Speaker 1: Hello, and welcome to another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Allaway and I'm Joe. WI isn't all so, Joe?
Speaker 1: It's been um. I mean, I think it's been a
Speaker 1: kind of a tough couple of weeks for crypto. We
Speaker 1: had the price of bitcoin go down below thirty thousand
Speaker 1: UM at one point, but it's shot up since then.
Speaker 1: I think it's closer to But on the other hand,
Speaker 1: we had some interesting developments around the sort of crypto ecosystem,
Speaker 1: around the market structure aspect of crypto. Well, it's interesting
Speaker 1: because all right, we did get this like sort of
Speaker 1: bare market, and I don't know if it's still in one,
Speaker 1: because as you mentioned, it's bounced back. But unlike say,
Speaker 1: you know, the sell off in or at the end
Speaker 1: of Seen, it doesn't feel like there's any slowdown at
Speaker 1: all in the pace of investment into this space, Like
Speaker 1: where is at the end of you know, is like
Speaker 1: all right, well, maybe this whole thing was a bubble
Speaker 1: or a fad. This time it feels like no one's
Speaker 1: thinking that it's like full steam ahead on various business
Speaker 1: plans and so forth, at least in these early months
Speaker 1: since the peak back in April or May. Yes, indeed,
Speaker 1: And as a sign of that investment interest, we just
Speaker 1: had the crypto exchange f t X, which we've talked
Speaker 1: about on the show before it completed. I think it
Speaker 1: was a Series B fundraising of nine hundred million that
Speaker 1: valued the company at eighteen billions. So to your point,
Speaker 1: I mean, the crypto ecosystem itself is clearly being valued
Speaker 1: by investors as a future investment. Eighteen billions pretty big, right,
Speaker 1: And of course f t X is the exchange we
Speaker 1: talked to the to the founder, it was not that
Speaker 1: long ago. I think it was either maybe like March
Speaker 1: or April, and it feels like his star, his significance
Speaker 1: within crypto has only probably like gone up like ten
Speaker 1: x uh since like literally like the last three or
Speaker 1: four months. Yeah, I think that's fair. So we're gonna
Speaker 1: be talking to the f t X founder of Sam
Speaker 1: Bankman Freed again on this episode, but we wanted to
Speaker 1: do it a little bit differently this time, so we've
Speaker 1: also brought on Bloomberg columnist Matt Levine, one of the best,
Speaker 1: probably the best financial writer out there if we're being honest,
Speaker 1: and he's going to join the conversation and we're just
Speaker 1: going to talk about what ft X has been doing
Speaker 1: and where it might go from here. Okay, wait, let's
Speaker 1: do it all right, Uh, Sam and Matt, thank you
Speaker 1: so much for coming on the show. Yeah, thanks for
Speaker 1: having us, Thanks for having me. So, Sam, nine nine
Speaker 1: million dollars is you know a lot of money. What
Speaker 1: are you going to be doing with that? Yeah? So
Speaker 1: it's um, I think we're looking good on the yacht front.
Speaker 1: Don't need any more are but no I acquisitions to
Speaker 1: serve the based answer? And you know, I think especially
Speaker 1: as crypto starts to bleed into the rest of the
Speaker 1: financial ecosystem, there's more and more points of overlap and
Speaker 1: potential uh you know, potential collaboration could expand what you
Speaker 1: mean by that? So what do you say crypto is
Speaker 1: going to bleed more into the rest of the financial system?
Speaker 1: How much of that is? Okay, we know that all
Speaker 1: of the big banks or traditional brokerages they're like thinking
Speaker 1: about like, well, what is their crypto play? How are
Speaker 1: they going to get in on this action? How much
Speaker 1: of it is? Are you talking about that? And every
Speaker 1: day there's some new uh announcement from like a legacy
Speaker 1: institution about something they're doing in the space, as opposed
Speaker 1: to crypto itself encroaching on areas of business, lines of
Speaker 1: business that we think of as traditional, where perhaps crypto
Speaker 1: has a potential to userve some of that activity. It's
Speaker 1: pride merrily so far been the former. And some of
Speaker 1: this is the you know, sort of traditional highly regulated
Speaker 1: financial institutions starting to get their toes in. Some of
Speaker 1: this is also fintech, and so you know, I mean
Speaker 1: when people say fintech, they're sort of an increasing chance
Speaker 1: that they're referring to, you know, a crypto company over time.
