WEBVTT - Life in Crypto After FTX 0:00:13.760 --> 0:00:17.480 Hello, and welcome to What Goes Up, a weekly markets podcast. 0:00:17.560 --> 0:00:20.400 My name is Mike Reagan. I'm a senior editor at Bloomberg. 0:00:20.800 --> 0:00:23.840 I'm Moldona hi across asset reporter with Bloomberg, And this 0:00:23.920 --> 0:00:26.680 week on the show, well, they've been calling this year's 0:00:26.720 --> 0:00:31.440 bear market and cryptocurrencies a crypto winter, but it's starting 0:00:31.480 --> 0:00:34.240 to look more like a crypto ie age. Hat tip 0:00:34.320 --> 0:00:37.200 to Voldana for that turn of phrase. But the implosion 0:00:37.240 --> 0:00:39.800 of the ft X exchanges and the rest of Sam 0:00:39.880 --> 0:00:44.479 bankman Fried's digital asset empire is reverberating throughout the industry. 0:00:45.040 --> 0:00:48.640 Many many billions of dollars have been evaporated, jobs have 0:00:48.680 --> 0:00:52.960 been lost, and institutions and retail investors of well, they've 0:00:52.960 --> 0:00:55.720 been left holding the bag. So where's all this heading. 0:00:56.200 --> 0:00:58.600 We'll get into it with the chief investment officer of 0:00:58.600 --> 0:01:03.040 a crypto focused set manager, But first the I've I 0:01:03.160 --> 0:01:05.400 got to ask you. Do you happen to own a 0:01:05.440 --> 0:01:09.120 pair of birken Stocks? No? I think Okay, this is 0:01:09.160 --> 0:01:13.520 an unpopular opinion. I think they're so ugly. Really yeah, 0:01:13.840 --> 0:01:16.440 all my friends have them. I think they're absolutely heinous. 0:01:16.480 --> 0:01:20.360 I'm sorry to all my friends. Really yeah, why you have. 0:01:20.640 --> 0:01:23.040 I've got a pair. I prefer to wear them with socks, 0:01:23.160 --> 0:01:26.280 which is that also an unpopular opinion? Which is a 0:01:26.360 --> 0:01:29.000 very unpopular opinion. Yeah, my wife gives me a lot 0:01:29.040 --> 0:01:31.560 of grief over that. But this is kind of a 0:01:31.600 --> 0:01:33.840 tease for my craziest thing of the week, And in fact, 0:01:33.880 --> 0:01:35.680 I feel like a lot of our crazy things end 0:01:35.760 --> 0:01:38.320 up revolving around footwear for some reason. I don't know. 0:01:38.640 --> 0:01:41.479 I'm just picturing you with socks and beat up birken 0:01:41.520 --> 0:01:44.440 stocks going to like a soccer game or something. Yeah, 0:01:44.520 --> 0:01:46.880 I'm not going to ask our guests how he feels 0:01:46.880 --> 0:01:52.160 about birkin stocks, but I do want to introduce him. 0:01:52.160 --> 0:01:55.080 I heard I'm snickering at at this little conversation here, 0:01:55.440 --> 0:01:58.320 Matt Hogan. He's the ce io at bit Wise. Thank 0:01:58.360 --> 0:02:00.559 you so much for joining us in, for coming into 0:02:00.560 --> 0:02:03.320 the studio, thanks for having me. And I'm short birkenstocks 0:02:03.320 --> 0:02:06.080 as well. Thank god, I have a feeling. I had 0:02:06.080 --> 0:02:08.360 a feeling, but I didn't want to venture this. Okay, 0:02:08.840 --> 0:02:10.760 tell us just to start out, tell us about bit 0:02:10.800 --> 0:02:14.440 wise and how you guys have been affected over the 0:02:14.520 --> 0:02:17.520 last couple of weeks in what honestly has felt like 0:02:17.960 --> 0:02:21.160 ten years of my lifetime. It does feel like ten years. 0:02:21.280 --> 0:02:24.720 So bit Wise is a specialist crypto asset manager. Crypto 0:02:24.800 --> 0:02:27.600 is all that we do. We serve primarily professional investors, 0:02:27.639 --> 0:02:31.480 financial advisors, family offices, and institutions. We've been in the 0:02:31.520 --> 0:02:36.440 market since so this is not our first bear marketing crypto, 0:02:36.600 --> 0:02:39.600 and we are best known for creating the world's first 0:02:39.600 --> 0:02:42.080 crypto index fund, the bit Wise ten, which holds the 0:02:42.120 --> 0:02:46.160 ten largest crypto assets waited by market cap. People have 0:02:46.240 --> 0:02:48.800 referred to it as the SMP five hundred of crypto. 