1 00:00:10,160 --> 00:00:14,360 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,400 --> 00:00:19,759 Speaker 1: I'm Joe Wasn't and I'm Tracy Allaway, Tracy Luna, Tera 3 00:00:20,000 --> 00:00:24,520 Speaker 1: stable coins, crypto crashing stuff. I'm gonna throw something else 4 00:00:24,560 --> 00:00:28,840 Speaker 1: out there, Roman history. Let's talk about classic history. What's 5 00:00:28,880 --> 00:00:32,239 Speaker 1: the Roman history part? It's Rome sacking Carthage. Have you 6 00:00:32,240 --> 00:00:35,760 Speaker 1: not heard about that? Yeah? Is that what's going on? 7 00:00:36,040 --> 00:00:38,880 Speaker 1: Is a Carthage big sacked right now? Well, that's actually yeah, 8 00:00:38,960 --> 00:00:40,800 Speaker 1: I mean that's kind of what we're going to talk about. 9 00:00:40,920 --> 00:00:43,200 Speaker 1: So we're going to be speaking with someone who has 10 00:00:43,200 --> 00:00:48,120 Speaker 1: framed himself as Rome in the historic parallel going after Carthage, 11 00:00:48,280 --> 00:00:52,000 Speaker 1: which would be Tara and Luna. The algorithmic stable coin, 12 00:00:52,080 --> 00:00:55,120 Speaker 1: slash cryptos This is such a wild story. I mean, 13 00:00:55,240 --> 00:01:01,960 Speaker 1: like I think you know, look, crashes, hacks, pond zis, 14 00:01:02,520 --> 00:01:06,160 Speaker 1: rug polls, they happened all the time in crypto, right 15 00:01:06,200 --> 00:01:08,320 Speaker 1: like it's almost it almost just like boring, And most 16 00:01:08,319 --> 00:01:10,080 Speaker 1: of the time they're not even worth reporting on or 17 00:01:10,120 --> 00:01:12,720 Speaker 1: talking about because they're like a daily occurrent. But the 18 00:01:12,920 --> 00:01:17,840 Speaker 1: Terra ecosystem, the us T stable coin, the Luna token 19 00:01:18,200 --> 00:01:22,959 Speaker 1: had gotten so big, so valuable, and so many major 20 00:01:23,040 --> 00:01:26,640 Speaker 1: backers of crypto um were invested in it or had 21 00:01:26,720 --> 00:01:29,319 Speaker 1: invested in it in some way that this is not 22 00:01:29,480 --> 00:01:33,000 Speaker 1: just like another coin to crash. I think that's absolutely right. 23 00:01:33,040 --> 00:01:36,720 Speaker 1: So two things here. One top ten coin, right, like, 24 00:01:36,760 --> 00:01:39,600 Speaker 1: it's not it's not every day that you see something 25 00:01:39,640 --> 00:01:43,000 Speaker 1: like this happened to a top ten coin. Secondly, the marketing, 26 00:01:43,520 --> 00:01:48,920 Speaker 1: so everyone knew it was an unusual experiment, an algorithmic 27 00:01:49,000 --> 00:01:51,720 Speaker 1: stable coin, and we'll get into exactly how it's supposed 28 00:01:51,720 --> 00:01:56,120 Speaker 1: to work. But even with that said, it was pitched 29 00:01:56,560 --> 00:01:58,920 Speaker 1: as a stable coin, as something that is supposed to 30 00:01:58,920 --> 00:02:01,880 Speaker 1: maintain a peg one to one with the dollar, and 31 00:02:01,920 --> 00:02:03,720 Speaker 1: people are supposed to be able to use it to 32 00:02:03,800 --> 00:02:08,200 Speaker 1: get in and out of more volatile cryptocurrencies. And clearly 33 00:02:08,880 --> 00:02:12,080 Speaker 1: that's not what's been happening because we've seen the peg 34 00:02:12,160 --> 00:02:13,960 Speaker 1: has crashed. I think it got too as low as 35 00:02:14,040 --> 00:02:18,960 Speaker 1: like point three is right, No, I mean that's exactly right. 36 00:02:18,960 --> 00:02:20,680 Speaker 1: So it's a stable coin. The interesting thing is, like 37 00:02:20,720 --> 00:02:24,120 Speaker 1: stable coins, there are many different flavors of stable coins, 38 00:02:24,120 --> 00:02:26,400 Speaker 1: and people have been skeptical about them for a while. 39 00:02:26,800 --> 00:02:30,440 Speaker 1: Most of the discussion about vulnerable stable coins was focused 40 00:02:30,440 --> 00:02:34,200 Speaker 1: on tether, which but this was a so called algorithmic 41 00:02:34,240 --> 00:02:37,600 Speaker 1: stable coin. They had some collateral backing. It's sort of complicated, 42 00:02:37,600 --> 00:02:40,640 Speaker 1: we're gonna get into it, but the point is that, yes, 43 00:02:40,840 --> 00:02:43,520 Speaker 1: it is sort of this classic example of the thing 44 00:02:43,600 --> 00:02:45,680 Speaker 1: that blows up is the thing that has to maintain 45 00:02:45,680 --> 00:02:48,360 Speaker 1: a peg, which is a lesson that in the trad 46 00:02:48,440 --> 00:02:51,000 Speaker 1: fi world is understood for a long time, which is 47 00:02:51,080 --> 00:02:53,960 Speaker 1: often the sorts of big sources of big risk are 48 00:02:53,960 --> 00:02:56,519 Speaker 1: the things that, on the surface appear to have the 49 00:02:56,600 --> 00:02:59,520 Speaker 1: least volatility. Here's the other thing that makes the story 50 00:02:59,600 --> 00:03:02,520 Speaker 1: so in staying it's the people involved. You know, you 51 00:03:02,560 --> 00:03:06,240 Speaker 1: mentioned some of the big funds like Galaxy Slash Novograts 52 00:03:06,280 --> 00:03:11,600 Speaker 1: who were invested in Tara slash Luna. Yeah, which I 53 00:03:11,639 --> 00:03:14,200 Speaker 1: thought was fake when I first saw that photo, but 54 00:03:14,440 --> 00:03:16,359 Speaker 1: it is in fact real. But the other thing is 55 00:03:16,400 --> 00:03:20,600 Speaker 1: there are strong personalities attached on both the pro Luna 56 00:03:20,720 --> 00:03:25,600 Speaker 1: Tara side and the sort of against or warning about 57 00:03:25,880 --> 00:03:29,079 Speaker 1: Tara slash Luna side. And that's where that Rome versus 58 00:03:29,160 --> 00:03:32,919 Speaker 1: Carthage analogy comes in. You had the founder Do Kuan, 59 00:03:33,400 --> 00:03:35,360 Speaker 1: and I don't know if anyone follows him on Twitter, 60 00:03:35,760 --> 00:03:41,600 Speaker 1: but he is incredibly I guess outspoken would be Yeah, 61 00:03:41,640 --> 00:03:44,640 Speaker 1: this is putting it all very very politely. But people 62 00:03:44,720 --> 00:03:48,880 Speaker 1: would come out with criticisms of the entire algorithmic stable 63 00:03:48,920 --> 00:03:53,600 Speaker 1: coin idea, and people would highlight vulnerabilities in the system 64 00:03:53,640 --> 00:03:55,839 Speaker 1: and he would just bat them away, or he would 65 00:03:55,880 --> 00:03:58,040 Speaker 1: just say, you're poor. I don't Yeah, you're poor. I 66 00:03:58,040 --> 00:03:59,680 Speaker 1: don't need to talk to you. So what is going on? 67 00:04:00,120 --> 00:04:02,240 Speaker 1: We are going to be speaking with a perfect guest. 68 00:04:02,280 --> 00:04:04,600 Speaker 1: When everyone was like odd Lots has to do an 69 00:04:04,600 --> 00:04:08,880 Speaker 1: episode on Luna obviously, and everyone my d MS flooded 70 00:04:08,960 --> 00:04:11,040 Speaker 1: with this is the guest you have to have on 71 00:04:11,120 --> 00:04:13,440 Speaker 1: because he's been warning about it for a while. We're 72 00:04:13,440 --> 00:04:16,320 Speaker 1: gonna be speaking with Kevin So. He's the co founder 73 00:04:16,400 --> 00:04:20,400 Speaker 1: of Gail Walk Capital, which is a crypto hedge fund 74 00:04:20,560 --> 00:04:23,880 Speaker 1: that was launched in so that's old by crypto hedge 75 00:04:23,920 --> 00:04:27,839 Speaker 1: fund uh longevity. But actually he's been in the space 76 00:04:27,839 --> 00:04:30,840 Speaker 1: for about a decade, which is truly extraordinary. He knows 77 00:04:30,839 --> 00:04:33,560 Speaker 1: it well. He's been warning. He had been warning about 78 00:04:34,120 --> 00:04:36,560 Speaker 1: Tara and Luna for a while. So, Kevin, thank you 79 00:04:36,640 --> 00:04:40,680 Speaker 1: so much for coming on odd Lots. Yeah, absolutely, thanks 80 00:04:40,680 --> 00:04:43,800 Speaker 1: for having me. Kevin, you started a crypto hedge fund, 81 00:04:45,520 --> 00:04:48,239 Speaker 1: like you know, now everyone has a crypto hedge fund obviously, 82 00:04:48,279 --> 00:04:52,720 Speaker 1: but you that's legit, legit, legit veteran in the space. 83 00:04:53,440 --> 00:04:55,880 Speaker 1: What what's your background? Why did you how did you 84 00:04:55,920 --> 00:04:59,960 Speaker 1: get into it so much earlier than most people? Um, yeah, 85 00:05:00,040 --> 00:05:02,400 Speaker 1: so you know, I think my background, Um, you know, 86 00:05:02,400 --> 00:05:05,200 Speaker 1: I've been in crypto for a while now, really got 87 00:05:05,240 --> 00:05:08,960 Speaker 1: started in I hadn't joined industry at the time. I 88 00:05:09,000 --> 00:05:11,359 Speaker 1: was just mostly trading my own p a uh. And 89 00:05:11,400 --> 00:05:16,160 Speaker 1: then I joined the industry, joined a small um bitcoin startup. 90 00:05:16,360 --> 00:05:18,839 Speaker 1: It was an exchange. It was called butter Coin. It 91 00:05:18,920 --> 00:05:22,640 Speaker 1: was the second y C company that was dealing with crypto, 92 00:05:22,680 --> 00:05:25,360 Speaker 1: the first being coin base. Um, things didn't go so 93 00:05:25,400 --> 00:05:27,359 Speaker 1: well over there and in the in the winter of 94 00:05:27,360 --> 00:05:31,000 Speaker 1: two thousand thirteen, we shut down. Afterwards, I joined Kraken, 95 00:05:31,440 --> 00:05:35,120 Speaker 1: ran their trading desk for two years, and then afterwards 96 00:05:35,160 --> 00:05:39,839 Speaker 1: in uh, you know, in I guess early seen, decided 97 00:05:39,880 --> 00:05:46,599 Speaker 1: to leave and start Galwa Capital and we launched in January. So, 98 00:05:47,400 --> 00:05:49,760 Speaker 1: as we mentioned in the intro, there's been a lot 99 00:05:49,800 --> 00:05:54,120 Speaker 1: of criticism of Terra and Luna and you're I think 100 00:05:54,160 --> 00:05:57,680 Speaker 1: probably the biggest voice in that space. What piqued your 101 00:05:57,800 --> 00:06:02,320 Speaker 1: interest in this particular pin or you know, system, when 102 00:06:02,360 --> 00:06:05,800 Speaker 1: did you first start getting interested and start looking into it? 103 00:06:05,800 --> 00:06:08,760 Speaker 1: And why? You know, when I first started looking into it, 104 00:06:08,839 --> 00:06:13,080 Speaker 1: I'd say it was around mid or late last year. 105 00:06:13,839 --> 00:06:15,920 Speaker 1: And uh, you know, at the time, I didn't think 106 00:06:15,960 --> 00:06:17,800 Speaker 1: too much of it. I thought, oh, you know, this 107 00:06:17,920 --> 00:06:20,120 Speaker 1: is just one of those i'll go stable coins. It 108 00:06:20,160 --> 00:06:22,840 Speaker 1: probably won't work out, you know, it'll just implode pretty soon. 109 00:06:22,960 --> 00:06:25,400 Speaker 1: Turned out not to be the case. It just kept going, uh, 110 00:06:25,520 --> 00:06:28,799 Speaker 1: you know, Luna kept going up, us T kept maintaining stability. 111 00:06:29,080 --> 00:06:32,320 Speaker 1: It grew bigger and bigger. And then I revisited it 112 00:06:32,960 --> 00:06:35,800 Speaker 1: in January of this year, and I at this point, 113 00:06:35,839 --> 00:06:37,440 Speaker 1: you know, I was kind of surprised at just how 114 00:06:37,640 --> 00:06:39,920 Speaker 1: big it got, you know, it all of a sudden, 115 00:06:39,920 --> 00:06:41,719 Speaker 1: you know, it's now like a top ten coin or 116 00:06:41,760 --> 00:06:43,880 Speaker 1: something like that. So now I was starting to get 117 00:06:43,880 --> 00:06:45,960 Speaker 1: worried because I've never seen one of these, you know, 118 00:06:46,000 --> 00:06:48,120 Speaker 1: i'll go stable coins get so big. Usually they just 119 00:06:48,160 --> 00:06:50,600 Speaker 1: collapsed before that. So you know that I thought, well, 120 00:06:50,640 --> 00:06:53,159 Speaker 1: you know, maybe this is first one, maybe a great 121 00:06:53,160 --> 00:06:57,520 Speaker 1: shorting opportunity, and to maybe this poses some systemic risks 122 00:06:57,760 --> 00:07:00,360 Speaker 1: to the entire space, and and maybe it's time intosan 123 00:07:00,480 --> 00:07:02,520 Speaker 1: sound the alarm, you know not. I mean, obviously for 124 00:07:02,600 --> 00:07:04,640 Speaker 1: my own benefit, I would definitely like to make money 125 00:07:04,680 --> 00:07:06,599 Speaker 1: on the short but also I think just as a 126 00:07:06,600 --> 00:07:09,400 Speaker 1: public service to also let everybody else know to So 127 00:07:09,800 --> 00:07:12,720 Speaker 1: can you actually back up for listeners? And we hear 128 00:07:12,760 --> 00:07:15,400 Speaker 1: stable coins and we sort of mentioned it in the intro, 129 00:07:15,480 --> 00:07:17,920 Speaker 1: which is that there are various flavors of stable coins. 130 00:07:18,440 --> 00:07:22,080 Speaker 1: Tethers one model, U S d C is a similar model. 131 00:07:22,160 --> 00:07:25,800 Speaker 1: There's also um maker and die. But what is uh 132 00:07:25,960 --> 00:07:29,720 Speaker 1: an Elgo stable coin, this project that keep trying and 133 00:07:29,760 --> 00:07:32,240 Speaker 1: they do have a long history of continuing to blow up. 134 00:07:32,360 --> 00:07:36,960 Speaker 1: How is an Elgo stable coin different than other stable coiners? Um? Yeah, 135 00:07:37,000 --> 00:07:39,600 Speaker 1: So I think we should first separate out these so 136 00:07:39,680 --> 00:07:42,840 Speaker 1: called um these centralized stable coins with the centralized ones. 137 00:07:43,240 --> 00:07:45,400 Speaker 1: So you know, first on the centralized side, you have 138 00:07:45,440 --> 00:07:49,520 Speaker 1: folks like UH USDT which is tether, and USDC which 139 00:07:49,560 --> 00:07:52,480 Speaker 1: is uh you know, circles dollar and you know, basically 140 00:07:52,520 --> 00:07:54,560 Speaker 1: what's happening here is that there's a dollar in some 141 00:07:54,600 --> 00:07:57,400 Speaker 1: bank account and for every dollar there they issue out 142 00:07:57,400 --> 00:07:59,680 Speaker 1: one coin. Anytime you return a coin to them, you 143 00:07:59,680 --> 00:08:02,560 Speaker 1: can demount of physical dollar, you know, by wire transfer 144 00:08:02,640 --> 00:08:06,440 Speaker 1: or whatnot. It's very much kind of tethered together between 145 00:08:06,440 --> 00:08:09,280 Speaker 1: the real world and the virtual world. Um. You know, 146 00:08:09,440 --> 00:08:11,680 Speaker 1: on the on the sort of decentralized side, you really 147 00:08:11,720 --> 00:08:15,160 Speaker 1: have variations of two models, right, So you have sort 148 00:08:15,200 --> 00:08:18,120 Speaker 1: of like the collateralized model, which is like make or 149 00:08:18,200 --> 00:08:21,520 Speaker 1: die um. What that is is basically you can post 150 00:08:21,760 --> 00:08:25,760 Speaker 1: uh some amount of um some other type of asset, 151 00:08:26,640 --> 00:08:29,000 Speaker 1: and in return you're going to get some stable coin, 152 00:08:29,320 --> 00:08:31,720 Speaker 1: which is maybe you know, like if you if you 153 00:08:31,760 --> 00:08:35,600 Speaker 1: over collateralize it by then you're gonna get a percent. 154 00:08:35,600 --> 00:08:37,760 Speaker 1: So if you put in a dollar worth of value, 155 00:08:37,880 --> 00:08:40,000 Speaker 1: you get back a dollar uh. And then at some 156 00:08:40,040 --> 00:08:43,880 Speaker 1: point the price of the underlying collateral will fluctuate to 157 00:08:43,920 --> 00:08:46,120 Speaker 1: the point at which you reach like a point where 158 00:08:46,120 --> 00:08:48,920 Speaker 1: there's a margin call and then you know, either your 159 00:08:48,920 --> 00:08:51,520 Speaker 1: collateral get seized or you top it up or you 160 00:08:51,600 --> 00:08:55,880 Speaker 1: return the borrow. Right, So it's basically collateralized leading right. 161 00:08:55,960 --> 00:08:57,880 Speaker 1: That's kind of you know, that that sort of model. 