Speaker 1: But but even outside that, many of the definitely not
Speaker 1: crypto companies in fintech, a very large fraction of those
Speaker 1: are reaching out to you talk about like like and
Speaker 1: imagine that you're some customer facing fintech business right and
Speaker 1: you know you don't offer a bitcoin right now? Like, what,
Speaker 1: what do you think the most frequent requests you get
Speaker 1: from your customers is? But he's definitely to add bitcoin, Matt,
Speaker 1: what's your understanding of what FTX actually does? Because you know,
Speaker 1: Joe and I have spoken to sam Um a few
Speaker 1: times before. Now I think we have a decent idea
Speaker 1: but what's your impression of it? I like this question
Speaker 1: exposing my ignorance question. Uh, my understanding is FTX is
Speaker 1: like one of the biggest crypto exchanges and that it's
Speaker 1: a particularly like uh, derivatives and structured product focus crypto exchange.
Speaker 1: Is that like about right? Yeah, that's that's that's pretty good.
Speaker 1: And you know, we're one of the newer exchange, certainly
Speaker 1: the newest of the big ones, you know, started up
Speaker 1: a couple of years ago, and more than half our
Speaker 1: volume historic based been derivatives. I think the big reason
Speaker 1: for that is basically, like they're the harder products to
Speaker 1: get right. And you know, I think a lot of
Speaker 1: the exchanges had serious issues when we started up and uh,
Speaker 1: and those issues just became much more transparent and played
Speaker 1: a much more devastating role when they tried to manage
Speaker 1: you know, margin and drivetives than with SPOT products, which
Speaker 1: are relatively simpler, although we do have a pretty wide
Speaker 1: range of products on the site. So I mean, I
Speaker 1: saw Sam someone made a joke on Twitter the other
Speaker 1: day that like, you know, you weren't even like a
Speaker 1: real player or active in the industry, like you know,
Speaker 1: the last bullmarket. I mean I don't think that's totally true,
Speaker 1: because on the last episode you told us the story
Speaker 1: of the U the Japan Premium, which is an incredible
Speaker 1: story and people should listen to it. But so much
Speaker 1: of your success really has come like in the last
Speaker 1: year or year and a half, and now f t
Speaker 1: X is this huge thing. What do you explain, like,
Speaker 1: what was it? It just sort of broadly and then
Speaker 1: we'll get into like the details, but you sort of
Speaker 1: mentioned some of the operational aspects of running a derivatives
Speaker 1: exchange versus just a pure spot exchange. You know, in
Speaker 1: the US people really know coin based globally people really
Speaker 1: know buyinance. But what was it in your view that
Speaker 1: you know, you have this thing, Okay, we're going to
Speaker 1: create a product for traders. What was it that f
Speaker 1: t X had that really allowed it to just explode
Speaker 1: seemingly out of nowhere, uh, in the last year or so. Yeah,
Speaker 1: And I think a lot of these things were things
Speaker 1: you might even just assume with TRUF all exchanges things
Speaker 1: for two, but that isn't And so one example is
Speaker 1: when you look at margining, the norm in crypto was
Speaker 1: you isolate everything, And what that means is if you
Speaker 1: want to go trade if against USD futures, you have
Speaker 1: to go like by Spot etherory and move it into
Speaker 1: your USD futures wallet and use that as margin. Trade
Speaker 1: your each features. If you then want to trade you know,
Speaker 1: Bitcoin against US Spot, you have to go move that
Speaker 1: e thout sell it for US or Bitcoin, move that
Speaker 1: into your US you know Bitcoin Spot margin wallet and
Speaker 1: use this collateral there. You had a margin you know,
Speaker 1: managing literally hundreds of wallets on one venue, each of
Speaker 1: which basically only supports one product um as this massive
Speaker 1: minigame to manage to be liquidated on any one of
Speaker 1: them independent if your collateral on others, you have no
Speaker 1: flexibility on margining. The liquidation engines were not up to
Speaker 1: the task, Like they're losing millions of dollars per day
Speaker 1: of customer assets um to failing to liquid eight in time.
