallow for, you
• 40:57
  know, politicians that have been operating under this Monopoly
• 41:03
  system that we've had for the end of the I can't think of an
• 41:08
  of, you know, another time in American history, right?
• 41:11
  So is this the type of thing where you know they kind of
• 41:17
  metaphorically. Of course they have to get their
• 41:19
  finger burnt on the stove we know bay there was a Bloomberg
• 41:23
  there's a Bloomberg article. Oil where it's so fascinating.
• 41:26
  Hong Kong right? Was saying, hey, we're going to
• 41:29
  be friendly towards this. They had CCP officials in the
• 41:33
  city, putting their stamp of approval, you know, you know,
• 41:37
  it's very frustrating. You know.
• 41:39
  Yes, it's frustrating as an American because even China's
• 41:42
  open It's incredible, right? And the u.s. is being more
• 41:46
  authoritarian than China. Yeah, true.
• 41:49
  Yeah, but I mean it makes sense. They have, you know, they have
• 41:52
  they have the most power they have the world Reserve currency.
• 41:55
  Right? Why wouldn't they want to defend
• 41:56
  that? Well, but I think that Carter's
• 41:59
  essay from January 2020 to where he he wrote a really interesting
• 42:04
  analysis that stable coins will help extend the u.s. dollars
• 42:08
  rain as Reserve currency. I think he's right because the
• 42:11
  technology is so bad. Now, of course the FED of
• 42:14
  course, didn't want competitors like custodia zavitz or You know
• 42:19
  the the be USD stable coin. For example, if you just look at
• 42:23
  how authoritarian the Crackdown has been that they're trying to
• 42:27
  shove the competitors off to the side and and when I say
• 42:30
  competitors, I'm talking about competitors to Fed now it's
• 42:34
  going to be fascinating to see how people respond when fed now
• 42:39
  comes online. Really fascinating?
• 42:41
  Yeah. Does it worry you that Alex
• 42:45
  gladstein? Here we go Opti, let me click
• 42:47
  it. There we go.
• 42:48
  Alex gladstein wrote Amazing book and called Financial
• 42:55
  privilege, right? And the reality is that, you
• 42:59
  know, if you live in a developed country, that has a relatively
• 43:03
  stable, fiat currency correct. There isn't a very big incentive
• 43:08
  for you to seek an alternative if you, if I speak to an
• 43:10
  Argentine and I'm like, hey, you know, there's this non
• 43:13
  government currency. Can't be the base camp easily,
• 43:16
  confiscated, like, where do I sign up?
• 43:17
  That's all Or or the us where the bread and circuses is very
• 43:27
  strong so to speak, right? And you were very pullovers to
• 43:30
  have all these financial application venmo cash app.
• 43:35
  All that stuff, does that worry you at all?
• 43:40
  That did people are just like, you know, Bitcoins boiling
• 43:43
  oceans. That's not necessary.
• 43:44
  Yeah, but you know what? It's a process, right?
• 43:46
  I mean, I Got very curious and got myself on the path after the
• 43:52
  2008 financial crisis, when I got curious, why the financial
• 43:56
  system was so unstable. And the things that I learned in
• 43:58
  school, you realize aren't exactly how the financial system
• 44:02
  works. Curious, people go to go on deep
• 44:05
  deep, Dives, and I tweeted out this morning just overnight last
• 44:10
  night at 434 new LinkedIn requests.
• 44:14
  LinkedIn is not like Twitter, you don't have all the bots in
• 44:18
  most cases. These are verified real people
• 44:21
  and much more so traditional Finance lawyers, accountants
• 44:25
  Regulators. You know, people that I went to
• 44:29
  law school with, right? That's the that's my network on
• 44:32
  LinkedIn. Very different than the network
• 44:34
  on Twitter, which is very different than the network.
• 44:36
  I'm Noster, but 434 request overnight on.
• 44:40
  LinkedIn is huge. It just a deluge and That's the
• 44:44
  second time that I've had a few hundred just overnight and it's
• 44:48
  just accelerating. And then in the last week, it's
• 44:51
  Insanity. What's happening, okay?
• 44:53
  What is that telling me? Why did I share that?
