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Is The Bitcoin Bottom In Or More Pain To Come? | Crypto Town Hall
00:40:44
Is The Bitcoin Bottom In Or More Pain To Come? | Crypto Town Hall
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- [00:01]
Scott
Everybody, Happy Wednesday. Welcome to Crypto Town hall. Every weekday, 10:15am Eastern Standard Time here on X. Did I just do it now? Carlo? Good morning, Carlo. Should I say that?
- [00:13]
Carlo
Good morning, Scott.
- [00:16]
Scott
We've gotten in the habit. Carlo and I had a call at like 5pm yesterday and he said good morning, Scott. Picked up the phone. It's a thing now.
- [00:23]
Carlo
It's what we do.
- [00:25]
Scott
It is, it's what we do. So listen, obviously all anyone wants to talk about at times when there's a dip is why bitcoin might be dipping when the bottom will be in what's likely to happen in the future. Because we all apparently have very, very efficient crystal balls to look into to predict what's coming. But we have the usual sort of bipolarity in predictions right now. We have some like Arthur Hayes famously calling for the 70,000, which to be fair he has been doing for a couple of weeks, not just since price has been dipping. And then others saying that they think that the bottom is in here. I just had Matt Hogan on my show this morning on he believes that we are bottoming. I think it's important to remember bottom isn't necessarily an exact price to the penny, but it's sort of a process. The area here likely being a bottom. I know that Andre from Bitwise is likely to join article on CoinDesk. I think it was Coindesk about him saying he thinks that the bottom is in here. So bitcoin did make a slightly lower bottom today. But interestingly, I think in basically the last hour, I'm looking at the chart here. Sorry, I' trading at 88,157. Just an hour ago it was 80. Well now we're looking at 88,000 flat basically. But it was about to touch 85. So almost a $3,000 candle spread on the hourly over the past, you know, hour or 90 minutes. So let's jump into it. Carlo, go ahead.
- [01:54]
Carlo
Yeah, so look man, I've been kind of talking in my, in my daily little crypto recap that we need to focus on the, on the long term effects of what's coming. If you look at all the negativity on X and the nihilism about what's happening because of the correction, you lose sight of the bigger picture. We are in an era of unprecedented regulatory clarity incoming into the sector. We just had uniswaps wells notice action get dropped. We've had open seas, open seas, wells notice action get dropped, the coinbase dismissal, the SEC's backing down against Robinhood and I Think, Scott, that we need to remember that, number one, there's a broader conversation to have here about what's coming because there's definitely a disconnect between people like Matt Hogan at Bitwise who are on the institutional side who see exactly where this is going and retail, which is, you know, getting most of their information from a lot of the posts they're seeing on X. And a lot of the negativity, however, zoom out from that and understand what's coming and you'll, you'll see that number one, as you are, I'm sure, are going to tell the crowd corrections are to be expected and are normal and healthy. And also a bigger takeaway that I've been thinking about is Trump has a bigger strategy here. I think what Trump wants to see happen through the SEC is a change in their mandate where they're no longer going after existing firms that are providing value to consumers based on this notion of investment contracts and probably pivoting to more of an anti fraud agenda. Because in order for the Trump family's stake in crypto to go up and to pump their bags, they need to see consumer adoption of crypto. And you're not going to get to consumer adoption of crypto as long as you've got rampant fraud in the mean coin space and in other sectors of crypto. So I think we're going to see a tremendous pivot here. We already see that the SEC no longer has a interest in pursuing the previous agendas, enforcement actions and we're now going to shift into more of a fraud based agenda which I think ultimately is good for the sector. It's good for our bags.
- [04:17]
Scott
Dave?
