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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisntal and I'm Tracy Alloway. Tracy, do you

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Speaker 1: remember the conversation that we recently had with Doug Seafood,

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Speaker 1: the Virtue CEO. Yeah, that was a great conversation. Looks funny, Yeah, no,

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Speaker 1: that was that was a really fun one. Um. Obviously,

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Speaker 1: that was a discussion about high frequency trading, electronic market

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Speaker 1: making and listed equities and what's striking is ultimately, I mean,

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Speaker 1: these are like profitable businesses, but you know they're in

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Speaker 1: that business just scraping for like pennies or fractions of appennies,

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Speaker 1: like these are pretty uh efficient, you know, pretty efficient markets.

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Speaker 1: It's it's hard to ring more profit out of out

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Speaker 1: of them. It's definitely a volume business. You're making like

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Speaker 1: a penny on the trade aid, um from a tiny

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Speaker 1: tiny like difficult to see spread, right, there's so many

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Speaker 1: different players and as everyone's trying to get their margin,

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Speaker 1: and so you know, I've said it before, if you

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Speaker 1: know US listed equities in particular and probably elsewhere too,

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Speaker 1: it's like they're pretty efficient markets. Yeah, I think that's right.

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Speaker 1: I mean I think, um, well, we also just had

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Speaker 1: an episode on the U. S. Treasury market, and I

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Speaker 1: think you'd probably say stocks and maybe US treasuries are

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Speaker 1: the most liquid markets out there. Um corporate bonds not

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Speaker 1: so liquid. We've talked a lot about that on the show.

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Speaker 1: So one thing we haven't actually talked about, I realized

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Speaker 1: is we've done a few episodes about like crypto and bitcoin,

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Speaker 1: but we've never really talked about like market structure in

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Speaker 1: the space as far as I know, or at least

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Speaker 1: not in depth. And my impression is even though the

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Speaker 1: sort of like industry of this ecosystem that's been built

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Speaker 1: around it several years old now, I think it's safe

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Speaker 1: to say completely still on the other side of the

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Speaker 1: efficiency spectrum from the space that like the for twos

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Speaker 1: of the world are the citadel securities of the world

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Speaker 1: are playing it. Yeah, I think that's a fair assessment.

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Speaker 1: I mean, for one thing, you have just tons of

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Speaker 1: platforms and the market is completely fragmented, and then you

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Speaker 1: also have these big regional variations where like the price

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Speaker 1: of bitcoin can be one thing in Korea and then

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Speaker 1: a different thing on a platform in the States. There

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Speaker 1: are a lot of arbitrage opportunities, I think, but Also,

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Speaker 1: I can't imagine what it's like trading in that environment,

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Speaker 1: and I think you probably have to think about costs

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Speaker 1: and platform risk and other things a lot more than

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Speaker 1: you would for certainly for equities. Right, So you have

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Speaker 1: these sort of like massive different you know, all these

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Speaker 1: different platforms, huge spreads potentially at times between what an

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Speaker 1: asset trades at one place elsewhere, different regulatory regimes, different currencies,

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Speaker 1: different banking systems. In theory though, those costs create big

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Speaker 1: opportunities for savvy traders. Yeah, and we've heard some stories

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Speaker 1: about people making millions um, possibly billions, just by arbitraging

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Speaker 1: like a simple regional spread. Yeah. So today we're going

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Speaker 1: to talk about crypto market structure with someone who I

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Speaker 1: think is basically the perfect guest to discuss it because

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Speaker 1: he previously was in the world closer to the sort

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Speaker 1: of market making uh world that we've talked about with Doug.

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Speaker 1: We're gonna be speaking with Sam Bankman Freed. He is

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Speaker 1: the CEO and co founder of the crypto exchange f

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Speaker 1: t X. He's also the CEO and co founder of

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Speaker 1: the crypto hedge fund alimt Research, and previously to that,

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Speaker 1: he was in the in the market making business. I

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Speaker 1: think trading E t F at James Street, which is

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Speaker 1: one of these trading shops that compete in that space

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Speaker 1: of of you know, high tech market making for regulated

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Speaker 1: listed assets. So has really seen both both ends of

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Speaker 1: the spectrum, the perfect guest to talk about crypto market

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Speaker 1: structure with us. Sam, thank you so much for joining us. Yeah,

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Speaker 1: thanks for having me so, Sam, I've you know, read

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Speaker 1: a little bit about your work. I take it you

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Speaker 1: got you know, not this boom, but the last sort

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Speaker 1: of like crazy cycle for cryptov I think is when

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Speaker 1: you sort of made that switch over. I think you're

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Speaker 1: at Jane Street at the time. Talk to us first

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Speaker 1: about sort of like your background. How did you first

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Speaker 1: get into finance and how did you find your way

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Speaker 1: into the world of before we even get into crypto

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Speaker 1: and make that John jump the world of the world

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Speaker 1: of trading. Yeah, I it's interesting, you know, sorry for

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Speaker 1: in retrospect, looking back on it, it seems like so

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Speaker 1: weird it in contingent how some of these things happened,

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Speaker 1: but also like kind of inevitable isn't quite the right word,

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Speaker 1: but like you know, it worked out like kind of

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Speaker 1: remarkably neatly given that, but you know, the context is,

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Speaker 1: so I went to have I t is, you know,

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Speaker 1: server math nerd, albeit a math nerd who was sort

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Speaker 1: of coming, you know, into the middle of their college experience,

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Speaker 1: having kind of reckoned finally with the fact that like

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Speaker 1: I wasn't going to become a math professor. And I mean,

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Speaker 1: they're probably pretty compelling arguments that that wasn't gonna be true. Um,

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Speaker 1: but realizing that I really like doing academic research was

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Speaker 1: maybe a little bit of a you know, a hole

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Speaker 1: in the plan. So sol it's sort of like, didn't

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Speaker 1: didn't really know it's gonna do with my life. The

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Speaker 1: one thing that I sort of know is that I

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Speaker 1: wanted to find out how I could have the most

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Speaker 1: positive impact on the world. Um. I've been into utilitarianism

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Speaker 1: for a very long time and and recently started getting

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Speaker 1: into effective alters, which is basically this movement of like,

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Speaker 1: you know, if you're trying to figure out how to

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Speaker 1: impact the world, like try and quantify things, trying try

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Speaker 1: and figure out what the most efficient way of doing

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Speaker 1: that is, you know, what the ways that you know

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Speaker 1: gives you the most bank for the book, and was

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Speaker 1: kind of playing around with a lot of possible careers

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Speaker 1: that were kind of all over the place. I had

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Speaker 1: some conversations to people, and basically, so, you know, you

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Speaker 1: go to work for for one of these charities or

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Speaker 1: organizations that that you think are good or you could

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Speaker 1: kind of donate to them, and you know, frankly, given

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Speaker 1: like your strengths and weaknesses, you know, maybe maybe you're

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Speaker 1: gonna be able to donate more to them than you'd

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Speaker 1: be able to contribute working directly for them. Um and

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Speaker 1: certain I thought about that. It seems like a pretty

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Speaker 1: plausible argument, and so I sort of started looking into

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Speaker 1: for the first time, well, okay, like if that's my goal,

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Speaker 1: if my goal to figure out or at least maybe

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Speaker 1: kind of like short term goal, how how can I

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Speaker 1: make as much money and donate it as possible? Like

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Speaker 1: where would that lead me? And sort of one of

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Speaker 1: the obvious, you know, obvious things to look at was, well,

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Speaker 1: how about finance. You know, I kind of heard that's

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Speaker 1: what happens there. I didn't really know a whole lot

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Speaker 1: else about it, but like, frankly, really was just like

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Speaker 1: I know, it's sort of like in my junior didn't

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Speaker 1: know what to do, and like just like applied for

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Speaker 1: some internships. You know, I don't know, some friends headered

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Speaker 1: in into James Street. They said, like, you know a

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Speaker 1: lot of really good things. So it's just like, you know,

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Speaker 1: sent in her resume, you know, really low conviction, and

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Speaker 1: then she's like interview there and really liked the interviews

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Speaker 1: and she found them really engaging, and then sort of

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Speaker 1: one thing led to another. Interned at James Street Capital,

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Speaker 1: you know after my junior year, really liked it and

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Speaker 1: and then went back full time when I graduated. So

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Speaker 1: what were you doing at Jane Street exactly? And I guess, um,

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Speaker 1: what was the opportunity that you spotted in crypto because

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Speaker 1: you know, it took a while for a lot of

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Speaker 1: financed people to jump into that market, but um, you did,

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Speaker 1: did it fairly early on. So what did you see

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Speaker 1: and how did your Jane Street experience, um in form

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Speaker 1: that decision? Yeah, I mean I think a Jeans Street

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Speaker 1: really the goal was buying low and selling high. I know, um,

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Speaker 1: but but but you know, I think that there is

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Speaker 1: sort of like something there of like people think of

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Speaker 1: like to use these you know, quant prompt firms on

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Speaker 1: Wall Street and either they think through this old style

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Speaker 1: you know, gigantic men in suits talking really loud, being

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Speaker 1: grabbing shairs of stock from each other on you know,

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Speaker 1: the stock exchange floor, or they think of sort of

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Speaker 1: a bunch of nerds with like, you know, equations you

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Speaker 1: could not fathom, you know, I mean, Jeezu is much

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Speaker 1: more on the second end than the first end. You know,

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Speaker 1: we were a bunch of a bunch of nerds basically

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Speaker 1: trading trading stocks. But you know the truth is that

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Speaker 1: like a lot of it is not sort of like

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Speaker 1: this incomprehensible girbledy book. A lot of it is like

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Speaker 1: really straightforward simple trade ideas, just don really carefully with

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Speaker 1: a lot of supporting you know, evidence and ringing everything

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Speaker 1: you can out of the trade, optimizing it as much

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Speaker 1: as you can, thinking hard about it. You know. So

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Speaker 1: I was treading internationally ETFs there um, which are you know,

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Speaker 1: ETFs are funds which contain other other equities um, and

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Speaker 1: the funds themselves trade on exchanges, and there's this classic

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Speaker 1: arbitrage of well, you can sort of price the e

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Speaker 1: t F based on you know, the sum of all

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Speaker 1: the stocks that it don't you know, and and you

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Speaker 1: can sort of you know, great and rogeem back and

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Speaker 1: forth between them. And you know, if the e t

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Speaker 1: F is trading below the stocks, you can buy the

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Speaker 1: et F and sell the stocks. And I was training

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Speaker 1: both the stock team buy the stocks, you know, merge

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Speaker 1: them into the e t F and sell the e

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Speaker 1: t F and do an arbitrage. So I was trying

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Speaker 1: internationally ts, which are those types of products, but where

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Speaker 1: the stocks don't trade on you know, on on NISY

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Speaker 1: where they trade on foreign stock exchanges on you know

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Speaker 1: Green or or you know Indian or or you know

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Speaker 1: the UK stock exchanges. And it's basically the same thing,

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Speaker 1: except incredibly messy and complicated and intricate because get all

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Speaker 1: these nice properties that fall out when you're training U

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Speaker 1: S ETFs that you don't with foreign ones and just

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Speaker 1: want to start. Is the et F itself is trading

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Speaker 1: you know what PM New York time five days a week.

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Speaker 1: You know, you take a n e TF on Korean stocks, right,

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Speaker 1: and there's Korean stocks are trading, you know, I don't

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Speaker 1: know whatever it is, like a A M two the

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Speaker 1: three PM or whatever Korean time five days a weeken,

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Speaker 1: those don't really even overlap. So whenever you're training d TF, right,

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Speaker 1: it's it's it's this fund of stocks that haven't traded

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Speaker 1: for twelve hours, and you can't just say, well, through

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Speaker 1: the arbitrage stocks aren't trading, no price for them, And

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Speaker 1: so that sort of opens this gigantic set you know,

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Speaker 1: can of worms of like how do you think about

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Speaker 1: these e t s? How to price them? And how

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Speaker 1: do you understand exactly what they hold? Uh? And how

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Speaker 1: do you understand the liquidity of the underlying stocks, how

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Speaker 1: do you understand the fund itself the mechanisms behind it,

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Speaker 1: and basically just be Hans is sort of like you know,

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Speaker 1: somewhat intricate modeling problem and and I and that does

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Speaker 1: sort of you know, what what we did was basically

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Speaker 1: provided liquidity in those international ETF and and particularly kind

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Speaker 1: of specialized in providing liquidity when it wasn't trivial, you know,

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Speaker 1: not doing the single easiest trade because anyone can do

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Speaker 1: that and that's super crowded, but trying to do even

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Speaker 1: just the second easiest trade through the hardest trade, but

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Speaker 1: being you know, trying to be out there twenty you know,

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Speaker 1: not going for something. But whenever US markets broken, have

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Speaker 1: as much liquidity as we could in those products given

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Speaker 1: the constraints and the uncertainty of you know, what they represented,

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Speaker 1: And yeah, that's that's sort of like what that desk

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Speaker 1: and you know, which is the death stares on, you know,

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Speaker 1: specialized in. So when you say that like the second

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Speaker 1: easiest trade, what do you what exactly do you mean

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Speaker 1: by that? And I'm glad you know it's funny. I've

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Speaker 1: actually wondered about this exact question before, Like, Okay, a

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Speaker 1: Korean ETF is trading during American hours when the underlying

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Speaker 1: shares have stopped trading, So like what is this based on,

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Speaker 1: you know, price relationships? Like you know, there's probably like

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Speaker 1: some historical correlation between what the SMP does and what

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Speaker 1: the COSPY does the following day, and sort of like

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Speaker 1: imputing what those stocks would theoretically be doing during that

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Speaker 1: time based on what the trading of other equities are happening.

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Speaker 1: Like talk about that a little bit more. Yeah, totally.

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Speaker 1: And I think that you're you're you're you're talking about

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Speaker 1: really good things there. And I think that's sort of

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Speaker 1: another takeaway there is like how do you start It's

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Speaker 1: not by you know, waving magic wand and using native words.

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Speaker 1: You start with literally the most sort of like intuitive,

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Speaker 1: straightforward things you can think of. You know, it's like

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Speaker 1: if you kind of think hard about this and have

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Speaker 1: a lot of context, and then she like, I don't know,

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Speaker 1: maybe I tried it this way you want. Honestly, that's

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Speaker 1: probably a good start. You know, you're probably gonna do

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Speaker 1: a lot better than someone who doesn't do that thing.