162 00:08:58,120 --> 00:09:00,520 Speaker 1: And then finally, and this is where you know we 163 00:09:00,520 --> 00:09:03,560 Speaker 1: we we start talking about Luna and Ust. You know, 164 00:09:03,600 --> 00:09:06,960 Speaker 1: finally there is this pure class of algo stable coins 165 00:09:06,960 --> 00:09:11,520 Speaker 1: which do not have collateral or or severely undercollateralized and 166 00:09:11,920 --> 00:09:16,199 Speaker 1: they have some kind of stabilization mechanism. Long story short, 167 00:09:16,600 --> 00:09:20,720 Speaker 1: it's basically like a perpetual motion machine. And it's not 168 00:09:20,840 --> 00:09:23,560 Speaker 1: the first time that exact phrase has been used on 169 00:09:23,600 --> 00:09:28,119 Speaker 1: this podcast in reference to a Tero slash Luna. Yeah, definitely, 170 00:09:28,360 --> 00:09:31,920 Speaker 1: I would say either perpetual motion machine or giant Rue 171 00:09:31,920 --> 00:09:34,840 Speaker 1: Goldberg machine. Right, So some of these are just really 172 00:09:34,840 --> 00:09:38,960 Speaker 1: elaborate contraptions and you know, you don't know where the 173 00:09:39,000 --> 00:09:42,160 Speaker 1: hand crank is, but someone's turning a hand crank to 174 00:09:42,280 --> 00:09:45,040 Speaker 1: keep the system going. And it's not actually a perpetual 175 00:09:45,080 --> 00:09:47,800 Speaker 1: motion machine, which we know is impossible, but um so, 176 00:09:47,800 --> 00:09:50,640 Speaker 1: so that's the analogy. But basically the idea is that 177 00:09:50,679 --> 00:09:54,839 Speaker 1: you have some kind of mechanism which in some way, 178 00:09:55,040 --> 00:09:59,440 Speaker 1: you know, indirectly or directly expands the supply of that 179 00:09:59,520 --> 00:10:02,400 Speaker 1: stable point when the price is too high in order 180 00:10:02,400 --> 00:10:05,000 Speaker 1: to push it back down, and on the other side, 181 00:10:05,280 --> 00:10:08,559 Speaker 1: contracts the supply of that stable point through some mechanism 182 00:10:08,760 --> 00:10:10,959 Speaker 1: when the price is too low, hence pushing the price 183 00:10:11,000 --> 00:10:13,640 Speaker 1: back up. Right. So these are kind of like these. 184 00:10:14,000 --> 00:10:17,080 Speaker 1: You know, there are these feedback mechanisms regardless of how 185 00:10:17,080 --> 00:10:19,439 Speaker 1: you design it. Within this class of stable coin. They're 186 00:10:19,480 --> 00:10:23,920 Speaker 1: all these feedback mechanisms which eventually caused something like this 187 00:10:23,960 --> 00:10:26,240 Speaker 1: to happen, which is why in the end, I think 188 00:10:26,240 --> 00:10:28,720 Speaker 1: they're all pretty much the same, but you know, just 189 00:10:28,760 --> 00:10:30,960 Speaker 1: through different methods. I mean, they all look different, but 190 00:10:31,000 --> 00:10:33,360 Speaker 1: when you really, like when you start to really break 191 00:10:33,360 --> 00:10:37,719 Speaker 1: it down, it's all just about supply contraction and expansion. 192 00:10:38,360 --> 00:10:41,880 Speaker 1: So two things here. One, could you give us a 193 00:10:41,960 --> 00:10:46,280 Speaker 1: little bit more detail on that arbitrage mechanism between Terra 194 00:10:46,480 --> 00:10:50,280 Speaker 1: and Luna, like walk us through exactly how it works 195 00:10:50,320 --> 00:10:52,440 Speaker 1: if the price of Luna goes up or the price 196 00:10:52,440 --> 00:10:55,240 Speaker 1: of Luna goes down, and you know, vice versa with Tera. 197 00:10:55,440 --> 00:10:59,680 Speaker 1: And then secondly, you mentioned a hand kind of turning 198 00:10:59,720 --> 00:11:03,880 Speaker 1: the rank. And my understanding here is that yields on 199 00:11:04,040 --> 00:11:07,199 Speaker 1: offer from Tera slash Luna were exceptionally high, I think 200 00:11:07,240 --> 00:11:11,440 Speaker 1: something like nineteen or And this is another question that 201 00:11:11,480 --> 00:11:14,160 Speaker 1: we ask a lot in the crypto or DeFi space 202 00:11:14,200 --> 00:11:17,400 Speaker 1: more broadly, but where do those yields actually come from? 203 00:11:17,440 --> 00:11:23,160 Speaker 1: Like how does this entire incentivization mechanism work? M Yeah, definitely, 204 00:11:23,240 --> 00:11:25,400 Speaker 1: And and I completely agree with you that I think 205 00:11:25,480 --> 00:11:28,960 Speaker 1: this component of it, which is the anchor yields on 206 00:11:29,120 --> 00:11:33,400 Speaker 1: deposits for US T this nineteen and a half percent, 207 00:11:33,520 --> 00:11:36,840 Speaker 1: which then eventually dropped down eight. That's exactly the hand 208 00:11:36,880 --> 00:11:39,840 Speaker 1: crank in this perpetual motion machine that that makes it 209 00:11:39,920 --> 00:11:42,640 Speaker 1: not perpetual. That's it's a great question always I think 210 00:11:42,679 --> 00:11:44,560 Speaker 1: to ask where do the yields come from? I think 211 00:11:44,600 --> 00:11:46,920 Speaker 1: a lot of times, you know, it just seems like 212 00:11:46,960 --> 00:11:49,560 Speaker 1: there's free money, but it turns out you're you're just 213 00:11:49,679 --> 00:11:53,360 Speaker 1: subsuming all of this kind of indirect or hidden risk 214 00:11:54,000 --> 00:11:55,640 Speaker 1: that you're not aware of, right, A lot of this 215 00:11:55,720 --> 00:11:59,480 Speaker 1: kind of like tail risk, which only manifests once in 216 00:11:59,480 --> 00:12:01,920 Speaker 1: a blue moon, but when it does, it completely wipes 217 00:12:01,960 --> 00:12:04,040 Speaker 1: you out, right. So it's just it's just really kind 218 00:12:04,080 --> 00:12:07,160 Speaker 1: of like very dangerous kind of invisible risk. What I 219 00:12:07,240 --> 00:12:09,760 Speaker 1: always like to say is that most of the time, 220 00:12:10,160 --> 00:12:12,200 Speaker 1: you know, if you can't find where the yield is 221 00:12:12,200 --> 00:12:17,320 Speaker 1: coming from, then effectively it's coming from future bag holders. Right. 222 00:12:17,800 --> 00:12:21,920 Speaker 1: So it's like this idea that the sort of true 223 00:12:21,960 --> 00:12:25,400 Speaker 1: belief and sort of the cultish behavior of true believers 224 00:12:25,760 --> 00:12:30,760 Speaker 1: will eventually produce some value which gets extracted from them, 225 00:12:31,240 --> 00:12:33,200 Speaker 1: and it is given to you now in the present. 226 00:12:33,280 --> 00:12:35,480 Speaker 1: So it's extracted in the future and given to you 227 00:12:35,520 --> 00:12:37,800 Speaker 1: in the present right now, right, And I think that's 228 00:12:37,840 --> 00:12:41,400 Speaker 1: basically exactly what's going on with this with this lunar model. 229 00:12:41,440 --> 00:12:43,600 Speaker 1: I know that's a little bit abstract, but um, you 230 00:12:43,640 --> 00:12:45,240 Speaker 1: know that's kind of how I how I see it. 231 00:12:45,640 --> 00:12:49,640 Speaker 1: And then maybe just returning to your first question, we 232 00:12:49,640 --> 00:12:52,080 Speaker 1: could do remind me again with the first question, can 233 00:12:52,120 --> 00:12:55,880 Speaker 1: you explain exactly how the arbitrage mechanism between Luna and 234 00:12:56,240 --> 00:13:00,240 Speaker 1: Terra or Ust actually works, Like, walk us through what 235 00:13:00,440 --> 00:13:04,120 Speaker 1: is happening as the prices of either of these things move, 236 00:13:04,679 --> 00:13:08,640 Speaker 1: like how they balance out. Yeah, so, um, how they're 237 00:13:08,640 --> 00:13:13,079 Speaker 1: supposed to balance out, I should say, yeah. So I'll first, um, 238 00:13:13,120 --> 00:13:15,960 Speaker 1: sort of just describe the simple model and then I'll 239 00:13:15,960 --> 00:13:19,240 Speaker 1: add some caveats on some of the intricacies there. So 240 00:13:19,280 --> 00:13:22,439 Speaker 1: the simple model is that at any point you can 241 00:13:22,480 --> 00:13:28,280 Speaker 1: always redeem one UST for one dollars worth of Luna, right, So, 242 00:13:28,360 --> 00:13:31,160 Speaker 1: like if Luna was at a hundred dollars, then one 243 00:13:31,280 --> 00:13:34,800 Speaker 1: us t would get you, uh, one luna penny right 244 00:13:35,000 --> 00:13:37,839 Speaker 1: point zero one Luna, which is equivalent to one dollar. 245 00:13:38,280 --> 00:13:40,720 Speaker 1: And if Luna is one dollar, then you know one 246 00:13:40,840 --> 00:13:42,720 Speaker 1: UST is going to give you one Luna. Right. But 247 00:13:42,800 --> 00:13:46,599 Speaker 1: in any case, you're always able to redeem us T 248 00:13:47,360 --> 00:13:51,920 Speaker 1: UH for the equivalent amount of dollars worth of Luna. Uh. 249 00:13:51,920 --> 00:13:53,800 Speaker 1: And the amount of Luna you get is based on 250 00:13:53,920 --> 00:13:57,000 Speaker 1: where the current market value for Luna is and the 251 00:13:57,080 --> 00:13:59,440 Speaker 1: vice and you know the opposite is true too. You 252 00:13:59,480 --> 00:14:03,880 Speaker 1: can all is destroy or burn one dollar's worth of 253 00:14:03,960 --> 00:14:08,200 Speaker 1: Luna to create one U s T. Right. So the 254 00:14:08,320 --> 00:14:12,040 Speaker 1: idea behind this feedback mechanism is that if us T 255 00:14:12,600 --> 00:14:14,959 Speaker 1: is trading below one dollar, what you can do is 256 00:14:15,000 --> 00:14:17,800 Speaker 1: you can buy that on the open market, right, and 257 00:14:17,840 --> 00:14:20,920 Speaker 1: then convert that to one dollar's worth of Luna and 258 00:14:20,960 --> 00:14:23,960 Speaker 1: then sell that one dollar of luna. Right. So that's 259 00:14:24,000 --> 00:14:26,800 Speaker 1: kind of how that arbitrage mechanism works in order to 260 00:14:26,920 --> 00:14:30,760 Speaker 1: maintain this peck. So that's that's basically the simple model. 261 00:14:31,120 --> 00:14:33,880 Speaker 1: Now it gets a little bit more complicated because there's 262 00:14:33,880 --> 00:14:37,600 Speaker 1: a lot of dials um and and knobs that you 263 00:14:37,600 --> 00:14:40,600 Speaker 1: can adjust uh and you know, bells and whistles around this. 264 00:14:40,920 --> 00:14:44,520 Speaker 1: So the first thing is that it's not technically true 265 00:14:44,680 --> 00:14:47,200 Speaker 1: that you get exactly one dollar's worth of Luna for 266 00:14:47,480 --> 00:14:51,400 Speaker 1: burning one U s T. There is basically something called 267 00:14:51,480 --> 00:14:54,560 Speaker 1: a automated market maker. This is something that has been 268 00:14:54,560 --> 00:14:58,480 Speaker 1: popularized by you know, uh, you know, unit swap, sushi swap, 269 00:14:58,560 --> 00:15:02,120 Speaker 1: curve balancer, a lot of these you know, m M protocols, 270 00:15:02,200 --> 00:15:06,440 Speaker 1: these uh, these sort of decentralized liquidity pools, and it's 271 00:15:06,520 --> 00:15:11,800 Speaker 1: really this automated market maker bonding curve which governs sort 272 00:15:11,800 --> 00:15:16,360 Speaker 1: of the slippage or the costs of converting between Luna 273 00:15:16,720 --> 00:15:22,400 Speaker 1: and UST. So the first component of this mechanism is 274 00:15:22,440 --> 00:15:25,400 Speaker 1: that the greater the size that you do, the worse 275 00:15:25,520 --> 00:15:28,200 Speaker 1: of a price you're going to get. Right, So this 276 00:15:28,280 --> 00:15:31,040 Speaker 1: is like equivalent to like market slippage. You know, if 277 00:15:31,040 --> 00:15:34,080 Speaker 1: you want to buy, you know, a million dollars worth 278 00:15:34,120 --> 00:15:36,720 Speaker 1: of something, you know you're gonna pay a little above 279 00:15:36,960 --> 00:15:39,040 Speaker 1: market price. If you want to buy a billion dollars 280 00:15:39,040 --> 00:15:42,400 Speaker 1: worth worth of something, you're gonna pay well above market price. Right. 281 00:15:42,440 --> 00:15:43,760 Speaker 1: So it's just you know, it kind of depends on 282 00:15:43,760 --> 00:15:46,400 Speaker 1: liquid in the market, but really it's governed by this 283 00:15:46,800 --> 00:15:49,440 Speaker 1: bonding curve, and you know, the greater the size that 284 00:15:49,480 --> 00:15:52,240 Speaker 1: you do, the more slippage you in curve. The second 285 00:15:52,360 --> 00:15:54,440 Speaker 1: part of it that's a little bit nuanced, is that 286 00:15:54,480 --> 00:15:56,400 Speaker 1: there is some fee that's collected in the middle just 287 00:15:56,480 --> 00:15:58,720 Speaker 1: like all these other bonding curves, all these other A 288 00:15:58,840 --> 00:16:02,240 Speaker 1: M M s. There is a fee for converting. It's 289 00:16:02,240 --> 00:16:04,400 Speaker 1: not very high, but you know, there is still some 290 00:16:04,480 --> 00:16:08,080 Speaker 1: fee which adds on to basically the transactional costs, which 291 00:16:08,080 --> 00:16:10,400 Speaker 1: are the slippage you know, plus the fee itself. And 292 00:16:10,440 --> 00:16:13,160 Speaker 1: then the last part that's really interesting about this mechanism 293 00:16:13,600 --> 00:16:16,200 Speaker 1: is that you know, before the full collapse, you know, 294 00:16:16,240 --> 00:16:18,920 Speaker 1: in the past couple of days, there was basically a 295 00:16:18,960 --> 00:16:24,920 Speaker 1: gating mechanism on which governed exactly how much ust could 296 00:16:24,960 --> 00:16:28,600 Speaker 1: be created or destroyed per day, So being destroyed being 297 00:16:28,640 --> 00:16:30,800 Speaker 1: you know, moving back into Luna, and I think that 298 00:16:30,800 --> 00:16:34,120 Speaker 1: that number was around like two fifty mil uh dollars 299 00:16:34,160 --> 00:16:36,760 Speaker 1: worth per day. Um, So anything beyond that you just 300 00:16:36,840 --> 00:16:38,960 Speaker 1: you're just gonna have to wait until the next day. 301 00:16:39,040 --> 00:16:42,280 Speaker 1: And then you know, there's also all sorts of like um, 302 00:16:42,320 --> 00:16:45,160 Speaker 1: you know, much finer details like pool recovery periods and 303 00:16:45,160 --> 00:16:46,800 Speaker 1: stuff like that, but you know, none of that is 304 00:16:46,800 --> 00:16:48,920 Speaker 1: really that important, I think, to what we're gonna be 305 00:16:48,920 --> 00:16:52,240 Speaker 1: talking about next. So I think just based on that explanation, 306 00:16:52,320 --> 00:16:55,080 Speaker 1: I think we should be able to describe the phenomenon 307 00:16:55,160 --> 00:16:57,200 Speaker 1: that we've we've seen in the past few days. So 308 00:16:57,240 --> 00:16:59,560 Speaker 1: I want to get before we get into sort of 309 00:16:59,600 --> 00:17:02,560 Speaker 1: like what happened over the last few days, because I 310 00:17:02,600 --> 00:17:04,800 Speaker 1: think you've said some important things. The fact that there's 311 00:17:04,800 --> 00:17:07,080 Speaker 1: a limit on how much can be converted in a 312 00:17:07,080 --> 00:17:10,040 Speaker 1: given day is really important to understanding the action. The 313 00:17:10,080 --> 00:17:12,760 Speaker 1: fact that there's a fee obviously for the more you trade, 314 00:17:12,800 --> 00:17:15,440 Speaker 1: which if everyone's trading, fees go up. The one other 315 00:17:15,720 --> 00:17:20,680 Speaker 1: UM element I'm curious about an understanding its role actually too. 316 00:17:21,119 --> 00:17:25,159 Speaker 1: I want to understand a little bit further them. The 317 00:17:25,280 --> 00:17:29,640 Speaker 1: Luna Foundation bought a ton of bitcoin I think earlier 318 00:17:29,680 --> 00:17:32,200 Speaker 1: in the year, and their basic idea was like, Okay, 319 00:17:32,520 --> 00:17:35,400 Speaker 1: you know, just in case I guess this the the 320 00:17:35,440 --> 00:17:38,600 Speaker 1: perpetual motion machine starts to wobble a little bit, we 321 00:17:38,680 --> 00:17:41,560 Speaker 1: can defend the PEG with this big bitcoin reserves, sort 322 00:17:41,600 --> 00:17:46,439 Speaker 1: of like classic e M style. So I found this 323 00:17:46,480 --> 00:17:49,240 Speaker 1: move really weird because either you're sort of a fully 324 00:17:49,280 --> 00:17:53,280 Speaker 1: backed stable coin or its traditional reserves, or you're an 325 00:17:53,280 --> 00:17:56,080 Speaker 1: algorithmic stable coin. Because the whole the whole problem they 326 00:17:56,080 --> 00:17:57,920 Speaker 1: were trying to solve was that they wanted to get 327 00:17:57,960 --> 00:18:01,639 Speaker 1: away from the traditional financial system UM without having to 328 00:18:01,680 --> 00:18:04,159 Speaker 1: build the reserves. It's sort of like being like a 329 00:18:04,200 --> 00:18:07,480 Speaker 1: little bit pregnant or something like we're sort of a 330 00:18:07,560 --> 00:18:11,440 Speaker 1: little bit a little bit uh, a little bit unbacked. Yeah, 331 00:18:11,480 --> 00:18:13,760 Speaker 1: like we're sort of reserved back but not so what 332 00:18:13,880 --> 00:18:16,639 