• 44:56
  Anecdote is just anecdotal, doesn't prove anything but what
• 44:59
  it is, is it's a qualitative evidence that there's a sea
• 45:02
  change happening that there are more people in the tribe, five
• 45:05
  world, who are waking up and realizing something's wrong
• 45:08
  here. And the system that you work in
• 45:10
  is not stable. I learned that in 18.
• 45:14
  I started to get very, very curious went on a very deep and
• 45:17
  very broad intellectual journey. I was taking classes on at moocs
• 45:23
  at night, I was doing all kinds of reading and research at from
• 45:29
  the Austrian School. On one end of the spectrum to
• 45:32
  mmt. Modern monetary theory on the
• 45:33
  other and it was fun because I didn't learn those those
• 45:38
  theories in school. In fact, actually I still have
• 45:41
  my history of economic thought. No.
• 45:43
  A book in my office here. And, and it was one of my
• 45:46
  favorite classes in school, and I went back.
• 45:49
  And looked did, was there anything about me sister
• 45:51
  rothbard know, was there anything about chart?
• 45:54
  Ilysm. No, those were considered Fringe
• 45:56
  theories. Those were not the mainstream
• 45:58
  theories that were taught in school so everybody still has to
• 46:00
  figure out for themselves. It's their own intellectual
• 46:02
  Journey, but the reason I went on this little diatribe is, I
• 46:06
  think that a lot of mainstream people are waking up.
• 46:09
  I think that they're understanding that, what they've
• 46:13
  been. Told isn't necessarily the
• 46:15
  truth. And curious people tend to go
• 46:18
  down rabbit holes and come on in folks, it's time to get orange.
• 46:22
  Pilled you might not go back out of that hole and it's a one-way
• 46:26
  Street. It's a, what you?
• 46:28
  I don't think I've ever met someone that's like, you know,
• 46:30
  understood about Bitcoin the like, hey, this dollar things.
• 46:33
  Eat sweet. Let me go back there, you know,
• 46:35
  but the, the leap so many have to make is subjective value
• 46:39
  Theory. And so few, In the mainstream
• 46:42
  are willing to make that leap because they want something
• 46:45
  object it. But what they don't understand
• 46:47
  is that, that object of price, it's Turtles all the way down.
• 46:50
  There's something subjective down at the bottom of that price
• 46:53
  Theory, there's always something subjective and so, yeah, they
• 46:57
  just have to make that leap. And for a lot of folks, it's
• 47:00
  just a leap too far and you're speaking about, you're speaking
• 47:04
  about the, it's a leap to in as a fascinating part.
• 47:07
  It's a leave too far or someone who doesn't need it.
• 47:11
  It if they don't have the necessity, right?
• 47:12
  It's a leave too far. If that as well and Argent, I
• 47:15
  know he's like, yeah, it's about putting food on the table,
• 47:18
  right? But you mentioned the subjective
• 47:21
  part and it's so fascinating to me and the Freudian slip coming
• 47:26
  from the central Bankers as when they're like.
• 47:29
  This thing has no value and then you're just looking at the price
• 47:31
  and you're like, are we looking at the same thing?
• 47:38
  So, Website 99 Bitcoins.com that has all the verified Bitcoin
• 47:45
  obituaries because it's just so irreverent, it just calls them
• 47:50
  on their own BS. I love it.
• 47:54
  Yeah. 100 percent. And, and then you see them like
• 47:58
  they're, you know, Andre Assad's not.
• 48:00
  But he was the original person that I would just watch his
• 48:04
  lectures on repeat. And see, he played a me to major
• 48:08
  role killer so good. Oh good.
• 48:11
  Just man, did he ever? Yeah, yeah him and of course Max
• 48:16
  Keiser played a very big role in my journey and for me Trace
• 48:22
  mayor as well and I'm back interesting during the block
• 48:26
  size War. Yeah, box dinosaurs were
• 48:28
  definitely scary looking at it from the miners perspective and
• 48:32
  you're just looking them artificially past the Bitcoin
• 48:36
  Bitcoin hash rate I think was like two or three times and just
• 48:39
  looking at you like there is no way they pulled this up.
• 48:41
  It's only in. Hi.