Speaker 1: You know, there was just like match engines fault fell
Speaker 1: over whenever markets got volatile, and so it's just like
Speaker 1: all over the place that was like not a great
Speaker 1: customer experience, and you know in sort of like really
Speaker 1: significant ways. So this is like raised the question that
Speaker 1: I have. So you come from a sort of like
Speaker 1: high tech, traditional finance background, you're a chain street and
Speaker 1: like one story you could tell here is like this
Speaker 1: is about like applying sort of best practices from traditional
Speaker 1: finance to like the wild West of crypto exchanges, where well,
Speaker 1: portfolio margining is a totally well understood thing, but to
Speaker 1: portfolio margining for crypto products. Um, But I'm curious, Like
Speaker 1: I've always thought that like a lot of the appeal
Speaker 1: of crypto is like all these people from like backgrounds
Speaker 1: like yours, who like work in like the coal mines
Speaker 1: of market structure and whatever and have like a list
Speaker 1: of things or like this is this like traditional financial
Speaker 1: thing is stupid and I could do it better if
Speaker 1: I were designing the system from scratch. And you kind
Speaker 1: of went and designed the system from scratch, right like
Speaker 1: you started like a big exchange in a in a
Speaker 1: product universe that is not really beholden to any traditional
Speaker 1: rules or you know, customs. And I'm wondering, like are
Speaker 1: there places where you were like like what we do
Speaker 1: here at chanceer it or what we do and like,
Speaker 1: you know, the stock market is really dumb. Like if
Speaker 1: I were doing it, I'd do it differently where you
Speaker 1: actually went and did that at f t X totally,
Speaker 1: and I do think the answer is really sort if
Speaker 1: you look at each place and you're like, who's doing
Speaker 1: it right? You know, it's sort of like the crypto norm, correct,
Speaker 1: the crypto exchanged norm, or like the traditional exchanged harm
Speaker 1: and kind of sometimes it was one and sometimes it
Speaker 1: was the other. So like some examples of places where
Speaker 1: I think crypto has like at least an argument for
Speaker 1: doing it right now, I personally think they probably are.
Speaker 1: One of these is moving funds around. This is obviously
Speaker 1: one of the first things that comes up with crypto,
Speaker 1: But I at least sort of just assumed it was
Speaker 1: easy to get your money wherever you wanted before I'd
Speaker 1: ever tried to do that. But as soon as I
Speaker 1: I tried to ever move money around, I realized how
Speaker 1: difficult it was. Anyone who sent an int like an
Speaker 1: international wire transfers immediately regrets having to do it. And
Speaker 1: then you look at like a c H and credit
Speaker 1: card payments to take months to finalize, and so either
Speaker 1: these all these limits huge, he's on them. There's so
Speaker 1: many roadblocks in the system because like there's two months
Speaker 1: of fraud risk there, and so just doing things like
Speaker 1: funding your account or what do you what if that
Speaker 1: even needs to find your account on traditional exchanges is
Speaker 1: like very messy and can take a while, whereas on crypto,
Speaker 1: like the goals to make it as clean as possible,
Speaker 1: and when you're sending cryptocurrencies in that's obviously like basically
Speaker 1: instant on sort of you know, the wire transferred time scale.
Speaker 1: But even with with fiat sort the emphasis is like anyone,
Speaker 1: whether you're you have two hundred dollars to your name
Speaker 1: or you're the world's second biggest d F t F,
Speaker 1: you can go to the website, submit kyc infote, create
Speaker 1: an account directly with the exchange, and then there's like
Speaker 1: the deposit button and it has like as many options
Speaker 1: as possible for how you can fund your account. And
Speaker 1: so it's just like a massively easier process. And you know,
Speaker 1: when when you're serve in crypto, what you quickly realize
Speaker 1: like you never want to send FIAT that's like the
Speaker 1: hardest thing to do, and like everything gets settled with
Speaker 1: stable points if if you can get away with it.
Speaker 1: Another thing I'll bring up is it's different nature of
Speaker 1: the products. So when you think of what he's like
Speaker 1: Nazi or cem me or something like they're mostly matching engines,
Speaker 1: like you know, they sort of match bids and offers
Speaker 1: from like a few institutions against each other, but they
Speaker 1: don't do anything else in the trade process. Right, There's
Speaker 1: like separate companies that do like custody clearing, m ok
Speaker 1: I see customer on boarding, branding, advertising, mobile app, website
Speaker 1: a p I. All of those are like different companies,
Speaker 1: and you end up with like, you know, ten companies
Speaker 1: stacked together. And first of all, that means you have
Speaker 1: ten rounds of fees stacked together on trades. But but
Speaker 1: second of all, it means you if this really fractured
Speaker 1: experience where you know, access to the actual ultimate liquidity
Speaker 1: and order books is basically restricted to like a very
Speaker 1: very small number of institutional trading firms going through some
Speaker 1: prime broker, and everyone else sort of has this like
Speaker 1: very abstracted away experience going through you know, two peef
Speaker 1: off firms in a dark pool and a broker. You know,
Speaker 1: so somewhere in the middle. In crypto exchanges are full
Speaker 1: stack products and so everything I mentioned from you know,
Speaker 1: rereading an account, submitting m l k C information, depositing funds,
Speaker 1: um using wold lack gooey website submitting in order, all
Speaker 1: those go straight through the exchange. And so you have
Speaker 1: like small retail customers and giant HFD firms all having
Speaker 1: the same exact access to the ultimate you know, order
Speaker 1: books and and and system. And I think that creates
Speaker 1: in some cases and much much more streamlined and frankly
Speaker 1: fair experience. So can I ask just on the margining idea.