0:02:48.880 --> 0:02:51.880 In the scale of crypto asset managers were on the 0:02:52.000 --> 0:02:56.720 very conservative side long term investors uh in in diversified 0:02:56.720 --> 0:03:00.320 index funds, and that's what we've been doing. And about 0:03:00.400 --> 0:03:02.760 the last couple of weeks and how that's affected your 0:03:03.000 --> 0:03:05.440 funds and your operations and everything that's been going on 0:03:05.480 --> 0:03:07.640 has been just Yeah, the last couple of weeks have 0:03:07.680 --> 0:03:11.440 been exhausting. I think everyone in the crypto industry would 0:03:11.440 --> 0:03:14.840 agree with that. As an asset manager, we did not 0:03:15.000 --> 0:03:18.880 trade on ft X. We actually never or almost never 0:03:19.000 --> 0:03:22.040 trade on exchanges. We did not custody assets with ft X, 0:03:22.080 --> 0:03:24.680 so we have no losses associated with that. But of 0:03:24.680 --> 0:03:27.240 course we're part of this broader crypto industry and it's 0:03:27.240 --> 0:03:30.640 had huge effects on that market. But I wanted to 0:03:30.680 --> 0:03:33.920 get into that idea of custody a little bit because 0:03:34.280 --> 0:03:36.960 it's so such an important topic. Now. You know, everyone's 0:03:36.960 --> 0:03:39.920 talking about not your keys, not your coins. You know, 0:03:39.960 --> 0:03:44.800 if you don't actually have the crypto blockchain pass keys, 0:03:45.080 --> 0:03:48.200 everyone's pointing the finger looking at everyone else, wondering, you know, 0:03:48.280 --> 0:03:50.240 sort of where the next domino is going to fall, 0:03:50.280 --> 0:03:53.520 and if you know, whoever actually has the custody of 0:03:53.560 --> 0:03:56.520 their coins will be next. From my understanding, you guys 0:03:56.600 --> 0:04:01.080 custody with coin base, right, and that. Yeah, we custody 0:04:01.120 --> 0:04:04.840 different funds with different custodians. So our flagship fund is 0:04:04.880 --> 0:04:08.800 custoded with coin based Institutional, our Bitcoin fund is custodyed 0:04:08.800 --> 0:04:12.000 with Fidelity. We have another fund that's custodied with Anchorage, 0:04:12.000 --> 0:04:15.000 which is a federally chartered digital bank. The thing that 0:04:15.080 --> 0:04:17.320 connects all three of them, and the way I think 0:04:17.360 --> 0:04:22.360 about this custody landscape is that they're all US domiciled, 0:04:22.839 --> 0:04:27.080 regulated institutions with insurance in place on their custody. If 0:04:27.080 --> 0:04:30.200 you think about the various ways that crypto investors can 0:04:30.240 --> 0:04:33.520 custody assets. It's kind of like a barbell. At one 0:04:33.640 --> 0:04:36.040 end of the barbell is what you mentioned, where you 0:04:36.080 --> 0:04:40.760 hold your crypto keys directly, individually in a safety deposit 0:04:40.839 --> 0:04:43.840 box on a Ledger or whatever. On the other end 0:04:43.839 --> 0:04:45.960 of the spectrum is what bit wise does working with 0:04:46.000 --> 0:04:49.279 some of the largest institutions in the crypto space, firms 0:04:49.320 --> 0:04:51.640 like Fidelity, firms like coin Base, that have been in 0:04:51.680 --> 0:04:55.360 the market, you know, for ten years, it's publicly traded entity, 0:04:55.440 --> 0:04:58.360 and then there's this fuzzy middle, and the fuzzy middle 0:04:58.520 --> 0:05:00.800 is where all the bad things have been. What the 0:05:00.800 --> 0:05:04.680 fuzzy middle looks like is centralized institutions that are not 0:05:04.839 --> 0:05:08.840 regulated and often offshore, and that is not a place 0:05:09.040 --> 0:05:13.200 you should custody crypto assets. Either go toward regulated, US 0:05:13.279 --> 0:05:18.040 domiciled established institutions or yes, if you have great security hygiene, 0:05:18.279 --> 0:05:21.280 do it yourself. I would argue that the regulated side 0:05:21.320 --> 0:05:24.240 of the spectrum is safer for the vast majority of investors. 0:05:24.560 --> 0:05:26.320 But you can be on either end of the barbel. 