Crypto Blood Bath - Is The Bull Market Over? | Crypto Town Hall

Summary

Podcast Summary: "Crypto Blood Bath - Is The Bull Market Over? | Crypto Town Hall"

Podcast Information:

• Title: The Wolf Of All Streets
• Host: Scott Melker
• Episode Title: Crypto Blood Bath - Is The Bull Market Over? | Crypto Town Hall
• Release Date: January 9, 2025

In this engaging episode of The Wolf Of All Streets, host Scott Melker delves deep into the current state of the cryptocurrency market, examining whether the anticipated bull run has reached its plateau or is on the verge of decline. Joined by experts Rand, Simon, Matt, and Carlo, the discussion traverses market dynamics, institutional influences, legal battles, and geopolitical developments influencing Bitcoin and the broader crypto landscape.

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1. Market Analysis: Is the Bull Market Over?

The conversation kicks off with Scott and Rand assessing the recent performance of Bitcoin, noting a 16% drawdown from its peak of $108,000. Rand challenges the notion that this drop signifies the end of the bull market, stating,

"I think this is the first time where I'm actually seeing people talk about the end of the bull market. And I think for me that's the most bullish thing that I've heard." (01:54)

Scott concurs, highlighting a 75-80% chance of a continuing bull market as predicted by major players in the space.

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2. Fear and Greed Dynamics in Crypto vs. Stocks

A significant portion of the discussion centers around the Fear and Greed Index, a tool used to gauge market sentiment. Rand points out that while the stock market is currently fearful, crypto remains relatively greedy. He attributes this divergence to Michael Saylor's influence in maintaining Bitcoin's price stability through substantial purchases:

"The Bitcoin price in my mind has been held up by Michael Saylor and this loop that he's found where he's bringing fixed income securities money into Bitcoin." (02:54)

Scott adds that despite some fluctuations in ETF flows, the overall sentiment remains positive, signaling underlying strength in the crypto market.

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3. Influence of Michael Saylor and Institutional Buying

Rand emphasizes the pivotal role of Michael Saylor and MicroStrategy in sustaining Bitcoin's bullish trend. He notes that MicroStrategy has purchased approximately $20 billion in Bitcoin since November, creating a buffer against market downturns. Carlo supports this view, asserting that institutional interest remains robust:

"I think the ETF bid is going to be consistent and I think you're going to see corporate bids be consistent as well. It's not just MicroStrategy." (17:00)

However, Rand counters by observing a disconnect between ETF flows and actual market inflows, suggesting that institutional activity might not be as pervasive as perceived.

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4. DOJ Bitcoin Seizures: Silk Road and Bitfinex Cases

A contentious topic arises regarding the Department of Justice's (DOJ) seizure of Bitcoin assets linked to the Silk Road investigation and Bitfinex hacks. Scott explains that the DOJ currently holds 213,297 Bitcoin, with 69,000 Bitcoin recently seized following a court ruling against Battle Born:

"So the current status of the Bitfinex tokens is in limbo... until a court ruling or government decision, the coins are held by the US Government." (07:17)

Simon clarifies that while 100,000 Bitcoin were recovered from Bitfinex, these are distinct from the DOJ-held assets and their ownership remains disputed.

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5. Political Implications: Trump’s Promises and Potential Actions

The episode delves into former President Trump's pledge to hold and not sell Bitcoin. Rand questions the feasibility of this promise, given that the DOJ typically liquidates seized assets. Matt suggests that the DOJ's delay in selling might be due to pending litigation or awaiting policy directives from the incoming administration:

"The DOJ is not mandated to sell, but it probably puts them in an awkward position because if it continues to tank, then it looks badly on them." (26:09)

Potential executive orders or legislative changes could alter the DOJ's stance, but Matt remains skeptical about immediate policy shifts.

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6. Legal Perspectives: Asset Forfeiture and Restitution

The legal intricacies of the DOJ's Bitcoin holdings are dissected, revealing a complex landscape where asset forfeiture intersects with restitution obligations. Matt elucidates that the DOJ cannot "double dip", meaning they cannot forfeit assets and simultaneously force repayment from defendants for restitution:

"If they can trace the forfeited assets to a victim, they can't then force the defendant... to pay restitution." (30:19)

Simon emphasizes that unless there’s a formal confiscation with clear legal backing, seized Bitcoins should rightfully belong to their original owners, in this case, Bitfinex.

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7. FTX Bankruptcy and Mismanagement Concerns

Scott brings up the FTX bankruptcy proceedings, highlighting allegations of extravagant spending by bankruptcy managers, which has raised concerns among creditors:

"FTX Bankruptcy Managers Accused of Spending Funds on Luxury Hotels Travel..." (42:45)

Rand expresses frustration over the mismanagement, suggesting systemic flaws within such financial institutions that often lead to significant losses for ordinary investors.

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8. Nation State Adoption of Crypto: Bhutan’s Strategic Reserve

A surprising development is the Kingdom of Bhutan's intention to adopt Bitcoin, ETH, and BNB as part of its strategic reserve. Simon relates this to positive market indicators, noting that the LEO token remains strong despite the DOJ’s actions:

"The LEO token is meant to benefit from using this bitcoin in order to purchase the token. So this should be creating some speculation on the LEO token." (37:34)

This move by Bhutan signifies increasing acceptance and institutionalization of cryptocurrencies at the national level.

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9. Institutional Resilience and Market Outlook

Carlo reassures listeners about the institutional community's long-term bullish outlook, stating that despite short-term fluctuations, the overall trajectory remains upward:

"I don't think they've noticed [the dip]. We're still massively up... it's still a strong bull market." (19:53)

Rand remains cautiously optimistic, citing institutional buying and MicroStrategy's support as stabilizing factors. However, he acknowledges potential vulnerabilities if major players like MicroStrategy reduce their Bitcoin holdings.

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10. Closing Thoughts: Market Resilience and Future Outlook

As the episode concludes, Rand and Scott reflect on the market’s resilience in the face of regulatory and legal challenges. While acknowledging the potential for market downturns, they emphasize that the crypto ecosystem has evolved, now featuring value buyers and institutional support that buffer against significant corrections.