- [04:19]
Dave
Yeah, it's funny, I wrote two posts over the last two days. One last night and one this morning. One was someone asked the question do I ride this down to zero to where I sell now and take profits. And so I explained that there's a big difference between things you buy for momentum and things you buy because you believe in the long term and the prospects. And what Carlo was talking about is all on the long term and the prospects because in that particular case, unless your thesis has changed, don't sell, right? It's pretty straightforward. Now if your thesis changes, then sell the regulatory changes basically reinforces the thesis for most of crypto outside of meme coins. But the thing about meme coins is a lot of money went there because frankly, it was the only thing you could do where the SEC wouldn't sue you. So you knew, and I've been saying this for months, so you knew that some something's going to come out of that sector. It's going to be the gambling that it's going to be. It's not going to die. There's still an attention economy. In fact you're going to see the rise of means where they're promised a percentage of profit to the community for eyeballs and advertising and all sorts of other stuff. You can lock that one down. That is an absolute certainty in the back half of this year because it's going to be legal. Now the other post is how Arthur Hayes statement about the expiration and about the carry trade is a completely oversimplified and likely going to be directionally wrong call. And I went through that in detail. Anyone can read it. It was re quoted you Scott, so you should, you can find it. But basically the TLDR is when you get an expiration that everybody knows unquote is going to be a big sell, it generally turns out to be a non event or a buyer. And what that means is that people who are going to sell have already sold. And I think that's why you saw V bottom this morning. I think people started to realize wait a minute, there isn't enough open interest left to sell, you know, of spot and to allow the futures to expire. And people can go through that. But I think it's really important to understand this stuff because fear drives a lot. Your show with Matt who was awesome this morning is, is a must. Listen, just listen to the first 15 minutes of it and you'll understand my case because I agree with every word he said.
- [06:29]
Scott
Yeah, that all makes perfect sense. I think that we know that Carlo, what you were mentioning before that if you go on crypto Twitter everybody is seemingly depressed. It's all over it's bear market. Well, it's important to remember that the bulk of those people who are there and tweeting about crypto every day are getting absolutely annihilated and washed out in altcoins and in the meme market and most of them probably don't even hold bitcoin. So it's a very very, very big, big difference. I mean Robby, what do you make of the alt at the moment? Obviously you know, Solana kind of leading the cool off there which makes a lot of sense after Libra and sort of, you know, pump fun selling off a lot of their Solana.
- [07:12]
Robby
Hey, sorry, my connection is quite slow today so I think a friend of mine put it best yesterday. I think maybe Altseason needs to get turned turned off and turned back on again, perhaps, and we can, we can correct things.
- [07:28]
Scott
I think we blow on the cartridge.
- [07:30]
Robby
Yes, exactly. But I think, to be honest, you know me, I'm always looking at things in a longer time horizon, so I'm not the best person to ask for trading strategies or investment advice because I'm a long term optimist when it comes to alts of all kinds. Well, frankly, it's not just alts, it's bitcoin and everything else too. But I do think that ultimately this year is going to be a fantastic year for crypto generally, but particularly for stuff that has gotten less attention over the last six or nine months. And it's just a matter of kind of things settling down a bit. And I think that there's obviously been a lot of news, there's been a lot of political turbulence and things over the last few weeks. And so I think that frankly, we just need a little bit of a break from distractions of other things for people to feel like maybe they're, they're getting back into the trenches again. And so I think weeding out some of the bad news around meme coins I think actually will be quite helpful for people to focus back because, because clearly I see a lot of stuff, I mean, all over the conversations I've been having both at events and on, on crypto Twitter with people who are really in search of fundamental value again, meaning, look, I'm interested in projects and tokens related to those projects that are doing well, that are doing exciting stuff, that are, you know, getting users and communities excited. And personally I think that's great because I think that actually sort of spreads the love far beyond just what's happening in bitcoin or a particular meme coin.
- [09:12]
Scott
Robby, when you mention obviously sort of value coming back to things that have been forgotten or that are just less compelling narratives or less hot at the moment, what specifically are you thinking about which buckets?