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Speaker 1: It doesn't do anything at all, But you know whatever,

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Speaker 1: twenty people can do that who have the setup and

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Speaker 1: the liquidity and the capital and everything like that, and

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Speaker 1: so and you have to do better. You know, that's okay,

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Speaker 1: you know you've you've done better than than just no

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Speaker 1: no modeling. But but there's there's enormous amounts of extensions

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Speaker 1: that you can build on that. And it's all about

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Speaker 1: acknowledging you're never going to be perfect, but trying to

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Speaker 1: get you know, as good as you can. So, can

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Speaker 1: you talk a little bit more about the crypto transition,

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Speaker 1: Like what was the opportunity that you spotted just to

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Speaker 1: circle back and what was um, I guess the shared

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Speaker 1: skill set that you thought could be applied to the

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Speaker 1: crypto market. You know, I love King Street and and

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Speaker 1: by the way, I really really liked it there maybe

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Speaker 1: the most notable thing about it was how much and

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Speaker 1: how much I liked it, how much a lot of

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Speaker 1: the people they're liked it. It was just a really

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Speaker 1: good place, and it probably still is in just a

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Speaker 1: number of different dimensions. And we just look at things like,

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Speaker 1: you know, like employee satisfaction compared to competitors. You know,

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Speaker 1: my sense is that's just off the charts. And again,

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Speaker 1: you in in many cases just for kind of straightforward reason,

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Speaker 1: it's you know, it's just like it does a good

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Speaker 1: job of treating its employees well, giving them responsibility when

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Speaker 1: it makes sense, and you know, guidance when they need it,

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Speaker 1: and and you know all that. So so anyway, you know,

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Speaker 1: I really liked it there, but after after about three

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Speaker 1: and a half years, basically just felt like, um, like

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Speaker 1: it was time to try my own thing. And I

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Speaker 1: think the core of that came from just thinking about,

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Speaker 1: you know, going back to to why I start in

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Speaker 1: the first place, which was, how can you figure out

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Speaker 1: how to have you know, as much positive impact as

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Speaker 1: I can on the world, and you know, as much

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Speaker 1: as more than just like a good amount. And so

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Speaker 1: I really started thinking very clear about like, all right,

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Speaker 1: is this the best thing I can be doing. And

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Speaker 1: basically it came away feeling like I have a lot

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Speaker 1: of things I want to try it with my life.

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Speaker 1: I don't know what's what's going to end up being

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Speaker 1: the right thing, but at least one of them might

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Speaker 1: go extremely well and maybe not. There's there's a lot

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Speaker 1: of risk in that, um, but so be it. And

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Speaker 1: so you know, left and sort of like started trying

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Speaker 1: things out. Um. And one of the first things that

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Speaker 1: that that I looked at was like, you know, all right,

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Speaker 1: like it's not the most imaginative thing ever, but have

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Speaker 1: a crypto. And this was late It's when Crypto was

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Speaker 1: really going through that that first gigantic public boom, and

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Speaker 1: you know, this was the time when when I had

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Speaker 1: sort of the mass retail appeal more so than ever

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Speaker 1: before or or after. You know, to this point where

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Speaker 1: you passed two people on the street and you see

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Speaker 1: them talking with each other and you're like, they're probably

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Speaker 1: talking about things. You know, She's is everywhere right, and

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Speaker 1: it wasn't clear why she's completely captured the public's attention

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Speaker 1: and imagination. In seventeen I mean, you know, the North

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Speaker 1: Bricing Creas obviously was like a large part of that,

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Speaker 1: it had a lot of the hallmarks of something that

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Speaker 1: might be, you know, really an efficient system with you know,

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Speaker 1: a big need for liquidity, which is basically gigantic demand

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Speaker 1: all of a sudden growing really rapidly, you know, want

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Speaker 1: the volume, lots of retail users, and not a lot

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Speaker 1: of time to build up institutions, not a lot of

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Speaker 1: time to build up liquidity, not a lot of time

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Speaker 1: to build up systems that worked seamlessly. You know, it

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Speaker 1: sort of felt like the thing that was decently likely

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Speaker 1: to have very large volume and price discrepancies and just

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Speaker 1: like not not really an a fliquidy prior to priding

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Speaker 1: to that. So like, can you give a little comparison

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Speaker 1: between a seventeen what you were seeing in trading internationally

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Speaker 1: t F versus the spreads that you were seeing crypto

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Speaker 1: and then also like, you know how twenty seventeen spreads

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Speaker 1: and crypto compared to spreads and crypto. It's obviously whatever,

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Speaker 1: there's there's you know, always whatever. Different situations have different spreads,

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Speaker 1: blah blah blah. But but okay, fine ball parking it.

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Speaker 1: I think you look at sort of like that, the

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Speaker 1: like lowest margin trades you find in finance that the

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Speaker 1: really purest h f T trades and the most competitive

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Speaker 1: ones what to spread on those. So I've never really

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Speaker 1: done pure h f T, but my sense is that

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Speaker 1: the answer to this is, you know, you're talking about

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Speaker 1: like a tenth of a penny to a hundredth of

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Speaker 1: a penny or maybe even a thousandth of a penny,

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Speaker 1: where a penny is is like about a hundredth of

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Speaker 1: a percent on on the average stock, and so you

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Speaker 1: know you're talking about like something even getting to like

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Speaker 1: the one one million of the price level presents it's

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Speaker 1: really really slim margins, right, And it's the kind of

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Speaker 1: things that like seem like how can you make any

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Speaker 1: real amount of money on that? Well, if you create

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Speaker 1: you know, five percent of all volume of everything in

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Speaker 1: the world every day, that adds up. Then you get

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Speaker 1: to sort of like scale like quant trades with you know,

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Speaker 1: what I was doing sort of being you know, an

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Speaker 1: example where the right unit to talk about it and

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Speaker 1: it's like a basis point and uh, and that that

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Speaker 1: the hundredth of a percent. That's not that everything had

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Speaker 1: exactly that amount of margin, but that was that was

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Speaker 1: sort of the order of magnitude that like the industry

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Speaker 1: talking there, sort of talking and like, are you making

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Speaker 1: like one hundredth of a percent? Are you making half

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Speaker 1: a hundreds of a percentery making like three percent? And

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Speaker 1: you know, and in a hundreds of percent, you can

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Speaker 1: think of it approximately is something like a penny on

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Speaker 1: the average stone. So okay, now that's sort of like

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Speaker 1: roughly the sort of margins that you're thinking about, right,

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Speaker 1: And you know, occasionally you see things a bit bigger.

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Speaker 1: Occasionally you'd be trying to scrape out anything you could,

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Speaker 1: but but whatever that that's sort of like the level

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Speaker 1: at which things at which competition tended to get. And

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Speaker 1: then you get take Crypto, and it just had things

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Speaker 1: I've never seen before or after, things that were just

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Speaker 1: completely bananas, and I'll give you They're all over the place.

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Speaker 1: It was sort of like a whole industry filled with

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Speaker 1: implausibly big spreads. But to give you the biggest that

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Speaker 1: I that I've ever seen, basically and biggest in terms

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Speaker 1: of obviously, you know, you can make ten percent on

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Speaker 1: a trade if you don't mind the total size available

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Speaker 1: being seven dollars ever, right, and that's like sort of

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Speaker 1: not interesting, right, like bias stick of gum and sell

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Speaker 1: if someone kind of wants to stick a gum right now.

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Speaker 1: But the real thing is finding traits are really good

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Speaker 1: and really scalable. And so from that perspective for late

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Speaker 1: early there's this really highly publicized thread called it and

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Speaker 1: it's often called the Kimsey premium um And what was

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Speaker 1: it was the price of bitcoins on creating scanatings. And

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Speaker 1: at its heart there is huge man for crypto all

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Speaker 1: over the world, but it wasn't equal everywhere, and there's

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Speaker 1: even huger demand in a number of countries including Korea,

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Speaker 1: then in in in many others to such a massive

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Speaker 1: net bling of crypto from Koream users. And the koream

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Speaker 1: one is also restricted currency. It means you can't just

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Speaker 1: freely sell it. You can't freely get it out of

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Speaker 1: the country, trade it for USD. You and all these

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Speaker 1: Crean citizens trying to sell their Korean wand for bitcoins,

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Speaker 1: and um, no one who could do much with the

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Speaker 1: cream one. You know, it's not like other people just

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Speaker 1: like selling bitcoins and deal with the current, get stuck

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Speaker 1: with it. That spread got up to like at the peak,

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Speaker 1: which say that pre and big wins started trading at

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Speaker 1: you know, fifteen dollars, while every else in the world

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Speaker 1: it was ten dollars. So that is a completely insane spread.

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Speaker 1: But and this was the big catch. You get back

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Speaker 1: to this restricting currency thing where sure you could turn

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Speaker 1: you know, ten U S dollars into fifteen dollars worth

381
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Speaker 1: of grand wand doing this, but then it's it's stuck.

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Speaker 1: You're not regular clearly allowed to just really turn that

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Speaker 1: grand wand back into US dollars. And so you know,

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Speaker 1: if you really wanted to buy a lot of consumer

385
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Speaker 1: goods in Korea, you could do it, but you can't

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Speaker 1: sort of easily loop that arbitrage through. You get stuck

387
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Speaker 1: at one end. And a lot of people tried to

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Speaker 1: do this trade. Many found a way to do it

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Speaker 1: for small size, very very hard to do it for

390
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Speaker 1: big size, even though there are billions of dollars a

391
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Speaker 1: day volume trading in it, because you couldn't all float

392
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Speaker 1: the grand wand easily um for for non crypto and

393
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Speaker 1: and so does serve a complication to it. And no

394
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Speaker 1: one is known to practice for massive size. You know,

395
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Speaker 1: there are a lot of people who are known to

396
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Speaker 1: have practiced for small size. No one is known to

397
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Speaker 1: have really been able to maximize the hell out of

398
00:21:09,760 --> 00:21:12,959
Speaker 1: that one because of the regulatory concerns. And and this

399
00:21:13,080 --> 00:21:15,480
Speaker 1: was sort of like the interesting thing down the road.

400
00:21:15,800 --> 00:21:19,879
Speaker 1: There are worth these Japanese exchanges, and on the Japanese exchanges,

401
00:21:19,920 --> 00:21:23,000
Speaker 1: like on the Krea exchanges, they're huge inclose, huge neckline.

402
00:21:23,080 --> 00:21:26,080
Speaker 1: Crypto is praying at a really big premium. But the

403
00:21:26,200 --> 00:21:30,240
Speaker 1: Japanese yen, unlike the Korean wand is not a restricted currency.

404
00:21:30,320 --> 00:21:32,840
Speaker 1: It's a free currency. You can you can sell it,

405
00:21:32,880 --> 00:21:34,640
Speaker 1: you can trade it, you can do whatever you want

406
00:21:34,680 --> 00:21:37,440
Speaker 1: with it. Um and that it wasn't trading it quite

407
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Speaker 1: the same premium, but it was trading at a fifteen

408
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Speaker 1: percent premium or so at the peak instead of fifty okay, fifteen,

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Speaker 1: it's not fifty, it's a lot. And there is you know,

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Speaker 1: billion dollars of volume trading in in in big point

411
00:21:50,040 --> 00:21:53,879
Speaker 1: against Japan's yeen each day, and you could actually do

412
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Speaker 1: that trade. You can actually buy bitcoin for ten thou

413
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Speaker 1: send it to Japanese exchange, send it, sell up for eleventh.

414
00:21:59,840 --> 00:22:03,840
Speaker 1: That was in five hundred worth of Japanese yen, and

415
00:22:03,880 --> 00:22:06,400
Speaker 1: then sort of you know, turned that end back into dollars,

416
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Speaker 1: send it back to the States and and cycle anew um.

417
00:22:10,000 --> 00:22:12,200
Speaker 1: It took about a day to do that trade, um,

418
00:22:12,200 --> 00:22:14,399
Speaker 1: given the wire transfers involved, but it was doable, and

419
00:22:14,400 --> 00:22:18,280
Speaker 1: you could scale it, making literally ten percent per weekday,

420
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Speaker 1: which is just absolutely insane, right. That is that that's

421
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Speaker 1: a thousand times what you make on you know, traditional trade.

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Speaker 1: But you're able to do it for like hundreds of

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Speaker 1: millions of dollars of volume per day. There was you

424
00:22:32,240 --> 00:22:34,920
Speaker 1: could actually scale it. And so you can start doing

425
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Speaker 1: that map. And I'm sure some you know you may

426
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Speaker 1: be doing that as I speak in multiplying those numbers,

427
00:22:39,240 --> 00:22:41,000
Speaker 1: and yeah, that's the right map. I don't know what

428
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Speaker 1: to tell you. And son, you can ask like, how

429
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Speaker 1: could that possibly be? Right? How could you possibly see

430
00:22:46,400 --> 00:22:50,359
Speaker 1: a trade that inefficient? Why wouldn't that get competed away? Right?

431
00:22:50,800 --> 00:22:53,000
Speaker 1: And the answer is, well, think about what you actually

432
00:22:53,400 --> 00:22:56,040
Speaker 1: realistically need to do. I told you could do this trade.

433
00:22:56,280 --> 00:22:58,600
Speaker 1: I can tell you how what you need to do

434
00:22:58,680 --> 00:23:00,400
Speaker 1: to do it? What what goes into this? Right? What's

435
00:23:00,400 --> 00:23:03,840
Speaker 1: the recipe? And well, okay, first of all, step one

436
00:23:04,440 --> 00:23:08,199
Speaker 1: is you start out with a US bank account and

437
00:23:08,200 --> 00:23:10,720
Speaker 1: you wire money to point base and then your bank

438
00:23:10,720 --> 00:23:14,760
Speaker 1: acount gets shut down because JP Morgan Chase doesn't want

439
00:23:14,800 --> 00:23:17,720
Speaker 1: to deal with Krypto. Um. Okay, So now you're back

440
00:23:17,760 --> 00:23:20,639
Speaker 1: to the drying board, right. And as you try again

441
00:23:20,720 --> 00:23:23,240
Speaker 1: and somehow you solve that step I don't know how.

