1 00:00:01,760 --> 00:00:05,400 Speaker 1: Welcome to Crash Course, a podcast about business, political, and 2 00:00:05,480 --> 00:00:08,719 Speaker 1: social disruption and what we can learn from it. I'm 3 00:00:08,720 --> 00:00:15,840 Speaker 1: Tim O'Brien. Today's Crash Course Cryptocurrencies Versus Reality. One of 4 00:00:15,880 --> 00:00:19,479 Speaker 1: my favorite scenes in the Social Network Aaron Sorkin's takedown 5 00:00:19,480 --> 00:00:23,079 Speaker 1: about Facebook's founders is when the actor playing Harvard President 6 00:00:23,200 --> 00:00:26,840 Speaker 1: Larry Summers upbraids the actor playing the dual role of 7 00:00:26,880 --> 00:00:30,840 Speaker 1: the Winklevoss twins. Don't ask the university to intervene in 8 00:00:30,840 --> 00:00:34,519 Speaker 1: your petty dispute with Mark Zuckerberg, he tells them, and 9 00:00:34,640 --> 00:00:39,400 Speaker 1: I quote, everybody at Harvard is inventing something. I suggest 10 00:00:39,440 --> 00:00:41,559 Speaker 1: again that the two of you come up with a 11 00:00:41,680 --> 00:00:46,680 Speaker 1: new new project in the real world. The Winklevoss twins, 12 00:00:46,920 --> 00:00:49,800 Speaker 1: who eventually walked away with tens of millions in Facebook 13 00:00:49,840 --> 00:00:53,120 Speaker 1: stock and other payments, did, in need come up with 14 00:00:53,200 --> 00:00:58,000 Speaker 1: new projects an asset management firm and a digital currency 15 00:00:58,040 --> 00:01:02,280 Speaker 1: exchange that made them Marquie Layers in the recent cryptocurrency 16 00:01:02,360 --> 00:01:06,280 Speaker 1: boom and melt out. There are other more significant crypto 17 00:01:06,319 --> 00:01:10,400 Speaker 1: players think Sam Bankman Freed, for example, But the twins 18 00:01:10,440 --> 00:01:13,640 Speaker 1: fascinate me because they embody the sort of collision Crash 19 00:01:13,720 --> 00:01:18,520 Speaker 1: Course lives for between innovation and possible hucksterism, and between 20 00:01:18,560 --> 00:01:23,360 Speaker 1: authenticity and possible manipulation. Crypto is one of the most 21 00:01:23,440 --> 00:01:27,679 Speaker 1: revolutionary and overhyped inventions of the twenty first century, and 22 00:01:27,800 --> 00:01:30,560 Speaker 1: how the Winkelvy intersected with that market is a tale 23 00:01:30,560 --> 00:01:34,240 Speaker 1: that sheds light on finance and on financial bubbles, on 24 00:01:34,400 --> 00:01:37,920 Speaker 1: what happens when everybody thinks they can get rich quickly. 25 00:01:39,240 --> 00:01:42,160 Speaker 1: Joining me today to discuss all of this is Leonel Laurent, 26 00:01:42,600 --> 00:01:45,520 Speaker 1: a financial columnist for Bloomberg Opinion and someone who has 27 00:01:45,520 --> 00:01:48,880 Speaker 1: spent a lot of time watching crypto evolve. He's joining 28 00:01:48,960 --> 00:01:56,000 Speaker 1: us today from Paris. He Leoney, thank you for being 29 00:01:56,000 --> 00:02:01,160 Speaker 1: with us. Let's start by demystifying crypto for anyone who 30 00:02:01,200 --> 00:02:04,400 Speaker 1: feels mystified by it. You know, I've always thought of 31 00:02:04,400 --> 00:02:08,040 Speaker 1: crypto as essentially a digital currency in the cloud and 32 00:02:08,480 --> 00:02:12,880 Speaker 1: a replacement for Fiat dollars, paper currency that doesn't really 33 00:02:12,919 --> 00:02:15,320 Speaker 1: have a central bank behind it. It just has all 34 00:02:15,360 --> 00:02:18,760 Speaker 1: the users gearing teeing one another that the value will 35 00:02:18,840 --> 00:02:22,480 Speaker 1: keep going up time and time and time again. How 36 00:02:22,480 --> 00:02:24,800 Speaker 1: do you describe it? How do you think of crypto? 37 00:02:25,520 --> 00:02:28,720 Speaker 1: That's pretty accurate, and it's accurate. I guess in hindsight, 38 00:02:28,880 --> 00:02:31,560 Speaker 1: because I think the term crypto has become very broad. 39 00:02:32,000 --> 00:02:34,519 Speaker 1: It's now used to describe, as you say, any kind 40 00:02:34,560 --> 00:02:38,399 Speaker 1: of virtual currency, digital currency that is not done by 41 00:02:38,480 --> 00:02:40,560 Speaker 1: a bank. I think if you go back to when 42 00:02:40,600 --> 00:02:43,480 Speaker 1: bitcoin first emerged, the purists, we're really focusing on the 43 00:02:43,480 --> 00:02:46,919 Speaker 1: crypto part of the word cryptocurrency. So in other words, 44 00:02:47,320 --> 00:02:50,760 Speaker 1: it's outside the banking system. It's decentralized because it relies 45 00:02:50,800 --> 00:02:55,080 Speaker 1: on cryptography, and therefore it is pseudonymous or close tutonymous. 46 00:02:55,360 --> 00:02:58,720 Speaker 1: It's private money, but it's also privacy money, and that 47 00:02:58,800 --> 00:03:02,839 Speaker 1: has been the kind of and the Winklevosses story gets 48 00:03:02,840 --> 00:03:05,160 Speaker 1: into that. There's always been a tension there between the 49 00:03:05,200 --> 00:03:08,440 Speaker 1: real hard nuts who are in this for the privacy, 50 00:03:08,960 --> 00:03:11,920 Speaker 1: for the kind of libertarian aspect of it, and those 51 00:03:11,919 --> 00:03:15,440 Speaker 1: who are in it for what it became, which is money, 52 00:03:15,520 --> 00:03:19,359 Speaker 1: speculation assets, nothing to do with privacy, but also nothing 53 00:03:19,400 --> 00:03:22,919 Speaker 1: to do with currency, because as we've seen it's been 54 00:03:22,960 --> 00:03:25,839 Speaker 1: a decade, we're still using cash, right, We're still using 55 00:03:25,840 --> 00:03:28,200 Speaker 1: notes and coins and cards. No one's would use in 56 00:03:28,200 --> 00:03:31,480 Speaker 1: crypto as a currency, and as we discovered over time, 57 00:03:31,480 --> 00:03:34,320 Speaker 1: it had a very elastic relationship with the notion of value. 58 00:03:34,639 --> 00:03:37,280 Speaker 1: But we could get into that later too, But I 59 00:03:37,360 --> 00:03:40,760 Speaker 1: wanted to ask you what caused this boom. There is 60 00:03:40,760 --> 00:03:44,720 Speaker 1: a real innovation here. It's an attempt to ground transactions 61 00:03:44,720 --> 00:03:48,080 Speaker 1: in a different universe. And the blockchain I think has 62 00:03:48,080 --> 00:03:51,520 Speaker 1: a lot of uses outside of crypto that are useful. 63 00:03:51,640 --> 00:03:55,040 Speaker 1: But I was wondering, when you think about the boom, 64 00:03:55,120 --> 00:03:59,240 Speaker 1: what are its foundations? Well, I think we've had several 65 00:03:59,280 --> 00:04:02,400 Speaker 1: booms crypto. We had several boom and bust cycles. If 66 00:04:02,440 --> 00:04:04,640 Speaker 1: you go back to the kind of first one, and 67 00:04:04,760 --> 00:04:07,440 Speaker 1: this is where the Winkelvos story comes in. It really 68 00:04:07,520 --> 00:04:09,360 Speaker 1: was the kind of thing that was supposed to follow 69 00:04:09,400 --> 00:04:13,640 Speaker 1: a set path involving tech and venture capital, and it 70 00:04:13,720 --> 00:04:16,600 Speaker 1: happened in the wake of the financial crisis. Famously, bitcoin 71 00:04:16,760 --> 00:04:19,640 Speaker 1: was held up as a response to the banking failures. 72 00:04:19,760 --> 00:04:21,800 Speaker 1: There was the collapse of one British bank that was 73 00:04:21,839 --> 00:04:25,440 Speaker 1: literally written into one of the bitcoin transactions, right, the 74 00:04:25,680 --> 00:04:29,680 Speaker 1: first one. And that kind of story really explains the 75 00:04:29,680 --> 00:04:32,040 Speaker 1: first initial boom, which is it pulls in a lot 76 00:04:32,040 --> 00:04:34,960 Speaker 1: of the cypherpunks and the anarchists that we're in this 77 00:04:35,080 --> 00:04:38,919 Speaker 1: for the cryptography revolutions of before. But it also pulls 78 00:04:38,920 --> 00:04:41,880 Speaker 1: in a lot of speculative money. The venture capital story 79 00:04:42,120 --> 00:04:44,560 Speaker 1: decided a technology is going to give us a lot 80 00:04:44,600 --> 00:04:47,720 Speaker 1: of answers to the questions that we pose, and we're 81 00:04:47,760 --> 00:04:50,880 Speaker 1: talking like the midnots, Like what years are we talking 82 00:04:50,920 --> 00:04:54,320 Speaker 1: about it? Yeah, well it's the late notes. Bitcoin comes 83 00:04:54,320 --> 00:04:56,600 Speaker 1: out just around the same time as the financial crisis, 84 00:04:56,880 --> 00:04:59,719 Speaker 1: and so the decade of crypto really was the twenty 85 00:04:59,760 --> 00:05:04,160 Speaker 1: ten and the Winklevoss symbolized that attempt to kind of 86 00:05:04,200 --> 00:05:08,480 Speaker 1: glom onto it as a venture capital style technological bet 87 00:05:08,480 --> 00:05:11,160 Speaker 1: that was going to disrupt society in the way that 88 00:05:11,200 --> 00:05:13,719 Speaker 1: you put it disruption. Now we can talk about the 89 00:05:13,720 --> 00:05:16,159 Speaker 1: other booms that happened, but that's the first one. And 90 00:05:16,200 --> 00:05:19,400 Speaker 1: then it went through several cycles where retail investors got 91 00:05:19,400 --> 00:05:20,840 Speaker 1: ahold of it and began to look like a kind 92 00:05:20,839 --> 00:05:23,400 Speaker 1: of stock market bubble, and the latest boom was a 93 00:05:23,400 --> 00:05:25,680 Speaker 1: credit bubble. So I guess my point is this is 94 00:05:25,720 --> 00:05:30,520 Speaker 1: all very financial, it's not very technological. If we look 95 00:05:30,560 --> 00:05:32,520 Speaker 1: at the core tech, a lot of it is like 96 00:05:32,600 --> 00:05:35,040 Speaker 1: decades old. It's a lot of things coming