1 00:00:03,440 --> 00:00:07,040 Speaker 1: This is Bloomberg Crypto Daily Bloomberghart Podcast, and this is 2 00:00:07,120 --> 00:00:10,960 Speaker 1: Katie greifeld In today for Stacy Marie Ishmail. It's Thursday, 3 00:00:11,119 --> 00:00:28,320 Speaker 1: November seventeen. This week on the podcast, we've attempted to 4 00:00:28,440 --> 00:00:31,720 Speaker 1: unpack the spectacular downfall of one of the biggest crypto 5 00:00:31,760 --> 00:00:35,000 Speaker 1: exchanges in the industry and how it's possibly changed the 6 00:00:35,040 --> 00:00:39,320 Speaker 1: sector forever. A month ago, if someone would have told 7 00:00:39,400 --> 00:00:43,440 Speaker 1: us f t X was potentially mismanaging customer funds, funneling 8 00:00:43,440 --> 00:00:47,080 Speaker 1: money into its sister trading firm, Alimator Research, and would 9 00:00:47,159 --> 00:00:50,280 Speaker 1: soon be the disgrace of the crypto industry, we wouldn't 10 00:00:50,280 --> 00:00:54,240 Speaker 1: have believed them. As more details about its general finances emerged, 11 00:00:54,600 --> 00:00:57,560 Speaker 1: we're starting to better understand how f t X and 12 00:00:57,600 --> 00:01:01,080 Speaker 1: its former CEO Sam bankman Fried might have managed to 13 00:01:01,160 --> 00:01:04,320 Speaker 1: change the industry forever. But how much of a mess 14 00:01:04,360 --> 00:01:07,960 Speaker 1: was f t X in, How did nobody notice? And 15 00:01:08,000 --> 00:01:10,800 Speaker 1: how can this shape the future of crypto? To make 16 00:01:10,880 --> 00:01:12,679 Speaker 1: sense of what this could all mean, I'm joined by 17 00:01:12,680 --> 00:01:16,000 Speaker 1: Bloomberg reporter vil Donna Hirich. When we speak to people, 18 00:01:16,040 --> 00:01:18,840 Speaker 1: to crypto investors or whoever, traders, a lot of them 19 00:01:18,840 --> 00:01:21,200 Speaker 1: are saying Oh, this is actually like a very scary 20 00:01:21,280 --> 00:01:25,360 Speaker 1: moment for crypto and we're going to interview Bloomberg opinion 21 00:01:25,400 --> 00:01:29,400 Speaker 1: columnist Matt Levin. Classically, the way you get into this 22 00:01:29,440 --> 00:01:33,920 Speaker 1: situation is like one trade goes wrong and you're like, 23 00:01:34,400 --> 00:01:36,480 Speaker 1: we can make this up, and then it sort of 24 00:01:36,480 --> 00:01:49,480 Speaker 1: snowballs from there. Hi, Matt, Hi don I'm here too. 25 00:01:50,160 --> 00:01:52,920 Speaker 1: Hey Hill Toma, what are you doing there? But if 26 00:01:52,920 --> 00:01:55,760 Speaker 1: we wanted to dive right in and thank you by 27 00:01:55,800 --> 00:01:58,520 Speaker 1: the way for being here, thanks for having me. You 28 00:01:58,560 --> 00:02:01,760 Speaker 1: are like the pre eminent voice here on what's going on, 29 00:02:01,800 --> 00:02:03,920 Speaker 1: I feel like everybody's already here. You don't have to 30 00:02:03,920 --> 00:02:06,640 Speaker 1: flatter Sorry, sorry, I have to. I have to. I'm 31 00:02:06,640 --> 00:02:09,600 Speaker 1: a big fan. But just to start, maybe you can 32 00:02:09,639 --> 00:02:12,920 Speaker 1: just give us your take overall what And I know 33 00:02:12,960 --> 00:02:15,079 Speaker 1: we've all been talking about this like non stuff, but 34 00:02:15,240 --> 00:02:18,760 Speaker 1: from your point of view, what actually happened? I still 35 00:02:18,800 --> 00:02:21,360 Speaker 1: don't know. I mean, like, in rough sense, is what 36 00:02:21,400 --> 00:02:25,640 Speaker 1: happened is that fd X disclose that it didn't have 37 00:02:25,720 --> 00:02:29,160 Speaker 1: a lot of customer balances, and that's really bad. I mean, 38 00:02:29,160 --> 00:02:30,960 Speaker 1: I guess what happened first of all is that customers 39 00:02:30,960 --> 00:02:32,840 Speaker 1: withdrew a lot of money from fd X, and then 40 00:02:32,919 --> 00:02:35,040 Speaker 1: ft X shut down with drills because it didn't have 41 00:02:36,120 --> 00:02:40,880 Speaker 1: it's customers money. Um. But beyond that, the question of 42 00:02:40,880 --> 00:02:43,560 Speaker 1: where did the customers money go? It still seems very 43 00:02:43,600 --> 00:02:45,919 Speaker 1: much up in the air. The sort of rough sense 44 00:02:46,000 --> 00:02:50,160 Speaker 1: is that ft X is affiliated hedge fund Alameda somehow 45 00:02:50,240 --> 00:02:52,600 Speaker 1: lost that money, but what it did to lose that 46 00:02:52,639 --> 00:02:55,560 Speaker 1: money is pretty unclear. There's talk of put a lot 47 00:02:55,600 --> 00:02:57,679 Speaker 1: of money into venture investments, put a lot of money 48 00:02:57,680 --> 00:03:01,840 Speaker 1: into rescuing you know, busted to affirms this summer in 49 00:03:01,960 --> 00:03:04,200 Speaker 1: ways that might have lost some of that money. Um. 50 00:03:04,240 --> 00:03:06,280 Speaker 1: But it's also you know, it's a leverage hedge fund, 51 00:03:06,280 --> 00:03:07,840 Speaker 1: and there are a lot of ways to lose money 52 00:03:08,880 --> 00:03:11,880 Speaker 1: leverage position in crypto this year, so it could have 53 00:03:11,960 --> 00:03:14,079 Speaker 1: lost money that way, and you know there are other 54 00:03:14,160 --> 00:03:19,440 Speaker 1: more complicated speculations, but those are some guesses. So I've 55 00:03:19,720 --> 00:03:23,840 Speaker 1: read everything that you've ever written. This past week especially 56 00:03:24,240 --> 00:03:27,160 Speaker 1: you've written a lot on the balance sheet that was 57 00:03:27,240 --> 00:03:31,040 Speaker 1: first reported by the Financial Times over the weekends. I 58 00:03:31,040 --> 00:03:33,880 Speaker 1: feel like you did a really beautiful takedown. The big 59 00:03:34,000 --> 00:03:37,320 Speaker 1: numbers to know, I believe it was nine billion dollars 60 00:03:37,360 --> 00:03:43,960 Speaker 1: in liabilities, like nine million in actual liquid assets, uh. 61 00:03:44,000 --> 00:03:47,680 Speaker 1: And you pointed out that back when I don't know, 62 00:03:47,760 --> 00:03:49,920 Speaker 1: last week, when we were so young, just talking about 63 00:03:49,920 --> 00:03:52,720 Speaker 1: the f t T token, you made the point that 64 00:03:53,240 --> 00:03:55,240 Speaker 1: it seems like some of their main assets were in 65 00:03:55,240 --> 00:03:58,040 Speaker 1: a token that they made up. But what that reporting 66 00:03:58,080 --> 00:04:01,920 Speaker 1: revealed by the Financial Times was that actually there's two. 67 00:04:02,680 --> 00:04:05,440 Speaker 1: There's more than two. I mean, right, there's the balance 68 00:04:05,480 --> 00:04:07,400 Speaker 1: sheet that we're talking about is something that f t 69 00:04:07,600 --> 00:04:10,680 Speaker 1: X was circulating as it was sort of in its 70 00:04:10,680 --> 00:04:13,400 Speaker 1: death throws, trying to stay about bankruptcy by getting an investment. 