Speaker 1: All right, welcome back. You are listening to another episode
Speaker 1: of The Mark Moss Show where we talk about bitcoin.
Speaker 1: We talk about the decentralized revolution the world is going through,
Speaker 1: and we look at it through the lens and the
Speaker 1: convergence of politics, finance, and technology to try to understand
Speaker 1: what the heck is going on in this crazy, crazy world. Um,
Speaker 1: you know, I try to bring to you some education
Speaker 1: so you can understand really what's going on behind the scenes,
Speaker 1: because of course you were never taught it and you're
Speaker 1: being misled all the time. Try to bring to you
Speaker 1: the latest breaking news, and of course I try to
Speaker 1: bring some interesting guests on so you can hear from
Speaker 1: some other people. But me talking all the time. And
Speaker 1: I am joined in the studio right now with one
Speaker 1: of my good friends, Mike Alfred. Mike, thanks so much
Speaker 1: for joining me today. Yeah. Thanks Mark. It was good
Speaker 1: to meet you in Miami. Yeah. Yeah, we just got
Speaker 1: to meet each other recently. We've been kind of following
Speaker 1: each other on Twitter for a while and we got
Speaker 1: to hang out there in uh in Miami, go to
Speaker 1: go to go to some some of the parties together.
Speaker 1: That was That was a fun way to get going.
Speaker 1: I enjoyed that. Um. I think we met at the
Speaker 1: unchained cab little party and then the Gemini party or whatever.
Speaker 1: But you know what's cool about that is um social media.
Speaker 1: You know. UM, I have a daughter who's just graduated
Speaker 1: high school and all her friends parents are like, UM,
Speaker 1: so eager to send their kids off to college. And
Speaker 1: I'm just not a big believer in that. And there's
Speaker 1: certainly things you need to college degree for, but unless
Speaker 1: you need that, I'm just not a big believer in it.
Speaker 1: And I'm I would ask them, like, you know, okay,
Speaker 1: what's you know, what do you see as big benefit?
Speaker 1: And most of them would always go back to not
Speaker 1: the education, um, the experiences. They lean on that, but
Speaker 1: then they lean on the connections. They're gonna get the connections.
Speaker 1: And I'm like, dude, have you heard of Twitter? Because like,
Speaker 1: I've like met everybody in the world on Twitter, Like
Speaker 1: Mike and I we were like friends on Twitter before
Speaker 1: we were like friends in real life. You know, pretty amazing.
Speaker 1: I'm sure you use it the same way. I thought
Speaker 1: it was overvalued for most of the time I use it.
Speaker 1: It wasn't until last summer when I left Nideck that
Speaker 1: for the first time I tried to actually engage with
Speaker 1: the platform every day, And now I see how valuable
Speaker 1: it is because I've met maybe hundreds of people through
Speaker 1: Twitter just over the last twelve months. It's opened up
Speaker 1: a whole bunch of doors. It's allowed me to invest
Speaker 1: in a couple of new bitcoin companies. I joined a
Speaker 1: couple of boards all from Twitter, and that surprised me
Speaker 1: because I used to think it was kind of a
Speaker 1: foo fou thing that people did. It was sort of
Speaker 1: a waste of time for CEOs to be engaging with
Speaker 1: social media. But I've seen the light now, Mark, and
Speaker 1: you came right up to me at a at a
Speaker 1: party and you you knew who I was. I knew
Speaker 1: who you were. And it's all because of Twitter. So yeah,
Speaker 1: do you think do you think it's changed? So like, um, obviously,
Speaker 1: like you have network effects, right, So the bigger than
Speaker 1: network gets, the more valuable it gets. And so maybe
Speaker 1: it was kind of more foofy as you in your words,
Speaker 1: or not not as usable. But now today since everybody's
Speaker 1: on there using it more, it's it's become more viable.
Speaker 1: I think it depends on your interest graph. So before Bitcoin,
Speaker 1: you know, Twitter was less interesting. I think the bitcoin
Speaker 1: community is one of the most rapid communities on the Internet,
Speaker 1: and Twitter is sort of like one of the primary
Speaker 1: places where people involved in bitcoin come together and share
Speaker 1: information and build relationships. And so I think for me,
Speaker 1: a lot of it was just becoming kind of a
Speaker 1: full time bitcoiner in a sense, like really embracing that
Speaker 1: as part of my identity is something I wanted to
Speaker 1: talk about and think about every single day. Um, and
Speaker 1: when I when that switch flipped, Twitter all of a
Speaker 1: sudden made more sonse right, and the community here has
Speaker 1: been incredible. I mean, look, I I sometimes get in
Speaker 1: battles with with people. I mean that just seems to
Speaker 1: be part of the space. It's funny how many friends
Speaker 1: I have that are like enemies of each other. But
Speaker 1: that's just sort of the fun part of of of
Speaker 1: using Twitter. Yeah. Well, I think it's important to battle,
Speaker 1: uh you know, not not in a bad way, but
Speaker 1: in a good way, because good ideas are one through discussion, right,
Speaker 1: and so we need to kind of I call it
Speaker 1: like verbally sparring, right, if we need to spar back
Speaker 1: and forth and in a in a good way. And um,
Speaker 1: we learned from that a lot of times, I'll see
Speaker 1: somebody's post and I'm like, oh, wow, that's that's that's
Speaker 1: that's so good, that's that's that that's right. I hadn't
Speaker 1: thought of that. And then I'll just read the comments
Speaker 1: of people sparring back and forth, the baiting if you will, right,
Speaker 1: and I'm like, oh, I didn't think about that. I
Speaker 1: didn't think about that. So you know, it's important to
Speaker 1: be able to have that discussion, and it's worked good
Speaker 1: for that. I I didn't start using Twitter until um
Speaker 1: I was in I was in Hawaii. It was January
Speaker 1: and um I was on the north shore of Oahu.
Speaker 1: Were there for a month and I woke up in
Speaker 1: the morning and my phone was like making this like
Speaker 1: weird alarm and uh, I think it was seven in
Speaker 1: the morning and something like pretty early, And I grabbed
Speaker 1: my phone and I looked at it and it says
Speaker 1: imminent threat inbound missile alert. This is not a test.