- [09:25]
Robby
So I'm thinking, obviously, you know me, we've always been big advocates of NFTs and things that have to do with culture. And I think that that's everything from PFP community collections and I mean, you know, ones that are long term sustainable. Like, if you see what's been happening with the meebits community recently, now that we've had some changes there, I think they're getting reinvigorated and excited. We saw the same thing happen around the Pengu launch with the pudgy community in December, and now we're going to see, you know, launches of Lots of other things, new, interesting new games coming up as well. There's a couple of things coming out on Telegram that are going to be more akin to kind of double A games soon. So I think this kind of stuff is going to, is going to really get people excited.
- [10:13]
Scott
Simon?
- [10:14]
Simon
Yeah, I mean look, when, when I'm describing bitcoin, I'm always trying to look at what is the next three cycles of adoption. And you know, I, I always, we always think of a cycle in terms of four years, whether that remains a thing or not, based upon the fact that so many bitcoins have been mined at this stage. But if you're not zooming out and seeing the bigger picture of the problems that Bitcoin can solve, then you may be confused into thinking that we just had the largest hack of an exchange in history, $1.4 billion. Historically, in the Mt. Gox days in the Bitcoinica days and the Cryptsy days in the Bitfinex days and the Bitstamp days in the FTX days, we've had approximately 40 to 60% corrections. We just got a 20% correction in Bitcoin with the largest hack that has ever happened on the Ethereum side, granted. But normally this is such a small correction relative to what that is and what it has mean historically in the past. And the reason for that is because at the moment it's all about scaring retail into selling to the person that's actually got a multi cycle theory of what Bitcoin does. So when I look around the world I see an America that is about to adjust to try and become crypto capital of the world. A recollaborate calibration, let's say, of the dollar that potentially needs to hedge against the Federal Reserve System into something that may look like Bitcoin strategic reserves and stablecoins at its extreme. I see a Europe that needs to re collaborate as well. And they've just launched, they've just released their MICA regulations and a series of financial institutions all across Europe that need to adjust to this. A bunch of countries that all need Bitcoin strategic reserves in order to hedge itself from an environment where these regions may break up as a result of the policy of the European Central Bank. I see a Middle east that needs to repurpose energy and can use Bitcoin and Bitcoin mining as the potential to hedge against certain industries. We see a war for artificial intelligence across China and America that all relies upon energy. And all of those data centers and energy providers may need Bitcoin as a hedge in order to manage some of the volatility in those data centers as well. I see a potential competitor or a new play for global trade across brics that naturally is not going to be able to figure out the problem of how do you do a distributed ledger and remove gold risk. And bitcoin will be a small solution that could lead to a large solution. And I say England that can't deliver upon its gold right now and is putting a six week delay at the same time as America deciding to audit Fort Knox and figure out whether the gold's there. Bitcoin fixes many of those problems over the long term and every country across the world and you as an individual get to buy it cheaper here before they figure it out.
- [13:57]
Amateo
Amateo well said Simon. I was really thorough. Good morning Scott. I got to get in on that.
- [14:05]
Scott
Good morning Amateo.
- [14:06]
Amateo
First and foremost, I just want to celebrate the fact that we're getting closer to a Russia Ukraine peace deal. I think that that is just unbelievably significant. I'll kind of believe it when I see it and I think many others will as well. But what we're seeing here is all of a sudden the world starting to reach a place where there's less geopolitical uncertainty and it's being replaced with global trade and economics, which is very exciting. I think that's just monumental. You know, I can't help but wonder if the fact that we didn't get a 30 or 40% correction on Bitcoin due to the hack and all the craziness that we've seen was due to this kind of prophecy that's been talked a lot about is that bitcoin volatility will start to be reduced based on the size and scale of the adoption as well as the price that is reached. Now that doesn't mean can't still have continued correction here or more, but it just makes me wonder if that's the case. At the same time, we think we're seeing Bitcoin dominance hit 65% without stables, which is pretty high up there. We've never had an alt season that didn't start on the heels of a capitulation event. And so while people were calling for this kind of at the top of the meme cycle, obviously that really, really needed a flush. It was really healthy. I agree that we're sort of entering this more anti fraud based agenda. In addition, with stablecoins that seems to be the primary we're seeing like these meme cabals Having started to vanish, it makes me wonder, did they get letters? Are things starting to happen? But, but there's a spooking that has definitely occurred that's been catering to this reset. And I think that there is some kind of new meta, new narratives that we can touch on a little bit, but I think it's phenomenal. So the SEC dropping the lawsuits is so big.