"I think that's the first time where I'm actually seeing people talk about the end of the bull market. And I think for me that's the most bullish thing that I've heard." (01:54)

Simon adds a final note on the LEO token, suggesting it remains unaffected by current speculations, reinforcing the notion that the crypto market continues to exhibit strong underlying fundamentals.

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Notable Quotes:

• Rand: "I think this is the first time where I'm actually seeing people talk about the end of the bull market. And I think for me that's the most bullish thing that I've heard." (01:54)

• Carlo: "I don't think they’ve noticed [the dip]. We're still massively up... it's still a strong bull market." (19:53)

• Matt: "They don't like to buy policy to hold assets, especially extremely volatile assets, and they're just kind of following their mandate." (24:00)

• Simon: "If these do belong to, you know, the US that would be unprecedented. They'd have to do an actual formal confiscation." (32:10)

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Conclusion:

The podcast episode provides a comprehensive analysis of the current state of the cryptocurrency market, intertwining market dynamics with legal and political factors. While acknowledging recent downturns and regulatory challenges, the consensus among the panel suggests that foundational support from institutional players and evolving market structures indicate a continued bullish trajectory for crypto. Listeners are left with a nuanced understanding of the interplay between market sentiment, institutional influence, and regulatory landscapes shaping the future of cryptocurrencies.

Transcript

[Rand]

Gm. Gm.

[Scott]

Glad you're here. I know you show up on days of carnage to help us unpack it.

[Rand]

I mean, carnage. You want to call it that? If you call news that came out 10 days ago and was only publicized yesterday news, then yeah, I'm just supposed.

[Scott]

To Totally, totally agree. Just also stupid perspective. I think what, from 108,000, we've had like a 16% drawdown or something.

[Rand]

I do think.

[Scott]

What's a classic bull market drawdown? 30.

[Rand]

Yeah, I do think though that, I do think though that you, you want like corrections are about fear and greed dropping. And I think we haven't had a proper drop in fear and greed. Generally in bull markets we get fear and greed dropping by around 50 points. And you know, we topped in the fear and greed at like 92 and I think we're currently at 69.

[Scott]

Which one do you use, by the way? Because when I check the random ones, it still says we're gre.

[Rand]

Yeah, so, so yeah, we agreed. It is, it is exactly. It's exactly agreed. But funny enough, funny enough, it's the first time in a long time that I've actually seen people calling for the end of the bull market. And for me, that's the most bullish thing I've ever heard. Like my timeline is full with, of this, like, oh, it's the end of the bull market at the end of the bull market. At the end of the bull market. And the truth is I've been waiting for this, for the correction where people say that it's the end of the bull market because that's, I remember in, in 2017 and in 2021, I remember that every time we had a real correction, we always thought it's the end of crypto. Like it was the end of crypto multiple times. And that's usually the time when, when the, the rich got rich, so to speak. Right. And, and we all got, and at the time we were all inexperienced and we got shaken out.

[Simon]

Right.

[Rand]

So I think that, I think that like this is the first time where I'm actually seeing people talk about the end of the bull market. And I think for me that's the most bullish thing that I've heard in, in months. I'm so excited that finally people are believing at the end of the bull market.

[Scott]

Yeah, I was saying, I think. And no, not non specific, but 75% chance of bull market from pretty big people. 80% chance, 50%. These are. Yeah, I, I 100 agree with you. I mean, this is the sentiment that you need people like, you know when you get the comments with like 7 curse words strung together in bad English about how dead everything is, it's. They're good signals.

[Rand]

Yeah, yeah. I mean, I must say, I think this is. Like I said, it's the most excited I've been in a long time. Most excited I've been. I just. I wish we could just. I don't know if it's a nuke or if it's a slow bleed down, but we need to get that fear and be done. The other thing about fear and greedy is that if you look at the stock market fearing greed, the stock market fear and greed is at fear at the moment.

[Scott]

And it's been very fearful.

[Rand]

Yeah, yeah. And crypto isn't. And the only explanation that I have for that, because usually they kind of move in tandem. You know, if the stock markets are fearful, usually crypto is very fearful. It's very rare that you get the stock markets fearful, but you get crypto not fearful. And the only explanation that I've got is that we've been shielded because of Michael Saylor. So, like, you got, you've got. Remember the, the fear and greed we're looking at is Bitcoin fear and greed. It's not altcoin fear and good, it's Bitcoin fear and greed. And the bitcoin price in my mind has been held up by Michael Saylor and this loop that he's found where he's bringing fixed income securities money into Bitcoin. And so I think we've been insulated from a fear and greed point of view.

[Scott]

I can't wait to get Matt. I know Matt Hogan's in the audience. We're having some as the usual glitches of getting people up and down off stage. But, like, I think they'll tell us that beyond Saylor, there's also just kind of a constant institutional bid of passive investment that's different from previous cycles.

[Rand]

I agree with you. We've had some very big ETF days of late. But to be honest, when I look at the. When I look at the ETF flows recently, we had monster days. We had two days, we had like a billion and a billion or 978 and 908.

[Scott]

Yeah.

[Rand]

And then we had half a billion flat yesterday. And then we had. The day before that we had 242 million flat. And then like three days before that we had half a billion flow out. Then we had 300 million flat. So kind of like, if I look at the last, like, since Since Christmas. If you look since Christmas, you've probably got a net inflow of like half a billion.

[Scott]

Yeah. Which is like one week of sailor. Although he's trickled off. Right. I think he did 100 million this week, 200 something before. But he was in the like two billions three or four weeks ago, right?

[Rand]

Yes.

[Scott]

So that, then listen, that begs the question as we're talking about it, in your opinion, you know, if there is a blackout period, we've heard that maybe you can't buy in January as they go up into the nasdaq. Like, do you if that bid disappears, even temporarily, that that would in some way spook the market or make a meaningful difference, the amount of bitcoin not being bought.

[Simon]

I don't know.