71 00:04:13,440 --> 00:04:15,800 Speaker 1: So I think that, loosely speaking, what happened is that 72 00:04:15,840 --> 00:04:18,720 Speaker 1: there are customer withdraws, and everything that they had that 73 00:04:18,839 --> 00:04:23,400 Speaker 1: was valuable they sold or paid out to customers. So 74 00:04:23,560 --> 00:04:27,120 Speaker 1: something like five billion dollars worth of bigcoin and dollars 75 00:04:27,160 --> 00:04:30,599 Speaker 1: and whatever else went out the door, and what was 76 00:04:30,680 --> 00:04:32,680 Speaker 1: left by the time they prepared that balance sheet was 77 00:04:33,960 --> 00:04:36,640 Speaker 1: it was the weird stuff. Tell us about the weird stuff. 78 00:04:36,640 --> 00:04:37,920 Speaker 1: I want to know about the weird. So there's a 79 00:04:37,920 --> 00:04:39,719 Speaker 1: lot of weird stuff, including a position on Twitter that 80 00:04:39,720 --> 00:04:42,599 Speaker 1: nobody quite understands, like do they have a position in 81 00:04:42,640 --> 00:04:46,479 Speaker 1: Elon Must's Twitter? Um clear, But the bulk of the 82 00:04:46,480 --> 00:04:53,320 Speaker 1: weird stuff is a basically these f t X related tokens. 83 00:04:53,320 --> 00:04:55,320 Speaker 1: So there's f t T which is the utility token 84 00:04:55,320 --> 00:04:58,280 Speaker 1: of f t X, which basically it's not exactly stock 85 00:04:58,320 --> 00:04:59,760 Speaker 1: in ft X, but it's kind of like stock in 86 00:04:59,800 --> 00:05:02,200 Speaker 1: the ft X exchange. Right, if you buy that token, 87 00:05:02,800 --> 00:05:04,880 Speaker 1: they will buy it back out of cash flow of 88 00:05:04,920 --> 00:05:07,040 Speaker 1: ft X, so it's kind of like the stock of FTEX. 89 00:05:07,360 --> 00:05:10,279 Speaker 1: There's a token called Serum, which is the not face, 90 00:05:12,440 --> 00:05:17,920 Speaker 1: although it isn't that what all alexis. We're interrupted. I 91 00:05:17,920 --> 00:05:19,560 Speaker 1: will tell you that Sirium is run by a thing 92 00:05:19,600 --> 00:05:21,640 Speaker 1: called the Serum Foundation. If you and if you google 93 00:05:21,680 --> 00:05:25,120 Speaker 1: Serum Foundation, it's all makeup. It's not at all contents 94 00:05:25,160 --> 00:05:28,599 Speaker 1: of the Serum Foundation. But the Sirium is like the 95 00:05:28,640 --> 00:05:32,919 Speaker 1: same thing. It's it's the token of a thing, a 96 00:05:33,000 --> 00:05:36,200 Speaker 1: decentralized exchange protocol called Serum, which was started by a 97 00:05:37,000 --> 00:05:39,000 Speaker 1: built by f t X and Alibata, and it was 98 00:05:39,080 --> 00:05:41,400 Speaker 1: sort of like, you know, people want to trade on 99 00:05:41,440 --> 00:05:45,440 Speaker 1: decentralized exchanges, and ft X is the centralized exchange, and 100 00:05:45,480 --> 00:05:49,080 Speaker 1: so this is like it's like decentralized counterparts. So what 101 00:05:49,120 --> 00:05:51,200 Speaker 1: that means is like there's a Serium token. It trades 102 00:05:51,240 --> 00:05:53,880 Speaker 1: a little, it doesn't trade that much, and they have 103 00:05:53,960 --> 00:05:56,440 Speaker 1: like all of it, and they have the giant pile 104 00:05:56,440 --> 00:05:57,960 Speaker 1: of it on their balance sheet that has more than 105 00:05:58,000 --> 00:06:00,320 Speaker 1: all of the serrium and circulation. And there's just called 106 00:06:00,360 --> 00:06:02,680 Speaker 1: maps which is the token of a different thing called 107 00:06:02,720 --> 00:06:05,760 Speaker 1: maps dot me, which I will take no further questions 108 00:06:05,800 --> 00:06:08,800 Speaker 1: about what maps dot me does. But there was a 109 00:06:08,839 --> 00:06:11,279 Speaker 1: third one to but like there's like three million dollars 110 00:06:11,279 --> 00:06:14,400 Speaker 1: of maps dot me and and they had like million 111 00:06:14,440 --> 00:06:16,320 Speaker 1: dollars of it on their balance sheet, so like way 112 00:06:16,320 --> 00:06:18,919 Speaker 1: more than there is maps dot me. And they were 113 00:06:18,920 --> 00:06:20,839 Speaker 1: acclaiming that as an asset on the balance sheet. So 114 00:06:20,839 --> 00:06:22,640 Speaker 1: if you add up all the assets and subtract all 115 00:06:22,640 --> 00:06:26,200 Speaker 1: the liabilities, like you get slightly more assets than my abilities. 116 00:06:26,320 --> 00:06:28,480 Speaker 1: But then if you like poke those assets a little bit, 117 00:06:28,480 --> 00:06:31,280 Speaker 1: they fall apart. Okay, can we poke at the assets? 118 00:06:31,440 --> 00:06:34,480 Speaker 1: Because as Katie said, so everybody should go and read 119 00:06:34,520 --> 00:06:36,760 Speaker 1: this first before they even listened to the rest of 120 00:06:36,760 --> 00:06:39,719 Speaker 1: this interview, because you did such a thorough breakdown of 121 00:06:39,800 --> 00:06:42,200 Speaker 1: what exactly was on their balance sheet. So maybe can 122 00:06:42,240 --> 00:06:45,359 Speaker 1: you just characterize for us, like how bad of a 123 00:06:45,360 --> 00:06:49,120 Speaker 1: balance sheet was it? Uh, Like, in terms of like 124 00:06:49,160 --> 00:06:52,640 Speaker 1: howling ghosts. Yeah, I said, I said a series of 125 00:06:52,680 --> 00:06:55,680 Speaker 1: metaphors about how because it is it is not it 126 00:06:55,839 --> 00:06:59,680 Speaker 1: is not like expressible in normal financial times. But now 127 00:06:59,720 --> 00:07:01,840 Speaker 1: I mean the bal like like I want to be 128 00:07:01,880 --> 00:07:03,919 Speaker 1: a little sympathetic here, because this is the balance sheet, 129 00:07:04,000 --> 00:07:08,279 Speaker 1: like after they got rid of all the good stuff, 130 00:07:08,320 --> 00:07:10,520 Speaker 1: this is the balance sheet of stuff they couldn't give 131 00:07:10,560 --> 00:07:15,160 Speaker 1: to their customers. And it's terrible stuff, but it's it's 132 00:07:15,200 --> 00:07:18,320 Speaker 1: basically it's mostly tokens that um, it's mostly a couple 133 00:07:18,320 --> 00:07:20,680 Speaker 1: of things, tokens that they made up that there's no 134 00:07:20,760 --> 00:07:23,680 Speaker 1: real market for, like they trade. But if they were 135 00:07:23,720 --> 00:07:26,160 Speaker 1: to sell billions of dollars with the serum, they would 136 00:07:26,160 --> 00:07:27,880 Speaker 1: get like, you know, kind of zero dollars for that. 137 00:07:28,120 --> 00:07:30,920 Speaker 1: So like the billions of dollars is fake, not fake, 138 00:07:30,960 --> 00:07:34,800 Speaker 1: but it's like not achievable. So I actually have a 139 00:07:34,880 --> 00:07:36,960 Speaker 1: quote from one of your recent columns. I love it 140 00:07:37,000 --> 00:07:40,400 Speaker 1: so much I'm going to read it to you. Quote. 