- [16:17]
Scott
So big. And I was going to say, you talk about the cabals, maybe they got a letter. I mean anything is possible. But I think it's even simpler than that, which is that crypto has a natural, for better or for worse way of sort of self regulating the market and the community. And I think that the just general awareness after Libra of how ugly and fixed the meme coin market, specifically on Solana, has been pretty much probably just put fear in everyone's hearts and has largely stopped that behavior. This is one of those cases where I think it just. The pendulum swung way too far. You know, Libra was just way too gratuitous. And then digging into what happened there, I think that has been a major, major, major flush. And I mean Matt Hogan even mentioned, I think it was Matt this morning or someone here. It all gets mixed that we also had the fact that there was this moment when after the Bybit hack it looked like North Korea or Lazarus Group was going to try to launder the money through Pump Fund. Right. And I think that scared a lot of people off of that market as well. I mean bb, what are you thinking right now about sort of the status of the market? Amateo's point obviously about dominance. I think is is well taken and worth discussing because there has been no altcoin bull market yet.
- [17:34]
Bill
Yeah, I think these guys all said it and Dave mentioned we've seen just some massive events, obviously the hack and barely dropped. Matteo said the same. We're two months into 2025 and so far the cycle hasn't gone. I'm pretty sure like any of us have predicted lawsuits dropping, potentially end of the world war. It just seems like everything is setting up for this massive bull run and adoption. But I've also said it in the past that we're also not ready for it security wise. I personally do not believe so because of the tools, the ui, just the security hacks and the interoperability is lacking. I don't recommend crypto honestly to many normies if they're looking to get into whatever some of the utilities that are out there, which are pretty few and far between, honestly right now the Primary utilities. But we have a long way to go before the space is secure for the average person. And that's because. And just look at how many people, and I've said this before, look at how many people still click links and emails and they lose their, they get their computer hacked or whatever. Big deal. Maybe you lose your credit card and so you call your bank, they fix it the next day. It's not the same in web 3. Look at what happens on a daily basis. People are losing their life savings due to simple mistakes that are going to continue to happen until we improve the infrastructure and stop having shit like this Bybit hack and the daily hacks we see.
- [19:10]
Scott
Yeah, absolutely agree. Bill, what are your thoughts? I personally cannot hear Bill. Can you guys hear Bill?
- [19:18]
Bill
No.
- [19:20]
Scott
Okay. All right, Bill, we'll have to drop you and bring you back up. Dave, Dave would love you to jump in, unpack everything we've just heard.
- [19:29]
Dave
Well, I mean, I agree and Simon, please, please, please don't fall off your chair, but I agree with about 98% of everything that Simon said. I think that when you zoom out, this is going to be, you know, I actually am more bullish today than I was in the beginning of the year because we've seen some of these washouts. But I do think it's really important when you talk about the regulatory side to understand what that really means. It does have implications such as this carry trade is going to be gone.
- [19:58]
Scott
Right.
- [19:58]
Dave
There's no need for a carry trade in the world where the US broker dealer community is not allowed to buy anything other than Bitcoin futures if they want to get long Bitcoin. So you won't have a structural carry trade. Now is that a good thing or a bad thing? Well, it's actually a good thing because, you know, we've seen that in multiple markets. You know, Japan basically took a decade or so to get rid of their structural reasons for a carry trade. And so as a result, their market was manipulated and played around with forever and that's going away. So a lot of the fears that people have in the bitcoin market of what futures can do, they're disappearing. So that's something that's worth understanding. The other big thing is that projects, new projects are going to emerge that actually pass on real tokenomics to users. We haven't had that. Right. You know, ICOs are not quote, non dilutive capital. Basically, users get crap and be happy for it and hope they make money and the founders do. Well, then we had Meme Coins users get even less crap and the founders do even better. We're going to see it, but it's going to take time. That's going to happen. And what you're going to see is you're going to see projects that do exist change their tokenomics to the extent that they can. You know, it's funny, I just saw on. On x that Patrick McHenry joined the board of the A16Z. Well, if I was sitting at A16Z, I would be pivoting my strategy rather hard right now.