0:05:26.440 --> 0:05:28.640 You just can't be in this fuzzy middle. It's where 0:05:28.680 --> 0:05:31.880 good crypto ideas go to die, right, you know, and Matt, 0:05:31.920 --> 0:05:35.040 I know in you know, when it comes to equity 0:05:35.400 --> 0:05:38.520 index funds. A lot of times, the way they sort 0:05:38.520 --> 0:05:41.440 of keep costs down and bringing a little electure revenue 0:05:41.680 --> 0:05:45.839 is to allow the securities they hold to be loaned 0:05:45.880 --> 0:05:50.680 out to short sellers, basically through through various prickleges. I 0:05:50.720 --> 0:05:53.839 wonder is that it play at all with the custody 0:05:53.920 --> 0:05:56.279 of your crypto, Is anyone sort of lending it out? 0:05:56.880 --> 0:05:59.800 So we never lend out our our crypto assets that 0:05:59.800 --> 0:06:03.680 are under custody for investors. We're one of the most 0:06:03.720 --> 0:06:07.240 conservative crypto asset managers in the world, which is frustrating 0:06:07.279 --> 0:06:10.120 during bowl markets but feels pretty good right now. There 0:06:10.160 --> 0:06:13.400 are other asset managers that engage in what you describe 0:06:13.400 --> 0:06:17.160 what amounts to securities lending lending out customer assets, but 0:06:17.279 --> 0:06:21.560 we consider that too risky and also not what investors want. 0:06:21.800 --> 0:06:23.960 If you think about what investors who are allocating to 0:06:24.040 --> 0:06:27.599 crypto want, they're betting that bitcoin is worth half a 0:06:27.640 --> 0:06:31.080 million or a million dollars. They're looking for asymmetric upside. 0:06:31.480 --> 0:06:33.840 We don't understand why someone would try to earn an 0:06:33.839 --> 0:06:36.359 extra one or two or three percent yield by lending 0:06:36.360 --> 0:06:39.400 out their bitcoin en route to that. Given the risks 0:06:39.440 --> 0:06:42.640 that are associated with it. So we don't trade on exchanges, 0:06:43.240 --> 0:06:46.640 we don't lend out our assets. We buy assets and 0:06:46.680 --> 0:06:49.000 put them in custody immediately and let them sit there. 0:06:49.960 --> 0:06:51.880 And I want to ask you just a bit more 0:06:51.960 --> 0:06:54.760 on this idea of cold charge, because so many people 0:06:54.800 --> 0:06:57.200 have been coming to me over the last two weeks 0:06:57.200 --> 0:06:59.440 saying like, this is what people have should have been 0:06:59.560 --> 0:07:03.960 doing all along to safeguard their assets, etcetera, etcetera. But 0:07:04.040 --> 0:07:08.000 does that not if everybody has their assets in cold storage? 0:07:08.040 --> 0:07:10.080 Does it not sort of suck away some of the 0:07:10.160 --> 0:07:14.080 fun from crypto, suck away some of the fun because 0:07:14.080 --> 0:07:17.280 it's so boring. Yeah, you use the word boring. It 0:07:17.400 --> 0:07:20.520 wasn't doesn't suck away some of the fun. I don't 0:07:20.520 --> 0:07:22.200 know if the past few weeks have been any fun 0:07:22.360 --> 0:07:25.880 build on. I think most investor would say no. What 0:07:25.960 --> 0:07:28.800 it does is recognize what crypto is as an investment, 0:07:29.280 --> 0:07:33.000 which is this is an early stage, disruptive nasset technology 0:07:33.040 --> 0:07:36.240 that exists in a gray regulatory framework, and people who 0:07:36.240 --> 0:07:38.960 are allocating to it, in my view, should be making 0:07:39.040 --> 0:07:41.240 five or ten year bets. And if you want to 0:07:41.280 --> 0:07:43.040 make a five or ten year bet, you do want 0:07:43.080 --> 0:07:45.960 to put this crypto in a vault and not look 0:07:46.000 --> 0:07:48.720 at it. And that's what cold storage is all about. 0:07:49.000 --> 0:07:51.240 You know. Keeping it on exchange where you can day 0:07:51.240 --> 0:07:55.280 trade and eight evolve asset is maybe fun for some people, 0:07:55.400 --> 0:07:58.080 but I think it's a recipe for high risk, right 0:07:58.720 --> 0:08:00.320 you know, Man, I kind of fell down the rabbit 0:08:00.360 --> 0:08:03.200 hole on this topic just aut of curiosity. And one 0:08:03.240 --> 0:08:06.000 of my weird hobbies is I love reading the risk 0:08:06.080 --> 0:08:10.400 factors of various public companies. Tells you a little bit 0:08:10.440 --> 0:08:12.960 about what a nerd I am. But you know, I'm 0:08:12.960 --> 0:08:17.560 reading coin bases risk factors about custody and their whole 0:08:17.640 --> 0:08:20.720 thing is we're