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Crypto Crashes Amidst Escalating Inflation Fears | Crypto Town Hall
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Crypto Crashes Amidst Escalating Inflation Fears | Crypto Town Hall
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- [00:01]
Scott
Good morning, everybody. Happy Wednesday. For me it's 10:15am Eastern Standard Time. I know for many of you it's afternoon and evening. So I guess in the words of Truman, good afternoon, good evening and good night. Good morning, good afternoon, good evening, good afternoon, good evening, good night. Savage says. Yeah, from the Truman show, obviously. I see we've got a bunch of guests we're still trying to bring up in the audience. Joe, Carlos, if you're there and want to join, I sent you an invite. Dave Weisberger as well. I see you guys out in the audience trying to get everybody invited up on stage. As always, it takes a little bit of time to get the show going. Obviously. I think today people are concerned about bitcoin price action currently trading at $95,330. A lot of people pointing out the fact that it has lost once again the 50 ma, the moving average on the daily chart as support. Now looking at it as resistance from a technical perspective, causing people to wonder, you know, where, where, where's, where's the bull market? What's happening? Obviously Monday was a really good day and then yesterday retraced all of those gains and more to the downside. So, and all, all coins as usual, taking it on the chin much more than than bitcoin. With bitcoin dominance rising quite a quite a bit. The kind of the worst case scenario for altcoin enthusiasts is when bitcoin goes down and bitcoin dominance goes down with it. Meaning that your altcoins lose even more value than your bitcoin is losing in that moment. But hard pressed to find people who believe that we're heading into a bare market and that this isn't just a normal retracement, but would love people's takes on that before we dig more into the news. FUS obviously got you here. You're a tech planelist. You're looking at the markets every day. What are your thoughts on this sort of, you know, we had the move two days ago up above 102,000 and here we are at 95.
- [01:53]
FUS
Hey, Scott. Yeah, Hi, guys. Yeah, it's an interesting one. I think the consensus opinion that Q1 was going to be bullish has been definitely called into question with this last 24 hours of price action. That's a pretty sharp rejection. And price on the high time frame now is starting to look a little bit distributive, a little bit like guys are rather than adding risk in January and getting back into positions they might have gotten out of at the end of the year they, they are continuing the trend of getting out of those positions. I, I just think that, yeah, I think this is probably a deeper correction. I think that the chart looks a little bit cooked at least short term. We have the inauguration in less than two weeks. That was an event that I had earmarked for quite a while. It's probably going to be a sell the news event. Maybe it's a little bit different if we're selling into that news for a couple of weeks. But yeah, I mean I think that, yeah, I wouldn't be surprised to see, to see this being the beginning of a slightly deeper correction. I'm not calling for 50 or 60k but I think looking at sub 90 is actually pretty reasonable at this point. Just on the basis of well, the fact that we haven't really taken liquidity at that area. There's quite a large price imbalance at that level. There's a CME gap. There's. There's what we call a fair value gap. There's. There's an area the price hasn't traded into since leaving, since leaving that imbalance behind. I just think it makes sense to, for price to be drawn there. No real indication of buyers stepping in on this drop. There's not much of a buyback. Not much, not much of a bounce. Something as well I discussed yesterday on my own stream is the fact that these, these, these dips that we're getting, these corrections that we're getting are, are different to the ones that you would see in, in a proper bull run whereby there's. You usually have sharp spike down and open interest flush liquidity liquidation cascade followed by basically the dip being bought. Buyers stepping in and forcefully V shaped reversing price back to the level that it was. We saw that a ton last year when BTC had just put in a new all time high. We saw price would put in a new all time high and then you know, around 70, 71, 72K and then it would, it would, it would dip. It would, there would be a very sharp drop that would be bought back extremely quickly. The, the dip slash corrections we're seeing now are not like that. They're far more forceful. They're. They take longer to resolve. Sure they get bought back up eventually. But it's a very different type of price action to what a lot of guys would have been used to trading quote unquote bull markets. I think it's leaving a lot of guys kind of scratching their heads and wondering what the next steps are. I see there's A huge amount of sentiment shift on the timeline between one week to the next. There's guys saying that the cycle top is in, this bull market is over, it never really started, et cetera. But I think it's indicative really of just the price action being very different this time around. And we've spoken about this, Scott, on numerous call how the ETF landscape or the ETF has changed the, the, the market landscape kind of irrevocably, especially when it comes to altcoins. And I think that has left a lot of people. Yeah, as I said, just kind of scratching their heads and saying, well, maybe this time it really is different, at least in terms of what we're likely to expect from, from a bull run.