- [21:16]
Scott
Wow. I did not. I did not see that. But that's crazy. Especially on the heels of Brian Quinten's leaving a 16Z to head to CFTC.
- [21:25]
Dave
Yeah, there you go. So, but. But the point is, is it's. If you're a project and you're trying to raise money from a 16Z, they know where the winds are blowing and they understand what I just said. And if they don't, they should call me and I'll explain it to them for a fee, of course. But, you know, it is. It is a. We're going to see a very big sea change. So effectively investing now is more like. Looking is more like 2016, you know, in the crypto space than 2017. 18. Right. You know, it's the seeds that are being planted, and we'll see what happens. It doesn't mean that the things you're buying aren't going to do well, but you need to be very, very careful. And I think it was Billy that said there's precious few out there that actually are going to survive and have real value. I think that's probably true. I would phrase it differently. I would say there are precious few. They're going to survive in their current form and have value.
- [22:14]
Scott
Mateo.
- [22:15]
Amateo
Yeah, Talking about the sea change, I just want to build on that. So that you retweeted, Scott, that the RWA issue or Ondo Finance joins the MasterCard network, which is pretty fascinating. We also saw that avalanche just launched a Visa card, allowing for the processing of stablecoins and Avax Visa merchants. We've got the Digital Assets Subcommittee that Cynthia Loomis is spearheading today. And we also have bank of America announcing the stable, stable, stable, stable coinization of the dollar.
- [22:52]
Scott
So, yeah, I didn't see the CEO's quote. I didn't see it exactly. Just so people know, he basically said stable coins are coming. Right. Bank of America.
- [23:00]
Amateo
He also said that. That stable coins are essentially just a form of banking because it's backed one to one by the dollar when they're registered. So I mean I'm always going to come back to this, which is years ago when we were exploring connecting the crypto rails with traditional banking and MasterCard and Visa, they were giving like a 10 year time horizon just because of how slow they move to adopt and innovate tech. The Rails are being built at a speed that I don't think we've actually seen in TradFi in a very long time. The adoption, the integration. The Rails are getting really well wired up here and I think that that is extremely promising for both a liquidity perspective but also just a normalization of crypto and stablecoins as assets that people interact with that that just completely goes mainstream. I just don't know how you look at that and not get really excited for this year.
- [23:59]
Scott
Yeah, though the crypto native companies, I mean the first example of this will be stablecoins haven't had to compete with TradFi yet because there hasn't been the regulatory clarity that TradFi needs to get into the space in a meaningful way. That's definitely going to change and it's going to first change with stablecoins and the question is what that means for crypto incumbents when they're competing like USDC and Tether are competing with BlackRock USD and JP Morgan USD and other sort of like high trust issuers. I think stablecoins is a topic worth staying on at the moment. There were a few stories around them and Zach, I totally agree with you. There's a few stories around them. One was kind of small but interesting which is that the Singapore based stores, department stores, Metro are now accepting stablecoins which I think is just one more big step in the path of adoption. The inevitability that stablecoins will be accepted basically everywhere. Especially when you know that PayPal has a stable coin and the banks will have stable coins and Stripe bought bridge for unicorn billion dollars. The other though is Jeremy Allaire giving an interview today. But we talk about Zach, you know, the incumbents having to compete with the banks. Well, we still have the incumbents competing with one another and Jeremy Allaire basically taking shots across the bow of Tether saying that regulated stablecoins in the United States should have to fall under basically the same laws as everybody else in the US basically saying hey, tether needs to like get in line with the US banks and be compliant and effectively alluding to the fact that Tether should not be able to operate in the United States. So did anybody see that? Or have thoughts.