Speaker 1: is what was the role? Well, I I want to 333 00:18:16,680 --> 00:18:20,880 Speaker 1: know what is the role of the Bitcoin Stabilization Fund? 334 00:18:21,200 --> 00:18:23,000 Speaker 1: And then also I know you touched on it, but 335 00:18:23,040 --> 00:18:25,399 Speaker 1: could you just explain a little bit and Tracy as 336 00:18:25,520 --> 00:18:29,600 Speaker 1: but I think it's crucial that percent yield that was 337 00:18:30,080 --> 00:18:32,840 Speaker 1: being given to induce people to hold us t this 338 00:18:32,960 --> 00:18:35,119 Speaker 1: sort of big reason to hold a stable coin and 339 00:18:35,160 --> 00:18:38,520 Speaker 1: actually make money holding a stable Like where was that 340 00:18:39,040 --> 00:18:41,960 Speaker 1: coming from? Like what was the source of funds specifically 341 00:18:41,960 --> 00:18:45,000 Speaker 1: other than just sort of theoretical future bag holders, Like 342 00:18:45,000 --> 00:18:48,600 Speaker 1: how was that paid out? So basically, you know, when 343 00:18:48,880 --> 00:18:52,480 Speaker 1: Luna or the terror Eco system first got started, Uh, 344 00:18:52,520 --> 00:18:54,399 Speaker 1: there was some funds that were set aside for the 345 00:18:54,440 --> 00:18:58,240 Speaker 1: company itself, right, And the main company is Terraform Labs TfL, 346 00:18:58,840 --> 00:19:01,800 Speaker 1: and they have this huge stash of Luna which unlocks 347 00:19:01,800 --> 00:19:04,240 Speaker 1: over a certain investing schedule. Right, so even for them, 348 00:19:04,320 --> 00:19:07,400 Speaker 1: you know, slowly unlocks over time. So what they would 349 00:19:07,400 --> 00:19:09,760 Speaker 1: do in order to finance their operations and to also 350 00:19:09,920 --> 00:19:13,280 Speaker 1: finance the anchor yield reserve. Is they would sell large 351 00:19:13,280 --> 00:19:15,679 Speaker 1: clips of this too, you know, willing investors at some 352 00:19:15,760 --> 00:19:18,080 Speaker 1: kind of discount that also has a one year clip 353 00:19:18,160 --> 00:19:20,720 Speaker 1: for some kind of vesting schedule, uh something like that, 354 00:19:21,200 --> 00:19:23,439 Speaker 1: and then they would use that for operations, and they 355 00:19:23,440 --> 00:19:26,679 Speaker 1: would also use that to keep basically topping up the 356 00:19:26,720 --> 00:19:31,439 Speaker 1: anchor protocol on their year reserve because they were paying 357 00:19:31,480 --> 00:19:35,760 Speaker 1: more interests to depositors than they were collecting from borrowers. 358 00:19:36,080 --> 00:19:38,719 Speaker 1: And you know, I think in the end stages of Luna, 359 00:19:38,960 --> 00:19:42,280 Speaker 1: in its final days, um, you could see that the 360 00:19:42,400 --> 00:19:46,000 Speaker 1: uh you know, the the deposit amount was way way 361 00:19:46,119 --> 00:19:49,040 Speaker 1: higher than the borrowed amount. So you know, they're they 362 00:19:49,080 --> 00:19:50,840 Speaker 1: were bleeding. I mean, I think at some point so 363 00:19:51,080 --> 00:19:54,800 Speaker 1: everyone so everyone buys UFT in order to collect that. 364 00:19:55,920 --> 00:19:58,720 Speaker 1: But that basically has the effect, if you think it through, 365 00:19:58,840 --> 00:20:02,479 Speaker 1: of sapping those reserves fund faster. They're sort of like 366 00:20:02,520 --> 00:20:05,160 Speaker 1: set aside to sort of bootstrap the whole thing and 367 00:20:05,440 --> 00:20:09,240 Speaker 1: incentivize the whole thing. But essentially, if everyone is chasing 368 00:20:09,280 --> 00:20:11,359 Speaker 1: for it at once, that starts to get depleted or 369 00:20:11,359 --> 00:20:15,200 Speaker 1: you start to like strain your ability to pay that up. Uh. Yeah, 370 00:20:15,200 --> 00:20:18,040 Speaker 1: that's exactly right. I think at the at the peak, 371 00:20:18,119 --> 00:20:21,400 Speaker 1: they were burning maybe about seven million a day, uh 372 00:20:21,440 --> 00:20:24,560 Speaker 1: dollars worth a day of their their their yield reserve, 373 00:20:24,960 --> 00:20:27,399 Speaker 1: and uh, you know, originally I think it was something 374 00:20:27,440 --> 00:20:29,680 Speaker 1: like fifty mil or eighty mil or something like that. 375 00:20:30,160 --> 00:20:31,679 Speaker 1: And then they had to do a top up of 376 00:20:31,880 --> 00:20:34,880 Speaker 1: four fifty mill and then, you know, very quickly soon 377 00:20:34,960 --> 00:20:37,840 Speaker 1: after that, soon was almost depleted, and they were thinking 378 00:20:37,840 --> 00:20:40,600 Speaker 1: about how much to do another top above. Whether you know, 379 00:20:40,640 --> 00:20:42,159 Speaker 1: they were thinking about whether to do it or not. 380 00:20:42,240 --> 00:20:46,399 Speaker 1: Everybody was you know, you know, lobbying Dough Dough quant 381 00:20:46,440 --> 00:20:48,600 Speaker 1: to to do it. You know, he was, you know, 382 00:20:48,680 --> 00:20:50,879 Speaker 1: running some rumors that oh maybe it's going to be 383 00:20:50,920 --> 00:20:53,840 Speaker 1: over a billion this time, this, this and that. So 384 00:20:54,040 --> 00:20:57,000 Speaker 1: you know, the whole the whole thing was very expensive. Now, 385 00:20:57,080 --> 00:20:59,159 Speaker 1: I think what they were thinking, because I don't want 386 00:20:59,160 --> 00:21:01,000 Speaker 1: to strawman them, you or, I think what they were 387 00:21:01,040 --> 00:21:04,720 Speaker 1: thinking is that, you know, they just want to uh 388 00:21:04,800 --> 00:21:07,280 Speaker 1: you know, they think about this as a marketing expense, right, 389 00:21:07,320 --> 00:21:08,760 Speaker 1: so they just want to get to get everybody talking 390 00:21:08,800 --> 00:21:12,160 Speaker 1: about Luna, everybody using us t um. You know, they're 391 00:21:12,200 --> 00:21:14,200 Speaker 1: just bleeding seven million in a day, but they're getting 392 00:21:14,200 --> 00:21:17,200 Speaker 1: a lot of people you know, talking about anchor using anchor, 393 00:21:17,640 --> 00:21:21,200 Speaker 1: you know, using their ecosystem, putting their money into it, uh, 394 00:21:21,240 --> 00:21:24,840 Speaker 1: into this bar lending protocol. So you know, I personally 395 00:21:24,880 --> 00:21:26,600 Speaker 1: don't think it was worth it. I think they you know, 396 00:21:26,680 --> 00:21:29,720 Speaker 1: probably even even if they were right, which I don't think. 397 00:21:29,920 --> 00:21:32,400 Speaker 1: I think they're absolutely wrong. But even if they were right, 398 00:21:32,440 --> 00:21:34,360 Speaker 1: they probably could have gone away with a little bit 399 00:21:34,359 --> 00:21:38,560 Speaker 1: lower than yields. I mean probably like even like eighteen 400 00:21:38,840 --> 00:21:40,879 Speaker 1: seventeen probably would have been fine. Now, it's not going 401 00:21:40,960 --> 00:21:42,439 Speaker 1: to save them that much more money, but I do 402 00:21:42,480 --> 00:21:44,800 Speaker 1: think they overpaid for that. Uh, if you know, it's 403 00:21:44,840 --> 00:21:47,320 Speaker 1: just the random thought there. And what about what do 404 00:21:47,359 --> 00:21:50,520 Speaker 1: you think was the rationale for the bitcoin reserves, because 405 00:21:50,560 --> 00:21:53,360 Speaker 1: I think before this week happened, I think they ended 406 00:21:53,440 --> 00:21:56,800 Speaker 1: up with something like three billion worth of bitcoin that 407 00:21:56,840 --> 00:22:01,440 Speaker 1: they'd accumulated. I think that's right. Yeah, um, yeah, that's 408 00:22:01,440 --> 00:22:05,360 Speaker 1: about right. So you know, um, I think this, uh, 409 00:22:05,400 --> 00:22:09,080 Speaker 1: this whole purchasing of the bitcoin was, in my opinion, 410 00:22:09,200 --> 00:22:12,919 Speaker 1: a great move, uh in some ways and in some 411 00:22:12,960 --> 00:22:15,240 Speaker 1: ways a really bad move. Right. So it was a 412 00:22:15,280 --> 00:22:18,359 Speaker 1: really good move I think in terms of trying to 413 00:22:18,440 --> 00:22:23,040 Speaker 1: make the system solvent eventually they probably needed about actually 414 00:22:23,119 --> 00:22:26,119 Speaker 1: about ten billion dollars worth of collateral. They got to 415 00:22:26,119 --> 00:22:30,359 Speaker 1: maybe about only only seven billion more, you know, And 416 00:22:30,400 --> 00:22:33,399 Speaker 1: it's uh, I mean easier said than done, definitely, but 417 00:22:33,480 --> 00:22:34,840 Speaker 1: you know, at least it was I think a step 418 00:22:34,840 --> 00:22:37,800 Speaker 1: in the right direction in terms of creating solvency for 419 00:22:37,840 --> 00:22:40,280 Speaker 1: the system. I think the system was way in the past. 420 00:22:40,280 --> 00:22:42,600 Speaker 1: It was already insolvent. You know. It's just that nobody 421 00:22:42,640 --> 00:22:46,600 Speaker 1: realized because they had created such a strong supply sink 422 00:22:46,720 --> 00:22:48,879 Speaker 1: an anchor for this us T. You know, if that 423 00:22:48,920 --> 00:22:52,920 Speaker 1: disappeared overnight or even gradually, the entire system was insolvent. 424 00:22:52,960 --> 00:22:54,840 Speaker 1: I mean even at a price I would say, of 425 00:22:54,920 --> 00:22:57,560 Speaker 1: over a hundred dollars a luna. Uh, this whole thing 426 00:22:57,640 --> 00:23:01,440 Speaker 1: was already insolvent, just nobody realized it. But anyway, returning 427 00:23:01,440 --> 00:23:04,239 Speaker 1: back to the bitcoin, um so, I think in that 428 00:23:04,240 --> 00:23:06,160 Speaker 1: sense it was really good that they bought the bitcoin, 429 00:23:06,480 --> 00:23:08,920 Speaker 1: But in some ways it was ald bit bad because 430 00:23:08,920 --> 00:23:13,800 Speaker 1: it kind of destroyed the narrative a little bit, right. Yeah, 431 00:23:14,280 --> 00:23:16,920 Speaker 1: Now it's just like a kind of half backed, a 432 00:23:16,960 --> 00:23:19,920 Speaker 1: little bit half aspect, you know, kind of Uh. I 433 00:23:19,920 --> 00:23:23,400 Speaker 1: don't know if I could say that something, but uh, 434 00:23:23,440 --> 00:23:25,120 Speaker 1: but you know, but it's you know, now it's sort 435 00:23:25,119 --> 00:23:27,560 Speaker 1: of like it's destroying their own narrative because like they 436 00:23:27,560 --> 00:23:31,359 Speaker 1: basically said that, oh, we we finally constructed this perpetual 437 00:23:31,359 --> 00:23:34,119 Speaker 1: motion machine. You know, behold everybody, We finally did it, 438 00:23:34,320 --> 00:23:36,560 Speaker 1: you know, and it's working and it's amazing. But actually, 439 00:23:36,560 --> 00:23:38,800 Speaker 1: you know, just in case it doesn't work, let's get 440 00:23:38,840 --> 00:23:41,280 Speaker 1: some insurance. You know. So like before they were the 441 00:23:41,359 --> 00:23:43,119 Speaker 1: narrative was very strong. It was just like there was 442 00:23:43,160 --> 00:23:44,959 Speaker 1: just saying, oh, yeah, for sure the state works now, 443 00:23:44,960 --> 00:23:46,760 Speaker 1: and obviously it doesn't. But you know, they were saying 444 00:23:46,760 --> 00:23:48,560 Speaker 1: and a lot of people were believing them. But you know, 445 00:23:49,040 --> 00:23:51,159 Speaker 1: it's almost like they were capitulating a little bit on 446 00:23:51,200 --> 00:23:54,879 Speaker 1: the narrative and making certain concessions by even buying the 447 00:23:54,880 --> 00:23:57,280 Speaker 1: bitcoin in the first place, because now it begets the question. 448 00:23:57,440 --> 00:23:59,680 Speaker 1: Now people were thinking, well, wait a second, this thing 449 00:23:59,760 --> 00:24:01,959 Speaker 1: is just always it was going to work all along. 450 00:24:02,200 --> 00:24:04,720 Speaker 1: Why do we even need that, Like you're telling me that, 451 00:24:04,960 --> 00:24:07,200 Speaker 1: you know that that's not really a vote of confidence there, 452 00:24:07,240 --> 00:24:09,520 Speaker 1: you know that you even feel the need to get 453 00:24:09,560 --> 00:24:12,440 Speaker 1: some insurance there. But you know, all that being said, 454 00:24:12,520 --> 00:24:14,240 Speaker 1: still happy that they did, I mean, it would have 455 00:24:14,280 --> 00:24:31,720 Speaker 1: been even worse if they did. So walk us through 456 00:24:31,760 --> 00:24:34,600 Speaker 1: what you think just happened, Because I've seen some wild 457 00:24:35,119 --> 00:24:38,880 Speaker 1: theories out there. I mean a lot of the lunar bowls, 458 00:24:39,359 --> 00:24:43,119 Speaker 1: I guess they sometimes call themselves lunatics, but a lot 459 00:24:43,160 --> 00:24:45,320 Speaker 1: of them are talking about this idea of a concerted 460 00:24:45,400 --> 00:24:50,920 Speaker 1: attack from people like Citadel and yeah, I mean it 461 00:24:51,000 --> 00:24:54,440 Speaker 1: just sounds crazy to me. But also, but also here's 462 00:24:54,480 --> 00:24:57,119 Speaker 1: the thing, Like, even if it was some sort of 463 00:24:57,160 --> 00:25:00,480 Speaker 1: concerted attack a bunch of people shorting all at once, 464 00:25:00,720 --> 00:25:04,960 Speaker 1: that still seems like a fundamental vulnerability in this machine 465 00:25:05,000 --> 00:25:09,400 Speaker 1: that you've designed to be stable. So I guess, walk 466 00:25:09,480 --> 00:25:11,760 Speaker 1: us through what you think happened and what the exact 467 00:25:11,840 --> 00:25:16,080 Speaker 1: trigger was for the chaos that we've seen this week. Yeah, 468 00:25:16,080 --> 00:25:19,280 Speaker 1: the deep pegging. Yeah, you know, I think we're really 469 00:25:19,440 --> 00:25:23,040 Speaker 1: entering this phase in the market cycle, which I've been 470 00:25:23,040 --> 00:25:26,720 Speaker 1: calling on Twitter the finger pointing phase. You know, now 471 00:25:26,760 --> 00:25:29,680 Speaker 1: that this thing is clearly you know, it's clearly failed, 472 00:25:30,160 --> 00:25:32,919 Speaker 1: who should take the blame for this? Right? Is it 473 00:25:33,119 --> 00:25:37,000 Speaker 1: a some external party in a foreign world, the trad 474 00:25:37,000 --> 00:25:40,000 Speaker 1: fi world? Right? The boomers in the suits that nobody 475 00:25:40,040 --> 00:25:43,119 Speaker 1: likes crypto? Yeah, easy scapegoat? Right? Probably was Citadel or 476 00:25:43,200 --> 00:25:45,840 Speaker 1: black Rock right, turned out to be just a post 477 00:25:45,880 --> 00:25:48,600 Speaker 1: of four chance, you know, like I mean, like they're not. 478 00:25:48,640 --> 00:25:51,840 Speaker 1: I can't believe we're in historic times. The Black Rocket Citadel. 479 00:25:52,000 --> 00:25:55,119 Speaker 1: Now I have to issue rebuttals to a four champ post. 480 00:25:55,200 --> 00:25:59,639 Speaker 1: But that's absolutely ridiculous. I mean, it just goes to 481 00:25:59,680 --> 00:26:03,199 Speaker 1: show how quickly means spread and how quickly narrative spreads, 482 00:26:03,480 --> 00:26:05,720 Speaker 1: whether it's right or wrong. Where we're in the age 483 00:26:05,720 --> 00:26:09,480 Speaker 1: of social media and words spread so fast that literally 484 00:26:09,840 --> 00:26:12,360 Speaker 1: a four chand post can trigger a response from set 485 00:26:12,440 --> 00:26:14,439 Speaker 1: it on black Rock And it's absolutely ridiculous. I mean, 486 00:26:14,520 --> 00:26:17,720 Speaker 1: where people coming up with these conspiracies. Uh so is 487 00:26:17,760 --> 00:26:20,800 Speaker 1: it a them, right, these outsiders, these boomer trade tread 488 00:26:20,880 --> 00:26:24,359 Speaker 1: rad fight guys. Is it be somebody internal to Crypto? 489 00:26:24,600 --> 00:26:27,040 Speaker 1: You know, some big shorters like uh you know, like 490 00:26:27,119 --> 00:26:30,640 Speaker 1: galwah Capital or like some of the other noted uh 491 00:26:30,680 --> 00:26:33,520 Speaker 1: you know six Factors of Luna. Was it Sam, you know, 492 00:26:33,680 --> 00:26:36,199 Speaker 1: was it Winter Mew? Who knows? Maybe it was one 493 00:26:36,200 --> 00:26:40,520 Speaker 1: of our own people, right or is it c Um? 494 00:26:40,720 --> 00:26:42,560 Speaker 1: Is it do Kuans fault? You know, because he built 495 00:26:42,560 --> 00:26:45,960 Speaker 1: this project, the mechanism was clearly unsound. Maybe he's a grifter. 