- [05:35]
Scott
Yeah. So I think that's a very good summary of price and we don't need to dig too deeply into it because, you know, it's easy to get caught in the weeds of what's happening day to day. And on this show I think it's important that we keep zoomed out and talk, you know, less about price action, which we definitely do, and talk more about sort of the fundamental underpinnings of what's moving price and what's likely to happen. And it's still early in 2025. So fun to talk about sort of what we think will happen this year. Fidelity had a report just came out that said nation states, central banks expected to buy Bitcoin in 2025. That's going to be one of the huge narratives, we think, obviously if the United States passes a strategic reserve, even just holds on to the bitcoin that we have, that's likely to just send nation states around the world and central banks into a buying frenzy because they'll be forced to basically to keep up with the United States if we add it to our balance sheet. And then of course we have competition at the state level for bitcoin strategic reserves. I think we're going to have a lot of corporations adding bitcoin to their balance sheets, as we've seen, following along with the success of microstrategy. So we have sort of all these just fundamental tailwinds, in my opinion, that are going to keep driving price of a scarce asset up in a market that's this tiny relative to others. So just important not to, I think, get caught in the weeds of holy crap, we're down from 102 to 95 when most people agree we're probably going to 150 or 200 or even much higher. If one of these major Catalysts happen. So, Dennis, obviously have you here, probably the best person to talk about when it comes to strategic reserves and what's happening certainly at the state level. I keep reminding people, Dennis, that we talk about maybe Canada will add bitcoin to the balance sheet if they get a new prime minister or one of these countries around the world. But then you talk about a state like Texas, which is the 8th largest economy on the planet if you, if it was a country. Right. So this state level action that you're working on and pushing towards, I think I saw you say maybe 20, we'll see 20 proposals soon. I mean, can you give us sort of an update on the strategic reserve landscape?
- [07:52]
Dennis
Yeah, absolutely. And it's 7, 27 here on the Pacific Coast Summit. Talking a little quiet as various members of the family get up. But yeah, definitely there's a lot going on on the state level. And I agree with you, Scott, that, you know, oftentimes people get very excited about this international strategic bitcoin reserve efforts. You know, I think it gives them the idea that there's a lot of validation when other countries are moving on board with bitcoin. But you know, when you're talking about size of economy and just impact and potential impact in purchasing power of a state versus country, I mean, just look at, like you said, Texas, it's the eighth largest economy in the world. It's a $2.7 trillion economy. Them getting into the game is huge. But also states like California are the fifth largest economy in the world. So just like people need to keep in mind when they're thinking about the states, oftentimes I think we take it for granted as, as Americans that these, these states are, are huge. They're massive. So we have, as you said, 20 pieces up. I say up to 20. So we're right about there right now. I'd say it's probably like 19 is more. So like the firm number that I'm aware of, I would assume there's probably a floating strategic bitcoin reserve bill out there that I'm just not aware of because we find out about them all the time. And also lawmakers are constantly hitting us up. In fact, we just had a lawmaker, a former lawmaker, reach out to us yesterday and he's putting us in touch with two people in a state, actually in a blue state that really want to introduce strategic bitcoin reserve. Strategic bitcoin reserve legislation that is about 14 states in total. And the, the reason why it's 20 and 14 states is because there are now lawmakers battling with each other to be able to be the first to get this thing across the finish line. We, the. The public is already aware of efforts like IO. There are already two bills to create strategic bitcoin reserves, but there's another state where there are four lawmakers in that state that want to get the. That want to be the first one to get strategic bitcoin reserve legislation across the finish line. Because. And these guys are normally friends. Like, they're not. They're not doing it because they're like, you know, screw you. Like, I don't want to work with you. It's just that strategic bitcoin reserve legislation is the hot ticket item when it comes to policy. I would say not even just like in the bitcoin space, like, all policy, really. From what I can tell, I very rarely come across issues where the lawmakers are unwilling to work together, and they basically just want to compete to be the first one to get it done. So, yes, 20. I would say 20, 19, 20. Right now, pieces of legislation that are floating out around there is an accurate estimate of where we are. I'm personally aware of 19 of them. So moving forward, I think for people to have some expectation of how quickly this stuff will happen, just to put it in context, and then I'll. I'll toss it back to you, Scott. In January and in February, things are going to start picking up really, really fast. In fact, one lawmaker just reached out to me. They got the bill number officially yesterday, and we're going to be announcing that state on Friday, most likely, and they are telling us that there's going to be a hearing next week, most likely. So these things are going to start picking up very rapidly, and they're going to start getting voted on and then hopefully, of course, pass.
- [11:17]
Scott
Yeah, that's my next question. Sorry. Yeah. Sorry to interrupt. But, like, so it's one thing to have to get on the ground and get, like, one lawmaker to propose a bill, right? So you, I guess at first you just have to convince one guy and then he gets the, like, you know, media benefit or PR push of saying, hey, I'm proposing this bill. Right. So, like, what's the gap there from odds of those, you know, from somebody proposing it to odds of it passing.