- [25:37]
Dave
Yeah.
- [25:37]
Scott
I mean, if you ask anyone who's been working in policy circles, that's been happening in the background for a while. This, you know, it's the knife fights become more public. But, you know, circle's been knives out for Tether basically since it was, you know, Trump won and, you know, it was clear there's going to be a more friendly stablecoin regime. Right. And so infighting before they're going to have to fight the banks, which is an interesting scenario. Dave, go ahead.
- [26:04]
Dave
Yeah. Sadly it's a tale as, as old as our bureaucracy itself, which is regulatory capture and use of regulation as a competitive weapon, which is, you know, in my mind, philosophically disgusting. And, you know, it's shame on him. The reality is, is I've worked on Wall street for 30 some odd years, spent decades going down and forth to the sec, being on industry committees, and I can tell you that is literally the normal process for stopping disruptive competition is to use regulators. And it is extremely painful to know that politics has not changed. And despite Elon Musk and what Doge is doing, it's probably going to continue. But the idea that Tether, which is mostly used, let's be honest, as the bridge to buying and selling crypto around the world would be banned to US customers. Considering that the whole point here is that US customers should have access to the entire universe is problematic. I mean, what needs to happen is really the opposite. You know, there needs to be, they should submit to US audits and the same audit regulation. But the idea of having stable coins being held only by banks is the exact opposite of safety. Just keep in mind, I mean, I'm going to channel Caitlyn Long here, but we have a banking regime in the United States where most banks are fractional reserve. So which means that they are, they are vulnerable to bank runs and you're effectively letting the Fed backstop it. The whole point of stable coins is to have assets that are fully backing, which means you shouldn't need a backstop being under banks. The idea that being in banks, which of course Circle did and needed to be. Yeah, their investors needed to be reassured and Silicon Valley bank needed to be saved. It's just, it's exactly the opposite of the way it should be. So, yes, I'm just, I'm angered, but I also understand that it's highly likely to be a pretty major fight.
- [28:00]
Scott
That's right. I mean, I don't remember the exact number, but I think it was roughly 10 billion. Excuse me, 10% of USDC's backing was in Silicon Valley bank, roughly $3 billion at the time. So the biggest risk to a fully backed stablecoin was where they were holding the assets that they were fully backing it with. And Palo Arduino from Tether pointed out that with MICO regulation, the biggest threat to Tether would be the amount of dollars or currency that had to be held in banks as a requirement for Mika. So I guess, ironically, the biggest threat to the stable coins is where you can actually store the money that you're backing it with. Go ahead, Simon.
- [28:40]
Simon
Yeah, well, as somebody that's a shareholder in both Circle and Bitfinex, I'm aware of the politics between the two. But there has to be a sense of the bigger picture here. If you weaponize regulations in order to try and get a regulatory silo within America, you're going to end up with regulations that ruin the design of stablecoins, which is that they're completely global markets that can be sent anywhere. So if we then add a travel rule and the ability to determine whether the recipient is, is resided in the US you suddenly got on chain KYC, the ability for how does it impact VPNs, what does it mean when someone's traveling? And you basically recreate the banking system and break the entire market. So this one we have to be very sensitive about and recognition as well that this is probably a future market for Treasuries in a recap, you know, in a changing environment of what the financial system may look like. And there is a plethora, you know, there is a massive market for people that want to engage in a dollar stablecoin but never actually touch the physicality of the US because they don't want to be subjected to withholding tax when they're not doing anything in the US So the vast pools of capital also exist in environments where it doesn't touch the US and that's a very large pool of capital that could be tapped into. So I'm hoping the type of thinking that the Trump administration and a business thinking, America first type of environment might be able to see through that and see the opportunity, rather than create this fragmented market that breaks everything. And that would only serve the banks and financial institutions that would be lobbying for such things.
