WEBVTT - The Mark Moss Show Nov 18, 2022 0:00:00.080 --> 0:00:02.520 Hello, and welcome to another episode of the Mark Mos Show, 0:00:02.520 --> 0:00:05.160 where we talk about the decentralized revolution, how the world 0:00:05.280 --> 0:00:07.800 is changing right before our very eyes. Of course, as 0:00:07.800 --> 0:00:09.960 we look at it through the lens of politics, finance, 0:00:10.080 --> 0:00:13.840 and technology, and the technology being of course bitcoin and 0:00:13.840 --> 0:00:17.520 the decentralized technology. There is a lot going on in 0:00:17.560 --> 0:00:20.239 the world every week. It's making my job easy. There's 0:00:20.239 --> 0:00:23.360 always so much to talk to, and this week, specifically 0:00:23.760 --> 0:00:26.920 in the finance space, more specifically in the crypto space, 0:00:27.240 --> 0:00:30.120 we have I guess, for lack of a better word, 0:00:30.240 --> 0:00:33.199 it is blowing up. I'm joined in the studio with 0:00:33.800 --> 0:00:37.440 Joe Consorti, a friend and somebody who helps me with 0:00:37.479 --> 0:00:39.760 my research. By the way, shout out to Joe. Follow 0:00:39.800 --> 0:00:43.640 him on Twitter at Joe Consorti. Um, he does great work. 0:00:43.680 --> 0:00:47.720 And uh, Joe, welcome to the show. Welcome back. Yeah, 0:00:48.000 --> 0:00:51.879 most definitely signed a chat man. Uh, it's always good 0:00:51.920 --> 0:00:53.360 to chat. You know. You help me out so much 0:00:53.400 --> 0:00:55.160 with a lot of the research that I'm doing on 0:00:55.200 --> 0:00:57.880 my YouTube channel, which, by the way, just this morning 0:00:57.920 --> 0:01:01.680 we broke the four hundred thousand subscriber mark, so pretty 0:01:01.720 --> 0:01:03.600 excited about that. If you're not following me on YouTube. 0:01:03.600 --> 0:01:05.560 You should just check it out. Mark Moss on YouTube. 0:01:06.440 --> 0:01:08.520 Joe helps me out loud out over there. But Joe 0:01:09.000 --> 0:01:12.640 uh Man, big news this week. Um, the frame this 0:01:12.760 --> 0:01:15.400 up just a little bit. UM. I covered it quite 0:01:15.440 --> 0:01:20.000 a bit. UM. The crypto industry UM and bitcoin took 0:01:20.000 --> 0:01:23.880 a massive hit. Um when Tara Luna blew up and 0:01:23.920 --> 0:01:27.200 Tara Luna blew up, and then we saw, um, you 0:01:27.240 --> 0:01:29.559 know the trickle down effect from that, the domino effect, 0:01:29.600 --> 0:01:32.000 if you will, And then you know, Celsius went down, 0:01:32.040 --> 0:01:34.480 and three arrows capital went down, and you know who 0:01:34.480 --> 0:01:37.520 knows what else went down. F t X came to 0:01:37.640 --> 0:01:40.720 be the savior. They came to be the Federal Reserve, 0:01:41.440 --> 0:01:44.800 if you will, to backstop all of these institutions. I 0:01:44.840 --> 0:01:50.120 pulled a couple of things here. Um. In May SPF 0:01:51.680 --> 0:01:54.880 he said, or May said that the leader as he 0:01:54.880 --> 0:01:56.200 was built at the exchange. I said that some of 0:01:56.240 --> 0:02:00.480 these exchanges are already secretly insolvent. He said some of 0:02:00.520 --> 0:02:03.520 them were too far gone. Uh. Then he went to 0:02:03.600 --> 0:02:06.280 say the month after, in July, that they have up 0:02:06.280 --> 0:02:09.440 to two billion dollars for further bailouts if they need it. 0:02:10.160 --> 0:02:13.839 And then uh, in October, just a couple of weeks 0:02:13.960 --> 0:02:18.079 October twenty six, he said that no more bailouts. He 0:02:18.200 --> 0:02:22.760 clarified the company will no longer pursue baillout type acquisitions 0:02:22.760 --> 0:02:25.560 and they were actually looking to raise money at a 0:02:25.720 --> 0:02:30.320 thirty two billion dollar valuation just a couple of weeks ago. 0:02:31.080 --> 0:02:35.400 Um my, my my, how quickly things change, right, Yeah, yeah, 0:02:35.440 --> 0:02:38.119 that's right. I mean, I think Celsius really did act 0:02:38.160 --> 0:02:40.760 as that de facto or not Celsie's rather with fp 0:02:41.000 --> 0:02:43.760 X acted like that de facto lender of last resort, 0:02:43.800 --> 0:02:46.880 similar to the Federal Reserve and in our own financial institutions. 