- [11:43]
Dennis
Yeah. So generally, I would say that for most pieces of legislation, for us as an organization, there's like a 20 to 30% chance of a bill passing. However, there is a one state in particular. I would say there's multiple states where there's Higher odds in that. There's one state in particular where the lawmakers meet in the off season. They have a task force of lawmakers. And for people that don't know the state process, they don't meet year round. They only meet for like two or three or four months sometimes. So during the off season, they will get together and say, okay, let's pregame, let's figure out what we're going to do. Let's vote on, let's pre vote on a bill to give it an extra oomph. Well, this task force, every time they vote on a bill and they say, yeah, we like this one, it passes into law 100% of the time. And so our bill, which creates a strategic bitcoin reserve in that state, just passed out of that task force. So that, that's why we give it like a very, very, very high chance of passing, almost like a near guarantee. But you can't guarantee anything in life. Now, the rest of the states, it's going to range in how much we think they have the chances of getting it done. But given the political momentum and just how excited people are about being the first to get this done, I do believe the odds are significantly high for us to have multiple states get this stuff across the finish line.
- [12:51]
Lou
Hey, Dennis, you know, just looking at Texas, So Texas has 37 billion in reserves at the end of fiscal 24. What, what percentage of their reserves are they talking about putting in bitcoin?
- [13:06]
Dennis
So Texas is a unique case. Texas, when we started to work with the lawmaker, they initially wanted to just allow for donations to go into the reserve. We didn't think that was enough. And we pushed for them to be able to allow for taxes to be paid in bitcoin and digital assets. Of course, the other digital assets will be converted into bitcoin. So some people are like, oh, it's kind of underwhelming. But at the end of the day, we, as an organization, our goal is always to pursue policy that's rationable and achievable. And we're never going to be telling lawmakers to take moonshots. Even the idea of the federal government, with our executive model order that we have finalized and we have submitted to the administration, that incoming administration, and also the transition teams, that model executive order is not going to say, hey, let's take a moonshot. Let's go buy a trillion dollars of bitcoin. It's just not reasonable. I know it gets a lot of clicks and views and likes on social media, but for us, it's really about pursuing what we believe is achievable. And also exciting because at the end of the day, Texas, even though it's not as exciting as like some of our other legislation, where generally our model says that we allow for up to 10% of a fund to be allocated to bitcoin, that's the one that you're going to see in like 99% of these states. That percentage could vary, but even in Texas, like let's say they, they get this thing across the finish line, they get the ability to create the reserve, they're allowed to accept donations, which I know a lot of people are lining up to be the first to do that just to get the, you know, the little. They actually have it set up so the, the comptroller will like send you a letter of like, thank you. So it's kind of like a co way, a little piece of history you can put on your wall if you donate to the Texas Strategic Reserve. But also the taxes on top of it, at the end of the day, like, we sort of have like a Reagan esque approach to our policy. We believe we should go for half the loaf and come back for the other half the, the next time around. So even if Texas gets this done, we're not going to be done, like with pursuing further purchases. We will be coming back the next legislative session to have them continue to buy even more.
- [15:05]
Scott
That answer your question, Lou?
- [15:08]
Lou
Yeah, I mean, I was looking maybe for like a percent. Do you think Texas could put in 1%, 2%, 3%? 3% would be like a billion.
- [15:18]
Dennis
Yeah. So I hope, I hope maybe that wasn't clear. Texas is the only state where out of all the pieces of bills that we're working on can only do donations or taxes paid in bitcoin. So there's no theoretical cap. The other states are. All the other states that we're working in, it's a 10% cap of their fund that they allocate towards. So in Pennsylvania, when we were working with them, I believe it was a $9 billion fund they were looking at. So it could be up to 10% of that fund. And then the rest of the states that we're working with, it'll also be up to 10% of their funds can go into the bitcoin strategic reserve.
- [15:52]
Simon
Do people donate to state. Why would you donate to a state? Is that what people do?
- [15:57]
Dennis
Again, I thought, listen, this is the Texas one again just to. Yeah, and people are going to donate. Actually legitimately, people are lining up to donate because it's sort of hist. But when we came alongside the lawmaker, we also thought that there should be an additional way for them to build their reserve. And so, given the amount of bitcoin mining in the state, we wanted to enable the possibility for those, to those miners and others that are in the bitcoin mining ecosystem to pay their taxes in bitcoin. And I know that there's also people lining up to do that. Now, is that going to be something that's going to get Texas to a $50 billion Bitcoin fund? Probably not. That's why we're going to come back the next legislative cycle and continue to purchase. I continue to push for Texas to create avenues for them to purchase bitcoin to put it into the strategic bitcoin reserve.
- [16:43]
Simon
Cool. Well, just a word of warning. Keep your bitcoin and give it to your state. I don't see how that's a good idea. Or at least if you want to give it away, give it to. Cause without a bureaucracy in the middle.