Speaker 1: I'm like what. And then like I look at my
Speaker 1: wife and like she's got the same alert on her
Speaker 1: phone and we're like like and this was right at
Speaker 1: the height of like the whole North Korea thing with
Speaker 1: Trump and the Korea is going to fire this missile
Speaker 1: and here we are and it's like alert inbound missile,
Speaker 1: imminent threat, not a not a you know, not a
Speaker 1: not test and uh and then that was it. And
Speaker 1: then there was like no news about it. You could
Speaker 1: turn on the TV, jump on the internet. There was nothing.
Speaker 1: And people were freaking out. All the neighbors were jumping
Speaker 1: in their cars and taking off all the where you're
Speaker 1: gonna go hide in the island, right. Um, And my
Speaker 1: business partner at the time, um, he was on Twitter.
Speaker 1: I wasn't, and so he jumped on Twitter. And then
Speaker 1: all the information was on Twitter, right, and like I
Speaker 1: couldn't find any information, and so I was like, okay,
Speaker 1: I started on Twitter. And that's great how the information goes.
Speaker 1: But let's uh, let's jump past that. That's some fun stuff.
Speaker 1: But um, some of the things that's been going on
Speaker 1: in the bitcoin and cryptocurrency space the last couple of weeks,
Speaker 1: it's been fun to see happening on Twitter. Well, fun
Speaker 1: depend on what side of the ball you're on. But
Speaker 1: we're starting to see crazy liquidity crisis happening and almost
Speaker 1: like this domino effect, uh, maybe starting with Tera Luna
Speaker 1: and now going through into other platforms, um Celsius, Voyager.
Speaker 1: I don't know, maybe Genesis Block Fi next, so and
Speaker 1: we don't know how far this gets. Let's talk about
Speaker 1: that for a little bit. I know you've been like
Speaker 1: pretty vocal and outspoken on that, Like what's your take
Speaker 1: on that on the big picture, and then we can
Speaker 1: kind of dive into that. At a very high level,
Speaker 1: I think we're at the tail end of like a
Speaker 1: ten to twelve year kind of fed fueled bowl market
Speaker 1: where interest rates have been held at a very low
Speaker 1: level for too long. There's been too much money creation,
Speaker 1: there's been too much risk taking, everybody's way out on
Speaker 1: the risk spectrum. Um. And so even before you get
Speaker 1: to crypto, I mean, you just look at what happened
Speaker 1: to Tiger Global, uh this year. You look at the
Speaker 1: decline and some of these large cap technology stocks, including
Speaker 1: some like Facebook and Netflix that were viewed as kind
Speaker 1: of teflon up until about the last kind of call
Speaker 1: it nine to twelve months, um. And so I just
Speaker 1: think we're seeing what happens at the end of every
Speaker 1: liquidity cycle, where there's this cascade of folks that get
Speaker 1: liquidated because they convinced themselves, um that the world was
Speaker 1: going to continue on in the same trajectory that it
Speaker 1: had been on for the last ten or fifteen years.
Speaker 1: And that's the problem with an unstable monetary policy. I mean,
Speaker 1: I do fault the Fed and politicians. I mean there
Speaker 1: they didn't see inflation coming, and then they don't understand
Speaker 1: that all of the activities that they've engaged in, including
Speaker 1: zero interest rate policy, quantitative easing, stimulus, etcetera. You can
Speaker 1: give out checked you know, six hundred bucks or bucks
Speaker 1: to people and then you can lie to them and
Speaker 1: say that won't cause inflation. But the reality is they've
Speaker 1: basically hauled out the middle class and and and the
Speaker 1: poor in this country um through this policy, um. And
Speaker 1: so that that's filters over into crypto. You know, people
Speaker 1: can't get a yield because interest rates or zero, they
Speaker 1: can't put their money in a savings account, and so
Speaker 1: they become deluded into thinking that it's okay to deposit
Speaker 1: money into a platform like Celsius, which is essentially an
Speaker 1: unregulated shadow bank offering unsustainable yields in an environment where
Speaker 1: yields are basically zero. And so the first red flag
Speaker 1: for something like Celsius is just that if you see
Speaker 1: yields of sevent when your bank is offering twenty BIPs
Speaker 1: like you might want to ask yourself how much risk
Speaker 1: is I am I taking? And then when you see
Speaker 1: a CEO that engages um and essentially weakly uh, you know,
Speaker 1: conversations with the community where he repeatedly lies about the
Speaker 1: risk that we're taking, fails to disclose risks, irresponsible risk
Speaker 1: that lead to loss of client capital, and then consistently
Speaker 1: makes sort of irresponsible decisions across the business. You know,
Speaker 1: you shouldn't be surprised. My current view on this mark
Speaker 1: is that Celsius is probably one of the worst actors
Speaker 1: in this entire ecosystem. It's completely it was completely predictable
Speaker 1: in my opinion, that it eventually was going to have problems.
Speaker 1: I also knew that Block five had had made bad,
Speaker 1: poor decisions as well. The difference seems to be that
Speaker 1: the investor community completely lost respect uh and trust in
Speaker 1: Alex Mashinsky and the Celsius team. Somehow, some way, the
Speaker 1: the sort of inexperienced team at Block five managed to
Speaker 1: hold onto some credibility in the market, and therefore they're
Speaker 1: able to kind of get bailouts at this point. Yeah, yeah,
Speaker 1: that's a good breakdown. I want to I want to
Speaker 1: break that down a little bit more and dig into
Speaker 1: some of this, including like the short squeeze that's like
Speaker 1: maybe they're trying to warm up, and the credit extension
Speaker 1: that's been thrown to block Fly. What that consolidation means. Um.
Speaker 1: I got a quote from Lenin that I want to
Speaker 1: read to you as well that I think helps some
Speaker 1: up kind of where we're at um and maybe talk
Speaker 1: about you know who swimming naked and kind of like
Speaker 1: a warm Buffett type type of quote. So anyway, listen
Speaker 1: to the Mark Mo Show. We're talking about the decentralized
Speaker 1: revolution the world's going through. We're talking about bitcoin and cryptocurrencies.