141 00:07:40,640 --> 00:07:43,680 Speaker 1: It's an Excel file full of the howling of ghosts 142 00:07:44,080 --> 00:07:47,119 Speaker 1: and the shrieking of tortured souls. If you look too 143 00:07:47,200 --> 00:07:50,800 Speaker 1: long at that spreadsheet, you will go insane. And that 144 00:07:50,880 --> 00:07:53,679 Speaker 1: leads me neatly to. My next question is what should 145 00:07:54,080 --> 00:07:56,720 Speaker 1: the balance sheet of f t X or a company 146 00:07:56,760 --> 00:07:59,600 Speaker 1: like f t X, what should it have looked like. Well, 147 00:08:00,000 --> 00:08:01,960 Speaker 1: it's a little hard to know, because, like you can 148 00:08:02,040 --> 00:08:03,680 Speaker 1: have a simple model of the balance sheet, which is 149 00:08:03,880 --> 00:08:06,440 Speaker 1: like customers put in some bitcoin or some dollars and 150 00:08:06,480 --> 00:08:08,880 Speaker 1: you just hold them right and like you're in exchange, 151 00:08:08,920 --> 00:08:11,320 Speaker 1: you charge fees for trading, you just hold the customer stuff, 152 00:08:11,320 --> 00:08:12,960 Speaker 1: and then the customers want their stuff back, you just 153 00:08:13,000 --> 00:08:14,800 Speaker 1: give it to them. I think it doesn't work that 154 00:08:14,840 --> 00:08:17,239 Speaker 1: way because it is a it offers a number of products, 155 00:08:17,280 --> 00:08:18,800 Speaker 1: but it offers a lot of futures, and so there's 156 00:08:18,800 --> 00:08:20,520 Speaker 1: a lot of futures trading. So you're doing a lot 157 00:08:20,560 --> 00:08:24,320 Speaker 1: of leveraging where you're sort of like effectively borrowing money 158 00:08:24,320 --> 00:08:26,320 Speaker 1: to lend to customers, and you're doing a certain amount 159 00:08:26,360 --> 00:08:28,760 Speaker 1: of barring from one customer to lend to another customer. 160 00:08:28,800 --> 00:08:30,840 Speaker 1: So you can have kind of a messy balance sheet. 161 00:08:31,200 --> 00:08:34,600 Speaker 1: But broadly speaking, you want to have like valuable stuff 162 00:08:34,920 --> 00:08:39,360 Speaker 1: to offset your obligations to your customers, and there is 163 00:08:39,400 --> 00:08:43,440 Speaker 1: just much less valuable stuff on this balance sheet then 164 00:08:43,480 --> 00:08:46,360 Speaker 1: there are customer obligations. I want to talk more about 165 00:08:46,400 --> 00:08:48,760 Speaker 1: serum and some of the other stuff that you've found. 166 00:08:49,160 --> 00:08:51,160 Speaker 1: Can you talk about the process of how you actually 167 00:08:51,200 --> 00:08:54,319 Speaker 1: went through all of this and sort of the revelations 168 00:08:54,440 --> 00:08:58,280 Speaker 1: as you went, you know, line by line or whatever 169 00:08:58,280 --> 00:09:00,800 Speaker 1: this process actually looks like, because I also have a 170 00:09:00,880 --> 00:09:02,760 Speaker 1: quote of yours that I'm going to read to you. 171 00:09:03,240 --> 00:09:05,559 Speaker 1: I love this exercise. I love it. This is so fun. 172 00:09:06,280 --> 00:09:10,199 Speaker 1: Who said this? It seems bad, but it somehow keeps 173 00:09:10,240 --> 00:09:12,840 Speaker 1: getting worse. And that's what you said. I believe it 174 00:09:12,880 --> 00:09:16,240 Speaker 1: was in regards to sirium, and I love I love Sirium. 175 00:09:16,280 --> 00:09:18,520 Speaker 1: I wish I had a metaphor for like, there's like 176 00:09:18,559 --> 00:09:21,680 Speaker 1: a vigorous skinker game applied to this balance sheet. Yeah, 177 00:09:21,920 --> 00:09:25,000 Speaker 1: like this this balance sheet needs some retinal am I right? Yes, 178 00:09:25,280 --> 00:09:28,160 Speaker 1: someone did actually email me to be like you're you're 179 00:09:28,200 --> 00:09:30,160 Speaker 1: overacting this balance This is a balance sheet with no 180 00:09:30,240 --> 00:09:34,120 Speaker 1: makeup on it. Every financial institution has, like you know, 181 00:09:34,480 --> 00:09:36,920 Speaker 1: some mess and they clean it up, and like you 182 00:09:36,960 --> 00:09:39,240 Speaker 1: see the cleaned up version, and this is the sort 183 00:09:39,280 --> 00:09:41,839 Speaker 1: of like no makeup version, and well that is true, 184 00:09:41,960 --> 00:09:45,440 Speaker 1: like substantively the mess is quite bad. Um, I don't know, 185 00:09:45,520 --> 00:09:48,800 Speaker 1: I mean, like candidly, what happened to me first was 186 00:09:48,840 --> 00:09:50,000 Speaker 1: not that I read the balance sheet, but that I 187 00:09:50,040 --> 00:09:52,880 Speaker 1: read the Financial Times article summarizing it, and they got 188 00:09:52,880 --> 00:09:56,000 Speaker 1: to the point where they said, it has two point 189 00:09:56,080 --> 00:10:00,440 Speaker 1: two billion dollars of sirium and the market capit sirium 190 00:10:00,520 --> 00:10:04,439 Speaker 1: is eighty eight million dollars. And I thought, well, those 191 00:10:04,480 --> 00:10:08,400 Speaker 1: are really bad numbers because the market cap is all 192 00:10:08,440 --> 00:10:11,520 Speaker 1: of serrium and they have so much more than all 193 00:10:11,679 --> 00:10:14,960 Speaker 1: of SIU. They have many times all of Syra. And 194 00:10:15,040 --> 00:10:17,760 Speaker 1: so I treated that people like, well, you know, the 195 00:10:17,800 --> 00:10:20,120 Speaker 1: price went down, like, no, the price didn't go down. 196 00:10:20,160 --> 00:10:22,760 Speaker 1: There's like a deep conception, and the price did go down, 197 00:10:22,800 --> 00:10:25,240 Speaker 1: but not that much. The deep conceptual problem, which is 198 00:10:25,240 --> 00:10:27,679 Speaker 1: that they have way more serium than there is serum, 199 00:10:27,760 --> 00:10:32,640 Speaker 1: because like you can, you know, you can do this 200 00:10:32,800 --> 00:10:36,040 Speaker 1: like funny math, where like you have a token and 201 00:10:36,080 --> 00:10:38,559 Speaker 1: you issue one percent of it for money and then 202 00:10:38,559 --> 00:10:40,880 Speaker 1: you're like one percent of it was worth ten million dollars, 203 00:10:40,920 --> 00:10:43,000 Speaker 1: a hundred percent of it was worth a billion dollars. 204 00:10:43,040 --> 00:10:45,640 Speaker 1: But that's not really true. And the other issue with 205 00:10:45,920 --> 00:10:50,040 Speaker 1: having so much of this one thing is that if 206 00:10:50,080 --> 00:10:53,199 Speaker 1: they were to offload it, then it would actually push 207 00:10:53,240 --> 00:10:56,680 Speaker 1: the price out, making their holdings worth even less, right, Yeah, 208 00:10:56,679 --> 00:10:58,640 Speaker 1: but also like if they were to offload it, like 209 00:10:58,679 --> 00:11:02,240 Speaker 1: something's gone wrong. Exterium is a sort of FTX project, 210 00:11:02,400 --> 00:11:04,800 Speaker 1: and FTX we're like we're dumping all of it today. 