- [16:57]
Dennis
Simon, I'm sure to some degree it'll be a spend and replace. But also, you know, think about it. Think. Think about how some folks in the state of Texas are going to feel like, you know, being the very first to donate to the strategic bitcoin reserve and that the comptroller sends you like a special little plaque that says you were the first one. Like, I'm. I'm not saying that they're going to get a ton of donations, but there are people lining up to do that for the historical purpose of it. But definitely, I don't think it's enough. We need to continue to push these states to be doing more and more and more. And that's why I'm really excited about states like Ohio and Pennsylvania and a lot of these other states where we're going to be working in because they do have specific abilities to allocate up to 10% of their rainy day fund, or it could fund that they're working on. I don't want to say that the, the funds that these states have because then you'll know kind of sort of which states we're working in. But that's our goal, is to have them pick one of their major funds that they can use and then allocate up to 10% of that fund into bitcoin.
- [17:50]
Simon
Dennis, just thinking allowed.
- [17:51]
Dennis
Sorry, just 13 states.
- [17:53]
Simon
I was just trying to. And crazy ideas. But I hope this, you know, this type of thing could be used to even rethink political campaign financing like Imagine if you could actually just donate strategic bitcoins to your state instead of to the individual people. Lots of flaws in that, but I just don't know why people would donate.
- [18:14]
Scott
To states where I'm from. Recall donations.
- [18:17]
Dennis
There is a big push.
- [18:18]
Scott
Go ahead, Dennis.
- [18:20]
Dennis
Oh, I just was going to say there is a big political push to say that campaign should all be funded by the state, like in a very small amount so that we don't have this, like, runaway money problem. I mean, the amount of money politics right now is, I mean, it's, it's a problem. Like, it's just a problem that can't go away. And if you don't take all the money that comes in, then you're not going to win your race. And so I, I personally believe that there needs to be campaign finance reform in this country. So, yeah, I, I, I, I, I don't know about donating bitcoin, but certainly I think that we should get away from spending a billion dollars to see who the next senator is.
- [18:54]
Scott
I was going to say that, Simon, in the United States, we call donations to your state playing the lottery. That's how you donate to your state. You go to the store and you buy a lottery ticket and you lose your dollar and the state takes the money.
- [19:06]
Simon
I see you also call bribery campaign financing.
- [19:11]
Scott
Yeah, no, I mean the literal lottery.
- [19:14]
Dennis
That's right.
- [19:14]
Scott
That's how we fund our states. You're allowed to gamble, but you can't buy crypto. But that's effectively how we use the lottery. I mean, to the rest of the panel, as you hear kind of Dennis, talk about this, we see how much of a groundswell there is for this level of adoption. It just feels like it's going to just take one of these things to respark a crazy, crazy bull market in, in my opinion. I know, Dave, we talk about this a lot, Weisberger, but I mean, these are your, your favorite statement. Like, it is not priced in. It's not priced in.
- [19:53]
Dennis
I don't think it's priced in.
- [19:55]
Scott
Oh, did you guys hear, Dave? We obviously have, we have clutches here all the time. Did any of you guys hear them? Oh, yeah. Now I hear you. Okay, that was Boomer user error, not Twitter glitch. Good job.
- [20:09]
David
Is that okay?
- [20:10]
Scott
You sound wonderful, my friend.
- [20:12]
David
Okay, good. Yeah. I mean, none of this stuff is priced in. You know, what's really amusing to me is there was a tweet I saw this morning, and I wish I could find it again where someone made the point that investing should be like watching paint dry. And you shouldn't be looking for dopamine hits with investing. And I think that so many of the people who are, who, you know, like Simon, myself and others who save in bitcoin and yeah, they may be trading around the edges, but you know, the long, you know, not leveraging, not doing any of this stuff, you just look at these moves and it's like, okay, well whatever. What matters is not whether it's 87,000 or 97,000 in the next three days. What matters is, is it going to be 500,000 or a million dollars in the next five years? And honestly, all of the news is setting up for the latter. And it's kind of amusing. I was looking this morning, there was about over half a billion dollars of liquidations over the last day. At the same time, funding rates were really, really low. What does that mean? That means that yes, there are people who are consistently putting in obscene levels of leverage and getting wiped out. And obviously that means professionals on the other side are making a lot of money against those people because this is a zero sum game when you're talking about derivatives. But it's happening from a situation where the moves are relatively small. Why? Well, because there's no big liquidation cascade. I mean a liquidation cascade. I mean, we've seen liquidation cascades in bitcoin that were 10, 20, 30% in blinks. We're just not at those sorts of numbers right now because there isn't that much froth. This has been spot led buying. When I look at this stuff, I just think that people need to take a chill pill and understand what's going on. But let's talk about what could be for the audience, what could be catalysts, the news stories that are out there, things that will actually matter. Watch the Senate confirmation of Pam Bondi and Hesgath Hesketh might be the hardest confirmation that he has. The market is not priced in. Trump being able to expeditiously get his cabinet in, in any reasonable time. If people think that Besant and then Atkins and Kintens and everyone's going to sail through the market will react quite positively to that. And we will start seeing news of that over the next few days. Watch this idiotic not farce of a sentencing thing that's gonna go on on Friday, will Trump have to be diverted by what's going on in that particular court case? I don't wanna go down that rabbit hole, but a lot of people are concerned about that. These are all things that could stop momentum. And I think that that's playing out. I think there's a lot of nervousness on the part of marginal traders on that. Lastly, I want to push back on the notion of sell the news at the inauguration. If we're at 150,000 with crypto rampaging for the next two weeks up till the inauguration, yeah, I think it would be a sell the news event. If we're doing this, then I think it's a buy the news event because frankly, I think there are people out there who still think it's not going to happen. And I think you just have to look at it that way and understand what's going on as far as the strategic reserves go. I mean, the more important one, to be blunt, is now I'm not minimizing Dennis's work, which is amazing and I think it's really good to see it and I think it will matter ultimately. But corporations are the big deal because there's a lot of cash risk companies out there. And all you have to do is look to see which stocks have been some of the best performers. And those CFOs are going to say, well, wait a minute, guys, maybe we should be putting our cash in Bitcoin because it'll pump our stock price and that will help us attract employees that will help enrich our board of directors, etc. Etc. And companies like to do stuff like that.