Speaker 1: So one of the things you did, um, I think
Speaker 1: it was just in the past week er two, but
Speaker 1: you changed, um the amount of leverage that you allow
Speaker 1: on the platform. So I think the maximum people can
Speaker 1: do now is twenty times, which seems like a lot
Speaker 1: to me still, but like it's a vast reduction from
Speaker 1: what it was. Uh, walk us through the thought process
Speaker 1: on that, And would you consider changing the margin requirements
Speaker 1: as well? Yeah, so I guess maybe on your last point,
Speaker 1: we talked about changing that the marginal requirements, and when
Speaker 1: we talked about margin leverage, we usually think of them
Speaker 1: is basically the same thing, like one is just one
Speaker 1: divided by the other one. And yes there's like initial
Speaker 1: versus maintenance, like how big of a position you're allowed
Speaker 1: to put on versus at what point your account actually
Speaker 1: starts getting liquidated. But but this this sort of affected
Speaker 1: both of those um and so you know you have
Speaker 1: to post five percent margin now on all positions, and
Speaker 1: at least in many cases much more than that I
Speaker 1: would deserve, equivalent to saying twenty leverage. The thought process
Speaker 1: behind it, the first thing is that it's actually not
Speaker 1: that big of a change for the site. Less than
Speaker 1: one percent of the volume was trading with leverage higher
Speaker 1: than that before. And the reason is that basically your
Speaker 1: margin requirements go up as your position size goes up.
Speaker 1: So if you want to put on a big position,
Speaker 1: you need to post way wey weay more than that
Speaker 1: collateral anyway, and you're only able to put on really
Speaker 1: tiny positions with very high leverage. And so it's served
Speaker 1: by definition, not where most of the volume or open
Speaker 1: interest or users were coming from. And so so it
Speaker 1: wasn't like a big part of the exchange. It wasn't
Speaker 1: super relevant to to us or to most of our
Speaker 1: users or their experience. It's also not super economically like
Speaker 1: useful frankly, like when when you talk about you know,
Speaker 1: hedging something or having on some spread or or one
Speaker 1: of the many reasons that you might want to do
Speaker 1: a margin trade. If you get down to one collateral left,
Speaker 1: you can't really use that to hedge something because you
Speaker 1: can get liquidated in like a print, like in like
Speaker 1: fifteen seconds. You know, markets could move enough that you're
Speaker 1: out of margin, and so it doesn't make sense for
Speaker 1: any like long or even medium term position that you're
Speaker 1: planning to hold for any reason. You're sort of like
Speaker 1: almost definitely opening yourself up to serious liquidation risks if
Speaker 1: you get anywhere close to that amount of leverage. And
Speaker 1: it's like most of the things that I think, like
Speaker 1: frankly could justify as like the more economically useful parts
Speaker 1: like don't require high like super high leverage anyway. And
Speaker 1: then the last species frankly, like it's something that a
Speaker 1: lot of people look on a scans like you know
Speaker 1: when when you talk about I mean reporters, but regulators
Speaker 1: as well, like not that they're like specific regulations around
Speaker 1: this in most jurisdictions, but like there probably will be eventually,
Speaker 1: and and it's sort of like clearly the direction of
Speaker 1: the world's going in and so start of combining all
Speaker 1: those together, like it wasn't important important part of the
Speaker 1: site wasn't super healthy part of the site necessarily. It
Speaker 1: was like a part that was going to start receiving
Speaker 1: a lot of negative attention, and it just seemed like
Speaker 1: it was like it was time to get rid of it.
Speaker 1: Talk to us a little bit more about the technical
Speaker 1: aspects of building um a system in which there was
Speaker 1: you know, as you describe it, the one wallet where
Speaker 1: everything is you know, cross margin, and so you don't have, okay,
Speaker 1: your bitcoin futures wallet and your future's wallet and so
Speaker 1: forth two things. So like how hard is that to build?
Speaker 1: But also we know that like with a lot of
Speaker 1: the legacy or it's weird to talk about legacy, the
Speaker 1: legacy crypto exchanges, they tend to go down a lot
Speaker 1: during periods of high volatility, which is a source of frustration,
Speaker 1: and we see it We've seen with coin based for example,
Speaker 1: where everyone's starting to like slam into one thing and
Speaker 1: suddenly social media has lit up. You like to point out,
Speaker 1: like on Twitter it's like, well, ft X another another
Speaker 1: day of a hundred percent up time or whatever it is.