together. And 97 00:05:35,600 --> 00:05:40,080 Speaker 1: just to really tip my hat to the crypto purists, 98 00:05:40,440 --> 00:05:43,240 Speaker 1: low interest rates, right, easy money, easy money, that kind 99 00:05:43,240 --> 00:05:46,120 Speaker 1: of fed this, and you get this bizarre symboidic relationship 100 00:05:46,160 --> 00:05:48,680 Speaker 1: between people who want to kill central banks and people 101 00:05:48,720 --> 00:05:52,360 Speaker 1: who want crypto prices to go up. And bizarrely, easy 102 00:05:52,400 --> 00:05:55,480 Speaker 1: money was kind of fueling the whole ride. Well, an 103 00:05:55,520 --> 00:05:59,680 Speaker 1: easy money in search of profitable returns. The low interest 104 00:05:59,760 --> 00:06:03,800 Speaker 1: rate that were engineered after the financial crisis left people 105 00:06:04,560 --> 00:06:08,040 Speaker 1: seeking alternate assets that could produce bigger returns than a 106 00:06:08,080 --> 00:06:12,640 Speaker 1: stagnant bond market and an unpredictable equity market, and crypto 107 00:06:12,680 --> 00:06:15,960 Speaker 1: benefited from that. It's also interesting to me that you 108 00:06:16,960 --> 00:06:21,159 Speaker 1: talk about the foundational grounding of this universe over the 109 00:06:21,240 --> 00:06:24,480 Speaker 1: last decade. And we'll talk more about this about financial 110 00:06:24,520 --> 00:06:29,120 Speaker 1: bubbles and people's emotional and psychological response to them. But 111 00:06:29,200 --> 00:06:31,440 Speaker 1: I wanted to dig in a little bit on that 112 00:06:31,560 --> 00:06:34,039 Speaker 1: before we get into the Winkle Vye because there's a 113 00:06:34,040 --> 00:06:37,240 Speaker 1: long history here, and you wrote one of your columns. 114 00:06:37,839 --> 00:06:42,320 Speaker 1: While financial history should have inspired caution, it instead inspired 115 00:06:42,440 --> 00:06:45,760 Speaker 1: greed and trust. So unpack that a little bit as 116 00:06:45,760 --> 00:06:48,919 Speaker 1: it pertains to the crypto boom. So, as I was 117 00:06:49,200 --> 00:06:51,560 Speaker 1: trying to say before, this is very financial. This is 118 00:06:51,560 --> 00:06:54,320 Speaker 1: a financial story. What do I mean by that? If 119 00:06:54,320 --> 00:06:56,400 Speaker 1: you come along with something new in the world of 120 00:06:56,480 --> 00:07:00,440 Speaker 1: money and finance, especially after the financial crisis, come along. 121 00:07:00,440 --> 00:07:04,200 Speaker 1: When you say we have something new, most people, especially 122 00:07:04,200 --> 00:07:07,000 Speaker 1: those who have the knowledge of financial history, should have 123 00:07:07,080 --> 00:07:09,479 Speaker 1: a bit of skepticism because if you're coming in with 124 00:07:09,520 --> 00:07:13,560 Speaker 1: something that doesn't fulfill and this was widely widely analyzed 125 00:07:13,600 --> 00:07:17,040 Speaker 1: when bitcoin and crypto first emerged. There are definitions of money. 126 00:07:17,160 --> 00:07:20,000 Speaker 1: Money works when it is and I'm sure people have 127 00:07:20,040 --> 00:07:22,400 Speaker 1: heard this before. Is it a store of value? Is 128 00:07:22,400 --> 00:07:24,360 Speaker 1: it a reliable store of value? Is it a good 129 00:07:24,360 --> 00:07:26,560 Speaker 1: medium of exchange? Is it a good unit of account? 130 00:07:27,600 --> 00:07:30,000 Speaker 1: Bitcoin did not meet the definition of these things, and 131 00:07:30,000 --> 00:07:32,720 Speaker 1: so initially there was a lot of skepticism. But the 132 00:07:32,720 --> 00:07:34,840 Speaker 1: problem is that if you keep saying that, it doesn't 133 00:07:34,840 --> 00:07:37,200 Speaker 1: really help. If people really believe that this time is different, 134 00:07:37,440 --> 00:07:39,040 Speaker 1: and so I think that then you have to look 135 00:07:39,080 --> 00:07:42,920 Speaker 1: at stories of bubbles, right, the Tulipmania, the south Sea bubble, 136 00:07:43,360 --> 00:07:47,080 Speaker 1: credit bubbles. The history of private money is littered with failures. 137 00:07:47,080 --> 00:07:48,920 Speaker 1: And the problem is that trying to talk about this, 138 00:07:49,320 --> 00:07:51,000 Speaker 1: all people would say back to you is, yeah, but 139 00:07:51,040 --> 00:07:54,440 Speaker 1: look at the crisis. Right. Even the Winkelboss Twins would 140 00:07:54,480 --> 00:07:57,240 Speaker 1: refer to while they we're getting into bitcoin. Everything they 141 00:07:57,320 --> 00:08:00,360 Speaker 1: read in the papers seem to confirm their bias towards 142 00:08:00,360 --> 00:08:03,920 Speaker 1: bitcoin again, the Eurozone crisis, the Aurozone debt crisis, that 143 00:08:04,120 --> 00:08:07,160 Speaker 1: write downs right on sovereign debt. This was the kind 144 00:08:07,160 --> 00:08:10,520 Speaker 1: of economic tale of the bitcoins where they would see 145 00:08:10,760 --> 00:08:13,920 Speaker 1: all of this system really on its knees and think, 146 00:08:14,280 --> 00:08:16,520 Speaker 1: this is it, right, this is the failure. And what 147 00:08:16,640 --> 00:08:19,240 Speaker 1: I think they didn't foresee is that this system would 148 00:08:19,240 --> 00:08:22,280 Speaker 1: actually prove quite resilient and in the same way that 149 00:08:22,320 --> 00:08:24,840 Speaker 1: today people like Charlie Mungun Warren Buffett are doing victory 150 00:08:24,920 --> 00:08:28,760 Speaker 1: lapse around crypto. It's because there was reason to be skeptical, 151 00:08:28,880 --> 00:08:31,360 Speaker 1: because if you look at history, somethings are too good 152 00:08:31,360 --> 00:08:34,160 Speaker 1: to be true when they're totally disconnected from the fundamentals. Right. 153 00:08:34,280 --> 00:08:36,439 Speaker 1: So that's what I mean when I said financial history 154 00:08:36,480 --> 00:08:38,959 Speaker 1: should have informed a bit of caution. And when we're 155 00:08:38,960 --> 00:08:41,280 Speaker 1: talking about the two hook bubble, you know, we're talking 156 00:08:41,320 --> 00:08:46,400 Speaker 1: about the seventeenth century and the eighteenth century, and there 157 00:08:46,400 --> 00:08:49,240 Speaker 1: are hundreds of years of bubbles behind this. In human 158 00:08:49,360 --> 00:08:54,080 Speaker 1: nature over that long stretch didn't really change all that much. 159 00:08:54,200 --> 00:08:58,959 Speaker 1: Greed was still a motivator and wishful thinking combined with 160 00:08:59,160 --> 00:09:02,240 Speaker 1: greed could produce some very interesting bubbles, like the one 161 00:09:02,280 --> 00:09:06,040 Speaker 1: we just went through with crypto. Nonetheless, there was an 162 00:09:06,160 --> 00:09:09,120 Speaker 1: architecture that developed beneath this industry that I want to 163 00:09:09,160 --> 00:09:10,920 Speaker 1: talk a little bit about with you too, because I 164 00:09:10,960 --> 00:09:13,920 Speaker 1: think that's useful for figuring out what the winkelby we're 165 00:09:14,000 --> 00:09:17,760 Speaker 1: up to. The industry essentially developed into two main arteries 166 00:09:17,800 --> 00:09:22,160 Speaker 1: more or less right, exchanges and then lenders, people who 167 00:09:22,160 --> 00:09:27,400 Speaker 1: were offering tokens and building markets around trading them. Is 168 00:09:27,400 --> 00:09:31,200 Speaker 1: that a fair, if overly simplistic description of what the 169 00:09:31,240 --> 00:09:34,280 Speaker 1: industry came to look like. Well, you've just perfectly described 170 00:09:34,480 --> 00:09:37,720 Speaker 1: how we've tried to use financial sected terms, financial industry 171 00:09:37,840 --> 00:09:40,800 Speaker 1: terms on an industry that is trying to create something 172 00:09:40,800 --> 00:09:43,240 Speaker 1: new and in a way almost ignoring all of the 173 00:09:43,320 --> 00:09:46,240 Speaker 1: lessons that got the financial industry to state whereds in today. 174 00:09:46,400 --> 00:09:49,560 Speaker 1: Let's take exchanges. The exchanges in the crypto world, by 175 00:09:49,600 --> 00:09:54,760 Speaker 1: calling themselves exchanges immediately conjured up images of regulated exchanges 176 00:09:54,800 --> 00:09:57,520 Speaker 1: like the Chicago Mercantile Exchange and others. That is not 177 00:09:57,600 --> 00:10:00,160 Speaker 1: what they were. And if we go back to the 178 00:10:00,200 --> 00:10:02,920 Speaker 1: first real bitcoin boom and bust, which was in the 179 00:10:03,280 --> 00:10:05,880 Speaker 1: It was about ten years ago Mount Gox, which was 180 00:10:05,960 --> 00:10:09,199 Speaker 1: the biggest bit coin exchange, right went belly up. It 181 00:10:09,360 --> 00:10:12,240 Speaker 1: called itself an exchange, but it really wasn't. I mean, 182 00:10:12,280 --> 00:10:15,560 Speaker 1: it wasn't the kind of trusted and trustworthy regulated exchange. 183 00:10:16,320 --> 00:10:19,040 Speaker 1: And even today, wait wait, wait, so what would you 184 00:10:19,080 --> 00:10:21,240 Speaker 1: call it? What would you call it if you weren't 185 00:10:21,240 --> 00:10:25,520 Speaker 1: going to call it an exchange, A sesspool, a trait. 186 00:10:27,000 --> 00:10:28,520 Speaker 1: I'm going to be polite, and I'm going to be 187 00:10:28,520 --> 00:10:32,160 Speaker 1: polite to say that even a decade on ftx, Binance, 188 00:10:32,360 --> 00:10:35,200 Speaker 1: all of these places that are called exchanges their platforms, 189 00:10:35,480 --> 00:10:37,960 Speaker 1: that's all. They are, their venues, and they do lots 190 00:10:37,960 --> 00:10:39,960 Speaker 1: of stuff behind the scenes that no one really knows. 