WEBVTT - Sam Bankman-Fried and Matt Levine on How to Make Money in Crypto 0:00:10.520 --> 0:00:14.560 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.720 --> 0:00:19.200 I'm Joe Wish and I'm Tracy Allowaite Tracy the coins. 0:00:19.440 --> 0:00:22.599 Time's time to talk about the coins again. The coins 0:00:23.360 --> 0:00:26.680 you mean, like you know, fiat coins, right, No, the 0:00:26.720 --> 0:00:31.760 electronic digital coins? People are you know what? It feels 0:00:31.800 --> 0:00:35.199 like It's been a while, isn't it. Well, so this 0:00:35.280 --> 0:00:37.440 is the crazy thing. This is my like, what what 0:00:37.440 --> 0:00:40.080 what makes the crypto difficult for me? Which is that 0:00:40.920 --> 0:00:43.120 if you like, and I've said maybe you said this before, 0:00:43.120 --> 0:00:44.919 but if you step away for like a month, then 0:00:44.960 --> 0:00:47.560 you like some other stuff like the price of corn 0:00:47.640 --> 0:00:50.680 or wheat or oil or something, Russia's invasion of Ukraine. Yeah, 0:00:50.760 --> 0:00:52.919 and then you come back to crypto and it's like 0:00:53.240 --> 0:00:57.280 the entire narrative has completely changed. It's all this new terminology, 0:00:57.560 --> 0:01:00.720 new tokens that you've never heard of, Like you can't 0:01:00.760 --> 0:01:03.160 step away from for a minute, let alone a month, 0:01:03.240 --> 0:01:04.880 and feel like you have any sort of hope of 0:01:04.959 --> 0:01:07.679 understand what's going on. It does feel like it requires 0:01:07.760 --> 0:01:11.800 a certain intensity to make it in crypto. And then 0:01:11.959 --> 0:01:14.280 after that month, it's like, well, I'm already so behind, 0:01:14.319 --> 0:01:15.720 I don't want to come back and actually, you know, 0:01:15.760 --> 0:01:17.600 you're like fore or four months behind, so we have 0:01:17.720 --> 0:01:20.080 to reverse it. We can catch back up with what's going. Yeah, 0:01:20.080 --> 0:01:22.120 we need to reverse that. I mean, I am vaguely 0:01:22.160 --> 0:01:24.880 aware of some of the big picture stuff that has 0:01:24.920 --> 0:01:27.039 been happening. So I'm looking at the price of bitcoin 0:01:27.200 --> 0:01:31.559 at the moment, it's just under forty thousand. It is weird, 0:01:31.640 --> 0:01:33.160 and I think he wrote about this, It is kind 0:01:33.200 --> 0:01:36.880 of strange that in this environment bitcoin hasn't been doing better. 0:01:37.680 --> 0:01:40.400 I know. So you know, here's what I've been thinking about, 0:01:40.440 --> 0:01:43.280 which is that the prices of especially the big ones. 0:01:43.319 --> 0:01:45.120 You know, there's always tokens going to the moon, but 0:01:45.200 --> 0:01:47.720 the prices of like the big ones overall market cab 0:01:48.360 --> 0:01:50.920 rough year kind of gone sideways in the last year 0:01:51.000 --> 0:01:55.000 or more down. But um, the interest in the space 0:01:55.040 --> 0:01:57.240 continues to be on debated and it feels like every 0:01:57.320 --> 0:02:00.880 day someone is leaving a big bang, big fund to 0:02:00.960 --> 0:02:05.120 do something new in crypto, crypto hedge fund, crypto VC. 0:02:05.920 --> 0:02:09.080 Interest in investing in the space does not seem to 0:02:09.080 --> 0:02:11.919 have abated at all, even with the price of big 0:02:11.960 --> 0:02:14.680 coins out of going sideways to down. No, absolutely, And 0:02:14.720 --> 0:02:17.679 also the other thing that's sort of happened is rather 0:02:17.720 --> 0:02:21.320 than crypto going off and being its own ecosystem, which 0:02:21.440 --> 0:02:25.000 if you think back to bitcoin and its origins, that 0:02:25.040 --> 0:02:26.840 was really kind of the point of the whole thing. 