Speaker 1: How much are those things connected? This sort of like
Speaker 1: the difficult stress of legacy liquidation books versus and just
Speaker 1: keeping the site going up. Yeah, So the thing that
Speaker 1: really causes the stress there is actually the interaction between
Speaker 1: two different effects, one of which is cross margining. One
Speaker 1: advantage of isolated eargining, and one reason that some exchanges
Speaker 1: do this is you can completely parallelize different products, right.
Speaker 1: You can just like completely separately, say like all right,
Speaker 1: there's our bitcoin EOS market, here's our eight futures. They
Speaker 1: have nothing to do with each other, Like, are none
Speaker 1: of our systems need to look at the other one.
Speaker 1: You have completely parallel margin checks, risk checks, order books,
Speaker 1: and it's easy to rent another server, Like if you
Speaker 1: could scale up your business just by buying ton of servers,
Speaker 1: that is the easiest thing to do, and like we
Speaker 1: would do that in a second. The problem that you
Speaker 1: run into is that doesn't increase increase like the clock
Speaker 1: speed of any one process. And so whenever you have
Speaker 1: these bottlenecking things where everything needs to feed through one process,
Speaker 1: like buying more computers doesn't help because there's just the
Speaker 1: one computer that's computing that one bottle necking thing. And
Speaker 1: the worry with cross margining is if I send an
Speaker 1: order in an bitcoin US order book, that immediately affects
Speaker 1: the amount of margin that I have available for an
Speaker 1: ethereum futures position, and so you can't treat them as
Speaker 1: completely separable from each other, and you sort of have
Speaker 1: in the end this one process, which is keeping track
Speaker 1: of the master amount of margin and collateral that each
Speaker 1: account has available, and that thing has to like every
Speaker 1: single order on every order world has to feed through
Speaker 1: that process, and all of a sudden paralyzation is way harder.
Speaker 1: And that means that your risk of that process falling
Speaker 1: over when things get busy, and if that process gets
Speaker 1: bottle lets, you can't accept orders in any order book
Speaker 1: because you don't know if the person has enough margin corps.
Speaker 1: So that that's sort of like the fundamental tension that
Speaker 1: you that you get too quickly when you frost margin,
Speaker 1: and inherent in that is like then you say, well, okay,
Speaker 1: how about traditional exchanges, like don't they cross margin? And
Speaker 1: the real answer is that it gets back to a
Speaker 1: previous point. In traditional finance, the exchanges aren't the primary
Speaker 1: risk check. The exchanges aren't like analyzing correlations between different
Speaker 1: assets and someone's portfolio. Generally, the exchanges are just processing
Speaker 1: the orders. And then you have things like prime brokers
Speaker 1: who are the actual risk check engines. They're not doing
Speaker 1: it in real time really, at least not like tick
Speaker 1: by tick or order by order. They don't have to
Speaker 1: be as high throughput. They're just sort of like periodically
Speaker 1: checking on people's portfolios. And then you say, okay, well,
Speaker 1: why can't we take it out of this critical process
Speaker 1: and just check it every hour or something. And the
Speaker 1: reason is, well, what if they went bankrupt in that hour? Right,
Speaker 1: which you now get to surface other piece, which is
Speaker 1: the fact that we allow everyone access to the site,
Speaker 1: including people who aren't like, you know, one of the
Speaker 1: five biggest trading firms in the world that you definitely
Speaker 1: have legal recourse over and they have tons of assets
Speaker 1: outside of your exchange that you can claim if they
Speaker 1: want net negative Like that's not how it works in
Speaker 1: crypt and crypto. We have everyone, and so if any
Speaker 1: account goes net negative value, like realistically speaking, we might
Speaker 1: never be able to like proclaim that, and and you know,
Speaker 1: we just end up eating that. And so we have
Speaker 1: to be real time monitoring the risk of all of
Speaker 1: the used years and and that's sort of like one
Speaker 1: of the easier parts to accidentally get sort of bottle
Speaker 1: necked on. Can you talk about that from like a
Speaker 1: perspective of your capital So, like, you know, exchanges are
Speaker 1: sort of notably thinly like in the in like the
Speaker 1: traditional finance where all the exchanges are not like particularly
Speaker 1: capitalized because they're not particularly capital intensive. Clearing houses have
Speaker 1: like weird capital you know, positions and drawing rights. And
Speaker 1: then prime brokers are giant banks who are who are
Speaker 1: like very heavily capitalized. Um, Like for you, like, do
Speaker 1: you have billions and billions of dollars to cover customer
Speaker 1: losses or is it more like you're a sort of
Speaker 1: technological situation where you can you're confident you can blow
Speaker 1: people out fast enough that like customer losses are not
Speaker 1: your problem? Or am I just thinking about it round? No,
Speaker 1: that you're thinking about exactly right? Um. And that's a
Speaker 1: really good question to ask. And different exchanges come to
Speaker 1: different answers that questions. Let me give you a little
Speaker 1: bit of a palette of like how one could answer it.