doing. I I can actually read them 0:08:20.840 --> 0:08:23.280 right right for you. Here we we placed great importance 0:08:23.280 --> 0:08:26.480 on safeguard and crypto assets we custody and keeping them 0:08:26.560 --> 0:08:31.040 quote bankruptcy remote from our our general creditors. The problem though, 0:08:31.120 --> 0:08:34.200 is that and they say this here, we believe that 0:08:34.280 --> 0:08:38.600 a court would not treat custodied crypto assets as part 0:08:38.760 --> 0:08:41.520 of our general estate, meaning you know, they're talking about 0:08:41.520 --> 0:08:44.640 a hypothetical bankruptcy here. And again this is risk factors 0:08:44.679 --> 0:08:48.840 where you you have to disclose the works possible scenario. 0:08:49.040 --> 0:08:51.920 You know, no no one's you know, saying coin bases 0:08:52.040 --> 0:08:54.800 is not big of trouble. But they say, however, due 0:08:54.840 --> 0:08:57.520 to the novelty of crypto assets, courts have not yet 0:08:57.559 --> 0:09:01.880 considered this type of treatment for custody crypto assets. But 0:09:02.080 --> 0:09:05.679 I guess the hope really here is that these courts 0:09:05.720 --> 0:09:09.880 would decide, uh, you know, creditors cannot get their hands 0:09:09.880 --> 0:09:13.560 on custody assets. I mean, it seems to me like 0:09:13.600 --> 0:09:16.920 that's a pretty good reasonable thing to assume. But how 0:09:17.160 --> 0:09:19.959 are you thinking about that idea? Yeah, well, first I 0:09:20.000 --> 0:09:21.800 should say, I'm never going to shake the image of 0:09:21.840 --> 0:09:25.200 you and birkenstocks and fleece stocks reading risk factors late 0:09:25.240 --> 0:09:28.280 at night. That's now every time I hear your voice, 0:09:28.320 --> 0:09:30.200 that's what I'm going to see. Yeah, that's it. Yeah, 0:09:30.240 --> 0:09:33.680 that's me. It's a great question and one that we 0:09:33.720 --> 0:09:35.880 think about a lot. You know. I do think it 0:09:35.960 --> 0:09:39.560 points to something in crypto that's really important, which is 0:09:39.679 --> 0:09:44.200 that we need greater clarity from a regulatory perspective so 0:09:44.240 --> 0:09:46.560 that the best actors in the space can build on 0:09:46.600 --> 0:09:50.760 a strong foundation. We agree with coin bases interpretation of 0:09:50.800 --> 0:09:53.319 that that it's highly unlikely in the event of a 0:09:53.360 --> 0:09:57.319 corporate bankruptcy that they would reach across to customer deposit assets. 0:09:57.679 --> 0:10:00.840 We need regulatory clarity that makes this exquisitely clear for 0:10:00.880 --> 0:10:03.679 all the regulated custodians in the space. We think if 0:10:03.679 --> 0:10:05.840 you look at trust charter law and you look at 0:10:06.240 --> 0:10:09.320 national bank account charter law, we view coin based as 0:10:09.360 --> 0:10:12.920 a very sound, very solid institution in place to custody crypto. 0:10:12.960 --> 0:10:15.880 It's also a publicly traded company with audited financials, which 0:10:15.920 --> 0:10:17.960 you can see in a strong balance sheet. But you 0:10:18.000 --> 0:10:19.839 point out that there is a need in crypto for 0:10:19.920 --> 0:10:22.959 greater regulatory clarity. I think we're going to get that 0:10:23.440 --> 0:10:27.520 on an accelerated freight train basis as a result of FTX, 0:10:28.000 --> 0:10:30.360 and I actually think that's going to be great for crypto. 0:10:30.480 --> 0:10:32.600 I think that is going to sew the seeds for 0:10:32.640 --> 0:10:36.079 the next bull marketing crypto. But you're absolutely right, you're 0:10:36.120 --> 0:10:38.920 taking on lots of risk in crypto. There's no free 0:10:38.960 --> 0:10:41.600 lunch in investing. Crypto is the best performing asset class 0:10:41.640 --> 0:10:43.680 in the world over the last three years, five years, 0:10:43.679 --> 0:10:46.000 and ten years. It's up over a hundred thousand percent. 