211 00:11:05,200 --> 00:11:07,080 Speaker 1: You wouldn't go down by like you know, you wouldn't 212 00:11:07,080 --> 00:11:09,199 Speaker 1: like calculate the effect of liquidity. You'd be like, well, 213 00:11:09,240 --> 00:11:14,320 Speaker 1: and that's worth zero, right, So it's bad. So I 214 00:11:14,360 --> 00:11:17,480 Speaker 1: want to talk about the fact that f t X 215 00:11:17,640 --> 00:11:23,520 Speaker 1: finance their centralized exchanges. And a counterpoint that I've seen 216 00:11:23,720 --> 00:11:26,360 Speaker 1: or narrative that I've seen on Twitter recently over the 217 00:11:26,400 --> 00:11:28,680 Speaker 1: past week or so, is that this is why you 218 00:11:28,720 --> 00:11:31,920 Speaker 1: know you shouldn't trust centralized exchanges. And then, as you 219 00:11:31,960 --> 00:11:33,560 Speaker 1: point out in a column, it kind of feels like 220 00:11:33,559 --> 00:11:36,920 Speaker 1: Finance wants to be a central bank. They have this 221 00:11:37,160 --> 00:11:41,000 Speaker 1: recovery fund, by the way, like of FTX, right, like 222 00:11:41,080 --> 00:11:43,360 Speaker 1: this is this is like the Binance recovery fund is 223 00:11:44,400 --> 00:11:46,719 Speaker 1: First of all, it's just it's just a tweet from 224 00:11:46,720 --> 00:11:51,520 Speaker 1: CZ right, But like even you if you sort of 225 00:11:51,559 --> 00:11:53,720 Speaker 1: like try to fill in the details with your best guess, 226 00:11:53,720 --> 00:11:55,599 Speaker 1: it sort of ends up looking like what FTX was 227 00:11:55,679 --> 00:11:58,120 Speaker 1: during this Well, I promised on getting to a question 228 00:11:58,120 --> 00:12:02,600 Speaker 1: here because there's also been warding that you've seen huge 229 00:12:02,720 --> 00:12:05,840 Speaker 1: outflows from exchanges, like billions of dollars. So I guess 230 00:12:06,080 --> 00:12:08,840 Speaker 1: I want to know if we make this a binary question, 231 00:12:08,920 --> 00:12:11,920 Speaker 1: where do you see the crypto industry going towards this 232 00:12:12,400 --> 00:12:16,120 Speaker 1: central bank sort of route, putting more trust and exchanges 233 00:12:16,160 --> 00:12:18,640 Speaker 1: such as binance we're trying to fill this void. Or 234 00:12:18,679 --> 00:12:21,040 Speaker 1: do you see a world sort of like a d 235 00:12:21,160 --> 00:12:27,200 Speaker 1: globalization and actual decentralization, people taking their money off of exchanges, 236 00:12:27,360 --> 00:12:31,160 Speaker 1: putting them in cold storage, wanting control of their keys. 237 00:12:31,679 --> 00:12:35,679 Speaker 1: It feels like we're at that precipice kind of. Yeah. 238 00:12:35,760 --> 00:12:38,880 Speaker 1: I think it's really hard. I think that UM cold 239 00:12:38,960 --> 00:12:42,760 Speaker 1: storage is like it's not a it's like like that's 240 00:12:42,800 --> 00:12:45,520 Speaker 1: a solution for like, you know, institutions wanting to buy 241 00:12:45,520 --> 00:12:48,280 Speaker 1: and hold bitcoin. But like there is this view that 242 00:12:48,320 --> 00:12:52,800 Speaker 1: you're building this whole financial system and that requires trading, right, 243 00:12:52,840 --> 00:12:54,439 Speaker 1: it requires exchanges. Like a lot of the people in 244 00:12:54,480 --> 00:12:57,560 Speaker 1: crypto are not you know, buy and whole bitcoin and 245 00:12:57,600 --> 00:12:59,640 Speaker 1: forget about it. Their page fund guys. They want to 246 00:12:59,640 --> 00:13:03,040 Speaker 1: trade um and it's hard to do that if you 247 00:13:03,080 --> 00:13:06,600 Speaker 1: don't have any exchanges that you trust. I think people 248 00:13:06,840 --> 00:13:12,800 Speaker 1: keep claiming victory for decentralized plinance because it seems to 249 00:13:12,960 --> 00:13:16,839 Speaker 1: not have some of these problems of charismatic founders losing 250 00:13:16,840 --> 00:13:19,959 Speaker 1: all the money. But you know, like the liquidity there's 251 00:13:20,000 --> 00:13:22,440 Speaker 1: the remains a lot smaller than on central than on 252 00:13:22,520 --> 00:13:26,760 Speaker 1: centralized exchanges. And I think, you know, the user experience 253 00:13:26,760 --> 00:13:29,440 Speaker 1: of that for either a retail customer or like you know, 254 00:13:30,280 --> 00:13:32,720 Speaker 1: the sort of like big institutional money that people want 255 00:13:32,760 --> 00:13:35,640 Speaker 1: to bring into Kryptos is I think, you know, I 256 00:13:35,640 --> 00:13:37,280 Speaker 1: don't know, you want to have an entity that you're facing, 257 00:13:37,640 --> 00:13:39,200 Speaker 1: So I think that's hard. And then I think, like 258 00:13:39,559 --> 00:13:42,760 Speaker 1: the central bank model, I would have to think that 259 00:13:42,840 --> 00:13:46,320 Speaker 1: most people trust finance less now than they did two 260 00:13:46,360 --> 00:13:49,480 Speaker 1: weeks ago, not because finance did anything wrong, but because 261 00:13:49,559 --> 00:13:51,880 Speaker 1: the person they trusted two weeks ago they don't trust anymore, right, 262 00:13:52,080 --> 00:13:54,880 Speaker 1: Like you, it's hard to be like, oh, like the 263 00:13:54,960 --> 00:13:58,440 Speaker 1: savior centralized exchange went bust, so we'll pick a new 264 00:13:58,520 --> 00:14:00,920 Speaker 1: savior central It's just like seems like a crazy thing 265 00:14:01,000 --> 00:14:03,760 Speaker 1: to do. Um, So I don't know, I mean, I 266 00:14:03,760 --> 00:14:08,120 Speaker 1: think the central bank model, like, I think the best 267 00:14:08,160 --> 00:14:11,280 Speaker 1: case is something like the central bank model, something like 268 00:14:11,280 --> 00:14:13,680 Speaker 1: we're gonna trust finance and coin based on others, and 269 00:14:13,679 --> 00:14:17,319 Speaker 1: we're going to do it in a vastly more regulated 270 00:14:17,360 --> 00:14:21,600 Speaker 1: way where there's like some like adult supervision of all 271 00:14:21,640 --> 00:14:25,080 Speaker 1: of this, so that it's not c Z saying I'm 272 00:14:25,080 --> 00:14:26,960 Speaker 1: going to be the central bank. But it's like there's 273 00:14:27,040 --> 00:14:30,400 Speaker 1: some sort of institutional framework in which it can be embedded. 274 00:14:30,600 --> 00:14:33,040 Speaker 1: And I think that's also very far away and very 275 00:14:33,040 --> 00:14:34,880 Speaker 1: hard to do. So I don't I don't know. I 276 00:14:34,880 --> 00:14:37,120 Speaker 1: don't gonna answer your question like there's a lot of 277 00:14:37,120 --> 00:14:39,920 Speaker 1: bad options. It sounds like if I listened to your 278 00:14:39,920 --> 00:14:43,120 Speaker 1: answer though, that this just isn't the death of centralized exchanges. 279 00:14:44,680 --> 00:14:49,440 Speaker 1: I don't think so. I don't think so. One thing 280 00:14:49,440 --> 00:14:50,920 Speaker 1: that's very weird is that it should be very easy 281 00:14:50,960 --> 00:14:53,880 Speaker 1: to write a cryptic exchange and not lose all your customers, 282 00:14:53,920 --> 00:14:55,880 Speaker 1: like and and you know, I'm really about this, and 283 00:14:55,920 --> 00:14:58,000 Speaker 1: I don't want to be too glib because you know 284 00:14:58,800 --> 00:15:01,920 Speaker 1: the people I just keep up. But like coin base 285 00:15:02,080 --> 00:15:04,360 Speaker 1: is a U S public company with an auditor balance sheet. 286 00:15:04,440 --> 00:15:07,440 Speaker 1: That's pretty straightforward, right, Like they take your money and 287 00:15:07,480 --> 00:15:09,560 Speaker 1: they put it somewhere and when you ask for it back, 288 00:15:09,560 --> 00:15:11,840 Speaker 1: to give it back. And their business model is they 289 00:15:11,920 --> 00:15:13,880 Speaker 1: charge you a lot of fees for trading, and you 290 00:15:13,960 --> 00:15:15,720 Speaker 1: trade a lot, and so they make a lot of money. Right. 