• 48:42
  It's only doing. We learn after the fact that it
• 48:45
  was all artificial, they're setting money on fire in order
• 48:49
  to make that happen. Yeah, yeah.
• 48:54
  Anyways so I took completely lost my train of thought because
• 48:57
  I'm enjoying this, okay? Okay, listen.
• 49:02
  So no, I wanted, I wanted to touch upon something that you've
• 49:05
  beaten the battle drum about many many times, which is this
• 49:09
  idea of rehypothecation, right? And the important of Owners
• 49:14
  taking self custody. Like if that's the employee,
• 49:16
  like you have to do that. What is rehypothecation?
• 49:20
  And what, what does what is, what is the danger that
• 49:23
  rehypothecation poses to bitcoin?
• 49:26
  Well, you don't get a true market price because it's fake
• 49:28
  Supply its paper Bitcoin. So we now know that sandbag been
• 49:33
  freed was selling Bitcoin and customers thought they were
• 49:37
  buying Bitcoin from him, but he didn't turn around and buy the
• 49:39
  actual Bitcoin on the market and hold it for his First, he just
• 49:45
  took the money and did what he did with it would appear so he
• 49:49
  sold them Phantom Bitcoin that Bitcoin didn't exist.
• 49:52
  Now that Bitcoin though in a market appeared as though it was
• 49:57
  legitimate Supply. Now go back and I did a big
• 50:00
  tweet throat about this about two years ago on Supply demand
• 50:04
  and and Hayek's, I had an aha moment reading something from
• 50:10
  Hayek. I've always said that any time
• 50:13
  You push the supply curve out and to the right.
• 50:17
  If you think about your supply, demand curves, your price is
• 50:20
  going to drop when you push the supply curve out to the right
• 50:22
  regardless of whether the supplied that was created was
• 50:27
  real or fake, you're going to actually holding demand
• 50:31
  constant, the price is going to drop because you know have more
• 50:34
  Supply, okay? But what I didn't realize at the
• 50:38
  time was that, it also reduces demand because demand for the
• 50:42
  real thing because the fakes Is satisfying demand for the real
• 50:46
  thing. People think they get the real
• 50:47
  thing when they buy it from FTX and it turns out they didn't
• 50:50
  buy. They didn't buy the real thing
• 50:52
  at all. There were they bought just a
• 50:54
  phantom instrument now if we added up all the claims to
• 50:57
  bitcoin that people thought they owned from their counterparties
• 51:01
  and looked at how many Bitcoins there are outstanding, I think
• 51:03
  19.3 million or so it would be a lot more than nineteen point
• 51:07
  three million. So a lot of people were sold
• 51:09
  fake Goods period. It's fraud a lot of people were
• 51:12
  sold that And it's it. Unfortunately suppresses the
• 51:17
  price in those two ways and a lot of people were expecting,
• 51:22
  you know. And this was like this was I
• 51:24
  don't know if it's because of you know a lot of people believe
• 51:28
  in the I do as well to be frank. This you know the theory of
• 51:32
  diminishing returns, the reality is it's a lot harder for Bitcoin
• 51:35
  to go to double from 28,000 to whatever the double of 28,000 is
• 51:39
  from for it to go from a dollar to two dollars.
• 51:41
  Like it's a lot heart, it's a lot.
• 51:43
  Bigger lift. But I guess what I'm trying to
• 51:46
  say is that a lot of people were let down that Bitcoin didn't hit
• 51:49
  100K last cycle and you believe that the rehypothecation played
• 51:54
  a role in? Yes.
• 51:55
  Yes. Because it Clips off the top of
• 51:58
  the bull markets and it actually amplifies, the bear markets on
• 52:02
  the downside. It's asymmetric and again it's
• 52:05
  all just logic if people are buying The the real if they
• 52:12
  think they're buying the real thing but what they're actually
• 52:13
  buying is fake, then all else equal the price is going to
• 52:18
  drop. Okay?
• 52:19
  And so that's going to clip the top of the bull market because
• 52:26
  up until 2017 we didn't have a lot but we did have scammers,
• 52:32
  right? You did have macaques and
• 52:34
  quadriga so you did have people who were running so called
• 52:37
  fractional, right? They had more claims to Bitcoin
• 52:40
  on their balance sheets that they've issued liabilities, for
• 52:43
  then they actually had assets on their balance sheet.