- [24:16]
G
David, speaking of news, can I break some news here?
- [24:21]
Scott
That's what we're supposed to do here, so yes.
- [24:24]
G
All right. So just for everyone's knowledge in the audience, in addition to a crypto hedge fund that I run, I'm also the CEO of a publicly traded company. It is listed in Canada on the tsx, also trades in the United States on the otc. The name of the company is Centaurus Energy. We broke some news a couple months back regarding using ETH as a strategic reserve of the company. The company is now out of the oil and gas business. Took three years out of my life. Feels a lot longer than that. But in any event, the company is just sitting on a passive revenue stream that it receives semiannually and the company has pivoted into cryptocurrency after six months of our stock being halted and extensive discussions with the Toronto Stock Exchange. Press release will come out later today that we have been approved to not only invest in and stake eth, we can also invest in and stake Solana. And we have been invited to suggest to the exchange additional layer ones. The company will be renamed Layer 1 after an upcoming shareholder meeting. In February, we'll change the name, we'll change the ticker and we will go ahead and hopefully methodically go through a bunch of other layer ones to go ahead and add to our portfolio. It's going to be an actively managed portfolio. I frankly don't know. If somebody else in the audience does know with certainty which layer ones are going to be the winners 10 years from now, please let me know. But for now, you know, we will actively manage that portfolio and based on, you know, lots of things that we consider, you know, appropriately rebalance the portfolio with regard to what layer ones we go ahead and put our money behind. We're launching a capital raise right now. Initial $25 million. It's actually an interesting capital raise. It's going to be a debt raise with a 7% guaranteed coupon, guaranteed by the revenue stream that we have, along with a sharing of the upside on the gains of the crypto that we buy. 65% of the gains will go to the investors, the lenders and 35% will go ahead and stay with the company. So essentially a crypto linked investment. More fixed income, but yet upside as well in terms of the appreciation microstrategy.
- [27:05]
Scott
Of E Salon and down the chain.
- [27:08]
G
Yeah, you got it man.
- [27:09]
Scott
You guys like my cldr?
- [27:11]
G
You got it, baby. You got it. And I think the idea is going to be not, I think, I know the idea is going to be that once we get to critical mass, we're going to use the staking gains to go ahead and pay our shareholders dividends. And so, you know, we will have kind of a dual beneficial structure of folks that go ahead and commit capital either on a debt basis, you know, hopefully one day 0% convertible notes that we can go ahead and issue. But we'll, we'll have people gaining both on the fixed income side of things from the appreciation in the crypto and then on the equity side of things along with a dividend yielding piece of stock. So there you go. Breaking news. The press release will come out later today and looking forward to exciting things.
- [28:04]
Scott
What's the current yield on eth staking? I have no idea.
- [28:10]
G
It's like mid single digits, 3, 4%.
- [28:14]
Scott
It's been there for a while. Yeah, I didn't know if, I didn't know if there had been some material change in it. But yeah, I think that that's going to make you a lot more attractive than Ethereum spot ETFs. Although you know, we do have Hester Purse saying that she thinks that staking and also in kind rather than cash redemption is likely coming to these ETFs in the United States.
- [28:36]
G
I have no doubt. I mean this is, this is a race. I mean, I'm in a race. I want to get biggest, fastest and have the most optionality and have the most active management and have the most kind of shareholder friendly or holder friendly terms and where we're out of the gate.
- [28:55]
Scott
Great to hear that you're no longer halted. So I thought you were just gonna say, hey, our stock's not halted yet. The fact that you actually got approval for the staking and to look at other assets was a huge, huge surprise, even to me. And we've talked about a lot of this in the past.