0:02:47.160 --> 0:02:49.400 But really, and I was speaking with Dylan Leclair about this, 0:02:49.440 --> 0:02:51.440 it seems like a lot of it was, you know, 0:02:51.720 --> 0:02:54.920 a peacock flaring out his feathers before you know it 0:02:54.960 --> 0:02:57.720 get gets pounced on by a predator. Um. Really, it 0:02:57.760 --> 0:03:00.639 seems like in hindsight, that quote that you said a 0:03:00.680 --> 0:03:03.760 lot of these exchanges are secretly insolving, you know, it 0:03:03.880 --> 0:03:06.679 reads more now like an ominous warning about f t 0:03:07.000 --> 0:03:09.600 X than you know it did obviously was addressing under 0:03:09.600 --> 0:03:11.920 exchanges at the time. And it seems like in you know, 0:03:12.000 --> 0:03:14.560 in a in a poetic irony sort of way, in 0:03:14.560 --> 0:03:16.760 a twist of fate, UH, f t X and net 0:03:16.840 --> 0:03:19.560 orver extended themselves and they found themselves in a precarious 0:03:19.639 --> 0:03:22.799 capital position. UM in finance pounceling. You know, I want 0:03:22.800 --> 0:03:24.440 to talk about this and then we'll talk about it 0:03:24.480 --> 0:03:26.560 from a wider standpoint back into kind of what we're 0:03:26.560 --> 0:03:29.480 seeing in the traditional financial space as well with with 0:03:29.639 --> 0:03:33.200 countries doing this. We won't dig into it, but really 0:03:33.240 --> 0:03:35.080 this kind of got put onto my radar with the 0:03:35.120 --> 0:03:38.800 famous Black Wednesday when George Soros famously broke the peg 0:03:38.840 --> 0:03:41.160 of the Bank of England and going into the terror Luna. 0:03:41.160 --> 0:03:43.400 I would say that all pegs are meant to be broken, 0:03:43.840 --> 0:03:46.320 uh traders. As long as traders are gonna trade, they're 0:03:46.320 --> 0:03:47.720 gonna do what they're gonna do. They're always going to 0:03:47.800 --> 0:03:51.720 try to break these pegs. But I'm curious, um, you know, 0:03:51.800 --> 0:03:54.520 with the SPF thing, that the f t X thing, 0:03:54.560 --> 0:03:56.920 I should say Sam bankman Fried for those listening, he's 0:03:56.960 --> 0:04:00.160 the CEO, the founder of of f t X. UM 0:04:00.320 --> 0:04:03.600 you said that maybe he was secretly warning about himself 0:04:03.640 --> 0:04:07.800 being insolvent. Maybe he over extended himself to kind of 0:04:07.840 --> 0:04:09.720 what you just said about trying to protect all these 0:04:09.760 --> 0:04:13.560 other exchanges. But do you think that's really what it was? 0:04:14.240 --> 0:04:18.680 Or was it that he was using something fake and 0:04:18.880 --> 0:04:21.400 made up and as long as the public thought it 0:04:21.480 --> 0:04:23.960 had value, he was able to use it. But it 0:04:24.040 --> 0:04:26.640 was when the public decided it no longer had value 0:04:26.800 --> 0:04:29.040 than he just wasn't able to use it. So it 0:04:29.080 --> 0:04:32.200 wasn't so much about being overextended as it was too 0:04:32.320 --> 0:04:35.160 he was living on borrow time, living in an imagine world, 0:04:35.160 --> 0:04:38.520 and when that imagining world ended, his game ended. That's 0:04:38.560 --> 0:04:41.360 precisely right on both f t X and alumy his 0:04:41.440 --> 0:04:44.200 balance sheet. A lot of what they were borrowing against, 0:04:44.240 --> 0:04:46.480 a lot of the assets that they held that they 0:04:46.480 --> 0:04:49.800 were they were borrowing against was f t T now exactly, 0:04:49.920 --> 0:04:52.159 So you're so, you're so, you're deep in the weeds 0:04:52.200 --> 0:04:54.719 on this, Joe. You've been talking about this extensively. Let's 0:04:54.760 --> 0:04:56.920 back it up a little bit for those just tuning in, 0:04:57.120 --> 0:04:58.680 and let's kind of frame this up a little bit. 0:04:58.760 --> 0:05:01.000 So f t X and ALIMI what is that? What? What 0:05:00.800 --> 0:05:04.320 What what's the relationship there? Yes, so, f t X 0:05:04.400 --> 0:05:08.279 is the second largest cryptocurrency exchange in the world