0:02:26.880 --> 0:02:29.040 But it feels like crypto as a whole is becoming 0:02:29.080 --> 0:02:32.239 more and more integrated with the existing financial system, or 0:02:32.280 --> 0:02:35.080 at least with Wall Street. Uh. And so you know, 0:02:35.120 --> 0:02:36.880 you see people who are collecting n f T s 0:02:36.960 --> 0:02:39.800 and now they're talking about the bond market in interest rates, 0:02:40.080 --> 0:02:42.040 which is kind of funny, but you're right, we haven't 0:02:42.040 --> 0:02:44.720 spoken about it for a while, and we should definitely 0:02:44.760 --> 0:02:47.520 rectify that. So I want to know basically what all 0:02:47.600 --> 0:02:50.280 this new money entering the space is doing. Something I've 0:02:50.280 --> 0:02:54.960 been thinking about is that you could make a fortune 0:02:55.360 --> 0:03:01.520 essentially just buying bitcoin or maybe buying bitcoin in the US. 0:03:01.639 --> 0:03:03.640 And still I get in Japan because the market was 0:03:03.680 --> 0:03:06.720 so inefficient that there were like multiple prices around the world, 0:03:07.280 --> 0:03:09.120 and you can make a ton of money doing that. 0:03:09.520 --> 0:03:13.600 These days, I suspect that the market is vastly more 0:03:13.680 --> 0:03:16.680 efficient than it was back then. On the flip side, 0:03:16.760 --> 0:03:19.840 I also get the impression that, compared to trad fied 0:03:19.880 --> 0:03:22.160 that the spreads are still a mile wide and that 0:03:22.200 --> 0:03:25.400 there's still big opportunities for all this money coming into 0:03:25.400 --> 0:03:28.560 the space. So I'm very let's have a conversation about 0:03:28.560 --> 0:03:31.400 how to make money in crypto? All right, I'm really excited. 0:03:31.560 --> 0:03:33.960 We're gonna be bringing back into his third time on 0:03:34.120 --> 0:03:37.200 the show, the one and only Sam Bankman Fried SPF. 0:03:37.240 --> 0:03:41.120 He's the co founder of f t X, And we're 0:03:41.120 --> 0:03:44.440 also going to be joined by Matt Levine, Bloomberg opinion columnist. 0:03:44.560 --> 0:03:47.960 We had them both on last fall. Everyone liked hearing 0:03:48.000 --> 0:03:50.320 them discuss the state of the markets together, so we 0:03:50.400 --> 0:03:53.160 figured let's have them both back on. So Sam and Matt, 0:03:53.280 --> 0:03:55.120 thanks to both of you for coming back on odd 0:03:55.120 --> 0:03:59.880 lots of course, thanks for having me back absolutely So, uh, Sam, 0:04:00.480 --> 0:04:03.040 let's start with you. Actually, you guys have a big 0:04:03.080 --> 0:04:05.960 conference coming up at the end of April, the FTX 0:04:05.960 --> 0:04:10.400 Salt Conference Crypto Bahamas, the Bahamas being your new your 0:04:10.560 --> 0:04:14.760 new corporate home, which sounds pretty nice, am I am? 0:04:14.800 --> 0:04:18.559 I basically right that there is a sort of still 0:04:18.680 --> 0:04:22.479 this huge essential tidal wave of money coming into the space, 0:04:22.520 --> 0:04:25.279 Like well, how would you characterize very big picture the 0:04:25.760 --> 0:04:29.360 all the interest right now in crypto, There is a 0:04:29.440 --> 0:04:32.719 huge tidal wave of money trying to come into the space, 0:04:32.839 --> 0:04:35.520 is what I would say, just sort of you know, 0:04:35.600 --> 0:04:37.960 gobs and gobs of it that that sort of has 0:04:38.000 --> 0:04:42.080 been desperately you know, sort of like trying to to 0:04:41.839 --> 0:04:45.159 to like find its way in over the last few years. 0:04:45.440 --> 0:04:49.320 Every month another sort of like nice little pile of 0:04:49.400 --> 0:04:53.080 that of that you know, larger gob nags to make 0:04:53.120 --> 0:04:56.360 it in. So one thing I saw recently is that 0:04:56.600 --> 0:04:59.960 you took a stake in i X, which I think 0:05:00.000 --> 0:05:02.480 a lot of people will recognize as the firm that 0:05:02.560 --> 0:05:06.360 was founded by Brad katsu Yama, who's the guy who 0:05:06.480 --> 0:05:10.480 was written about in Michael Lewis's book Flashboys, all about 0:05:10.720 --> 0:05:13.479 the evils of high frequency trading and stuff like that. 0:05:14.160 --> 0:05:17.920 What exactly is the thinking there? And you know, I 0:05:18.279 --> 0:05:22.400 guess I understand some of the maybe the ideological alignment 0:05:22.480 --> 0:05:26.080 or the stated ideological alignment there, But what exactly are 0:05:26.080 --> 0:05:30.440 you going to be doing together? Yeah, and you know, 