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- [00:00]
Scott
Good morning everybody and welcome to Crypto Town hall. Every weekday here at 10:15am Eastern Standard Time. Dave, I know you're co hosting. I thought you had to drop for a second.
- [00:11]
Dave
I don't know if you can hear.
- [00:12]
Scott
Me, but I know Dave is trying to shuffle his mic at the moment. Obviously the key topic of the day here is CDC's pardon. Very polarizing, obviously decision by the Trump administration, those who are deeply, obviously entrenched in the crypto industry, thinking that CZ's case in the first place was lawfare by the Biden administration, that he served his time, paid a massive fine for a crime that nobody has previously gone to jail for, he was already free and effectively that this pardon is just erasing of a bad decision from a previous administration. Of course, others view CY as a different kind of figure than that and think that this with some sort of bribe or grift. And of course that means we have to argue endlessly about it on social media. Pretty unbelievable situation to be quite honest. What I find interesting personally is that when I scroll social media or group chats with friends of mine, nobody seems to have the story straight. It's a very clear idea of what normal people who are not in the industry are being fed and how wrong it is. If you read my group chats, you would literally think that Trump showed up at the prison with a suitcase full of cash and sprung him directly from jail, you know, and bribed the guards on his way in. I mean, that's really the way that they're presenting it. And I think most people don't even realize that CZ is free and out of jail and effectively has been living his best life with $90 billion in net worth already. So just really interesting here. You know, I just discussed this on Friday 5 with NLW this morning. He was more on unhappy about it side. I was more on the happy about it side. I guess we can dig into it here. His point was nothing to do with cz, though he really did believe that this pardon makes life more difficult for the industry in the United States. I don't necessarily agree, but that was his take. Dave, you're good.
- [02:21]
Dave
Can you hear me now? Okay, Yeah, I don't know what it is. I, I can't get X to work on my computer again. It's just annoying as crap because phones get interrupted. But anyway, look, lots of people have lots of views on cz. He's a polarizing figure for sure. There's a couple of absolute certainties here. It is absolutely certain. It's going to make complicate the political situation. That's just fact. We can argue it or not. It is equally certain that the timing of this is highly likely to be a response to the fact that the political situation had broken down and people like Gallego acting with faux outrage. I think this is classic Trump timing it to tweak them and basically say, I don't give a crap. You guys don't want to abandon this industry and be looked at this way, so here goes. I wouldn't be remotely surprised if that were true, but it is going to complicate the political situation. So there is that. Then again, it's done and we've got to live with it. The thing, the takes on this, though are insane, right? You know, it's like everyone's like, well, you know, people are like, well, you know, CZ dumped ftt. That's what NLW said. And all sorts of other, other stuff about whether he's a bad actor. That was not what he was convicted of. What he was convicted of was effectively turning a blind eye to us people generally, the big market makers and active traders using Binance and a period of time that's what you know, and not supervising. And that having. And that on the platform, their aml, their AML processes were shit. Meaning that there's some amount of bad actors that were using it. By the way, every single foreign crypto platform at some point in time probably is guilty of the same thing. By and large, almost every major international bank has been fined for ignoring suspicious activity reports and all sorts of things that amount to the same thing under the same act. And he's the only person who've been personally prosecuted for it, that.
- [04:28]
Scott
I used to have the stats, Dave, but I don't have it in front of me. But there's an amazing site where you can basically see all the fines paid for similar crimes. Wells Fargo, J.P. morgan, I mean, J.P. morgan was Epstein's banker, right? I mean, it's not like.
- [04:40]
Dave
Yeah, I mean, Right. And not one person at J.P. morgan, not one has even been prosecuted, much less convicted. Also, the fact is he served his jail time. He did serve it. So the only thing the pardon does realistically, because he doesn't have to pay his fine, not like the personal fine, which was of course to him a slap on the wrist, you know, like 54 billion bucks. No, no, no, no. That was, that was Binance. That was not him. But it's his personal fine. Was, was, was 200 million, 150 civil and 50 criminal. But he is not paying that back, that Trump's not handing them the money, but he paid, you know, he literally served time in jail. He's literally the only CEO that did, you know, other than people like Elizabeth Holmes and sbf. Now, SBF I'm going to get to in a heartbeat. But, you know, the only real question is, does the pardon? What it allows, is it allows him to be back in the industry, whether at Binance or someplace else that it does. And you can argue good, bad or indifferent, I think that the unbalanced people would probably see good. There are lots of people who are still really upset about the way he, you know, his, as NLW put it, his ego fighting with spf, you know, triggered a mess. A mess is, by the way, a woeful understatement. But that would never have been a problem if SBF hadn't basically embezzled customer funds to do the shit that he had done and replaced it with shit collateral, you know, as ftt. But the real issue here is he FTX or Sam was a massively bad actor. He criminally defrauded and harmed people at a level that, and that he was convicted of that nobody else would do. It is not even remotely the same thing as, as, as cz. And if, if he pardons Sam, that would be a shitstorm that I can't even imagine. I mean, that is, It'd be such a bad look, you know, it'd be like pardoning Bernie Madoff. Arguably worse. It was. Bernie Madoff is dead.
- [06:35]
Gary
The bad look would be if he, if he, if he commuted P. Diddy. That I can't tolerate.
- [06:41]
Dave
Yeah, that would be. You're right, but that would be in the same. But Gary. Yeah, agree. I mean, you and I agree on all.
- [06:47]
Gary
Non starter for me too. Like, I will go fucking ballistic against Trump. He can't do that. That'll destroy his reputation.