- [29:10]
G
Yeah, no, no, no doubt. It was, it was an arduous process. There were no less than, I don't know, I'd say eight very long requests by the exchange. I have a 50 page PowerPoint that I had to assemble and present. So yes, I, I did my homework, I put in my, my time, rolled up my sleeves for the benefit of everybody. I've gone through this. But yeah, we're going to get unhalted, hopefully in a couple days because of some crazy exchange rules. They need to go ahead and issue a bulletin and then wait two trading days until it starts trading again and then we'll have the meeting in mid February and. And then we're off.
- [29:49]
Simon
Congratulations, David. I look forward to seeing you becoming as flamboyant as Michael Saylor. That's a hard one to follow in, dude.
- [29:59]
Scott
The next, the next party is going to be in Canada.
- [30:02]
Simon
Yeah. Just for, to answer the question, the Current yield on ETH is 3.29%, but it changes all the time.
- [30:12]
Scott
Yeah. It seems to kind of vacillate around the mid threes though of late. Right. I mean, I don't check it too often, but seems to me that's kind of just where it's at. Yeah, everybody's agreeing, giving me that heads up. I'm looking at all the other news. So you know, when we talk about obviously strategic reserves. Czech national bank considers Bitcoin reserve. Was one up here. One of the main stories today. I wonder, I mean, Dennis, Dennis, still here. Yeah. When we talk about these, once again, is this just. It says the governor of Czech national bank said the central bank is considering allocating Bitcoin to diversify its reserves, but then kind of said, hey, I'm like one out of a number of people that would have to visit this. It just makes me wonder each time we hear these News again, one guy who thinks it's a good idea and maybe hopes there'll be groundswell. Or is there a meaningful chance that it happens just because one of these governors kind of alludes to the possibility? Can you guys hear Dennis? I cannot. I hate awkward silences. No Kanye with spaces. You never know when it's your own glitch or a major glitch. Okay, so we'll. I guess I can ask that question to the rest of you. I mean, how big of a news is it when something like the Czech Republic says that they would add bitcoin to the balance sheet?
- [31:33]
Simon
I'll say there is actually a difference with the Czech Republic news. I just read the headline. I didn't read into it too deeply, but the headline did say that it's a central bank that's going to be holding it as a strategic reserve. And so obviously there is a big difference between the treasury holding it and the central bank holding it. And so this, yeah, this is a very strange and interesting model. I think it's way more interesting that countries are able to hedge from the risk of their central bank's monetary policy and build their own reserves. But I'm not sure of the exact structure between the Czech Republic central bank and Treasury. But this one was an announcement of a central bank doing it.
- [32:22]
Scott
Yeah, I didn't hear me. Yeah, I can hear you. Go ahead.
- [32:26]
Dennis
Jumped off and came back. Yeah, I'm not really sure exactly on the Czech Republic one, but yeah, I agree. Ultimately, we should sort of celebrate any interest from anyone around the world wanting to pursue these things. And there are some good groups in the Czech Republic that I'm aware of that have been working on legislation there for. In a variety of ways. So I don't think it's just like this one guy waking up one day and saying, like, oh, hey, look at this bitcoin thing. Maybe I should make a public comment and get a lot of views. There's certainly people on the ground there in the country that are probably most likely advocating to him and, and to the people there, pushing them into the right direction.
- [33:03]
Simon
And Czech Republic was where I spoke at the very first bitcoin conference after the New York conference. So it was a. The first one in Europe in November 2011. And yeah, so I remember having to go around Prague and you had to knock on the. You had to get these SMS text messages to find the after Hackathon venue. And when you would go around, you get these codes around different parts of Prague and then you'd end up on what I can only describe as a crackdown, you have to go through, knock on the door in a certain way. And there were a bunch of people in anonymous masks and a bitcoin vending machine. And I did make my first bitcoin purchase of a Mars bar for one bitcoin.
- [33:49]
Lloyd
LLOYD so one thing that occurred to me, occurs to me or when I'm speaking to some people is that the Michael Saylor fud, which is the idea that somehow he's going to get liquidated and he's going to tear down the market and he's why it's going up. I'm sure some of that is true, but that fud, I mean it doesn't hit institutional players. If you're a country or a business looking to get in, that's not changing your mind. Most likely you've already got some bigger reasons. But if you are an individual and you're thinking should I, you know, top blast a hundred thousand dollar bitcoin makes you a lot more nervous and a lot of people are thinking, you know, I've heard, I've been hearing people say, well, I heard the only reason it's up is Michael Saylor and he's going to get liquidated. So I'd like to wait for after all that and like sure, but you, you may just miss it. I mean this is, my advice is always, you know, take what you were going to buy in DCA over a year weekly. I'm not saying that you should do any of those things, but I think that this particular FUD is less effective on the larger players and very effective on the smaller ones.