Speaker 1: Of course, I'm in the studio with Mike Alfred. You
Speaker 1: can find them on Twitter at Mike Alfred and uh,
Speaker 1: we got a lot more to cover when we get back,
Speaker 1: so don't go away, all right, Welcome back. You are
Speaker 1: listening to the Mark Mo Show. We're talking about the
Speaker 1: decentralized Revolution. We're talking about bitcoin, we're talking about what's
Speaker 1: happening in the cryptocurrency space, and I'm in the studio
Speaker 1: with Mike Alfred. You can find on on Twitter. At
Speaker 1: Mike Alfred and uh, you're explaining Mike, how Um, you know,
Speaker 1: this is basically kind of the the the end effects
Speaker 1: of this long term bowl market, the long's bowl market
Speaker 1: we've been in history and what happens, and um, it
Speaker 1: made me think of this Lenin quote that I wanted
Speaker 1: to pull up real quick. Um, Vladimir Lenin from Russia,
Speaker 1: not someone that we should model after, but he said, quote, Um,
Speaker 1: the the best way to destroy the capitalist system was
Speaker 1: to debouch the currency by a continuing process of inflation.
Speaker 1: Governments confiscates secretly and unobserved an important wealth of their
Speaker 1: citizens by this method not only confiscate, but they confiscate arbitrarily,
Speaker 1: so through inflation and deflation. And then and then at
Speaker 1: the end, he says, as the inflation proceeds and the
Speaker 1: real value of the currency fluctuates wildly from month to month,
Speaker 1: the ultimate foundation of capitalism becomes so utterly disordered as
Speaker 1: to be almost meaningless, and the process of wealth getting
Speaker 1: degenerates into a gamble and a lottery. And so I
Speaker 1: think that's kind of where we're at. Where it's like, um,
Speaker 1: you know, at the end of this long term death cycle,
Speaker 1: through all this inflation. That's happened. Um, there's no yield
Speaker 1: left anymore. Right, the interest rates are down at zero.
Speaker 1: They've pushed everybody out on this crazy risk risk of
Speaker 1: to try to get any kind of yield they hand
Speaker 1: they can, but ultimately they've turned it into a generation gamble.
Speaker 1: And so now everybody has to gamble. And I think
Speaker 1: to your point, they think everything just goes up in perpetuity,
Speaker 1: and it doesn't and they and they find out, unfortunately,
Speaker 1: they find out the hard way. Yeah. And if you
Speaker 1: were raised in the nineteen fifties or sixties, right, um,
Speaker 1: you were told, hey, save money by government bonds, put
Speaker 1: in the bank, right, or earn more than you spend.
Speaker 1: And that whole model was flipped on his head because
Speaker 1: the FED change the rules. The rule for the last
Speaker 1: twelve years was big bar and steal as much capital
Speaker 1: as you can get, take as much risk as possible,
Speaker 1: use as much leverage as possible. It doesn't matter because
Speaker 1: if you mess up, we will bail you out. So
Speaker 1: that FED put incentivized increasingly risky behavior, and only some
Speaker 1: people understood the rules of the game. Right, So when
Speaker 1: people were overlevered going into the COVID situation, in the
Speaker 1: spring of guess what the government did. They basically bailed
Speaker 1: those people out with p PP loans. So these companies
Speaker 1: got five million, ten million, twenty million dollar p PP
Speaker 1: loans that were forgiven. And yes, some of the employees
Speaker 1: got to keep their fifteen dollar an our job for
Speaker 1: an extra six months, but the owners of those firms
Speaker 1: should have been wiped out by that irresponsible leverage that
Speaker 1: was on those firms. So look, I think when the
Speaker 1: Fed manipulates the market like this, nobody knows which prices
Speaker 1: to trust, nobody knows which rules of the game to follow,
Speaker 1: And so people got sucked into things like Celsius, where, yeah,
Speaker 1: if you can't get a reasonable return in your bank,
Speaker 1: you might you might be convinced that, even though it
Speaker 1: makes no sense, something like Celsius might work. Yeah, what
Speaker 1: about um, what about the Wall Street raiders whatever we
Speaker 1: want to call them, right, I mean, they've been they've been,
Speaker 1: They've been at this game for a long time. George
Speaker 1: Soros became infamously rich, making a billion dollars a day
Speaker 1: by breaking the peg of the Bank of England. And
Speaker 1: so it seems like Wall Street traders or raiders, they're
Speaker 1: gonna want to always want to go after these you know,
Speaker 1: they smell a little blood in the water. They want
Speaker 1: to attack, and so, um, I don't want to dig
Speaker 1: into this, but it looks like that's there's some big
Speaker 1: Wall Street fund, Blue Street or Boost Blue guys going
Speaker 1: after the bo g A right now, which is pretty interesting,
Speaker 1: but they want to be a George Soros. But back
Speaker 1: to the crypto space, it's almost like they spot these
Speaker 1: things like Tera Luna or Celsius, see how they're over leveraged,
Speaker 1: understand their over leverage, and they can start to see
Speaker 1: where their liquidation levels are, and they just start hunting
Speaker 1: those liquidation levels. Um. I think that's what happened with
Speaker 1: Terry Luna. It looks like that was what's happening with Celsius,
Speaker 1: and they keep trying to lower their liquidation levels, but
Speaker 1: of course everybody knows where they're at, so it's like
Speaker 1: the raiders want to keep pushing that down. Do you
Speaker 1: do you see something like that happening? You think that's
Speaker 1: what happened. Yeah, I mean, look, that's the essence of capitalism, right.
Speaker 1: Markets systematically hunt down and kill any sort of weakness.