496 00:26:46,040 --> 00:26:48,600 Speaker 1: Maybe he was a scammer all along. Maybe it's his 497 00:26:48,640 --> 00:26:51,639 Speaker 1: fault or is it cut d like? Is it? Is 498 00:26:51,680 --> 00:26:53,720 Speaker 1: it like people's own fault in a way? Right? Is 499 00:26:53,760 --> 00:26:56,680 Speaker 1: it that they themselves got a bit greedy? Um? They 500 00:26:56,760 --> 00:26:59,320 Speaker 1: wanted so badly to believe that there was free money 501 00:26:59,359 --> 00:27:02,480 Speaker 1: raining from this sky that they turned off all their 502 00:27:02,520 --> 00:27:05,560 Speaker 1: reason and logic because they you know, they had some 503 00:27:05,640 --> 00:27:08,840 Speaker 1: hope of changing the circumstances of their life. You know, 504 00:27:08,880 --> 00:27:10,639 Speaker 1: it's a bit sad to say, but I think you 505 00:27:10,640 --> 00:27:12,760 Speaker 1: know there is some bit of that too, you know, 506 00:27:12,960 --> 00:27:17,960 Speaker 1: So what I would say is really hard to say 507 00:27:18,320 --> 00:27:20,919 Speaker 1: what you know exactly triggered it, but I think it 508 00:27:20,960 --> 00:27:23,840 Speaker 1: would you know, if this is any lesson for us, 509 00:27:23,920 --> 00:27:26,040 Speaker 1: and I think you know, the crypto space, we've we've 510 00:27:26,080 --> 00:27:29,320 Speaker 1: always been um kind of like we want to be 511 00:27:29,359 --> 00:27:33,040 Speaker 1: a self regulatory, regulating industry. We do. We don't really 512 00:27:33,080 --> 00:27:35,880 Speaker 1: need regulators to step in, you know, protect the little guy, 513 00:27:36,119 --> 00:27:39,440 Speaker 1: protect the retail from themselves. Right, we can handle things 514 00:27:39,480 --> 00:27:42,080 Speaker 1: on our own. And if that is the case, then 515 00:27:42,119 --> 00:27:44,360 Speaker 1: every time something like this happens, we have to take 516 00:27:44,400 --> 00:27:46,560 Speaker 1: some very good lessons about them. We have to, you know, 517 00:27:46,600 --> 00:27:49,360 Speaker 1: take a hard look at ourselves and why this happened? 518 00:27:49,640 --> 00:27:52,439 Speaker 1: You know, why how did people get so greedy and 519 00:27:52,480 --> 00:27:55,280 Speaker 1: not just not just retail themselves to write I think 520 00:27:55,320 --> 00:27:57,520 Speaker 1: it is good for them to reflect on themselves too. 521 00:27:57,600 --> 00:28:00,119 Speaker 1: But also, you know, how did the vcs? How did 522 00:28:00,119 --> 00:28:02,399 Speaker 1: the investors get so greedy about this stuff? How did 523 00:28:02,400 --> 00:28:04,760 Speaker 1: the founders get so greedy about this stuff? You know, 524 00:28:05,280 --> 00:28:07,320 Speaker 1: the exchanges, I mean to some extent. I mean, they 525 00:28:07,320 --> 00:28:10,119 Speaker 1: definitely benefit from all the trading volume, right, so you know, 526 00:28:10,280 --> 00:28:12,560 Speaker 1: maybe it's not that you know, they're particularly greedy, but 527 00:28:12,640 --> 00:28:14,600 Speaker 1: maybe they look the other way because they don't really care. 528 00:28:14,600 --> 00:28:17,240 Speaker 1: As long as you could trade a coin back and forth, uh, 529 00:28:17,240 --> 00:28:19,400 Speaker 1: and you know, collect the fees, maybe it was still 530 00:28:19,400 --> 00:28:21,639 Speaker 1: good for them, right. So you know, I think I 531 00:28:21,640 --> 00:28:23,879 Speaker 1: think it is important for us to reflect on ourselves 532 00:28:24,080 --> 00:28:26,880 Speaker 1: before we just start pointing fingers. Now that being said, 533 00:28:26,920 --> 00:28:28,679 Speaker 1: if we want to talk about how how you know, 534 00:28:28,720 --> 00:28:31,480 Speaker 1: it actually went down, there's been you know, a lot 535 00:28:31,520 --> 00:28:35,040 Speaker 1: of speculation and you know, some people have woven these 536 00:28:35,119 --> 00:28:38,120 Speaker 1: very intricate narratives about Okay, on this time, this thing happened, 537 00:28:38,160 --> 00:28:40,239 Speaker 1: this time, that thing happened. Um, what I would say 538 00:28:40,280 --> 00:28:43,440 Speaker 1: is that most mostly its speculation. There are some things 539 00:28:43,880 --> 00:28:46,880 Speaker 1: that are I think factual. So maybe we can just 540 00:28:46,920 --> 00:28:50,479 Speaker 1: start with that, which is that when Luna first um 541 00:28:50,680 --> 00:28:54,560 Speaker 1: started to unwind. This was during a period, you know, 542 00:28:54,560 --> 00:28:56,960 Speaker 1: when the first deep pegging happened. There's a couple of 543 00:28:57,040 --> 00:29:00,600 Speaker 1: days ago. Just before you keep moving. We're recording this Thursday, 544 00:29:00,640 --> 00:29:03,800 Speaker 1: May twelve, and so it was really I feel like 545 00:29:04,040 --> 00:29:07,560 Speaker 1: last Saturday morning. I guess that was maybe the seventh 546 00:29:07,640 --> 00:29:09,120 Speaker 1: or something. I just wanted to sort of like set 547 00:29:09,160 --> 00:29:11,280 Speaker 1: that when people like people have been talking about for 548 00:29:11,280 --> 00:29:13,320 Speaker 1: a while, but that was sort of when it suddenly 549 00:29:13,320 --> 00:29:16,200 Speaker 1: started to deviate. I think it was about roughly five 550 00:29:16,280 --> 00:29:18,360 Speaker 1: or six days ago. But anyway, sorry, keep going. I 551 00:29:18,400 --> 00:29:20,240 Speaker 1: just want to make sure listeners start to understand the 552 00:29:20,280 --> 00:29:24,280 Speaker 1: time frame here. Yeah, exactly. So, so it was around 553 00:29:24,320 --> 00:29:27,920 Speaker 1: that time, and it was during a time when there 554 00:29:28,120 --> 00:29:34,320 Speaker 1: was a migration of assets from the three pool on 555 00:29:34,440 --> 00:29:38,400 Speaker 1: Curve to the new four pool, right, So maybe I 556 00:29:38,520 --> 00:29:42,760 Speaker 1: just I'll explain that a So I guess starting with curve. 557 00:29:43,040 --> 00:29:45,520 Speaker 1: Curve is basically it's a little bit like unit swap. 558 00:29:45,640 --> 00:29:48,080 Speaker 1: It's a it's a bonding curve. M M. It's a 559 00:29:48,120 --> 00:29:50,680 Speaker 1: bit flatter in terms of the bonding curve meaning that 560 00:29:50,920 --> 00:29:55,520 Speaker 1: you can trade greater size near quote unquote the peg, 561 00:29:55,800 --> 00:29:57,320 Speaker 1: you know, and this is like this is mostly for 562 00:29:57,360 --> 00:29:59,720 Speaker 1: stable points, right see. You know, for three pool, it's like, 563 00:30:00,040 --> 00:30:03,840 Speaker 1: you know, you have USDC USDT Die, and those are 564 00:30:03,960 --> 00:30:06,640 Speaker 1: three three coins in three pool, and they're all stable coins. 565 00:30:06,640 --> 00:30:09,280 Speaker 1: They should all be pegged roughly to a dollar. Uh 566 00:30:09,320 --> 00:30:11,640 Speaker 1: so you know, around a dollar you can trade huge 567 00:30:11,640 --> 00:30:15,240 Speaker 1: amounts of size, which is not quite doable in you know, 568 00:30:15,440 --> 00:30:18,560 Speaker 1: rounder bonding curve like you know, most things on NITA, 569 00:30:18,640 --> 00:30:20,880 Speaker 1: at least un swab. So it's an a MM, it's 570 00:30:20,880 --> 00:30:24,000 Speaker 1: a it's a it's a defy MM. But it's particularly 571 00:30:24,040 --> 00:30:27,160 Speaker 1: well optimized for trading stables between each other. Yes, I 572 00:30:27,160 --> 00:30:29,320 Speaker 1: mean there's some caveats there, but you know, I think 573 00:30:29,320 --> 00:30:32,000 Speaker 1: the details don't don't matter too much. So, um, it 574 00:30:32,080 --> 00:30:35,080 Speaker 1: is particularly optimized for trading stables for the most part. 575 00:30:35,400 --> 00:30:38,520 Speaker 1: So that's three pool. Three pool is you know, circles Dollar, Tether, 576 00:30:38,760 --> 00:30:42,560 Speaker 1: and Die which is makers coin, and then four pool 577 00:30:42,760 --> 00:30:45,760 Speaker 1: would have been would have been two of the coins 578 00:30:46,000 --> 00:30:50,320 Speaker 1: from three pool being tether and Circle dollar. But instead 579 00:30:50,360 --> 00:30:53,120 Speaker 1: of having Die, they we're gonna have ust and they 580 00:30:53,160 --> 00:30:56,920 Speaker 1: were gonna have fracts as dollar. So you know, the 581 00:30:56,920 --> 00:31:00,280 Speaker 1: whole idea there is that they kind of it to 582 00:31:00,360 --> 00:31:01,959 Speaker 1: kill die, and they wanted to have more of their 583 00:31:02,000 --> 00:31:04,840 Speaker 1: own native liquidity. They didn't want to just have a 584 00:31:05,000 --> 00:31:08,960 Speaker 1: meta pool, which is you know, for example, ust against 585 00:31:08,960 --> 00:31:12,120 Speaker 1: three curve, right, so it's it's a pool between two assets, 586 00:31:12,160 --> 00:31:15,400 Speaker 1: but one of the assets is a pool itself, right. 587 00:31:15,480 --> 00:31:18,000 Speaker 1: So they don't want to just be attached as like 588 00:31:18,200 --> 00:31:20,760 Speaker 1: a sidecar, you know, to three pool. They wanted to 589 00:31:20,800 --> 00:31:22,960 Speaker 1: be you know, have their own native pool. So these 590 00:31:23,000 --> 00:31:25,360 Speaker 1: great plans for you know, four pool and whatnot. So 591 00:31:25,480 --> 00:31:27,600 Speaker 1: you know, during this time in the DP pegging, returning 592 00:31:27,640 --> 00:31:30,120 Speaker 1: to that point of the story, um, you know, they 593 00:31:30,120 --> 00:31:33,840 Speaker 1: were basically the lunar guys TfL they were doing a 594 00:31:33,880 --> 00:31:35,680 Speaker 1: migration from three pool of the four pool. So they're 595 00:31:35,680 --> 00:31:38,160 Speaker 1: pulling all the liquity from three pool putting into four pool. 596 00:31:38,320 --> 00:31:41,479 Speaker 1: And this is basically when somebody just took up all 597 00:31:41,520 --> 00:31:45,000 Speaker 1: the liquidity left on us T by basically just in 598 00:31:45,040 --> 00:31:48,040 Speaker 1: the U S T pools, just by dumping all their 599 00:31:48,120 --> 00:31:50,479 Speaker 1: us T and taking out all the other assets. And 600 00:31:50,560 --> 00:31:54,800 Speaker 1: this basically was what caused the first panic. Now was 601 00:31:54,880 --> 00:31:58,160 Speaker 1: that one person was that multiple people I think really 602 00:31:58,160 --> 00:31:59,400 Speaker 1: hard to say. I think you'd have to take a 603 00:31:59,400 --> 00:32:01,640 Speaker 1: look at the chain. Right now, the narrative is that 604 00:32:01,720 --> 00:32:03,520 Speaker 1: it was just one attacker, But I mean, I think 605 00:32:03,520 --> 00:32:05,120 Speaker 1: this is kind of like a like a boogeyman. I 606 00:32:05,160 --> 00:32:07,480 Speaker 1: think we should we should actually take a look at 607 00:32:07,640 --> 00:32:10,400 Speaker 1: the actual transactions that had happened on Curve at that 608 00:32:10,440 --> 00:32:13,240 Speaker 1: time and see if it came from multiple addresses or 609 00:32:13,280 --> 00:32:15,040 Speaker 1: came from a single address. I mean, to be fair, 610 00:32:15,080 --> 00:32:16,800 Speaker 1: I mean, even if it comes from ultiple addresses, it 611 00:32:16,800 --> 00:32:18,840 Speaker 1: could still be you know, the same party. Maybe they 612 00:32:18,840 --> 00:32:20,720 Speaker 1: just split up their wallets, you know, But at least 613 00:32:20,760 --> 00:32:23,840 Speaker 1: we shouldn't We should verify right before making these kinds 614 00:32:23,880 --> 00:32:27,040 Speaker 1: of speculations. But in any case, basically all the us 615 00:32:27,080 --> 00:32:29,560 Speaker 1: T was dumped, all the other assets were drained from 616 00:32:29,600 --> 00:32:32,400 Speaker 1: these pools, and then that that basically caused a little 617 00:32:32,400 --> 00:32:35,240 Speaker 1: bit of a panic. Other people pulled money out of anchor, 618 00:32:35,440 --> 00:32:37,719 Speaker 1: people try to find ways of getting rid of their 619 00:32:37,800 --> 00:32:41,360 Speaker 1: us T. Luna started tanking. The entire markets were already tanking. 620 00:32:41,680 --> 00:32:43,720 Speaker 1: Um you know, it's kind of like an alignment of 621 00:32:43,760 --> 00:32:46,360 Speaker 1: the stars. The equity markets were tanking, and cryptos really 622 00:32:46,560 --> 00:32:50,320 Speaker 1: correlated with the equity markets these days, so everything was dropping, 623 00:32:50,600 --> 00:32:53,080 Speaker 1: and on top of that, the migration was happening. So 624 00:32:53,200 --> 00:32:56,400 Speaker 1: it was, you know, a cacophony of the perfect sequence 625 00:32:56,400 --> 00:32:59,840 Speaker 1: of events and um, you know, coincidences there. So this 626 00:33:00,080 --> 00:33:04,200 Speaker 1: system was already very unstable, and this was something that 627 00:33:04,240 --> 00:33:07,920 Speaker 1: you know, you recognized and other people, but you recognized 628 00:33:08,040 --> 00:33:11,640 Speaker 1: going back to last year, it was inherently flawed. But 629 00:33:11,720 --> 00:33:13,880 Speaker 1: then we get this sort of perfect storm because we 630 00:33:13,920 --> 00:33:17,160 Speaker 1: have this big risk asset sell off. You know, stock 631 00:33:17,200 --> 00:33:21,080 Speaker 1: market has obviously been tanking Bitcoin, which on some level 632 00:33:21,200 --> 00:33:26,000 Speaker 1: had of course been a contributor to ust stability. Bitcoin 633 00:33:26,040 --> 00:33:28,120 Speaker 1: has obviously been tanking, so did the extent that that's 634 00:33:28,160 --> 00:33:33,080 Speaker 1: a backstop that's dissolved or diminishing by the day. And 635 00:33:33,120 --> 00:33:35,600 Speaker 1: then you have this migration and it was about to 636 00:33:35,600 --> 00:33:39,000 Speaker 1: be a switch and someone dumps a lot and drains 637 00:33:39,040 --> 00:33:42,200 Speaker 1: the liquidity from the existing pool you mentioned and I 638 00:33:42,200 --> 00:33:43,840 Speaker 1: saw I've seen a lot of people talk about this 639 00:33:43,880 --> 00:33:45,800 Speaker 1: move from the three pool to the four pool. Was 640 00:33:45,840 --> 00:33:49,800 Speaker 1: there something inherent about that migration that made it vulnerable? 