- [06:53]
Dave
Yeah, absolutely. You know, it's like Biden didn't have much of a reputation to destroy when he commuted the sentence of a bunch of people who basically were in the same sort of zip code as P. Diddy. But P. Diddy is higher profile. And you're right, and you know, it just. But that's what this is about. I mean, people are, you know, very emotional about this topic. But the truth is what, what actually matters. What actually matters is whether or not we're going to continue a political impasse or we're going to get somewhere in terms of making the US Capable of being a hub for innovation. That's what matters. And I'd love to hear what everybody else thinks. So I've, I've gotten to speak my piece that it's, it is to me this is much more about emotion than it is about actually impacts.
- [07:43]
Gary
I'd love to know at some point, guys where inflation is going to come from. All this hyperinflation that I was being terrified about.
- [07:51]
Dave
Well, I mean, yeah, I, I, there, never, never mind. I, I, I could, I could go on that one. Richard, you have your head how we.
- [07:59]
Scott
Do that one next?
- [08:00]
Dave
Yeah, let's do that one next. Richard, what's up?
- [08:02]
Richard
He, yeah, look, I mean I'm unequivocally going to come out in support of cz. I mean if you've been here from the day Binance launched the one thing that is undoubtedly the most common thread with cz, he's present, always been present, he's never hidden away from any kind of controversy. And I mean, you just have to go around to the conferences. I mean, perhaps this is a, you know, looking at, from a purely crypto lens, he's extremely loved. He brings so much art and attention to, to any conference that he attends. And maybe we've, you know, we're all seeing it through relative tinted lenses. You know, I think with this most recent market wipeout people asking some serious questions. But once again, you know, finance didn't waver. They, they, they were front footed with dealing with Mr. Barkle. You know, they, they came out with immediate compensation. And I'm sure there'll be, there'll be more that that comes out of this. But my, my take on it is this is, that CD is front and center. You know, he's online, he's engaged, he talks with people, he's constantly on spaces. This is not somebody that's hiding or trying to run away from controversy. So, you know, perhaps there's some, you know, from a political point of view, questions would be asked. But if you truly are somebody that considers yourself passionate about crypto, I mean this guy is nothing short of a hero. You know what he's had to endure and he's survived everything. Let's not forget every single issue we've had since 2017. He survived it all and I think he deserves our support. However this plays out between the political parties in the US that will take its natural course. But I really believe that, you know, as crypto people, I don't believe the crypto community are polarized about this. Maybe political people are polarized about this. I don't believe crypto people are polarized.
- [10:01]
Scott
People are definitely polarized about this.
- [10:03]
Dave
Yep, I see this exact same thing. I'm more on your side, Richard. I think that, look, if you talk about billionaires that have done bad things for society, CZ isn't even in my, even close to the top. I mean, you know, I'll start probably with Reid Hoffman ending up with Bill Gates trying to make us all eat bugs and doing what he did with the pandemic and the vaccine shit. You know, there's, there's so many billionaires that have done societally worse things. We could go, we could have an entire space, you know, target the billionaire that's done the worst things for society. CZ is not going to even be in the conversation. So the sole question really is people who are butthurt about different things that Binance has done over the years to become what it's become. But nobody can argue that the market would be in the place that it's been at the same level of institutional acceptance without cc. I mean, if you want to make that argument, you're being intellectually dishonest. You might not like some of the ways that it happened. You might not like some of the bare knuckle stuff. And believe me, I know I ran a company. And I think that Binance is actually a much more professional, better actor in the space today than it was five years ago. I have direct personal receipts on this. But that is not a reason for someone to be, you know, to have a criminal record, you know, whether you expunge it or not, when he was the only person targeted. And I think you're right, he stands up. But anyway, that's. You've heard enough of me, Carlo. And then Adam. Yeah.
- [11:26]
Carlo
Good morning, gentlemen. I, I have to.
- [11:30]
Dave
You gotta say. You don't.
- [11:31]
Scott
Good morning, Carlo. Dave. Good morning, Scott. You've hired Dave as your good morning assistant now? I love it. Good morning.
- [11:40]
Carlo
Look, I got, I got some firsthand experience on this because I actually was in New York City speaking at NYU when Sam Bankman trial was going on. Got to see testimony from the government's forensic accountant who broke down where the 12 billion in fraud went. And I agree with Dave, there's just no comparison. CZ got to see him speak at Token 2049 in Dubai. And you cannot deny that he's definitely passionate about this sector. Passionate about the technology. And he's also smart. Look, he made mistakes. He, he wanted access to the US market. The government had the internal communications from the company players about, you know, what was going on as far as Geo Fencing and trying to work around the restrictions. Is he good for the money transmitter violation? Probably. And that's why he struck a deal. He paid. Should that have been handled administratively? Probably. But it was a different agenda for the doj. We know from what's happened with Samurai Wallet, what's happened with Tornado Cash, that that administration and that DOJ weaponized the money transmitter law, and that is one example of it. But he knew they had him. He knew he was not going to win a fight with the United States, and that's why he took the deal he did. SAM Bankman Freedom knew I, I would venture to say that the government had him, but his inability to accept that and his hubris caused him to go in a different direction, where he said, f you, I'm going to trial. And the government gave him exactly what he wanted. He got his day in court and his defense was not acceptable to the jury. They didn't buy any of it, and the judge didn't buy any of it at sentencing. And he's, in my opinion, I see no reason for him to get a pardon. Because while Trump clearly doesn't care, Trump's going to do what he wants to do. And Trump's a businessman. And Trump probably looks at CZ and says, look, it's a cost of doing business, but I'm going to throw you a pardon here for this. So we can perhaps talk about bringing you back into the US Market in a regulatory compliant way in this new era. SAM Bankman Fried's a different thing politically. His family's not at all aligned with this administration, and I can't see Trump having any incentive, although he can do it. He enjoys absolute power to grant these pardons. I can't see any upside, especially when he's got critical crypto sector players at his beck and call who would probably advise him on this and say, look, man, we've been in the sector, we know what happened here firsthand. We saw the contagion effect of what he did to the market, and this is a very different thing. So I just can't see that happening. We could speculate about it. There'll be prediction markets about it, but I just can't see that happening.