191 00:10:40,480 --> 00:10:43,960 Speaker 1: They launched their own coins. FTX had its own token, 192 00:10:44,040 --> 00:10:47,280 Speaker 1: Binants has its own token. They're brokers too, they handle 193 00:10:47,320 --> 00:10:51,400 Speaker 1: your trades, they invest as well. They do everything right. 194 00:10:51,440 --> 00:10:53,800 Speaker 1: I mean the phrases the house always wins. It's easy 195 00:10:53,840 --> 00:10:57,120 Speaker 1: to slip into gambling language. Is this really an exchange 196 00:10:57,200 --> 00:10:59,480 Speaker 1: or is it a casino? Basically, my point is that 197 00:10:59,679 --> 00:11:03,080 Speaker 1: the exchange helps them out. It is nothing like a 198 00:11:03,160 --> 00:11:07,120 Speaker 1: regulated exchange. But that's the catual term that was used. 199 00:11:07,160 --> 00:11:10,959 Speaker 1: It gives them credibility, It gives them establishment s dial credibility, 200 00:11:11,080 --> 00:11:13,920 Speaker 1: and they also suffer serve a purpose because the whole 201 00:11:13,920 --> 00:11:17,240 Speaker 1: irony is that crypto it was supposed to be. You know, 202 00:11:17,280 --> 00:11:20,920 Speaker 1: you could be your own bank, private money, totally decentralized. 203 00:11:21,080 --> 00:11:26,600 Speaker 1: But humanity just finds decentralization awkward. It is an elite pursuit, 204 00:11:26,640 --> 00:11:29,320 Speaker 1: it's a niche pursuit. So that's the big irony. In 205 00:11:29,360 --> 00:11:32,439 Speaker 1: the end. People gravitating these exchanges because they are centralized 206 00:11:32,640 --> 00:11:34,840 Speaker 1: and they take a lot of power and get rich. 207 00:11:35,160 --> 00:11:37,160 Speaker 1: And that's why so many of the richest people in 208 00:11:37,200 --> 00:11:40,760 Speaker 1: crypto billionaires. They're exchange owners. They're not people who were 209 00:11:40,760 --> 00:11:43,559 Speaker 1: smart and god and early. They own the exchange, They 210 00:11:43,559 --> 00:11:45,679 Speaker 1: set the rules, and they make the money. And so 211 00:11:45,720 --> 00:11:49,320 Speaker 1: you're also describing another interesting phenomenon there, the development of 212 00:11:49,360 --> 00:11:54,840 Speaker 1: the exchanges or a response to the market evolving and 213 00:11:55,080 --> 00:12:00,240 Speaker 1: lots of various operators and smarties and others decent ending 214 00:12:00,280 --> 00:12:03,360 Speaker 1: on this to see what they could do with it. 215 00:12:03,400 --> 00:12:06,200 Speaker 1: Is there an emblematic moment around that, you know, that 216 00:12:06,360 --> 00:12:10,400 Speaker 1: second step of going from crypto being mined and crypto 217 00:12:10,480 --> 00:12:16,040 Speaker 1: being traded to crypto taking on the clothing, if not 218 00:12:16,080 --> 00:12:22,080 Speaker 1: the authenticity of financial exchanges and more sophisticated markets. We 219 00:12:22,160 --> 00:12:24,480 Speaker 1: may be getting a bit ahead on the Winklevoss story, 220 00:12:24,520 --> 00:12:27,480 Speaker 1: but I definitely think for me, the emblematic year or 221 00:12:27,559 --> 00:12:30,720 Speaker 1: moment is twenty thirteen twenty fourteen, because that's when you 222 00:12:30,800 --> 00:12:33,760 Speaker 1: have the collapse of Mount Gox. So you have a 223 00:12:33,880 --> 00:12:36,920 Speaker 1: narrative where an exchange got really big and very powerful 224 00:12:36,960 --> 00:12:40,040 Speaker 1: and then just went bust. You have the Silk Road 225 00:12:40,160 --> 00:12:42,440 Speaker 1: being shut down, so you have a sense of regulators 226 00:12:42,600 --> 00:12:45,160 Speaker 1: trying to clean up a wild West. And then you 227 00:12:45,240 --> 00:12:47,280 Speaker 1: have this is ten years and shut down Bray the 228 00:12:47,280 --> 00:12:50,440 Speaker 1: way Silk Road shutdown in part because they worried about 229 00:12:50,440 --> 00:12:53,640 Speaker 1: money laundering and crypto rather than simply being used as 230 00:12:53,679 --> 00:12:57,880 Speaker 1: a libertarian currency, also being used to fund possibly fund 231 00:12:58,120 --> 00:13:01,760 Speaker 1: crimes and money laundering and other dark deeds. Well, I mean, 232 00:13:01,760 --> 00:13:03,360 Speaker 1: we could spend all data on matther because that is 233 00:13:03,360 --> 00:13:07,360 Speaker 1: precisely what the libertarian cipherpunks were totally amenable to. That's 234 00:13:07,360 --> 00:13:08,840 Speaker 1: what they want, they said, the freedom to do what 235 00:13:08,880 --> 00:13:11,000 Speaker 1: you want, and that may involve that's known as the 236 00:13:11,000 --> 00:13:14,280 Speaker 1: four horsemen of the crypto apocalypse, which is to say, 237 00:13:14,600 --> 00:13:19,120 Speaker 1: money laundering, crime, pornography, gambling, all of this stuff they're 238 00:13:19,120 --> 00:13:21,640 Speaker 1: okay with. And just to add to your point, post 239 00:13:21,640 --> 00:13:24,920 Speaker 1: Silk Road came the narrative of the wild West is 240 00:13:24,960 --> 00:13:27,600 Speaker 1: over now at the time for regulated exchanges, and this 241 00:13:27,640 --> 00:13:30,880 Speaker 1: is when the Winklevos twins found their exchange, Gemini. This 242 00:13:30,960 --> 00:13:34,200 Speaker 1: is a decade ago when they're all sitting at a 243 00:13:34,280 --> 00:13:37,520 Speaker 1: hearing in front of the New York Department for Financial Services, 244 00:13:37,520 --> 00:13:40,520 Speaker 1: several crypto entrepreneurs, and they're saying, the wild West is over. 245 00:13:41,440 --> 00:13:44,280 Speaker 1: We've solved it and now we can get on with 246 00:13:44,320 --> 00:13:47,720 Speaker 1: doing regulated business. And they were saying, we've solved the 247 00:13:47,800 --> 00:13:53,320 Speaker 1: wild West problem by offering a quote unquote exchange. Right. Well, 248 00:13:53,360 --> 00:13:56,320 Speaker 1: the difference was that this time the phrase this time 249 00:13:56,360 --> 00:13:58,800 Speaker 1: is different always seems to apply. This time it was 250 00:13:58,800 --> 00:14:03,280 Speaker 1: going to be regulated on shore in New York with 251 00:14:03,400 --> 00:14:06,640 Speaker 1: a new license and it was going to be part 252 00:14:06,720 --> 00:14:09,920 Speaker 1: of the Wall Street furniture. That was the narrative, at 253 00:14:09,960 --> 00:14:12,720 Speaker 1: least for the Winkelvos twins and for Gemini. The idea was, 254 00:14:12,840 --> 00:14:16,160 Speaker 1: don't overregulate your laws currently work. Give us a path 255 00:14:16,200 --> 00:14:18,960 Speaker 1: to regulation and we will do that. And that was 256 00:14:19,000 --> 00:14:21,440 Speaker 1: a decade ago. All of these questions are cyclical. They 257 00:14:21,480 --> 00:14:23,880 Speaker 1: keep coming back because this is the nature of crypto. 258 00:14:23,960 --> 00:14:26,040 Speaker 1: It is not a straight line, it's a constant circle. 259 00:14:26,560 --> 00:14:29,120 Speaker 1: Here's a detail that I just love is the fact 260 00:14:29,120 --> 00:14:32,160 Speaker 1: that you met with the winkel Vye I think back 261 00:14:32,200 --> 00:14:36,720 Speaker 1: in twenty seventeen. Tell me about that, right, So that 262 00:14:36,800 --> 00:14:39,320 Speaker 1: was in late twenty seventeen. It was in New York. 263 00:14:40,160 --> 00:14:42,760 Speaker 1: It was really at the height of the bitcoin boom. 264 00:14:43,200 --> 00:14:45,720 Speaker 1: I mean, sadly not this bitcoin boom, the last bit. 265 00:14:46,200 --> 00:14:48,880 Speaker 1: There's been too many. It was late twenty seventeen. Nicola 266 00:14:48,920 --> 00:14:51,120 Speaker 1: was hitting a record and the Winkelvos twins were doing 267 00:14:51,160 --> 00:14:53,680 Speaker 1: a tour of Wall Street and I remember meeting with them. 268 00:14:53,800 --> 00:14:58,080 Speaker 1: They were very affable, very tall, as everyone knows, very 269 00:14:58,720 --> 00:15:01,320 Speaker 1: start by bed for a minute, describe them for me, 270 00:15:01,440 --> 00:15:03,760 Speaker 1: because they are very tall. I think they're each like 271 00:15:04,040 --> 00:15:09,120 Speaker 1: six foot five at least. Former Olympic crew rowers. Yeah, 272 00:15:09,160 --> 00:15:11,320 Speaker 1: and it was a bit twin peaksy. Sorry for the 273 00:15:11,400 --> 00:15:14,240 Speaker 1: terrible pun, but they were moving through the office. They 274 00:15:14,280 --> 00:15:16,240 Speaker 1: had just done a tour of Wall Street and they 275 00:15:16,240 --> 00:15:19,640 Speaker 1: were wearing suits. And later on, while reading the history 276 00:15:19,680 --> 00:15:21,920 Speaker 1: of their adventures in crypto, you see suits are a 277 00:15:21,960 --> 00:15:24,520 Speaker 1: recurring theme. They've always been seen as suits, but they 278 00:15:24,520 --> 00:15:27,040 Speaker 1: were wearing suits because they wanted to blend in. They 279 00:15:27,040 --> 00:15:28,960 Speaker 1: were trying to sell a product to Wall Street. They 280 00:15:28,960 --> 00:15:31,960 Speaker 1: were trying to get regulatory approval. They were trying to 281 00:15:32,400 --> 00:15:35,440 Speaker 1: really bring this into everyone's pocket through an ETF, through 282 00:15:35,520 --> 00:15:38,920 Speaker 1: regulated products. The delusion would persist, right, But this was 283 00:15:38,960 --> 00:15:41,200 Speaker 1: the kind of height of the retail mania where every 284 00:15:41,280 --> 00:15:43,680 Speaker 1: question or Thanksgiving dinner was so are you going to 285 00:15:43,720 --> 00:15:46,520 Speaker 1: buy bitcoin? And so we talked and yeah, this was 286 00:15:46,680 --> 00:15:49,200 Speaker 1: their moment, this was their time to shine on Wall Street. 