0:10:46.160 --> 0:10:49.120 Even with the current draw down. You don't get those 0:10:49.200 --> 0:10:52.080 kind of returns without risk. There is still risk in 0:10:52.120 --> 0:10:54.280 this market, which to my mind mean there is still 0:10:54.720 --> 0:10:58.960 the opportunity for great returns, but you will need to 0:10:58.960 --> 0:11:01.720 work with glow gold plated providers that are very conservative 0:11:01.800 --> 0:11:04.839 the space to to tap into those. Yeah, and you know, Matt, 0:11:04.880 --> 0:11:07.280 the reason why I bring this up and was thinking 0:11:07.320 --> 0:11:09.080 about it is I look at the you know, you 0:11:09.080 --> 0:11:11.800 look at the bit Wise ten crypto index fund. UH, 0:11:11.840 --> 0:11:15.680 you know about million in assets. It holds the ten 0:11:15.720 --> 0:11:19.200 biggest cryptos, basically a passive index fund UH in the 0:11:19.240 --> 0:11:23.520 crypto world. The net asset value is like fifteen bucks 0:11:23.600 --> 0:11:26.920 and change per share. Uh. The share prices less than 0:11:27.000 --> 0:11:29.440 seven bucks, So we're talking about sort of a fifty 0:11:29.480 --> 0:11:33.679 five discount to the actual assets that you're holding in 0:11:33.679 --> 0:11:36.319 that fund. Why is that? Do you think? Is it? 0:11:36.360 --> 0:11:38.440 Is it the exact things we've just been talking about, 0:11:38.480 --> 0:11:40.960 basically that people are just worried about where the next 0:11:41.000 --> 0:11:44.080 domino is gonna gonna hit? Well, I should start by 0:11:44.120 --> 0:11:47.880 saying we have three different ways that investors could gain 0:11:47.960 --> 0:11:52.200 access to the bit Wise ten, depending on whether they're credited, 0:11:52.240 --> 0:11:54.800 whether they work with advisors, or whether they're buying retail. 0:11:55.440 --> 0:11:59.320 One way is through a private placement for credited investors 0:11:59.400 --> 0:12:02.480 that's available Bowle with with access you know, on a 0:12:02.520 --> 0:12:06.400 weekly basis at NAV, so no premium and discount. Another 0:12:06.440 --> 0:12:09.440 way is a separately managed account that a financial advisor 0:12:09.480 --> 0:12:12.600 can set up that holds the assets directly held at NAV. 0:12:13.000 --> 0:12:15.160 And the third way is the one that you mentioned, 0:12:15.440 --> 0:12:17.680 which is b I t W, which is a publicly 0:12:17.720 --> 0:12:21.640 traded over the counter O t c q X traded security. 0:12:22.120 --> 0:12:26.320 Those securities operate given the regulatory limitations in the crypto 0:12:26.360 --> 0:12:29.439 space like closed end funds, which means they can trade 0:12:29.440 --> 0:12:32.120 at premiums and discounts, and given the volatility of the 0:12:32.120 --> 0:12:36.560 crypto market, not surprisingly they traded larger premiums and discounts 0:12:36.600 --> 0:12:39.320 than you would say, see in a MUNI bond closed 0:12:39.400 --> 0:12:42.880 end e t F. So what that discount reflects is, 0:12:43.080 --> 0:12:45.880 you know, more more sellers than buyers over a period 0:12:45.920 --> 0:12:49.280 of time. What we've stated publicly to investors and what 0:12:49.360 --> 0:12:51.920 I hope the long term outcome is is once we're 0:12:51.960 --> 0:12:54.439 allowed to, we will convert this fund to an e 0:12:54.520 --> 0:12:57.320 t F, which is likely to you know, largely, if 0:12:57.320 --> 0:13:01.160 not entirely, eliminate that discount. The sec is not allowed 0:13:01.200 --> 0:13:03.600 there to be a crypto et F. I think that's 0:13:03.640 --> 0:13:09.400 another good example of regulators not helping investors by pushing 0:13:09.440 --> 0:13:12.720 forward regulatory clarity. Investors want to gain access to bitcoin, 0:13:12.800 --> 0:13:14.880 they want to gain access to other crypto assets. If 0:13:14.920 --> 0:13:16.720 they could do it in an e t F, there 0:13:16.720 --> 0:13:20.040 wouldn't be this question of premiums and discounts. Asset managers 0:13:20.080 --> 0:13:23.079 like bit wise are trying to help investors gain exposure 0:13:23.080 --> 0:13:26.600 to the space within the regulatory limitations we face, and 0:13:26.679 --> 0:13:28.480 so we have these O t c q X traded 0:13:28.520 --> 0:13:31.320 securities that can trade at premiums and discounts. I don't know, 0:13:31.440 --> 0:13:33.640 it's a complex answer. I hope it helped, but that's 0:13:33.640 --> 0:13:42.760 what's going on there. So you sent some notes before 0:13:42.760 --> 0:13:45.679 the podcast and it says it holds the largest and 0:13:45.760 --> 0:13:48.800 digital assets, but it's screened out f t T even 0:13:48.960 --> 0:13:51.800 when that token, which is the doomed f t X 0:13:52.240 --> 0:13:55.480 utility token, um when it would have classified for inclusion. 