- [34:51]
Simon
It is quite dangerous. The strategy of, look, you have whatever your strategy is, but I can't tell you how many people I've met over the years that were expecting bitcoin to come back down to a price and they sold their bitcoin and said I'll re enter at this price. And that price never came and they missed the whole thing because, you know, they would rather buy it like $10 lower and they set a price. I'm sure people have their own strategies for how they enter, but I can't tell you how many people I've met over the years that really wanted it to go to a price. It never got there and they missed the whole thing and they never re entered.
- [35:32]
David
DAVE yeah, I mean that is a very important point because I get asked that question all the time by people and, and that's why I'm always so overly, despite having founded a company that caters to professional traders and actually understanding what a lot of the professional traders are doing. I talk about dollar cost averaging, et cetera. That's why there are companies out there, like your friends at Arch Public, who do things that will facilitate that. It is so important for people to understand that if you start picking price levels in the asset, that. And we have to bring this up, Scott. I mean, what is it? Ten days out of every bull run is 90 plus percent of the move. So if you think of a bull run or out of 365 days, if you're not in the market for 10 days, you literally lose 90% of your upside for that entire move. I mean, that's just insane. And so that's why the notion of exiting your position and understand there's a difference in exiting a position, which is what Simon was talking about. And people do this and saying, okay, I'm going to hold 80% of my position forever and 20% up and down. I'm willing to be as much as 100% invested or only 60% invested or whatever your numbers are. I mean, those things can be done. But it's really important for people to understand that Bitcoin has a very. The reason its volatility is considered so high is because of the kind of gaps that it can do. And you won't get that entry if you're. If you miss it, you miss it. That doesn't say that you shouldn't trade around it. But there is a difference between what you do. Scott. Putting out stink bids. For those in the audience that don't know a stink bid is say, okay, I'm going to. I'd like to buy extra if it drops to 88. And so stick it out there. And if it gets hit, it gets hit and you're happy. That's a very important point that Simon was making because people really do need to understand that a lot of the squiggles and technical trading is not where the drivers of the price are. And so the drivers of the price are different.
- [37:42]
Scott
Yeah, that's very important points. I wanted to highlight a couple other news stories. It's supposed to be a news show and we always forget to actually discuss the news when we get down in these deep in the weeds of these conversations. But there are kind of a lot of, I think, important things that I just noticed that are worth discussing. Of course, MicroStrategy plans 2 billion capital raised to buy more bitcoin shocker as BlackRock's IBIT acquires 596. 6 million in bitcoin. That's interesting. I think that we're still seeing, at least for now, major inflows, even on the. On the downturn of bitcoin price. And not so notable, I guess, but always worth discussing that MicroStrategy is still going to continue to raise money and continue to buy bitcoin. Next one was South Korea seeks to lift ban on institutional trading of cryptocurrencies, which I don't know if you guys know how much volume comes from South Korea for crypto, but holy crap, it is a lot when you dig into the numbers. This is actually relatively big news. South Korea Koreans account for a massive amount of crypto trading. Some would say some of the gambling side of it. Very popular over there as well. There are two stories about Coinbase. Coinbase receives virtual currency business license in New York, which anyone who knows New York is arguably the most difficult state to get any kind of approval. I think that this really another story that shows sort of the spawning of the regulatory environment in the United States. But this says the approved assets that they can now offer, Kusama, Alluvium, Oasis, Gnosis and Metis, all with established market histories, but allowing New York residents to trade more, I guess we'll say they're not securities anymore. The other one, Coinbase versus SEC legal battle will set precedent for the US Crypto industry. But the real story there is that Coinbase gained a major court win in the SEC legal battle over securities law. Maybe a lawyer or. Zach, you can give us a little more on this? Yeah, go ahead.
- [39:38]
Zach
Because the quick rundown on that, that, that actually is huge for the industry. So the Coinbase motion to dismiss was partially granted on the Coinbase wallet not being a securities broker, which was good. But the legal theory that Judge Fela in the case seemed to agree with was very favorable to the sec. It more or less. It didn't accept the sort of ecosystem theory that probably you've heard about. That is the SEC's strongest view. But it did adopt sort of the mainstream view that Judge Rakoff had about how the Howey test applies to secondary transactions. Judge Phil granted what's called an interlocutory appeal to the 2nd Circuit, meaning the case pauses and the court of appeals, the 2nd Circuit, which sits over SDNY in the federal courts, gets to decide this specific legal issue, which means that Judge Phil is taking it seriously. The 2nd Circuit will have another bite at this. And the most damaging part of the Coinbase motion dismiss ruling for the crypto industry is immediately up for review. So that I think is sort of bullish in general for, you know, Even if the 2nd Circuit narrows it somewhat or speaks differently, that will become binding authority in the Coinbase case and in the other cases in SDNY and other federal courts. So this is something that could really change the game. I mean, if they accept Coinbase's theory, which I think is kind of unlikely, then like, that's a whole new paradigm and that potentially like legalizes a ton of secondary trading for tokens. But even if they narrow the SEC's theory somewhat, that could provide a lot of headway that will go much faster than we're likely to get a market structure bill test.