0:05:30.480 --> 0:05:33.960 obviously we'll have to see what happened, because is you know, 0:05:34.120 --> 0:05:38.040 highly regulatorily dependent space. But the core of it is 0:05:38.120 --> 0:05:43.080 like some digital assets are our securities. Different people might 0:05:43.080 --> 0:05:45.680 give different quotes for exactly attraction of them are, but 0:05:45.680 --> 0:05:48.360 but certainly some fraction of them are. Let's say that 0:05:48.440 --> 0:05:52.360 you want to offer trading in a digital asset security, 0:05:52.640 --> 0:05:55.480 what would you do right now? This is not a 0:05:55.520 --> 0:06:00.960 problem that people have really confident, regular right solutions for. 0:06:01.400 --> 0:06:03.440 It's something that there's certainly a lot of thought going 0:06:03.480 --> 0:06:06.760 into from the regulatory perspective, you know, at its core, 0:06:06.920 --> 0:06:09.240 like we're experts in in you know, things to do 0:06:09.400 --> 0:06:12.640 with with tokens and offering trading and tokens I x 0:06:12.760 --> 0:06:16.560 er know, experts in offering trading insecurities and more generally, 0:06:16.600 --> 0:06:19.880 they're also really good at being creative and sort of 0:06:19.920 --> 0:06:23.560 building out new market structures that might not be exactly 0:06:23.600 --> 0:06:26.040 the same as what they're sort of used to doing. 0:06:26.480 --> 0:06:28.640 And that's exactly what we need to do right now, 0:06:28.720 --> 0:06:31.680 is to build out a new market structure that is 0:06:31.720 --> 0:06:35.840 consistent with our existing rules and regulations in coordination with 0:06:35.920 --> 0:06:39.720 the SEC and other regulators for digital docity securities, and 0:06:39.760 --> 0:06:42.239 that is our big goal with them. It's something you said, 0:06:42.400 --> 0:06:45.800 Sam in your first answer I thought is really interesting. 0:06:46.040 --> 0:06:49.480 You said there's always some money and it tries to 0:06:49.520 --> 0:06:51.800 get into this space, which I sort of took as 0:06:52.080 --> 0:06:54.479 to me, and there's like some constraint or that it's 0:06:54.480 --> 0:06:57.480 not easy, it's easy to just sort of jump into 0:06:57.600 --> 0:07:01.320 crypto as perhaps people imagine, what is the country, Why 0:07:01.400 --> 0:07:03.520 why is it that the money is just trying to 0:07:03.520 --> 0:07:05.800 get in? Yeah, I mean it's a really good question 0:07:05.839 --> 0:07:07.760 and the answer is a little bit different for different 0:07:07.760 --> 0:07:10.000 lots of money. But the high level structure if it 0:07:10.080 --> 0:07:14.280 looks somewhat you know, similar, which is basically your let's 0:07:14.320 --> 0:07:18.120 say a big bank, right, and all of your clients 0:07:18.120 --> 0:07:20.119 are asking you, can you please get into the digital 0:07:20.160 --> 0:07:22.400 assets space. We want to invest and we want to 0:07:22.720 --> 0:07:26.360 access token through you, and all of your traders are saying, hey, 0:07:26.400 --> 0:07:28.760 we want to be trading crypto, you know, as for 0:07:28.920 --> 0:07:32.960 the prop desk for the firm, and you know, random 0:07:33.000 --> 0:07:36.520 employees are are coming up to you, the strategy person 0:07:37.080 --> 0:07:39.240 or or whatever at this bank every day and think, hey, 0:07:39.240 --> 0:07:42.520 why aren't we doing the crypto thing yet? And um, 0:07:42.600 --> 0:07:45.320 And so you go to compliance basically and you say, hey, 0:07:45.520 --> 0:07:48.160 we'd really like to do with the crypto thing, like 0:07:48.240 --> 0:07:51.320 I know, last time we asked you sort of groaned, well, 0:07:51.360 --> 0:07:53.520 like could you give you know, maybe give us a 0:07:53.560 --> 0:07:55.880 little bit more than a grown right, like like put 0:07:55.880 --> 0:07:58.360 some words that grown and it's sort of like growing 0:07:58.400 --> 0:08:02.600 really loudly, and they say, can you tell me what 0:08:02.680 --> 0:08:05.800 regulatory framework are we going to be under? You know, 0:08:05.920 --> 0:08:08.880 Compliance comes back