291 00:15:15,920 --> 00:15:18,280 Speaker 1: Like that's oversimplifying in various ways, but it's like a 292 00:15:18,280 --> 00:15:22,440 Speaker 1: pretty easy business, right. Um. At the Bloomberg cryptos somewhat, 293 00:15:22,480 --> 00:15:26,760 Speaker 1: I interviewed SPF and said, you know, we talked a 294 00:15:26,800 --> 00:15:31,440 Speaker 1: little bit about like the analysis of these acquisitions, and 295 00:15:31,440 --> 00:15:35,040 Speaker 1: he said something to the effect of, like our thinking was, 296 00:15:35,080 --> 00:15:37,640 Speaker 1: if we could incinerate a relatively small amount of money, 297 00:15:37,920 --> 00:15:41,760 Speaker 1: we would do it. And there's a lot of ways 298 00:15:41,760 --> 00:15:44,680 Speaker 1: in which that makes sense. Right. If you are the 299 00:15:44,680 --> 00:15:47,560 Speaker 1: biggest player in crypto and you want the crypato ecosystem 300 00:15:47,600 --> 00:15:51,520 Speaker 1: to be healthy, you would incinerate some money for the broader, 301 00:15:51,960 --> 00:15:55,320 Speaker 1: like longer term purpose of keeping the ecosystem healthy. If 302 00:15:55,320 --> 00:15:57,760 Speaker 1: you are a well capitalized player, that is the time 303 00:15:57,800 --> 00:16:00,360 Speaker 1: to deploy capital, either because you think there will be 304 00:16:00,360 --> 00:16:02,320 Speaker 1: a recovering you'll make money on it, or even if 305 00:16:02,320 --> 00:16:04,800 Speaker 1: you are really incinerating money, you're at least keeping the 306 00:16:04,800 --> 00:16:08,760 Speaker 1: system healthier and you know, improving your long term cash list. 307 00:16:09,840 --> 00:16:12,320 Speaker 1: If you're not well capitalised, though, which it seems like 308 00:16:12,320 --> 00:16:14,920 Speaker 1: they were not, then it's a terrible decision. Um, and 309 00:16:15,000 --> 00:16:17,440 Speaker 1: that seems to be part of the problem. Anyways, they 310 00:16:17,760 --> 00:16:20,560 Speaker 1: blewe money on buying failed crypto firms so that they 311 00:16:20,560 --> 00:16:23,680 Speaker 1: didn't get back. Coming up more with Bloomberg reporter vill 312 00:16:23,680 --> 00:16:27,120 Speaker 1: Donna Hirich and Bloomberg opinion columnist Matt Levine on what 313 00:16:27,240 --> 00:16:30,000 Speaker 1: the FTX fallout could mean for the future of crypto. 314 00:16:43,640 --> 00:16:46,680 Speaker 1: So that kind of leads me to a question I've 315 00:16:46,720 --> 00:16:48,320 Speaker 1: been thinking about, and I think I've asked you this 316 00:16:48,400 --> 00:16:52,280 Speaker 1: a few different times already this past few weeks. Week 317 00:16:52,520 --> 00:16:56,520 Speaker 1: Uh to your point that if you were well capitalized, 318 00:16:57,560 --> 00:16:59,640 Speaker 1: that's the thing to do. If you weren't, that's a 319 00:16:59,720 --> 00:17:05,360 Speaker 1: terrible decision. When you think about just SPF, how we acted, 320 00:17:05,480 --> 00:17:08,639 Speaker 1: what you the conversations that you've had with SPF. Do 321 00:17:08,680 --> 00:17:14,800 Speaker 1: you think that this was intentionally bad decisions like intentional fraud, 322 00:17:14,840 --> 00:17:17,800 Speaker 1: intentional evil, or do you think this was just hubrius 323 00:17:17,840 --> 00:17:21,560 Speaker 1: someone who got over their skis. I don't know. I 324 00:17:21,880 --> 00:17:25,640 Speaker 1: I you know, I've said I have talked to SBF 325 00:17:25,680 --> 00:17:29,320 Speaker 1: a few times. I've I've liked I've liked him personally. 326 00:17:29,480 --> 00:17:32,600 Speaker 1: I would like to think the best of everyone. I 327 00:17:32,640 --> 00:17:35,320 Speaker 1: think that, um, it is hard to get into this 328 00:17:35,359 --> 00:17:39,600 Speaker 1: sort of situation as like your plan, because like what's 329 00:17:39,640 --> 00:17:42,000 Speaker 1: the next step of the plan? Right, like like it 330 00:17:42,040 --> 00:17:43,760 Speaker 1: doesn't like this doesn't seem to have worked out great 331 00:17:43,760 --> 00:17:46,760 Speaker 1: for SPF. So it just and just in general, like 332 00:17:46,760 --> 00:17:49,800 Speaker 1: looking at a lot of these sort of situations, you know, 333 00:17:49,880 --> 00:17:53,320 Speaker 1: loosely speaking, Um, the way you get into the situation 334 00:17:53,480 --> 00:17:55,520 Speaker 1: is you get out over your skis. I mean the 335 00:17:55,560 --> 00:17:57,320 Speaker 1: way you get like classically, the way you get into 336 00:17:57,320 --> 00:18:01,840 Speaker 1: the situation is like one trade goes wrong and you're like, 337 00:18:02,400 --> 00:18:04,440 Speaker 1: we can make this up, and then it's sort of 338 00:18:04,480 --> 00:18:07,280 Speaker 1: snowballs from there to the point where you're sort of 339 00:18:07,320 --> 00:18:10,200 Speaker 1: using all of your customer money. Um. I also think 340 00:18:10,280 --> 00:18:12,320 Speaker 1: like looking at that like one thing that you've learned, 341 00:18:12,359 --> 00:18:15,360 Speaker 1: like you noticed looking at that balance sheet is that 342 00:18:15,440 --> 00:18:20,640 Speaker 1: like the processes at FTX, we're maybe not great, right, 343 00:18:21,080 --> 00:18:24,160 Speaker 1: And like there was certainly like part of their media 344 00:18:24,160 --> 00:18:26,560 Speaker 1: images that is a very small firm that was very 345 00:18:26,560 --> 00:18:30,040 Speaker 1: profitable with very few people, and all the people were 346 00:18:30,080 --> 00:18:32,600 Speaker 1: sort of like the perceptions they were all brilliant and 347 00:18:32,640 --> 00:18:34,760 Speaker 1: like came from like you know, Jane Street, and like 348 00:18:35,119 --> 00:18:38,719 Speaker 1: I knew a lot about trading, but they're you know, 349 00:18:38,880 --> 00:18:42,200 Speaker 1: accounting and compliance functions. Seems to have been maybe less 350 00:18:42,240 --> 00:18:45,200 Speaker 1: than you would want. And so one thing that SPF 351 00:18:45,240 --> 00:18:48,280 Speaker 1: has tweeted and then the Terrible Balance Sheet said was 352 00:18:48,320 --> 00:18:51,240 Speaker 1: that there was a hidden, mislabeled eight billion dollar gap 353 00:18:51,280 --> 00:18:56,640 Speaker 1: where they just forgot about it at some level. That's 354 00:18:56,640 --> 00:18:59,399 Speaker 1: hard to believe, but also I believe it, Like I mean, 355 00:18:59,440 --> 00:19:03,800 Speaker 1: who among right like like like something went wrong that 356 00:19:04,040 --> 00:19:06,640 Speaker 1: had something to do with sloppin us in some form, right, 357 00:19:06,720 --> 00:19:11,920 Speaker 1: And I don't know exactly what that was, but they 358 00:19:11,960 --> 00:19:14,680 Speaker 1: do seem to have lost track of some of their money. Well, 359 00:19:14,680 --> 00:19:17,119 Speaker 1: speaking of that, if I can quote you to you again, 360 00:19:18,520 --> 00:19:22,040 Speaker 1: you cannot apply ordinary arithmetic to numbers in a cell 361 00:19:22,160 --> 00:19:26,800 Speaker 1: labeled hidden poorly internally labeled account in all caps. Of course, 362 00:19:27,400 --> 00:19:30,439 Speaker 1: the result of adding subtracting those numbers with ordinary numbers 363 00:19:30,520 --> 00:19:33,880 Speaker 1: is not a number, It is prison. Do you want 364 00:19:33,880 --> 00:19:38,080 Speaker 1: to talk more about that? Not really, but like, I mean, 365 00:19:38,520 --> 00:19:42,240 Speaker 1: clearly people are in legal jeopardy when they lose customer 366 00:19:42,280 --> 00:19:45,720 Speaker 1: money and hidden poorly leavel all the ways. What kind 367 00:19:45,760 --> 00:19:49,080 Speaker 1: of like you could imagine that being a series of 368 00:19:49,160 --> 00:19:52,760 Speaker 1: understandable mistakes and still being in a lot of legal trouble. 