0:13:55.559 --> 0:13:57.200 So can you tell us about that process, because it 0:13:57.200 --> 0:14:02.280 sounds like you purposefully and cognizantly. Yeah, I I really 0:14:02.320 --> 0:14:05.240 appreciate that question, and I do think in a frontier 0:14:05.280 --> 0:14:07.920 market like crypto, you can't have a simple index fund. 0:14:08.000 --> 0:14:10.760 You need to have lots of rules that screen out assets. 0:14:10.800 --> 0:14:13.520 If you went to coin market cap dot com and 0:14:13.559 --> 0:14:16.040 looked at their list of crypto assets by market cap, 0:14:16.400 --> 0:14:18.400 you'd have to get to asset about twenty one or 0:14:18.440 --> 0:14:21.640 twenty two before you found the tenth asset in our funds. 0:14:21.640 --> 0:14:24.000 So we're screening out a large number of assets. We 0:14:24.120 --> 0:14:27.360 screened out ft T, We screened out Luna. We've never 0:14:27.400 --> 0:14:30.280 held dose coin, we don't hold tron. There are a 0:14:30.360 --> 0:14:34.280 variety of screens that protect us from those examples. We 0:14:34.360 --> 0:14:37.080 look at the fundamental token omics of an asset. That's 0:14:37.080 --> 0:14:39.920 what protected us from Luna. We saw the potential for 0:14:39.960 --> 0:14:42.760 the death spiral that claimed that quote unquote stable coin. 0:14:43.480 --> 0:14:45.760 We look at assets that are at undue risk of 0:14:45.800 --> 0:14:49.280 being found in violation of federal securities laws. F t 0:14:49.280 --> 0:14:53.760 T fell into that framework because we thought it was 0:14:53.880 --> 0:14:57.840 likely or possible to be deemed a security by regulators. 0:14:58.120 --> 0:15:01.240 It was it was largely internally control old. In our view, 0:15:01.400 --> 0:15:03.640 it could potentially meet the Howie test, and so we 0:15:03.680 --> 0:15:06.520 won't hold it in our fund. There are other screens 0:15:06.560 --> 0:15:10.080 as well that that are really important screens around liquidity. 0:15:10.120 --> 0:15:12.360 I'll put on my index geek hat I used to 0:15:12.480 --> 0:15:14.760 edit the Journal of Indexes which is the world's most 0:15:14.760 --> 0:15:21.880 boring publication probably with absolutely absolutely. I used to check 0:15:22.000 --> 0:15:24.480 check Bogol and I I interviewed him a few times 0:15:24.520 --> 0:15:28.800 and and he was a big He could quote chapter 0:15:28.840 --> 0:15:32.760 and verse of that from Yes he was he was. 0:15:32.960 --> 0:15:34.920 He was a big fan and and and wrote some 0:15:35.000 --> 0:15:38.360 articles for us, which was amazing. We free flow adjust 0:15:38.520 --> 0:15:42.440 crypto assets, which means we don't count in the market 0:15:42.440 --> 0:15:45.240 cap of an asset the assets that are held by insiders. 0:15:45.520 --> 0:15:48.360 And that's important because you're hearing things around FTX about 0:15:48.400 --> 0:15:51.640 Serum about these other assets that they were counting the 0:15:51.720 --> 0:15:55.280 full market cap of the maps. Those would never enter 0:15:55.280 --> 0:15:58.080 our index because we will only hold the publicly traded assets, 0:15:58.080 --> 0:16:00.800 which means they're publicly traded. Market cap up it was 0:16:00.840 --> 0:16:03.320 like eighty eight millions. So yeah, we were fortunate to 0:16:03.320 --> 0:16:04.880 have these screens in place. We've been doing it for 0:16:04.920 --> 0:16:07.320 five years. We've we've avoided a number of blow ups. 0:16:07.520 --> 0:16:09.640 That doesn't mean we'll avoid all of them in the future, 0:16:09.920 --> 0:16:12.400 but we do try our best. No doge coin, what 0:16:12.480 --> 0:16:16.280 a buzz kill, Matt, Come on, that was your your 0:16:16.400 --> 0:16:20.160 no dog meme screen? I take it, or although