globally, 0:05:08.760 --> 0:05:13.640 and Alameter Research was co founded by these same CEO. Right, So, 0:05:13.760 --> 0:05:18.200 basically same owner, same CEO of both firms. Alameter Research 0:05:18.240 --> 0:05:21.600 is a prop trading desk, so they engage in crypto trading, 0:05:21.920 --> 0:05:24.360 and f t X is an exchange. So even though 0:05:24.360 --> 0:05:27.720 they aren't the same company, they're essentially tied it the hip. Right, 0:05:27.760 --> 0:05:32.320 So for for my entire analysis, I've essentially considered them 0:05:32.360 --> 0:05:35.640 one of the same because of how closely intertwined they 0:05:35.720 --> 0:05:38.480 have been, and their activity over the last few days 0:05:38.480 --> 0:05:41.520 just just serves to prove that right. So m f 0:05:41.640 --> 0:05:44.200 t X is the crypto exchange, the crypto casino. You 0:05:44.240 --> 0:05:45.679 can go on there. You can buy all your different 0:05:45.680 --> 0:05:48.920 different crypto tokens that you want, your salonas, your ethereums, whatever, 0:05:48.960 --> 0:05:51.960 exchange your bitcoin for whatever you want. And then Alameda 0:05:52.120 --> 0:05:54.800 was a sister company that he created, um too then 0:05:54.839 --> 0:06:00.560 invest into these types of crypto projects. Um so if 0:06:00.600 --> 0:06:03.120 I framed it up right, and uh fun fact I 0:06:03.240 --> 0:06:06.239 used to write a cryptocurrency research newsletter, I don't anymore 0:06:06.839 --> 0:06:10.640 my I hate to dock him, but my ex business 0:06:10.680 --> 0:06:13.800 partner who I decided to work with anymore. Um and 0:06:13.920 --> 0:06:15.920 we knew Sam Bankman freed from back in the day 0:06:15.920 --> 0:06:17.479 before he went on to do all this stuff. And 0:06:17.480 --> 0:06:19.160 he reached out to him and said, hey, you know, 0:06:19.400 --> 0:06:22.320 um what what what new crypto projects do you think 0:06:22.360 --> 0:06:25.520 we need in for Salona And SPS said, hey, if 0:06:25.560 --> 0:06:27.120 we had this type of a project, I'm not going 0:06:27.160 --> 0:06:29.400 to ouch the whole thing. Um, then that would be 0:06:29.480 --> 0:06:31.960 something that probably beneficial from the market. And he said, great, 0:06:31.960 --> 0:06:33.760 if I build it, will you list it? And he said, well, 0:06:33.760 --> 0:06:36.080 if you can get Alameda to back it, then I will. 0:06:36.160 --> 0:06:38.400 He's like, well, can you set up a meeting with Alameda? Sure, 0:06:38.480 --> 0:06:41.080 no problem, Uh, set up a meeting with Alameda. They said, sure, 0:06:41.080 --> 0:06:43.640 if you build it, will buy it. I think less 0:06:43.680 --> 0:06:46.080 than like six months from start to finish, he had 0:06:46.120 --> 0:06:48.520 like hired a couple of people off upwork, launched the token, 0:06:48.800 --> 0:06:51.760 cashed out a big chunk of money from Alameda. They 0:06:51.800 --> 0:06:55.880 took a huge chunk of tokens from them, right, That's 0:06:55.880 --> 0:06:58.960 what they do, which is relevant because now let's talk 0:06:58.960 --> 0:07:00.960 about what's on their book, and one of which is 0:07:01.000 --> 0:07:03.760 a whole bunch of tokens that are probably worth nothing. Um. So, 0:07:03.800 --> 0:07:07.320 now that we've kind of framed up these two entities, um, like, 0:07:07.880 --> 0:07:09.600 so dig into how they were using this and kind 0:07:09.600 --> 0:07:11.400 of how we found the emperor has no clothes, I 0:07:11.400 --> 0:07:15.000 guess of course. So essentially the way that Alameda was 0:07:15.080 --> 0:07:19.200 borrowing was through what's called a flywheel scheme. Now essentially 0:07:19.240 --> 0:07:22.520 what a flywheel scheme is UM. F t X was 0:07:22.560 --> 0:07:27.960 responsible for creating this essentially worthless token, this internally printed 0:07:27.960 --> 0:07:31.960 out of nowhere token UM. But it was described value right. 