442
00:23:23,600 --> 00:23:25,200
Speaker 1: You send it to point Base and then you realize

443
00:23:25,240 --> 00:23:28,000
Speaker 1: you have a thousand dollars a day withdrawal from Point

444
00:23:28,040 --> 00:23:30,480
Speaker 1: Base and you just sent your entire hedge funds capital

445
00:23:30,520 --> 00:23:33,640
Speaker 1: there and it's gonna be thirty decades before you can

446
00:23:33,640 --> 00:23:36,639
Speaker 1: get any money out, and their support ticket to is

447
00:23:36,760 --> 00:23:39,920
Speaker 1: three months long. So okay, So now you solve that problem, right,

448
00:23:40,320 --> 00:23:44,120
Speaker 1: You buy your bitcoins, you send them to a Japanese exchange,

449
00:23:44,119 --> 00:23:46,600
Speaker 1: and you realize that in order to get verified there

450
00:23:46,640 --> 00:23:50,400
Speaker 1: you need to be Japanese, but you're not Japanese. In fact,

451
00:23:50,440 --> 00:23:52,119
Speaker 1: maybe you couldn't be Japanese to get some of the

452
00:23:52,160 --> 00:23:54,520
Speaker 1: other things you needed. So okay, now you have to

453
00:23:54,520 --> 00:23:57,760
Speaker 1: somehow beat Japanese and not Japanese. And you solve that,

454
00:23:57,920 --> 00:24:01,120
Speaker 1: and then you try and send it to the Oh god,

455
00:24:01,200 --> 00:24:03,360
Speaker 1: now you realize you need a Japanese bank account send

456
00:24:03,400 --> 00:24:05,959
Speaker 1: it to and needs to be a domestic bank account

457
00:24:06,000 --> 00:24:08,359
Speaker 1: in Japan. Um. And you need to again be a

458
00:24:08,440 --> 00:24:10,679
Speaker 1: Japanese resident to get one of those. So as you

459
00:24:10,680 --> 00:24:12,520
Speaker 1: get a bank account, and then you realize they're not

460
00:24:12,560 --> 00:24:15,080
Speaker 1: They don't like crypto either, so you need to solve that.

461
00:24:15,760 --> 00:24:17,679
Speaker 1: And then you finally get all these pieces and you

462
00:24:17,680 --> 00:24:19,480
Speaker 1: go to them you're like, yes, I would like to

463
00:24:19,480 --> 00:24:22,200
Speaker 1: do a wire transfer please, Yes, it would be you whever,

464
00:24:22,440 --> 00:24:26,320
Speaker 1: like fifteen million US dollars to this random bank account

465
00:24:26,680 --> 00:24:30,400
Speaker 1: in America from this random bank account in Japan, different owners,

466
00:24:30,640 --> 00:24:34,040
Speaker 1: same wire transferated yesterday. Yes, that's correct. Yes, it's always

467
00:24:34,040 --> 00:24:36,960
Speaker 1: in the same direction. I acknowledge that. Yes, it's international.

468
00:24:37,680 --> 00:24:39,960
Speaker 1: And there's sort of like this is literally the sketches

469
00:24:40,040 --> 00:24:42,359
Speaker 1: that you can possibly do, like like think about like

470
00:24:42,640 --> 00:24:45,359
Speaker 1: every day this random guy walks in sends it to

471
00:24:45,400 --> 00:24:49,320
Speaker 1: an seemingly unrelated bank account across the world, always in

472
00:24:49,320 --> 00:24:52,840
Speaker 1: the same direction, always changing currencies, right, and sort of

473
00:24:52,880 --> 00:24:54,800
Speaker 1: like that no business has that right there, like it's

474
00:24:54,880 --> 00:24:59,320
Speaker 1: obviously just money laundering, and like no, it's arbitrage. You're

475
00:24:59,359 --> 00:25:01,359
Speaker 1: talking like it's color at Japanese bank, you know, just

476
00:25:01,359 --> 00:25:04,720
Speaker 1: be Japanese, right, So okay, Son, you're trying to explain,

477
00:25:04,760 --> 00:25:06,439
Speaker 1: like no, you buy it this point, you have to

478
00:25:06,440 --> 00:25:10,119
Speaker 1: transfer it on the block chain, and they're like, sorry

479
00:25:10,160 --> 00:25:14,240
Speaker 1: you you said you trade stocks but in Japanese, so okay,

480
00:25:14,280 --> 00:25:16,919
Speaker 1: so whatever. So you solve all these problems, right, and

481
00:25:16,960 --> 00:25:18,840
Speaker 1: then you realize that you have two thousand dollars to

482
00:25:18,840 --> 00:25:21,320
Speaker 1: your name, and so you're gonna be making two hundred

483
00:25:21,320 --> 00:25:23,440
Speaker 1: dollars a day and that's pretty cool, but it wasn't

484
00:25:23,440 --> 00:25:25,800
Speaker 1: the fortune you thought. And now you're trying to raise

485
00:25:26,119 --> 00:25:29,080
Speaker 1: two hundred million dollars of capital, and you know this

486
00:25:29,119 --> 00:25:31,119
Speaker 1: trade won't last out long. So you've got about a

487
00:25:31,200 --> 00:25:34,120
Speaker 1: week to build a two million dollar hedge fund that's

488
00:25:34,160 --> 00:25:38,600
Speaker 1: doing random international cryptocurrency trades in twenty seventeen. And everyone's like, yes,

489
00:25:38,680 --> 00:25:41,640
Speaker 1: obviously will not find your hedge fund. That sounds incredibly

490
00:25:41,720 --> 00:25:44,560
Speaker 1: risky um, And you're like, no, it's arbitrage, don't worry.

491
00:25:44,880 --> 00:25:48,680
Speaker 1: And they're like, sure, I'm hot ten percent per day returns. Yeah,

492
00:25:48,680 --> 00:25:51,639
Speaker 1: I've heard that one before, but okay, fine. Somehow you

493
00:25:51,720 --> 00:25:55,880
Speaker 1: then get your million dollars in capital, and now now

494
00:25:55,920 --> 00:25:58,040
Speaker 1: what like, now do you make twenty million dollars a day?

495
00:25:58,320 --> 00:26:18,080
Speaker 1: The answer is yes, you do. So I mean you

496
00:26:18,200 --> 00:26:22,200
Speaker 1: just laid out the very fragmented nature of the market

497
00:26:22,400 --> 00:26:26,000
Speaker 1: with the different platforms and also with its interaction with

498
00:26:26,080 --> 00:26:28,640
Speaker 1: the traditional banking system. You laid that out really well,

499
00:26:28,680 --> 00:26:32,359
Speaker 1: but I I have a slightly weird question, which is

500
00:26:32,400 --> 00:26:37,280
Speaker 1: about like the nature of crypto trading itself and how

501
00:26:37,560 --> 00:26:41,360
Speaker 1: it maybe differs to stocks or bonds or more traditional

502
00:26:41,400 --> 00:26:46,400
Speaker 1: financial assets. So, I mean, it seems like when bitcoin

503
00:26:46,520 --> 00:26:50,080
Speaker 1: really takes off, it's usually because the price is going

504
00:26:50,200 --> 00:26:52,960
Speaker 1: up quite a lot, and people are talking a lot

505
00:26:53,000 --> 00:26:56,080
Speaker 1: about holding and waiting for it to go up even

506
00:26:56,119 --> 00:26:59,840
Speaker 1: more So I'm curious, like, how do you reconcile the

507
00:27:00,320 --> 00:27:06,080
Speaker 1: hoodal or huddle concept with having a liquid two way market,

508
00:27:06,640 --> 00:27:10,280
Speaker 1: Like how do you get that activity going? It's really

509
00:27:10,320 --> 00:27:13,920
Speaker 1: interesting and and there's a lot of really weird dynamic

510
00:27:13,960 --> 00:27:16,399
Speaker 1: and cryptom You've hit on one of them, which is

511
00:27:16,440 --> 00:27:19,040
Speaker 1: how incredibly I mean, there are lots of ways to

512
00:27:19,040 --> 00:27:21,240
Speaker 1: phrase it, but one of them is, like you can

513
00:27:21,240 --> 00:27:24,639
Speaker 1: phrase it as how incredibly bullish the crypto ecosystem is.

514
00:27:24,640 --> 00:27:27,879
Speaker 1: On the crypto ecosystem, everyone's bullished on the thing they

515
00:27:27,880 --> 00:27:30,119
Speaker 1: believe in, the think they're spending their top time on. Generally,

516
00:27:30,160 --> 00:27:32,679
Speaker 1: but not to this extent. This is sort of like

517
00:27:32,800 --> 00:27:35,520
Speaker 1: much more so than you find with with stuff. And

518
00:27:35,560 --> 00:27:39,240
Speaker 1: then also like how about south side liquidity? Right? If

519
00:27:39,280 --> 00:27:41,600
Speaker 1: people want to buy bitcoins and no one who holds

520
00:27:41,640 --> 00:27:44,399
Speaker 1: bitcoins is willing to sell their bitcoins, who are you

521
00:27:44,400 --> 00:27:46,520
Speaker 1: buying it from? And and you know, both are sort

522
00:27:46,560 --> 00:27:48,760
Speaker 1: of like a how do you ever find people buy

523
00:27:48,800 --> 00:27:50,959
Speaker 1: it from? But also like a day to day where

524
00:27:50,960 --> 00:27:54,640
Speaker 1: where the offers coming from? Whereas where the market makers?

525
00:27:55,040 --> 00:27:56,720
Speaker 1: If all the bitcoins a ruined by people who are

526
00:27:56,800 --> 00:27:59,679
Speaker 1: just toddling and not you know, then I don't know

527
00:27:59,760 --> 00:28:01,800
Speaker 1: you you actually if you trace that down and start

528
00:28:01,840 --> 00:28:06,639
Speaker 1: to uncover some interesting things about crypto and the ecosystem.

529
00:28:06,680 --> 00:28:10,480
Speaker 1: So one thing is that everyone is bullish inside of

530
00:28:10,480 --> 00:28:14,320
Speaker 1: crypto on crypto and actually massive impact on the ecosystem

531
00:28:14,359 --> 00:28:17,200
Speaker 1: because any way that people can find to get longer,

532
00:28:17,320 --> 00:28:20,240
Speaker 1: they will. And so you see these weird things where

533
00:28:20,240 --> 00:28:23,080
Speaker 1: features are always trading it not always, but on average

534
00:28:23,080 --> 00:28:26,320
Speaker 1: training at big premiums in crypto where people are willing

535
00:28:26,320 --> 00:28:31,919
Speaker 1: to pay a year to borrow dollars in crypto, um

536
00:28:32,040 --> 00:28:34,840
Speaker 1: generally chooses to buy more crypto, and anything else that

537
00:28:34,920 --> 00:28:39,040
Speaker 1: serves a synthetic interest rate or forward type product reflecting

538
00:28:39,240 --> 00:28:42,800
Speaker 1: will generally reflect this, you know, forward looking premium. So

539
00:28:42,840 --> 00:28:45,120
Speaker 1: it's that's sort of one thing, and that plays into

540
00:28:45,120 --> 00:28:48,360
Speaker 1: these concepts of yield quite strongly. But another thing is,

541
00:28:48,400 --> 00:28:52,280
Speaker 1: as you said, like a lot of the real supply

542
00:28:52,480 --> 00:28:57,720
Speaker 1: here is not circulating. It's not really circulating, right, It's

543
00:28:57,760 --> 00:28:59,400
Speaker 1: it's it's sort of some guy who's just not going

544
00:28:59,480 --> 00:29:04,520
Speaker 1: to sell. And so you look at crypto and the

545
00:29:04,520 --> 00:29:07,280
Speaker 1: the trading volume divide by market cap is actually quite

546
00:29:07,320 --> 00:29:12,280
Speaker 1: high compared to other assets, and the market cap is

547
00:29:12,400 --> 00:29:16,719
Speaker 1: also even lower than it looks like. It's even more

548
00:29:16,760 --> 00:29:19,720
Speaker 1: extreme than that, because a pretty large number of holders

549
00:29:19,720 --> 00:29:22,640
Speaker 1: of crypto are just not trading it. They're not selling it.

550
00:29:22,680 --> 00:29:25,240
Speaker 1: They're they're going to keep it no matter why. And

551
00:29:25,320 --> 00:29:28,360
Speaker 1: so you actually have this really large amount of volume

552
00:29:28,400 --> 00:29:33,400
Speaker 1: traded relative to the effective liquidity in the products on

553
00:29:33,560 --> 00:29:37,960
Speaker 1: both by side and sell side, and you get these

554
00:29:38,040 --> 00:29:41,440
Speaker 1: really giant market moves. Firstly, as as a product of that,

555
00:29:42,360 --> 00:29:47,000
Speaker 1: there's a video of you online that's really interesting where

556
00:29:47,720 --> 00:29:51,120
Speaker 1: it shows you acquiring a bunch of bitcoin that someone

557
00:29:51,200 --> 00:29:55,400
Speaker 1: had dumped on the exchange binance, and you like walk

558
00:29:55,480 --> 00:29:57,640
Speaker 1: through this trade where like, I guess someone made a

559
00:29:57,760 --> 00:30:00,600
Speaker 1: terrible trade or they were not very sophisticated did, and

560
00:30:00,600 --> 00:30:03,320
Speaker 1: they sold a bunch of bitcoin on that exchange and

561
00:30:03,360 --> 00:30:05,440
Speaker 1: it depressed the price, and you recognize this. I thought

562
00:30:05,480 --> 00:30:07,840
Speaker 1: it was an interesting video. One question I have is,

563
00:30:07,880 --> 00:30:11,840
Speaker 1: so a how much um more efficient does the market

564
00:30:11,960 --> 00:30:14,160
Speaker 1: these days than it was when you first started trading?

565
00:30:14,400 --> 00:30:17,320
Speaker 1: But be there's a part where you talk about um.

566
00:30:17,520 --> 00:30:20,880
Speaker 1: Part of the slowness that you had in scooping up

567
00:30:20,960 --> 00:30:23,440
Speaker 1: some of those bitcoins that were just dumped was you

568
00:30:23,440 --> 00:30:28,200
Speaker 1: were waiting for your tether to arrive at finance and uh,

569
00:30:28,280 --> 00:30:30,840
Speaker 1: that took a little while because you didn't have cash

570
00:30:30,920 --> 00:30:34,360
Speaker 1: on hand at that exchange. How much also, you know,

571
00:30:34,360 --> 00:30:36,520
Speaker 1: talk about that trade, but also like how much of

572
00:30:36,560 --> 00:30:39,640
Speaker 1: the premium that you can collect has to do with

573
00:30:40,000 --> 00:30:42,800
Speaker 1: to put it better better ways, like sort of like

574
00:30:43,040 --> 00:30:45,360
Speaker 1: counterparty risk. And I'm not I'm not one of you know,

575
00:30:45,760 --> 00:30:48,320
Speaker 1: sending aside all the sort of conspiracy theories about tether.