- [41:15]
Scott
So glad that we have lawyers here to help us. Go ahead, Simon.
- [41:19]
Simon
Zach.
- [41:20]
Scott
Yeah.
- [41:20]
Simon
Just question, is there any impact? Is this like Coinbase, the centralized custodian trading service, or is this Coinbase Wallet the self custodial?
- [41:29]
Scott
No, no, no.
- [41:30]
Zach
The claims about the wallet have already been dropped from the case. Those were already dismissed. This is about secondary trading of tokens on the centralized exchange. Which is the, which is the most important part of this.
- [41:40]
Scott
The ripple question. Right, the ripple question. I mean that, that, that obviously with Gendler on the way out, you would think is likely to go in a more favorable direction now than it would have before.
- [41:54]
Dennis
Right.
- [41:54]
Scott
I mean, a lot of people, you.
- [41:56]
Zach
Wouldn'T necessarily expect that from the courts, which are not administration dependent. They're lifetime appointments.
- [42:01]
Scott
Great. Totally makes sense. So the other story we had here, movement lab set to close 100 million funding round as crypto markets heat up. I know Mario's not here, but his favorite topic is VC funding and how much money is flowing into the space. Well, These guys raised 38 million Series A in April of 24. I think they just launched a token. Now, Series B being raised 100 million, which values movement as another unicorn at 3 billion. So if there are any questions. I love that. I'm reading the article in Fortune Crypto and it describes, it says, founded by two college dropouts. Movement previously raised 388 billion Series A. I love that that's what they highlight on is two college dropouts.
- [42:43]
Simon
But is that equity or token?
- [42:47]
Scott
I think it's a mix. I'm reading through it right now. It said it here or it's in the article and now I don't want to butcher it, but it is here. I think it's a blend.
- [42:59]
Simon
It's just interesting if people are calling like tokens Series A, Series B. Like you're in securities terror, dude.
- [43:05]
Scott
Far Point series B at 2 billion valuation right, yeah, I'm trying to find. It's a mix. It says move which launches emphasis. Yeah, I can't find it, but I think it's a mix of stock and tokens. I know it was in here somewhere when I was reading, but now, because.
- [43:27]
Simon
In the 2017 days, there was very much a pretense you're not investing, you're buying the token because you want to use it and all that type of stuff. But this sounds like things have progressed.
- [43:37]
Scott
Yeah, I mean, some ser. Pretty serious. Here you go. Investors will receive a combination of equity and movements. Proprietary token move, which launched in December, said one of the sources. But the emphasis will be on the token common funding structure and crypto venture deals. This round is expected to close by the end of January. So, yeah, I mean, I think it's in question, like, what? You know, where's that valuation come from? But still interesting to see there's a layer two on Ethereum, so anyone who thinks that interest there from institutional capital or VC is dead, clearly not right.
- [44:12]
Simon
That kind of sets the model. Just sell equity and treat it as a security with all the defined securities laws. But add an element of. And you get this token seems to be what they're going for there.
- [44:25]
Scott
I've seen a lot of smaller and weird deals coming around now that are structured similarly. It's an equity raise, but then you get a token match when they launch. Have you seen a lot of that, Simon?
- [44:37]
Simon
Yeah, I mean, this is, you know, this. I mean, in the 2017 days when everyone stopped buying equity and everyone was buying tokens, this is how we tried to do some of our structures that we kept it as equity because we were authorized to sell securities. And then some of them were launching things that also came with tokens. And then it kind of pivoted away from that model where everyone was pretending they're not securities and saying, you're not investing, you're using the token. Then obviously it switched to the SAFT model that says we're selling an investment contract, but the actual token's not a security. And now it seems to have gone full circle of we'll sell equity. And this is kind of the whole thing, right, that people are buying tokens and people are selling tokens. So can we stop playing gymnastics and figure out what these things are, what the disclosure is and kind of this is the root of the issue with these tokens for so long.
- [45:38]
Scott
Yeah. It's going to be interesting to see how this plays out in the new regulatory regime. Right. I mean, how close people have to dance at the line of what is okay and what is not. I think moving forward is going to change dramatically. I just saw a story too. This blows my mind. Kazakhstan regulators announced they have blocked more than 3,500 illegal cryptocurrency exchanges. 3,500 exchanges. Wow. Good to know that we're still degening as hard as we ever have in the past. Guys. I think we've pretty much covered every story for today. We're gonna call it a day and come back tomorrow, 10:15am Eastern Standard Time. As always, guys, everyone in the audience, please follow all of our guests on stage. They're here because we love them, we listen to them, we deeply believe in them. And you should be following them for all the alpha that they give on X outside of these conversations and looking forward to another Great one tomorrow, 10:15am Eastern Standard Time. Thanks to all of you for listening. Thanks to all of the guests for joining. We'll see you guys tomorrow.
- [46:39]
Dennis
Bye.