- [14:38]
Adam
It's funny when you're talking about prediction markets, Carlo, because I'm like, how many people are, you know, using a VPN to trade poly market and stuff too? It's, it's, it's kind of hilarious that he, he paid such a price for that sort of thing. But your question to you, though, is, is do you think like, CZ's pushing for this part? And I mean, do we, is the general vibe. My vibe is that he's, he wants to go back, start leading Binance again and try to bring this thing public in the US Maybe.
- [15:02]
Dave
I don't know.
- [15:03]
Adam
What was your vibe you got at the conference about that?
- [15:06]
Carlo
Yeah, look, I think, I think he would certainly, I would predict, I don't know him personally, but I think he would love to have the opportunity to take back the reins of his company. Now, you have to understand there's a nuance here. The company also was convicted and sanctioned and the company has very stringent limitations and requirements for regulatory oversight. Whether this opens up a path for him to take over the reins of the company again, I think that's possible. And it's very clear that this White House is open to crypto. It's very clear that crypto has the attention of this White House. I mean, we saw reports that you've got Coinbase, you've got Ripple and you've got Tether helping to pay for the expansion of the White House for the ballroom. I mean, this is kind of the reality of where we're at right now. So CZ certainly understands how the world works.
- [15:59]
Scott
Carlo, can I ask you a question? Has anybody dug into what the pardon actually means for czv, considering he's already paid his fine, done his time? Like, what does this actually allow him to do?
- [16:12]
Dave
Get rid of the restrictions. It gets rid of any restrictions.
- [16:16]
Scott
Yes. Right, but Binance is restricted and Binance.
- [16:18]
Dave
Is not a while.
- [16:20]
Scott
And CV has been bullposting like meme coins and exchanges for the last few months and talking about Binance openly.
- [16:26]
Dave
Yeah, but that keeps everything. No, but, but there's, there's very strict rules on, in virtually every financial services business about convicted felons and almost always you would be blocked from being involved in anything that's money transmitting. You would certainly have been blocked. If they got ftc, you know, CFTC or SEC licensure, he would have been blocked.
- [16:47]
Scott
Right, right, but I thought it was like a two year ban, not a lifetime ban or something. Maybe. I don't.
- [16:51]
Carlo
Yeah, but also, also to factor into that, he also, if I'm not mistaken, after his time served under federal sentencing, he was required to be unsupervised release for three years. Right, so this erases the remainder of his supervisor. Yeah, yeah, this is a. Because that restricts his movements. And also if you're trying to come into the US in a regulatory compliant way, having a big Fat conviction on your record for violating the Bank Secrecy act is, is not going to favor well for you. So I think it's a big win for him. Absolutely.
- [17:24]
Dave
Yeah.
- [17:24]
Carlo
Different fight.
- [17:25]
Dave
Yeah, exactly. And so realistically, as I said, you know, you can boil it down for the simple people in the group chats and all the people thinking that what it means is he can personally be involved in crypto businesses in the United States and it gets rid of that. That's the sole question that this has impact on. And by the way, in the United States is a very broad term for obvious reasons. So it's, that's, that's what it matters, Scott. And you know, look, you could, you could look at every aspect of this if you want, but that's really what it boils down to, and there's just a lot of emotion here. Anyway, I saw Richard first and then Ajit. Yeah, I've been in a bit of.
- [18:07]
Richard
A rabbit hole the last couple of days. I mean, but I have been following as much as I can. But what, what is the polarizing view on it, Scott? I'm curious to know, man.
- [18:14]
Dave
There, there are a lot of people who think that, that he was a, is a bad guy who's done bad things.
- [18:21]
Scott
Not even that, though, Dave. I mean, people, people are saying that he paid $2 billion or effectively like moved money around to fund USD1 to buy himself a pardon and that he's financially involved with the Trump administration and their crypto plans. I mean, that's the, that's the quote, unquote, accused grift part. Like, if you read the mainstream articles, Wall Street Journal and such, it's, you know, convicted criminal buys himself a pardon. That's basically it, right?
- [18:51]
Carlo
By the way, Scott, your take on Elizabeth Warren's take on this was great. You actually got a drive for a community note to correct her where she was up in arms about him being pardoned for money laundering. While, yes, it was a conviction based on lax AML standards and so forth, it wasn't an actual charge of money laundering. And you got to be commended for calling that out.
- [19:15]
Scott
She's such a hoe God, Elizabeth Warren. Anyways, yeah, I, I, you know, I reached out to her to interview her. Strangely, they have not responded to me on my multiple requests. I've tried about 50 times. Weird, weird, strange.
- [19:33]
Carlo
She's just gonna talk her book. She's gonna talk her book and there's no, there's no change in that.
- [19:38]
Scott
Yeah, and listen, a lot of people accuse me of saying, hey, you're being Nitpicky. But saying somebody pled guilty to money laundering is wildly different than somebody saying that they did not put the protections in place on a platform that they were running that allowed some money laundering to maybe happen on that platform.
- [20:00]
Carlo
And then you add to that, Scott, that her major ally in Jamie Dimon has now decided that he's going to let collateralized bitcoin be on the line.