576
00:30:48,840 --> 00:30:50,959
Speaker 1: You're dealing with like a lot of sort of like

577
00:30:51,320 --> 00:30:56,280
Speaker 1: either unregulated or underregulated entities that are not at all

578
00:30:56,400 --> 00:30:58,640
Speaker 1: like say the exchanges that a Korean et f for

579
00:30:58,680 --> 00:31:01,640
Speaker 1: a Korean stock is. So you have to rely on

580
00:31:01,840 --> 00:31:05,080
Speaker 1: these entities in order to complete the trade. Talk to

581
00:31:05,160 --> 00:31:09,400
Speaker 1: us about those calculations and how they play into both

582
00:31:09,400 --> 00:31:13,640
Speaker 1: the risks but also the profit opportunities. Absolutely, and I

583
00:31:13,680 --> 00:31:17,840
Speaker 1: think what I would say is basically um that that

584
00:31:17,920 --> 00:31:19,960
Speaker 1: I think those things do play huge, huge roles in

585
00:31:20,000 --> 00:31:23,040
Speaker 1: the ecosystem for the reasons you outline, which are you

586
00:31:23,080 --> 00:31:26,200
Speaker 1: see these big premiums sometimes open up, and the reason

587
00:31:26,400 --> 00:31:28,480
Speaker 1: is like, you know, how can there be like a

588
00:31:28,520 --> 00:31:33,360
Speaker 1: three arbitrage for a hundred million dollars of size all

589
00:31:33,400 --> 00:31:35,520
Speaker 1: of a sudden pop up? Right that seems like a lot.

590
00:31:36,560 --> 00:31:38,240
Speaker 1: And part of the reason, part of the part of

591
00:31:38,280 --> 00:31:41,400
Speaker 1: the answer there is roughly, you know, in order to

592
00:31:41,440 --> 00:31:44,120
Speaker 1: clothes that you need to have a hundred million dollars

593
00:31:44,120 --> 00:31:46,760
Speaker 1: of tether sitting on bindance. How many people are doing

594
00:31:46,800 --> 00:31:50,120
Speaker 1: that right now? You know? It's like and and you

595
00:31:50,600 --> 00:31:55,040
Speaker 1: there's no cross marketing between exchanges, there's no central clearing

596
00:31:55,120 --> 00:31:58,600
Speaker 1: firms or brokers, and so you can it's not just

597
00:31:58,760 --> 00:32:00,959
Speaker 1: you don't even just need a hundred million dollars in crypto,

598
00:32:01,200 --> 00:32:04,120
Speaker 1: a hundred million dollars in every single exchange if you're

599
00:32:04,160 --> 00:32:05,760
Speaker 1: gonna wait for you know, any one of them to

600
00:32:05,800 --> 00:32:09,960
Speaker 1: go crazy. And so it's really capital intensive. And also

601
00:32:10,120 --> 00:32:13,880
Speaker 1: you you have to worry about counterparty risk. And the thing,

602
00:32:13,960 --> 00:32:17,240
Speaker 1: big thing I'd say about counterparty risk is it's not

603
00:32:17,400 --> 00:32:20,880
Speaker 1: so much that, like with all good trades, they're actually

604
00:32:20,920 --> 00:32:23,800
Speaker 1: not nearly as good to say, look because secretly you're

605
00:32:23,840 --> 00:32:26,440
Speaker 1: being paid three percent in order to assume two and

606
00:32:26,440 --> 00:32:29,840
Speaker 1: a half percent worth of counterparty risk. Rather, what's going

607
00:32:29,880 --> 00:32:33,040
Speaker 1: on is, if you take a really outside point of view,

608
00:32:33,640 --> 00:32:36,280
Speaker 1: right at a point of a sort of relatively uninformed

609
00:32:36,320 --> 00:32:39,080
Speaker 1: one of this space, you're sort of like, look, there's

610
00:32:39,080 --> 00:32:41,760
Speaker 1: counterparty risk all over the place. I don't know what

611
00:32:41,880 --> 00:32:44,800
Speaker 1: sketchy and what's not. Like you sort of like using

612
00:32:44,800 --> 00:32:47,800
Speaker 1: your instincts, but all of these trades have these weird

613
00:32:47,920 --> 00:32:50,320
Speaker 1: forms of counterparty risk, and you have just sort of, like,

614
00:32:51,360 --> 00:32:54,400
Speaker 1: you know, from a low information perspective, doing the math

615
00:32:54,440 --> 00:32:56,440
Speaker 1: and decaying that it is all counterparty risks, but there's

616
00:32:56,440 --> 00:33:00,480
Speaker 1: no edge after that. From a high information perspective, if

617
00:33:00,520 --> 00:33:03,720
Speaker 1: you really know this space deeply, then it's a bit

618
00:33:03,760 --> 00:33:07,040
Speaker 1: different because then you can sort of feel like, Okay,

619
00:33:07,040 --> 00:33:09,080
Speaker 1: but I actually know that in this particular case, the

620
00:33:09,120 --> 00:33:11,600
Speaker 1: county party risk is very close to the room, and

621
00:33:11,640 --> 00:33:13,520
Speaker 1: the edge is still quite high, and other people aren't

622
00:33:13,520 --> 00:33:16,160
Speaker 1: doing it because they can't distinguish this from the cases

623
00:33:16,160 --> 00:33:19,280
Speaker 1: where the counterparty risk is real. And so I think

624
00:33:19,360 --> 00:33:22,520
Speaker 1: really the answer to that is the specter of counterparty

625
00:33:22,600 --> 00:33:26,600
Speaker 1: risk holds a lot of liquidity out of the ecosystem um,

626
00:33:26,640 --> 00:33:28,280
Speaker 1: and then there's a lot of money to be made

627
00:33:28,480 --> 00:33:30,560
Speaker 1: to be made if you can really figure out and

628
00:33:30,600 --> 00:33:34,480
Speaker 1: pinpoint when there isn't isn't a ton of edge and

629
00:33:34,480 --> 00:33:38,440
Speaker 1: whether it isn't isn't a ton of actual counterparty risk? Um.

630
00:33:38,480 --> 00:33:41,560
Speaker 1: I want to go back to that liquidity point, UM,

631
00:33:41,720 --> 00:33:44,640
Speaker 1: because I think you yourself have been described as one

632
00:33:44,680 --> 00:33:47,720
Speaker 1: of the biggest whales in crypto. I think someone called

633
00:33:47,720 --> 00:33:51,720
Speaker 1: you like the moby Dick of crypto whales. And I

634
00:33:51,760 --> 00:33:54,520
Speaker 1: saw one estimate that you you can move like ten

635
00:33:55,240 --> 00:33:57,960
Speaker 1: of the market when you make a trade. Um. How

636
00:33:58,000 --> 00:34:00,200
Speaker 1: does well first of all, how big do you think

637
00:34:00,240 --> 00:34:04,520
Speaker 1: you are? Um? And how that happens? How does that

638
00:34:04,760 --> 00:34:08,640
Speaker 1: liquidity risk affect your trading strategy? Like how do you

639
00:34:08,680 --> 00:34:11,799
Speaker 1: offset that or how do you manage around it? Yeah? So,

640
00:34:12,080 --> 00:34:13,960
Speaker 1: I you know, the first thing that I'll say, I mean,

641
00:34:14,000 --> 00:34:16,279
Speaker 1: you know first things that I you know, I was

642
00:34:16,320 --> 00:34:17,839
Speaker 1: I was a full time trader a few years ago

643
00:34:17,880 --> 00:34:21,400
Speaker 1: in crypto, building out Alameda. You know, I'm now spending

644
00:34:21,520 --> 00:34:23,920
Speaker 1: you know, my time focusing on building out fts the

645
00:34:24,120 --> 00:34:27,160
Speaker 1: crypto exchange I founded, um so I'm I'm you know,

646
00:34:27,360 --> 00:34:31,120
Speaker 1: have been um a lot less involved in that, but

647
00:34:31,120 --> 00:34:33,960
Speaker 1: but recently. But the other thing is that you know,

648
00:34:34,000 --> 00:34:37,040
Speaker 1: Alaminus core core model is acting as sort of a

649
00:34:37,080 --> 00:34:40,120
Speaker 1: liquidy fighter, an arbitrage firm. And what that means is

650
00:34:40,120 --> 00:34:43,000
Speaker 1: that like if if you trade large volume, the core

651
00:34:43,080 --> 00:34:45,800
Speaker 1: trade and this didn't say every trade, but the average

652
00:34:45,840 --> 00:34:50,160
Speaker 1: core trade is sort of just adulta neutral hedged position.

653
00:34:50,760 --> 00:34:52,840
Speaker 1: You know, it's it's whatever it is, you know, selling

654
00:34:52,840 --> 00:34:55,840
Speaker 1: a future against buying spot or something like that, something

655
00:34:55,880 --> 00:35:00,040
Speaker 1: where you're keeping your book hedged in neutral uh and

656
00:35:00,040 --> 00:35:01,759
Speaker 1: and so so that's sort of one of the big

657
00:35:01,800 --> 00:35:07,239
Speaker 1: things there, which is like, I you know, if the

658
00:35:07,360 --> 00:35:08,879
Speaker 1: risk is in sometimes a lot lower if you don't

659
00:35:08,920 --> 00:35:12,640
Speaker 1: have a net position on right, But that's not trivially true,

660
00:35:13,000 --> 00:35:15,840
Speaker 1: and in particular here, you know, the thing that I

661
00:35:15,840 --> 00:35:18,800
Speaker 1: would add to that is roughly like, you know, well,

662
00:35:19,480 --> 00:35:22,600
Speaker 1: the nature of crypto that's sort of like cross exchange

663
00:35:22,680 --> 00:35:25,720
Speaker 1: and not the exchanges don't talk to each other, adds

664
00:35:25,760 --> 00:35:29,319
Speaker 1: this interesting new twist of risk to it, which is

665
00:35:29,640 --> 00:35:33,160
Speaker 1: you have to manage your position on each platform, on

666
00:35:33,239 --> 00:35:36,759
Speaker 1: each wallet, and you see the global view, but no

667
00:35:36,800 --> 00:35:40,200
Speaker 1: one else does of your book, right, and so you

668
00:35:40,200 --> 00:35:44,360
Speaker 1: have to deal with exchange specific liquidity risk um and

669
00:35:44,400 --> 00:35:48,400
Speaker 1: you have to worry about cascading liquidations on a particular product,

670
00:35:48,440 --> 00:35:51,600
Speaker 1: blowing that one out and not anything else. And you

671
00:35:51,600 --> 00:35:53,840
Speaker 1: have to make sure that your book and your cackle

672
00:35:53,880 --> 00:35:56,839
Speaker 1: in your positions can withstand those moves. And it's one

673
00:35:56,840 --> 00:35:58,080
Speaker 1: of these, like you know, you have to make sure

674
00:35:58,120 --> 00:35:59,960
Speaker 1: that that you know you can hold your position for

675
00:36:00,200 --> 00:36:01,960
Speaker 1: you know, longer than the market can stay crazy, so

676
00:36:02,040 --> 00:36:05,480
Speaker 1: to speak. If you're doing an arbitrage and eventually right

677
00:36:05,520 --> 00:36:07,200
Speaker 1: you can just lock in your gains and and there's

678
00:36:07,239 --> 00:36:09,560
Speaker 1: nothing anyone can say about that as long as you

679
00:36:09,560 --> 00:36:11,400
Speaker 1: can make it to that point to expery or whatever.

680
00:36:11,800 --> 00:36:14,680
Speaker 1: But you can sometimes seem gigantic dislocations and sort of

681
00:36:14,719 --> 00:36:17,839
Speaker 1: the biggest one the industry scene was on you know,

682
00:36:17,960 --> 00:36:21,680
Speaker 1: the probably the bloodiest day in any market, maybe in

683
00:36:21,719 --> 00:36:24,640
Speaker 1: the history of anything, which is market twelfth of last year,

684
00:36:24,920 --> 00:36:28,800
Speaker 1: when all global markets burned free fall, you know, COVID

685
00:36:28,920 --> 00:36:34,280
Speaker 1: was causing and just panic and equities were down or whatever.

686
00:36:34,600 --> 00:36:37,880
Speaker 1: Crypto was down like SI that day. It was a

687
00:36:37,880 --> 00:36:40,440
Speaker 1: massive move. You know, you've gone from like nine thousand

688
00:36:40,520 --> 00:36:43,560
Speaker 1: to four thousand. You know. One way to think about

689
00:36:43,600 --> 00:36:46,360
Speaker 1: what happened was that it went from nine thousand to

690
00:36:46,520 --> 00:36:52,440
Speaker 1: sixty or something like that. And then it triggered two

691
00:36:52,520 --> 00:36:56,080
Speaker 1: billion dollars of liquidations of people who have leveraged long

692
00:36:56,120 --> 00:36:59,480
Speaker 1: positions in the futures products that were now close to

693
00:36:59,520 --> 00:37:03,439
Speaker 1: going under water. And so the exchanges began closing down

694
00:37:03,480 --> 00:37:06,359
Speaker 1: the customers because they put on margin positions they didn't

695
00:37:06,400 --> 00:37:08,800
Speaker 1: have the margin for it. And as they started closing

696
00:37:08,800 --> 00:37:12,560
Speaker 1: these positions down dead to sell off the leverage longs

697
00:37:12,640 --> 00:37:16,399
Speaker 1: and that caused more selling pressure that drove markets down more,

698
00:37:17,040 --> 00:37:20,719
Speaker 1: which meant even more people had to be liquidated. There's

699
00:37:20,760 --> 00:37:25,960
Speaker 1: this danger that can happen. She's really weird and wacky,

700
00:37:26,040 --> 00:37:27,960
Speaker 1: and it's when this ratio gets above one, which is

701
00:37:28,000 --> 00:37:31,839
Speaker 1: like the impact of liquidations. You sort of look at

702
00:37:31,840 --> 00:37:33,800
Speaker 1: like how much you move price when you when you

703
00:37:33,800 --> 00:37:36,080
Speaker 1: you have a logation of a certain size, and how

704
00:37:36,160 --> 00:37:39,120
Speaker 1: much how large of liquidations at triggers as it jus

705
00:37:39,400 --> 00:37:42,040
Speaker 1: larger size than it took to get there in the

706
00:37:42,080 --> 00:37:46,440
Speaker 1: first place, you have this exponentially diverging growing set of

707
00:37:46,480 --> 00:37:50,279
Speaker 1: liquidations and crashing and rather than like things calming down,

708
00:37:50,680 --> 00:37:52,920
Speaker 1: things seroically just crashed his rown, you know, in an

709
00:37:52,920 --> 00:37:56,440
Speaker 1: exponentially increasing way. And obviously it's not exactly what happens,

710
00:37:56,480 --> 00:37:59,440
Speaker 1: but but it is sort of what happened. And you

711
00:37:59,480 --> 00:38:04,400
Speaker 1: saw them they playing crash from some exchanges as just

712
00:38:04,560 --> 00:38:08,320
Speaker 1: cascading liquidations did their thing. So I'm really glad you

713
00:38:08,640 --> 00:38:11,399
Speaker 1: brought up this day last March because this leads into

714
00:38:11,400 --> 00:38:14,200
Speaker 1: a sort of bigger question I've been having. Um. So obviously,

715
00:38:14,280 --> 00:38:17,880
Speaker 1: like that was just this insane selling across all markets everywhere,

716
00:38:17,960 --> 00:38:21,759
Speaker 1: and everyone wanted liquidity, everyone wanted wanted cash, and it

717
00:38:21,920 --> 00:38:25,920
Speaker 1: clearly sort of on that day, it was very clear

718
00:38:25,960 --> 00:38:29,640
Speaker 1: how the global demand for liquidity was intersected with both

719
00:38:29,840 --> 00:38:35,040
Speaker 1: crypto and traditional traditional financial instruments, and you know, this

720
00:38:35,080 --> 00:38:36,759
Speaker 1: was sort of seems like it's what's kind of a

721
00:38:36,760 --> 00:38:39,479
Speaker 1: new phenomenon, because I have to imagine that like back

722
00:38:39,480 --> 00:38:42,359
Speaker 1: in the old like ten years ago, during the Mountagox days,

723
00:38:42,400 --> 00:38:44,160
Speaker 1: when it was just a handful of sort of like

724
00:38:44,520 --> 00:38:49,320
Speaker 1: weirdos who were trading bitcoin, They're like it was probably

725
00:38:49,360 --> 00:38:52,200
Speaker 1: like pretty disconnected from anything that was happening in the

726
00:38:52,280 --> 00:38:55,399
Speaker 1: quote real world, so to speak. So it's clear that

727
00:38:55,480 --> 00:38:57,560
Speaker 1: like and you know on on f t X and

728
00:38:57,600 --> 00:38:58,920
Speaker 1: I want to get into this in a minute, but

729
00:38:58,960 --> 00:39:02,640
Speaker 1: you also have actually your trade tokenized forms of equity.