0:07:31.960 --> 0:07:33.600 You know, f t X sold it on the open 0:07:33.680 --> 0:07:36.840 market on its exchange, and then users would buy it, 0:07:36.880 --> 0:07:39.400 and then through having this f T f t T token, 0:07:39.760 --> 0:07:42.160 they'd be able to go off on the exchange and 0:07:42.520 --> 0:07:44.720 buy things at a discount. They'd be you know, instead 0:07:44.760 --> 0:07:47.880 of having a larger transaction fees. Basically owning this token 0:07:47.920 --> 0:07:50.040 would allow them to have smaller transaction fees. Good. So 0:07:50.360 --> 0:07:52.880 essentially f t X created a market out of nowhere 0:07:53.120 --> 0:07:55.520 UM for for a feature, they created a security out 0:07:55.520 --> 0:07:58.200 of it, and then as a result of liquidity being 0:07:58.200 --> 0:08:01.640 pumped into this security, they were able to borrow against 0:08:01.720 --> 0:08:04.880 that security. Right, and then you can borrow against your security. UM. 0:08:04.960 --> 0:08:07.800 You go ahead and mark those on your books. You say, wow, 0:08:07.840 --> 0:08:10.160 take a look, we take a look at this. We've grown. UM, 0:08:10.240 --> 0:08:12.920 you issue more of that security, and it's essentially you're 0:08:13.000 --> 0:08:16.200 creating uh, something out of nothing and then backing it 0:08:16.240 --> 0:08:19.680 with yourself, backing with your cash flowing business um and 0:08:19.680 --> 0:08:22.560 and encouraging customers purchased this for a normal feature that 0:08:22.600 --> 0:08:25.000 you can include on your site anyways. And essentially it's 0:08:25.040 --> 0:08:27.760 creating this value out of nothing, which is allowing f 0:08:27.880 --> 0:08:31.520 t X and its sister company, Alameda to load a 0:08:31.520 --> 0:08:33.360 lot of this onto its balance sheet and then borrow 0:08:33.400 --> 0:08:36.840 against it. Right, so it's essentially borrowing against this vapor 0:08:36.920 --> 0:08:40.160 were token um and that's what we've seen him come 0:08:40.200 --> 0:08:42.560 home to roost um. You know. Well, we'll talk about 0:08:42.600 --> 0:08:45.520 what occurred with finance, but essentially the moment that the 0:08:45.880 --> 0:08:49.360 veil started to slip and the balance sheet leaked and 0:08:49.400 --> 0:08:53.560 people started publicly realizing that essentially the entire you know, 0:08:53.559 --> 0:08:58.520 the net equity of this firm is essentially backed by nothing, 0:08:59.040 --> 0:09:02.240 that's when this liquid it he began to un Yeah. Yeah, 0:09:02.679 --> 0:09:06.120 and this is uh, this is a micro look at 0:09:06.160 --> 0:09:08.679 how the overall financial system works. So I want to 0:09:08.720 --> 0:09:10.520 break all that down. If you're just tuning in, you're 0:09:10.520 --> 0:09:13.960 listening to the Markmas Show, We're sitting down with Joe Consorti. 0:09:14.160 --> 0:09:16.839 We're talking about the willow up in the crypto space 0:09:16.880 --> 0:09:20.200 with f t X Finance. What happened. We're breaking down 0:09:20.240 --> 0:09:21.640 the play by play, but like I said, I really 0:09:21.679 --> 0:09:23.280 want to kind of get into what this means for 0:09:23.280 --> 0:09:25.319 the greater financial system, the risk that we have. We 0:09:25.400 --> 0:09:27.400 got a whole lot to cover when we come. Come back. 0:09:27.440 --> 0:09:29.520 Don't go away, We're gonna be right back. All right, 0:09:29.520 --> 0:09:31.360 welcome back. If you're just tuning in, you're listening to 0:09:31.440 --> 0:09:33.600 the Mark Moss Show. Of course, we're talking about the 0:09:33.600 --> 0:09:36.880 decentralized revolution. We're talking about bitcoin, and we're talking about 0:09:36.920 --> 0:09:41.079 the cryptocurrency space right now that is absolutely blowing up 0:09:41.120 --> 0:09:44.840 this week with big news of the maybe the first 0:09:44.840 --> 0:09:47.760 and second largest crypto exchanges battling out. I'm in the 0:09:47.760 --> 0:09:50.240 studio with Joe Consortium Joe. Before the break, we were 0:09:50.240 --> 0:09:52.200 talking kind of we kind of framed it up, and 0:09:52.240 --> 0:09:54.520 we framed up how really kind of ft X and 0:09:54.559 --> 0:09:58.640 Alimeter kind of sister companies doing different things. Um, but 0:09:59.440 --> 0:10:02.240 they're both backed by something they created out of nothing. 