641 00:33:49,920 --> 00:33:53,240 Speaker 1: Was that inherently going to be a less liquid moment 642 00:33:53,680 --> 00:33:57,120 Speaker 1: for us? T Yeah, I mean it would definitely be 643 00:33:57,160 --> 00:34:00,920 Speaker 1: a less liquid moment, But I don't want to just 644 00:34:01,040 --> 00:34:05,080 Speaker 1: say that definitively someone was trying to attack the probo 645 00:34:05,400 --> 00:34:07,560 Speaker 1: at that time, you know, because what it really could 646 00:34:07,560 --> 00:34:10,440 Speaker 1: be is that somebody was just looking at the liquidity 647 00:34:10,480 --> 00:34:13,439 Speaker 1: and didn't even know that the migration was happening that day, right, 648 00:34:13,680 --> 00:34:17,480 Speaker 1: and then just saw all the liquidity evaporate, panicked themselves, right, 649 00:34:17,800 --> 00:34:20,200 Speaker 1: and then just dumped all their us t training the 650 00:34:20,239 --> 00:34:22,520 Speaker 1: rest of liquidity, right. Or or it might not have 651 00:34:22,560 --> 00:34:24,319 Speaker 1: been one person, it could have been multiple people who 652 00:34:24,360 --> 00:34:26,319 Speaker 1: all you know, we're sitting at their computers one day 653 00:34:26,360 --> 00:34:29,080 Speaker 1: and not having read that they were doing the migration, 654 00:34:29,160 --> 00:34:33,320 Speaker 1: everybody feeling the same panic, everybody dumping, right. So, speaking 655 00:34:33,360 --> 00:34:37,719 Speaker 1: of opportunistic moments, I guess or triggers for these type 656 00:34:37,719 --> 00:34:41,800 Speaker 1: of types of moves. You mentioned that you were short, 657 00:34:42,480 --> 00:34:46,320 Speaker 1: and I know you probably can't necessarily go into detail 658 00:34:46,480 --> 00:34:50,040 Speaker 1: of exactly what that position looked like. But I imagine, 659 00:34:50,160 --> 00:34:55,279 Speaker 1: given the degree of criticism against Terra slash Luna, that 660 00:34:55,400 --> 00:34:57,760 Speaker 1: there were a number of people who would have liked 661 00:34:57,960 --> 00:35:03,000 Speaker 1: to or maybe have better against this over time. And 662 00:35:03,320 --> 00:35:07,200 Speaker 1: I'm wondering, you know what, what, how did those trades 663 00:35:07,239 --> 00:35:12,000 Speaker 1: theoretically work? And then is it possible that there were 664 00:35:12,120 --> 00:35:16,560 Speaker 1: frictions within the Luna Terra ecosystem that made shorting it 665 00:35:17,200 --> 00:35:20,239 Speaker 1: kind of difficult, because this is a classic thing in markets, right, 666 00:35:20,360 --> 00:35:22,640 Speaker 1: you know, you can identify the bubble or you can 667 00:35:22,680 --> 00:35:27,759 Speaker 1: identify the ponzi and then get killed. So I guess 668 00:35:27,760 --> 00:35:30,080 Speaker 1: I'm wondering how painful it would have been to short 669 00:35:30,160 --> 00:35:34,280 Speaker 1: this for a substantial amount of time. Yeah, I definitely 670 00:35:34,280 --> 00:35:36,879 Speaker 1: would be very painful. And this is why we didn't 671 00:35:36,920 --> 00:35:40,920 Speaker 1: start shorting this thing until actually pretty recently. I want 672 00:35:40,960 --> 00:35:42,840 Speaker 1: to say, I don't want to say exactly when, but 673 00:35:42,880 --> 00:35:45,000 Speaker 1: it was sometime this month, and it wasn't actually earlier 674 00:35:45,080 --> 00:35:47,600 Speaker 1: than that that we were shut um. And you know, 675 00:35:47,680 --> 00:35:51,200 Speaker 1: I think that with something like this, being early is 676 00:35:51,280 --> 00:35:54,799 Speaker 1: almost as bad as being wrong, right uh. And you know, 677 00:35:54,960 --> 00:35:57,160 Speaker 1: partly one of the reasons that this thing was so 678 00:35:57,280 --> 00:36:01,080 Speaker 1: difficult to short was because the funding on putting on 679 00:36:01,200 --> 00:36:05,040 Speaker 1: shorts uh was extremely high. And that's because the opportunity 680 00:36:05,080 --> 00:36:10,600 Speaker 1: cost was getting yield on anchor. Right, So basically you're 681 00:36:10,640 --> 00:36:15,480 Speaker 1: paying maybe about but it's about that, it'll be about that, right, 682 00:36:15,480 --> 00:36:17,759 Speaker 1: Like that yield was higher, maybe even harder to shore 683 00:36:18,040 --> 00:36:20,120 Speaker 1: that yield was lower. It would be easier to shore, right. 684 00:36:20,160 --> 00:36:23,840 Speaker 1: But basically that's the opportunity cost of not shorting, right. 685 00:36:23,920 --> 00:36:26,840 Speaker 1: So that's why, you know, that's why this this trade 686 00:36:26,840 --> 00:36:30,360 Speaker 1: I think was particularly difficult to put on just from mechanically, 687 00:36:30,400 --> 00:36:33,480 Speaker 1: from that standpoint, but also I think on top of that, 688 00:36:33,719 --> 00:36:37,520 Speaker 1: this whole system and this whole design is so reflexive 689 00:36:37,920 --> 00:36:41,200 Speaker 1: on both the up and the downstading, right, So like 690 00:36:41,560 --> 00:36:46,239 Speaker 1: we saw this thing go negative down right, right, just 691 00:36:46,320 --> 00:36:49,440 Speaker 1: in a couple of days, right. But you know, on 692 00:36:49,480 --> 00:36:52,960 Speaker 1: the up side, it's also very violent, right, So you know, 693 00:36:53,040 --> 00:36:55,080 Speaker 1: you could be right, but you know, the market could 694 00:36:55,080 --> 00:36:57,840 Speaker 1: still liquidate, you you know, for some reason. You know, 695 00:36:57,920 --> 00:37:01,640 Speaker 1: the equity markets rally, everything rally, Bitcoin rallies, the you know, 696 00:37:02,040 --> 00:37:05,000 Speaker 1: Luna having beta to bitcoin it also rallies. Uh. And 697 00:37:05,040 --> 00:37:06,440 Speaker 1: then on top of that they make some kind of 698 00:37:06,480 --> 00:37:09,880 Speaker 1: crazy announcement whether it's true or not, you know, and 699 00:37:09,920 --> 00:37:12,200 Speaker 1: then and then you know, you could completely get blown out. 700 00:37:12,480 --> 00:37:14,360 Speaker 1: So you know, I think that that's why, you know, 701 00:37:14,400 --> 00:37:16,480 Speaker 1: this thing was just particularly difficult to short. You know, 702 00:37:16,520 --> 00:37:18,799 Speaker 1: just structurally, it's just very difficult. But we did get 703 00:37:18,800 --> 00:37:20,960 Speaker 1: it in. Uh, And I think it was just roughly 704 00:37:21,000 --> 00:37:24,080 Speaker 1: about the right timing, so very happy about that. Yeah, 705 00:37:23,760 --> 00:37:26,560 Speaker 1: I bet um. I mean it feels to me like 706 00:37:26,640 --> 00:37:29,040 Speaker 1: one of the difficulties or one of the reasons this 707 00:37:29,080 --> 00:37:32,000 Speaker 1: week has been so extreme, is because there's no natural 708 00:37:32,520 --> 00:37:35,960 Speaker 1: circuit breaker on while either on the upside and this 709 00:37:36,040 --> 00:37:39,080 Speaker 1: is why you saw you know, some phenomenal valuations, but 710 00:37:39,120 --> 00:37:42,160 Speaker 1: also on the downside. Yeah, you know, I think my 711 00:37:42,239 --> 00:37:45,360 Speaker 1: opinion there is a little bit you know, different than yours, Tracy, 712 00:37:45,400 --> 00:37:48,719 Speaker 1: because you know, I think that the circuit breakers could 713 00:37:48,760 --> 00:37:51,960 Speaker 1: have slowed things down, but couldn't have stopped them. And 714 00:37:52,040 --> 00:37:55,160 Speaker 1: in some ways by doing the circuit breakers, uh you know, 715 00:37:55,320 --> 00:37:57,759 Speaker 1: like let's say the exchange is just you know, limit 716 00:37:57,840 --> 00:38:00,200 Speaker 1: up or down. They just hit the circuit breakers. Well, 717 00:38:00,200 --> 00:38:02,680 Speaker 1: there's still the defied markets, right, and then there's still 718 00:38:02,719 --> 00:38:06,279 Speaker 1: like all these other sources of true price discovery, and 719 00:38:06,360 --> 00:38:08,600 Speaker 1: as long as there's some kind of outlet for it, 720 00:38:08,800 --> 00:38:11,759 Speaker 1: you're basically just building up pressure on the Sea FI 721 00:38:11,880 --> 00:38:15,360 Speaker 1: exchange once the circuit breaker is released, right, So now 722 00:38:15,360 --> 00:38:19,160 Speaker 1: like instead of it just like you know, exponentially crashing down, 723 00:38:19,560 --> 00:38:21,640 Speaker 1: now it might just be straight up vertical line. You 724 00:38:21,680 --> 00:38:24,560 Speaker 1: hit the limit and then the moment the market reopens, 725 00:38:24,680 --> 00:38:27,360 Speaker 1: another straight vertical line down to the next limit and 726 00:38:27,400 --> 00:38:30,160 Speaker 1: then just like staggered lines down right instead of like 727 00:38:30,200 --> 00:38:33,680 Speaker 1: more more a curve line, almost vertical down. So you know, 728 00:38:33,960 --> 00:38:35,880 Speaker 1: I think at the end of the day, Um, you 729 00:38:35,920 --> 00:38:37,759 Speaker 1: can't really go against the market. If it wants to 730 00:38:37,760 --> 00:38:40,040 Speaker 1: go down, it's just gonna go down. I mean, you know, 731 00:38:40,560 --> 00:38:44,520 Speaker 1: any kind and especially for something so reflexive. Um, most 732 00:38:44,520 --> 00:38:48,000 Speaker 1: people are not trading, you know, people are trading emotionally. 733 00:38:48,120 --> 00:38:50,600 Speaker 1: But there's like there's what I'm saying is that there's 734 00:38:50,680 --> 00:38:53,480 Speaker 1: there's more that's coming, right, It's not that oh you know, 735 00:38:53,560 --> 00:38:55,759 Speaker 1: after a while, people just want to go buy the dip. Right, 736 00:38:56,000 --> 00:38:59,879 Speaker 1: This asset is the complete opposite of a dip buying asset. Right, 737 00:39:00,160 --> 00:39:02,600 Speaker 1: some assets they're more mean reverting when it goes down 738 00:39:02,600 --> 00:39:04,680 Speaker 1: and you buy something looks cheap when it's when it 739 00:39:04,719 --> 00:39:06,520 Speaker 1: pops up, you know, when you sell down a little 740 00:39:06,520 --> 00:39:09,560 Speaker 1: bit because it looks expensive. This is the complete opposite. 741 00:39:09,760 --> 00:39:12,719 Speaker 1: The further it goes down, the easier it is to shore, right, 742 00:39:13,040 --> 00:39:15,200 Speaker 1: because then first of all, like everybody else is unwinding, 743 00:39:15,239 --> 00:39:18,319 Speaker 1: you know that's happening. And then uh, second of all, 744 00:39:18,880 --> 00:39:22,640 Speaker 1: the entire value of everything back in us T which 745 00:39:22,640 --> 00:39:27,560 Speaker 1: is circularly, Luna It's itself and Bitcoin are both losing value. Right, 746 00:39:27,640 --> 00:39:29,440 Speaker 1: So then at some point, you know, if you if 747 00:39:29,480 --> 00:39:32,719 Speaker 1: you think collateralization ratio was bad yesterday, then today it's 748 00:39:32,719 --> 00:39:34,480 Speaker 1: even worse, and the next day it's going to be 749 00:39:34,520 --> 00:39:37,840 Speaker 1: even worse, and you can see that trend deterministically playing out, 750 00:39:38,000 --> 00:39:39,560 Speaker 1: than at that point you might as well just dump 751 00:39:39,600 --> 00:39:42,520 Speaker 1: it today, right. So this thing is a purely reflective asset. 752 00:39:42,719 --> 00:39:45,799 Speaker 1: It's the purest of momentum assets. So what you say 753 00:39:45,880 --> 00:39:48,680 Speaker 1: makes total sense. But you know, I'm trying to understand 754 00:39:48,760 --> 00:39:54,040 Speaker 1: actually how different fundamentally Luna Terra is from a lot 755 00:39:54,080 --> 00:39:57,840 Speaker 1: of other crypto defy assets. And of course, we recently 756 00:39:58,040 --> 00:40:00,680 Speaker 1: did an episode with Sam Bankman for and he was 757 00:40:00,719 --> 00:40:03,120 Speaker 1: asked to describe yield farming and he's like, oh, it's 758 00:40:03,120 --> 00:40:05,960 Speaker 1: a box and you put money in and then you know, 759 00:40:06,280 --> 00:40:09,320 Speaker 1: you get some governance tokens to incentivize more money in 760 00:40:09,360 --> 00:40:11,120 Speaker 1: the box, and then more money goes into the box, 761 00:40:11,160 --> 00:40:12,839 Speaker 1: and then you make a lot of money if you're 762 00:40:12,880 --> 00:40:16,560 Speaker 1: earlier in the box. You talk about the reflexivity of 763 00:40:16,640 --> 00:40:19,680 Speaker 1: the Luna Tarot box and when it's going down, there's 764 00:40:19,719 --> 00:40:23,120 Speaker 1: literally no reason there's no cash flow, there's no book 765 00:40:23,200 --> 00:40:26,920 Speaker 1: value or anything that inherently stabilizes the price. There's this 766 00:40:27,080 --> 00:40:30,040 Speaker 1: is what I meant by a natural by the way, 767 00:40:30,440 --> 00:40:33,759 Speaker 1: So then how different is it from a lot of 768 00:40:33,920 --> 00:40:40,080 Speaker 1: other crypto things in terms of this reflexivity? And is 769 00:40:40,160 --> 00:40:43,040 Speaker 1: this and I mean, is it really different from the 770 00:40:43,080 --> 00:40:45,799 Speaker 1: rest of the space, because I don't see, like it 771 00:40:45,800 --> 00:40:50,320 Speaker 1: feels like a lot of crypto assets have the same reflexivity. Yeah, 772 00:40:50,320 --> 00:40:53,600 Speaker 1: so I want to separate out the reflexivity from the 773 00:40:53,680 --> 00:40:56,840 Speaker 1: garbageness of it. Right, So, like I think on the 774 00:40:56,840 --> 00:41:01,319 Speaker 1: reflexivity part, this is uniquely bad, like or Luna is 775 00:41:01,400 --> 00:41:05,520 Speaker 1: uniquely bad in its reflexivity. It's extremely extremely high reflectivity. 776 00:41:05,840 --> 00:41:07,920 Speaker 1: I think that's not the case for a lot of 777 00:41:07,920 --> 00:41:12,360 Speaker 1: these other yield farming boxes. Um. Now that being said, uh, 778 00:41:12,520 --> 00:41:14,880 Speaker 1: on the other side, there are some similarities in the 779 00:41:14,920 --> 00:41:17,840 Speaker 1: sense that there was a box also for Luna, and 780 00:41:17,880 --> 00:41:19,600 Speaker 1: it was called Anchor, and you put money in that 781 00:41:19,640 --> 00:41:22,799 Speaker 1: box and seemingly you've got money out of it. Now 782 00:41:22,840 --> 00:41:25,960 Speaker 1: what it turned out to be is that, uh, you know, 783 00:41:26,160 --> 00:41:27,920 Speaker 1: And I want to maybe just go off of Sam's 784 00:41:27,920 --> 00:41:31,680 Speaker 1: metaphor here, which I found hilarious, which is that you know, 785 00:41:31,719 --> 00:41:34,439 Speaker 1: in a lot of these cases, right, you put money 786 00:41:34,440 --> 00:41:36,799 Speaker 1: in the box and then money comes out of it, 787 00:41:37,120 --> 00:41:39,440 Speaker 1: especially you know, if you're early, I would say that 788 00:41:39,480 --> 00:41:42,400 Speaker 1: in this case, you put money in the box, seemingly 789 00:41:42,440 --> 00:41:45,880 Speaker 1: money comes out of it, but really, really the true 790 00:41:45,920 --> 00:41:48,640 Speaker 1: transfer value here is that you put your money in 791 00:41:48,680 --> 00:41:54,040 Speaker 1: the box, that money, somehow, through many different pipes, goes 792 00:41:54,120 --> 00:41:58,319 Speaker 1: to investors and founders of the project, and then your 793 00:41:58,320 --> 00:42:01,719 Speaker 1: money disappears and you have nothing. So it's it's more 794 00:42:01,800 --> 00:42:04,480 Speaker 1: like that, I would say, so instead of how is 795 00:42:04,520 --> 00:42:08,160 Speaker 1: that different? Sorry, yeah, because I would say that certain 796 00:42:08,239 --> 00:42:12,080 Speaker 1: boxes are a little bit more honest in the sense 797 00:42:12,160 --> 00:42:14,560 Speaker 1: that you know, it's kind of like a like a 798 00:42:14,640 --> 00:42:18,400 Speaker 1: chicken game, right, So it's like users competing with users, 799 00:42:18,520 --> 00:42:21,200 Speaker 1: and the earlier you are, the better that you do. Right. 800 00:42:21,760 --> 00:42:23,680 Speaker 1: I know it sounds really bad. It is really bad, 801 00:42:23,920 --> 00:42:25,960 Speaker 1: But what I'm saying is that this is even worse 802 00:42:26,000 --> 00:42:28,600 Speaker 1: than that, because it's not even it's not really just 803 00:42:28,840 --> 00:42:33,080 Speaker 1: users competing against users. It's more like users thinking they're 804 00:42:33,120 --> 00:42:36,680 Speaker 1: competing against other users, but really getting all their funds 805 00:42:36,680 --> 00:42:40,200 Speaker 1: siphoned out by you know, investors and the inside team. 806 00:42:55,960 --> 00:42:58,359 Speaker 1: So one of the other things that's been happening this 807 00:42:58,400 --> 00:43:04,000 Speaker 1: week is now Tether has depegged. And initially at the 808 00:43:04,040 --> 00:43:07,239 Speaker 1: start of this week, when Tara was going down, when 809 00:43:07,440 --> 00:43:11,000 Speaker 1: ust hit point three or whatever it was, everyone was 810 00:43:11,040 --> 00:43:13,440 Speaker 1: talking about, Oh, it's it's a problem with the algorithmic 811 00:43:13,440 --> 00:43:16,000 Speaker 1: stable coins, only this thing is worse than a lot 812 00:43:16,040 --> 00:43:19,080 Speaker 1: of other stuff. But now we've seen strains on Tether, 813 00:43:19,440 --> 00:43:22,120 Speaker 1: which is supposed to be reserved backed, but of course 814 00:43:22,160 --> 00:43:25,280 Speaker 1: there have always been questions swirling around what those reserves 815 00:43:25,280 --> 00:43:28,160 Speaker 1: actually are, what they look like. We've also seen some 816 00:43:28,200 --> 00:43:32,319 Speaker 1: stable coins um I can't remember exactly what it was, 817 00:43:32,360 --> 00:43:37,919 Speaker 1: but like stuff like USDC and b USD and things 818 00:43:37,960 --> 00:43:42,320 Speaker 1: like that, UM that seemed to have done relatively better. 