and says, well, okay, like you want 0:08:08.880 --> 0:08:11.360 to have this conversation, sure we'll have it. Talk to 0:08:11.360 --> 0:08:14.680 me about why you think we are allowed to do this? Right, 0:08:15.200 --> 0:08:19.000 and uh, you know, at its heart, people are sort 0:08:19.000 --> 0:08:21.600 of like, oh boy, like you know what, why are 0:08:21.640 --> 0:08:24.240 we allowed to do this? Well, people bush track and say, well, 0:08:24.280 --> 0:08:27.280 what regulation are we breaking? And Compliance is like, you 0:08:27.280 --> 0:08:29.600 know what, understand like we're the first ones who are 0:08:29.600 --> 0:08:32.559 going to get sued if there's anyone who's gonna get 0:08:32.600 --> 0:08:35.000 sued here by a regulator. We can't point to a 0:08:35.000 --> 0:08:38.120 regulation we're breaking here. We need to know what regulatory 0:08:38.120 --> 0:08:41.000 framework are we a part of? What licenses are necessary 0:08:41.040 --> 0:08:44.280 to play different roles in this space? Right and and 0:08:44.280 --> 0:08:46.920 and the answer is as it is right now basically 0:08:46.960 --> 0:08:50.520 like we're working on it right from like as a country, 0:08:50.559 --> 0:08:53.360 like as as as a global society, we're working on it. 0:08:53.920 --> 0:08:56.240 That's not that's not a great answer. And that's like 0:08:56.360 --> 0:08:59.840 roughly where the money gets trapped. So when you say money, 0:08:59.880 --> 0:09:02.400 is that like I mean what you're describing sounds like 0:09:02.440 --> 0:09:05.240 the sort of regulatory environment that a bank lives in. 0:09:05.920 --> 0:09:08.480 I'm less convinced that's like what an asset manager lives in. 0:09:08.960 --> 0:09:11.920 Like do you mean, do you mean mostly banks are 0:09:11.960 --> 0:09:15.440 like sort of everyone in trad fun Well, yeah, it's 0:09:15.440 --> 0:09:18.040 a good question. It certainly isn't everyone in trad by 0:09:18.160 --> 0:09:20.440 and and in particular, the closer that you get to 0:09:20.520 --> 0:09:24.840 something that looks like proprietarily owned and controlled money, the 0:09:25.080 --> 0:09:28.040 more you are able to do something here, right. And 0:09:28.080 --> 0:09:30.240 so when you look at, for instance, a prop trading 0:09:30.280 --> 0:09:33.200 firm that is trading I mean on wine extreame, you know, 0:09:33.240 --> 0:09:35.599 take one, this trade entirely for its own book, so 0:09:35.600 --> 0:09:38.400 it doesn't even have customers, doesn't have LPs, does not 0:09:38.440 --> 0:09:42.520 have anything right from their perspective, this is this is 0:09:42.520 --> 0:09:45.640 a lot clear right from their perspective, The answer is 0:09:45.679 --> 0:09:48.160 a lot closer to like, oh, well, you know, here's 0:09:48.160 --> 0:09:50.319 our deal, Like we trade things, that's what we do. 0:09:50.360 --> 0:09:53.400 We're going to trade this other asset class. And the 0:09:53.480 --> 0:09:56.080 often see of themselves is like, look, we're not showing 0:09:56.120 --> 0:09:58.120 this customers or anything. We're not sort of in the 0:09:58.160 --> 0:10:00.600 line of fire here. So that is the area that 0:10:00.640 --> 0:10:03.840 we've seen sort of most come in early to the space, 0:10:04.040 --> 0:10:06.560 but if you sort of take a step back, actually 0:10:06.600 --> 0:10:09.480 even a lot of other money managers end up in 0:10:09.640 --> 0:10:13.679 the more concerned bucket. Shall we say, take a look 0:10:13.720 --> 0:10:16.560 at like a giant et F company, right, Like, that's 0:10:16.559 --> 0:10:19.680 an example of like an asset manager. A lot of 0:10:19.679 --> 0:10:21.880 assets are in our in our in ets and other 0:10:21.920 --> 0:10:25.320 sort of similar funds. How many ETFs currently have cryptocurrencies 0:10:25.320 --> 0:10:29.040 in them? Well, the answer is like two or something 0:10:29.080 --> 0:10:31.520 like that. And again you're getting back to questions of well, 0:10:32.040 --> 0:10:35.199 what are these are these commodities? Are these securities under 0:10:35.360 --> 0:10:38.120 which statute are we