730
00:39:02,960 --> 00:39:06,160
Speaker 1: So I'm curious about, like how much these linkages are

731
00:39:06,200 --> 00:39:10,319
Speaker 1: emerging between what's happening in say the NASDAC and what's

732
00:39:10,360 --> 00:39:13,440
Speaker 1: happening in bitcoin. It feels like it's happening. Um you

733
00:39:13,480 --> 00:39:15,680
Speaker 1: can see on days lately, for example, there have been

734
00:39:15,680 --> 00:39:20,080
Speaker 1: some really uh ugly days in the NASDAC textell off,

735
00:39:20,080 --> 00:39:22,520
Speaker 1: and it kind of looks like on those days, even

736
00:39:22,560 --> 00:39:25,160
Speaker 1: like bitcoin gets caught up in the down draft. What

737
00:39:25,360 --> 00:39:29,160
Speaker 1: is your perspective and view right now on a sort

738
00:39:29,200 --> 00:39:33,239
Speaker 1: of these like cross crypto asset linkage is and the

739
00:39:33,280 --> 00:39:36,759
Speaker 1: degree to which there is this sort of emerging correlation

740
00:39:36,800 --> 00:39:42,000
Speaker 1: and feedback between the two that's probably didn't used to exist. Yeah, totally.

741
00:39:42,040 --> 00:39:46,240
Speaker 1: And you if you go Rewindah, you had big arguments

742
00:39:46,239 --> 00:39:49,239
Speaker 1: about whether stocks in corrictly were positively or negatively for it,

743
00:39:50,080 --> 00:39:51,920
Speaker 1: and a lot of people like you know bitcoin is

744
00:39:52,200 --> 00:39:55,040
Speaker 1: is that the flight to safety asset, like when stocks

745
00:39:55,120 --> 00:39:58,239
Speaker 1: crash and people don't trust the financial system anymore, they're

746
00:39:58,280 --> 00:40:00,400
Speaker 1: all going to turn to bitcoin with like a thing

747
00:40:00,440 --> 00:40:02,680
Speaker 1: you heard a lot, and then other people would say, no,

748
00:40:02,920 --> 00:40:05,040
Speaker 1: it's sort of like a risky asset. It's gonna be

749
00:40:05,160 --> 00:40:08,040
Speaker 1: risk on asset and positively correlated. And you look at

750
00:40:08,120 --> 00:40:10,680
Speaker 1: historical data and you know, you could maybe try and

751
00:40:10,760 --> 00:40:12,920
Speaker 1: draw conclusion from it, but but really there's sort of

752
00:40:12,960 --> 00:40:15,279
Speaker 1: like summary was that I don't know, it wasn't totally clear.

753
00:40:15,600 --> 00:40:18,960
Speaker 1: You know, there certainly wasn't extremely strong or consistent positive

754
00:40:19,040 --> 00:40:21,840
Speaker 1: or negative correlation. It just like it wasn't clear what

755
00:40:22,000 --> 00:40:24,400
Speaker 1: what the answer was going to be. So it's sort

756
00:40:24,440 --> 00:40:27,000
Speaker 1: of like, really the answer historically and then after March

757
00:40:27,040 --> 00:40:28,880
Speaker 1: Paul Feforn is like, Okay, no, we know the answer now.

758
00:40:28,960 --> 00:40:32,640
Speaker 1: It's positive. That's fine, positive relation. And that's what happened

759
00:40:32,640 --> 00:40:36,799
Speaker 1: there was you know, basically when when when people are

760
00:40:36,800 --> 00:40:39,239
Speaker 1: training crypto, there's a question of what do they see

761
00:40:39,280 --> 00:40:41,880
Speaker 1: it as? What is the real trade that that most

762
00:40:41,880 --> 00:40:47,120
Speaker 1: people are doing when they're buying bitcoin, And at least recently,

763
00:40:47,160 --> 00:40:51,160
Speaker 1: the answer hasn't been that they're betting against etonomy exactly,

764
00:40:51,280 --> 00:40:55,080
Speaker 1: or or companies or things like that. It's first of all,

765
00:40:55,200 --> 00:40:59,440
Speaker 1: it's been much more intertwined with currency and with worries

766
00:40:59,520 --> 00:41:04,040
Speaker 1: about inflation and money printing and and and so so,

767
00:41:04,520 --> 00:41:06,200
Speaker 1: and in fact, like you can see some of the

768
00:41:06,239 --> 00:41:09,600
Speaker 1: positive correlation coming from that, people feeling like, well, you know,

769
00:41:10,120 --> 00:41:14,000
Speaker 1: if it's sort of like you know, the currency hyperinflates,

770
00:41:14,200 --> 00:41:16,360
Speaker 1: then stops will go up in crypto will go up,

771
00:41:16,360 --> 00:41:17,880
Speaker 1: and gold will go up, and everything will go up

772
00:41:18,680 --> 00:41:22,560
Speaker 1: measured into hyperinflating crypto ther currency. So that's a part

773
00:41:22,560 --> 00:41:24,799
Speaker 1: of what's going on here is just sort of like

774
00:41:24,880 --> 00:41:29,160
Speaker 1: expectations of future inflation basically, but there are other things too,

775
00:41:29,600 --> 00:41:33,440
Speaker 1: And you know, it's clear that at least right now,

776
00:41:33,680 --> 00:41:39,000
Speaker 1: people see crypto as something with huge upside potential and

777
00:41:39,080 --> 00:41:43,319
Speaker 1: huge volatility, and that's the sort of thing that does

778
00:41:43,400 --> 00:41:47,720
Speaker 1: well in risk on markets, not risk off markets, because

779
00:41:48,200 --> 00:41:49,480
Speaker 1: you know, it's sort of like when you've got a

780
00:41:49,480 --> 00:41:51,040
Speaker 1: lot of money to play around with and you're looking

781
00:41:51,080 --> 00:41:53,760
Speaker 1: for something to do with it, something with huge upside

782
00:41:53,800 --> 00:41:56,399
Speaker 1: sounds really appealing, and you're willing to take the risk

783
00:41:56,440 --> 00:41:59,440
Speaker 1: that it goes to zero. But you know, when everything's crashing,

784
00:41:59,520 --> 00:42:01,440
Speaker 1: you flaw stall your money. You know, a lot of

785
00:42:01,440 --> 00:42:04,000
Speaker 1: people are just sort of gonna put in what they're

786
00:42:04,440 --> 00:42:06,840
Speaker 1: they just think is gonna be safe. So so I

787
00:42:06,840 --> 00:42:09,240
Speaker 1: think that's sort of like why my best guess about

788
00:42:09,239 --> 00:42:11,839
Speaker 1: why it seems like that correlation has become just really

789
00:42:11,960 --> 00:42:15,080
Speaker 1: robustly positive. There's one other thing I would say too, though.

790
00:42:15,840 --> 00:42:18,080
Speaker 1: In the last year, equities have started to look a

791
00:42:18,120 --> 00:42:21,399
Speaker 1: little bit more like crypto and I mean you look

792
00:42:21,440 --> 00:42:24,960
Speaker 1: at game Stop, right, and I mean I think for

793
00:42:25,000 --> 00:42:27,919
Speaker 1: a lot of people like this is nuts. I've never

794
00:42:27,960 --> 00:42:31,279
Speaker 1: seen something like this before. Um, there's like these short squeezes,

795
00:42:31,840 --> 00:42:34,799
Speaker 1: like people are in liquidated and like the markets can't

796
00:42:34,840 --> 00:42:39,120
Speaker 1: handle it. Liquidity has fallen apart. And what's driving it

797
00:42:39,160 --> 00:42:42,799
Speaker 1: is not rampant disagreement on the business model. It's like

798
00:42:43,200 --> 00:42:46,520
Speaker 1: people ship posting on social media and then getting together

799
00:42:46,840 --> 00:42:50,280
Speaker 1: and then Elon Musk sort of like acting as a

800
00:42:50,440 --> 00:42:53,400
Speaker 1: standing standard bearer for it. And you're sort of like,

801
00:42:53,440 --> 00:42:55,360
Speaker 1: this is this has like nothing to do with like

802
00:42:55,400 --> 00:43:00,520
Speaker 1: analysts publishing reports on on Apple's future dividend stream. You know,

803
00:43:00,640 --> 00:43:03,279
Speaker 1: from someone who's been in the crypto ecosystem, as they're like,

804
00:43:03,320 --> 00:43:04,680
Speaker 1: I don't know if there's a word for that. It's

805
00:43:04,680 --> 00:43:08,040
Speaker 1: a it's a checkpoint. There's thousands of them. We see

806
00:43:08,080 --> 00:43:11,440
Speaker 1: it every day. That's normal. That's how the market works

807
00:43:11,520 --> 00:43:15,200
Speaker 1: for all these assets. Like GameStop was behaving like a

808
00:43:15,280 --> 00:43:20,360
Speaker 1: s Illoqually cryptence the ship colinization of equity markets exactly.

809
00:43:20,400 --> 00:43:23,440
Speaker 1: And it's like this moment, and I think the beautiful

810
00:43:23,480 --> 00:43:27,920
Speaker 1: moment of this was the moment that Robin Hood banned

811
00:43:28,000 --> 00:43:31,360
Speaker 1: buying a game Stop. Do you guys know what happened next?

812
00:43:32,400 --> 00:43:35,440
Speaker 1: What happened? Um, game Stop crashed because you could only

813
00:43:35,440 --> 00:43:38,120
Speaker 1: sell it, not buy it. Okay, not talking on Robin Hood.

814
00:43:38,280 --> 00:43:40,279
Speaker 1: So everyone was either you know, start selling their game

815
00:43:40,320 --> 00:43:43,080
Speaker 1: Stop or being forced to or couldn't buy it and

816
00:43:43,120 --> 00:43:45,880
Speaker 1: had money, and so they stopped buying game Stop and

817
00:43:45,920 --> 00:43:49,960
Speaker 1: instead they bought what he's in retrospect the only possible

818
00:43:50,000 --> 00:43:52,680
Speaker 1: answer to this question, like as soon as you hear like, oh,

819
00:43:52,719 --> 00:43:57,480
Speaker 1: of course that's what they bought. Um they bought so

820
00:43:58,239 --> 00:44:01,080
Speaker 1: as soon as game Stop started crashing, dodge quintin act

821
00:44:02,200 --> 00:44:04,640
Speaker 1: and and it's like absolutely beautiful of like, yes, that

822
00:44:04,719 --> 00:44:07,360
Speaker 1: is exactly what this is. Like game Stop and dodge

823
00:44:07,440 --> 00:44:11,880
Speaker 1: Coin are like very very similar products. This is the

824
00:44:11,960 --> 00:44:16,080
Speaker 1: idea that like a stock can basically be a token

825
00:44:16,360 --> 00:44:18,840
Speaker 1: for gambling, right, Like you're just speculating at that point

826
00:44:18,840 --> 00:44:21,640
Speaker 1: whether it's going to go up or down based on

827
00:44:21,960 --> 00:44:25,919
Speaker 1: popular interest. Right, you're you know, you're you're speculing whether

828
00:44:25,920 --> 00:44:28,719
Speaker 1: it's gonna go up or down based on whether you

829
00:44:28,760 --> 00:44:31,279
Speaker 1: think people think it's gonna go up or down. You know,

830
00:44:31,719 --> 00:44:34,040
Speaker 1: and and and I think that one of the key

831
00:44:34,120 --> 00:44:38,840
Speaker 1: insights here, which is really powerful and spooky at the

832
00:44:38,880 --> 00:44:42,799
Speaker 1: same time, is um let's say the Apple, you know,

833
00:44:42,840 --> 00:44:45,320
Speaker 1: the Apples, no news and Apple, but someone sells a

834
00:44:45,320 --> 00:44:48,160
Speaker 1: lot whatever liquidations. Who knows something? It doesn't have any

835
00:44:48,200 --> 00:44:51,680
Speaker 1: bearing on the company directly, um an Apple's market cat

836
00:44:51,880 --> 00:44:54,440
Speaker 1: cap crashes from what is it now, like one or

837
00:44:54,480 --> 00:44:57,120
Speaker 1: two trillion dollars, and it crashes down to a billion

838
00:44:57,120 --> 00:45:00,880
Speaker 1: dollars tomorrow. Right, what happens next? Apple crushes to a

839
00:45:00,880 --> 00:45:03,640
Speaker 1: billion dollars. I'll buy it because their cash flows are

840
00:45:03,640 --> 00:45:06,880
Speaker 1: so high that I'm not worried about. I'm not worried about. Right,

841
00:45:06,920 --> 00:45:09,840
Speaker 1: you should google like Apple earnings, then they'll take themselves private.

842
00:45:09,920 --> 00:45:13,840
Speaker 1: At exactly I'm googling it right now, your Apple earnings.