287 00:15:49,640 --> 00:15:52,240 Speaker 1: What did you talk about? I mean, we talked about 288 00:15:52,240 --> 00:15:54,680 Speaker 1: what their aim was, right, their view of bitcoin, which 289 00:15:54,720 --> 00:15:57,680 Speaker 1: they said publicly on the TV set, which they were 290 00:15:57,680 --> 00:15:59,880 Speaker 1: selling bitcoin as the new gold. Right, Bitcoin was going 291 00:16:00,120 --> 00:16:02,880 Speaker 1: better than gold at being gold, It was going to 292 00:16:02,920 --> 00:16:04,920 Speaker 1: be in everyone's portfolio, it was going to be a 293 00:16:04,960 --> 00:16:07,120 Speaker 1: hedge against a lot of things, and it was going 294 00:16:07,160 --> 00:16:09,600 Speaker 1: to be an asset to store. And as a result, 295 00:16:09,600 --> 00:16:12,080 Speaker 1: it should be in the mainstream, and they were the 296 00:16:12,120 --> 00:16:15,480 Speaker 1: best vehicle to get it. And as you were having 297 00:16:15,520 --> 00:16:17,720 Speaker 1: that conversation with them back then, what was going on 298 00:16:17,800 --> 00:16:20,480 Speaker 1: in your own mind? What did you think about the 299 00:16:20,520 --> 00:16:24,640 Speaker 1: fact that two six ft five guys in suits we're 300 00:16:24,680 --> 00:16:27,040 Speaker 1: saying crypto is the new goal. I mean, I was 301 00:16:27,080 --> 00:16:30,720 Speaker 1: skeptical from the beginning, and I think it's been hard 302 00:16:30,760 --> 00:16:33,280 Speaker 1: to well, I've always made an effort right to at 303 00:16:33,320 --> 00:16:35,880 Speaker 1: least meet people who believe to try and I guess 304 00:16:36,360 --> 00:16:38,800 Speaker 1: shape my own arguments right or try and hear one 305 00:16:38,880 --> 00:16:41,360 Speaker 1: day the killer argument as to why this was not 306 00:16:41,440 --> 00:16:44,440 Speaker 1: just speculative. But I mean, at the time I wrote, 307 00:16:44,440 --> 00:16:47,520 Speaker 1: this was just the most incredible bubble I'd ever seen. 308 00:16:47,560 --> 00:16:49,480 Speaker 1: And this was in twenty seventeen. I mean, this is 309 00:16:49,480 --> 00:16:53,400 Speaker 1: when Big when at ten thousand seemed completely crazy, but 310 00:16:53,480 --> 00:16:56,360 Speaker 1: at the time it was the most incredible burst of 311 00:16:56,840 --> 00:17:00,160 Speaker 1: fomo and speculative fever that I've ever seen. The point is, 312 00:17:00,200 --> 00:17:02,720 Speaker 1: it wasn't just the retail obviously, the taxi driver and 313 00:17:02,760 --> 00:17:05,560 Speaker 1: the cliche of the shoeshine boy. It was the regulators. 314 00:17:05,640 --> 00:17:08,320 Speaker 1: I was seeing people from the CFTC. You go on 315 00:17:08,359 --> 00:17:12,040 Speaker 1: Bloomberg TV and say we need futures products because we're 316 00:17:12,080 --> 00:17:14,960 Speaker 1: meeting invested demank. It felt incredible. I mean, it really 317 00:17:15,000 --> 00:17:17,920 Speaker 1: just blew my mind. And at the time I was like, well, 318 00:17:17,920 --> 00:17:20,480 Speaker 1: this clearly isn't going to last, and it didn't. But 319 00:17:20,560 --> 00:17:22,439 Speaker 1: at the same time, it did, so I feel I 320 00:17:22,520 --> 00:17:25,159 Speaker 1: was half right, half wrong. I definitely didn't think that 321 00:17:25,160 --> 00:17:27,440 Speaker 1: it would survive and then bounce back and in the 322 00:17:27,480 --> 00:17:29,119 Speaker 1: way that it has done. But definitely the whole thing 323 00:17:29,119 --> 00:17:33,520 Speaker 1: seemed crazy. So with the images of fomo and speculative 324 00:17:33,560 --> 00:17:36,560 Speaker 1: bubbles dancing in my head, Leonel, I want to take 325 00:17:36,560 --> 00:17:39,439 Speaker 1: a slight break here to hear from our sponsors, and 326 00:17:39,480 --> 00:17:42,639 Speaker 1: then we'll come back and dig into the Winkelvy a 327 00:17:42,640 --> 00:17:50,240 Speaker 1: little bit more. We're back with Leonel, la columnist for 328 00:17:50,280 --> 00:17:54,639 Speaker 1: bloom Rigg Opinion. We are digging into everything crypto via 329 00:17:54,800 --> 00:18:00,280 Speaker 1: everything Twins. And the twins, of course, are the winklevost Wins, 330 00:18:00,440 --> 00:18:07,160 Speaker 1: and they named their crypto exchange Gemini, the astrological symbol 331 00:18:07,160 --> 00:18:09,800 Speaker 1: of twins. So I guess everything is self referential in 332 00:18:09,840 --> 00:18:14,000 Speaker 1: their little world. Do you know specifically how the Winkle 333 00:18:14,040 --> 00:18:18,360 Speaker 1: I became interested in crypto and how Gemini itself came 334 00:18:18,400 --> 00:18:23,240 Speaker 1: to be yes, because the twins were not shy about 335 00:18:23,280 --> 00:18:26,240 Speaker 1: promoting it once they'd done what they I guess considered 336 00:18:26,280 --> 00:18:30,280 Speaker 1: to be a first big investment. And that first investment 337 00:18:30,840 --> 00:18:34,520 Speaker 1: came obviously with a kind of second act right or 338 00:18:34,560 --> 00:18:37,280 Speaker 1: a redemption narrative, because as you pointed out in the intro, 339 00:18:37,800 --> 00:18:42,119 Speaker 1: they were best known as the guys who were screwed 340 00:18:42,160 --> 00:18:45,520 Speaker 1: over by Zuckerberg on Facebook and who kind of had 341 00:18:45,560 --> 00:18:47,440 Speaker 1: fought and fought and fought for the scraps of a 342 00:18:47,480 --> 00:18:49,840 Speaker 1: settlement and who are now trying to kind of make 343 00:18:49,840 --> 00:18:54,200 Speaker 1: a comeback. So their whole narrative was Act number two redemption. 344 00:18:54,880 --> 00:18:57,400 Speaker 1: And the anecdote for how they discovered it, I mean, 345 00:18:57,400 --> 00:19:02,080 Speaker 1: they were on vacation somewhere, partying models, alcohol, cocktails the lot, 346 00:19:02,119 --> 00:19:04,520 Speaker 1: and then somebody came up to them and said, hey, man, 347 00:19:04,560 --> 00:19:08,040 Speaker 1: this is the next big thing, and so they then 348 00:19:08,320 --> 00:19:11,240 Speaker 1: learned all about bitcoin and got into it. What's interesting 349 00:19:11,240 --> 00:19:13,159 Speaker 1: at that time, though, is that they were acting as 350 00:19:13,160 --> 00:19:16,040 Speaker 1: adventure capitalists. It is not the case that they were 351 00:19:16,560 --> 00:19:18,240 Speaker 1: sucked in and went to live on a kind of 352 00:19:18,280 --> 00:19:21,120 Speaker 1: bitcoin funded commune. These guys had come out of Facebook, 353 00:19:21,119 --> 00:19:25,080 Speaker 1: they had their own VC firm, so they really were skeptical. 354 00:19:25,440 --> 00:19:27,639 Speaker 1: They asked lots of people about it. They asked all 355 00:19:27,680 --> 00:19:30,120 Speaker 1: the questions that you and I and other journalists ask 356 00:19:30,480 --> 00:19:32,680 Speaker 1: and when they decided they were ready for it, they 357 00:19:32,680 --> 00:19:35,280 Speaker 1: went into it, not just by investing in what was 358 00:19:35,320 --> 00:19:37,760 Speaker 1: then a kind of exchange they went into it by 359 00:19:37,760 --> 00:19:40,159 Speaker 1: buying Bitcoin two, so they really tried to corner the 360 00:19:40,200 --> 00:19:42,760 Speaker 1: market but in both hands. Then they publicized the story 361 00:19:42,760 --> 00:19:45,959 Speaker 1: and well Winnow the rest. As for Gemini, as I 362 00:19:46,000 --> 00:19:50,479 Speaker 1: was saying earlier, that came after the MTS collapse, and 363 00:19:50,520 --> 00:19:52,399 Speaker 1: it was their new narrative, right, it was the digital 364 00:19:52,400 --> 00:19:55,600 Speaker 1: goal narrative. It was the suits and ties. It was 365 00:19:55,640 --> 00:19:58,680 Speaker 1: the wild West and the hoodies and the kind of 366 00:19:58,880 --> 00:20:02,200 Speaker 1: silk road stuff that's yesterday's news. The real story now 367 00:20:02,320 --> 00:20:05,440 Speaker 1: is going to be about getting institutional investors and Wall 368 00:20:05,480 --> 00:20:09,440 Speaker 1: Street into this product. And they had a partner company 369 00:20:09,640 --> 00:20:12,560 Speaker 1: in all of this, right, Genesis. Tell me a little 370 00:20:12,560 --> 00:20:16,160 Speaker 1: bit about Genesis and its relationship with Gemini. So we're 371 00:20:16,200 --> 00:20:18,000 Speaker 1: going to have trouble with the Genesis and the Gemman. 