putting them in the fund? Do 0:10:38.160 --> 0:10:41.960 we need to register them? They're having active conversations with 0:10:42.040 --> 0:10:45.120 regulators about this, and and there's obviously been a lot 0:10:45.160 --> 0:10:46.920 of back and forth about attempts to have a bit 0:10:46.960 --> 0:10:50.319 poin ETF which have only sort of come together so far. 0:10:50.400 --> 0:10:52.880 There are now big when futures ets which or something, 0:10:53.000 --> 0:10:56.400 but they're certainly this is not a solved problem. Even 0:10:56.440 --> 0:10:59.400 if if you sort of like allied the specific you know, 0:10:59.480 --> 0:11:03.760 registered creation requirements around a publicly listed et F and 0:11:03.760 --> 0:11:06.640 you look at sort of like private mutual funds for 0:11:06.720 --> 0:11:09.840 high net worth individuals. Most of those are sort of 0:11:09.880 --> 0:11:11.800 sitting there thinking, like, are we going to get in 0:11:11.800 --> 0:11:16.040 trouble somehow for this compliance to somewhat on, you know, 0:11:16.200 --> 0:11:19.200 uncertain and nervous about it. And so I think they're 0:11:19.320 --> 0:11:21.880 you know, you're you're still in a pretty messy situation 0:11:21.880 --> 0:11:26.920 all things consider. The thing you're describing sounds like incredibly 0:11:26.960 --> 0:11:30.280 bullish for like the prices of crypto assets, because basically 0:11:30.320 --> 0:11:32.600 you're saying, there's a title wave of trillions of dollars 0:11:32.640 --> 0:11:35.000 of institutional money that they all own up at ten 0:11:35.040 --> 0:11:37.720 percent into crypto and they can't but they'll figure it out, 0:11:37.960 --> 0:11:40.560 and then like crypto assets will expect Like is that 0:11:40.600 --> 0:11:42.320 the right way to read it? Or is there like 0:11:42.360 --> 0:11:44.200 I mean, like the counter narrative would be like you know, 0:11:44.280 --> 0:11:46.920 the sort of prop traders and and like retail speculators 0:11:47.040 --> 0:11:48.920 have gotten so far ahead of that trend that like 0:11:49.240 --> 0:11:52.360 prices already reflect that demand. How do you think about it? 0:11:52.600 --> 0:11:54.319 I think those two sides are the right way to 0:11:54.360 --> 0:11:55.760 think about it. And I do think this is the 0:11:55.880 --> 0:11:58.640 thing that makes me the bullish about like crypto asset 0:11:58.720 --> 0:12:01.200 pricing is just the amount of money that isn't able 0:12:01.240 --> 0:12:04.400 to access it today or able to that that isn't 0:12:04.440 --> 0:12:06.960 accessing it today, you know, one way or another, but 0:12:07.080 --> 0:12:09.720 directly could be and very well might start doing so 0:12:09.880 --> 0:12:12.280 over the next few years. That that is I think 0:12:12.320 --> 0:12:15.160 the most bullish trend going on in the space. And 0:12:15.200 --> 0:12:17.400 on the flip side, right there's this question of will 0:12:17.520 --> 0:12:19.560 has that already been priced in? And that can only 0:12:19.559 --> 0:12:21.720 be the narrative in some sense for like so many 0:12:21.920 --> 0:12:24.720 years in a row before at some point you have 0:12:24.800 --> 0:12:26.640 to start saying, well, the way, isn't that why people 0:12:26.679 --> 0:12:29.880 were buying last year and holding you know, anticipation of this. 0:12:30.480 --> 0:12:32.560 I mean, in the end, it's messy, like there's lots 0:12:32.559 --> 0:12:34.920 of reasons that people would be and I don't think 0:12:34.920 --> 0:12:37.719 that there's a very clean tally of this, and I 0:12:37.760 --> 0:12:40.280 think I'm still not bullish because of it, but I 0:12:40.320 --> 0:12:43.080 definitely do think this has already been prepositioned for a 0:12:43.160 --> 0:12:45.880 decent amount. Now there's a limit to how prepositioned it 0:12:45.960 --> 0:12:48.080 could be, right because if you think about it, the 0:12:48.160 --> 0:12:51.440 scale of what could roll into crypto. If you think 0:12:51.440 --> 0:12:54.960 that a few trillion dollars of actual capital is what 0:12:55.080 --> 0:12:57.960 could happen, that's