Speaker 1: One answer, which used to be very popular is that's
Speaker 1: not our problem, that's are you years problem? And you
Speaker 1: might say, what you mean if users negative, you can't
Speaker 1: get funds from them? Twix respond sure, but that means
Speaker 1: some other users positive, and maybe you consider of see
Speaker 1: where that's going. You know, there are these things called
Speaker 1: the positive user doesn't isn't actually positive exactly right, it's
Speaker 1: the clawbacks is sort of like the word that people
Speaker 1: used for that. And there are exchanges where like each
Speaker 1: week they say, like, congrats, you did good trading. You
Speaker 1: get paid eighty six point two percent of your penil
Speaker 1: this week. You know, the other thirteen point went to
Speaker 1: bail people out, and and it just happened week after
Speaker 1: week after week. There's millions off per day of losses
Speaker 1: of customers to that, which is not how you want
Speaker 1: to end up, right. That's sort of like breaking this
Speaker 1: like seemingly really inherent inviolable property of a future, which
Speaker 1: is that if you buy a bitcoin future what like
Speaker 1: whatever something, interest rates, something something. But when all of
Speaker 1: a sudden done in the end, you have a bitcoin
Speaker 1: right have like bitcoint goes up to make it finically
Speaker 1: goes up ten thousand dollars, you make town thous dollars
Speaker 1: if you're like holding its expiration or what effort. But
Speaker 1: all of a sudden, if you're on a getting paid
Speaker 1: back your PNL, you don't really quite have a bigcoin.
Speaker 1: You have something that's kind of like a bigcoin, but
Speaker 1: maybe it's only most of a bigcoin. We'll see. So
Speaker 1: that's like not a good answer, but that is an answer,
Speaker 1: and that is what what some exchanges said. Other exchanges
Speaker 1: give sort of the worst dancer. That's not a good answer.
Speaker 1: Was not the worst answer. The worst answer is going bankrupt,
Speaker 1: and that's not what we want to see. But you know,
Speaker 1: there have been some exchanges blow out in crypto, and
Speaker 1: especially the smaller ones, which gets to your point of
Speaker 1: like how much capital is actually backing these exchanges. One
Speaker 1: of the most dangerous things about using a dinky exchange.
Speaker 1: There's there are two scary things. First of all, they
Speaker 1: probably don't have like very sophisticated tack, so like the
Speaker 1: hacking risk is way higher. But second of all, they
Speaker 1: probably don't have a billion dollars of capital, and so
Speaker 1: if there is a loss, like they don't have anything
Speaker 1: backing back, you know, like they they they have you know,
Speaker 1: two million dollars back in they if they lose five
Speaker 1: million dollars and customers lost three. Okay, So so that's
Speaker 1: sort of like another bad answer, but it's the answer
Speaker 1: you've seen on on some of the smaller venues, and
Speaker 1: then you get sort of like about the biggest venues,
Speaker 1: and the answer to your question is really, yeah, they
Speaker 1: do have a lot of capital backing. Like if you
Speaker 1: look at the actual effective amount of capital backing the
Speaker 1: books on on the largest exchanges, it is and the
Speaker 1: billions and you know, obviously we just raised nine hundred
Speaker 1: or so, but you know, we we we had a
Speaker 1: bunch of profits before that. And then on top of that,
Speaker 1: there's sort of you know, effectively the equity value of
Speaker 1: the exchanges, which are you know, well should be implicitly
Speaker 1: backing these you know, for sort of people exchanging that
Speaker 1: if you have a billion dollar loss, you can like
Speaker 1: go ris a billion dollars and people are like, well,
Speaker 1: you know, to have equity. Yeah, And so the answer
Speaker 1: is for the biggest exchanges, yeah, there is effectively a
Speaker 1: lot backing it. But but once you start going down
Speaker 1: in the pegging or or to exchange where you don't
Speaker 1: trust that they wouldn't do that, that they would kind
Speaker 1: of go do whatever it took to make their users whole. Yeah,
Speaker 1: there's real risk there that you know, if their liquidation
Speaker 1: engine is enough to task neither world their users you know,
Speaker 1: b and if you're like a big exchange with a