369 00:19:52,920 --> 00:19:55,880 Speaker 1: What kind of legal trouble are we talking about? As 370 00:19:55,920 --> 00:19:59,600 Speaker 1: I understand it, one main kind go on. The US 371 00:19:59,600 --> 00:20:02,440 Speaker 1: Attorney Office of the Southern District of New York decides 372 00:20:02,480 --> 00:20:07,359 Speaker 1: to prosecute you for wire fraud. That's the main kind. Yeah, 373 00:20:07,400 --> 00:20:11,040 Speaker 1: that's the biggie. I think even with a series of 374 00:20:11,040 --> 00:20:14,040 Speaker 1: innocent mistakes, the U s Attorney's Office will be very 375 00:20:14,080 --> 00:20:18,080 Speaker 1: interested and will not except a serious innocent mistakes. But 376 00:20:18,119 --> 00:20:19,959 Speaker 1: I also think, like I don't know, you look at 377 00:20:19,960 --> 00:20:23,320 Speaker 1: the evidence like your first thought is not a series 378 00:20:23,320 --> 00:20:25,840 Speaker 1: of innocence. I'm not a lawyer, but I do want 379 00:20:25,840 --> 00:20:28,880 Speaker 1: to talk about the fact that SPF keeps tweeting. This 380 00:20:28,960 --> 00:20:32,800 Speaker 1: man is tweeting through it. It does some weird tweets, 381 00:20:33,280 --> 00:20:35,399 Speaker 1: like a letter by letter. I know it sounds like 382 00:20:36,400 --> 00:20:38,680 Speaker 1: a lot of time on his hands. It hasn't been 383 00:20:38,720 --> 00:20:40,919 Speaker 1: going over too well on crypto twitter. It seems like 384 00:20:41,040 --> 00:20:43,879 Speaker 1: no one wants this man to be tweeting. Should he 385 00:20:43,920 --> 00:20:46,439 Speaker 1: be tweeting. I don't think it's doing a lot for 386 00:20:46,680 --> 00:20:50,600 Speaker 1: anything to be tweeting. So I know we've been talking about, 387 00:20:50,600 --> 00:20:54,240 Speaker 1: like we heard the word death of x y C 388 00:20:54,680 --> 00:20:56,960 Speaker 1: a lot. Katie and I actually on this podcast have 389 00:20:57,000 --> 00:20:59,840 Speaker 1: been talking about how when we speak to to pe 390 00:21:00,000 --> 00:21:03,800 Speaker 1: pulled to crypto investors or whoever, traders even not just 391 00:21:03,840 --> 00:21:06,280 Speaker 1: like bystanders that a lot of them are saying, Oh, 392 00:21:06,320 --> 00:21:09,640 Speaker 1: this is actually like a very scary moment for crypto. 393 00:21:10,040 --> 00:21:12,399 Speaker 1: And we we have actually a story from one of 394 00:21:12,400 --> 00:21:14,320 Speaker 1: our producers. We want to bring her in and have 395 00:21:14,440 --> 00:21:16,919 Speaker 1: her share it with you. I think you will like 396 00:21:17,040 --> 00:21:20,959 Speaker 1: this and get your take and get your take on 397 00:21:20,960 --> 00:21:23,280 Speaker 1: on what's going on, because she too has been talking 398 00:21:23,280 --> 00:21:29,080 Speaker 1: to people about everything that's going on and how much 399 00:21:29,119 --> 00:21:34,320 Speaker 1: of an issue it's been. Hi, Sharon, Hey, guys, how 400 00:21:34,359 --> 00:21:36,720 Speaker 1: are you. I'm not a reporter, I'm only a producer, 401 00:21:37,080 --> 00:21:42,800 Speaker 1: I mean a reporter. Yeah, but you're Matt Levine. But 402 00:21:42,920 --> 00:21:44,840 Speaker 1: this is the point actually of the story that you 403 00:21:44,880 --> 00:21:49,840 Speaker 1: are Matt Levin. Yeah, exactly. Um. Yes. Over the weekend 404 00:21:50,200 --> 00:21:55,520 Speaker 1: I went out and I, um, I guess I should 405 00:21:55,560 --> 00:21:58,320 Speaker 1: say that I'm within the age range where it's appropriate 406 00:21:58,400 --> 00:22:02,359 Speaker 1: for me to hang around college seniors and anyway, I 407 00:22:02,480 --> 00:22:12,240 Speaker 1: she's thirty fun oh man, um and yeah, I just 408 00:22:12,240 --> 00:22:15,280 Speaker 1: slamped into these two guys and they seemed to be 409 00:22:15,640 --> 00:22:19,040 Speaker 1: kind of mumbling something about f t X and SPF, 410 00:22:19,920 --> 00:22:22,160 Speaker 1: and I sort of approached them and I said, oh, 411 00:22:22,200 --> 00:22:23,880 Speaker 1: what do you think about this whole f t X thing. 412 00:22:23,920 --> 00:22:25,960 Speaker 1: And when I told them that I worked for Bloomberg 413 00:22:26,520 --> 00:22:28,879 Speaker 1: and that I specifically worked within the crypto vertical and 414 00:22:28,920 --> 00:22:33,520 Speaker 1: the cryptopod, their eyes we're so wide and so lit, 415 00:22:33,560 --> 00:22:37,000 Speaker 1: and they immediately asked me do you work with Matt Levine? 416 00:22:37,200 --> 00:22:39,600 Speaker 1: Do you know Matt Levine? And I said, well, I 417 00:22:39,600 --> 00:22:44,840 Speaker 1: don't know him personally, but yeah, but I've worked in 418 00:22:44,840 --> 00:22:47,000 Speaker 1: the professional vicinity of Matt Levine. So it was really 419 00:22:47,040 --> 00:22:50,119 Speaker 1: interesting just kind of like see how they were so awestruck. 420 00:22:50,320 --> 00:22:52,280 Speaker 1: I felt like I was like, I just told them 421 00:22:52,320 --> 00:22:54,960 Speaker 1: that I like worked with the President Barack Obama or 422 00:22:55,000 --> 00:22:57,360 Speaker 1: like something to that effect. I didn't ask about Katie Kreifeld. 