Speaker 1: So if you're you have weakness in any form the
Speaker 1: full extent of any capital cycle, right if it's allowed
Speaker 1: to happen, which again, the FED is sort of this
Speaker 1: sort of put a pause on normal cycles in some senses. Right,
Speaker 1: we're supposed to suspend disbelief and believe that bowl markets
Speaker 1: can go on forever with no interruption. But in a
Speaker 1: typical cycle, all of the week as players at some
Speaker 1: point get taken out. When times are good, right, you
Speaker 1: can get away with all kinds of shenanigans, But as
Speaker 1: soon as the tide goes out, you find out who's
Speaker 1: swimming naked. And I think that's what happened with Tara Luna, right,
Speaker 1: Like it was a weak system. It was sort of
Speaker 1: designed to fail from the beginning, and so it only
Speaker 1: took uh one powerful actor who identified the risk in
Speaker 1: that system and put a little bit of pressure. You
Speaker 1: just lean a little bit on the weakest part of
Speaker 1: that system, and the whole thing collapses. Um, and you know,
Speaker 1: Japan's in a tough spot. I mean, the yen actually
Speaker 1: used to be a safety trade. If you remember, back
Speaker 1: in the last financial crisis, last major one, people bought
Speaker 1: the yet and it actually went up, uh you know,
Speaker 1: over a five or ten year period recently. Now they've
Speaker 1: got to print a lot of you and just to
Speaker 1: protect their bond market, and their bond market may go
Speaker 1: down before our bond market. And obviously we have huge
Speaker 1: advantages in terms of being the global reserve currency that
Speaker 1: they don't have. But we'll see what happens there. I
Speaker 1: actually hope that that doesn't happen because I think it'll
Speaker 1: end up being bad for everybody. Yeah, well, I I
Speaker 1: think it's inevitable. I mean, it's it's only a matter
Speaker 1: of time. It's it's uh, I think more um if,
Speaker 1: I'm sorry, more when not if? But back to back
Speaker 1: to kind of the crypto space a little bit. So
Speaker 1: obviously Terry Luna got taken down. You know, you said
Speaker 1: it's a capitalism doing this thing, which which it is,
Speaker 1: and um, I agree with that. I'm not super happy
Speaker 1: about it because, like you know, some rich Wall Street
Speaker 1: guy made an extra couple of bucks and he ruined
Speaker 1: the life of a lot of people. But that's that's capitalism.
Speaker 1: It's more, it's it's not their fault. Don't hate the player,
Speaker 1: hate the game, right, it's the game that enables them
Speaker 1: to play that. Um, it's this fiat money system and
Speaker 1: it's the FED behind them that's enabled them to get
Speaker 1: to this point, and so I think we have to
Speaker 1: put the blame where the blame is due. Um. But uh,
Speaker 1: you know, back to Celsius. You know, they they froze Withdraws,
Speaker 1: which was kind of the death kneel. Right. They were
Speaker 1: getting a run on the bank, which is always going
Speaker 1: to happen when you're overleveraged. It's kind of like the
Speaker 1: free banking era that we had in the late eighteen
Speaker 1: hundreds of the United States. Right, each of these banks
Speaker 1: were over levered. There wasn't enough mone me there. Um
Speaker 1: they had they had to they had to shut down
Speaker 1: with Draws. Um. Have you seen did you see this
Speaker 1: week they started getting a little short squeeze. They were
Speaker 1: trying to organize a rally on the cell token. Yeah.
Speaker 1: I mean there's a guy named the Real plan C
Speaker 1: who is an influencer on Twitter or a hundred thousand
Speaker 1: plus followers, who told everybody it was safe to use
Speaker 1: uh Celsius. Up until the last moment. There were other
Speaker 1: influencers like this invest answers guy who literally had Maschinsky
Speaker 1: on days before the withdraw all shut down, basically giving
Speaker 1: him a platform to continue to spew all kinds of
Speaker 1: potentially definitely misrepresentations but potentially fraudulent misrepresentations about the state
Speaker 1: of the platform to customers, and so that's that's bad stuff.
Speaker 1: These same people who um did that are now trying
Speaker 1: to organize a short squeeze on an essentially worthless token,
Speaker 1: which is fine, that's the free market too, But like
Speaker 1: the token has nothing to do with whether or not
Speaker 1: people are gonna get their money back. So I'm really
Speaker 1: more focused on the underlying solve and see and liquidity
Speaker 1: issues experienced by the corporate entity Celsius network, and whether
Speaker 1: or not the sort of half a million or so
Speaker 1: depositors into that institution ever see any of their money back.
Speaker 1: My current view is unless there is a bailout, unless
Speaker 1: there's some sort of acquisition of all of the assets
Speaker 1: and liabilities of Celsius, that it almost certainly will go
Speaker 1: into Chapter eleven over the next call it a month
Speaker 1: or two, and then it will take at least a
Speaker 1: year to start distributing assets to the underlying customers. That's
Speaker 1: what I'm focused on. I think the short squeezes a
Speaker 1: total side show. Yeah, I would agree, and uh, you
Speaker 1: know that that sounds like the most probable outcome. Right,
Speaker 1: they've already brought on the people to kind of help
Speaker 1: that wind down. I think there's a difference of money
Speaker 1: they had in custody versus money that was being earning yield,
Speaker 1: so then they'll probably get divided up between that a
Speaker 1: little bit better. Um, there's a chance there's a chance
Speaker 1: you might get some of your money back. I wouldn't
Speaker 1: hold your breath, but there's a chance it might be
Speaker 1: pennies on the dollar. Um, we'll see how that shakes out.
Speaker 1: I want to talk more about this block fine this
Speaker 1: credit from ft X. I think that's kind of interesting.