843
00:45:13,880 --> 00:45:17,920
Speaker 1: And you know Google is claiming that their revenue was

844
00:45:18,000 --> 00:45:20,839
Speaker 1: a hundred billion dollars. You know, let me see if

845
00:45:20,840 --> 00:45:23,840
Speaker 1: I can figure out what their earnings are. Here Apple

846
00:45:24,160 --> 00:45:27,319
Speaker 1: was whatever, you know, revenue of a hundred billion and

847
00:45:27,360 --> 00:45:32,239
Speaker 1: guessing their earnings were, you know, fifty billion or something, right, So,

848
00:45:32,239 --> 00:45:33,879
Speaker 1: so so you're sort of like, okay, so you're telling

849
00:45:33,880 --> 00:45:36,200
Speaker 1: me that for a billion dollars, I can buy an

850
00:45:36,320 --> 00:45:39,680
Speaker 1: entire company and that company is going to make what

851
00:45:40,120 --> 00:45:42,520
Speaker 1: is this like fifty times that in the next year,

852
00:45:42,840 --> 00:45:45,160
Speaker 1: like I'll be sailed by right Warren Buffeties comes in.

853
00:45:45,200 --> 00:45:47,279
Speaker 1: It's like I'll take it all of it now. And

854
00:45:47,320 --> 00:45:49,640
Speaker 1: so there's just sort of this lower bound what equities

855
00:45:49,640 --> 00:45:52,960
Speaker 1: can trade at, which is like, you know, they're discount time,

856
00:45:53,000 --> 00:45:57,440
Speaker 1: discountry future cash flow adjusted for risk, and you know

857
00:45:57,560 --> 00:46:00,440
Speaker 1: how long it's gonna take to realize it, and you

858
00:46:00,440 --> 00:46:02,319
Speaker 1: know whatever else you want to kind of tack on there.

859
00:46:02,960 --> 00:46:06,440
Speaker 1: But now flick script around, right and instead of Apple,

860
00:46:06,480 --> 00:46:10,120
Speaker 1: you're talking about game Stop, and instead of going from

861
00:46:10,280 --> 00:46:13,520
Speaker 1: a trillion to a billion, you're talking about going from

862
00:46:13,560 --> 00:46:17,800
Speaker 1: a hundred million to right, so it's market cap, you

863
00:46:17,800 --> 00:46:20,520
Speaker 1: know if thousand excess in a day, and it's clearly

864
00:46:20,520 --> 00:46:22,360
Speaker 1: not because game Stop is going to be selling a

865
00:46:22,360 --> 00:46:25,160
Speaker 1: lot of games this year. And now you can ask

866
00:46:25,239 --> 00:46:28,440
Speaker 1: like what you do, right, Like what's the trade there?

867
00:46:28,880 --> 00:46:31,800
Speaker 1: And the problem is, well, it's not it's not actually

868
00:46:31,880 --> 00:46:34,640
Speaker 1: really clear, is it, right. I mean, you could sell it, right,

869
00:46:35,040 --> 00:46:37,719
Speaker 1: you'd be like, this thing will make seventeen dollars from

870
00:46:37,880 --> 00:46:40,440
Speaker 1: the next year, and like it's never gonna make more

871
00:46:40,440 --> 00:46:43,680
Speaker 1: than seventeen dollars. Ever, it doesn't even really have much

872
00:46:43,680 --> 00:46:46,400
Speaker 1: of a business left. And now it's got a hundred

873
00:46:46,480 --> 00:46:49,439
Speaker 1: billion dollar market. Yet that's the best short sale ever. Right,

874
00:46:50,040 --> 00:46:53,279
Speaker 1: you can short sell it, but it's not like it's

875
00:46:53,280 --> 00:46:54,719
Speaker 1: not like you can short sell and then be like

876
00:46:54,760 --> 00:46:58,000
Speaker 1: ha ha, earnings were low, Please give me money now, everyone,

877
00:46:58,120 --> 00:47:01,480
Speaker 1: Like that's not how it works. There's no strict arbitrage

878
00:47:01,640 --> 00:47:05,360
Speaker 1: in the selling direction. Like if it just never goes down,

879
00:47:05,800 --> 00:47:08,520
Speaker 1: it just always trades at this insane premium to earnings.

880
00:47:09,200 --> 00:47:11,200
Speaker 1: You're never gonna make money. You're just gonna slowly be

881
00:47:11,280 --> 00:47:14,560
Speaker 1: bleeding to borrow costs and and the dividence duo each

882
00:47:14,640 --> 00:47:19,080
Speaker 1: year as you slowly look sillier and sillier, and and

883
00:47:19,160 --> 00:47:22,960
Speaker 1: so while there's you know, things can't trade in theory

884
00:47:23,360 --> 00:47:27,040
Speaker 1: that much below their future cash flow, there is no

885
00:47:27,160 --> 00:47:29,440
Speaker 1: upper limit to what they can trade at. And if

886
00:47:29,440 --> 00:47:32,440
Speaker 1: things start to diverge on the upside, you know, the

887
00:47:32,520 --> 00:47:35,359
Speaker 1: global liquidity priors. Can't you step in and fix it?

888
00:47:35,800 --> 00:47:54,920
Speaker 1: Like it's not to slew it? That means, so I

889
00:47:54,960 --> 00:47:58,080
Speaker 1: have a question about f t X, and you know

890
00:47:58,080 --> 00:48:00,719
Speaker 1: we're talking about equity, So this is a good you

891
00:48:00,760 --> 00:48:04,720
Speaker 1: have not everything on ft X is actually strictly crypto,

892
00:48:04,880 --> 00:48:08,200
Speaker 1: and you actually have what you call token ized equity,

893
00:48:08,280 --> 00:48:11,279
Speaker 1: and there's listed companies sort of like I don't I

894
00:48:11,280 --> 00:48:15,080
Speaker 1: think it's like like Tesla futures trading and Square Future

895
00:48:15,120 --> 00:48:17,840
Speaker 1: trading and and this is sort of the even weirder

896
00:48:17,880 --> 00:48:20,520
Speaker 1: part you have had. And I think you have now

897
00:48:21,160 --> 00:48:24,520
Speaker 1: equity trading of companies that aren't trading. So I understand,

898
00:48:24,560 --> 00:48:26,840
Speaker 1: like say like Tesla futures, because you could you know,

899
00:48:27,120 --> 00:48:29,080
Speaker 1: there's a link between the price of what you could

900
00:48:29,120 --> 00:48:32,120
Speaker 1: get it on. But you have you have coin based

901
00:48:32,120 --> 00:48:35,720
Speaker 1: equity trading on f t X. But there's no actual

902
00:48:35,840 --> 00:48:37,960
Speaker 1: venue right now for coin based trading yet because they

903
00:48:37,960 --> 00:48:40,319
Speaker 1: haven't gone public. How does that work? And how do

904
00:48:40,400 --> 00:48:44,200
Speaker 1: you head your exposure in that kind of situation? I

905
00:48:44,200 --> 00:48:46,799
Speaker 1: don't really get how like you can make a book,

906
00:48:46,840 --> 00:48:49,600
Speaker 1: so so um, the first thing to how it works

907
00:48:49,640 --> 00:48:53,520
Speaker 1: there's two different models for it, but though they're ultimately

908
00:48:53,520 --> 00:48:56,759
Speaker 1: economically very similar. And and the way to think about

909
00:48:56,840 --> 00:48:59,839
Speaker 1: is basically one version of this. Let's pretend for now

910
00:49:00,320 --> 00:49:02,840
Speaker 1: that you happen to know for sure coin based was

911
00:49:02,880 --> 00:49:05,080
Speaker 1: going to go public sometime in the next three months. Right,

912
00:49:06,040 --> 00:49:07,719
Speaker 1: you know, it's not public yet, but it will be,

913
00:49:07,760 --> 00:49:09,080
Speaker 1: you know, for whatever it is, and you're a hundred

914
00:49:09,080 --> 00:49:12,239
Speaker 1: percent confident in that, then what you could do is

915
00:49:12,280 --> 00:49:14,719
Speaker 1: you can say, okay, here's a coin based feature. It's

916
00:49:14,719 --> 00:49:17,440
Speaker 1: gonna cash settle to the price of one coin based

917
00:49:17,440 --> 00:49:21,120
Speaker 1: share um on June one or on you know, August first,

918
00:49:21,160 --> 00:49:24,239
Speaker 1: or whatever whatever point is safe, right, and and and

919
00:49:24,320 --> 00:49:26,359
Speaker 1: the point is that like, even if it's not trading now,

920
00:49:26,719 --> 00:49:28,759
Speaker 1: if you know it will be trading, then you can

921
00:49:28,800 --> 00:49:32,080
Speaker 1: always do something like cash expiring too, you know, to

922
00:49:32,160 --> 00:49:34,640
Speaker 1: whatever price it ends up trading. Act. That's sort of

923
00:49:34,719 --> 00:49:36,719
Speaker 1: one way to think about what you can do with this.

924
00:49:37,239 --> 00:49:40,200
Speaker 1: And another thing, which is, you know, economically very similar,

925
00:49:40,600 --> 00:49:43,919
Speaker 1: is you could say this converts into one actual share

926
00:49:44,000 --> 00:49:47,319
Speaker 1: of coin based stock once it lists. Either way, it's

927
00:49:47,360 --> 00:49:50,279
Speaker 1: something between a stock and a future on stock, and

928
00:49:50,400 --> 00:49:53,080
Speaker 1: query what the difference even is if you can't actually

929
00:49:53,080 --> 00:49:56,560
Speaker 1: do anything with stock today. So that's the way to

930
00:49:56,600 --> 00:49:59,719
Speaker 1: think about things like the coin based market. Um. And

931
00:49:59,760 --> 00:50:02,239
Speaker 1: you know, we had an Airbnb market, and you know,

932
00:50:02,280 --> 00:50:03,759
Speaker 1: I think we're gonna have another one of these coming

933
00:50:03,760 --> 00:50:06,279
Speaker 1: out soon. So anyway, you know, that's sort of like,

934
00:50:06,760 --> 00:50:09,400
Speaker 1: you know, that's how you can think about um, these

935
00:50:09,440 --> 00:50:12,719
Speaker 1: like pre I p O markets, so to speak. And

936
00:50:12,719 --> 00:50:15,719
Speaker 1: and then you ask like the second part of your question, right,

937
00:50:15,880 --> 00:50:17,279
Speaker 1: which is like, how the hell do you hedge that?

938
00:50:18,080 --> 00:50:20,400
Speaker 1: Because it's it's not trading, right, It's not like like

939
00:50:20,440 --> 00:50:23,000
Speaker 1: someone wants to go buy you know, if someone goes

940
00:50:23,040 --> 00:50:27,640
Speaker 1: on on robin Hood Right to buy a share of Apple,

941
00:50:28,400 --> 00:50:32,319
Speaker 1: I mean, fine, you know, robin Hood whoever hands it

942
00:50:32,400 --> 00:50:34,960
Speaker 1: to some you know pe fops it out, um, some

943
00:50:35,200 --> 00:50:37,359
Speaker 1: h f T firm that then goes and buys it

944
00:50:37,640 --> 00:50:40,080
Speaker 1: on on nasdacs. That that's all fine, you know that

945
00:50:40,200 --> 00:50:42,879
Speaker 1: that works. But then you say, okay, but but point

946
00:50:42,920 --> 00:50:45,919
Speaker 1: based is not trading anywhere. There's no you know, even

947
00:50:45,960 --> 00:50:48,000
Speaker 1: if you've got sated out there, where are they gonna

948
00:50:48,000 --> 00:50:50,560
Speaker 1: buy this? And part of the answer, you know, there's

949
00:50:50,560 --> 00:50:53,160
Speaker 1: two possible answers to this. Neither of them are perfect,

950
00:50:53,200 --> 00:50:58,880
Speaker 1: but both of them theoretically work, and one of them is, well, um,

951
00:50:58,920 --> 00:51:01,840
Speaker 1: you know these sickly in order service you need to

952
00:51:01,880 --> 00:51:05,839
Speaker 1: actually own equity, right. That would be one model is that,

953
00:51:06,080 --> 00:51:08,280
Speaker 1: you know, you you have to be like an existing

954
00:51:08,280 --> 00:51:11,120
Speaker 1: equity shareholder to sell this to short, you know short

955
00:51:11,160 --> 00:51:13,839
Speaker 1: this que quote and then you're basically converting your equity

956
00:51:13,880 --> 00:51:16,920
Speaker 1: into the tokenized equity and you know that will sort

957
00:51:16,920 --> 00:51:20,640
Speaker 1: of settle out once um, once at list and and

958
00:51:20,680 --> 00:51:23,560
Speaker 1: so and you're you're start backing the shares by actual equity.

959
00:51:23,640 --> 00:51:25,440
Speaker 1: But of course then in order to get any liquidity

960
00:51:25,480 --> 00:51:27,839
Speaker 1: in this, you need to like, you know, find someone

961
00:51:27,880 --> 00:51:29,680
Speaker 1: who happened to be you know, a big VC in

962
00:51:30,080 --> 00:51:32,799
Speaker 1: point base. The other thing that you do is is

963
00:51:33,040 --> 00:51:35,759
Speaker 1: the cash subtle futures model. And again this is all

964
00:51:35,800 --> 00:51:38,080
Speaker 1: playing off of you know, either treating this as a

965
00:51:38,120 --> 00:51:42,680
Speaker 1: cast subtle future or training it as a uh, you know,

966
00:51:42,760 --> 00:51:46,600
Speaker 1: as a physically settled thing. Um. Once it lists with

967
00:51:46,640 --> 00:51:50,400
Speaker 1: the cast settle futures model, what you say is you know, whatever,

968
00:51:50,440 --> 00:51:52,759
Speaker 1: it's fine, Like, um, you know this is just gonna

969
00:51:52,800 --> 00:51:54,920
Speaker 1: settle to whatever it'll settle to, and you need to

970
00:51:54,960 --> 00:51:57,600
Speaker 1: post collateral, right, you know, you need to post if

971
00:51:57,640 --> 00:52:00,359
Speaker 1: you want to go along or short this. You have

972
00:52:00,360 --> 00:52:02,680
Speaker 1: some dollars in your account, and you know you'll make

973
00:52:02,760 --> 00:52:04,600
Speaker 1: or lose money equal to the difference between what it

974
00:52:04,640 --> 00:52:06,560
Speaker 1: trades that when it lists, and what you buy or

975
00:52:06,560 --> 00:52:09,040
Speaker 1: sell it at. Now as then anyone can be a

976
00:52:09,040 --> 00:52:11,400
Speaker 1: liquid e in fighter. They just need to post collateral.