372 00:20:18,440 --> 00:20:21,040 Speaker 1: Just hate hate these names, oh these names. But that's 373 00:20:21,040 --> 00:20:23,480 Speaker 1: what we're here to do, shed light and clarity on 374 00:20:23,600 --> 00:20:27,480 Speaker 1: this crazy world for our listeners. So Genesis actually comes 375 00:20:27,680 --> 00:20:29,600 Speaker 1: a lot later in the story. That comes with the 376 00:20:29,680 --> 00:20:31,960 Speaker 1: last boom that we experienced, which was the credit bubble 377 00:20:32,000 --> 00:20:34,960 Speaker 1: boom in crypto, the pandemic boom that we all have 378 00:20:35,119 --> 00:20:37,840 Speaker 1: fresh in our minds. And even though, as I was saying, 379 00:20:38,000 --> 00:20:41,400 Speaker 1: the twins are next to Barry Silbert, who's the head 380 00:20:41,400 --> 00:20:44,480 Speaker 1: of the Digital currency group that owns Genesis. They're sat 381 00:20:44,520 --> 00:20:46,920 Speaker 1: next to him in twenty fourteen. I think at these 382 00:20:46,960 --> 00:20:51,360 Speaker 1: hearings of crypto Silbert has brought into bitcoin. I think 383 00:20:51,359 --> 00:20:53,760 Speaker 1: he got them from the Silk Road auction, and they're 384 00:20:53,760 --> 00:20:56,880 Speaker 1: both at the same table saying the same thing. This 385 00:20:57,000 --> 00:20:59,000 Speaker 1: is now a mature industry, or it's going to be 386 00:20:59,080 --> 00:21:02,800 Speaker 1: a mature industry. Anyway. The big irony of this whole 387 00:21:02,840 --> 00:21:05,520 Speaker 1: story is that clearly whatever bet Gem and I had 388 00:21:05,600 --> 00:21:08,800 Speaker 1: made did not really work out, because over time the 389 00:21:08,840 --> 00:21:11,119 Speaker 1: exchanges that got really big and powerful were the official 390 00:21:11,160 --> 00:21:16,040 Speaker 1: ones FTX Finance, not in New York, far away away 391 00:21:16,080 --> 00:21:20,879 Speaker 1: from regulators noses. They're the ones offering leverage, speculative and 392 00:21:21,000 --> 00:21:25,359 Speaker 1: dangerous trading, and they're getting incredible traction. But you're pointing 393 00:21:25,359 --> 00:21:28,080 Speaker 1: out is they're doing the things that New York regulators 394 00:21:28,119 --> 00:21:32,520 Speaker 1: wouldn't let a financial exchange do, right, being a traditional 395 00:21:32,520 --> 00:21:35,760 Speaker 1: financial exchange, right, which is separately why these exchanges had 396 00:21:35,960 --> 00:21:39,240 Speaker 1: US arms called dot us or whatever. And let's also 397 00:21:39,320 --> 00:21:41,879 Speaker 1: point out that those aren't regulators saying you can't do this, 398 00:21:41,920 --> 00:21:47,800 Speaker 1: because they're just mean nasty, unthoughtful, uninnovated, dullards, but that 399 00:21:47,920 --> 00:21:51,320 Speaker 1: there are, as you've pointed out, centuries of financial bubbles 400 00:21:51,320 --> 00:21:53,760 Speaker 1: that have come along. And one of the responses the 401 00:21:53,760 --> 00:21:56,760 Speaker 1: financial industry has learned over the years is you should 402 00:21:56,760 --> 00:21:59,760 Speaker 1: embrace innovation, you should allow it to flourish, but you 403 00:21:59,800 --> 00:22:03,080 Speaker 1: have to make distinctions between innovation and fraud, or innovation 404 00:22:03,080 --> 00:22:06,760 Speaker 1: and self dealing, or innovation and mouthfeasance, and that a 405 00:22:06,840 --> 00:22:10,400 Speaker 1: regulatory touch that makes sure that isn't occurring is good 406 00:22:10,400 --> 00:22:13,360 Speaker 1: for everyone involved, as good for investors, it's good for borrowers, 407 00:22:13,359 --> 00:22:15,800 Speaker 1: it's good for the companies, it's good for the development 408 00:22:15,800 --> 00:22:20,000 Speaker 1: of economies. And it doesn't exist there just because it's 409 00:22:20,160 --> 00:22:24,600 Speaker 1: a fence post blocking the long march of progress. And 410 00:22:24,720 --> 00:22:27,440 Speaker 1: the fact that these exchanges decided to go off shore 411 00:22:28,119 --> 00:22:30,680 Speaker 1: might have been a warning signal to people, right right, 412 00:22:30,800 --> 00:22:35,160 Speaker 1: and it wasn't. And what's incredible is that money begets money, 413 00:22:35,200 --> 00:22:39,280 Speaker 1: liquidity begets liquidity, and so money was being thrown at 414 00:22:39,280 --> 00:22:43,280 Speaker 1: these platforms by venture capital firms, by institutional investors, and 415 00:22:43,320 --> 00:22:46,520 Speaker 1: then we hit the pandemic and everything exploded. But I 416 00:22:46,560 --> 00:22:48,520 Speaker 1: guess the point I'm trying to make is that had 417 00:22:48,640 --> 00:22:54,000 Speaker 1: Gemini's story back in twenty fourteen, twenty fifteen, been it right, 418 00:22:54,080 --> 00:22:55,879 Speaker 1: the story might have ended on a different note, or 419 00:22:55,880 --> 00:22:58,560 Speaker 1: they might have gone away, but it didn't. It went 420 00:22:58,600 --> 00:23:01,320 Speaker 1: into a new phase Gemini now when it's to go global, 421 00:23:01,760 --> 00:23:04,800 Speaker 1: and when it became clear that this pandemic boom was 422 00:23:04,880 --> 00:23:08,560 Speaker 1: creating a whole new threaded bubble, a whole new industry 423 00:23:08,560 --> 00:23:11,760 Speaker 1: of leverage around it, they ended up joining in. And 424 00:23:11,880 --> 00:23:16,640 Speaker 1: Genesis was the lender that really drove a lot of this. 425 00:23:16,880 --> 00:23:19,280 Speaker 1: I mean, the amount of money that it lended, the 426 00:23:19,320 --> 00:23:22,520 Speaker 1: growth of its loan book in just two years was 427 00:23:22,600 --> 00:23:25,800 Speaker 1: just I mean madness, right. I think it's fifteen billion 428 00:23:25,880 --> 00:23:29,480 Speaker 1: or ten billion, very short space of time. And that's 429 00:23:29,560 --> 00:23:33,800 Speaker 1: the reason why today we have this feud or dispute 430 00:23:34,080 --> 00:23:37,840 Speaker 1: turned bankruptcy fight between the Winklevoss twins and Silver. It's 431 00:23:37,880 --> 00:23:40,200 Speaker 1: not because they were in this from the beginning. It's 432 00:23:40,240 --> 00:23:43,399 Speaker 1: because they both got in. They both got swept up 433 00:23:43,400 --> 00:23:46,679 Speaker 1: in this most recent credit bubble. And I think the 434 00:23:46,680 --> 00:23:51,480 Speaker 1: thing to remember here when you're noting how lending spiked 435 00:23:52,200 --> 00:23:55,399 Speaker 1: to fifteen billion dollars, all of this lending was in 436 00:23:55,520 --> 00:23:59,480 Speaker 1: service of giving the market a big boost in terms 437 00:23:59,520 --> 00:24:03,840 Speaker 1: of help the market to inflate the value of crypto, 438 00:24:03,920 --> 00:24:06,800 Speaker 1: and then the crypto that was traded among all the 439 00:24:06,880 --> 00:24:11,359 Speaker 1: various entities Gemini and Genesis included. Is it fair to 440 00:24:11,400 --> 00:24:14,119 Speaker 1: call that self dealing or do you think it was 441 00:24:14,200 --> 00:24:18,359 Speaker 1: just raw market speculation? Oh? I mean it is all 442 00:24:18,400 --> 00:24:21,960 Speaker 1: speculation that if you mean, look at the way it unraveled. 443 00:24:22,000 --> 00:24:25,240 Speaker 1: You had hedge funds that collapsed that then owed money 444 00:24:25,240 --> 00:24:28,720 Speaker 1: to Genesis, which then had to find money which wasn't 445 00:24:28,720 --> 00:24:31,600 Speaker 1: there from its parent group, which then trickled all the 446 00:24:31,640 --> 00:24:33,760 Speaker 1: way down to people who had put their money with Gemini. 447 00:24:34,320 --> 00:24:39,040 Speaker 1: That kind of chain reaction, in that kind of domino toppling, 448 00:24:39,800 --> 00:24:41,920 Speaker 1: reveals that at the end of the day, what's there 449 00:24:42,040 --> 00:24:44,880 Speaker 1: isn't real because everyone's trying to find the original money 450 00:24:44,960 --> 00:24:47,960 Speaker 1: which isn't there. That the cash isn't there, right, and 451 00:24:48,680 --> 00:24:52,600 Speaker 1: even today, what is the crypto economy? I think people 452 00:24:52,680 --> 00:24:55,119 Speaker 1: stopped trying to say that crypto was real. People stopped 453 00:24:55,119 --> 00:24:57,320 Speaker 1: trying to say that crypto was being used by people 454 00:24:57,720 --> 00:24:59,800 Speaker 1: or merchants. People just gave up because it was just 455 00:25:00,000 --> 00:25:03,040 Speaker 1: ely and blatantly not true. All of it was trading 456 00:25:03,359 --> 00:25:08,440 Speaker 1: as an asset with hedge funds and borrowing and speculation 457 00:25:08,560 --> 00:25:11,639 Speaker 1: and betting. People just stopped trying to pretend right that 458 00:25:11,680 --> 00:25:14,400 Speaker 1: it was in the service of some fundamental economic good. 459 00:25:14,520 --> 00:25:18,080 Speaker 1: So yeah, I would say as completely expectative, and you know, 460 00:25:18,440 --> 00:25:21,199 Speaker 1: I want to stay focused on the Winkelvoss twins, but 461 00:25:21,359 --> 00:25:25,880 Speaker 1: the demise of Sam Bankman Freed and FTAX and Alameda. 462 00:25:26,000 --> 00:25:29,959 Speaker 1: One of the lessons from that is that these close 463 00:25:30,040 --> 00:25:34,639 Speaker 1: relationships between the exchanges and between asset management firms, and 464 00:25:34,760 --> 00:25:37,639 Speaker 1: the ready transmission of funds back and forth in this 465 00:25:37,800 --> 00:25:43,080 Speaker 1: whirlwind that kept the price of cryptocurrency escalating, there may 466 00:25:43,119 --> 00:25:47,840 Speaker 1: be plain old traditional accounting fraud and financial fraud involved 467 00:25:47,840 --> 00:25:51,280 Speaker 1: in all of that. There's investigations going on right now 468 00:25:51,320 --> 00:25:54,639 Speaker 1: of FTX and Alameda for those very reasons. Do you 469 00:25:54,680 --> 00:25:57,760 Speaker 1: think those sort of partner relationships should have been warning 470 00:25:57,800 --> 00:26:02,240 Speaker 1: signs too regulators and investors and others observing this that 471 00:26:02,800 --> 00:26:07,919 Speaker 1: something hanky might have been afoot? Yes, But I also 472 00:26:08,040 --> 00:26:11,840 Speaker 1: feel like crypto is one of those things where everything, 473 00:26:12,640 --> 00:26:15,200 Speaker 1: everything should have been an alarm belt. Take the whole 474 00:26:15,359 --> 00:26:17,800 Speaker 1: lending earned product, which is the reason why Gemini and 475 00:26:17,880 --> 00:26:21,479 Speaker 1: Genesis are at loggerheads. What are they? Why are you 476 00:26:21,520 --> 00:26:24,560 Speaker 1: getting interest rates. Why are you getting interest rates many 477 00:26:24,600 --> 00:26:28,520 Speaker 1: times above the base central bank rate for parking your crypto? 