[Rand]

I mean, I also don't know if this, like, I've heard multiple things about this blackout period where we're in the blackout period. Like, I don't. I mean, why is he not allowed to buy bitcoin? That's. That is what the company.

[Scott]

He's already bought, right.

[Simon]

He bought on Monday.

[Scott]

So they. Yeah, but nobody announced the buy on Monday. But I think they were buys from the end of December. Technically, I think I could be wrong. I don't know when they finalized. But also, I don't know that it was January specifically or if people were just conjecturing that, you know, because of the news and timing for the being added to the NASDAQ 100, that maybe that would be January. I don't know if it's a two week blackout period. That could be at some other time. I haven't seen any confirmation of it. Just sort of bad takes. But I guess it just begs the question, if a Monday or two passes and you don't get the sailor buy, you know, does that scare the market in any way, shape or form? Or is it like the hundreds of millions or billions he's actually buying, like, is that what's been soaking up some of the selling? Right. I mean, what soaks up the selling of $6.5 billion from the United States government, which, by the way, I don't think is. I think is a nothing burger. But, you know.

[Rand]

Well, let's look at it. The last couple of times that they got the court approval, it took them about six months from the day that they got the court approval to actually sell it, number one. I mean, I would like to hear from the Americans because I'm not American. And you know, your system, your system. You know, I just realized that Mario is a listener and it's actually so much nicer when he's a listener and not a speaker.

[Scott]

He doesn't speak with us anymore. He's too, too busy running business to go on spaces. But it's not even just ours. Like he doesn't even, I don't hear his voice on the political spaces, but we do get to look at his picture, which is nice.

[Rand]

Yeah, I think I'd love to hear from the Americans in terms of whether Trump can intercept this or whether the, whether they now have an obligation to sell all the, all the bitcoin. So I'm going to throw it into your court to speak to the Americans. I'd love to hear a little bit more about it.

[Scott]

So I can, I can't speak to it. We don't have our team of lawyers. If I had Carlo here, I'd be able to tell you. But I'm looking. He tweeted a very like long winded and clear explanation on this. Exactly. So basically what he said. So why would DOJ sell 69,000 bitcoin two weeks before the incoming administration takes power? Let's discuss. I'm not going to get too deeply into it. Effectively, here is the conclusion. In summary, while the DOJ is not strictly required to sell see Bitcoin immediately, prevailing legal and policy frameworks favor liquidation. Retaining the assets in anticipation of future policy shifts would be unprecedented and would likely necessitate new legislation or executive directives, maybe a Trump executive order to modify existing DOJ policy governing the management of seized crypto assets. So the bottom line here is that its policy of the DOJ to not keep any asset, Bitcoin, crypto or otherwise, real estate, seized cars, anything, they liquidate them. And so what do you think? So this is curious timing, but it did come because of a, I mean there's just no conspiracy theory to be had here in, to, to some degree because this is a result of that, this, the sort of conclusion of a bankruptcy proceeding where a company called Battle Born was basically claiming that these tokens, bitcoin, were theirs in a bankruptcy. And the judge ruled that that was not the case. So this was as of December 30th was the day effectively that that case closed and that they were firmly legally the DOJ's possession.

[Rand]

So, so I have a question, a few questions. The first question I have is when Trump said that he's going to hold all the bitcoin, all the bitcoin that he said, he said we're going to hold 100 and we're not going to sell 100 of the Bitcoin, do you think? Or maybe the question is how do you think he planned to do that? Or maybe did he not even think at all that he just said because there's an election, an election promise. But how did he, how did he expect to do that if the, the bitcoin were held by the Department of Justice? Like surely someone as astute as him in the political arena kind of would have known and said, hold on, no, you know, we can't hold these bitcoin because they, they belong to the Department of Justice. And, and you know, history, precedent always tells us that, that we have to sell these things. That's what the law says.

[Matt]

I don't know.

[Scott]

I mean, my assumption is political, political promises make the promise, figure it out later. I mean, listen, Mexico is also going to pay for the wall and no new taxes. You know, we, we know that presidential candidates, for better or for worse, and I don't know that's intentional or not, I'm not picking on Trump for his promises. But every political candidate kind of lays out a platform of things they would love to do and then it gets pared back dramatically when it actually, when they come into power and realize what they can or can't. But according to Carlo there, an executive order could potentially do that in lieu of legislation which could come in the first hundred days. But the United states government holds 213,297 bitcoin. So while this 69,000 is a big deal, it still leaves the government with, you know, over 150,000 Bitcoin that he could effectively just hold to make that strategic reserve without having to buy more. But yeah, I mean, there's going to have to be some sort of action that breaks this precedent of the DOJ liquidating, which they do with every kind of asset. So I don't know if we knew or didn't know, but it seems like this would be an executive order that would likely then, you know, be, maybe the Democrats challenge it. Yeah, right now it's just, maybe it's just too unpopular right now to be anti crypto and maybe this one just kind of passively passes through. It doesn't seem like a big deal to just not sell. Right, it's not a big deal.

[Rand]

Yeah. So that was my next question. My next question is, do you think that maybe someone at the DOJ would say, look, I know Trump didn't want to sell these things. I'm not going to, I'm not going to do it because I'm on Trump side kind of thing, or do you.

[Scott]

Think it would be really nice if somebody just like, you know, got confused as to where the transfer went for the next two weeks? Right. But yeah, I think it's just very, like, odd and poor timing and we all love a good conspiracy theory. I just don't think that's it right now.

[Rand]

I mean, I want. I want this market to nuke. I'm like, I'm in this thing where, like, I'm in this thing. I want this market to nuke me too.

[Scott]

Because we all think it's going way higher and there's still things I want to buy. So.

[Rand]

Yeah.

[Matt]

Yeah.

[Rand]

I mean, the next question I have is if part of the US Reserves are the Bitfinex coins. Now the question is if the US Knows that those coins were stolen from Bitfinex and that was like, those are the Bitfinex hack coins, then why are those U. S. Government property? Why isn't that the property of like.

[Scott]

We have Simon here. He can give us a disclaimer about Bitfinex before he tells us what he thinks about that, because we know that he knows.