- [20:07]
Scott
Did you see the meme that Jeff park posted?
- [20:12]
Carlo
You got to share it. It's so good.
- [20:14]
Dave
That's going to be the next. We need to talk about that. But let's go to. You know, I think there are a couple of hands of Jeet and then Panos, and then we do want to talk about that specifically, because that's a way bigger deal than people realize.
- [20:26]
CJ
Yeah.
- [20:27]
Ajit
So, you know, people may have their personal politics about whether they love or hate Trump, which might be driving this, and there might be this entire conspiracy around whether there was bribery involved. But on the topic of whether this has derailed crypto laws, regulations, or the industry, I must tell you that I work with regulators in India, Dubai, and earlier in Singapore. And when I talk to people, I feel this actually is a positive. It was not too long ago where any activity that you would do in the business of crypto was used suspiciously and probably still is that way. So the fact that there is a legal action, whatever it might be, the fact that somebody's been given a pardon and the fact that that major industry player, cz, is going to be back in action, I am seeing within the crypto circles as being very welcome, because it is not as if you are guilty until proven innocent. So, politics apart, I think this is a good thing to happen.
- [21:21]
Scott
Dave, I can't see hands in your car.
- [21:26]
Richard
Yeah.
- [21:26]
Unidentified
Just to touch on cz, what you guys were saying, as far as the pardon goes, obviously the. A lot of factors come into play now because he's got his rights and his freedoms back and he has now more business opportunities, maybe even stepping back up as CEO for Binance. I think one of the biggest impacts for him is his reputational aspects. But what I'm very interested in is for him being pardoned. That basically shows clearly there was overreach towards him and the crypto industry. So what does that mean moving forward for regulators and, and the industry, if the one of the biggest guys has been pardoned and it's literally showing that there was overreach and that he shouldn't have gone to jail?
- [22:17]
Dave
Well, I, I think that it would be very hard for Someone to argue that the Biden DOJ and Biden, basically the entire administration directed by Elizabeth Warren, wasn't targeting crypto. I mean, we all felt it in many different ways. And it's, it was. I mean, as far as I can tell, in my, my short lifetime on this planet, which is longer, sadly, than most of the people on this, on the space, it was pretty damn unprecedented for an industry to be targeted unless you consider, you know, in such a way. So, yeah, I mean, that's true. Whether this proves anything or not, I don't think we needed the proof. But I think your point is well taken. That we know this, that it's a new world.
- [23:09]
Scott
Should we pivot to Jamie Dimon?
- [23:11]
James
Yes.
- [23:11]
CJ
Pristine collateral.
- [23:13]
Dave
Yeah. Yeah.
- [23:15]
Scott
C.J. you're my guy. You're my pristine collateral guy. What do you got?
- [23:19]
CJ
Oh, my goodness. My, my heart jumped a few beats this morning when I saw that. I. This is so important. This is so big that it's. I'm not sure there's anything going on that is bigger than this right now. And the reason is, is because the, the, this is an acceleration, right? This is beyond the Wall street narrative of digital gold. Digital gold is money, right? And digital gold is a store of value. But beyond that, there's a financial premium that will be added onto Bitcoin when it is recognized as a pristine collateral. So I think that the two things I want to hit home here for most of the people who already have my view, these are the, this is the way I'm thinking about it. Number one, the, the upside on Bitcoin is the path of least resistance as the asset class matures and evolves from a store value to a financial tool, because there's much more use case for it. Like people always ask, how do I use my Bitcoin? Well, when it's a collateral and eventually becomes recognized as pristine collateral, there are many, many, many, many ways you're going to be able to use your Bitcoin. Just like investors use real estate to add leverage to their position. So that, that will create a premium, that will create an added layer of demand on the asset class, which will bring about the result we all want, which is a, a higher fair market value price.
- [24:39]
Dave
Well, but I think, but cj it's so much bigger than that. Let me put this in terms that people should, should understand. In pre1988, equities was treated at the same way crypto is treated today. That is, you know, equities and non and non U.S. treasury sovereign debt. If you're in the U.S. was treated as you needed to reserve 100% risk capital against it. The 1988 Basel Accords effectively allowed banks to create what are called haircuts on risk assets in a much more programmatic, rational way that allowed for securitization. The business that developed in terms of stock loans, securitization, we're talking overall trillions of dollars worth of business. We're talking tens, if not hundreds of billions of dollars of profits or, you know, and utilization and financialization. The entire bull market in many of these things was triggered by that 1988 decision because it allowed for full use in the, in the financial system. So now we have a financial system that Bitcoin sits on the outside. And what these banks basically just said, they put their line in the sand and they're like, look, this is the only way that what they are doing could happen is if Basel and if banking rules change. And they're basically saying, listen, we need them to change because we don't want to lose to companies to. No offense, C.J. but companies like yours who can innovate the crap out of us because they're hamstrung by capital rules, it is a very, very big deal. Because if they get that done, we're not, you know, people don't get the fact. But basically that is the, in many respects, the final boss for Bitcoin to become part of the financial system in a way that is a multiplier on its value. So I can't underestimate, you can underestimate how big this will be. But it is only the first inning of this story. But it is a very important first inning.
- [26:43]
James
And it's only for institutional clients first. Let's, let's be clear about that.
- [26:46]
Dave
Oh, absolutely. 100%. But only for institutional clients means only for a multi trillion dollar market.
- [26:55]
Carlo
Quick question for everybody. What do you do if you're sailor on the heels of this news? Because you're holding 600,000 bitcoin, you're offering a full suite of products, including a dividend product. Now, on the low end of the spectrum for consumers, does this pivot strategy to open its own bank over Bitcoin?