0:10:02.280 --> 0:10:08.160 Now you know, I guess I say, all value is subjective, 0:10:08.320 --> 0:10:10.040 so everything is kind of created out of nothing and 0:10:10.040 --> 0:10:13.640 then the market prescribes value to it. Like you said, Um, 0:10:13.720 --> 0:10:15.520 I remember when I was a kid, there was like 0:10:15.559 --> 0:10:17.920 these beanie babies and they they you know, or you 0:10:18.080 --> 0:10:20.160 go like to the tulip, the tulip mania rights. All 0:10:20.160 --> 0:10:22.439 of a sudden, everyone just thinks these tulips are super valuable. 0:10:22.520 --> 0:10:24.920 But then the value just disappears. And so they created 0:10:24.920 --> 0:10:27.640 these these f T T tokens out of thin air. 0:10:27.679 --> 0:10:29.679 And then to the point you made, right the value 0:10:29.720 --> 0:10:32.360 the market prescribed value to them. The problem is that 0:10:32.360 --> 0:10:34.800 they were just holding that and that was this big 0:10:34.840 --> 0:10:37.199 asset on their books. Now, you did say that they 0:10:37.240 --> 0:10:41.679 were um leveraging it, borrowing against it, etcetera. Um, But 0:10:41.840 --> 0:10:44.439 even as much as they borrowed it and leveraged against it, 0:10:44.520 --> 0:10:47.480 they didn't really still have any other real world assets 0:10:47.520 --> 0:10:49.720 that didn't seem like that's exactly right. So if you 0:10:49.760 --> 0:10:51.839 take a look at the other assets that they had 0:10:51.880 --> 0:10:55.720 on their books, uh, it's basically a hodgepodge of of 0:10:55.880 --> 0:10:59.400 nameless and very very liquid other cryptocurrencies. You know, I 0:10:59.400 --> 0:11:02.120 could rattle off the list all to live long day, 0:11:02.160 --> 0:11:04.600 but none of your listeners, you or I wouldn't know 0:11:04.679 --> 0:11:08.520 what they are. Essentially, what Alameda and FTX were engaging 0:11:08.559 --> 0:11:13.000 in was, uh, you know this rapid selling of all it. Well, 0:11:13.080 --> 0:11:16.440 you know, this ownership of all these relatively unknown coins 0:11:16.440 --> 0:11:20.480 with very very very small markets, they practically own the market. 0:11:20.800 --> 0:11:23.200 And so you know, they were caught in this situation 0:11:23.920 --> 0:11:27.040 where they're basically owning every worthless thing under the sun 0:11:27.040 --> 0:11:29.680 that you could possibly imagine, um, and then having to 0:11:29.679 --> 0:11:32.040 sell it onto the open market for dollars. And you know, 0:11:32.160 --> 0:11:35.440 they're the most recent, you know, victim of this global 0:11:35.679 --> 0:11:38.480 golbal dollar shortage that we're facing, and unfortunately they're they 0:11:38.480 --> 0:11:42.480 were caught holding the steaming pile of worthlessness. Yeah, I 0:11:42.520 --> 0:11:45.480 think I I tweeted on somebody I replied on I 0:11:45.480 --> 0:11:48.640 think it was Corey Clipston's uh tweet, and I just said, 0:11:48.679 --> 0:11:50.960 you know, it's back to this warm buffet thing, which 0:11:51.000 --> 0:11:53.839 is a rising tide lifts all boats. And he looked 0:11:53.840 --> 0:11:57.120 like this genius because he used massive amounts of leverage 0:11:57.640 --> 0:12:00.360 at a time when the tide was rising. It made 0:12:00.400 --> 0:12:02.160 him look like a genius because he took way more 0:12:02.280 --> 0:12:05.240 risk than everybody else through massive amounts of leverage as 0:12:05.280 --> 0:12:09.760 well as all kinds of financial engineering, if you will fraud, 0:12:09.800 --> 0:12:12.640 if we might even go out that far to say that, um. 0:12:12.679 --> 0:12:14.880 But then as The second part of the buffet says 0:12:14.920 --> 0:12:17.120 that when the tide goes out, you see you swimming naked. 