Speaker 1: I want to talk about in a minute. I'm in
Speaker 1: the studio with Mike Alfred. You can find him at
Speaker 1: Mike Alfred on Twitter. You listen to the Mark Mo
Speaker 1: Show talking about bitcoin and the decentralized Revolution. Be back
Speaker 1: with that and more in a minute, So don't go away,
Speaker 1: we'll be right back, all right, Welcome back. You are
Speaker 1: listening to the Mark Mo Show talking about bitcoin. We're
Speaker 1: talking about cryptocurrencies, we're talking about the decentralized Revolution, and
Speaker 1: I am in the studio with Mike Alfred. You can
Speaker 1: find them on Twitter. At Mike Alfred and we've been
Speaker 1: talking about, you know, the capitalistic system, how the FED
Speaker 1: kept things too low too long, and we ended up
Speaker 1: here and some of the damna is being done in
Speaker 1: the cryptocurrency space. We were talking about Celsius. Uh, maybe
Speaker 1: maybe someone gets some of their pennies back. We'll see
Speaker 1: what happens with that. But with Block five, maybe they're
Speaker 1: in the same boat. Of course, the problem with all
Speaker 1: these companies is we don't know. When I was at
Speaker 1: the Bitcoin conference in Miami a couple of months ago,
Speaker 1: I met with one of the one of the head
Speaker 1: guys over at Celsius, and I told him as much.
Speaker 1: I said, look, I said, I can't give you money
Speaker 1: because I have no way to quantify the risk. I said,
Speaker 1: if you could give more transparency over the assets and
Speaker 1: where they're at, etcetera. I said, then I could quantify
Speaker 1: the risk and I could decide if I wanted to.
Speaker 1: And I said, I thought, I think if you would
Speaker 1: give more visibility or transparency, that would help your business.
Speaker 1: Apparently they didn't do that, but blocked fire. Kind of
Speaker 1: same thing. We don't know right, it's like this black box. Um.
Speaker 1: Maybe they handled credit or or risk better. We don't know, um,
Speaker 1: but it looks like they just got an credit line
Speaker 1: from f t X. I'm sure you saw that. Yeah, Yeah,
Speaker 1: that was what two or fifty million, Yeah, which which
Speaker 1: is probably a drop in the bucket, I would imagine, right,
Speaker 1: considering what funds they have. Yeah. Well, I mean Sam
Speaker 1: Bankman Fried is personally worth over twenty billion dollars, right,
Speaker 1: and he personally did a half a billion dollar investment
Speaker 1: into a company that I was involved with last year,
Speaker 1: and so like, the guy seems to have almost unlimited
Speaker 1: liquidity at this point in to his credit I mean,
Speaker 1: FTX only has like two or three dred employees, so
Speaker 1: they're far smaller than most of the other venues and
Speaker 1: exchanges that have done the same amount of volume. And
Speaker 1: he's an exceptional entrepreneur. Nobody's perfect. I'm not lionizing him.
Speaker 1: I'm not saying that, like everything he's doing is right right,
Speaker 1: like necessarily good for space and long term. But you've
Speaker 1: got to give him credit for helping both Voyager and
Speaker 1: block Fight at this point, because both of those firms
Speaker 1: might have already gone out of business without some support
Speaker 1: from him. Did he also extend a credit line to Voyager?
Speaker 1: As well previously. Um, yes, I don't know the exact
Speaker 1: numbers there, but I've seen a lot of figures flying around.
Speaker 1: But all that said, I mean Voyager lost so much
Speaker 1: money with three a c that the stock was down
Speaker 1: to was down like at some point um this morning,
Speaker 1: it was under fifty cents. So I mean the markets
Speaker 1: basically saying Voyager could go to zero at any point. Yeah,
Speaker 1: the stock. If the stock goes to zero, does that
Speaker 1: mean the company goes out of business? Stocks barely go
Speaker 1: to zero in the absence of bankruptcy. But remember, even
Speaker 1: in a bankruptcy scenario of the stock can still trade
Speaker 1: above zero for a period of time because sometimes during
Speaker 1: a reorganization, people still managed to get something out of
Speaker 1: the company depending on what the what the balance sheet
Speaker 1: looks like. But I'd much rather be a senior secured
Speaker 1: lender to those companies than an equity shareholder. You know.
Speaker 1: Block Fight was one of the first companies in this
Speaker 1: space to to really show cracks, So I think at
Speaker 1: this sort of beginning of one there was no substantive
Speaker 1: difference in my view. Uh and qualitatively between the risk
Speaker 1: books of Celsius and block Fire and block five got
Speaker 1: caught in that gray scale bitcoin trust trade, which looked
Speaker 1: like a no brainer, right, you buy the trust and
Speaker 1: n a V. As long as you hold it for
Speaker 1: six months, you can dump it back on the market
Speaker 1: at that premium. And for most of the history of
Speaker 1: g BTC up until that point, it traded at a
Speaker 1: twenty plus percent premium, so it looked like free money,
Speaker 1: and so kids with no risk management experience in a
Speaker 1: Wall Street experience probably would think that's fine, and they
Speaker 1: piled into that trade. They locked up a huge chunk
Speaker 1: of the deposits in block FI in that trade, and
Speaker 1: then when that premium discount flip negative during the draw
Speaker 1: down in the spring of last year, all of a sudden,
Speaker 1: they were completely upside down. So if they had experienced
Speaker 1: a similar bank run to what Celsius just experienced over
Speaker 1: the last month or so, they would have gone bust.
Speaker 1: Oh last brick um. But again, they had such good
Speaker 1: equity backing that they were able to continue to raise
Speaker 1: equity and plug the hole in their balance sheet. Celsius
Speaker 1: did a similar thing. They raised a round of equity
Speaker 1: last summer, they didn't announce it until the fall, and
Speaker 1: they used that to paper over their balance sheet. So
Speaker 1: I think the only difference today, Mark, honestly, is that
Speaker 1: block Fire grew up faster. Somebody on the board or
Speaker 1: somebody in that investor base said, listen, Zach and team,
Speaker 1: you guys need to grow up. You guys need to
Speaker 1: have put your big boy pants on and actually developed
Speaker 1: some adult level risk framework so you don't lose all
Speaker 1: of the positors money and go bankrupt. And they listen,
Speaker 1: and they stopped doing the same types of crap that
Speaker 1: Selsie's was doing all the way up until now. I mean,
Speaker 1: you can see on chain Celsie's continues to gamble with
Speaker 1: the positive money even as they've frozen the customers assets. Yeah, yeah,
Speaker 1: I think. I mean, you know, the narrative that I've
Speaker 1: always kind of believed, and I guess maybe I was
Speaker 1: naive although I wasn't using these services, but um, I
Speaker 1: always believe that they were doing over collateralized loans and
Speaker 1: so it was supposed to be risk free because they
Speaker 1: had overclatteralized loans. But then it turns out like Celsius
Speaker 1: is losing money and there's like Badger Dow attack, Like
Speaker 1: what the heck are they doing in something called badger
Speaker 1: Dow in the first place? Right, um, and so they
Speaker 1: were like way out on the risk curve, it sounds like,
Speaker 1: and that's just the tip of the iceberg. I mean,
Speaker 1: they lost seventy five million in stay count because the
Speaker 1: protocol team managing that protocol lost the keys. They put
Speaker 1: a whole bunch of money into a mining business at
Speaker 1: the peak of the market when they have no expertise
Speaker 1: in mining. They would run around the market telling everybody
Speaker 1: they were one of the biggest North American miners. I
Speaker 1: mean those of us in the space just kind of
Speaker 1: chuckled and said, what the hell are these guys doing.