977
00:52:11,560 --> 00:52:15,080
Speaker 1: And now that doesn't answer the question how they could

978
00:52:15,120 --> 00:52:17,040
Speaker 1: do this in a risk this way, and the answer

979
00:52:17,080 --> 00:52:20,200
Speaker 1: is probably they can't. They can't just arbitrage out of

980
00:52:20,280 --> 00:52:23,160
Speaker 1: this um, and that makes it harder to get liquidity.

981
00:52:23,160 --> 00:52:24,920
Speaker 1: But they can still trade it. They can do what

982
00:52:24,960 --> 00:52:26,279
Speaker 1: they think is a good trade. You know, if they

983
00:52:26,280 --> 00:52:29,080
Speaker 1: see these trading at ten trillion dollar valuation, they just

984
00:52:29,120 --> 00:52:31,640
Speaker 1: short it. They're pretty sure they're gonna make money. And

985
00:52:31,680 --> 00:52:33,439
Speaker 1: so it's it's not the most liquid thing in the world,

986
00:52:33,440 --> 00:52:35,200
Speaker 1: but you can do it. And those are basically the

987
00:52:35,239 --> 00:52:40,560
Speaker 1: true models I have. What I think in normal circumstances

988
00:52:40,640 --> 00:52:43,480
Speaker 1: or for traditional financial assets would probably be a very

989
00:52:43,480 --> 00:52:47,640
Speaker 1: boring question, but in relation to the crypto market, I'm

990
00:52:47,680 --> 00:52:52,239
Speaker 1: hoping it's more interesting. But like, how do you manage taxes?

991
00:52:53,080 --> 00:52:56,440
Speaker 1: I'm really curious, Like, yeah, both for f t X

992
00:52:56,800 --> 00:52:59,520
Speaker 1: and for UM. The hedge fund when you are running it.

993
00:52:59,640 --> 00:53:03,360
Speaker 1: Like if you think that it's difficult to even open

994
00:53:03,560 --> 00:53:06,440
Speaker 1: a bank account that's dealing in crypto, I can't imagine

995
00:53:06,480 --> 00:53:09,200
Speaker 1: what it's like to actually try to, you know, work

996
00:53:09,239 --> 00:53:14,000
Speaker 1: with the government on crypto profits or losses. Yeah, and

997
00:53:14,000 --> 00:53:15,400
Speaker 1: and of course you know then you know, and I

998
00:53:15,440 --> 00:53:18,120
Speaker 1: think the answer is it's about what you think, which

999
00:53:18,160 --> 00:53:20,960
Speaker 1: is to say, a complete total mess. And and so

1000
00:53:21,120 --> 00:53:24,600
Speaker 1: what you do, well, you know you can get part

1001
00:53:24,600 --> 00:53:26,480
Speaker 1: of the way they're easily right, Like it's sort of

1002
00:53:26,520 --> 00:53:28,440
Speaker 1: like you know, if you like in the middle of

1003
00:53:28,520 --> 00:53:30,399
Speaker 1: your you buy a bitcoin for ten thousand, you sell

1004
00:53:30,440 --> 00:53:32,840
Speaker 1: it for eleven thousand, you just clearly got a thousand

1005
00:53:32,880 --> 00:53:35,520
Speaker 1: dollars of gain somehow, right, So to some extent you

1006
00:53:35,520 --> 00:53:39,719
Speaker 1: can just treat is trading. Whatever trading is trading. And similarly,

1007
00:53:39,760 --> 00:53:42,279
Speaker 1: if you've got an exchange, right, and you know you

1008
00:53:42,360 --> 00:53:46,000
Speaker 1: make a thousand dollars of revenue from fees earned on

1009
00:53:46,040 --> 00:53:48,080
Speaker 1: your exchange, that's that's okay. You know, I've got thousand

1010
00:53:48,120 --> 00:53:50,800
Speaker 1: dollars of revenue. You know, if you don't have expenses

1011
00:53:50,800 --> 00:53:53,400
Speaker 1: you booked as profits. So to first or some of

1012
00:53:53,440 --> 00:53:55,800
Speaker 1: this is easy something it's just a straightforward answer. But

1013
00:53:56,200 --> 00:53:57,840
Speaker 1: once you dig under the hood to some of the

1014
00:53:57,840 --> 00:54:00,719
Speaker 1: weirder cases, what you learn is the same thing you've

1015
00:54:00,719 --> 00:54:03,160
Speaker 1: seen in crypto regulation, which is, you know, the answer

1016
00:54:03,239 --> 00:54:05,439
Speaker 1: isn't known, not in a lot of cases. There's there's

1017
00:54:05,440 --> 00:54:07,719
Speaker 1: a lot of cases where it's just like world isn't

1018
00:54:07,719 --> 00:54:10,080
Speaker 1: ready for that yet. You know, here's one case which

1019
00:54:10,120 --> 00:54:12,600
Speaker 1: I think is pretty clearly something the world needs to

1020
00:54:12,640 --> 00:54:15,279
Speaker 1: think through a lot harder than it has um, which is,

1021
00:54:15,640 --> 00:54:20,960
Speaker 1: let's say that you get a locked token from some

1022
00:54:21,160 --> 00:54:26,400
Speaker 1: like defy staking or air dropped type system. Right, you

1023
00:54:26,440 --> 00:54:29,960
Speaker 1: aren't allowed to sell this token for years, and you

1024
00:54:30,040 --> 00:54:32,360
Speaker 1: sort of forcibly got this. You didn't purchase it, you

1025
00:54:32,440 --> 00:54:35,440
Speaker 1: got it for free. Okay, what's that mean for taxes?

1026
00:54:35,520 --> 00:54:38,239
Speaker 1: And did you just did you just realize a lot

1027
00:54:38,239 --> 00:54:40,440
Speaker 1: of game, you know, equal to the price of an

1028
00:54:40,520 --> 00:54:43,840
Speaker 1: unlock token mark to market when when it was forcibly

1029
00:54:43,880 --> 00:54:46,200
Speaker 1: air dropped on you. Maybe I don't know. I mean

1030
00:54:46,239 --> 00:54:48,640
Speaker 1: you can't you can't not get that game and you

1031
00:54:48,680 --> 00:54:50,920
Speaker 1: can't sell it out for dollars to pay the taxes

1032
00:54:51,239 --> 00:54:54,400
Speaker 1: locked you actually kind of forcibly bankrupt someone if you

1033
00:54:54,400 --> 00:54:57,480
Speaker 1: really think this, right, you just like forcibly air dropped

1034
00:54:57,520 --> 00:54:59,800
Speaker 1: them like a billion dollars marked to market if to

1035
00:55:00,000 --> 00:55:03,880
Speaker 1: pins that the blockchain won't let themselves for two years

1036
00:55:03,920 --> 00:55:06,839
Speaker 1: and then let them have fun with their tax bill, right,

1037
00:55:06,920 --> 00:55:08,799
Speaker 1: So okay, So as soon as you start to get

1038
00:55:08,840 --> 00:55:12,600
Speaker 1: into the weirder cases is when it becomes clear that

1039
00:55:13,160 --> 00:55:16,359
Speaker 1: you know, actually this this is really complicated, and like

1040
00:55:16,600 --> 00:55:18,640
Speaker 1: there's going to have to be a lot of new

1041
00:55:18,719 --> 00:55:20,799
Speaker 1: thinking about how to treat these things. And the world

1042
00:55:20,880 --> 00:55:23,880
Speaker 1: isn't there yet. I know, we're like sort of running

1043
00:55:23,880 --> 00:55:26,160
Speaker 1: short on time. I have like a few can we

1044
00:55:26,200 --> 00:55:28,600
Speaker 1: do like a little like short lightning round questions where

1045
00:55:28,600 --> 00:55:30,839
Speaker 1: I just ask you a few quick things. And so

1046
00:55:30,920 --> 00:55:34,360
Speaker 1: here's one question. There's a lot of stable coins, Now,

1047
00:55:34,719 --> 00:55:38,640
Speaker 1: what can you explain the persistent dominance of tether in

1048
00:55:38,680 --> 00:55:41,400
Speaker 1: this market? Given uh, you know, there's all kinds of

1049
00:55:41,440 --> 00:55:44,360
Speaker 1: always concerns about it and legal questions. What is it

1050
00:55:44,440 --> 00:55:48,239
Speaker 1: about their role in the crypto ecosystem that's so hard

1051
00:55:48,280 --> 00:55:51,520
Speaker 1: to dislodge despite the existence of many competitors. It's a

1052
00:55:51,520 --> 00:55:54,280
Speaker 1: good question, and a lot of people have this question.

1053
00:55:54,360 --> 00:55:56,440
Speaker 1: And and if I understand your question right, you're not

1054
00:55:56,480 --> 00:55:59,399
Speaker 1: saying you know them to be a fraud erant I don't,

1055
00:55:59,440 --> 00:56:02,040
Speaker 1: and I actually think most of the fraud arguments aren't compelling.

1056
00:56:02,080 --> 00:56:04,839
Speaker 1: But I do know also that there's other more regulated ones,

1057
00:56:05,239 --> 00:56:07,359
Speaker 1: right exactly. It's like even if you don't think, if

1058
00:56:07,360 --> 00:56:10,279
Speaker 1: you think it's basically totally fine, it's like okay, but

1059
00:56:10,320 --> 00:56:12,800
Speaker 1: there's also something that no one even has ever thought

1060
00:56:12,840 --> 00:56:16,120
Speaker 1: was a fraud, like like where's the bar here? Really, like,

1061
00:56:16,760 --> 00:56:19,440
Speaker 1: so part of this is just historical. Part of the

1062
00:56:19,440 --> 00:56:22,200
Speaker 1: answer here is, well, it was first and it was

1063
00:56:22,239 --> 00:56:24,600
Speaker 1: the first stable pining crypto at least first one traction,

1064
00:56:25,320 --> 00:56:28,040
Speaker 1: and what that means is that a lot of people

1065
00:56:28,040 --> 00:56:31,080
Speaker 1: started using it. It became listed on all the exchanges.

1066
00:56:31,360 --> 00:56:34,000
Speaker 1: It wasn't just listed in the way that like random

1067
00:56:34,000 --> 00:56:37,080
Speaker 1: tokens are listed on the exchanges. It was the only

1068
00:56:37,120 --> 00:56:39,680
Speaker 1: way that these exchanges made sense. I think it's like

1069
00:56:39,680 --> 00:56:41,840
Speaker 1: a crucial part of the history of tethers back in

1070
00:56:43,280 --> 00:56:47,440
Speaker 1: if you want to have an exchange, a spot exchanging crypto, right,

1071
00:56:47,760 --> 00:56:49,400
Speaker 1: and you want to have like a quote unquote bicklin

1072
00:56:49,480 --> 00:56:52,080
Speaker 1: usd market, how would you do that if you didn't

1073
00:56:52,120 --> 00:56:54,680
Speaker 1: have a bank account, um, and and of course you

1074
00:56:54,719 --> 00:56:57,200
Speaker 1: probably didn't have a bank account because it was really

1075
00:56:57,239 --> 00:56:58,960
Speaker 1: hard to get a bank account. If you're in crypto,

1076
00:56:59,320 --> 00:57:01,080
Speaker 1: no one wants if you want, and it's certainly no

1077
00:57:01,120 --> 00:57:02,879
Speaker 1: one want to get you want if you said you're

1078
00:57:02,880 --> 00:57:05,879
Speaker 1: gonna be, you know, putting customer deposits in it from

1079
00:57:05,960 --> 00:57:07,680
Speaker 1: you know, and all of a sudden you start talking

1080
00:57:07,719 --> 00:57:10,640
Speaker 1: about all the messy things in running exchange and and

1081
00:57:10,680 --> 00:57:13,239
Speaker 1: it just sounds so much worse to a bank than

1082
00:57:13,320 --> 00:57:16,120
Speaker 1: it did when you were a trading firm. What you

1083
00:57:16,200 --> 00:57:18,880
Speaker 1: do then, right, Like, the answer is you listed tether.

1084
00:57:18,960 --> 00:57:20,760
Speaker 1: You got a big poin tether pair. And if people

1085
00:57:20,760 --> 00:57:22,440
Speaker 1: want to get dollars on you're like, go talk together,

1086
00:57:22,840 --> 00:57:25,560
Speaker 1: put your dollars in together, and then come here. And

1087
00:57:25,640 --> 00:57:28,160
Speaker 1: so because of a lot of the industry just grew

1088
00:57:28,280 --> 00:57:30,400
Speaker 1: up with tether, is the answer to how you got

1089
00:57:30,440 --> 00:57:34,120
Speaker 1: dollars and that that gives a huge built in advantage.

1090
00:57:34,520 --> 00:57:36,400
Speaker 1: That's one piece of it. But there's another piece to

1091
00:57:36,480 --> 00:57:39,400
Speaker 1: which is quite important. There is a big East West

1092
00:57:39,400 --> 00:57:43,200
Speaker 1: divide here and in the West you'll generally hear people saying, like,

1093
00:57:43,520 --> 00:57:46,280
Speaker 1: all right, we got one regulated stable point held in

1094
00:57:46,280 --> 00:57:49,920
Speaker 1: the US bank account like audits from US auditing firms,

1095
00:57:50,400 --> 00:57:53,320
Speaker 1: and like got another one which like it's not clear

1096
00:57:53,560 --> 00:57:56,520
Speaker 1: it's been audited. Really, it's probably not regulated. There's like

1097
00:57:56,600 --> 00:58:01,120
Speaker 1: rumors of fraud. It's offshore maybe something Bahamas. I don't

1098
00:58:01,120 --> 00:58:03,560
Speaker 1: think any government can can can really regulate it or

1099
00:58:03,880 --> 00:58:05,640
Speaker 1: or control it, like I don't know which of those

1100
00:58:05,640 --> 00:58:07,920
Speaker 1: sounds like like like like you know, lower risk and

1101
00:58:07,920 --> 00:58:10,120
Speaker 1: and sver. It's like, okay, no, obviously it goes like

1102
00:58:10,200 --> 00:58:12,400
Speaker 1: you know USDC or whatever. Right, But then you go

1103
00:58:12,480 --> 00:58:15,840
Speaker 1: to China and and you say, okay, yet two different

1104
00:58:15,840 --> 00:58:19,600
Speaker 1: stable points, one of which is how is in an

1105
00:58:19,680 --> 00:58:24,600
Speaker 1: untouchable offshore bank account that there's sort of like uncertainty surrounding,

1106
00:58:25,200 --> 00:58:29,640
Speaker 1: and another of which is a highly government regulated bank account,

1107
00:58:30,320 --> 00:58:32,840
Speaker 1: you know, with with like lots of people looking at

1108
00:58:32,880 --> 00:58:35,560
Speaker 1: it and auditing it. Which is those sounds safer? And

1109
00:58:35,600 --> 00:58:38,280
Speaker 1: they're like, jeez, you're telling me that in one of

1110
00:58:38,280 --> 00:58:41,440
Speaker 1: these cases the government has access to this bank account

1111
00:58:41,520 --> 00:58:43,640
Speaker 1: and the other they don't, Like, obviously, I'll take the

1112
00:58:43,680 --> 00:58:46,240
Speaker 1: one the government doesn't have access to. Please And and

1113
00:58:46,280 --> 00:58:48,400
Speaker 1: this is sort of a weird. Big part of it

1114
00:58:48,480 --> 00:58:51,760
Speaker 1: is that this notion of being government regulated is a

1115
00:58:51,800 --> 00:58:55,960
Speaker 1: good thing. And as astanding safety is, you know, so

1116
00:58:56,440 --> 00:59:00,200
Speaker 1: omnipresent has to be obvious in the West in a

1117
00:59:00,200 --> 00:59:05,200
Speaker 1: lot of countries, like government regulated doesn't mean state necessarily, right,

1118
00:59:05,600 --> 00:59:09,160
Speaker 1: Like sometimes that that that's even maybe the opposite right right,

1119
00:59:10,800 --> 00:59:12,760
Speaker 1: And and so I think that's another piece of this

1120
00:59:12,960 --> 00:59:15,600
Speaker 1: is that a lot of people are like, oh, geez,

1121
00:59:15,640 --> 00:59:18,480
Speaker 1: like you know, give me the tether pees, like you're

1122
00:59:18,520 --> 00:59:21,080
Speaker 1: telling me that, Like no one, not even a government

1123
00:59:21,160 --> 00:59:24,120
Speaker 1: or auditor, can confirm for sure what's in this bank account.