0:12:17.120 --> 0:12:19.520 So he looked like a genius using all this financial engineering, 0:12:19.559 --> 0:12:21.720 leverage going up, but as soon as the tide pulls out, 0:12:22.000 --> 0:12:25.520 all of a sudden, he is swimming naked. Now it 0:12:25.559 --> 0:12:29.640 seems like it all really got started. Maybe and correct 0:12:29.720 --> 0:12:32.000 me if I'm wrong. But when I think coin base 0:12:32.080 --> 0:12:34.720 had broken article, basically they got I don't know, some 0:12:34.760 --> 0:12:37.960 sort of insider information showing what the assets actually were 0:12:38.040 --> 0:12:41.680 on their balance sheet. Absolutely. Yeah. So the entire impetus 0:12:41.720 --> 0:12:45.480 for this was coin desk actually leaking their balance sheet. 0:12:45.559 --> 0:12:48.280 And it was revealed that within this coin desk report 0:12:48.400 --> 0:12:51.320 that had fourteen billion dollars worth of assets, right, which 0:12:51.360 --> 0:12:53.680 is you know, of course that number in and of 0:12:53.679 --> 0:12:57.720 itself means virtually nothing, right, Alameda is a relatively small company, UM. 0:12:57.760 --> 0:13:00.360 But then it was revealed that at the already of 0:13:00.360 --> 0:13:02.880 their assets are actually the largest holding, not the majority, 0:13:02.920 --> 0:13:06.160 but the largest holding individual holding that they had was 0:13:06.400 --> 0:13:08.560 ft T Right, this is worthless token I was printed 0:13:08.559 --> 0:13:10.920 out of thin air, which is of course backed by 0:13:11.000 --> 0:13:14.360 f t x is reputation. UM did three three and 0:13:14.360 --> 0:13:16.839 a half billion of what was called unlocked f t T. 0:13:17.080 --> 0:13:19.640 They had two and a half billion of FTT collateral, 0:13:19.640 --> 0:13:22.720 which leads us to believe that it's called FTT collateral. 0:13:23.200 --> 0:13:26.160 They're probably borrowing against that at least at two point 0:13:26.160 --> 0:13:29.400 one six billion dollar portion, and then two two million 0:13:29.440 --> 0:13:32.240 of locked FTT. Now, the reason this was concerning is 0:13:32.280 --> 0:13:35.959 because the entire free float market capitalization of ft T 0:13:36.720 --> 0:13:38.680 is less than four billion dollars. At the time that 0:13:38.720 --> 0:13:42.520 this coindesk article was released, it was revealed that Alameda 0:13:42.640 --> 0:13:45.960 was holding more FTT on their books than was regularly 0:13:45.960 --> 0:13:49.160 in circulation. And so that's essentially the you know, the 0:13:49.200 --> 0:13:51.240 straw that broke the camel's back, if you will. And 0:13:51.280 --> 0:13:53.960 it really started to get these market participants scared of 0:13:53.960 --> 0:13:56.280 what they were holding and the solignty of the Alameda 0:13:56.320 --> 0:13:58.600 and f t X. Yeah, so the tide starts going 0:13:58.600 --> 0:14:01.040 out all of a sudden, you go, shoot, they're swimming naked. 0:14:01.320 --> 0:14:04.680 They don't have my money. And what happens is psychologically 0:14:05.160 --> 0:14:07.959 everybody know, most people haven't really taken the time to 0:14:07.960 --> 0:14:09.960 stop and think about this. But if I give my 0:14:10.000 --> 0:14:11.520 money to the bank or I give my money to 0:14:11.559 --> 0:14:14.240 an exchange, whether it's the trade charl shwab or f 0:14:14.360 --> 0:14:17.160 t X, there's a chance I maybe don't get my 0:14:17.240 --> 0:14:20.120 money back. And uh, I think a lot of people 0:14:20.200 --> 0:14:24.200 willingly participate in Ponsi schemes. A lot of times people 0:14:24.240 --> 0:14:26.520 say what do you mean cardanos a scam? Like look 0:14:26.520 --> 0:14:29.080 how much money I've made? Well, people make money in 0:14:29.400 --> 0:14:32.680 Ponzi schemes. Uh. The game is can I get in 0:14:32.840 --> 0:14:35.880 and ride it up and get out before everybody else 0:14:35.880 --> 0:14:38.320 tries to get out because we know that there's no money? Um, 0:14:38.360 --> 0:14:41.160 and I think you know, once people saw this number 0:14:41.200 --> 0:14:44.320 and went, oh, shoot, they don't have enough money, then 0:14:44.360 --> 0:14:48.040 the smart people start getting out, and then everybody starts 0:14:48.120 --> 0:14:50.840 rushing for the exits and it just really started to 0:14:50.920 --> 0:14:53.520 go down, so that that started happening. Um, I haven't 0:14:54.000 --> 0:14:55.920 I looked at the chart. I didn't actually try to 0:14:56.000 --> 0:15:00.480 coordinate the the plunge of ft T. It looked like 0:15:00.480 --> 0:15:03.040 it really kind of started over the weekend on Sunday. 