Speaker 1: Then they put out an s one about a month
Speaker 1: ago to take a mining business public. It is a
Speaker 1: waste land in the publicly traded bitcoin mining space. I mean,
Speaker 1: there are stocks that are down, some of them are
Speaker 1: going to go to zero. I know of at least
Speaker 1: one publicly traded mining company that's already about the default
Speaker 1: on some of their loans. And so this is not
Speaker 1: an environment to take a mining business public. But it
Speaker 1: speaks to the desperation of the Celsis management team because
Speaker 1: they had made so many poor decisions compounded on top
Speaker 1: of each other that they literally had to file on
Speaker 1: us one for an liquid mining business at the worst
Speaker 1: time in human history to do that. Um, so it's
Speaker 1: just an absolute disaster. I really think the people who
Speaker 1: lost money in this, they need to accept that they're
Speaker 1: probably going to lose a big chunk, probably up to
Speaker 1: fifty of the money at the low end. Right, they're
Speaker 1: lucky they'll get eighty cents on the dollar back. But
Speaker 1: instead of attacking the people who pointed out the risk here,
Speaker 1: maybe maybe spend more time looking at all the management
Speaker 1: decisions that led to this so that you can avoid
Speaker 1: it in the next for future times, right, because I
Speaker 1: think if you learn from this, great, maybe you won't
Speaker 1: make the same mistake again. If you spend all your
Speaker 1: time attacking folks that were just trying to call out
Speaker 1: the misdeeds. Um again, I think people are wasting their
Speaker 1: time on that. Yeah, I mean it's uh it again.
Speaker 1: It's a capitaliststs capitalistic system, right, So, um in any market, right,
Speaker 1: you have short sellers, and then um they might decide
Speaker 1: to put big short positions, and then of course they're
Speaker 1: going to start talking about how bad that that position
Speaker 1: is that company is to try to drive it lower.
Speaker 1: And it's just part of the capitalist system. And so
Speaker 1: you have to identify the risk. Um, all this leverage
Speaker 1: builds up, and if you're going to put your money
Speaker 1: there and you don't know that the celsis is going
Speaker 1: into Badge or Dow or whatever this other one here
Speaker 1: is talking about it, then if you're not paying attention
Speaker 1: to that, then why do you have money there? Right?
Speaker 1: And so you kind of have to figure that out.
Speaker 1: To your point, they think they have to kind of,
Speaker 1: um take this lesson and learn. What is that saying?
Speaker 1: I never lose either either win or I learned, and
Speaker 1: so hopefully they'll learn from that. I was thinking about
Speaker 1: Block five just in regards to this and to your point, Um,
Speaker 1: you know Sam Makmun freed, but he's got a lot
Speaker 1: of money. I mean f t X. You know, between
Speaker 1: f t X and Alameda they seem to be pretty
Speaker 1: much in bed with Tether as well. Um, big big,
Speaker 1: big pockets. I would imagine if um, he's putting two
Speaker 1: d fifty million in, he's probably not gonna want to
Speaker 1: lose that two million. So we might have done a
Speaker 1: little bit due diligence and he might be prepared to
Speaker 1: do whatever it takes to keep them afloat. Do you
Speaker 1: think they might have dodged a bullet with it. Was
Speaker 1: that was that kind of like a vote of confidence
Speaker 1: from SPF? Yeah? I think so. And you know, if
Speaker 1: you've got SPF on your side, there's a good chance
Speaker 1: that you won't go out of business, right And the
Speaker 1: other thing to keep in mind is they were already
Speaker 1: out raising a down round in Oliver raising a billion
Speaker 1: dollar valuation. I don't think they were finding a lot
Speaker 1: of success with that. But after an equity investor sees
Speaker 1: a vote of confidence on the debt side from an SPF,
Speaker 1: they're going to be more likely to put equity in
Speaker 1: because they can underwrite it with a lower risk of
Speaker 1: losing all of the capital that goes on. I want
Speaker 1: to make one quick distinction though, mark On if we
Speaker 1: can just go back real quick, I think there's a
Speaker 1: big difference between Tara Luna and Celsia's Tara Luna. You
Speaker 1: actually had a somebody, some sort of chanization or trader
Speaker 1: attacking Tara Luna directly. In the Celsius case, it was
Speaker 1: literally just mismanagement. There was no particular single incident, There
Speaker 1: was no particular single actor that that precipitated that situation,
Speaker 1: whereas Tara Luna was very clearly one actor that was
Speaker 1: was moving on the on the against that tokens. That's
Speaker 1: that's that's a that's a really good point to bring up.
Speaker 1: So I appreciate that. I'm listening to the Mark mo Show.
Speaker 1: I'm in the studio with Mike Alfred. We are talking
Speaker 1: about bitcoin. We're talking about the cryptocurrency space. We're talking
Speaker 1: about the state of the markets with the Federal Reserve
Speaker 1: driving them to a level never seen in the last
Speaker 1: well the longest ball run in history, and here we
Speaker 1: are de levering the system. I want to talk a
Speaker 1: little bit more about who swimming naked when we come
Speaker 1: back in a minute, So don't go away, all right,
Speaker 1: Welcome back. You are listening to the Mark moa show.