that 0:16:20.320 --> 0:16:22.400 that was that was a case where the float was 0:16:22.560 --> 0:16:25.200 sort of half held in in some burn wallet too, right, 0:16:25.520 --> 0:16:27.640 or the total market cap it would half held in 0:16:27.640 --> 0:16:31.280 a burn wallet. It also piggybacks on other assets proof 0:16:31.320 --> 0:16:34.360 of work, which introduces some security risks into it. You know, 0:16:34.400 --> 0:16:36.640 we have a ten person research team. It takes that 0:16:36.720 --> 0:16:39.200 much effort to screen all these assets and maintain what 0:16:39.320 --> 0:16:42.920 from the outside looks like just the top ten ten assets. 0:16:43.120 --> 0:16:44.800 We put a lot of work into it. And yeah, 0:16:44.800 --> 0:16:46.600 so no doge coin. We think it had a fundamental 0:16:46.640 --> 0:16:50.000 security flaw. It also had that that internal control and 0:16:50.040 --> 0:16:52.640 I'm not sure it was engaged in true price discovery. 0:16:52.840 --> 0:16:55.720 There were so many outstanding coins in such a limited 0:16:55.760 --> 0:16:57.680 trading volume that I think it had that risk too. 0:16:58.520 --> 0:17:01.080 You know, man, I wanted to ask you about a 0:17:01.120 --> 0:17:04.720 lot of the pain in the industry right now is 0:17:04.840 --> 0:17:08.920 centered on these sort of high yield deposit accounts where 0:17:08.920 --> 0:17:12.359 you know, you give the Winklevoss twins your coins and 0:17:12.400 --> 0:17:14.320 you you collect out on a seven eight percent and 0:17:14.359 --> 0:17:19.040 they loaded out to uh someone else where. Do you 0:17:19.080 --> 0:17:23.120 see that whole sort of both centralized and decentralized high 0:17:23.200 --> 0:17:26.560 yield component of crypto going Because I feel like it 0:17:26.720 --> 0:17:30.760 really is, really, really helped bring a lot of assets, 0:17:30.880 --> 0:17:33.119 a lot of attention into the market, a lot of interest. 0:17:33.280 --> 0:17:35.480 And now it seems like the whole notion of that 0:17:36.000 --> 0:17:38.960 concept of getting a really high yield and crypto seems 0:17:39.000 --> 0:17:43.520 to be questionable whether that business model can continue to exist. 0:17:43.600 --> 0:17:45.959 How are you looking at that? Yeah, I think that 0:17:46.040 --> 0:17:49.240 business model is going to go very quiet and then 0:17:49.240 --> 0:17:52.480 emerge as a much smaller, much more regulated, much more 0:17:52.480 --> 0:17:56.080 institutional model. I would actually argue that the yields weren't 0:17:56.119 --> 0:17:59.600 high enough to reflect the underlying risks. Um. You know, 0:17:59.640 --> 0:18:02.400 there is no free lunch. If you were looking at 0:18:02.440 --> 0:18:05.760 doing what amounts to securities lending of a bitcoin asset 0:18:05.920 --> 0:18:09.239 or an ethereum asset and expecting to get, you know, 0:18:09.840 --> 0:18:13.879 a yield on those working with unregulated counterparties with an 0:18:13.880 --> 0:18:15.959 E D E voll asset, the yield should have been very, 0:18:16.040 --> 0:18:18.000 very high because you were taking on a huge amount 0:18:18.000 --> 0:18:21.800 of risk. What turned out in those examples is, uh, 0:18:21.840 --> 0:18:24.760 those were bad loans. The collateral didn't match up. I 0:18:24.760 --> 0:18:27.200 think some of it's gonna migrate to D five platforms. 0:18:27.359 --> 0:18:30.840 It's worth noting D five platforms work perfectly through this, 0:18:30.920 --> 0:18:35.000 which is really remarkable. There were no losses on things 0:18:35.040 --> 0:18:37.600 like A A and other D five platforms, and then 0:18:37.680 --> 0:18:40.760 there's going to be, of course an institutional prime brokerage, 0:18:40.800 --> 0:18:43.960 but people will only work with regulated entities. I don't 0:18:43.960 --> 0:18:46.200 think retail investors should be leaning out their crypto trying 0:18:46.200 --> 0:18:48.400 to get five percent yields anyway. I really don't think 0:18:48.400 --> 0:18:50.640 that's the bet most people want to make. People thought 0:18:50.680 --> 0:18:52.640 it was a free lunch, they thought it was riskless. 