the entire market cap ofcrypto right now. 0:12:57.960 --> 0:13:00.800 If a few trillion dollars rolled into crypto, I'm guessing 0:13:00.800 --> 0:13:03.160 it would ten x in price roughly speaking from where 0:13:03.160 --> 0:13:05.440 it is. And so if you think that the odds 0:13:05.480 --> 0:13:08.440 of that are at least ten percent, that alone can 0:13:08.480 --> 0:13:10.920 sort of justify And it's sort of like an argument 0:13:11.000 --> 0:13:14.840 that it sort of probably hasn't been fully prepositioned for 0:13:15.360 --> 0:13:18.240 by the world, which I think, I like, roughly believe 0:13:18.240 --> 0:13:21.080 in expected value terms also like in median terms, what 0:13:21.120 --> 0:13:23.360 are the odds crypto will go up or down versus 0:13:23.360 --> 0:13:25.960 like how much we'll go up or down? You know, 0:13:26.200 --> 0:13:29.280 I certainly don't think it's like anything close to conclusive 0:13:29.360 --> 0:13:32.240 argument that like it's you know, very likely to go 0:13:32.320 --> 0:13:35.560 off you say crypto, Like, I mean, my impression of 0:13:35.640 --> 0:13:39.640 like giant institutional interest is like the idea of having 0:13:39.720 --> 0:13:42.720 some portion of your portfolio in bitcoin is very attractive. 0:13:42.880 --> 0:13:44.760 My impression is that there's a sort of like sharp 0:13:44.840 --> 0:13:47.960 falloff where like they're not sort of thinking about the 0:13:48.000 --> 0:13:50.920 difference between other black chains and like how to you know, 0:13:51.040 --> 0:13:53.760 yield farm and stuff like that. Because that your impression 0:13:53.760 --> 0:13:55.000 as well, or do you think that a lot of 0:13:55.000 --> 0:13:58.000 this institutional money is like you know, wants to actively 0:13:58.000 --> 0:14:02.280 trade lots of different cryptocurrencies. Yeah, I don't think they've 0:14:02.280 --> 0:14:04.840 decided is the real answer, right, Like, I think the 0:14:04.880 --> 0:14:07.760 real answer is that, like, you know, if you ask them, 0:14:07.800 --> 0:14:09.760 they would say something like I don't know, you know, 0:14:09.760 --> 0:14:12.040 if you like what you mean by crypto, like what crypto? 0:14:12.480 --> 0:14:14.360 I think they're honest answers like I don't know, you know, 0:14:14.440 --> 0:14:17.760 the crypto thing, right, like there's bitcoin, Like yeah, they're 0:14:17.760 --> 0:14:20.200 more like yeah, totally there are more like are you 0:14:20.200 --> 0:14:22.360 you know, intending to trade more? You know, I don't know, 0:14:22.480 --> 0:14:25.720 Like I certainly want to consider that, you know, down 0:14:25.760 --> 0:14:29.040 the road, Like right now, our focuses on finding a 0:14:29.080 --> 0:14:32.240 way to get bitcoin access and maybe ethereum access to 0:14:32.520 --> 0:14:35.600 users like you know, but like absolutely, you know, we considered, 0:14:35.920 --> 0:14:38.480 you know, would be we'd be potentially interested in offering more. 0:14:38.720 --> 0:14:41.480 I think that's a sort of like messy confused answer 0:14:41.560 --> 0:14:44.200 that that you would here in practice, which is just 0:14:44.240 --> 0:14:47.840 another example of like, you know, things are not very 0:14:47.960 --> 0:14:50.560 orderly right now in in sort of like money looking 0:14:50.600 --> 0:14:53.160 at the space just on this point, and Joe kind 0:14:53.160 --> 0:14:56.320 of touched on it in the intro, but I guess 0:14:56.320 --> 0:14:59.320 this is sort of an existential question, but it feels 0:14:59.480 --> 0:15:05.080 like the market is in the process of maturing, And 0:15:05.120 --> 0:15:08.400 it also seems like f t x's whole purpose is 0:15:08.440 --> 0:15:11.480 to improve liquidity and crypto trading, and some of that 0:15:11.520 --> 0:15:14.360 should happen naturally as more money comes in, but some 0:15:14.440 --> 0:15:17.040 of it is you making a conscious effort to do so. 0:15:17.680 --> 0:15:21.760 But at the same time, it seems like a lot 0:15:21.800 --> 0:15:26.680 of the opportunity in crypto has historically been from illiquidity 0:15:26.720 --> 