[Rand]

He's going to say full disclosure.

[Scott]

I own Full Disclosure. I am the CEO and founder of Bitfinex. Okay. So go ahead, Simon.

[Simon]

Yeah, full disclosure. I'm not the CEO and founder of Bitfinex and I wouldn't like to be. It's probably one of the most stressful jobs I could ever imagine, but pretty lucrative. The. Yeah. So we don't know whether that. I mean, someone should have done the work by now, but how much was seized from Silk Road versus how many were sold? But I've got a feeling that the Bitfinex ones, which is approximately 100,000 that were recovered, are in that. And. But I don't know.

[Rand]

No, no, it's different. It's a separate wallet. It's two separate wallets. The ones. There's 69,000 Bitcoin in one wallet, and then there's another wallet that's got like a hundred and something thousand bitcoin. I had it open on my show today.

[Scott]

Is that confirmed or is that just like Arkham's assumption just jumping in? Because I don't know.

[Rand]

No, no, no. It's not from Arkham. It's actually two. It's June and Arkham, but it's got different sources.

[Simon]

Okay, and then so we're saying the Bitfinex is included in the 200,000 number or isn't.

[Rand]

Yes, it is.

[Simon]

Okay. From my perspective, it's 90%. That's not the U.S. bitcoin, it's already been ruled in court that it belongs to Bitfinex. All the settlements have already happened with the shareholders. I was actually in El Salvador and Giancarlo was there when the actual news was delivered that they had been retrieved and by the doj. And so, yeah, those are Bitfinexes and they're in a period whereby somebody can dispute if they think they belong to them as well. And if they don't belong to somebody else, then they belong to Bitfinex and then they get transferred. That's the current status, with my understanding.

[Matt]

Yeah.

[Scott]

And that's effectively rings similar to what just happened with this. Right. These coins from Silk Road were in dispute because of a bankruptcy proceeding with another organization. That bankruptcy went against that or that that proceeding went, you know, in favor of the doj, if you want to call it that, or against the other people. And that's why these just unlocked. So, Simon, that sort of, sort of indicates that, like, until there's much more clarity, these are just going to sit there for a bit.

[Simon]

Yeah. So if these do belong to, you know, the US that would be unprecedented. They'd have to do an actual formal confiscation. They'd actually have to go through a formal procedure of why the DOJ thinks that they belong to them and they're not to return to Bitfinex. And none of that has happened. And there's been no indication that any of that will happen.

[Scott]

Yeah, I'm just. I gave it the Good old fashioned ChatGPT research question here. And the summary basically was that the current status of the Bitfinex tokens is in limbo. Literally says in limbo, until a court ruling or government decision, the coins are held by the US Government, which they say are technically owned by the government. Right now, Bitfinex would need to file a legal claim to reclaim the funds, arguing that the bitcoin was wrongfully taken from custody during the hack. Possible Outcomes coins could be returned to Bitfinex or its customers if the court recognizes their claim. Or the US Government could auction the coins and decide whether restitution should go to Bitfinex or its impact to customers. I think we add to that, they become the reserve. But, Simon, you're saying that effectively there has been a ruling of some sort that would indicate that these would be Bitfinexes.

[Simon]

Yeah, these are Bitfinexes. And then they're disputing whether someone else should get them. And now if DOJ wants to put a claim in for them, then I think that would be a process.

[Scott]

Interesting. Panos, if you have thoughts.

[Rand]

Yeah, I'm just curious concerning the coins that aren't bitfinexes, that are confiscated from Silk Road or whatever. If the DOJ or the government have to sell them, what's stopping Michael Saylor, BlackRock Coinbase for stepping up and saying, hey, we'll do an OTC deal and buy these coins off of you guys.

[Simon]

That's what they should do. Because before previously they did auctions. The first, all the first rounds of sales were auctions. So they should do an auction. It would be, I don't know if they maybe if they thought that there's some efficiency doing it through an exchange just because of the liquidity that we're in right now, because an auction might be a longer bureaucratic process. I'm not sure. But they, I mean, yeah, there'd probably be an OTC buyer for them, so it shouldn't have impact.

[Scott]

Matt, quickly, I don't know if you, I know you were in the audience, I don't know if you were listening when Rand was sort of talking about the sailor bid maybe being what's keeping the fear and greed in this market a bit greedier than perhaps in stocks. And I sort of pointed to the ETFs or maybe another institutional bid. I mean, do you think that any of this price action or inflation fears and yields and all that is having a dramatic effect on these institutions that are slowly getting clearance and coming in and starting to enter this space? Do you think that that bid is still persistent or even at all?

[Carlo]

Yeah, I think that bid is absolutely still persistent. I don't think institutions have even noticed that the market is down. Remember, we were at 60, what, 9,000 before the election. So we're still massively up. We've seen no slowdown in interest, in inbound meeting requests in traction with the sales team. I think the ETF bid is going to be consistent and I think you're going to see corporate bids be consistent as well. It's not just microstrategy. There are other people out there buying. So even if microstrategy takes a pause, I think those are, those are long term trends and not short term trends.

[Rand]

Matt, I think I want to agree with you, but if I look at the data, the data showing me that. So other than MicroStrategy and the miners, there's not much of a corporate bid like the miners. The miners are buying bitcoin and the reason why the miners are buying bitcoin is because of the long micro strategy, short the miners trade. And so which was, which was the hedge. And now they've basically all worked out that if they also have bitcoin on their balance sheet, then they're not going to be shorted. And so like, it feels to me, it feels to me like, like MicroStrategy, who's bought insatiably since November, has basically kept the market up. And that's why there's a disconnect between the stock markets and bitcoin so much. Because you've had, I don't know how much he's bought. I think he's bought 20, $20 billion since December, since, since the 5th of November. And that to me is unnatural. Buying in the market, I think that's, that's basically shielded us. Even when I look at the ETF flows, as I said, I think since Christmas, I think a net of about 700 billion slowed in. 700 million slowed in since Christmas.