Speaker 1: lot of capital, like the empirically, how good is the
Speaker 1: risk management? Like do you guys regularly have like bloods
Speaker 1: that you don't uh that you're not made hole? It's
Speaker 1: a good question. So we um, we we put a
Speaker 1: bunch of thirst engine we don't have the issues like
Speaker 1: we've never had a day I think where there were
Speaker 1: there's more money that we lost in blowouts too, revenue
Speaker 1: that we made just from trading fees. So and on
Speaker 1: most days it's effectively zero dollars cost. So this is
Speaker 1: not like a big deal for for us. I mean,
Speaker 1: it's a big deal think about, but like economically it
Speaker 1: has been a big cost to us. So you're not
Speaker 1: doing like a leverage on big positions, is right, And
Speaker 1: that's that's why it gets down to exactly right, like
Speaker 1: are your you are are your parameter is good and
Speaker 1: reasonably as their liquidation into like reasonable in real time
Speaker 1: and stuff. In some cases the answer that has just
Speaker 1: effectively been no. And and you know we've we've stared
Speaker 1: pretty hard to keep it like pretty effective. But you know,
Speaker 1: when you look at the biggest blowouts historically, especially back
Speaker 1: in like is the kind of thing you like you
Speaker 1: would just look at that and be like that doesn't work, right, Sam,
Speaker 1: and be like, yeah, you're right, that doesn't work. Like
Speaker 1: he's just like, yeah, fifty to one leverage on a
Speaker 1: three hundred million dollar bitcoin position and just like Okay,
Speaker 1: that's interesting until it is exactly It's like, can you
Speaker 1: liquidate like three million dollars a bitcoin consistently with less
Speaker 1: than two percent impact plus slippage plus movement during the
Speaker 1: time it takes you that Like, no, you can't. Can
Speaker 1: I ask you about? I don't. I don't really know
Speaker 1: the phrase liquidation engine, but like, um, like my my
Speaker 1: understanding is that like there's like a stereotype in like
Speaker 1: the crypto world where when people get blown out of
Speaker 1: margin positions, they it is done as like sloppily as
Speaker 1: eggs can be imagined, and like prices like move right
Speaker 1: jerkily and mechanically in a way that like you know,
Speaker 1: like I'm just I've been thinking about you know where
Speaker 1: recording this on the day of the Archagos report coming
Speaker 1: at where like you know, in traditional finance, like when
Speaker 1: a big position gets blown out, like they don't necessarily
Speaker 1: do a good job of it. But they sort of
Speaker 1: sit down and think, what is the way to liquidate
Speaker 1: this position with minimal and back to the bank, Whereas,
Speaker 1: like my understanding is that in crypto exchanges it's all automated,
Speaker 1: and often automated in a sort of like predictable and
Speaker 1: dangerous way. Yeah, it's been getting a little bit better
Speaker 1: over time. It's not great, i would say, for us
Speaker 1: to space, but it used to be terrible. So let
Speaker 1: me tell you some horror stories here which are like,
Speaker 1: here's like one really bad example that we did see,
Speaker 1: you know, back in like when when things were really messy,
Speaker 1: someone had, you know, a two hundred million dollar position
Speaker 1: in bitcoin futures. First of all, it very very strongly
Speaker 1: seemed like there's a human they're clicking, and that human
Speaker 1: was sometimes to sleep, and and so maybe markets moved
Speaker 1: while that human was asleep, and then the account was
Speaker 1: net negative by the time the human weight woke up.
Speaker 1: So that's like not a good start. And then you know,
Speaker 1: you see this position is obviously underwater, and and and
Speaker 1: what they would do, you know, let's say two percent underwater,
Speaker 1: is you know, they place an offer for two hundred
Speaker 1: million dollars of bitcoin futures two percent behind the b BO,
Speaker 1: right and just sit there. And and of course that
Speaker 1: was at the bankruptcy price, like hoping someone would lift
Speaker 1: through the book and buy two million, two million dollar offer.
Speaker 1: Obviously that's not what happens, right. What happens is everyone
Speaker 1: sees the offer and things just like crash more, right,
Speaker 1: and it just gets like worse and worse. You know that.