0:15:31.600 and frictions and fragmentation in the market. Is there attention there, like, 0:15:31.880 --> 0:15:35.960 does the attractiveness of the crypto world start to ebb 0:15:35.960 --> 0:15:40.200 away as the market actually matures. It depends on how 0:15:40.360 --> 0:15:43.360 mature is in theory, and this this might not happen, 0:15:43.440 --> 0:15:46.240 but certainly I think you would ask most of the 0:15:46.280 --> 0:15:49.160 traders in the market what they think. What they would 0:15:49.200 --> 0:15:52.520 say would be something like, well, yeah, we do think 0:15:52.560 --> 0:15:56.480 that pian l in basis points you know portrayed will 0:15:56.520 --> 0:15:59.000 will sort of like go down over time, but we 0:15:59.040 --> 0:16:01.760 also think volume will go up, and that that certainly 0:16:01.760 --> 0:16:03.800 has been what we've seen so far. Work you compare 0:16:03.880 --> 0:16:09.640 today to right. You know, I was busy trying to 0:16:09.640 --> 0:16:14.720 to make money arbitraging bitcoins here versus Japan, and those 0:16:14.800 --> 0:16:18.640 trades were good by many per cent um. But you know, 0:16:18.720 --> 0:16:21.040 there's a billion dollars a day of volume going on 0:16:21.080 --> 0:16:24.240 in each side, which is a whole lot if you're 0:16:24.280 --> 0:16:27.720 making many percent on it. But you know, what do 0:16:27.840 --> 0:16:30.440 things look like today, Well, there's one or two hundred 0:16:30.520 --> 0:16:33.440 billion dollars a day of volume that are trading in crypto, 0:16:33.480 --> 0:16:35.600 and so I think volumes are probably up like fifty 0:16:35.760 --> 0:16:38.480 x or so since then spreads on the other hand, 0:16:38.600 --> 0:16:42.240 or down, and they're down sort of a comparable you know, ratio, 0:16:42.800 --> 0:16:46.160 And so I think that's so far like the story 0:16:46.240 --> 0:16:50.200 of crypto has sort of been like spreads are coming 0:16:50.320 --> 0:16:53.160 in and at the same time volumes are going up 0:16:53.280 --> 0:16:56.640 such that actually the arbitrageures are making about as much 0:16:56.640 --> 0:16:59.640 as they always did, although it's it's maybe harder than 0:16:59.640 --> 0:17:02.720 it was before. And you can imagine the future that 0:17:02.840 --> 0:17:05.440 like that continues, that that things continue to get more efficient. 0:17:05.480 --> 0:17:08.000 But that as part of you know, the asset class 0:17:08.000 --> 0:17:11.600 getting more institutionalized, like you know, volume and liquidity goes 0:17:11.680 --> 0:17:15.000 up a therapy which increases the sort of like scale 0:17:15.000 --> 0:17:18.800 of activity people can have. That being said, and and 0:17:19.000 --> 0:17:21.280 part of me doesn't believe that, but but not all 0:17:21.320 --> 0:17:24.000 of me, because it is also the case that like, 0:17:24.160 --> 0:17:27.800 at least as of today, we are probably over indexed 0:17:28.359 --> 0:17:32.760 on you know, volume relative to liquidity. And I think 0:17:32.800 --> 0:17:34.520 one way to look at that is just looking out 0:17:34.640 --> 0:17:38.800 ratio daily trading volume to market cap they're trading, you know, 0:17:38.920 --> 0:17:41.800 comparable amounts to how much US stocks trade each day, 0:17:42.160 --> 0:17:44.800 but you know, have the market cap of Amazon. But 0:17:44.920 --> 0:17:47.159 I would definitely guess on the margin that like we 0:17:47.240 --> 0:18:03.960 are going to see compression in that Rob people who 0:18:03.960 --> 0:18:06.399 haven't listened to last April was the first time we 0:18:06.440 --> 0:18:08.800 had you and Sam, and we talked a lot about 0:18:08.840 --> 0:18:13.320 that trade whereas like really difficult sort of operationally to execute, 0:18:13.320 --> 0:18:16.240 but just these crazy spreads between the price of bitcoin 0:18:16.520 --> 0:18:19.040 in the US and Japan four or five years ago, 0:18:19.680 --> 0:18:22.399 and how you could just you know, how simple that 0:18:22.400 --> 0:18:24.680 that sort of opportunity was once you found a way 0:18:24.720 --> 0:18:27.359 to make