[Carlo]

Yeah, I mean, actually I agree with that. In terms of MicroStrategy's impact, particularly over the last month, I think you're going to see the ETF flows spread out over multiple weeks. Be really strong right up until tax day. ETF flows tend to take a break around the new year as people go away and then they tend to heat back up. So I wouldn't worry too much about the short term dip in ETF flows. Those will be there. I do think if we have less microstrategy buying that could explain why we're down. But the big picture for me is we're still just not down that much. I think this feels more blippy than me. I agree. It would be nice if people got bearish to go back to the earlier part of the conversation. I just, at least from the institutional community that isn't living, breathing and sweating this, we're not there at all. We're still in a strong bull market. It's still up substantially year over year. And again, I don't think they've noticed.

[Rand]

How much volatility are the institutions expecting in Bitcoin? Like when I said it, I know in previous cycles we've, we've expected like 35, 30%, 25% corrections. And so for us that's like, you know, like we, we said, we're sitting here going, hey, it's only 10%. Are they sitting in their office going, it's only 10% or are they sitting going, holy shit, it's 10%.

[Carlo]

Oh, I really think it's, they're thinking it's only 10%. In our experience, the institutions don't worry we don't get inbound questions. That's one way I measure this. Until you're Talking about a 25, 30% drawdown, they know that this is risky. They know that it's long term, it's a small allocation. So at least if I look at the questions that are coming in from our clients and prospects, they're actually not about a pullback. They're about idiosyncratic things. I get more questions about quantum computing than I do about this market pullback right now. I think the institutions are broadly taking a long view on this one.

[Scott]

I'd be very worried about my bank login if quantum computing becomes a real issue or the nuclear code beyond Bitcoin. Personally.

[Carlo]

I agree, it's amazing to me. But that's just an example. I mean, it's literally true. We get more research questions about that than we do about this, this market pullback so far. Maybe that's not a good thing. Maybe that means we still are greedy and we need more correction to get into that fearful territory. But that's, that's at least one data point from the institutional front for you to chew on.

[Scott]

So, Matt, why do you think that, you know, so far on the way up, we haven't seen the classic kind of 30, you know, 25, 30, 40% retraces of former markets on the way up. Oh, Carlos here, I asked about him before, so I'm going to bring him up too. Go ahead, Matt.

[Carlo]

Yeah, look, I think we have, we've, we've had the emergence of a value buyer in bitcoin that we've never had before. It was well stated earlier, previously, every time bitcoin went down 10%, we thought bitcoin was dead. I mean, you can go to the Bitcoin obituaries page. It was literally true. There'd be media stories that bitcoin was dead. So the idea was if you had a 10% pullback, it could go to zero. And I think that's been repealed. Now if there's a 10% pullback, you have value buyers who've been waiting to come in, jump in and support it. I think it's a pretty fundamental change in the market. I don't think it's repealed major drawdowns. But if you remove that existential risk from people's minds, it dramatically changes the level of cushion that exists. And I think we've really done that. Now if we rip back down to 69,000, I think you'll start to see the bitcoin is dead idea come back. But at least right now, I think most people assume bitcoin is not going to die. And that means when you have a 12% pullback, it's time to buy. And I think that cushion has been reducing that pullback.

[Rand]

What you say is so true because I kind of remember every time that there was a correction in the beginning, my first pull market or my second bull market. Yeah, I remember every single time there was a correction was like, the question we really asked is like, is this the end of bitcoin? Like, are they going to ban bitcoin? Is this the end of bitcoin? Like, and now it's like, oh, okay, cool. Yeah, it's fine.

[Scott]

Or at the very least, is this bull market over? Right. Even if you didn't believe it was going to die, you definitely believe that the top. Was it.

[Rand]

Correct? Correct.

[Carlo]

Yeah, go ahead. I don't think most people think that.

[Scott]

Yeah, just quickly since Carlo jumped up. Carlo, I was reading literally, like, reading your words on the doj, and maybe you can give us just the very tldr quick summary of why this is happening and how and perhaps why this isn't, you know, political maneuvering.

[Rand]

Yes.

[Matt]

Good morning, Scott, and thank you for sharing my post this morning. You know, my initial response to this was kind of similar to everybody else in crypto Twitter. I just find it stunning that two weeks before a change in administration that they would contemplate liquidating this much bitcoin, especially knowing full well that the incoming administration wants to accumulate Bitcoin and potentially looking at it even from the legislative perspective, as a currency reserve. However, sleeping on it and thinking about it, it is kind of predictable because DOJ tends to take this approach when it comes to the seizure of assets and the forfeiture of assets. They don't like to buy policy to hold assets, especially extremely volatile assets, and they're just kind of following their mandate. And the timing of this, although it seems dubious, is tied to this court ruling with respect to the Silk Road assets that were forfeited. There was pushback and litigation that it was an illegal seizure of these funds, and they litigated this in court. And the court just issued a ruling giving the DOJ the authority under the law to liquidate the assets. I don't think they've been liquidated yet, Scott, and they have the discretion to do so. I. I think that they should hold off and wait until there's a change in administration, because I could fully see either Trump changing DOJ procedures on this by way of maybe a possible executive order or Even legislation coming. So I don't see the urgency to sell the asset right now, given how close we are to changing regime. But I understand from a policy perspective that this is kind of how the DOJ works. I don't think they're politically motivated to do this. I don't think they're fighting bitcoin by doing this. But it certainly is troubling because that's a lot of bitcoin to put into the market that Trump is then going to have to buy back.

[Scott]

But not selling for the next two weeks would actually be the break of precedent. Even if they're just kind of being pragmatic and saying, hey, we're bending to the obvious desires of the next administration, but they would normally sell it within two or three weeks.

[Matt]

Yeah, I think that's a fair assessment. The only reason they haven't sold it, I think, is because it's been tied up in litigation. So, yeah, that's. That's a fair assessment. Do they have to sell it? No, I don't think they're mandated to sell it. But it probably puts them in an awkward position because if it continues to tank, then it looks badly on them that they're holding this really volatile asset that they could be putting into the treasury and redeploying that asset. You know, if it was cash, it would be standard operating procedure. They'd liquidate it. You know, they would if it was real estate. But in this case, because it's bitcoin and it's a touchy subject, this has obviously triggered a lot of. A lot of blowback.