0:15:03.080 --> 0:15:06.400 I guess right, Um where the coin Desk article? When 0:15:06.400 --> 0:15:11.280 did that come out? That was November two, So it 0:15:11.280 --> 0:15:14.840 looked like it kind of held on a couple of days. 0:15:14.840 --> 0:15:17.240 But who knows how much they were defending that peg 0:15:17.800 --> 0:15:21.720 so talk about that. So so then UH, that article 0:15:21.760 --> 0:15:25.520 comes out, it starts casting doubt. Then, um, I guess 0:15:25.520 --> 0:15:27.800 c Z, who's the founder of Finance, which I think 0:15:27.840 --> 0:15:31.960 is the largest cryptocurrency exchange, basically says, hey, we're holding 0:15:32.000 --> 0:15:35.400 a bunch of these tokens and we don't want them anymore. 0:15:35.440 --> 0:15:37.680 We're just gonna go ahead and sell them. Um. We 0:15:38.040 --> 0:15:39.960 for whatever reason, we see there a scam, we see 0:15:39.960 --> 0:15:42.360 there's no backing. We we want to be the first 0:15:42.360 --> 0:15:45.040 ones out of the exit. Is that what really kind 0:15:45.040 --> 0:15:47.160 of took it to them? That is what took it 0:15:47.200 --> 0:15:48.800 to them. If you take a look at the chart 0:15:49.480 --> 0:15:53.400 a few days afterwards. This is actually on the sixth, 0:15:53.440 --> 0:15:56.280 so four days after the coin Desk article released and 0:15:56.320 --> 0:15:59.120 the fear started moving through markets, c Z, obviously the 0:15:59.120 --> 0:16:02.560 owner of the largest UH cryptocurrency exchange, came out and said, 0:16:02.560 --> 0:16:06.120 we hold two point one billion dollars USC equivalent of 0:16:06.360 --> 0:16:08.520 f t T. We're gonna sell it all. We plan 0:16:08.600 --> 0:16:11.000 on selling it all on the market. Due to the 0:16:11.080 --> 0:16:13.320 limited liquidity in the market, We're gonna sell it over 0:16:13.360 --> 0:16:16.800 the next couple of weeks. And that sparked imminent panic. Essentially, 0:16:16.800 --> 0:16:19.320 you saw the price whipped down and then whip back up, 0:16:19.360 --> 0:16:22.840 and then strangely, for the next twenty four hours roughly, um, 0:16:22.880 --> 0:16:25.200 you know, until last evening when the strawbert of the 0:16:25.240 --> 0:16:28.000 camel's back. You saw essentially the price trying to move 0:16:28.040 --> 0:16:30.880 down and then getting defended at the twenty two dollar level. 0:16:31.280 --> 0:16:35.200 And why was this, Well, it seems like Alameda and 0:16:35.400 --> 0:16:38.000 f t X were engaging in currency defense, that they 0:16:38.000 --> 0:16:41.480 were essentially selling all of their assets in order to 0:16:41.560 --> 0:16:44.240 buy f t T and defend it. Now, why would 0:16:44.280 --> 0:16:46.600 you want to do something like that, Well, if you 0:16:46.680 --> 0:16:50.240 have a margin call level that's at or around twenty two, 0:16:50.520 --> 0:16:52.120 that's the kind of behavior that they were engaging in. 0:16:52.280 --> 0:16:54.840 We saw on chain both Alameda and f t X 0:16:54.880 --> 0:16:57.280 were really selling everything that they had in their books 0:16:57.280 --> 0:16:59.680 that had a liquid market and flipping it into f 0:16:59.720 --> 0:17:02.880 t t UM. And as we saw, there was just 0:17:02.880 --> 0:17:05.199 too much cell pressure to contend with on top of 0:17:05.240 --> 0:17:07.600 c Z, on top of the short sellers, UH and 0:17:07.640 --> 0:17:10.240 the spots sellers, um, you know, f t X in 0:17:10.280 --> 0:17:13.000 and of themselves didn't have enough liquidity in order to 0:17:13.200 --> 0:17:15.199 you know, maintain this twinty through all our peg. It 0:17:15.280 --> 0:17:18.439 eventually broke and UH and yeah, not a very pretty picture. 