478 00:26:28,720 --> 00:26:32,880 Speaker 1: What does that mean? Who? Either it's being done at 479 00:26:32,880 --> 00:26:35,639 Speaker 1: a loss by a company that just basically wants to 480 00:26:35,680 --> 00:26:37,920 Speaker 1: grow and it's being given lots of money to grow, 481 00:26:38,520 --> 00:26:41,480 Speaker 1: in which case what happens in the future, How sustainable 482 00:26:41,560 --> 00:26:45,159 Speaker 1: is that? Or else there are incredible risks being taken 483 00:26:45,520 --> 00:26:48,040 Speaker 1: on the other side of the trade to get you 484 00:26:48,400 --> 00:26:52,399 Speaker 1: that interest rate, to get you that return, And that's 485 00:26:52,440 --> 00:26:56,119 Speaker 1: clearly what was being done too, where that fund was 486 00:26:56,160 --> 00:26:59,760 Speaker 1: being lent onto hedge funds, which we're doing very risky trades, 487 00:27:00,040 --> 00:27:03,160 Speaker 1: and in the end it all just kind of toppled. 488 00:27:03,200 --> 00:27:06,679 Speaker 1: So I guess my point is, yes, of course there 489 00:27:06,680 --> 00:27:10,040 Speaker 1: were conflicts of interest, and yes, institutional investors and bench 490 00:27:10,119 --> 00:27:13,680 Speaker 1: capital funds hedge funds clearly were far too chummy and 491 00:27:13,680 --> 00:27:16,159 Speaker 1: didn't do their homework. On the other hand, there is 492 00:27:16,200 --> 00:27:20,960 Speaker 1: something basic just the alarm bells. Whether it's where it's 493 00:27:20,960 --> 00:27:24,760 Speaker 1: this venue located, what does it do where it's financials 494 00:27:24,760 --> 00:27:26,919 Speaker 1: and why is it offered me such a generous interest rate? Right? 495 00:27:26,960 --> 00:27:30,080 Speaker 1: What's the cash? Crypto seemed to be free lunches at 496 00:27:30,119 --> 00:27:34,880 Speaker 1: every single floor you know, Warren Buffett has famously said 497 00:27:35,080 --> 00:27:37,520 Speaker 1: he looks at lots of companies, but whatever company he 498 00:27:37,560 --> 00:27:40,400 Speaker 1: looks at, he always focuses on the management, and as 499 00:27:40,400 --> 00:27:44,440 Speaker 1: the management seemed competent and dedicated and capable. And I've 500 00:27:44,440 --> 00:27:47,359 Speaker 1: sort of wondered about that in the context of the 501 00:27:47,440 --> 00:27:50,640 Speaker 1: Winkle Vas twins. You know, during the time that they 502 00:27:50,680 --> 00:27:55,399 Speaker 1: were helping engineer the cryptocurrency boom, they also were spending 503 00:27:55,400 --> 00:27:58,520 Speaker 1: a lot of time in the limelight. They invested in 504 00:27:58,560 --> 00:28:03,600 Speaker 1: a magazine that routinely featured topless models and Hollywood actresses. 505 00:28:03,960 --> 00:28:06,920 Speaker 1: They had their own rock band. Do you think those 506 00:28:07,080 --> 00:28:09,959 Speaker 1: might have been indications that they were maybe more enamored 507 00:28:10,000 --> 00:28:15,080 Speaker 1: of the spotlight than they were running their own business effectively. Yeah. 508 00:28:15,119 --> 00:28:16,959 Speaker 1: The thing is that the Winkle Got Twins. I mean 509 00:28:17,000 --> 00:28:19,400 Speaker 1: they are tech billionaires to me, right, I mean, these 510 00:28:19,400 --> 00:28:22,680 Speaker 1: are people who came out of the Facebook boom, and 511 00:28:22,760 --> 00:28:24,720 Speaker 1: so a lot of their behavior I feel it is 512 00:28:24,800 --> 00:28:27,280 Speaker 1: very commensurate with tech billionaires. They're very rich, and they're 513 00:28:27,320 --> 00:28:29,800 Speaker 1: always going to be disconnected on some way from society. 514 00:28:30,320 --> 00:28:35,320 Speaker 1: The crypto angle. Firstly, these two they're like the portrait 515 00:28:35,359 --> 00:28:39,600 Speaker 1: of Dorian Gray, right, they visually represent crypto along every 516 00:28:39,640 --> 00:28:42,840 Speaker 1: single step of the way. They're wearing suits when they're 517 00:28:42,840 --> 00:28:45,240 Speaker 1: selling it to Wall Street. They're on Twitter with the 518 00:28:45,320 --> 00:28:47,800 Speaker 1: laser eyes when it's going up a lot, and as 519 00:28:47,800 --> 00:28:52,160 Speaker 1: you say, when everything is tanking, they are discreetly running 520 00:28:52,160 --> 00:28:54,720 Speaker 1: away to play in a rock band. For me, there's 521 00:28:54,760 --> 00:28:58,880 Speaker 1: something so decadent. They're not even doing their old rowing thing, 522 00:28:58,920 --> 00:29:01,600 Speaker 1: because I mean, these guys are guild athletes. They weren't 523 00:29:01,640 --> 00:29:03,720 Speaker 1: going back to some passion, they weren't doing something they're 524 00:29:03,720 --> 00:29:05,800 Speaker 1: generally good at. It just seemed like they were hiding. 525 00:29:05,920 --> 00:29:09,760 Speaker 1: They were going off and playing competent or okay covers 526 00:29:09,800 --> 00:29:13,640 Speaker 1: of seventies rock standards days after having laid off ten 527 00:29:13,680 --> 00:29:17,000 Speaker 1: percent of staff and their Twitter avatars, which used to 528 00:29:17,040 --> 00:29:19,720 Speaker 1: be laser eyed ten people to buy Bye Bye. Was 529 00:29:19,760 --> 00:29:21,960 Speaker 1: not just some anonymous things saying come and see our band. 530 00:29:22,160 --> 00:29:23,920 Speaker 1: So for me, it just seemed like the height of decadence. 531 00:29:23,960 --> 00:29:25,920 Speaker 1: It just reminded me of how tech billionaires and venture 532 00:29:25,920 --> 00:29:30,800 Speaker 1: capitalists today, after having gotten so rich and having faced 533 00:29:30,880 --> 00:29:33,720 Speaker 1: none of the consequences, just increasingly seemed just to be 534 00:29:33,840 --> 00:29:35,680 Speaker 1: checked out. So for me, it just felt like the 535 00:29:35,760 --> 00:29:37,640 Speaker 1: end of the story. It felt like by then it 536 00:29:37,640 --> 00:29:39,440 Speaker 1: was too late. I mean, if that was your red alert, 537 00:29:39,440 --> 00:29:42,880 Speaker 1: you're probably already losing money on crypto. Or it was 538 00:29:42,920 --> 00:29:46,440 Speaker 1: like Jay Gatsby pouring Bootleg Jane into a fountain and 539 00:29:46,560 --> 00:29:50,720 Speaker 1: dancing wildly around it. We've seen this before. I want 540 00:29:50,760 --> 00:29:54,640 Speaker 1: to take another break, you know, to hear from our sponsors, 541 00:29:54,800 --> 00:29:57,240 Speaker 1: and when we come back, we will dig a little 542 00:29:57,240 --> 00:30:00,640 Speaker 1: bit more into what might be the end for the 543 00:30:00,680 --> 00:30:03,240 Speaker 1: Wink of Vases and some of the recent developments around 544 00:30:03,240 --> 00:30:09,760 Speaker 1: their crypto empire. We'll be right back. We are back 545 00:30:09,760 --> 00:30:13,800 Speaker 1: with William l. Or Ant columns with Bloomberg Opinion, Crypto 546 00:30:13,880 --> 00:30:16,600 Speaker 1: savant and always a great and fun guy to talk with. 547 00:30:17,200 --> 00:30:20,800 Speaker 1: We are now in this stage in the short brief 548 00:30:20,840 --> 00:30:25,760 Speaker 1: flaming history, like a medior of crypto, of what appears 549 00:30:25,800 --> 00:30:29,360 Speaker 1: to be yet another epic meltdown phase. What caused the 550 00:30:29,480 --> 00:30:34,400 Speaker 1: recent meltdown that we've all been witnessing, the recent meltdown? Obviously, 551 00:30:34,480 --> 00:30:36,840 Speaker 1: we have in our heads a lot of things. The 552 00:30:36,880 --> 00:30:38,880 Speaker 1: fact that we were locked down during the pandemic, the 553 00:30:38,880 --> 00:30:41,720 Speaker 1: fact there was so much social media and so much uncertainty, 554 00:30:42,120 --> 00:30:43,720 Speaker 1: we were all kind of vulnerable to a lot of 555 00:30:43,720 --> 00:30:47,000 Speaker 1: new narratives such as crypto again, really is going to 556 00:30:47,040 --> 00:30:49,280 Speaker 1: take over the world. And by the way, there's a 557 00:30:49,360 --> 00:30:52,200 Speaker 1: very good book by Jonathan Bigle, Reckless, which is all 558 00:30:52,240 --> 00:30:55,360 Speaker 1: about the most recent bubble, and that really was about credit. 559 00:30:55,680 --> 00:30:58,200 Speaker 1: Because if you think about the last two booms, you 560 00:30:58,320 --> 00:31:01,240 Speaker 1: had the kind of freaks and geeks revolution boom, and 561 00:31:01,280 --> 00:31:04,160 Speaker 1: then you had the retail boom for Thanksgiving dinner boom. 562 00:31:04,320 --> 00:31:06,920 Speaker 1: But that was always about buying, you buying bitcoin, you 563 00:31:07,000 --> 00:31:10,320 Speaker 1: buying bitcoin. This one was about leverage. It was about 564 00:31:10,480 --> 00:31:14,560 Speaker 1: lending and loans and trading on margin. It was really 565 00:31:15,160 --> 00:31:18,040 Speaker 1: the credit bubble and all of the rest of the 566 00:31:18,040 --> 00:31:21,520 Speaker 1: things that we think about, the influencers, the social media, 567 00:31:21,560 --> 00:31:24,440 Speaker 1: the pandemic, uncertainty, that was all triggered as well by 568 00:31:24,440 --> 00:31:26,320 Speaker 1: the price. But I think the price could not have 569 00:31:26,760 --> 00:31:30,560 Speaker 1: exploded that high without the combination of people using leverage 570 00:31:30,600 --> 00:31:34,200 Speaker 1: to choose the price, and at the same time institutions 571 00:31:34,200 --> 00:31:37,000 Speaker 1: and big companies making bets that they thought would pay 572 00:31:37,000 --> 00:31:39,520 Speaker 1: off in the pandemic. So I think it's fundamentally incredibable. 