[Rand]

But in the previous. In the previous cases of this, we actually went back into the timeline and we looked to see when they got the court order and when they actually liquidated. It's been as long as six months, seven months in some cases. Like if you look at the. For example, the Tim Draper bitcoin, which were in 20, like 2014, I think it was part of the same batch of bitcoin. The court order was given, court approval was given in January, that the transaction only took place in July. So, like, you know, if I. If I look back, it's.

[Scott]

Then I'm wrong. There is precedent to wait for. Sure.

[Matt]

Yeah. To fast track this thing ran would be obviously unusual because nothing in the government moves fast. The government's not selling the bitcoin to realize a gain, so to speak, or to, you know, or to to somehow arbitrage this trade. You would think, given what's about to happen, there shouldn't be a sense of Urgency to do it. So it is a little dubious if they fast track it and sell it right before Trump steps into office. I agree.

[Rand]

Poly Markets is giving it a 24% chance that they sell it before Trump before the inauguration. Kyle, do you think that if Trump came in, he could make an executive order or do you think it's even. Do you think he even gives a shit, to be honest? That he's going to give a shit enough to actually intercept this or not?

[Matt]

I think he would give a shit, especially if it gets on his radar and I see a lot of people clamoring about it. So it's likely to get on his radar. And I did speculate about whether an executive order could do that because the ultimate power over the Department of Justice lies with the executive branch. So yes, the legislature could pass a law and change, but this is an internal DOJ policy. And because the DOJ falls under the purview of the executive branch, I would think he could. It's never been done to my knowledge. I haven't looked at that close enough. But I guess in theory he could issue an executive order telling the DOJ to change its policy on how they hold digital assets.

[Rand]

So now I have another question for you. There's a whole bunch of other assets that the government owns from similar things. This was the Silk Road assets. But there's bitcoin that the government owned from the Bitfinex act. Like 94,000 Bitcoin which were hacked from Bitfinex. You know about those ones, right?

[Matt]

Yes.

[Rand]

Okay, now what makes that US Government property? Like they know. I just, I just, I almost feel like the following. Like, if I have a television at my house and then someone breaks into my house, steals a television, and the US Government catches the perpetrator and confiscates the television. Why can the US Government sell my television? Like, it's. We know whose bitcoin those are. Those people are out of pocket for their bitcoin. Why does the US Government get the right to hold those bitcoin?

[Matt]

You know, it's a long term and a long standing debate. And as a criminal defense lawyer, I confront this all the time. The government can in certain respects, kind of double dip where they can forfeit assets and then force the defendants who were prosecuted and convicted of the wrongdoing to. To. To again make good and pay restitution to the victims. So it is an unusual situation.

[Simon]

There is no victim is the victim.

[Rand]

But hold on. But the. Let's say the asset was forfeited, right? So let's Say my wife has a diamond ring. And then somebody steals a diamond ring. The US Government catches the thief, takes the diamond ring into its possession. Surely they need to return the diamond ring to my wife. Don't the insurance companies pay that out, though?

[Matt]

Okay, but then you got to return the company. It's bizarre. You can have situations where you have assets that are seized as part of criminal conduct and are forfeited to the government, and then you can have the very defendant who was prosecuted be obligated under a payment plan to repay the victims. It's bizarre because it's a different, There's a different track when it comes to their asset forfeiture division. Should they use their discretion to not do that? Yes. Do they have technically the discretion to do that very thing? Yeah, they do.

[Rand]

So where does the money go? So now you're going to get. We're going to get $6 billion. Who. Who gets that $6 billion?

[Matt]

As I understand it, the U.S. marshals manages the asset, and I think once it's liquidated, if I'm not mistaken, it goes to Treasury.

[Simon]

Yeah, this is, this is the key point. Look, walk through this, right? So DOJ is a department department fighting for budget. Everybody thinks they're under resourced and they all want resources. So at the moment, these Bitfinex are essentially held in custody. Right? So they belong to somebody. So now there's a bit of a battle around who owns them. They either belong to the DOJ or they belong to Bitfinex, or they belong to somebody that claims that they're theirs as well.

[Rand]

I mean, there's no debate.

[Scott]

They.

[Rand]

Oh, they belong to Bitfinex. It's the diamond ring that's was stolen from Bitfinex. It's.

[Simon]

Sure, but even. Yeah, but sure, even then. But think through the logic, right? So you're the Department of Justice. Are you going to want to give away a $6 billion asset? No, you're going to.

[Scott]

It's not yours. Yeah, it's.

[Simon]

Sure, I agree. I, I agree. But if, if it, if there is. If this turns out it belongs to the government in some way, you're going to want to sell.

[Rand]

Wait, wait, wait, wait, wait. Why does this belong to government like it doesn't.

[Simon]

But I'm just saying if they're, they're kind of making out as if it is. Trump made a political promise to the community as if it did belong to the US Government. I don't think it does. And they're mine as well. I'm a shareholder, so I'd like Them back, please, America.

[Rand]

Yeah, you're out of pocket. You're out of pocket. I'm out of pocket. We took those crummy Bitfinex recovery rights, then I must be honest.

[Simon]

No, I didn't. I sold. That's what my chair say I got.

[Matt]

And just to clarify. Just to clarify, there. There. There is a. I need to make a very clear distinction. If the government does forfeit assets, they're. They're not permitted under law to then force repayment. If they can trace the forfeited assets to a victim, they can't then force the defendant, who was the perpetrator of the fraud, to pay restitution. So they. They essentially can't double dip. But it does get complicated when it comes to the. To the fine line between forfeiture and seizure of assets. It does get muddled in cases, and I've seen this happen. And unfortunately, the defendants usually end up overpaying in a lot of instances, in my experience. But there's not much you can do about it because they've got you.

[Rand]

Sounds like a fucking Mafia organization to me. Like, it sounds like a Mafia organization.

[Simon]

If you ask me, that's exactly what. That's exactly what.