819 00:43:42,400 --> 00:43:45,759 Speaker 1: So those are holding up. So I guess my question is, 820 00:43:45,760 --> 00:43:49,040 Speaker 1: is this now a shakeout in the stable coin space 821 00:43:49,160 --> 00:43:51,160 Speaker 1: or what happens now? Do people go to stuff that 822 00:43:51,200 --> 00:43:54,480 Speaker 1: they perceived to be safe or does the safe stuff 823 00:43:54,520 --> 00:43:58,240 Speaker 1: get liquidated because a bunch of hedge funds have Luna 824 00:43:58,400 --> 00:44:03,759 Speaker 1: Tera exposure and need to raise money. Like what exactly happens? Yeah, 825 00:44:03,800 --> 00:44:05,200 Speaker 1: you know, I think a lot of those things. So 826 00:44:05,280 --> 00:44:09,600 Speaker 1: let's first talk about the general sort of financial contagion, right, So, 827 00:44:09,680 --> 00:44:11,920 Speaker 1: like a lot of these guys who are just like 828 00:44:12,000 --> 00:44:14,600 Speaker 1: these funds uh and and other types of investors who 829 00:44:14,600 --> 00:44:17,920 Speaker 1: are just really long but let's say Luna or Ustu 830 00:44:18,200 --> 00:44:20,960 Speaker 1: or sometimes even doubling down on the position. Uh. You know, 831 00:44:21,239 --> 00:44:23,759 Speaker 1: they basically, you know, as as the price moves against them, 832 00:44:23,760 --> 00:44:25,839 Speaker 1: they're facing margin calls. So I think what a lot 833 00:44:25,880 --> 00:44:28,440 Speaker 1: of them did is that they sold their other hard assets, right, 834 00:44:28,480 --> 00:44:32,919 Speaker 1: so other coins, bitcoin, ethereum, whatever, they had to meet 835 00:44:32,920 --> 00:44:35,799 Speaker 1: these margin calls, uh, and then eventually, like some of 836 00:44:35,800 --> 00:44:38,000 Speaker 1: them even got wiped out on on the entire fund. 837 00:44:38,320 --> 00:44:40,400 Speaker 1: So I think that's probably why you're seeing all of 838 00:44:40,440 --> 00:44:42,560 Speaker 1: this contagion. I mean, some some of it is just 839 00:44:42,560 --> 00:44:45,520 Speaker 1: correlated to equities, but I think for the most part, 840 00:44:45,800 --> 00:44:48,759 Speaker 1: there's also some psychological contagion. And you know, people just 841 00:44:48,880 --> 00:44:50,960 Speaker 1: all of a sudden, you know, they see this huge 842 00:44:51,239 --> 00:44:53,760 Speaker 1: you know, top ten coin implode, they start to feel 843 00:44:53,760 --> 00:44:55,800 Speaker 1: a little bit less safe about all their other investments 844 00:44:55,840 --> 00:44:58,000 Speaker 1: in general. And then some of it is this like 845 00:44:58,080 --> 00:45:01,520 Speaker 1: to meet margin calls and to find ants themselves. You know, 846 00:45:01,560 --> 00:45:04,360 Speaker 1: some people have just sold off actually much better assets 847 00:45:04,360 --> 00:45:08,360 Speaker 1: than than Luna and ust to defend their position, and 848 00:45:08,760 --> 00:45:10,319 Speaker 1: Lunar and U s t so I think that that 849 00:45:10,320 --> 00:45:13,759 Speaker 1: that definitely happened. So I forget what the first part 850 00:45:13,800 --> 00:45:16,840 Speaker 1: of that. I guess, how does the stable coin market 851 00:45:17,160 --> 00:45:20,239 Speaker 1: shake out now? Does more money flow into things that 852 00:45:20,280 --> 00:45:22,919 Speaker 1: are perceived to be higher quality, or how do people 853 00:45:22,960 --> 00:45:26,879 Speaker 1: start to differentiate? Yeah, definitely. Uh, you know, I think, 854 00:45:27,320 --> 00:45:28,920 Speaker 1: you know, these days, you're starting to see like some 855 00:45:29,000 --> 00:45:32,000 Speaker 1: of these coins trade above parody that are not, you know, 856 00:45:32,040 --> 00:45:34,880 Speaker 1: the non tether stable coins. At least for a little bit, 857 00:45:34,920 --> 00:45:36,520 Speaker 1: I think a lot of stuff was trading like a 858 00:45:36,880 --> 00:45:39,319 Speaker 1: dollar and two cents dollar in three cents, that sort 859 00:45:39,360 --> 00:45:41,520 Speaker 1: of thing. I think generally the consensus right now in 860 00:45:41,560 --> 00:45:45,719 Speaker 1: the market is that us d C is the safest 861 00:45:46,080 --> 00:45:48,360 Speaker 1: and there's a little bit of worry about Tether. I 862 00:45:48,400 --> 00:45:50,680 Speaker 1: think that's fair. But I do think the worries about 863 00:45:50,680 --> 00:45:52,920 Speaker 1: Tether or a little bit overblown. And I want to 864 00:45:53,000 --> 00:45:56,719 Speaker 1: qualify that statement by saying that although Tether as a 865 00:45:56,760 --> 00:45:59,440 Speaker 1: company has done some really shady stuff in the past, 866 00:46:00,200 --> 00:46:04,319 Speaker 1: actually happened to believe that they're actually more than just 867 00:46:04,400 --> 00:46:07,840 Speaker 1: fully collateralized. I think they're actually overcollateralized. Um. So you know, 868 00:46:07,880 --> 00:46:09,520 Speaker 1: if you think, if you think about some of the 869 00:46:09,600 --> 00:46:12,840 Speaker 1: weird and wacky stuff they did that they shouldn't have done. Um, 870 00:46:12,880 --> 00:46:16,960 Speaker 1: they actually backed some of the tether with crypto righte 871 00:46:17,080 --> 00:46:19,600 Speaker 1: with with bitcoin itself, and this is like during a 872 00:46:19,640 --> 00:46:21,640 Speaker 1: bull run. So first of all, they really shouldn't do 873 00:46:21,680 --> 00:46:25,440 Speaker 1: that because that's not the point of what their business. 874 00:46:26,560 --> 00:46:29,000 Speaker 1: Yeah yeah, I mean they really should just be keeping 875 00:46:29,040 --> 00:46:32,160 Speaker 1: like really dollar like instruments or actual dollars that would 876 00:46:32,160 --> 00:46:34,600 Speaker 1: be the absolute safist in the bank account and they 877 00:46:34,600 --> 00:46:37,520 Speaker 1: shouldn't be speculating with client funds like that. But given 878 00:46:37,520 --> 00:46:39,760 Speaker 1: that they actually did do that something that they shouldn't, 879 00:46:39,920 --> 00:46:41,480 Speaker 1: they actually worked out for them. So they kind of 880 00:46:41,480 --> 00:46:43,640 Speaker 1: got lucky and with you know, I don't know if 881 00:46:43,640 --> 00:46:46,200 Speaker 1: they kept a lot of the profits themselves are whatnot, 882 00:46:46,360 --> 00:46:48,800 Speaker 1: But if at least some of that profits still was 883 00:46:48,840 --> 00:46:51,840 Speaker 1: held on the vaults, then they should actually be overcollateralized. 884 00:46:52,040 --> 00:46:53,920 Speaker 1: And then you know the other you know, crazy stuff 885 00:46:53,920 --> 00:46:56,080 Speaker 1: that they did, you know, where they loaned money to 886 00:46:56,160 --> 00:46:59,800 Speaker 1: themselves because you know, Tether is also owned by X, 887 00:47:00,120 --> 00:47:02,400 Speaker 1: just the parent company at bit foin X. They basically 888 00:47:02,440 --> 00:47:05,440 Speaker 1: loan money to bitfoin X because of you know, some 889 00:47:05,440 --> 00:47:08,880 Speaker 1: some bad debt that bitfoin X had because they they 890 00:47:08,920 --> 00:47:11,880 Speaker 1: were like short like eight million or something because of 891 00:47:11,880 --> 00:47:14,680 Speaker 1: like crypto capital something I don't I don't remember exactly, 892 00:47:14,840 --> 00:47:17,560 Speaker 1: but it was something like that. Um so they were 893 00:47:17,560 --> 00:47:21,160 Speaker 1: basically like doing all these crazy loans between their own companies. 894 00:47:21,560 --> 00:47:24,360 Speaker 1: And you know that's you know, I think, definitely something 895 00:47:24,360 --> 00:47:26,320 Speaker 1: that they shouldn't have done. But technically they you know, 896 00:47:26,360 --> 00:47:27,719 Speaker 1: they made it out of that too. They issued the 897 00:47:27,800 --> 00:47:30,680 Speaker 1: LEO token, they sold it to investors, raised a billion, 898 00:47:31,080 --> 00:47:33,799 Speaker 1: put that money back in, gave that money back to Tether. 899 00:47:34,360 --> 00:47:36,920 Speaker 1: Uh So you know, technically it should still be a whole. 900 00:47:36,960 --> 00:47:39,439 Speaker 1: I mean, they keep doing things that they shouldn't do, 901 00:47:39,800 --> 00:47:41,839 Speaker 1: but yet they always get lucky and they come out 902 00:47:41,840 --> 00:47:44,720 Speaker 1: of it. So I actually tend to believe that Tether 903 00:47:44,840 --> 00:47:47,200 Speaker 1: is pretty safe. But you know, they really should stop 904 00:47:47,280 --> 00:47:52,160 Speaker 1: doing crazy ship I want to ask about the more 905 00:47:52,360 --> 00:47:54,640 Speaker 1: the terror fall out in a different direction. So clearly 906 00:47:54,680 --> 00:47:58,239 Speaker 1: there's this sort of pure financial contagion. You see the 907 00:47:58,280 --> 00:48:00,920 Speaker 1: top ten coin crash and cetera, or you start to 908 00:48:00,960 --> 00:48:03,200 Speaker 1: wonder about the safety of some of these other yield 909 00:48:03,200 --> 00:48:06,160 Speaker 1: boxes and so forth. But the other thing good striking, 910 00:48:06,200 --> 00:48:08,480 Speaker 1: and I mentioned this in the intro, which is that 911 00:48:08,840 --> 00:48:11,480 Speaker 1: we're used to hacks and crashes in crypto. They happened 912 00:48:11,480 --> 00:48:13,160 Speaker 1: all the time, and most of the time they're too 913 00:48:13,160 --> 00:48:16,400 Speaker 1: boring to even mention. But this one was like backed 914 00:48:16,440 --> 00:48:21,080 Speaker 1: by like legit or people who are respected leaders in 915 00:48:21,120 --> 00:48:23,880 Speaker 1: the industry, people who go on TV and obviously like 916 00:48:24,040 --> 00:48:28,400 Speaker 1: Nova grads who has the dog tattoo mean nothing seriously, 917 00:48:28,480 --> 00:48:30,640 Speaker 1: So you know, but there's others two And if you 918 00:48:30,719 --> 00:48:32,520 Speaker 1: look at you know, I saw the press release of 919 00:48:32,560 --> 00:48:35,120 Speaker 1: the first time, like you know, when Tara got funded, 920 00:48:35,280 --> 00:48:37,720 Speaker 1: and it's all of the like some of the biggest 921 00:48:37,800 --> 00:48:41,200 Speaker 1: names in crypto, and so I'm curious, like how that 922 00:48:41,320 --> 00:48:44,239 Speaker 1: affects the industry that this is not like some like 923 00:48:44,320 --> 00:48:47,360 Speaker 1: big connect weird thing where everyone sort of new was 924 00:48:47,440 --> 00:48:52,239 Speaker 1: really terrible, like a bunch of people really stood by this. Yeah, definitely, 925 00:48:52,280 --> 00:48:54,759 Speaker 1: And you know, I think historically we've seen stuff like 926 00:48:54,800 --> 00:48:57,439 Speaker 1: that happened before. You know, look at like the Dow 927 00:48:57,560 --> 00:48:59,600 Speaker 1: for example, you know when that came out and it 928 00:48:59,680 --> 00:49:02,000 Speaker 1: got act I mean that was also backed by a 929 00:49:02,040 --> 00:49:04,640 Speaker 1: lot of heavy hitters in the industry. And then you know, 930 00:49:05,120 --> 00:49:06,719 Speaker 1: there was at some point there was like the whole 931 00:49:06,719 --> 00:49:09,160 Speaker 1: Bitcoin cash fork. Uh, And I wouldn't I want, I 932 00:49:09,200 --> 00:49:11,040 Speaker 1: don't want to say it was backed by like everybody. 933 00:49:11,080 --> 00:49:12,680 Speaker 1: It was in the majority. It was still a minority 934 00:49:12,719 --> 00:49:15,359 Speaker 1: within the industry, but it was a very healthy minority, right, 935 00:49:15,400 --> 00:49:18,480 Speaker 1: So we've definitely had situations like that in the past. 936 00:49:18,840 --> 00:49:20,719 Speaker 1: What I would say, and I don't want to cast 937 00:49:20,760 --> 00:49:24,399 Speaker 1: any expersions on most of the investors in Luna and Terra, 938 00:49:25,000 --> 00:49:26,680 Speaker 1: what I would say is that I think it's a 939 00:49:26,719 --> 00:49:30,400 Speaker 1: combination of three things. I think the first is that 940 00:49:30,440 --> 00:49:33,480 Speaker 1: people got used to too much easy money in the 941 00:49:33,480 --> 00:49:36,000 Speaker 1: bull cycles. And you know, before the FED started hiking 942 00:49:36,080 --> 00:49:38,839 Speaker 1: up rates, you know, they were used to this kind 943 00:49:38,880 --> 00:49:42,640 Speaker 1: of access arbitrage right as vcs, they're very well connected. Um, 944 00:49:42,680 --> 00:49:45,240 Speaker 1: they can get into these very early seed round deals 945 00:49:45,560 --> 00:49:49,440 Speaker 1: and massive discounts mark that stuff up, you know, crazy amounts, 946 00:49:49,480 --> 00:49:51,279 Speaker 1: you know, ten X in a week, you know ten 947 00:49:51,440 --> 00:49:54,200 Speaker 1: X in a couple of months, hundreds X in a year, 948 00:49:54,239 --> 00:49:58,120 Speaker 1: you know, even thousands possible. So I think they just 949 00:49:58,160 --> 00:50:02,000 Speaker 1: saw that as a continuation of business as usual, right. 950 00:50:02,360 --> 00:50:04,719 Speaker 1: And you know that also like to get some questions 951 00:50:04,719 --> 00:50:06,640 Speaker 1: like why why should the returns be so high in 952 00:50:06,680 --> 00:50:08,399 Speaker 1: the first place, But you know that's I think another 953 00:50:08,440 --> 00:50:11,359 Speaker 1: philosophical discussion. I mean, but I think you know, they 954 00:50:11,400 --> 00:50:13,440 Speaker 1: got kind of used to that, and for them, they 955 00:50:13,440 --> 00:50:17,280 Speaker 1: hadn't really switched their mindsets yet to more of a bearish, 956 00:50:17,400 --> 00:50:20,160 Speaker 1: more of a hawkish kind of fed environment. So I 957 00:50:20,160 --> 00:50:23,160 Speaker 1: think that's one part. I think the second part is 958 00:50:23,239 --> 00:50:27,360 Speaker 1: that generally some of them tended to be true believers. 959 00:50:27,719 --> 00:50:31,200 Speaker 1: And what I mean by that is that they thought that, yeah, 960 00:50:31,320 --> 00:50:34,840 Speaker 1: maybe most likely this thing fails, like nine chance this 961 00:50:34,920 --> 00:50:37,799 Speaker 1: thing fails, but maybe ten percent chance the same thing 962 00:50:37,920 --> 00:50:41,359 Speaker 1: succeeds and it goes up a million x, right, So 963 00:50:41,400 --> 00:50:45,240 Speaker 1: then that still makes the investment positive ev right, positive 964 00:50:45,280 --> 00:50:48,919 Speaker 1: expected value. So I think from that standpoint, they thought 965 00:50:48,960 --> 00:50:50,880 Speaker 1: that this was still maybe a good bet to make, 966 00:50:50,920 --> 00:50:52,759 Speaker 1: and it was an honest bet. Um, you know, they 967 00:50:52,760 --> 00:50:54,560 Speaker 1: thought it was good at the time. Maybe they don't 968 00:50:54,560 --> 00:50:56,640 Speaker 1: think so anymore, but maybe some of them even still 969 00:50:56,680 --> 00:50:58,719 Speaker 1: now made money because they got out in time, right, 970 00:50:59,200 --> 00:51:02,600 Speaker 1: And I think the I think the third thing is 971 00:51:02,640 --> 00:51:06,239 Speaker 1: that probably some of these investors realize that this thing 972 00:51:06,280 --> 00:51:08,640 Speaker 1: would never work, but they figured that they can make 973 00:51:08,640 --> 00:51:11,359 Speaker 1: some money in the short term, and being a bit 974 00:51:11,400 --> 00:51:14,920 Speaker 1: on the more cynical side within that demographic of investors, uh, 975 00:51:15,000 --> 00:51:16,920 Speaker 1: they figured that they could exit out of this thing 976 00:51:16,960 --> 00:51:20,239 Speaker 1: before it blew right so I think it's a combination 977 00:51:20,280 --> 00:51:23,240 Speaker 1: of those things, you know, just you know, true belief 978 00:51:23,280 --> 00:51:28,680 Speaker 1: and plus c v um cynicism and quick flip and 979 00:51:29,280 --> 00:51:33,600 Speaker 1: hopium not being adjusted to a new bear market. So 980 00:51:34,040 --> 00:51:36,040 Speaker 1: before we go, I want to like talk a little 981 00:51:36,080 --> 00:51:38,400 Speaker 1: bit more about sort of what's happened or where we 982 00:51:38,440 --> 00:51:40,919 Speaker 1: are now. And again, one of the things that we've 983 00:51:40,960 --> 00:51:47,480 Speaker 1: seen with Tara and Luna specifically is Tera continues the 984 00:51:47,520 --> 00:51:50,080 Speaker 1: stable cling continues to have these periods where it drives 985 00:51:50,160 --> 00:51:53,920 Speaker 1: up back towards the peg of a dollar. Meanwhile, Luna 986 00:51:54,000 --> 00:51:56,600 Speaker 1: is just absolutely blown out and every day it's going 987 00:51:56,640 --> 00:52:02,120 Speaker 1: down by like in a a and the total issuance 988 00:52:02,160 --> 00:52:04,040 Speaker 1: of I think there is like a hundred million, I 989 00:52:04,080 --> 00:52:06,080 Speaker 1: don't know, and now there's like billions and billions. Can 990 00:52:06,120 --> 00:52:08,120 Speaker 1: you walk us through like this sort of like weird, 991 00:52:08,239 --> 00:52:11,840 