573 00:31:40,200 --> 00:31:43,719 Speaker 1: And of course credit bubbles pop when interest rates start rising, 574 00:31:44,160 --> 00:31:46,800 Speaker 1: and when the Federal Reserve and other central banks around 575 00:31:46,840 --> 00:31:50,240 Speaker 1: the world started jacking up interest rates in response to 576 00:31:50,320 --> 00:31:56,560 Speaker 1: massive inflation. Industries that were running on airplane fumes, like crypto, 577 00:31:57,200 --> 00:32:01,680 Speaker 1: came under pressure, right, correct and simple reason that if 578 00:32:01,800 --> 00:32:06,000 Speaker 1: you can earn a return on your cash deposit, that 579 00:32:06,360 --> 00:32:09,080 Speaker 1: means that other investments that do not produce a return 580 00:32:09,440 --> 00:32:11,800 Speaker 1: have to compete with that. It's really just that basic, 581 00:32:12,000 --> 00:32:15,880 Speaker 1: basic math, basic math. And so before the whole irony 582 00:32:15,920 --> 00:32:18,680 Speaker 1: of crypto offering you an interest rate, the whole irony 583 00:32:18,760 --> 00:32:21,440 Speaker 1: is that when returns on real cash were going up, 584 00:32:21,720 --> 00:32:24,600 Speaker 1: the returns on crypto and their value was sort of 585 00:32:24,600 --> 00:32:27,320 Speaker 1: both falling at the same time. So there really was 586 00:32:28,000 --> 00:32:31,240 Speaker 1: no contest. Crypto proved to be unprofitable tech. It proved 587 00:32:31,240 --> 00:32:34,320 Speaker 1: to be nastack social media times one hundred times a thousand. 588 00:32:34,760 --> 00:32:37,480 Speaker 1: It wasn't digital gold, it wasn't a hedge, wasn't a 589 00:32:37,480 --> 00:32:42,400 Speaker 1: story of value. It was a tech risk on megabubble 590 00:32:42,440 --> 00:32:45,800 Speaker 1: bets helped by easy money. And so when the easy 591 00:32:45,800 --> 00:32:48,680 Speaker 1: money goes away, that bet falls. You had what I 592 00:32:48,840 --> 00:32:52,160 Speaker 1: consider sort of an epic description of where the Winkelvy 593 00:32:52,360 --> 00:32:55,120 Speaker 1: reside right now. And you describe them in one of 594 00:32:55,200 --> 00:32:58,800 Speaker 1: your columns as being stuck in the financial version of 595 00:32:58,800 --> 00:33:02,600 Speaker 1: the Hotel California explain that to me. Can I just 596 00:33:02,680 --> 00:33:05,800 Speaker 1: quickly say the Hotel California has been a term that 597 00:33:06,360 --> 00:33:08,400 Speaker 1: my colleagues and I have been banding around for years, 598 00:33:08,480 --> 00:33:13,000 Speaker 1: right because Hotel California describes also just generally buying into crypto, 599 00:33:13,320 --> 00:33:16,680 Speaker 1: because when the Winkelvos twins bought their first big stash 600 00:33:16,680 --> 00:33:19,680 Speaker 1: of crypto after the collapse, there were a lot of 601 00:33:19,680 --> 00:33:22,400 Speaker 1: people trying to get out. Crypto is about people getting 602 00:33:22,440 --> 00:33:25,840 Speaker 1: in and then when an a liquid asset like crypto falls, 603 00:33:26,520 --> 00:33:29,360 Speaker 1: you are faced with the choice of taking potentially huge 604 00:33:29,400 --> 00:33:31,560 Speaker 1: loss just to get out. And so that's why I 605 00:33:31,560 --> 00:33:35,520 Speaker 1: think also exchanges look very appealing because they're a way 606 00:33:35,560 --> 00:33:39,040 Speaker 1: to sell your cryptocurrency to bring down the pile while 607 00:33:39,080 --> 00:33:41,560 Speaker 1: making money of transaction fees. So I just want to 608 00:33:41,600 --> 00:33:43,360 Speaker 1: kind of put that out there and say that the 609 00:33:43,360 --> 00:33:45,480 Speaker 1: Hotel California issue with though it has been there in 610 00:33:45,480 --> 00:33:48,600 Speaker 1: a long time, because everybody rushes in when it's going up, 611 00:33:48,680 --> 00:33:51,760 Speaker 1: and everyone's terrified to sell when it's gone down. Today's 612 00:33:51,760 --> 00:33:55,840 Speaker 1: Hotel California is pretty much the latest episode in a 613 00:33:55,880 --> 00:33:58,040 Speaker 1: long running story which is based on the fact that 614 00:33:58,080 --> 00:34:01,040 Speaker 1: they offered this product of lending where people would put 615 00:34:01,040 --> 00:34:04,520 Speaker 1: their money on Gemini in hopes for a return. Gemini 616 00:34:04,600 --> 00:34:06,920 Speaker 1: would straight away land that onto Genesis, the company we 617 00:34:07,000 --> 00:34:11,160 Speaker 1: mentioned earlier, and now it's all kind of gone south 618 00:34:11,320 --> 00:34:17,960 Speaker 1: because the market fell, Genesis's partners went bust. Now Genesis 619 00:34:18,440 --> 00:34:21,080 Speaker 1: has a hole that it has to fill and it's 620 00:34:21,160 --> 00:34:24,480 Speaker 1: essentially not given back the money that the clients of 621 00:34:24,560 --> 00:34:27,600 Speaker 1: Gemini were told they could take any time. So the 622 00:34:27,600 --> 00:34:29,960 Speaker 1: reason why it's hurts the California is because once again 623 00:34:30,480 --> 00:34:33,320 Speaker 1: people who ran in when prices were going up, thinking 624 00:34:33,719 --> 00:34:37,240 Speaker 1: I'm going to time this just right, but now stuck 625 00:34:37,360 --> 00:34:41,279 Speaker 1: they cannot get ahold of their money. And we've seen 626 00:34:41,280 --> 00:34:42,839 Speaker 1: this time and time again. But now I just think 627 00:34:42,840 --> 00:34:45,279 Speaker 1: it's a byproduct of the credit bubble. But it's like 628 00:34:45,320 --> 00:34:50,080 Speaker 1: another floor of the hotel, and regulators are sniffing around 629 00:34:50,239 --> 00:34:55,040 Speaker 1: the Winkelwy's operation. Lawsuits have started to fly. Where do 630 00:34:55,080 --> 00:34:58,640 Speaker 1: you think some of that might be headed? So the lawsuits, 631 00:34:58,640 --> 00:35:01,040 Speaker 1: you might say, are coming a late in the day 632 00:35:01,280 --> 00:35:04,960 Speaker 1: because we saw the first regulatory response to these lending 633 00:35:05,000 --> 00:35:08,359 Speaker 1: products a year ago or less than a year ago. 634 00:35:08,480 --> 00:35:12,600 Speaker 1: Because they resemble securities in US law, they look like 635 00:35:12,640 --> 00:35:15,040 Speaker 1: a security, They walk like a sity. It taught like 636 00:35:15,080 --> 00:35:17,960 Speaker 1: a security of regulators. These products where you're offering interest 637 00:35:18,040 --> 00:35:22,279 Speaker 1: rates on crypto are securities. Now, maybe you could turn 638 00:35:22,320 --> 00:35:23,880 Speaker 1: around and say, well, this is all very late in 639 00:35:23,920 --> 00:35:28,439 Speaker 1: the day to be now after this fund freeze, after 640 00:35:28,560 --> 00:35:32,320 Speaker 1: FTX has gone down, after this big bankruptcy fight between 641 00:35:32,800 --> 00:35:35,560 Speaker 1: Gemini and Genesis. It's a bit late in the day. 642 00:35:35,960 --> 00:35:38,279 Speaker 1: But I think it tells you that essentially what we're 643 00:35:38,320 --> 00:35:41,520 Speaker 1: dealing with here is the real risk that these people 644 00:35:41,640 --> 00:35:44,719 Speaker 1: come back for act number three at number four, at five. 645 00:35:45,080 --> 00:35:48,239 Speaker 1: Remember that the Winklevos twins in their fight with Genesis, 646 00:35:48,480 --> 00:35:51,759 Speaker 1: have portrayed Genesis and Barry Silbert as the ones that 647 00:35:51,800 --> 00:35:54,040 Speaker 1: their own clients should be angry at. Okay, it's a 648 00:35:54,080 --> 00:35:56,759 Speaker 1: bit like Billionaire A opens the door to find a 649 00:35:56,840 --> 00:35:59,240 Speaker 1: huge crowd of people with pitchforks saying where's our money? 650 00:35:59,520 --> 00:36:01,799 Speaker 1: And he's says, hey, WHOA, WHOA. You need to see 651 00:36:01,840 --> 00:36:05,319 Speaker 1: Billionaire B, because even though I willingly gave your money 652 00:36:05,360 --> 00:36:07,640 Speaker 1: to that billionaire, he's the one who did all this 653 00:36:07,760 --> 00:36:11,400 Speaker 1: shady stuff. He's non transparent, go and chasing with pitchforks, 654 00:36:11,520 --> 00:36:14,319 Speaker 1: And so the crowd runs to Billionaire B, led by 655 00:36:14,400 --> 00:36:16,840 Speaker 1: Billionaire A, who's now picked up a pitchwalk. This is 656 00:36:16,840 --> 00:36:19,319 Speaker 1: the Winkelwolf twins. They've picked their pitchfork, and they are 657 00:36:19,360 --> 00:36:23,920 Speaker 1: now writing letters saying that, oh, Genesis has lost school 658 00:36:23,960 --> 00:36:27,600 Speaker 1: teacher's money lost, grandmother's money lost. We're sharked. We're sharked 659 00:36:27,600 --> 00:36:30,440 Speaker 1: to discover there's gambling going on in this casino. Yeah. 660 00:36:30,480 --> 00:36:34,719 Speaker 1: And I really wonder without these lawsuits, right, without a 661 00:36:34,800 --> 00:36:39,239 Speaker 1: real question mark over whether Gemini's own responsibility in this 662 00:36:39,640 --> 00:36:43,640 Speaker 1: is worthy of regulatory attention. Without that, I wonder whether 663 00:36:43,640 --> 00:36:45,640 Speaker 1: the Winkelhospons might be thinking great. I think if we 664 00:36:45,719 --> 00:36:47,839 Speaker 1: do a deal with Genesis and we get some money back, 665 00:36:47,920 --> 00:36:51,239 Speaker 1: we can come out of this with our reputations sort 666 00:36:51,239 --> 00:36:53,920 Speaker 1: of semi preserved and get back onto doing business. So 667 00:36:53,960 --> 00:36:56,760 Speaker 1: I think it could be fundamentally quite important for their future. 