that trade. As you've described, volumes way up, 0:18:27.440 --> 0:18:31.680 spreads way down. Where are you know? And you mentioned 0:18:31.680 --> 0:18:33.959 too that there's like a range of sophistications. So there 0:18:34.000 --> 0:18:36.360 are some entities that I just want to have Bitcoin exposure, 0:18:36.400 --> 0:18:38.560 I want to have etherorum exposure, and then there's other 0:18:38.600 --> 0:18:42.359 tread five that's clearly way more sophisticated, like entities like 0:18:42.440 --> 0:18:44.480 jump trading or doing all kinds of wild stuff. And 0:18:44.520 --> 0:18:46.400 we had their head of crypto on the podcast last 0:18:46.480 --> 0:18:49.880 year kind of Korea. But what you know, like where 0:18:49.960 --> 0:18:53.600 are the current frictions as you see them or the 0:18:53.720 --> 0:18:57.280 arbitrarge ores entering this market are seeing, like what kind 0:18:57.320 --> 0:19:00.959 of things? Obviously it's gonna be way morephisticated than just 0:19:01.119 --> 0:19:05.320 by USL Japan. Like where are the existing inefficiencies sort 0:19:05.359 --> 0:19:09.240 of broadly in crypto right now? Yeah, I mean they're 0:19:09.240 --> 0:19:12.320 a little all over the place, although obviously way smaller 0:19:12.680 --> 0:19:14.840 in particular. I think it's a lot less well you 0:19:14.880 --> 0:19:17.120 buy on this echanges on that exchange. As you said, 0:19:17.160 --> 0:19:19.520 it's it's a lot less identifiable in some sense, is 0:19:19.640 --> 0:19:22.000 what it is? So what is it if it's not that? 0:19:22.440 --> 0:19:25.280 You know, some of this is just traditionally jef T stuff. 0:19:25.320 --> 0:19:27.719 You know, there's a hundred fifty billion dollars a day 0:19:27.760 --> 0:19:29.879 of volume that traded. It's trading on a bunch of 0:19:29.880 --> 0:19:33.760 different order books. And when you say how efficient is it, right, 0:19:33.800 --> 0:19:36.520 like how much price might be order books be? Well, 0:19:36.640 --> 0:19:39.120 I don't know, take two bitcoin or bitcoin futures order 0:19:39.160 --> 0:19:41.919 books right now, they probably each have these of a 0:19:41.960 --> 0:19:44.960 couple of basis points and a spread of a basis 0:19:44.960 --> 0:19:47.480 point or you know, some fraction of basis point or 0:19:47.520 --> 0:19:50.439 something like that. And you know, given sort of like 0:19:50.480 --> 0:19:53.200 the funding rates and the premiums of futures and things 0:19:53.240 --> 0:19:55.880 like that, and the time and costed to do one 0:19:55.880 --> 0:19:58.840 of these ARBs, they can absolutely be a few BIPs, 0:19:59.440 --> 0:20:01.480 you know, out of line with each other. And so 0:20:01.600 --> 0:20:03.800 in theory you can sort of do out the math. 0:20:03.880 --> 0:20:07.480 Let's say that you know, you made one basis point 0:20:07.520 --> 0:20:10.680 on each side, which would be a lot and would 0:20:10.720 --> 0:20:13.440 be like, you know, an impressive amount to make on 0:20:13.440 --> 0:20:17.080 on the third volume, on fifty of volume in crypto, 0:20:17.320 --> 0:20:19.840 giving the extreme of like you were the arbit charger, 0:20:19.920 --> 0:20:23.199 you're the h f T firm, then you know, how 0:20:23.280 --> 0:20:26.119 much is that a day will a bip on you know, 0:20:26.240 --> 0:20:30.359 fifty billion dollars of volume is five million dollars of 0:20:30.440 --> 0:20:32.439 profit a day, which is you know, what what a 0:20:32.480 --> 0:20:35.359 billion and a half a year, And so that gets 0:20:35.400 --> 0:20:38.399 some sense for and again obviously I'm sort of like 0:20:38.400 --> 0:20:40.400 putting a lot of corners in that, like I don't 0:20:40.440 --> 0:20:42.320 want to sort of imply that that's like you know 0:20:42.480 --> 0:20:45.000 that is the amount that could be made. But but whatever, 0:20:45.040 --> 0:20:48.680 maybe that gives some sense for like what the available 0:20:48.800 --> 0:20:53.040 scale here is of arbor charge profit in the space, 0:20:53.119 --> 0:20:56.560 and it is like substantial, and so that's part of 0:20:56.560 --> 0:20:59.760