Speaker 1: like I guess like put rigor mortis or something, or 992 00:52:11,840 --> 00:52:14,440 Speaker 1: this sort of like afterlife of the court right now. 993 00:52:14,960 --> 00:52:16,959 Speaker 1: The death was like, what is actually this like weird 994 00:52:16,960 --> 00:52:19,720 Speaker 1: phenomenon that we're seeing right now? You know, I totally 995 00:52:19,760 --> 00:52:22,040 Speaker 1: agree with you, it's actually pretty bizarre. But there's a 996 00:52:22,120 --> 00:52:24,840 Speaker 1: there's a couple of theories here. So the first theory 997 00:52:25,080 --> 00:52:29,440 Speaker 1: is that lf G Lunafination Guards still has some reserves left, right, 998 00:52:29,800 --> 00:52:32,040 Speaker 1: and they know the timing of it. They decide, Okay, 999 00:52:32,120 --> 00:52:34,399 Speaker 1: at this point, you know us T is too low, 1000 00:52:34,680 --> 00:52:36,560 Speaker 1: We're just going to exhaust the rest of it, and 1001 00:52:36,600 --> 00:52:38,840 Speaker 1: we're just going to support the price either for a 1002 00:52:39,360 --> 00:52:41,759 Speaker 1: for people on the inside to get out, or for 1003 00:52:41,880 --> 00:52:45,440 Speaker 1: be uh you know, altruistically to just get whoever wants 1004 00:52:45,440 --> 00:52:47,719 Speaker 1: to get out. Whatever remaining back holders want to get 1005 00:52:47,719 --> 00:52:50,279 Speaker 1: out of USC they can with with the remainder of 1006 00:52:50,280 --> 00:52:53,560 Speaker 1: these reserves. So that could be the case. Another possibility 1007 00:52:53,920 --> 00:52:56,839 Speaker 1: is that uh, it's the arbors that are closing up 1008 00:52:56,880 --> 00:52:59,160 Speaker 1: this that that are pushing the us T price up 1009 00:52:59,400 --> 00:53:03,239 Speaker 1: because the Luna protocol itself the underlying virtually and M 1010 00:53:03,239 --> 00:53:06,680 Speaker 1: will always consider us T is worth one dollar of Luna, right, 1011 00:53:07,000 --> 00:53:09,040 Speaker 1: So as long as Luna has any bit in the 1012 00:53:09,080 --> 00:53:12,359 Speaker 1: market and any market price in the market, you can 1013 00:53:12,400 --> 00:53:16,960 Speaker 1: always generate some kind of hyper inflating value to create 1014 00:53:17,040 --> 00:53:19,560 Speaker 1: these dollars. So the issue is if you're guaranteed to 1015 00:53:19,600 --> 00:53:22,520 Speaker 1: get a dollar for us T, all that happens and 1016 00:53:22,600 --> 00:53:25,440 Speaker 1: let's say Luna or sorry, a dollar's worth of Luna 1017 00:53:25,600 --> 00:53:31,880 Speaker 1: for us T, and then Luna plunges by then whatever. 1018 00:53:32,000 --> 00:53:34,680 Speaker 1: Then to continue to redeem those, you just have to 1019 00:53:34,880 --> 00:53:39,000 Speaker 1: create billions and billions of fresh lunas to meet that obligation. 1020 00:53:39,280 --> 00:53:42,400 Speaker 1: That pushes it down. Then the next wave of redeemers 1021 00:53:42,440 --> 00:53:44,400 Speaker 1: that makes even more billions, and so you have this 1022 00:53:44,480 --> 00:53:48,359 Speaker 1: like true hyperinflation to defend the peg. But that's what 1023 00:53:48,400 --> 00:53:50,000 Speaker 1: the AMM is supposed to do. I mean, this is 1024 00:53:50,040 --> 00:53:54,560 Speaker 1: the bot basically working as the code instructed it too. Yes, exactly. 1025 00:53:54,600 --> 00:53:56,600 Speaker 1: And I think this is actually a really great point 1026 00:53:56,680 --> 00:53:59,120 Speaker 1: that you bring up, Joe, And I think there's a 1027 00:53:59,120 --> 00:54:02,920 Speaker 1: lot of interesting nuance here, which is that first of all, 1028 00:54:02,960 --> 00:54:06,680 Speaker 1: this is hyper inflation, but this is actually worse than hyperinflation. 1029 00:54:07,080 --> 00:54:11,759 Speaker 1: This is hyper hyperinflation because it's hyper inflation, which itself 1030 00:54:11,840 --> 00:54:15,759 Speaker 1: is accelerating, right, So it's like it's hyper inflation of 1031 00:54:15,840 --> 00:54:20,279 Speaker 1: hyper inflation. Basically, it's like exponentially bad, right because basically, 1032 00:54:20,680 --> 00:54:23,600 Speaker 1: as more and more luna get created, pushing the price 1033 00:54:23,640 --> 00:54:27,239 Speaker 1: further down, exponentially more lunar needs get created. Right, So 1034 00:54:27,280 --> 00:54:29,680 Speaker 1: like maybe you like you burn a clip of ust 1035 00:54:30,440 --> 00:54:32,279 Speaker 1: and you have to mint a million luna, and then 1036 00:54:32,360 --> 00:54:34,360 Speaker 1: next time you you do it, you have to mint 1037 00:54:34,440 --> 00:54:36,120 Speaker 1: a billion Luna and next time you have to do 1038 00:54:36,120 --> 00:54:37,799 Speaker 1: do it, you have to mint a trillion lunar. Next 1039 00:54:37,840 --> 00:54:40,120 Speaker 1: time you do, you have to minto quadrillion luna. Right, 1040 00:54:40,200 --> 00:54:44,000 Speaker 1: So it just like exponentially gets worse. Right. So, on 1041 00:54:44,000 --> 00:54:47,160 Speaker 1: one hand, yes, this still does allow the UST holders 1042 00:54:47,160 --> 00:54:50,920 Speaker 1: to get out, But now there's kind of a political consideration, right, 1043 00:54:50,960 --> 00:54:53,960 Speaker 1: because the holders of Luna and the holders of UST 1044 00:54:54,280 --> 00:54:57,279 Speaker 1: are not aligned. Right. The us T holders don't really 1045 00:54:57,320 --> 00:54:58,920 Speaker 1: care about the lunar price. You want to give the 1046 00:54:59,040 --> 00:55:03,120 Speaker 1: thing down to, Yeah, points one, that's fine for them, 1047 00:55:03,160 --> 00:55:05,200 Speaker 1: you know, as long as they have they meant enough 1048 00:55:05,360 --> 00:55:08,000 Speaker 1: that they can get out a dollar's worth or you know, 1049 00:55:08,239 --> 00:55:10,120 Speaker 1: close to a dollar's worth of us T. Well, the 1050 00:55:10,200 --> 00:55:12,600 Speaker 1: Luna holders, you know, they're not happy that the us 1051 00:55:12,640 --> 00:55:15,359 Speaker 1: T guys just continuously crushing this price when no one 1052 00:55:15,440 --> 00:55:18,000 Speaker 1: in sight, I mean, we got yards to go, you know, 1053 00:55:18,040 --> 00:55:20,919 Speaker 1: there's no end and insight, right, Um, so I think 1054 00:55:20,960 --> 00:55:25,800 Speaker 1: there is some political disconnect between the interests of either 1055 00:55:25,960 --> 00:55:28,680 Speaker 1: the holders. And then I would say, finally, you know, 1056 00:55:28,800 --> 00:55:31,719 Speaker 1: how does this actually end? Well, what I think is 1057 00:55:31,760 --> 00:55:35,200 Speaker 1: that in the end, you don't actually fully redeem out 1058 00:55:35,239 --> 00:55:37,759 Speaker 1: all of this us T at a dollar you know, 1059 00:55:37,800 --> 00:55:39,399 Speaker 1: even if it takes forever, and even if you hyper 1060 00:55:39,440 --> 00:55:42,840 Speaker 1: inflate Luna to like a Googleplex or whatever. Right, Like, 1061 00:55:43,120 --> 00:55:45,440 Speaker 1: I don't think you actually get out this us T 1062 00:55:45,880 --> 00:55:48,360 Speaker 1: because at the end of the day, there is still 1063 00:55:48,719 --> 00:55:53,560 Speaker 1: a tick size constraint on exchanges. Right. So, like let's 1064 00:55:53,560 --> 00:55:59,279 Speaker 1: say the tick size on the exchange is one penny. Right, Eventually, 1065 00:55:59,320 --> 00:56:02,919 Speaker 1: if Luna it's actual fair value price is below half 1066 00:56:02,960 --> 00:56:06,080 Speaker 1: a penny, which rounds down to zero, and it's technically 1067 00:56:06,120 --> 00:56:08,880 Speaker 1: below one tick, then there will just be no bids 1068 00:56:08,880 --> 00:56:10,680 Speaker 1: in the order book. It will just be a one 1069 00:56:10,680 --> 00:56:13,560 Speaker 1: sided order book with only offers and no bid. Right. 1070 00:56:13,920 --> 00:56:17,160 Speaker 1: So at that point you can't actually complete this arm. 1071 00:56:17,239 --> 00:56:20,000 Speaker 1: You can't actually you know, sell that no matter how 1072 00:56:20,120 --> 00:56:24,359 Speaker 1: much Trillon's or Google's of of you know Luna you have, 1073 00:56:24,920 --> 00:56:27,319 Speaker 1: there's just no market to sell it because it's worth 1074 00:56:27,400 --> 00:56:31,040 Speaker 1: less than a tick, right, So like it, once that happens, 1075 00:56:31,320 --> 00:56:36,160 Speaker 1: then basically everything remaining in us T is just bad debt. Right. 1076 00:56:36,640 --> 00:56:40,279 Speaker 1: So what is the market saying right now? I think 1077 00:56:40,280 --> 00:56:42,560 Speaker 1: it's being, first of all, a little bit optimistic. I 1078 00:56:42,600 --> 00:56:45,200 Speaker 1: think it's saying that, you know, thirty eight cents on 1079 00:56:45,239 --> 00:56:48,080 Speaker 1: the dollar basically they're saying that if everybody takes a 1080 00:56:48,120 --> 00:56:51,799 Speaker 1: haircut of sixty cents, everybody can have thirty eight cents. 1081 00:56:51,920 --> 00:56:53,520 Speaker 1: First of all, I think this is wrong, but let's 1082 00:56:53,520 --> 00:56:56,719 Speaker 1: say that this was right. Right, So if this was right, 1083 00:56:57,120 --> 00:56:59,799 Speaker 1: then maybe that would be the fair thing to do. 1084 00:57:00,000 --> 00:57:02,680 Speaker 1: Everybody just takes a haircut, everybody gets thirty eight cents. 1085 00:57:02,800 --> 00:57:05,480 Speaker 1: But what's actually gonna happen is not not quite that. 1086 00:57:05,840 --> 00:57:09,319 Speaker 1: What's going to happen is that thirty eight percent of 1087 00:57:09,400 --> 00:57:13,839 Speaker 1: people are going to get a dollar and people are 1088 00:57:13,840 --> 00:57:16,840 Speaker 1: going to hold that debt word zero. Wow, that's really depressing. 1089 00:57:17,000 --> 00:57:19,480 Speaker 1: Speaking of depressing, so one of the things Joe and 1090 00:57:19,560 --> 00:57:22,120 Speaker 1: I were doing was we were looking at the subredit, 1091 00:57:22,240 --> 00:57:26,360 Speaker 1: the terror Luna subreddit, and there are some really sad 1092 00:57:26,400 --> 00:57:28,720 Speaker 1: stories out there, you know, people claiming to have lost 1093 00:57:28,760 --> 00:57:32,840 Speaker 1: their life savings, um threatening to commit suicide, things like that. 1094 00:57:33,600 --> 00:57:36,040 Speaker 1: And one of the stories that struck me it was 1095 00:57:36,120 --> 00:57:39,760 Speaker 1: someone who said that they had done all their research, 1096 00:57:40,200 --> 00:57:44,200 Speaker 1: they really believed in the project, and this happened to 1097 00:57:44,240 --> 00:57:47,160 Speaker 1: them and they've lost a lot of money. And one 1098 00:57:47,200 --> 00:57:49,760 Speaker 1: of the interesting things about crypto, at least to me, 1099 00:57:50,080 --> 00:57:53,600 Speaker 1: is it is such a polarizing space on the one hand, 1100 00:57:53,640 --> 00:57:55,040 Speaker 1: there are people saying this is going to be the 1101 00:57:55,080 --> 00:57:59,200 Speaker 1: next big thing Web three point oh, a new financial system. 1102 00:57:59,240 --> 00:58:01,200 Speaker 1: And on the other side, there are people who are 1103 00:58:01,240 --> 00:58:04,040 Speaker 1: saying that this is an outright ponzi. So I guess 1104 00:58:04,120 --> 00:58:06,959 Speaker 1: my question is, you know, someone comes and they see 1105 00:58:07,040 --> 00:58:09,680 Speaker 1: the same they read the same things about Terra and 1106 00:58:09,760 --> 00:58:12,160 Speaker 1: Luna that you do, presumably, and they come to a 1107 00:58:12,240 --> 00:58:17,880 Speaker 1: completely different conclusion. How does crypto, as like a wider 1108 00:58:18,040 --> 00:58:22,080 Speaker 1: space try to solve some of that tension? And what 1109 00:58:22,160 --> 00:58:24,920 Speaker 1: advice would you give to people who are trying to 1110 00:58:25,000 --> 00:58:30,040 Speaker 1: evaluate these different projects or boxes. Yeah, you know, I 1111 00:58:30,040 --> 00:58:31,840 Speaker 1: think I think you're breaking bring up a lot of 1112 00:58:31,960 --> 00:58:35,440 Speaker 1: very interesting topics there. Maybe just starting with that what 1113 00:58:35,560 --> 00:58:37,440 Speaker 1: I would say, And this is a bit more on 1114 00:58:37,480 --> 00:58:40,080 Speaker 1: the brutal side, but I think in crypto, you know, 1115 00:58:40,120 --> 00:58:43,320 Speaker 1: it's literally the wild West. Everybody needs to be personally 1116 00:58:43,320 --> 00:58:47,200 Speaker 1: responsible for their own decisions and accountable to themselves, do 1117 00:58:47,280 --> 00:58:50,320 Speaker 1: their own research, and that's kind of how a market works. 1118 00:58:50,360 --> 00:58:52,560 Speaker 1: To people can look at the same mechanics, do the 1119 00:58:52,600 --> 00:58:55,920 Speaker 1: same research and come to different conclusions, and then based 1120 00:58:55,920 --> 00:58:58,920 Speaker 1: on the market mechanism, eventually one side is right and 1121 00:58:58,960 --> 00:59:01,920 Speaker 1: the other side is wrong. But that is basically the 1122 00:59:01,920 --> 00:59:04,920 Speaker 1: function of the market. The bet making here is exactly 1123 00:59:04,920 --> 00:59:07,560 Speaker 1: what creates the price discovery. So I don't think that 1124 00:59:07,600 --> 00:59:10,000 Speaker 1: there's anything particularly wrong about that. But I do think 1125 00:59:10,200 --> 00:59:13,120 Speaker 1: that people should think very clearly for themselves whether or 1126 00:59:13,160 --> 00:59:15,400 Speaker 1: not they want to put up their mortgage on a 1127 00:59:15,480 --> 00:59:19,240 Speaker 1: bet that they think is good. But maybe you know, 1128 00:59:19,320 --> 00:59:22,840 Speaker 1: have some doubt, maybe have have have some skepticism, to 1129 00:59:22,920 --> 00:59:24,960 Speaker 1: have a little bit more skepticism, maybe don't put in 1130 00:59:25,000 --> 00:59:27,520 Speaker 1: more than you can lose. And you know, my sympathies, 1131 00:59:27,560 --> 00:59:30,280 Speaker 1: I think go out to all of these folks who 1132 00:59:30,440 --> 00:59:32,720 Speaker 1: you know, lost their home, lost their life savings, that 1133 00:59:32,840 --> 00:59:35,120 Speaker 1: sort of thing. But what I would say is that 1134 00:59:35,400 --> 00:59:38,560 Speaker 1: better that this happened now than later. You know, if 1135 00:59:38,600 --> 00:59:42,320 Speaker 1: if if us T was hunter billion and eventually there 1136 00:59:42,360 --> 00:59:46,360 Speaker 1: was of bad debt or ninety billion of bad debt, 1137 00:59:46,560 --> 00:59:48,640 Speaker 1: I mean, it would be way more devastating, right, I mean, 1138 00:59:49,000 --> 00:59:51,800 Speaker 1: even more people would have lost their lost their shurts. 1139 00:59:52,160 --> 00:59:54,600 Speaker 1: I wish it would have unwound earlier. You know, I think, 1140 00:59:54,680 --> 00:59:57,080 Speaker 1: I think we've been great to have this unlinding last year, 1141 00:59:57,360 --> 00:59:59,480 Speaker 1: But you know, at the end of the day, you know, 1142 00:59:59,720 --> 01:00:02,240 Speaker 1: better now then later, at least well, so I want 1143 01:00:02,280 --> 01:00:05,280 Speaker 1: to just go back to your history with it, because 1144 01:00:05,320 --> 01:00:08,480 Speaker 1: you did. You've the reason people said you gotta have 1145 01:00:08,640 --> 01:00:11,000 Speaker 1: Kevin on the show is because you have been allowed 1146 01:00:11,640 --> 01:00:15,800 Speaker 1: critic slash skeptic publicly on Twitter about the model and 1147 01:00:15,840 --> 01:00:19,640 Speaker 1: about its unsustainability. But also, as we discussed, being wrong 1148 01:00:19,760 --> 01:00:22,440 Speaker 1: can or being early can be devastatingly wrong when it 1149 01:00:22,560 --> 01:00:26,480 Speaker 1: comes time to place a trade, and with us T 1150 01:00:26,600 --> 01:00:29,480 Speaker 1: in particular, because you have this big like tact are 1151 01:00:29,520 --> 01:00:31,880 Speaker 1: you you know you have to pay that if you're 1152 01:00:31,880 --> 01:00:34,360 Speaker 1: going to short a stable coin or whatever. And the 1153 01:00:34,440 --> 01:00:36,880 Speaker 1: Luna just kept going up, even amid the sort of 1154 01:00:36,880 --> 01:00:40,600 Speaker 1: like broader crypto malaise of the last year. So what 1155 01:00:40,680 --> 01:00:43,680 Speaker 1: did you see that? What you went from being like, Okay, 1156 01:00:43,720 --> 01:00:47,520 Speaker 1: this is unstable too, Yep, Okay it's falling apart. Now. 1157 01:00:48,120 --> 01:00:50,000 Speaker 1: I always thought it was going to fall apart. I 1158 01:00:50,040 --> 01:00:52,240 Speaker 1: just didn't know when I actually thought the timing was 1159 01:00:52,320 --> 01:00:54,040 Speaker 1: not bad at all because I I thought this thing 1160 01:00:54,040 --> 01:00:56,080 Speaker 1: would have lasted a little bit longer, to be honest. 