668 00:36:57,600 --> 00:37:01,239 Speaker 1: In one of your columns about SPA, you said that, 669 00:37:01,680 --> 00:37:05,040 Speaker 1: and I quote you, his apology is as hollow as 670 00:37:05,080 --> 00:37:09,000 Speaker 1: his empire. Is there anyone whom you look at as 671 00:37:09,000 --> 00:37:13,160 Speaker 1: a model citizen or citizens in the crypto market? I 672 00:37:13,160 --> 00:37:18,600 Speaker 1: would love to say yes. I think I guess the 673 00:37:18,640 --> 00:37:20,880 Speaker 1: people who I have the least contempt for are the 674 00:37:20,920 --> 00:37:25,080 Speaker 1: people who are kind of honest with themselves and they 675 00:37:25,080 --> 00:37:28,200 Speaker 1: wear their values on their sleeve. So, for example, the cipherpunks, okay, 676 00:37:28,200 --> 00:37:31,840 Speaker 1: the real libertarians who will openly say I'm in this 677 00:37:32,080 --> 00:37:35,400 Speaker 1: for my niche pursuits, for my elite pursuits of freedom 678 00:37:35,560 --> 00:37:40,359 Speaker 1: and privacy and being outside government control. I kind of 679 00:37:40,360 --> 00:37:42,880 Speaker 1: respect at least people who have the honesty to say that, 680 00:37:42,920 --> 00:37:44,839 Speaker 1: even if I don't agree with it. And the same 681 00:37:44,840 --> 00:37:46,959 Speaker 1: thing goes for the very smart people who actually design 682 00:37:47,000 --> 00:37:50,800 Speaker 1: some of these cryptocurrencies, Vitalic Beuta and the designer of Ethereum. 683 00:37:50,840 --> 00:37:52,600 Speaker 1: I can't say that that isn't smart. These are these 684 00:37:52,680 --> 00:37:55,600 Speaker 1: very smart people. They are doing things that no ordinary 685 00:37:55,600 --> 00:37:57,719 Speaker 1: person can do, and maybe in a hundred years, a 686 00:37:57,719 --> 00:38:01,000 Speaker 1: thousand years, somebody will finally find it use case for it. 687 00:38:01,040 --> 00:38:04,200 Speaker 1: That justifies all of this effort. But the other people, 688 00:38:04,280 --> 00:38:06,480 Speaker 1: the hucksters, the people who kind of surf on it, 689 00:38:06,760 --> 00:38:09,120 Speaker 1: the people who try and pretend it's tech. It's about 690 00:38:09,160 --> 00:38:12,520 Speaker 1: tech and disruption revolution, and it's really just about separating 691 00:38:12,520 --> 00:38:15,520 Speaker 1: people from their money. I just don't see any models 692 00:38:15,640 --> 00:38:18,920 Speaker 1: or model citizens. Maybe there are people genuinely making money 693 00:38:18,920 --> 00:38:21,040 Speaker 1: and getting rich, I just don't really see it as 694 00:38:21,080 --> 00:38:24,319 Speaker 1: a kind of model to follow. So what have you 695 00:38:24,480 --> 00:38:28,839 Speaker 1: learned from the Winkle Voss's journey about crypto, maybe something 696 00:38:28,880 --> 00:38:31,359 Speaker 1: that you didn't know before, given how long you've been 697 00:38:31,440 --> 00:38:36,359 Speaker 1: watching all of this unfold. I think the age of 698 00:38:36,440 --> 00:38:41,160 Speaker 1: the average entrepreneur, billionaire entrepreneur, the whole second act, that act, 699 00:38:41,239 --> 00:38:44,960 Speaker 1: fourth act. This is stuff that I have never seen before, 700 00:38:45,080 --> 00:38:46,960 Speaker 1: or I'm just not used to this idea that you 701 00:38:46,960 --> 00:38:50,160 Speaker 1: can have multiple lives. I mean, look at Michael Sailor 702 00:38:50,480 --> 00:38:54,080 Speaker 1: and MicroStrategy. These are people who actually had really terrible 703 00:38:54,120 --> 00:38:56,880 Speaker 1: times in previous crises. They try to bounce back, and 704 00:38:56,920 --> 00:38:58,600 Speaker 1: they're going to keep bouncing back, and they're going to 705 00:38:58,719 --> 00:39:01,319 Speaker 1: keep finding ways to make money. I'm just kind of 706 00:39:01,600 --> 00:39:03,719 Speaker 1: stunned by a lot of it. I also think that 707 00:39:03,920 --> 00:39:06,680 Speaker 1: there is something in there about this new generation of 708 00:39:07,200 --> 00:39:10,280 Speaker 1: I guess privileged entrepreneur. I mean, they already have money 709 00:39:10,320 --> 00:39:13,160 Speaker 1: and they have a network already, They're a new kind 710 00:39:13,200 --> 00:39:16,440 Speaker 1: of entrepreneur. And I mean, I think it's also quite 711 00:39:16,480 --> 00:39:19,880 Speaker 1: an American phenomenon. Tripto has become a very American phenomenon, 712 00:39:20,000 --> 00:39:21,920 Speaker 1: and a lot of the stuff that's coming out as 713 00:39:21,960 --> 00:39:26,000 Speaker 1: wild West is really being fit into American capitalism. So, 714 00:39:26,080 --> 00:39:29,040 Speaker 1: I mean, I think I've learned a lot not all 715 00:39:29,040 --> 00:39:31,080 Speaker 1: of it good. So you're telling me this is our fault, 716 00:39:31,480 --> 00:39:34,840 Speaker 1: and since you're a French the decent, it's not your fault. No. Well, 717 00:39:34,880 --> 00:39:37,120 Speaker 1: I mean these guys clearly Thede might from Europeans too, 718 00:39:37,160 --> 00:39:39,040 Speaker 1: But I just fight it't kind of fascinating that it 719 00:39:39,080 --> 00:39:42,520 Speaker 1: was basically copped it by venture capital, blessed by regulators 720 00:39:42,520 --> 00:39:45,200 Speaker 1: and bankers, and this is Wall Street and Silicon Valley 721 00:39:45,640 --> 00:39:49,520 Speaker 1: melded together, sold as the American dream to a whole 722 00:39:49,760 --> 00:39:52,279 Speaker 1: class on Main Street. I'm not saying that no one 723 00:39:52,320 --> 00:39:54,280 Speaker 1: else fell for it. I'm saying that it just seems 724 00:39:54,280 --> 00:39:57,239 Speaker 1: incredible that it just really checked all the boxes of 725 00:39:57,239 --> 00:40:03,000 Speaker 1: American capitalism and sounded super complex and mysterious and innovative 726 00:40:03,320 --> 00:40:07,120 Speaker 1: as crypto might just as easily have been described as 727 00:40:07,200 --> 00:40:12,040 Speaker 1: quote unquote snake oil. Possibly. Absolutely, the history of frauds 728 00:40:12,200 --> 00:40:14,200 Speaker 1: very relevant if you go back one hundred years. These 729 00:40:14,200 --> 00:40:16,480 Speaker 1: are exactly the same issues that were being grappled with. 730 00:40:16,920 --> 00:40:19,600 Speaker 1: When do you regulate? How do you intervene this whole 731 00:40:19,640 --> 00:40:22,239 Speaker 1: idea that actually it's very Unamerican to imposed rules. We've 732 00:40:22,239 --> 00:40:25,080 Speaker 1: had all of these debates before, and I just think, yeah, 733 00:40:25,080 --> 00:40:27,640 Speaker 1: as you were saying, Crypto has just recreated all of 734 00:40:27,680 --> 00:40:29,839 Speaker 1: this and as far as I can see, as yet 735 00:40:29,840 --> 00:40:32,560 Speaker 1: to leave. Maybe it's early days, but it's yet to 736 00:40:32,640 --> 00:40:38,520 Speaker 1: leave something like the railroads or anything that's useful infrastructure behind. Yes, 737 00:40:39,480 --> 00:40:41,239 Speaker 1: I could talk to you about this stuff forever, and 738 00:40:41,280 --> 00:40:44,080 Speaker 1: that went by really quickly. Leonell, thanks so much for 739 00:40:44,200 --> 00:40:46,839 Speaker 1: giving us a chunk of your brain and a chunk 740 00:40:46,880 --> 00:40:51,360 Speaker 1: of your time. Thank you. You can follow Leonel Laurent 741 00:40:51,440 --> 00:40:54,920 Speaker 1: on Twitter at Leonel R. A. Laurent, and you can 742 00:40:54,920 --> 00:40:59,319 Speaker 1: read his columns on Blueberrig Opinion dot com here at 743 00:40:59,320 --> 00:41:04,080 Speaker 1: crash Course, we believe that collisions can be messy, impressive, challenging, surprising, 744 00:41:04,280 --> 00:41:07,799 Speaker 1: and always instructive. In today's Crash Course, I learned that 745 00:41:07,840 --> 00:41:11,160 Speaker 1: the Crypto kids may be back for more. That despite 746 00:41:11,160 --> 00:41:14,359 Speaker 1: their missteps and some of the meltdowns they've participated in, 747 00:41:14,640 --> 00:41:16,680 Speaker 1: and maybe the wool that they pulled over our eyes, 748 00:41:17,239 --> 00:41:20,040 Speaker 1: they might be coming back from more if they can 749 00:41:20,040 --> 00:41:23,080 Speaker 1: get out of the Hotel California. That is what did 750 00:41:23,080 --> 00:41:25,799 Speaker 1: you learn? We'd love to hear from you. You can 751 00:41:25,840 --> 00:41:29,239 Speaker 1: tweet at the Bloomberg Opinion handle at Opinion or me 752 00:41:29,719 --> 00:41:34,120 Speaker 1: at Tim O'Brien using the hashtag Bloomberg Crash Course. You 753 00:41:34,160 --> 00:41:37,120 Speaker 1: can also subscribe to our show wherever you're listening right 754 00:41:37,120 --> 00:41:39,920 Speaker 1: now and leave us a review that helps more people 755 00:41:39,920 --> 00:41:44,400 Speaker 1: find the show. This episode was produced by the indispensable 756 00:41:44,440 --> 00:41:49,319 Speaker 1: Anamazarakis and me. Our supervising producer is Magnus Henrickson, and 757 00:41:49,400 --> 00:41:53,040 Speaker 1: we had editing help from Katie Boyce, Jeff Grocott, Mike 758 00:41:53,160 --> 00:41:58,000 Speaker 1: Niezza and Christine Vanden Bilart. Blake Maples does our sound engineering, 759 00:41:58,400 --> 00:42:01,759 Speaker 1: and our original theme song was posed by Luis Gara. 760 00:42:02,320 --> 00:42:05,240 Speaker 1: I'm Tim O'Brien. We'll be back next week with another 761 00:42:05,280 --> 00:42:05,880 Speaker 1: Crash Course