- [27:14]
Dave
Well, it would allow it. And if you're sailor, you're licking your chops. If the Basel rules changed, given everything that he's already built, I don't know what the multiple would be. But his M Nav should be far closer to JP Morgan's M Nav to book than where it is today as it's currently Sitting. Not to mention the fact that he becomes a crazily attractive takeover target for the largest banks in the world. So, yeah, I'm sure that the people inside Strategy are, look at this and are like, this is, this is a good thing. But they don't have any way to. Maybe they do, I don't know, lobby, you know, Basel and the bank rules, etc. I mean this is all that kind of grungy plumbing that people don't like to think about, but it's very important. Grungy plumbing. C.J. you obviously think about this all the time, so. But I don't think people appreciate just how politicized this stuff gets and how important it is to have the major stakeholders who spend the most on lobbying and the most on persuasion to be behind it. That, that, that's why I think it's a big deal.
- [28:19]
CJ
I probably. Dave, thank you so much for that breakdown because you said it more eloquently than I could have. That was the, this cannot be underestimated. But what's so exciting for me is that as somebody who thinks about this way too much, you can just ask my wife about that. Just, I can't get this out of my head. But what, what happens is when you first start working with Bitcoin as a collateral, especially from the lender side versus the borrower side, there's some really big realizations that take place. And that is what I think is like, yes, this is step one. There's a long way to go. We need to get from institutional to retail. We need to get basil banking laws updated. We need, we need to do a lot of things to make this have the effect that Dave and I see that it will have on the marketplace. But the long term effect of this I think is innovation. The long term effect of this, like recently we saw credit tightening. We saw subprime auto loans flip upside down. Well, Bitcoin itself is, it's a de risking asset. So you know, when you have mortgage and you have less than 20 equity, they'll get you, they want you to have a private mortgage insurance. And this insurance is supposed to reduce the risk for the lender. Well, the same thing could be done with Bitcoin. You have a bitcoin mortgage insurance, but what about a bitcoin auto insurance? Bitcoin is, when you start to work with Bitcoin as collateral, it become, it moves from a risk off asset, excuse me, a risk on asset to a risk off asset. It is literally a de. Risking a deleveraging collateral. When you Integrate it into traditional credit products. And this is the, this is the conundrum of our time. How do we get interest rates lower without stating and anchoring and yield curve control? Well, it's not just the supply of money and the demand for loans, it's the risk element. And this is where Bitcoin enters the equation. We can get the risk variable down and create negative risk. And by adding Bitcoin as a collateral component to Tradfi credit systems, whether it's a subprime auto loan, a mortgage, whatever it is, putting a little sliver of Bitcoin into that through some type of insurance product or some type of DCA strategy, it completely de risks the long term credit risk. What we call D in credit. The longer the credit, the, the, the greater the duration risk. That's what they call term premium. The longer you borrow money, the higher the term premium because the greater the risk the promise is going to be broken. Crypto.
- [30:53]
Dave
So C.J. could I, could I make this, Can I, let me, let me make this. You're very technical and I understand what you're saying. But let me put this in terms for the audience and please correct me if I'm getting this wrong. If today you want to get a mortgage on a house and you want to do a Bitcoin backed loan, you don't get the companies that doing the Bitcoin backed loan can't give you loan to value on the basis of the actual house. They can only give you loan to value on the basis of the Bitcoin. Now imagine a world where you can do both simultaneously. It is a very big deal. So pick an example. You have a $2 million house, you have a million dollars in Bitcoin, you don't have any cash. Well, if you can get 50% loan to value on the Bitcoin, well guess what? Now you have $500,000 down payment insured by Bitcoin and a traditional mortgage or whatever traditional mortgage rate is on the cash, which will by the way will be an interest rate that's well lower than just the Bitcoin backed loans because of a variety of reasons that can't be done today. That can only be done when the capital rules change. Am I missing. And that is, and, and you don't.
- [31:56]
Carlo
Have to take the tap the capital gains hit on selling your Bitcoin.
- [31:58]
Dave
That's right. It's to me, I mean I'm not shitting on what, what's being available in the Bitcoin backed loan space. And you guys, innovation. I think there's a lot of really cool stuff, but it excludes second home. It includes a lot of stuff. Getting this mainstream is a very, very, very big deal. I don't think I can underestimate that. And I just, and I don't. And by putting it that way, because there are a lot of bitcoins who don't own, you know, 100 Bitcoin. They don't own even 10, but they might own two or three. And they might not have enough money in cash to do a down payment that all of a sudden they can, they can pledge their bitcoin for a down payment and people will come up with those sorts of products once it's accepted as pristine collateral within the existing mortgage structure. So there's all sorts of use cases that become possible once the rules change. Now, the rules haven't changed yet. This is just a couple of banks basically signposting that they're going to push for it. But it is a big deal when it happens. I mean, cj, did I get any of that wrong?
- [32:58]
Scott
Like I say, cj, isn't that a pretty good commercial for People's Reserve?
- [33:01]
CJ
That was. Dave, can we bring you on? Not only do you have that, have the content, you have that beautiful voice too.