1161 01:00:56,440 --> 01:01:00,120 Speaker 1: So I think this is one of the more optimistic outcomes. Um. 1162 01:01:00,120 --> 01:01:02,080 Speaker 1: But uh, you know what what I would say is 1163 01:01:02,120 --> 01:01:06,120 Speaker 1: that you know, with all these kinds of mechanisms most 1164 01:01:06,120 --> 01:01:07,840 Speaker 1: of the time. You know, you look at all these 1165 01:01:07,920 --> 01:01:10,680 Speaker 1: kinds of I call them money games, right, these i'll 1166 01:01:10,680 --> 01:01:13,920 Speaker 1: go stable coins, these rebasing games. They've never gotten this 1167 01:01:13,960 --> 01:01:16,960 Speaker 1: big before, right. You know. You look at Home for example, 1168 01:01:17,400 --> 01:01:19,240 Speaker 1: barely you know, Billy, I forget how much it was, 1169 01:01:19,320 --> 01:01:21,200 Speaker 1: but it was like it was, it was much much smaller, 1170 01:01:21,280 --> 01:01:24,240 Speaker 1: right order magnitude smaller. Right, you look at like mem 1171 01:01:24,320 --> 01:01:26,120 Speaker 1: You look at all you know, all this stuff. Mim 1172 01:01:26,160 --> 01:01:27,960 Speaker 1: was a collateralized staple coin though, but I mean there 1173 01:01:28,000 --> 01:01:32,080 Speaker 1: was still some contagion from the time Wonderland fallout over there, 1174 01:01:32,200 --> 01:01:36,800 Speaker 1: and you like e S D DSD based VAMS Basis Cash, 1175 01:01:37,400 --> 01:01:40,600 Speaker 1: who some people think that do Quan was also the 1176 01:01:40,880 --> 01:01:45,280 Speaker 1: founder of I've also heard that remark reported it um yesterday, 1177 01:01:45,320 --> 01:01:49,800 Speaker 1: in fact May eleven, that do Quan, the creator of Luna, 1178 01:01:50,360 --> 01:01:53,840 Speaker 1: was involved in the other stable, Elgo stable that crash 1179 01:01:53,920 --> 01:01:56,120 Speaker 1: called Basis Cash. So at least they they it has 1180 01:01:56,160 --> 01:01:59,800 Speaker 1: been reported that that is the case. Yeah, I've been 1181 01:01:59,840 --> 01:02:02,120 Speaker 1: here in that rumor for a while too. Um you know, 1182 01:02:02,120 --> 01:02:03,560 Speaker 1: I don't know if it's true or not, but you know, 1183 01:02:03,560 --> 01:02:06,040 Speaker 1: I tend to believe that that is true. Um So, 1184 01:02:06,120 --> 01:02:08,680 Speaker 1: But Anyway, these experiments have all been tried before, but 1185 01:02:08,800 --> 01:02:11,200 Speaker 1: never to this scale, right, And that's what I thought 1186 01:02:11,480 --> 01:02:14,640 Speaker 1: was particularly alarming, because even with the collapse of Wonderland time, 1187 01:02:14,920 --> 01:02:18,080 Speaker 1: with the whole seafood drama, I mean, there was already 1188 01:02:18,120 --> 01:02:20,680 Speaker 1: some contagion, but it was it was still well contained, right, 1189 01:02:20,840 --> 01:02:23,040 Speaker 1: but you could see that like any bigger and there 1190 01:02:23,040 --> 01:02:25,760 Speaker 1: would just be massive whiteouts. You know. It's like at 1191 01:02:25,840 --> 01:02:29,919 Speaker 1: some point the cancer really is it's terminal, right. And 1192 01:02:29,920 --> 01:02:32,200 Speaker 1: and for that one, we did some chemo, we came 1193 01:02:32,200 --> 01:02:34,680 Speaker 1: out of Wonderland time. For this one, you know, it 1194 01:02:34,760 --> 01:02:36,480 Speaker 1: is stage four, you know what I mean. So this 1195 01:02:36,480 --> 01:02:39,200 Speaker 1: one's a lot worse, right, So you know, So that's 1196 01:02:39,280 --> 01:02:42,280 Speaker 1: that's what really really got me thinking about this one 1197 01:02:42,280 --> 01:02:44,439 Speaker 1: in particular. And this is also why I've never really 1198 01:02:44,440 --> 01:02:46,520 Speaker 1: called down any projects in the past. You know, if 1199 01:02:46,520 --> 01:02:48,880 Speaker 1: you if you look at my Twitter. Um, first of all, 1200 01:02:48,880 --> 01:02:51,960 Speaker 1: I rarely tweet, and most of the times when I 1201 01:02:52,000 --> 01:02:55,080 Speaker 1: do tweet, it's about some new obscure play that I found. 1202 01:02:55,120 --> 01:02:57,440 Speaker 1: I generally share Alpha and you know, you know, we 1203 01:02:57,480 --> 01:03:01,880 Speaker 1: found FTT, we found WiFi in the very early days. Um, 1204 01:03:01,920 --> 01:03:04,040 Speaker 1: you know, I think, you know, I think you'll find 1205 01:03:04,040 --> 01:03:06,720 Speaker 1: some you know, interesting eleph and mostly on the positive side. 1206 01:03:06,920 --> 01:03:09,280 Speaker 1: But I think this one and I maybe just to 1207 01:03:09,280 --> 01:03:10,720 Speaker 1: take a step back. One of the reasons that I 1208 01:03:10,760 --> 01:03:13,919 Speaker 1: don't like calling out projects is because in some ways 1209 01:03:13,960 --> 01:03:16,080 Speaker 1: I don't believe you can stop human nature. Right, if 1210 01:03:16,080 --> 01:03:18,600 Speaker 1: people want to gamble, if people want to play these 1211 01:03:18,600 --> 01:03:21,400 Speaker 1: money games. Um, I think if you if, even if 1212 01:03:21,440 --> 01:03:23,720 Speaker 1: if you can't really suppress it, and even if you did, 1213 01:03:23,720 --> 01:03:25,840 Speaker 1: it would come out in other ways, right. But I 1214 01:03:25,880 --> 01:03:27,680 Speaker 1: think for this one in particularly, it was just so 1215 01:03:27,760 --> 01:03:30,200 Speaker 1: bad that I felt I had to say something because 1216 01:03:30,240 --> 01:03:32,240 Speaker 1: you know, this is just gonna be devastating for the space. 1217 01:03:32,360 --> 01:03:34,920 Speaker 1: I mean, regulators are going to use this as an 1218 01:03:34,960 --> 01:03:38,080 Speaker 1: excuse to basically put on more regulation, and this is 1219 01:03:38,080 --> 01:03:40,520 Speaker 1: going to stifle innovation. You know, it's gonna be It's 1220 01:03:40,560 --> 01:03:42,880 Speaker 1: just gonna be a rough ride. What are the chances 1221 01:03:43,040 --> 01:03:45,960 Speaker 1: that someone comes to the rescue here and pours more 1222 01:03:45,960 --> 01:03:48,960 Speaker 1: money into it and gets the machine going again. Well, 1223 01:03:49,000 --> 01:03:52,000 Speaker 1: what I would say is that there probably is going 1224 01:03:52,080 --> 01:03:56,040 Speaker 1: to be some residual value in Luna and Ust, but 1225 01:03:56,160 --> 01:03:59,120 Speaker 1: not until all of the bad debt on wines. Right, 1226 01:03:59,680 --> 01:04:02,880 Speaker 1: So I think it's better to wait for the dust 1227 01:04:02,960 --> 01:04:05,880 Speaker 1: to clear out, and then you know, if you want to, 1228 01:04:06,160 --> 01:04:08,680 Speaker 1: you can just have you know, you can bid up Luna. Uh, 1229 01:04:08,800 --> 01:04:11,200 Speaker 1: you know, you can have some price discovery. But what 1230 01:04:11,240 --> 01:04:14,280 Speaker 1: I would say is that until that bad debt winds down, 1231 01:04:14,480 --> 01:04:17,120 Speaker 1: you're just gonna have hyperinflation. You're just gonna have massive 1232 01:04:17,160 --> 01:04:20,040 Speaker 1: selling pressure, crushing the price to a tick and then 1233 01:04:20,080 --> 01:04:24,200 Speaker 1: to note ticks. Right, So until that happens, you know, 1234 01:04:24,480 --> 01:04:27,480 Speaker 1: and and who who knows what the actual intrinsic value 1235 01:04:27,480 --> 01:04:29,520 Speaker 1: of an l one without the stable coin really is. 1236 01:04:29,880 --> 01:04:32,520 Speaker 1: You know, it could be actually well higher than like 1237 01:04:32,720 --> 01:04:34,880 Speaker 1: three cents or wherever it's training two cents right now. 1238 01:04:35,320 --> 01:04:37,280 Speaker 1: It could be well well higher than that, but we 1239 01:04:37,320 --> 01:04:39,640 Speaker 1: won't know that. We can't really have that price discovery 1240 01:04:39,800 --> 01:04:42,400 Speaker 1: until all the bad debt winds out. So you know, 1241 01:04:42,480 --> 01:04:45,040 Speaker 1: for now, you know, I'm really no bid on Luna. 1242 01:04:45,640 --> 01:04:48,240 Speaker 1: I think UST itself is going to go down. I 1243 01:04:48,240 --> 01:04:50,000 Speaker 1: think three or eight cents on dollars. It's still too 1244 01:04:50,040 --> 01:04:53,280 Speaker 1: expensive to be honest, And then at some point bad 1245 01:04:53,320 --> 01:04:55,480 Speaker 1: debt clears out and then people bid up Luna and 1246 01:04:55,520 --> 01:04:57,840 Speaker 1: then it'll settle at its true fair value. But I 1247 01:04:57,880 --> 01:04:59,400 Speaker 1: do think that they're doing the right things. I do 1248 01:04:59,520 --> 01:05:02,000 Speaker 1: think that survive as a chain. Will it ever be 1249 01:05:02,040 --> 01:05:04,720 Speaker 1: top ten again? Very unlikely. I think something like this 1250 01:05:04,920 --> 01:05:07,680 Speaker 1: is so damaging to the reputation that I don't think 1251 01:05:07,720 --> 01:05:11,360 Speaker 1: it will ever happen again. Kevin So of Gila Capital, 1252 01:05:11,960 --> 01:05:15,400 Speaker 1: fascinating conversation. We could talk with you over three hours. 1253 01:05:15,600 --> 01:05:18,720 Speaker 1: You're so clear, you're such a such a so good 1254 01:05:18,720 --> 01:05:21,760 Speaker 1: at explaining things. So glad we had you on odd 1255 01:05:21,840 --> 01:05:25,200 Speaker 1: Lash And yeah, likewise, really glad to be on. Thanks 1256 01:05:25,240 --> 01:05:28,120 Speaker 1: for inviting me. Absolutely, Thanks Kevin. That was so good. Yeah, 1257 01:05:28,160 --> 01:05:44,360 Speaker 1: that was great. Thank you, Kevin Tracy. Just in terms 1258 01:05:44,560 --> 01:05:49,320 Speaker 1: of how crypto defy these markets work, I think Kevin 1259 01:05:49,360 --> 01:05:52,040 Speaker 1: is the best guest we've had on that. I think 1260 01:05:52,040 --> 01:05:55,360 Speaker 1: he was really good and really clear. He obviously has 1261 01:05:55,400 --> 01:05:58,120 Speaker 1: a lot of credibility on this one as well, because 1262 01:05:58,160 --> 01:06:01,000 Speaker 1: he was such a big vocal critic of Luna Terra. 1263 01:06:01,240 --> 01:06:04,240 Speaker 1: But at the same time, you know, you can't just say, oh, 1264 01:06:04,360 --> 01:06:06,920 Speaker 1: he's an anti crypto guy. He doesn't get it. It's 1265 01:06:06,920 --> 01:06:09,720 Speaker 1: all fun like he's actually invested in the space and 1266 01:06:09,880 --> 01:06:12,400 Speaker 1: called this one out as a bad actor, and he's 1267 01:06:12,480 --> 01:06:16,280 Speaker 1: clearly into the space because you know he you know, 1268 01:06:16,360 --> 01:06:18,400 Speaker 1: he's on he's clearly of the view that you know, 1269 01:06:18,440 --> 01:06:23,280 Speaker 1: it doesn't want like massive regulatory response to this, and 1270 01:06:23,400 --> 01:06:27,280 Speaker 1: also that if crypto is going to avoid big regulatory 1271 01:06:27,400 --> 01:06:30,480 Speaker 1: responses in the future, whichever one in the industry wanted 1272 01:06:30,520 --> 01:06:34,200 Speaker 1: to avoid, presumably there has to be like a greater 1273 01:06:34,440 --> 01:06:38,240 Speaker 1: willingness to call out projects that are unsustainable. I also 1274 01:06:38,320 --> 01:06:42,680 Speaker 1: really like the description of the self reflexivity of the 1275 01:06:42,680 --> 01:06:45,120 Speaker 1: way Luna terror works. And you know, this is something 1276 01:06:45,160 --> 01:06:47,800 Speaker 1: that I know we've spoken about before, but this idea 1277 01:06:47,960 --> 01:06:52,000 Speaker 1: of you know, the ultimate sort of momentum play, but 1278 01:06:52,080 --> 01:06:55,280 Speaker 1: the whole system is predicated that at some point people 1279 01:06:55,320 --> 01:06:59,600 Speaker 1: will want exposure that starts falling away because people start 1280 01:06:59,680 --> 01:07:02,480 Speaker 1: doubting the way the entire thing is working. Then it 1281 01:07:02,560 --> 01:07:05,200 Speaker 1: just feels like there's almost a limited downside. And you 1282 01:07:05,280 --> 01:07:08,080 Speaker 1: asked the key question, and I still think that, like 1283 01:07:08,200 --> 01:07:11,640 Speaker 1: it's it seems like shades of great to me, the 1284 01:07:11,680 --> 01:07:15,280 Speaker 1: difference between Tara Luna or some of these other DeFi things, 1285 01:07:15,320 --> 01:07:18,840 Speaker 1: because with the stock, when the stock goes down, where're like, yeah, 1286 01:07:18,880 --> 01:07:20,680 Speaker 1: but the company is still selling a bunch of paint 1287 01:07:20,720 --> 01:07:22,680 Speaker 1: and they're getting a lot of right, and so there's 1288 01:07:22,720 --> 01:07:25,400 Speaker 1: this cash flow that people want. But with a lot 1289 01:07:25,400 --> 01:07:27,800 Speaker 1: of DeFi stuff where it's like token trading all the 1290 01:07:27,800 --> 01:07:31,040 Speaker 1: way down. There is not like some natural other source 1291 01:07:31,120 --> 01:07:34,080 Speaker 1: of cash other than you know is he put it great, 1292 01:07:34,120 --> 01:07:35,880 Speaker 1: He said, if you get if you're getting a yield, 1293 01:07:36,000 --> 01:07:38,840 Speaker 1: you're often just getting money from future bag holders. But 1294 01:07:38,880 --> 01:07:41,040 Speaker 1: if there's no more future bag holders. And I think 1295 01:07:41,040 --> 01:07:44,040 Speaker 1: that still is the case with many coins, even if 1296 01:07:44,040 --> 01:07:46,920 Speaker 1: they're not quite as convoluted or not quite as blatant 1297 01:07:47,080 --> 01:07:49,520 Speaker 1: about how the box were. Yeah, and I mean the 1298 01:07:49,560 --> 01:07:52,280 Speaker 1: other thing I would say is this kind of arbitrage mechanism. 1299 01:07:52,400 --> 01:07:55,800 Speaker 1: It is not unknown in the world of traditional finance, 1300 01:07:55,840 --> 01:07:58,120 Speaker 1: and I think a few people have drawn analogies with 1301 01:07:58,200 --> 01:08:01,440 Speaker 1: the way that Exchange traded his work and market making 1302 01:08:01,520 --> 01:08:04,640 Speaker 1: for those. But the difference is, you know, you're trading 1303 01:08:04,680 --> 01:08:08,360 Speaker 1: a basket of stocks, and the stocks kind of have 1304 01:08:08,560 --> 01:08:10,680 Speaker 1: some sort of value, they're tied to some sort of 1305 01:08:10,720 --> 01:08:13,120 Speaker 1: cash flow. For this one, the arbitrage is all about 1306 01:08:13,120 --> 01:08:15,320 Speaker 1: the crypto, and if you don't think the crypto has 1307 01:08:15,360 --> 01:08:19,639 Speaker 1: any value anymore, then it kind of collapses very quickly. Well, 1308 01:08:19,640 --> 01:08:21,639 Speaker 1: we can talk about this a long time, and I'm 1309 01:08:21,680 --> 01:08:23,840 Speaker 1: sure we will. Yeah, our producer is kicking us out 1310 01:08:23,840 --> 01:08:25,840 Speaker 1: of the studio. All right, shall we leave it there? 1311 01:08:25,960 --> 01:08:28,479 Speaker 1: Let's leave it there. This has been another episode of 1312 01:08:28,479 --> 01:08:31,200 Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow 1313 01:08:31,200 --> 01:08:33,760 Speaker 1: me on Twitter at Tracy Alloway and I'm Joe wi 1314 01:08:33,800 --> 01:08:36,639 Speaker 1: Isn't though. You can follow me on Twitter at the Stalwart. 1315 01:08:36,840 --> 01:08:39,759 Speaker 1: Follow our guest Kevin So on Twitter. He's at Gail 1316 01:08:39,840 --> 01:08:43,760 Speaker 1: law Capital. Follow our producer Kerman Rodriguez at Kerman Arman. 1317 01:08:44,080 --> 01:08:47,719 Speaker 1: Follow the Bloomberg head of podcast Francesco Leavi at Francesco Today. 1318 01:08:48,040 --> 01:08:50,679 Speaker 1: And check out all of our podcasts at Bloomberg under 1319 01:08:50,720 --> 01:09:08,760 Speaker 1: the handle at podcasts. Thanks for listening to