0:18:52.800 --> 0:18:55.520 It turned out they were wrong. Um, and so I 0:18:55.560 --> 0:18:58.200 think that that retail focused lending is just going to 0:18:58.240 --> 0:19:01.280 go away. And what about the DEFY space, because this 0:19:01.359 --> 0:19:03.520 is the other thing that I keep hearing that Defy 0:19:03.600 --> 0:19:06.320 is going to benefit amidst all this because when we 0:19:06.359 --> 0:19:08.840 think of f t X and coin Base, etcetera, those 0:19:08.880 --> 0:19:14.639 are more centralized places versus Defy maybe coming out possibly 0:19:14.720 --> 0:19:17.120 stronger from it, or what is your view? Definitely true, 0:19:17.160 --> 0:19:19.879 It's definitely true. I go back to that Barbell image. 0:19:20.359 --> 0:19:24.280 Regulated centralized institutions that are trustworthy will benefit. Coin Base 0:19:24.320 --> 0:19:26.320 will pick up share. I think it's the most important 0:19:26.320 --> 0:19:31.120 exchange in the world. And defy exchanges, lending platforms, etcetera. 0:19:31.119 --> 0:19:32.879 Where you can trust the code and don't have to 0:19:32.920 --> 0:19:35.960 trust you know Sam Bankman freed with his crazy hair, 0:19:36.040 --> 0:19:39.800 wearing shorts and berken stocks. Almost certainly now he now 0:19:39.840 --> 0:19:43.439 he wears he wears grungey old new balances. Don't you 0:19:43.520 --> 0:19:45.640 are right? You are right? There's a funny, funny meme 0:19:45.640 --> 0:19:48.640 about that. No. I think Defy will benefit tremendously. There's 0:19:48.720 --> 0:19:52.280 there is a argument to make that's uncomfortable to make 0:19:52.400 --> 0:19:55.359 right now, that the flaw of f t X was 0:19:55.400 --> 0:19:58.840 that it wasn't crypto enough. That rings hollow in the 0:19:58.880 --> 0:20:01.640 current market because the market is crashing and people are 0:20:01.760 --> 0:20:05.320 unable to disambiguate between good crypto and bad crypto. But 0:20:05.359 --> 0:20:09.439 it's subjectively true if investors did hold their own keys, 0:20:09.480 --> 0:20:13.320 if those loans were really collateralized and overcollateralized in a 0:20:13.359 --> 0:20:16.280 way people could see, you wouldn't have these blow ups. 0:20:16.640 --> 0:20:19.840 I think if you look a year from now, you're 0:20:19.880 --> 0:20:23.320 going to see many investors who favor doing it internally 0:20:23.400 --> 0:20:26.400 migrate to DEFY, and other investors the kind of investors 0:20:26.400 --> 0:20:31.400 that bit wise serves migrating to well regulated centralized institutions. 0:20:32.080 --> 0:20:35.480 I think the question I have though, is that this 0:20:35.520 --> 0:20:41.280 notion of defied decentralized exchanges and finances it's a great concept, 0:20:41.960 --> 0:20:45.439 but in practice it often seems like, well, there is 0:20:45.560 --> 0:20:48.520 some sort of central party that is a very big 0:20:48.560 --> 0:20:50.439 player in it. And I think Tera Lune is a 0:20:50.440 --> 0:20:53.400 good example of that. You know, technically a defied project, 0:20:53.520 --> 0:20:57.240 but do quan and and Terraform Labs were basically in 0:20:57.320 --> 0:21:00.199 control of it. Um so when it blew up up, 0:21:00.600 --> 0:21:03.680 you know, there was no halting of withdrawals there were 0:21:03.720 --> 0:21:06.800 there was no bankruptcy. But you know, you you you've 0:21:06.840 --> 0:21:09.240 got your coins out at sort of pennies on the 0:21:09.240 --> 0:21:12.440 dollar of what you they were a week ago. Um, 0:21:12.480 --> 0:21:14.040 So how do you think about that? You know, is 0:21:14.080 --> 0:21:16.920 it are we really at the point where these things 0:21:16.960 --> 0:21:20.360 are everything is truly defy or is there still sort 0:21:20.400 --> 0:21:24.200 of that big player risk in a lot of these projects. 0:21:24.320 --> 0:21:26.600 I think if you look at the better projects, there 0:21:26.720 --> 0:21:30.600 is relatively low big player risk, but not zero. I 0:21:30.640 --> 0:21:32.800 think you're right to point out that in most projects 0:21:32.880 --> 0:21:36.359 there is still an obvious big player that has significant 0:21:36.359 --> 0:21:39.240