- [33:07]
Dave
No, I'm, I'm more than, by the way. Yeah, you know, it's like, yeah, we, we all, we all know. I'm sitting here, you know, my, my most, most impressive unpaid job co hosting this space. But yeah, no, but people need to understand what all this stuff means. And so many people, especially on crypto Twitter, get involved in not understanding the real world implications. This has very major real world implications. Now if you play the chessboard down, you say, well, okay, cool. What does that mean? That means that the number of people who are selling bitcoin this year, which is the reason the price is where it is, almost none of them would need to sell. They would do what, they would do what Bezos does. You know, Scott, you have the best way of expressing this. Buy. Yeah, buy, borrow, die, buy, borrow, die, and that. And you don't hear, you don't hear sell. And that, that matters. Right? You know, but look, there's a long way to Tipperary here. It's not happening immediately, but it's telling you this is, you're now, you now have a really good idea of where it's going. And once this happens, there's, this is, this is one of those things that you, you're not, it's not going backwards.
- [34:15]
CJ
That's right. This is, this is the acceleration of institutional like GIB adoption. So we know why regular people want bitcoin. They need a savings vehicle. They need to protect their purchasing power. But big, you know, gibs, big institutions, they don't, they don't really care about that. They have billions of dollars of cash flow and they're running a business and they're want, they want to capture as as much market share as possible. They don't really have a real reason to adopt bitcoin unless their customers are demanding it. This is the institutional use case. This is the argument that can be made in the White House of how to sustainably lower interest rates without stating and angering and yield curve control. This dynamic, this narrative, I believe is the real bull market narrative.
- [35:03]
Dave
Yeah, I agree. As opposed to. Look, and with this story out there and these things going on, I just find market action rather amusing. Right, because the market action, you know, bitcoin was up when gold was down. Now gold is up and bitcoin is down. There's obviously speculators, you know, pushing between the two and there's no new money, you know. Well, there is new money coming into bitcoin but they're still selling. It's just, it's basically range bound, boring trading at the same time as we're seeing tectonic stories. And these tectonic stories, they take months, maybe even years, but probably months, months before people really understand them. And that's what's going to change things. So you know, from a. If you want to know what real alpha is, real alpha is understanding this. I mean, Gary, I mean I have. I made you even more bullish. I know that that's not all that easy. But you know, you've been in these markets a long time and you see how long it takes for some of these stories to play out, right?
- [35:59]
Gary
Yeah, it's coming though. It is most certainly coming. And the interest rates are helping us. Like I don't see. Maybe you guys don't want to talk about inflation, but I just don't see where this inflation is coming from.
- [36:15]
Dave
Well, the thing that people always forget about inflation, Gary, is just how important gas prices are in pretty much everything you buy. I mean I actually, this is totally, you know, totally ridiculous. I'm going all Peter lynch again. But you know, I cooked. You know, we have our outdoor barbecue here in my apartment. I cooked, you know, T bone steaks yesterday. And the T bone steaks I happened to notice were at my local Publix were they were good ones and they were cheaper than Costco. Or what Costco usually is. And the reason is because gas prices are down across the board and it's easier to transport this stuff. And people don't understand that when you start calculating inflation, that's what's going to matter. Now, if oil prices do in fact spike up for one reason or another, sanctions, et cetera, that could reverse it. But until then, we're not on the consumer side. It's pretty muted on the services side, it continues to explode. But it's a question of what you're looking at. Right.
- [37:13]
James
We did get the CPI report that came in a little bit cooler than expected this morning. So to your point there, Gary, you're looking at inflation. Markets seem to like it a little bit, though.
- [37:23]
Dave
Yeah.
- [37:23]
Carlo
And look, you got, also, you got to remember you have $7 trillion right now in money markets and rates are about to get cut, which is going to now incentivize people to get out of those money markets into higher yielding vehicles. So you're going to see that money flow into stock market bitcoin and this. And hopefully an end to the government shutdown should be the opening for the final bull leg that we've been waiting for.
- [37:51]
CJ
That can't be understated enough. Like what Carlos just said is so important. Gary, that's the answer to your question, where's the hyperinflation going to come from?
- [37:59]
Gary
That's why I brought it up, dude, because I, I don't hear anybody talking about, I don't care about CZ. I mean, CZ's good guy.
- [38:04]
Dave
Good.
- [38:04]
Gary
He got his deal, paid his fees, interest rates coming down. I mean, there's $7 trillion sitting in money market funds that can move at the switch of a phone call.
- [38:15]
Dave
Yeah.
- [38:15]
CJ
And, yeah, and it's. Dave, how much is that is retail? Because I know it's retail and institutional. Last time I checked, it was like, I think it was 4 trillion retail somewhere just over 3 trillion.
- [38:25]
Dave
I mean, these are very big numbers, CJ. There's both that and there's also trap bank deposits. Right. That earn virtually nothing that are going to get freed up because of, of other things we always talk about. I don't want to mention stable coins because then Carlo will spend the rest of the, of the. Well, we don't have that much time together. I mean, Scott needs to leave in a minute. But look, the truth is that these things aren't switches, but they are. Everyone who says, oh well, I've heard, seen lots of people on crypto Twitter, Gary, say, well, you stop talking about money market Funds, those are different investors, et cetera. We saw it in the pandemic. We understand that the marginal player, it does matter. And at a certain point everyone makes their decisions. I think the two year is probably the most important benchmark for that because of various and sundry stuff. It's also CDs. There's a ton of CDs that roll over and people won't renew when the interest rate is a percent or 2 lower. All of this creates people to push out on the yield curve. And whoever just said it, it's right, it's out on the yield curve. Some will end up in stocks, some will end up in bitcoin, some will end up on products, more will end up in products. Probably like what strategy is offering. And he probably won't have to offer 10% to be able to buy bitcoin.
- [39:46]
James
What percentage do you think Dave might of that 7 trillion might roll? Are we talking 10%, 20%?