• 52:45
  We know in Mal Cox's case, that was true.
• 52:48
  The reason was because they were hacked and then they try to
• 52:50
  cover it up quadriga who knows what really happened there.
• 52:53
  But clearly they sold more Bitcoin than they actually had
• 52:55
  an inventory to back up those liabilities.
• 52:58
  Okay. So those two companies helped
• 53:02
  push the Bitcoin price lower at their Peak than they otherwise
• 53:08
  would have now once we Not in 2017 where you started to get
• 53:14
  derivatives markets, the derivatives markets played with
• 53:17
  the spot price even more, it can kick around the spot spot price
• 53:22
  to a tremendous degree and and cash-settled derivatives.
• 53:26
  Do it less than physical settled derivatives.
• 53:29
  And I started writing a 20-18 warning that went backed the
• 53:33
  sister company of the New York Stock Exchange, was getting into
• 53:36
  the Bitcoin Futures Market that here.
• 53:38
  Comes paper Vic Coin. And it's ironically backed
• 53:44
  didn't do it as much as FTX did because backed was limited to
• 53:48
  two and a half times. Leverage in the Futures markets
• 53:51
  here on Shore. Whereas you had FTX at 125 to 1
• 53:56
  leverage two and a half times compared to 125 times big
• 54:01
  difference. Yeah, absolutely.
• 54:04
  So, do you think, do you think we'll ever see a Bitcoin ETF as
• 54:08
  spot ETF? Does that even matter?
• 54:11
  Doesn't matter to me, I've come on the record that that's a
• 54:14
  double-edged sword. It certainly would be better for
• 54:17
  as a market structure instrument.
• 54:19
  Then gbtc the the problem with the closed-end funds is that
• 54:24
  they can trade a big, big discounts or big premiums
• 54:27
  usually discounts to the spot price, because the fees
• 54:30
  obviously have to get passed through.
• 54:33
  And, and so, unfortunately, in in cvtc's case it traded on a
• 54:39
  huge. Premium.
• 54:40
  And now it's trading at a huge discount, so it's just not
• 54:44
  tracking the spot and it's not helping investors.
• 54:47
  It's not it's not been a safe product for investors.
• 54:49
  And I do wish that the SEC would allow a restructuring of that
• 54:54
  but you know, they're very afraid of allowing spot Bitcoin
• 54:58
  trading into regulated markets because they think that they're
• 55:01
  going to be implicitly endorsing it if they if they do.
• 55:04
  Yeah. Interesting.
• 55:06
  Very interesting. Okay listen.
• 55:08
  We're at the top of the hour and I Want to take more of your
• 55:10
  time. Thank you so much for joining us
• 55:13
  today on simply Bitcoin IRL. Why don't you tell everybody?
• 55:16
  You know, of course they were, is this a question?
• 55:18
  I ask everybody. So why do you tell everybody
• 55:20
  where they can find you online and what you're working on?
• 55:23
  Now days at Kaitlyn long underscore on Twitter?
• 55:26
  Noster, come join me on the roster.
• 55:28
  All you, all you now stretches. It's a Bitcoin adjacent network.
• 55:32
  If you haven't, signed up, definitely do.
• 55:33
  It's, it's so cool to see SATs flying around.
• 55:38
  And, and, and, and we're Bootstrapping.
• 55:40
  We collectively the community is helping to bootstrap that
• 55:43
  lightning Network and that's a huge deal, big fan of lightning
• 55:47
  and then also linked in and and then custodia bank.com can't say
• 55:53
  much about what's happening in our future plans.
• 55:55
  But stay tuned. It's exciting.
• 55:58
  Thank you. Thank you.
• 55:59
  Caitlin going to put you back stage for a second while.
• 56:01
  Wrap it up, guys. Thank you so much for joining
• 56:03
  us. Another episode of simply be
• 56:05
  called IRL. We'll be back tomorrow for the
• 56:07
  live show. 12:15 p.m. In standard time.
• 56:10
  Love you all. See you tomorrow.