- [30:47]
Scott
Tb, you had your hand up.
- [30:50]
Bill
Yeah, I was actually just gonna ask a question around the stablecoin line and what he was even saying, Simon, there. If obviously both of these stable coins, the two primary ones, are completely centralized and some people may not know that they can be frozen, stolen Wiped at any given time. Do we believe there's going to be a truly decentralized stablecoin in the market that's going to have Dominan dominance at some point?
- [31:13]
Simon
Well, I mean, make a Dow still does.
- [31:15]
Scott
I don't think so.
- [31:16]
Simon
I mean, make a Dow still exists and the stablecoin, whether that model will dominate. You know, I. I think. I think what the history of the world has always shown is that custody and ease of use is always a bigger market than the market for decentralization. But we are also moving to an environment where controlling your own data is a future skill that all young people will need to understand. And so I'm hoping that this friction of the younger people being brought up on crypto and Bitcoin and doing things in a defi type of world is going to crowd out the custody type of people eventually and everybody ends up owning their own identity, ends up owning their own thing. Now, I know that is the battle of the future. And the battle of the future is, are we going to have decentralized artificial intelligence, decentralized money, decentralized social networks, or are we essentially going to be fully controlled by artificial intelligence because we gave all the data to the centralized company? Welcome to the next 10 years of battle. And whether we do it decentralized or centralized is going to determine the future of humanity, quite frankly.
- [32:41]
Scott
Yeah. I mean, and the short answer to your question, db is no, they will not be dominant. There's no way with the trajectory of stable coins currently, that a decentralized token, even though it's amazing that we have them decentralized stable coins are going to dominate. There's no chance. They're way too far behind even now, without the regulation. Amateo. You had your hand up some fall.
- [33:02]
Amateo
I was going to shift gears. You guys went pretty deep. So go to Paul.
- [33:07]
Paul
Okay, I'm going to take the opposite stance. I think decentralized stablecoins are actually our only hope in the future, if anything. Mainly because without a decentralized stablecoin we're not going to be able to have a private payment method. If we actually intend to use stablecoins in any way, shape or form as actual payments, we'll need some level of privacy. I'm not going to want to go and pay for something in a merchant and have that merchant know the entire balance of the source address of my wallet that held that stablecoin. And as Simon said, Makerdao has been stable over the course since like 2017. Now granted, they did add USDC, which I think was one of the big issues and they just had a really bad name. I know as an example, we used to integrate an off ramp that supported USDC Tether and DAI and most people did not know what the hell DAI was. It just had really bad branding. And for all of you that think that if you're still having PTSD over Luna and Terra, realize that the stablecoins that have depegged have traditionally been backed by a very volatile asset. The ones that have been backed by bitcoin, which many people aren't aware of because they've been on smaller chains like Rootstock, have been incredibly stable. So backing a stablecoin algorithmically by a stable asset such as Bitcoin is a method that has worked in the test of time, but it just hasn't been adopted by a lot of the exchanges. So fundamentally I think there is a hope for stablecoins and our world absolutely needs them both from the viewpoint of privacy. And I don't think any of the stablecoins out today that are actually backed by dollars in a bank account are going to be allowed to be put on a private layer blockchain such as what's coming out with Zano and actual confidential assets. So funnily, I hope it does happen and I think it absolutely can and absolutely needs to.
- [34:53]
Scott
Yeah, I agree with you fundamentally that that would be better. I just don't think it happens with the trajectory that we're going. I'm not saying that they'll disappear or be marginalized. I just can't imagine the dominant stablecoin in the world, especially as we move into a higher regulated stablecoin environment with legislation. I can't imagine that's the one that's going to win, if that makes sense. Especially when we start having JP Morgan Coin and blackrock Coin and Goldman Coin.