- [39:54]
Dave
It doesn't work like that. It's all marginal. Right. It won't be all at once. But ultimately, you know, it's the amount of money sloshing on the economy. I mean, make no mistake, the US government alone is pushing $2 trillion into the economy this year in money. In order to, to fund the fiscal deficit, they have to.
- [40:13]
CJ
Yeah, Matt, remember the, the, when the Fed was raising interest rates, it wasn't just about attracting new demand to issue new debt. It was about pulling liquidity from the marketplace. And that's, that's where all that money went and parked itself in that yield. And now that it can't get that yield, it's going to go out the risk curve. It's gonna, these people who were investors were incentivized to become savers. And now that the pendulum swinging the other way, the savers are going to be incentivized to become investors. And that demand, it can't be just gauged on a one shot. Oh, you know, when we hit this point, x percent is going to shift. It is marginal, as Dave said. But the front running I think is happening right now. We are forming the base in these, in these assets right now, which is why I believe we don't see that. You know, Gary asked a great question, which is where does the inflation come from? But behind that question, the, the, the foundational element of that question is how strong is the economy and, and is it gonna be, can we maintain 3.8% GDP and where's that growth going to come from? Where the hell is the inflation going to come from? People get positioned into cash equivalents like Dave said, they go into the two year. This is why the Fed watches the spread between effective federal funds in the two year because the two year leads the way. But this time around there's no guaranteed white swan, black swan, liquidity crisis, whatever you want to call it. Typically there is something that is is foreshadowing a price crash. And the market participants will get into the two year and that will bring down the rate, the yield curve. They'll go out the yogurt that will invert the yield curve giving us the weak economy signal. But this time I think it's more evident, I think the psyche has changed. It's more evident that the prices are going to go up and there's not necessarily a guarantee that they're going to come down like they did during the 2020 Covid liquidity crisis, giving you this great entry point. So therefore establish your positions now as you're front running this exit of liquidity from being a saver to an investor. Get these assets now. And that's why you know, Bitcoin's been trading at a hundred thousand dollars for a very long time. Never in its history has its traded at this kind of elevated level, level relative to new all time high for this amount of time. What are we doing? We're forming a base. Were forming a, a foundation for explosive growth. And much like what happened in 2022, they were talking about hike interest rates. They talked about it and there was a little bit of front running. But once they actually started lowering interest rates, boy the liquidity went from a stream to a river. And that's what's happening right now. We're talking about lowering interest rates. People are smart. Money is getting positioned at where they need to be. But when they start really lowering interest rates significantly, and that probably takes place next May when PAL gets replaced, that's when the real big moves are going to come. And you have now until then to really position yourself in a POS before the, before the flood, before that stream turns into a river flood. And there's no guarantee between now and next May that there's going to be some type of liquidity crisis that offers lower prices. So screw the cash equivalents. We want gold, silver, bitcoin and other hard assets that can't be printed. And I think that's why we're seeing the bid on that instead of on the cash equivalents in anticipation of a weak economy. And where's the inflation? The dynamic, the psyche has changed.
- [43:47]
Dave
That was very eloquent you know, from a macro point of view, I, I tend to boil it down every time I argue with McGlone who looks at numbers on charts and ignores the, the amount of liquidity that's been injected into the system over the last five years and it is ongoing with 10% projections of increased liquidity out as far as the eye can see. And it's not just the U.S. by the way, it's also China. It's also the rest of the G7 who's printing. You need to understand and keep an eye on the denominator. And so when we talk about 7 trillion in money market funds, I mean understand there's a change. We know by May Powell's gone. We are pretty confident that by May, the person who's going to be running the Federal Reserve believes that interest rates are, that interest rates as a tool to curtail aggregate demand to stop consumer inflation isn't a smart process. They believe that people who, like Steven Morin, he's actually said it, he thinks the neutral rate is half a percent. That's what that, those. That's just factual. That's what his last paper said. So understand what that means. That means these are people who believe that goosing that if you in fact lower interest rates, yes, it will create asset inflation but they believe that it will also have massive productivity gains to subdue consumer inflation. And this matters. This was a stated policy for years that we sort of got away from in the pandemic and it bit us all in the ass. And whether or not you like asset inflation and there are lots of societal reasons to say that it's a bad thing because it makes housing unaffordable, it increases wealth disparity. That's not relevant. If you're an investor, what you care about is is this administration for the next three years going to target asset inflation? And the answer is yes. And so shorting that basically means you are betting on the probability that there will be a black swan. And you know, I know I don't see Joe Carlos or in the, in, in the, he likes to make this point is like, you know, if you're a doomer and you're predicting this stuff, that's great. And the one time you get it right, you're going to look smart. But you know, over the next 20 years there will be black swans. That's absolutely certain. But betting your financial future on black swan seems like a losing proposition. And that's effectively what he said, right? I mean Adam, from a bitcoin perspective, I mean, you know you guys been in this for a long time. This is, this is what you wanted to see. This is literally the, the, the way the playbook works, right?
- [46:15]
Adam
It really is. But I mean I just see CJ to his point. It's like you're pushing the, the cycle so far out. I just know very few people who think that it's going to go, I mean through May next year. Like that's the, like the start of the super bubble. Like I just, it could be, I would love it. It would be amazing, right? I just. Vibes don't, they don't, they don't, they don't work that way. For the people who still believe in the cycle and there are lots of us, I know Dave is kind of talking about the end of the cycle, but certainly us who believe in kind of the cycle of human nature and stuff feel like, I mean it could happen, I hope it happens, but it just has that really, really hard to get my head around feel to it.