423 00:23:00,000 --> 00:23:03,920 Speaker 1: That's right, It's right, Well I did, to be honest, 424 00:23:03,960 --> 00:23:08,600 Speaker 1: I did plug crypto. I r l oh, thanks. I 425 00:23:08,760 --> 00:23:12,359 Speaker 1: just renamed this podcast to the mal Levine Crypto Podcast 426 00:23:12,720 --> 00:23:20,280 Speaker 1: and just a pilon Yes. But but was that the story? No, 427 00:23:21,640 --> 00:23:24,240 Speaker 1: We're still getting to the to the crux of the story, 428 00:23:24,640 --> 00:23:27,600 Speaker 1: because they told you some interesting things about crypto and 429 00:23:27,600 --> 00:23:31,080 Speaker 1: how they're viewing the state of the market. Yeah. I 430 00:23:31,359 --> 00:23:33,239 Speaker 1: I sort of asked them, like, so, what do you 431 00:23:33,280 --> 00:23:36,879 Speaker 1: think like it's going to happen now, like about crypto 432 00:23:36,960 --> 00:23:40,000 Speaker 1: and are you like really into the crypto world. And 433 00:23:40,080 --> 00:23:42,520 Speaker 1: I mean, when you think about it, like their two 434 00:23:42,560 --> 00:23:46,280 Speaker 1: year old college seniors, they're just starting to be like 435 00:23:46,359 --> 00:23:49,080 Speaker 1: financially independent and they're really dipping their toes into like 436 00:23:49,119 --> 00:23:52,679 Speaker 1: crypto verse, so to speak. And they seem to be 437 00:23:52,720 --> 00:23:56,320 Speaker 1: really optimistic about the whole thing. Um, they did say 438 00:23:56,359 --> 00:23:59,800 Speaker 1: they did acknowledge, you know, this whole FTX fallout is 439 00:24:00,000 --> 00:24:03,159 Speaker 1: really disappointing. It happened, it was terrible, it caused a 440 00:24:03,160 --> 00:24:06,200 Speaker 1: lot of pain. We can't disregard that. But they did 441 00:24:06,240 --> 00:24:09,040 Speaker 1: also follow up with there's a lot of hope, and 442 00:24:09,200 --> 00:24:12,080 Speaker 1: I don't think we should be, you know, in the 443 00:24:12,119 --> 00:24:14,640 Speaker 1: position to say let's give up on crypto. So they 444 00:24:14,680 --> 00:24:17,119 Speaker 1: were really kind of like optimistic about the future crypto 445 00:24:17,160 --> 00:24:20,199 Speaker 1: and said let's hold on because these are essentially like 446 00:24:20,280 --> 00:24:23,119 Speaker 1: growing pains about what they think is going to be 447 00:24:23,119 --> 00:24:27,679 Speaker 1: like a really game changing industry. Yeah, I mean, you know, 448 00:24:28,160 --> 00:24:30,040 Speaker 1: this is not the first time that I mean, it's 449 00:24:30,040 --> 00:24:31,480 Speaker 1: not even the biggest exchange, but this is not the 450 00:24:31,480 --> 00:24:33,439 Speaker 1: first time the biggest crypto exchange has gone down, right, 451 00:24:33,440 --> 00:24:36,560 Speaker 1: I mean, like this is a recurring story. It's a 452 00:24:36,720 --> 00:24:39,119 Speaker 1: sad and embarrassing story and it's you know, I do 453 00:24:39,200 --> 00:24:42,640 Speaker 1: think that people you know, in twenty two would say 454 00:24:42,680 --> 00:24:45,800 Speaker 1: that there is a that crypto has been more institutionalized 455 00:24:45,880 --> 00:24:48,160 Speaker 1: and like the days of the biggest exchange going down 456 00:24:48,200 --> 00:24:50,800 Speaker 1: because it was act or over, not that this one 457 00:24:50,880 --> 00:24:54,240 Speaker 1: went down because it was that, but still and this 458 00:24:54,280 --> 00:24:57,640 Speaker 1: feels like a throwback to the battle days. But um, 459 00:24:57,680 --> 00:24:59,160 Speaker 1: you know, in the Battle of this people were still 460 00:24:59,160 --> 00:25:02,320 Speaker 1: bullish on crypto. They you know, turned out to be right, right, 461 00:25:02,320 --> 00:25:05,160 Speaker 1: I mean, like people who but bitcoin after mout Cox 462 00:25:05,160 --> 00:25:08,879 Speaker 1: Coops did find uh. I don't know, I don't know. 463 00:25:08,960 --> 00:25:11,720 Speaker 1: I think it's a real step back for institutionalization. I 464 00:25:11,760 --> 00:25:14,199 Speaker 1: think it is like you know your question earlier, like 465 00:25:14,240 --> 00:25:16,399 Speaker 1: it's just hard to know, like what the what the 466 00:25:16,520 --> 00:25:20,200 Speaker 1: just like future mechanical processes for like having a crypto 467 00:25:20,400 --> 00:25:23,960 Speaker 1: trading ecosystem where like I think trust and centralized exchanges 468 00:25:24,000 --> 00:25:26,080 Speaker 1: has gone way down. I think like the thing to 469 00:25:26,119 --> 00:25:30,080 Speaker 1: replace that is either decentralized exchanges or like regulation, and 470 00:25:30,119 --> 00:25:31,840 Speaker 1: I think neither of those are kind of ready for 471 00:25:31,880 --> 00:25:35,000 Speaker 1: prime time. But I don't know. If you're twenty two 472 00:25:36,040 --> 00:25:38,000 Speaker 1: and you like crypto, I suppose you can still be 473 00:25:38,000 --> 00:25:40,280 Speaker 1: bullish on crypto. But I will say, if you're twenty 474 00:25:40,280 --> 00:25:41,919 Speaker 1: two and you like, there's a good chance you're like 475 00:25:42,160 --> 00:25:45,440 Speaker 1: working at FDx right now, because they're all like children, 476 00:25:45,520 --> 00:25:50,800 Speaker 1: and what kind of frustrates me, Like, I know that 477 00:25:50,840 --> 00:25:55,520 Speaker 1: they were like twenty to thirty actual children, but I'm 478 00:25:55,640 --> 00:26:01,680 Speaker 1: very old and he's seven, exactly. It's good to laugh. 479 00:26:01,920 --> 00:26:05,600 Speaker 1: I'm almost thirty myself. I like to think that maybe 480 00:26:05,640 --> 00:26:07,720 Speaker 1: I wouldn't have come up with an eight billion dollar hold, 481 00:26:07,760 --> 00:26:09,520 Speaker 1: but I don't know. Maybe I would have gotten over 482 00:26:09,560 --> 00:26:12,639 Speaker 1: my skis in the exact same way. It's really easy 483 00:26:12,800 --> 00:26:18,080 Speaker 1: to judge from the sidelines, you know. Like one thing 484 00:26:18,080 --> 00:26:20,359 Speaker 1: in financial markets is that people who are older have 485 00:26:20,480 --> 00:26:23,560 Speaker 1: just seen more cycles and sort of like have a 486 00:26:23,600 --> 00:26:25,919 Speaker 1: better sense of what can go wrong. I mean in theory, right, 487 00:26:25,960 --> 00:26:28,240 Speaker 1: it's not always true. But another thing is like, no 488 00:26:28,240 --> 00:26:30,480 Speaker 1: one's seen any cycles in crypto, right, Like everything encrypto 489 00:26:30,560 --> 00:26:32,000 Speaker 1: is kind of happening for the first time. I think 490 00:26:32,000 --> 00:26:34,159 Speaker 1: that entirely have been cycles, but it's like, you know, 491 00:26:34,200 --> 00:26:36,480 Speaker 1: it's kind of all happening for the first time. And 492 00:26:36,560 --> 00:26:38,920 Speaker 1: so on the one hand, that means that the young 493 00:26:38,960 --> 00:26:43,160 Speaker 1: people are just as much as the old people at 494 00:26:43,200 --> 00:26:44,399 Speaker 1: the other end, it means that there's a lot more 495 00:26:44,400 --> 00:26:48,840 Speaker 1: things can go wrong, right, coming up more with Bloomberg 496 00:26:48,880 --> 00:27:02,320 Speaker 1: reporter Villdanna Hirich and Bloomberg opinion columnist Matt Levine. Can 497 00:27:02,359 --> 00:27:04,240 Speaker 1: I just say my whole family loves you. I know 498 00:27:04,359 --> 00:27:15,040 Speaker 1: you know that this is credit podcast. That's that's really 499 00:27:15,080 --> 00:27:20,399 Speaker 1: nice to hear. Um, I've, I've how much are we 500 00:27:20,440 --> 00:27:24,240 Speaker 1: sharing on this podcast? Everything? I know this in part 501 00:27:24,240 --> 00:27:26,240 Speaker 1: because I talked to your dad on the phone on 502 00:27:26,400 --> 00:27:29,360 Speaker 1: our way to a crypto hang out. Yeah, I was there. 