Speaker 1: We're talking about bitcoin and the decentralized revolution, specifically in
Speaker 1: the studio with Mike Alfred, and we are talking about um,
Speaker 1: the blow up in the I don't know what we
Speaker 1: call it, se FI central heist finance world if we
Speaker 1: call it that, talking about Celsie is talking about block fire,
Speaker 1: talking about Voyager. Um. You know a couple of people
Speaker 1: that I haven't heard a whole lot about. Maybe you
Speaker 1: have is a genesis that seems to probably be behind
Speaker 1: all of these people. And then NEXTO as well, what
Speaker 1: have you heard about them? So, I mean, Genesis is
Speaker 1: a digital currency group company, it's Barry Silbert, and that
Speaker 1: is probably one of the best financed funded organizations in
Speaker 1: the entire space. Barry systematically buys back stock every single
Speaker 1: year and also pays a dividend, which is very unusually
Speaker 1: for a non public growth company. And they have some
Speaker 1: of the strongest equity shareholders in the world. And so
Speaker 1: Genesis probably the last lender that would ever fail in
Speaker 1: the space. And from what I hear, they terminated three A,
Speaker 1: C and and UH some of the other bad counterparties
Speaker 1: alongside block Fire others right pretty early. And even if
Speaker 1: they took losses, they have a big enough on sheet
Speaker 1: across DCG that like probably not going to go anywhere.
Speaker 1: The rumors about next are much worse. Right, there's a
Speaker 1: lot of conversation about whether or not NEXTO is actually solvent.
Speaker 1: I don't have any smoking gun or particular issue to
Speaker 1: take with NEXTO like I did with Celsius, where with
Speaker 1: Celsie's I felt like it was definitely going to collapse. Uh,
Speaker 1: and I said that multiple times on the record. I'm
Speaker 1: not gonna say that about Next because I don't have
Speaker 1: enough information, But if I was a depositor there, I'd
Speaker 1: be thinking about pulling my assets out based on based
Speaker 1: on just the chatter that I'm I'm hearing in the market. Yeah,
Speaker 1: I was. I was always skeptical of Next. So just
Speaker 1: because one there European company, if forget exactly what country
Speaker 1: they're from, um, and their founder has some you know,
Speaker 1: rumors about where he's from and maybe some nefarious things
Speaker 1: that he's done in the past, and that lack of transparency,
Speaker 1: the lack of US regulation concerned me. But I saw
Speaker 1: it today. They came out with this UH post talking
Speaker 1: about how they're partnered up with City to do some
Speaker 1: I don't know if they're going to try to provide
Speaker 1: liquidity to the space. They put out a press release
Speaker 1: talking about how they ad buy Celsious. I think it
Speaker 1: was just like a press release. UM. It wasn't like
Speaker 1: an actual you know, l o I or anything like that. Um,
Speaker 1: so it looks like they're trying to make some noise,
Speaker 1: kind of trying to prove that maybe they're above all that.
Speaker 1: But yeah, I would probably pretty skeptical of that as well, yeah,
Speaker 1: my impression is that City is quite desperate to be
Speaker 1: in the space all of a sudden. I'm not sure
Speaker 1: where that's coming from at the executive level within City,
Speaker 1: but somebody gave a directive that they need more exposure,
Speaker 1: and so they seem to be thrashing around trying to
Speaker 1: get into the custody space, trying to back certain companies.
Speaker 1: Their their analysts keep making comments about how high bitcoining
Speaker 1: can go, even though they knew nothing about bitcoin like
Speaker 1: three weeks ago. Um So, I wouldn't read too much
Speaker 1: into anything related to any of the banks because frankly,
Speaker 1: none of the banks have proven the big US banks
Speaker 1: at least have proven to have any real expertise in
Speaker 1: the space. They'll come when the hedge funds are clamoring
Speaker 1: for services, but the moment the price goes down, they
Speaker 1: seem to disappear. Um so I wouldn't read into that.
Speaker 1: I would focus more on whether next To itself is
Speaker 1: actually solvent and what kind of lending they've done behind
Speaker 1: the scenes, and if there's real risk there. Again, um,
Speaker 1: my vote would be to remove your capital from all
Speaker 1: of these centralized landing platforms if you haven't already. Yeah,
Speaker 1: I would agree with we agree with that statement. And
Speaker 1: what about the big news that broke this week with
Speaker 1: UM the first UM short et F that Ginsler just
Speaker 1: approved on bitcoin. What's your thoughts on that? Is that?
Speaker 1: Is that bullish or is that barish? Or is it neutral?
Speaker 1: I mean it could be it could be bullish, right, Uh,
Speaker 1: just because usually by the time a short ETF comes out, right,
Speaker 1: most of the move is is sort of over. Uh.
Speaker 1: Michael Sonenshein, the CEO of Gray Scale, actually put out
Speaker 1: a tweet store arguing that was actually bullish. But I
Speaker 1: think the SEC regulation angle is actually the more interesting one,
Speaker 1: and just that the SEC is allowing these futures based
Speaker 1: what I call garbage products with ten percent fully loaded cost.
Speaker 1: When you when you look at the cost of rolling
Speaker 1: those contracts every month, UM, it's it's just kind of
Speaker 1: ridiculous that they would allow those products to exist. But
Speaker 1: they wouldn't allow the biggest bitcoin fund, the Great Skill
Speaker 1: Bitcoin Trust, to just convert to an ETF and remove
Speaker 1: the discount from n a V that the fund is
Speaker 1: currently trading out. I mean, that would help so many
Speaker 1: more people than giving the general public another vehicle to
Speaker 1: speculate with and to trade. Yeah, you know, it's crazy,
Speaker 1: it's absolutely I almost I'm starting to think the SEC
Speaker 1: is trying to hurt the public through some of these actions,
Speaker 1: because it actually makes no logical sense why you would
Speaker 1: allow a futures based short product before you'd allow us
Speaker 1: body t F. Well, I think you could look at
Speaker 1: most of the SEC's actions and probably draw that conclusion.