- [46:57]
Dave
And but Adam, here's the point. The point, the point is, is that the bitcoin cycle was born on three data points. It's been entrenched in the community. It was created, it happened for a very rational, economic, marginal reason, which is the having changed the supply huge. And frankly people were worried the network was going to fail. But even as more and more havings came down, it become less and less important. And you see that Dave. I get Dave, I get it.
- [47:24]
Adam
I trust true, I believe your thesis. But I still believe humans are just like literally just monkeys who do monkey things.
- [47:30]
Dave
You know, we're in agreement. That's why we are where we are. That's why we have this sort of unprecedented basing action within a few percentage points of an all time high for a year, you know, or for, for many, many months. So yeah, that's what's going on.
- [47:46]
CJ
And macro does play a role though because you know, in, in 2012, 2016, these halving cycles were really unimpeded by significant macro conditions. 2020 was the first time where we had a global macro issue. And then look at what happened during that having cycle. And this is somebody who wrote about the having cycle going into the 2016 having, who was levered up very aggressively because of my understanding of the doubling of the cost of production and a new price discovery cycle. But when you look what happened in 2020, in 2021 we were at 60,000. What happened? China mining ban. The miners had to sell the bitcoin down to cost of production so they could relocate when that process was done, it shot right back up to 70,000. And then what happened? We, the Fed started talking about raising interest rates and going on an aggressive hiking schedule and that forced us into the bear market which caused the cascading liquidation. So yeah, the having is really important. Yes, the cycle is, is there and it's relevant because there is a, a doubling of the cost of production and therefore a forced price discovery to access the value proposition of the Bitcoin network. Not arguing against that. Absolutely believe in it. However, macro plays its role within these cycles and there's no, you know, you don't need to have a bear market before you have another having. You can have another having in the middle of a bull market. What's the difference? The cost of production goes up and if the price is already far enough above the cost, well then things will just continue going on. If cost gets pushed above price, well then the miners who in the earlier days had more of the supply would then, you know, affect the price more often. But I think going into it's the opposite of 2022 we are, the macro is now working for us instead of against us and we're going to get a, a cutting cycle which will accelerate and probably, you know, create, create a misunderstanding in the marketplace of these four year having cycles having to take place with all the psyche that goes with it.
- [49:47]
Dave
And let's, and let's not forget the other thing you didn't mention, which is an enormously important thing is Luna happened and we had the GBDC widowmaker trade which then took out end number, you know, whether it's, you know, Celsius Voyager and then ultimately FTX all was part of a full, a massive wave of for selling. And unless we're missing something, we just had a liquidation event that was on a scale of Luna and basically almost not even a ripple into bitcoin. Yeah, some altcoins got crushed and a lot of people realized that holding altcoins as collateral for positions is probably stupid. And so they're going to be permanently, permanently. But the discount to bitcoin and bitcoin dominance has increased. But we just had that. And if there aren't any bodies floating to the top of the pool that creates for selling of assets from it, then that is a massive difference. And it shows how much more robust the system is right now than it was in 22. It was 22. There were these massive structural issues. And let's not forget that at the peak in 22, the Bitcoin network itself was 1/6 or 1/7, the overall size and strength, and we didn't have any. And we had a completely different regulatory environment, completely different international environment, could be completely different institutional environment, and we're literally only double that. I mean, hell, that's a Tuesday in, in a tech stock these days. I mean, you know, Gary has pointed this out many times. So, you know, it's, it's, it's a very different environment. And people always want to think that history repeats. It rhymes, but it doesn't always repeat. Richard? Richard, are you speaking? Can anyone else hear him? Because I can't.
- [51:30]
James
No, I can't. Hey Dave, I got a jump, but I just want to leave the room with, leave you with one Last thought here. October 24, 1929, the headline came out on the newspaper. The Wall street was in panic as stocks were crashing.
- [51:41]
Dave
Right.
- [51:42]
James
History was on this day. Back then they didn't have Bitcoin. Today, October 24, 2025, we still, we do have bitcoin. So be smart, be safe. Stacks. That's about it. So a little bit of history for you on this day. Have a good one.
- [51:55]
Dave
Okay, guys, I think it's getting time to get close to wrapping for the week. So any final thoughts? I mean, Richard, you, you, your mic's gone. Can. Are you trying to say something?
- [52:07]
CJ
I got one final thought as he tries to reconnect. And I just want to add to all of that for everybody in the room, what we've been talking about, the psychology of the market cycle. So remember, it's not just the having cycle, it's the psychology within the market as well. When everybody is bearish and afraid that the cycle is going to end, it's not going to end. When everybody is super bullish and million dollar bitcoin is inevitable, then start piling up some cash. Just remember the psychology of the market as well.
- [52:35]
Dave
Mike McGlone says it best selling when they're yelling, buying when they're crying.
- [52:41]
Richard
Yeah, I just wanted to, I just wanted to add there's a good read tagged on the spaces from James, your colleague, Dave, for the listeners, it's probably some good weekend reading, but very compelling case for qe. So, you know, cycle, non cycle. When you're looking at it from a macro point of view, you know, the Fed's backed into a corner. That's some fascinating reading there. So I strongly recommend it.
- [53:03]
Dave
Yeah, we're. And anyone who wants to hear, James, you know, and I, you know, debate McGlone and talk about the macro, we do this every Monday at 9, so that'll be the next. The next thing that I do. Anybody else? Carlo, final thoughts? Okay. Well, in that case, enjoy your weekend, everyone. Will the markets are doing what the markets are doing, but, you know, let's touch grass, enjoy life and CZ or not cz, Politics or not politics, macro or not macro, the world will continue to march on. Take care, everyone. It.