[Rand]

It's pretty wild.

[Simon]

But even then, imagine if it did belong to the doj. The DOJ wouldn't just say, right, I'm going to now transfer it to Treasury. They're going to say, I got a $6 billion asset. Go ask the Fed to print $6 billion and buy this asset from me so that it can be transferred from the DOJ. And the DOJ gets $6 billion.

[Rand]

This is the government's stealing from its citizens. Sorry, there's not. I cannot. It is justified any other way.

[Simon]

Is this because it's an American shareholder?

[Scott]

I was gonna say it's only America. There's this standard. I'm not a lawyer, standard practice in many nations.

[Simon]

Wouldn't you agree, though, that the doj, even if it did belong to the doj, they wouldn't just transfer it to Treasury. They would say, we want $6 billion of budget and you buy the bitcoins from us to whoever holds them in Treasury.

[Rand]

Fucking criminal organization.

[Scott]

That's above my pay grade, but, yeah, criminal organization.

[Rand]

Meanwhile, bitcoin's recovering to 94. 5 because this is all or nothing.

[Scott]

But bitcoin at 94. 5 and altcoins are bouncing hard, hard. I'm the guy that looks at the charts, but everything on the four hour is oversold with bullish divergence, with RSI on every, like, almost Every major altcoin that I looked at, which I was putting out this morning, I mean these candles on the four hour are looking pretty, pretty good.

[Simon]

But on the plus side, if America wants a strategic reserve, it hasn't got that many bitcoin now, so it needs to buy some.

[Scott]

Right. But maybe. Or does owning one bitcoin and calling it a strategic reserve asset qualify? Right.

[Simon]

I'm sure Dennis Porter would say yes.

[Scott]

Yeah, likely. I mean this just does seem like noise. Even if they do immediately sell off this 6 billion, the market will absorb it and it won't work matter. I mean we just did this with like the one of the states in Germany, right. People love to say that Germany sold their bitcoin. They didn't. Just for anyone who needs clarity, it was a state in Germany, very similar situation where they basically had to sell them because they were. Same situation here as the DOJ, but they sold what, 50,000 Bitcoin. And how much G. Matt, Matt, how much GBTC sold off when the, when the ETFs were launched? A lot worth.

[Matt]

Right.

[Scott]

And that was a lot more bitcoin because the price was lower. Right. So yeah, I just, I mean, I think even in the worst case scenario, isn't $6.9 billion worth of Bitcoin a temporary setback, Matt? I mean, is that an accurate statement? Even if they don't. I can't hear you, Matt. I can hear some background, but I'm not sure.

[Simon]

Scott, translate while we're waiting. Translating this into something that people can think about. The speculation of this should affect the leo. The LEO token. Leo because they. Those token hold the. The bitcoin is meant to be used for recovery. Right. Token holders, which are just the people that were involved that may. But then there was a secondary market for them, but they delisted the market, so those people are known. But the LEO token is meant to benefit from using this bitcoin in order to purchase the token. So that this should be creating some speculation on the LEO token.

[Scott]

Yeah, that makes sense. I mean, you know, we. It's just amazing. I don't think that this headline is what's doing it. I think this is just a normal retracement. It was already happening before the headline, so I should put that out there as a disclaimer. But it's amazing to me how many insanely bullish tailwinds are and bullish headlines every single day that don't get credit for price going up and then you get one bearish headline and all of a sudden it's over. Bull markets canceled. Right. I mean on a day to day basis we have Benham from the CFTC obviously is leaving and he made extremely pro crypto remarks on the way out the door. We're likely to get Brian Quintenz who is an Advisor now to a 16Z in that role. We have, I mean Besant and Atkins and RFK. I mean even if the government sells $6.5 billion worth of Bitcoin, isn't that a nothing burger compared to the insane bullish tailwinds and headlines that we get on a day to day basis here? To me it just feels like, I mean, Bill, I'll let you speak. You haven't spoken yet.

[Simon]

I mean adding a bit because look, the LEO token should be the market for Bitfinex's fear of whether these tokens belong to DOJ or Bitfinex or not. But for the last month it's not moved and it's currently almost virtually at all time highs. So there's no fear in the LEO market that these tokens don't, that these tokens aren't going to be used to pump the LEO market.

[Scott]

I mean Bill, you're good at zooming out and giving sort of the 30,000 foot view. I mean, shouldn't this just be a small story?

[Rand]

Yeah, not for someone I, I know. Like I'd love for someone to give me the legal principle under which the Department of Justice owns these bitcoin. It's absurd. No, no, but it's not. Like I know we say it's absurd and we just brush it off. But you like, you think about this and you say like laws are made with legal principle, right? Like there's legal principle. And to be honest, one thing I do know about the US is it actually does have legal logic. You know, like there is legal logic. We might not agree all the time, but there is legal logic to most decisions in they make. But this one baffles my mind.

[Simon]

No, it's true. You like, you know there's a lot of injustice but the, the backbone of the American economy is that you can sue. You can and you know the, the judicial system does hold the government to account. So you would expect Bitfinex if, you know this would be a massive case anyway. Like they're not just going to say okay, they're yours, they actually have to win.

[Rand]

Sam, surely Bitfinex is already doing this, is already in court with the US government going, hold on bro, that's my bitcoin. Here's the on chain movement, here's the day it was stolen. I remember that day very clearly. Surely this is already happening.

[Simon]

Well, from, from my understanding, our conversation about who owns it is not something that's factoring into their equation. Like the, they were involved in the whole process with the doj, they got the news and there's been no doubt that these tokens belong to Bitfinex. They just don't. They're not like a PR type company. They don't tend to engage in these conversations, so they believe it's theirs. And I think, aren't you a shareholder? Yeah, but I can't talk about. I can only talk about public information.

[Scott]

I mean, this is random. When you put it in the context of the stolen diamond ring, it's insane because these bitcoin were not seized from Bitfinex, they're seized from the person who stole them from Bitfinex.

[Rand]

And there's unchained fucking proof that it's the right. It's the same bitcoin. Like, hey guys, look here. There's the transaction A, transaction B, transaction C, bang. Right?