503 00:27:29,440 --> 00:27:32,720 Speaker 1: I was there. Can we talk about the I remember 504 00:27:32,760 --> 00:27:34,199 Speaker 1: it all too well. We can call him out now, 505 00:27:34,240 --> 00:27:36,000 Speaker 1: we can call him right now, if you can. We 506 00:27:36,000 --> 00:27:39,000 Speaker 1: talk about the fact that we did to crypto drinks 507 00:27:40,320 --> 00:27:45,119 Speaker 1: last Thursday before the bankruptcy. But that was really remarkable. 508 00:27:45,119 --> 00:27:46,600 Speaker 1: That felt like drinks at the end of the world. 509 00:27:46,640 --> 00:27:49,120 Speaker 1: I don't know. It wasn't a bunker, but it was. 510 00:27:49,480 --> 00:27:52,080 Speaker 1: It was in a cellar. It just felt where in 511 00:27:52,119 --> 00:27:55,200 Speaker 1: downtown Manhattan. It felt like everyone thought it was stunned. 512 00:27:55,520 --> 00:28:00,320 Speaker 1: I don't know, like out of blank faces. Yeah, at 513 00:28:00,359 --> 00:28:01,679 Speaker 1: the end of the world. It's like they'll be when 514 00:28:01,720 --> 00:28:07,640 Speaker 1: they listen to this. Yeah, Okay, let's sober up. Let's 515 00:28:07,680 --> 00:28:10,440 Speaker 1: tie a ball on this. Matt, what is your best 516 00:28:10,480 --> 00:28:13,840 Speaker 1: guess what crypto looks like down the road? Where do 517 00:28:13,920 --> 00:28:17,680 Speaker 1: we go from here? What's the takeaway? I think it's 518 00:28:17,680 --> 00:28:20,000 Speaker 1: really hard to know. I think that, you know, the 519 00:28:20,119 --> 00:28:23,000 Speaker 1: original promise of crypto is sort of like getting away 520 00:28:23,000 --> 00:28:26,680 Speaker 1: from trusting centralized institutions and putting your trust in like 521 00:28:26,800 --> 00:28:29,680 Speaker 1: the code or the blockchain or decentralized exchanges or whatever. 522 00:28:30,359 --> 00:28:33,480 Speaker 1: I think that what we've learned over the last year 523 00:28:33,560 --> 00:28:37,160 Speaker 1: certainly is that people really want to trust and centralized institutions. 524 00:28:37,240 --> 00:28:41,120 Speaker 1: That's just like more efficient, it's easier, it works to 525 00:28:41,120 --> 00:28:44,480 Speaker 1: how you can have a functioning financial system. But over 526 00:28:44,520 --> 00:28:46,840 Speaker 1: and over again this year you've seen that that trust 527 00:28:46,840 --> 00:28:50,680 Speaker 1: has been misplaced. Uh. So I don't know where we 528 00:28:50,760 --> 00:28:53,760 Speaker 1: go from there. I mean, the way that all other 529 00:28:53,880 --> 00:28:59,200 Speaker 1: centralized intermediaries work is some combination of transparency and regulation, right, 530 00:28:59,320 --> 00:29:02,120 Speaker 1: And you can imagine something like that coming to crypto. 531 00:29:02,160 --> 00:29:06,920 Speaker 1: I mean, is bizarre that that publish its balance sheets? Right? Uh? 532 00:29:07,000 --> 00:29:12,000 Speaker 1: And it is sort of reasonable that fd X tried 533 00:29:12,040 --> 00:29:15,400 Speaker 1: to avoid US regulation by being in the Bahamas, because 534 00:29:15,520 --> 00:29:17,920 Speaker 1: you know, US regulation of crypto is this sort of 535 00:29:18,400 --> 00:29:22,800 Speaker 1: not great, but um that in hindsight that looks terrible 536 00:29:22,840 --> 00:29:28,320 Speaker 1: and the more regulated exchanges do a little better. Uh So, 537 00:29:28,360 --> 00:29:30,960 Speaker 1: I think that part of the answer is, like, there 538 00:29:31,000 --> 00:29:34,680 Speaker 1: are ways to make trusted intermediaries more trustworthy, and you 539 00:29:34,720 --> 00:29:36,680 Speaker 1: could do some of them. You could have transparency and 540 00:29:36,720 --> 00:29:40,360 Speaker 1: regulation and sort of oversight boards of directors and things 541 00:29:40,400 --> 00:29:44,360 Speaker 1: like that. Um, but that's not the answer that everyone 542 00:29:44,360 --> 00:29:46,640 Speaker 1: in crypto wants to hear, right, And I think this 543 00:29:46,760 --> 00:29:50,600 Speaker 1: will continue to be a boon for people who want 544 00:29:50,640 --> 00:29:55,800 Speaker 1: true decentralization. Some of that is you know, decentralized exchange 545 00:29:56,000 --> 00:29:59,400 Speaker 1: people and people and defy who say that centralized finance 546 00:29:59,440 --> 00:30:03,040 Speaker 1: is bad and should use defy where you can trust 547 00:30:03,080 --> 00:30:06,080 Speaker 1: the code rather than intermediaries. Some of it will be bitcoiners, 548 00:30:06,200 --> 00:30:08,479 Speaker 1: right where like the bitcoiners are like all of this 549 00:30:08,600 --> 00:30:12,240 Speaker 1: stuff here, this stuff is all just like the opposite 550 00:30:12,240 --> 00:30:14,440 Speaker 1: of the point of crypto. The point of crypto is 551 00:30:14,480 --> 00:30:17,959 Speaker 1: just bitcoin, hard money, no leverage, no trust than anyone, 552 00:30:18,120 --> 00:30:23,120 Speaker 1: just you and your keys, you and your keys. And 553 00:30:23,320 --> 00:30:26,000 Speaker 1: that's like, you know, unsatisfying if you're on a hedgehune 554 00:30:26,000 --> 00:30:27,200 Speaker 1: and you want to be like trade and stuff all 555 00:30:27,200 --> 00:30:29,600 Speaker 1: the time. But like I don't know it kind of 556 00:30:29,640 --> 00:30:32,720 Speaker 1: comes out of this looking I think relatively good. This 557 00:30:32,800 --> 00:30:34,440 Speaker 1: was the best thing that ever happened to me. I 558 00:30:34,480 --> 00:30:36,680 Speaker 1: don't know about you, vill Donna. This is pretty fun 559 00:30:36,920 --> 00:30:43,520 Speaker 1: Matt Levin show. I've never heard a better. Um. All right, great, Matt, 560 00:30:43,880 --> 00:30:47,160 Speaker 1: thanks for joining us. Thank you, Matt. You can find 561 00:30:47,200 --> 00:30:49,320 Speaker 1: more of all Donna, Hi, Rick and Matt Levine's work 562 00:30:49,360 --> 00:30:52,560 Speaker 1: on the Bloomberg Terminal and on Bloomberg dot com. For more, 563 00:30:52,640 --> 00:30:55,719 Speaker 1: be sure to check out our twice weekly newsletter, Bloomberg Crypto. 564 00:31:00,080 --> 00:31:05,440 Speaker 1: M This is Bloomberg Crypto, a daily podcast from Bloomberg 565 00:31:05,480 --> 00:31:08,560 Speaker 1: and I Heart Radio. For more shows from I Heart Radio, 566 00:31:08,800 --> 00:31:11,880 Speaker 1: visit the I Heart Radio app, Apple Podcasts, or wherever 567 00:31:11,960 --> 00:31:15,480 Speaker 1: you get your podcasts. Send us your comments, questions, or 568 00:31:15,520 --> 00:31:18,520 Speaker 1: suggestions for the show to Crypto at Bloomberg dot net. 569 00:31:21,760 --> 00:31:24,880 Speaker 1: The supervising producer of Bloomberg Crypto is Vicky very Galina. 570 00:31:25,280 --> 00:31:29,000 Speaker 1: Our senior producer is Janet Babin. Our producers are Mohammed 571 00:31:29,000 --> 00:31:32,600 Speaker 1: Faruk and Sharon Barriro. Our associate producers are Ty Butler 572 00:31:32,680 --> 00:31:36,240 Speaker 1: and Moses on Them. Desta wonder At is our engineer. 573 00:31:36,640 --> 00:31:41,800 Speaker 1: Original music by Leo Sidrn. I'm Stacy Marie Schmal We'll 574 00:31:41,840 --> 00:31:42,560 Speaker 1: be back tomorrow.