1124
00:59:24,400 --> 00:59:26,960
Speaker 1: That is so much safer, Like the worst thing I

1125
00:59:26,960 --> 00:59:28,480
Speaker 1: could do would be with this in a bank acount

1126
00:59:28,480 --> 00:59:31,800
Speaker 1: ever knows about this is a very short question. There's

1127
00:59:31,880 --> 00:59:34,880
Speaker 1: a report that f t X is going to sponsor

1128
00:59:34,960 --> 00:59:39,440
Speaker 1: the name of the Miami Heat Arena. Is that true? So, um,

1129
00:59:39,600 --> 00:59:42,720
Speaker 1: I think there's a sorry, I'm just thinking about what

1130
00:59:42,840 --> 00:59:46,400
Speaker 1: can be said now? Are that there's there's a board

1131
00:59:46,440 --> 00:59:49,560
Speaker 1: vote scheduled for tomorrow. It's a basic answer, um, and

1132
00:59:49,720 --> 00:59:53,160
Speaker 1: you know after that, um, there will be uh, you know,

1133
00:59:53,240 --> 00:59:56,840
Speaker 1: actual final confirmation on this. But but yeah, I think

1134
00:59:56,840 --> 00:59:59,760
Speaker 1: it is now public that, um, that that is the intention.

1135
01:00:00,000 --> 01:00:03,560
Speaker 1: Cool with the toe on ft X, with the Since

1136
01:00:03,600 --> 01:00:06,200
Speaker 1: you trade crypto and equity, do you see people doing

1137
01:00:06,720 --> 01:00:11,160
Speaker 1: cross asset trades themselves? They're like arbitraging square against bitcoin,

1138
01:00:11,240 --> 01:00:12,960
Speaker 1: stuff like that. We do see some of it. It's

1139
01:00:12,960 --> 01:00:15,720
Speaker 1: super cool. It's not large size. I'd be super excity

1140
01:00:15,760 --> 01:00:17,560
Speaker 1: if it were huge size. But it's one of my

1141
01:00:17,600 --> 01:00:20,040
Speaker 1: favorite things to see. And you can even use them

1142
01:00:20,040 --> 01:00:24,200
Speaker 1: as merchant for each other. You can buy micro strategy

1143
01:00:24,200 --> 01:00:26,560
Speaker 1: and you see this flateral for bitcoin future. You can

1144
01:00:26,560 --> 01:00:29,680
Speaker 1: buy bigcoin says flateral for micro strategy or micro thregy

1145
01:00:29,760 --> 01:00:34,120
Speaker 1: short um. They're all we cross margin everything, including the currency,

1146
01:00:34,200 --> 01:00:37,360
Speaker 1: crypto and equities. We do see some of that. You know,

1147
01:00:37,360 --> 01:00:40,280
Speaker 1: we see bitcoin run up after hours and and then

1148
01:00:40,320 --> 01:00:42,640
Speaker 1: sometimes we'll see you know, micro strategy move, We'll see

1149
01:00:42,640 --> 01:00:45,439
Speaker 1: buyers of it, and you know, the actual stock won't

1150
01:00:45,440 --> 01:00:48,200
Speaker 1: be trading on other venues because most places are in

1151
01:00:48,240 --> 01:00:53,240
Speaker 1: point four seven. But Sam, uh, so great to have you.

1152
01:00:53,400 --> 01:00:55,240
Speaker 1: This is like such a fascinating here. I think this

1153
01:00:55,320 --> 01:00:58,160
Speaker 1: is one of the most fascinating crypto discussions I've ever had.

1154
01:00:58,960 --> 01:01:03,080
Speaker 1: So really appreciate you joining us. And well, uh, maybe

1155
01:01:03,080 --> 01:01:05,680
Speaker 1: in a year or something we'll talk about how much

1156
01:01:05,680 --> 01:01:07,760
Speaker 1: more the industry is matured, because there's still just like

1157
01:01:07,760 --> 01:01:12,480
Speaker 1: a million things I want to know take care of. Sam,

1158
01:01:26,400 --> 01:01:28,640
Speaker 1: I really did think that was probably one of the

1159
01:01:28,720 --> 01:01:33,400
Speaker 1: most interesting crypto conversations I've ever had. I mean, you know,

1160
01:01:33,960 --> 01:01:36,480
Speaker 1: I guess I'll say this. I like talking to a

1161
01:01:36,480 --> 01:01:38,600
Speaker 1: lot of people in bitcoin. I find it to be

1162
01:01:38,640 --> 01:01:42,360
Speaker 1: a very fascinated world. But you know, I'm the sort

1163
01:01:42,400 --> 01:01:45,720
Speaker 1: of typical conversations. The government's printing all this money and

1164
01:01:45,720 --> 01:01:47,640
Speaker 1: they're gonna want to like buy fiat. It gets a

1165
01:01:47,640 --> 01:01:52,240
Speaker 1: little repetitive to actually like talking about market structure and

1166
01:01:52,800 --> 01:01:57,120
Speaker 1: how to exploit these seemingly huge obvious arbitrarge trades, but

1167
01:01:57,240 --> 01:02:00,560
Speaker 1: how difficult that is in practice. Super interest think topic.

1168
01:02:00,920 --> 01:02:04,760
Speaker 1: I totally agree, Like I am legitimately excited about crypto

1169
01:02:04,760 --> 01:02:07,440
Speaker 1: market structure now in a way that I didn't necessarily

1170
01:02:07,440 --> 01:02:10,280
Speaker 1: think I ever would be. But the other thing that

1171
01:02:10,320 --> 01:02:13,640
Speaker 1: I thought was really interesting was Sam's point about the

1172
01:02:13,720 --> 01:02:19,280
Speaker 1: equity market resembling crypto more and more like Bitcoin sort

1173
01:02:19,320 --> 01:02:24,760
Speaker 1: of like open the floodgates to people becoming comfortable with trading,

1174
01:02:25,280 --> 01:02:29,640
Speaker 1: you know, basically a token um that's not attached to

1175
01:02:29,760 --> 01:02:33,200
Speaker 1: anything specifically. And I think like we've seen a few

1176
01:02:33,600 --> 01:02:36,760
Speaker 1: stocks like game Stop, like AMC that started to take

1177
01:02:36,760 --> 01:02:39,760
Speaker 1: on that characteristic as well, Like people were just trading

1178
01:02:39,840 --> 01:02:43,440
Speaker 1: a number on the screen. Um. And that's really new

1179
01:02:43,480 --> 01:02:46,840
Speaker 1: for the market, I think, and it's a really difficult

1180
01:02:46,880 --> 01:02:50,160
Speaker 1: one for the existing stock market structure the way it's

1181
01:02:50,240 --> 01:02:53,760
Speaker 1: organized actually deal with, which is why game Stop was

1182
01:02:53,840 --> 01:02:57,800
Speaker 1: such a huge deal in was it January February? I

1183
01:02:57,800 --> 01:03:02,840
Speaker 1: can't remember January. Yeah. And I also I also feel like, um,

1184
01:03:02,880 --> 01:03:06,280
Speaker 1: this like the existence of exchanges like f t X,

1185
01:03:06,360 --> 01:03:09,040
Speaker 1: and we didn't even really get into like its own

1186
01:03:09,440 --> 01:03:12,280
Speaker 1: situation that much, but like f t X as a

1187
01:03:12,280 --> 01:03:15,600
Speaker 1: token that itself now has like an eleven billion dollar

1188
01:03:15,640 --> 01:03:18,080
Speaker 1: market cap um. And so this is like a you know,

1189
01:03:18,160 --> 01:03:23,960
Speaker 1: pretty substantial platform that Sam Sam is built and the

1190
01:03:24,000 --> 01:03:27,080
Speaker 1: ability to do like these sort of like you know,

1191
01:03:27,120 --> 01:03:29,280
Speaker 1: he said a small still, but the ability to do

1192
01:03:29,360 --> 01:03:33,760
Speaker 1: like cross crypto equity trades. It just feels like this

1193
01:03:33,880 --> 01:03:37,560
Speaker 1: like melding of what we call like the crypto world

1194
01:03:37,680 --> 01:03:39,880
Speaker 1: versus the traditional world is only going to get more

1195
01:03:40,680 --> 01:03:43,400
Speaker 1: gonna get more notable as time goes on. And it

1196
01:03:43,440 --> 01:03:45,720
Speaker 1: really started last March, like in that huge crash. But

1197
01:03:45,760 --> 01:03:49,120
Speaker 1: it just feels like they're getting more and more interlinked. Yeah.

1198
01:03:49,360 --> 01:03:51,440
Speaker 1: Well that's the other thing I was thinking about. So

1199
01:03:51,520 --> 01:03:55,080
Speaker 1: if you're doing that sort of cross trading, it feels

1200
01:03:55,120 --> 01:03:59,120
Speaker 1: like you're adding a lot of leverage and perhaps unappreciated

1201
01:03:59,400 --> 01:04:02,680
Speaker 1: linkages into the market. Like all these coins basically come

1202
01:04:02,840 --> 01:04:05,360
Speaker 1: from nothing, and so if they're going to be tied

1203
01:04:05,400 --> 01:04:09,160
Speaker 1: to traditional assets, like again that's something that I don't

1204
01:04:09,160 --> 01:04:14,400
Speaker 1: think has really happened that much before. No, But it

1205
01:04:14,480 --> 01:04:17,919
Speaker 1: also seems like how can you know that there has

1206
01:04:17,960 --> 01:04:21,440
Speaker 1: been a lot of selling of bitcoin as a diversifier

1207
01:04:22,200 --> 01:04:25,760
Speaker 1: and it's hard to see how that persists as they

1208
01:04:25,800 --> 01:04:28,200
Speaker 1: get more linked because you know, again going back to

1209
01:04:28,320 --> 01:04:31,480
Speaker 1: that last March, when you need liquidity, Like sure, intry

1210
01:04:31,560 --> 01:04:35,760
Speaker 1: day whatever, things will be different, but people want diversification

1211
01:04:35,840 --> 01:04:38,120
Speaker 1: for the big moment, and in the big moments, the

1212
01:04:38,200 --> 01:04:40,280
Speaker 1: question is often comes down to like do you have

1213
01:04:40,360 --> 01:04:43,600
Speaker 1: liquidity or do you need liquidity? And so as you

1214
01:04:43,680 --> 01:04:45,760
Speaker 1: sort of like get these into linkages where it's like

1215
01:04:45,960 --> 01:04:48,000
Speaker 1: the world's falling apart, we gotta gross down and you're

1216
01:04:48,040 --> 01:04:50,640
Speaker 1: gonna sell some SMP and you're gonna sell some other

1217
01:04:50,680 --> 01:04:53,040
Speaker 1: stuff and you're gonna sell some Bitcoin, it feels like

1218
01:04:53,040 --> 01:04:55,480
Speaker 1: we're going to have that those linkages are allowed to

1219
01:04:55,520 --> 01:04:57,800
Speaker 1: get even tighter than they are. You know, it would

1220
01:04:57,800 --> 01:05:01,240
Speaker 1: be interesting is if we got a big market sell

1221
01:05:01,280 --> 01:05:05,880
Speaker 1: off because of like some massive inflation shock or scare,

1222
01:05:06,160 --> 01:05:09,400
Speaker 1: and then see what bitcoin did. Yeah, that's like the

1223
01:05:09,520 --> 01:05:12,920
Speaker 1: ultimate question for bitcoin. That would be like the real test.

1224
01:05:13,080 --> 01:05:16,240
Speaker 1: I think of the thesis because yeah, that would be

1225
01:05:16,360 --> 01:05:19,400
Speaker 1: that would be interesting. Okay, shall we leave it there,

1226
01:05:19,760 --> 01:05:23,000
Speaker 1: Let's see it there. This has been another episode of

1227
01:05:23,040 --> 01:05:26,040
Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow

1228
01:05:26,080 --> 01:05:29,520
Speaker 1: me on Twitter at Tracy Alloway, and I'm Joe wi

1229
01:05:29,560 --> 01:05:32,520
Speaker 1: isn't Thal. You can follow me on Twitter at the Stalwart.

1230
01:05:32,920 --> 01:05:35,880
Speaker 1: Follow our guests Sam Bank and Fried he Is at

1231
01:05:36,360 --> 01:05:40,920
Speaker 1: s b F Underscore Alameda. Follow our producer Laura Carlson.

1232
01:05:41,040 --> 01:05:44,680
Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of podcast,

1233
01:05:44,720 --> 01:05:48,840
Speaker 1: Francesca Levi at Francesca Today, and check out all of

1234
01:05:48,880 --> 01:05:53,040
Speaker 1: our podcast at Bloomberg under the handle at podcasts. Thanks

1235
01:05:53,040 --> 01:06:09,320
Speaker 1: for listening to to