- [35:18]
Paul
No, it's true for sure from the viewpoint of regulation. You have to ask also, why is the regulation coming out such that it is very pro dollar backed stablecoins and very anti algorithmic backed stablecoins is because they cannot be controlled, much like bitcoin. So one has to ask the question like what do you think the world really wants and needs versus what existing governments want to drive drive the public towards?
- [35:47]
Dave
Dave, there are two things governments care about. They care about getting their tax revenue and they care about going after bad guys. That isn't going to change unless we have a complete global revolution. As a result, there will be no algorithmic stablecoin dominance in the stablecoin market. Market it will be backed by fiat until fiat disappears. That said, what the hell's wrong with Bitcoin? Why is it that you need a stablecoin backed by bitcoin? Maybe you know, you talk to Iago were up here, he would be explaining to us all about the way you can use bitcoin on layer twos and other ways to actually provide for that peer to peer and have a decentralized network. My brain doesn't understand when basis came out I thought it was, I was right. When Luna came out and terror came out I thought it was Makerdao is different because it actually does maintain a peg, you know, and so that's fine but the reality is there's no need for it. There's no product market fit for it. People don't give a. Simon is right, they don't care. And frankly the ones who don't want to be backed by fiat and be backed by government should be using bitcoin. And I just don't understand this. I mean I know, I know lots of money on the the C side keeps going into this stuff. I just don't see the product market fit. I would love to be educated otherwise.
- [37:05]
Scott
Simon.
- [37:05]
Simon
Yeah, again I think it requires a bit more imagination than the existing paradigm. I come from a belief that we're actually entering to an era where artificial intelligence will make governments irrelevant and tax collection impossible. And I think we're moving in the next 10, 20 years to that level of disruption. And so the governments will hold on for as long as they can into tax collection and stopping the bad people until artificial intelligence says sorry, we can do this better than you and we can manage banking system better than you and we can manage a central banking system better than you. And so what I think we should be doing is preparing for that type of disruption and environment. And one of the really interesting developments is the concept of tether on a lightning channel and the possibilities of people being able to lock up their bitcoin, receive yield for opening up a channel all native on the bitcoin blockchain and then be able to build some kind of quasi financial system using stablecoins. And the reason for stablecoins is because as long as your goods are priced in fiat currency, you don't want to take price volatility and managing your financial services. And so I think we need to get back to we are, we need to be building, we need to be building fast. We have got so much more to build and the opportunity of actually being able to have stable coins on lightning with private transactions and open channels is something we need to be ready for because I think artificial intelligence will choose such a system eventually when governments can't collect tax anymore.
- [39:01]
Paul
So I think one of the issues with that example that you've got Simon, and you're right, Lightning does offer an enhanced level of privacy is just imagine and that's privacy for all of us obviously all of the people that just want to make payments. But imagine just the first time that someone puts on the dark web. Here's my Lightning invoice. Please send me USDT to it in order to buy kiddie porn. As soon as that happens, Tether is going to be targeted and targeted very heavily because it's now a fully private transaction where we can't see who that went to. And that will be true for any, any dollar backed stablecoin. And hence really the only way to get the dream that you have Simon, on a private, I'm going to call it a protocol, not necessarily a blockchain because Lightning is more of a protocol but any, any private protocol is to have an actual algorithmic coin where you don't have a central party that you can just simply target.
- [39:52]
Simon
Yeah, that's exactly. Agree with that completely. So eventually it will, it will get there and it will start with Tether and then you know the, that that's the environment, this is the friction that we're going to be going through. And that's why anybody that's panicking about price today, take a step back. Recognize that you are alive at one of the most exciting times in financial history and recognize that we've got a multi decade strategy of innovation ahead and we're only at the beginning.
- [40:24]
Scott
I think those are perfect words to end on here. I have to actually run. So sorry for wrapping a few minutes early. Everybody in the audience, please give everybody on stage a follow. They're all amazing and worthy of your following here on X. Otherwise we'll see everybody back here tomorrow. Crypto Town Hall 10:15am Eastern Standard Time thanks everyone, have a great day.