[Scott]

Yeah. Well, I mean, yeah, and if you want to scam, take a look at bankruptcy sometime. Yeah, I mean there's a lot of broken things in this, but they could.

[Simon]

Try and coincide it with something else they want to sue Bitfinex for. That would be the strategy. Right. So just, just dig up some of the old cases and try and put it all together.

[Scott]

Yeah.

[Rand]

As long as I carry on protecting.

[Simon]

The people, I'll be happy, well entitled to these bitcoins. So they're not protecting their American people if they do that.

[Scott]

Did you guys see the story here? Bhutan SAR intends to. Now my headline disappeared. Intends to adopt bitcoin ETH and BNB as part of its strategic reserve. Bhutan. You guys see this? Nation state adoption.

[Simon]

They will say that. They will say.

[Rand]

CZ tweeted about it like two days ago. I think.

[Scott]

I know it's nation state adoption man counts.

[Matt]

You know, just to circle back on what Rand had asked, I think the Bitfinex situation is very convoluted because obviously you've had scammers who took it from Bitfinex. So now if you follow, if you follow the letter of the law, the DOJ should be prioritizing repayment of victims by way of restitution. And if Bitfinex is the true victim, Scott, then they should be entitled to that restitution. And if it's clear that Bitfinex was not a player in the underlying fraud, then they shouldn't be subject to the asset Forfeiture. I just wanted to kind of clarify that because I know that was hotly debated.

[Scott]

You guys, since we're talking about scams or broken systems, here's one, and I just mentioned the bankruptcy court. Then saw this headline. FTX Bankruptcy Managers Accused of Spending Funds on Luxury Hotels Travel as Creditors file legal Action. I don't know if you guys saw this story that came out yesterday, but obviously this is one of the creditors has raised some concerns about some of the extravagant spending by Sullivan and Cromwell and Alvarez and Marshall and all the other bankrupt people involved in the bankruptcy, including this. Bavario revealed that Kumamon Ramanathan, an A and m professional, spent $1733 on taxi rides during a single week. Another professional billed $151 for a five minute taxi ride. Furthermore, the state reportedly paid 2,683 for three taxis to wait for FTX CEO John Ray during his deposition. While business class flights for the professionals cost up to 4,279 a trip, they're spending a thousand bucks a night on five star hotels. That's creditors money, right? I mean all of these systems are just so incredibly broken. There's a reason that we bitcoin to some degree, right?

[Rand]

No, but hold on, hold on, hold on. I want to defend that because like, I think to myself, like, if you're at that level, if you're at John Ray's level, just, you know, like you're.

[Scott]

Not gonna stay at a hotel, you're.

[Rand]

Not gonna stay in a motel. And to be honest, like when I go to New York right now, like it's very hard to get a hotel for less than 500 bucks. Like a reasonable hotel. If you're traveling on business, you want to be comfortable, you want to get a reasonable hotel. Honestly, like in some places, New York, Los Angeles hotels are like a thousand bucks. Like if you want to get a decent room where you can conduct meetings and actually work and it's not just a fucking bed. And then like to be honest, like we have a policy in our company that if you're flying for more than, I think six hours or whatever it is.

[Scott]

Yeah.

[Rand]

Then it's business then. And especially because we find that our staff are more productive. So I think like people are nitpicking here. They're looking for, for something.

[Scott]

I don't think that's fair.

[Rand]

I don't think there's anything wrong with spending a thousand bucks a night and flying business class if you're speak.

[Scott]

Yeah, but it does. I mean, I agree with that. But it does speak to the fact that the people who got screwed are not the ones who chose to go into bankruptcy.

[Rand]

Hold on, hold on.

[Scott]

Their money is spent on the bankruptcy proceed. Now FTX in their case, actually I.

[Simon]

Think it is the old client money argument.

[Rand]

Hold on, hold on, hold on, hold on. Let's just agree on one thing. I think that John Ray did a fucking great job recovering, got so much.

[Scott]

Money back he was worth every penny there. Just ask any Voyager creditor like myself how. What a difference Exactly.

[Rand]

Could you have done better to be.

[Scott]

Maybe Voyager. Voyager is the one that like Steve Ehrlich's not in trouble. There was no fraud. You know, Celsius obviously and ftx. Sam and Alex are both in deep shit legally. Voyager should have been the easiest one. It was only a $506 million, 5 or $600 million loan. But they tried to sell to FTX and then tried to sell to Binance US as the United States government kicked Binance and just completely like wasted the money. I mean literally just threw it down and sold the dead bottom of the market in every single case of every asset that had to be liquid.

[Simon]

But also there is the old client money argument here because with in the FTX case it was never actually aggressively argued whether it's client money or not. And in the Celsius like it was a different case but with FTX it was very clear in the terms and conditions that these are custody and if they're custody then they should be handed back and they shouldn't be used for the proceeds of the bankruptcy.

[Scott]

Right. Voyager. I think more, more like Celsius that there's a lack of clarity on who own the assets once you deposit them.

[Simon]

Yeah, and another one just connecting together. You talked about the Kingdom of Bhutan, there's a case there as well because they actually are the largest preference withdrawer from the Celsius bankruptcy. They had over 100 million and withdrew it 90 days prior to the. Well just before the bankruptcy. And so they've still, the Kingdom of Bhutan actually have a preference claim with the Celsius estate because they got 100% of their Bitcoin back.

[Scott]

Wild, crazy times in crypto. Well, we're trading now 94,368 little bluer skies than we had when we started the show and altcoins bouncing nicely. Ran, I default to your no big deal sort of assessment here. I think if you're battle hardened and been through this a few times, that's going to be the case. We're going to go ahead and wrap. We'll be back tomorrow, 10:15am Eastern Standard Time. As usual, give a follow to everybody on stage. Ran, it's. I gotta say, man, it's just a much better show when. When we can get you here. I know you have to spend time with your kids. I totally get it. But, man, it's great to have you. Really great. To everybody else, that's all we got for you today. We'll see you tomorrow. Thank you.