Speaker 1: Just look at the credit investor rule for example, right,
Speaker 1: so they can't get into the early round deals, but
Speaker 1: they can get dumped on by retail as soon as
Speaker 1: it goes public. I mean it's uh, I think you
Speaker 1: could probably draw that conclusion with most of them. And
Speaker 1: I think if you look at um Gary Ginsler, head
Speaker 1: of the SEC, I mean, he obviously knows bitcoin, he
Speaker 1: was teaching at m I T he gets it. He's
Speaker 1: you know, he's quoted Satoshi. He seems like he gets it.
Speaker 1: So then you kind of have to look at that
Speaker 1: and then look at his actions, and then I think, like, um,
Speaker 1: with these synthetic you know, degenerate gambling, you know, naked
Speaker 1: shorting for example, that they're bringing out, or even this
Speaker 1: these long synthetics or whatever, it's like almost like it
Speaker 1: hurts the cryptocurrency space more and even potentially hurts bitcoin,
Speaker 1: So like, are they doing it maybe as the way
Speaker 1: for the government to kind of attack bitcoin and crypto
Speaker 1: potentially um or maybe he doesn't want to have a
Speaker 1: physical so he can encourage people to buy the physical.
Speaker 1: I don't know. It's a it's interesting either way, I
Speaker 1: guess yeah. I mean, I actually think it's probably more ineptitude,
Speaker 1: um than than conscious effort to destroy bitcoin, Like, I
Speaker 1: honestly don't think the government is smart enough to do that.
Speaker 1: What about for somebody like myself and probably yourself as well.
Speaker 1: I'm not trying to put words in your mouth, but
Speaker 1: you know, Michael Sailor type right, I'm long bitcoin. I'm
Speaker 1: gonna hold bitcoin. I want my grandkids to own my bitcoin.
Speaker 1: I'm never going to sell, so I'm not trying to
Speaker 1: trade it. I'm not trying to sell the peaks and
Speaker 1: re buy back at the dips, etcetera. You think having
Speaker 1: a shorting et F could be beneficial in that type
Speaker 1: of environment where I don't want to sell my bitcoin
Speaker 1: m at the top, but I could take a little
Speaker 1: leverage on the short to protect myself on the downside.
Speaker 1: I think net of all the expenses and the potential
Speaker 1: taxes on that. You'll find most people over a ten
Speaker 1: year period come out behind. Any trading at all generally
Speaker 1: is going to be a drag on long term returns,
Speaker 1: especially for an asset like bitcoin that has the potential
Speaker 1: to compound at a year across the decade. So my
Speaker 1: advice is never going to change on that. No matter
Speaker 1: how many new fangled products that Wall Street comes out
Speaker 1: with and try to tempt people to trade more, tend
Speaker 1: people to hedge more, or whatever, the vast majority of
Speaker 1: people will not use those products properly no matter how
Speaker 1: hard they try, and they'll end up poorer and worse
Speaker 1: off by even using them at all. Yeah, So for
Speaker 1: the listeners, what Mike's referring to is that I believe
Speaker 1: on this short fund, they recalculate on a monthly basis
Speaker 1: and then they put the fees about two percent per month,
Speaker 1: So over the course of the year cost you between
Speaker 1: ten and fifteen percent in fees, and so you're gonna
Speaker 1: have to beat that just to break even on that.
Speaker 1: And then on top of that, if you have profits,
Speaker 1: you have to pay taxes on that as well. So
Speaker 1: when you let out the fees and the taxes, like
Speaker 1: it's pretty hard to get ahead. I guess is that
Speaker 1: kind of we're referring to. Yeah, I'm saying the stated
Speaker 1: expense ratios are always lower, right, They're not going to
Speaker 1: tell you center fient. But the cost of rolling because
Speaker 1: the futures contracts and the contango, right, that that happens
Speaker 1: sometimes in these contracts as the prices change across those
Speaker 1: months as you look out, and just the trading fees
Speaker 1: that are internal to the fund, the market impact of
Speaker 1: those trades, um, that's what creates the real cost versus
Speaker 1: just holding spot bitcoin. Most people should just buy bitcoin, uh,
Speaker 1: put it in cold storage, leave it alone, don't try
Speaker 1: to lever it, don't try to earn yield on it.
Speaker 1: Don't you any other products. Just hold bitcoin and leave
Speaker 1: it alone for five or ten years. That's the only
Speaker 1: way that I can sort of make sort of assurance
Speaker 1: to somebody that I think they'll do pretty well. As
Speaker 1: soon as they start bringing in options, leverage, uh ets
Speaker 1: with futures, etcetera, there's a good chance they're gonna mess
Speaker 1: something up. Yeah. Brings me back to a quote from
Speaker 1: Warm Buffet's partner, Charlie Munger. He says that the big
Speaker 1: money isn't made in the buying and the selling. The
Speaker 1: big money is made in the waiting. So you wait
Speaker 1: for the right opportunity, and then you wait for that
Speaker 1: opportunity to come to fruition. And to what Mike is saying,
Speaker 1: bitcoin is average, I mean it had been average annual
Speaker 1: compounding growth rate. Even if that slows down to half
Speaker 1: of that or even a quarter of that fifty times,
Speaker 1: I mean, it's still still amazing. And so just wait,
Speaker 1: just waited out. Um. That's that's been my approach as well,
Speaker 1: and it seemed to work out pretty good. Sometimes it
Speaker 1: doesn't look perfect, but like right now, but over the
Speaker 1: long run of you zoom out, it's been pretty good
Speaker 1: of buying. So it's worked out. Um. You listen to
Speaker 1: the Mark Moss Show. We're talking about bitcoin. We're talking
Speaker 1: about the decentralized revolution. I've been in the studio with
Speaker 1: Mike Alfred. You can give him a follow on Twitter
Speaker 1: at Mike Alfred talking about the the contagion that we've
Speaker 1: seen in the scripto lending space. Word of the word
Speaker 1: word to you from Mike is get your money out
Speaker 1: of those platforms around there. That's what I got for
Speaker 1: today Thanks for listening to The mark Ma Show. Until
Speaker 1: next time,