0:17:18.640 --> 0:17:20.480 It all really started with coin desk, and then c 0:17:20.680 --> 0:17:23.240 Z was the one who exactly like you said, he said, 0:17:23.280 --> 0:17:25.280 I'm out, Yeah, I want to. I want to. I 0:17:25.280 --> 0:17:27.119 want to walk through what this means for c Z 0:17:27.359 --> 0:17:30.680 because he had two billion dollars over two billion dollars 0:17:30.680 --> 0:17:34.000 of the token. The market cap was almost three billion 0:17:34.040 --> 0:17:37.000 at the time. Today the market cap is uh less 0:17:37.080 --> 0:17:40.080 about five hundred million or less. So we'll walk through that. 0:17:40.200 --> 0:17:41.639 If you're just tuning in, you're listening to the Mark 0:17:41.760 --> 0:17:44.560 Moss Show, I'm in studio with Joe Consorti, and we 0:17:44.600 --> 0:17:47.760 are trying to sort through the big mess, the big 0:17:47.760 --> 0:17:51.200 blow up in the cryptocurrency space of the largest crypto 0:17:51.320 --> 0:17:56.120 exchange f t X becoming in solvent, being taken over 0:17:56.160 --> 0:18:00.480 by its largest competitor, and uh, what's really no better 0:18:00.480 --> 0:18:02.280 way to describe it as a speculaive attack. We're gonna 0:18:02.280 --> 0:18:03.760 break that down and then we're gonna I want to 0:18:03.760 --> 0:18:05.800 pivot into the greater financial system and show you how 0:18:05.840 --> 0:18:07.800 countries are basically doing the same thing, and you don't 0:18:07.800 --> 0:18:09.800 want to get caught off guard. A lot more to cover. 0:18:09.920 --> 0:18:12.119 We come back, don't go away, We're back all right, 0:18:12.160 --> 0:18:13.920 welcome back. If you just tune it in, you're listening 0:18:13.960 --> 0:18:16.960 to the Mark Moss Show. We are talking about right 0:18:17.040 --> 0:18:20.760 now the blow up in the cryptocurrency market where f 0:18:20.880 --> 0:18:26.080 t X, the second largest cryptocurrency exchange, just got taken 0:18:26.160 --> 0:18:28.800 out by its biggest competitor, got taken over. I'm in 0:18:28.840 --> 0:18:31.880 the studio with Joe CONSORTI. Um, Joe. When we were 0:18:31.920 --> 0:18:33.440 just before we went to break, we were talking about 0:18:33.440 --> 0:18:36.280 how or you had said that c Z had put 0:18:36.280 --> 0:18:39.639 out this tweet. Let's talk about why he put that 0:18:39.640 --> 0:18:41.399 tweet out. But what he said in the tweet was, 0:18:41.560 --> 0:18:43.600 as you already said, right, we have over two billion 0:18:43.600 --> 0:18:45.359 dollars of this token and we want to get rid 0:18:45.400 --> 0:18:47.560 of it. We're gonna do it orderly. UM. So what 0:18:47.600 --> 0:18:49.960 happens is for people that don't know, when you're doing 0:18:50.000 --> 0:18:53.720 a big purchase or sell, a lot of times you 0:18:53.720 --> 0:18:56.440 want to do that over the counter, meaning that's off 0:18:56.480 --> 0:18:58.560 the market, because if you do a big buy or 0:18:58.560 --> 0:19:00.520 you do a big cell where people see it, it 0:19:00.600 --> 0:19:02.840 could move the price up or could move the price down, 0:19:02.840 --> 0:19:05.440 and either way, typically you don't want that. It's what's 0:19:05.480 --> 0:19:07.840 known as slippage. So, for example, if I want to 0:19:07.840 --> 0:19:11.199 buy a million dollars worth of a certain token that 0:19:11.240 --> 0:19:13.359 had thin liquidity. If about a million dollars a bitcoin, 0:19:13.400 --> 0:19:15.359 it probably wouldn't matter so much. But you buy a 0:19:15.359 --> 0:19:17.639 million dollars off a token that has thin liquidity, the 0:19:17.680 --> 0:19:19.800 price will start going up, and so then that means 0:19:19.840 --> 0:19:23.400 I'm paying higher and higher and higher amounts. Likewise, if 0:19:23.440 --> 0:19:25.879 I have a million dollars I want to sell, I 0:19:25.920 --> 0:19:27.640 also want to do that off the books, because as 0:19:27.640 --> 0:19:29.720 I'm selling it, it pushes the price lower and lower 0:19:29.760 --> 0:19:32.200 and lower. And so typically you want to do that 0:19:32.720 --> 0:19:37.359 without telling people. Um, in this case, he specifically told 0:19:37.359 --> 0:19:39.600 everybody what is gonna do. He told him in advance, 0:19:39.640 --> 0:19:42.040