Speaker 1: That's like an example of not a good liquidation engine,
Speaker 1: so to speak. Yeah, although honestly that's better, Like I
Speaker 1: sort of expected it was like if you hit some trigger,
Speaker 1: like some automated thing just puts in market orders to
Speaker 1: sell the position. So we've seen that as well, which
Speaker 1: is sort of the opposite extreme, and it's sort of
Speaker 1: like different exchanges that did different pieces of this, like yeah,
Speaker 1: and I basically think like both those extremes are bad, right,
Speaker 1: and the market order thing goes about as poorly as
Speaker 1: you would expect, you know, So where have things been
Speaker 1: moving over time? Like what's sort of like the reasonable system? Well,
Speaker 1: I don't know, but it's sort of like I think
Speaker 1: you would like if you just like had ten minutes
Speaker 1: write down something like better than either of those, which
Speaker 1: is like kind of a decent proxy um, which is
Speaker 1: basically like, you know, what do we do so whatever,
Speaker 1: first of all offices that we cut off opening your position,
Speaker 1: then if your accounted like it's further you know down
Speaker 1: in collateral, the first thing we do is we just
Speaker 1: start sending orders on behalf of your account closed down
Speaker 1: the position. It's done in an automated way. It's done
Speaker 1: like bit by bit, like basically twalps it. And you know,
Speaker 1: we keep it to like a relatively low fraction of
Speaker 1: of of of underlying volume of the asset, so like
Speaker 1: we don't want to be in position where like the
Speaker 1: liquidation engine global volume, because then then it's just like
Speaker 1: that like the market doesn't have time to get liquidity
Speaker 1: for that um. And and that's also sort of like
Speaker 1: one way to think of what happens if you send
Speaker 1: to market orders like volume for that two second period.
Speaker 1: You know, that just overwhelms order books and it basically
Speaker 1: sort of like chip away with that and and and
Speaker 1: hopefully that works or it's just like markets recover or
Speaker 1: go down depending on which direction their position was in.
Speaker 1: And you know, but before action, most their position has
Speaker 1: been liquidated, like we no longer have to liquidated and
Speaker 1: and then we stopped. If that doesn't work, like things
Speaker 1: just keep moving against a position, and like the location
Speaker 1: engine is like going as fast as is willing to
Speaker 1: go in terms of like fraction of volume and and
Speaker 1: and like the digits closer and closure bankruptcy you have
Speaker 1: it spells backs oppliquity prior system where basically we just
Speaker 1: pass off their mating positions and value the account wholesale,
Speaker 1: like paraded to a bunch of liquidity fighters who have
Speaker 1: agreed to seven like basically forcibly take on you know,
Speaker 1: liquidating accounts um and so that's what happens when it
Speaker 1: looks like the you know, first stup liquidation and shoul
Speaker 1: wouldn't get their time. And the thought is they're like,
Speaker 1: you know, these market makers have well collateralized, well capitalized accounts,
Speaker 1: and then they can figure out what they want to
Speaker 1: do with those positions. It's not like perfect, but at
Speaker 1: least sort of like you know, the goal is to
Speaker 1: sort of like get rid of the unnecessary impact, right
Speaker 1: and like you're you're gonna have impact whenever there's a
Speaker 1: forced sale, but like at least you want to have
Speaker 1: that impact be like the correct economic impact instead of
Speaker 1: like five times that because it's done way too quickly
Speaker 1: or something. Can I ask them about like order books
Speaker 1: and market makers? Like what I'm interested in is an
Speaker 1: intuition for sort of how liquid these crypto products are. Right, So,
Speaker 1: like you have like sort of in US equity exchanges,
Speaker 1: you have the stereotype of like there are you know,
Speaker 1: high frequency electronic market makers. If you sell a lot
Speaker 1: of stock, the stock will go down by like a
Speaker 1: sort of predictable amount, and like people are willing to
Speaker 1: step up to buy at these declining prices a certain amount, right,
Speaker 1: Like there's there's like a certain amount of capital in
Speaker 1: the in the order book, there's a certain amount of
Speaker 1: like any time the market is open, someone is there
Speaker 1: to buy. People complain that they're not as willing to
Speaker 1: sort of take risk as like the old school banks were,
Speaker 1: but like there's there's a sort of like predictable amount
Speaker 1: of liquidity like in crypto markets in particularly because they're
Speaker 1: so fragmented and there's so many products. Like if you
Speaker 1: want to sell a bunch, like does the price good zero?
Speaker 1: Like are there a lot of market makers with capital
Speaker 1: who are sort of like committing capital everywhere and kind
Speaker 1: of like trading quickly or is it a little bit
Speaker 1: more of a like you never know where you're gonna
Speaker 1: get kind of thing. Yeah, if well, first of all,
Speaker 1: it depends on the ben years. If you're using sort
Speaker 1: of a dicky exchange, then like it's sometimes like who
Speaker 1: the hell knows what's going to happen, right, And you'll
Speaker 1: see completely wacky prints sometimes go up on liquid fund us.
Speaker 1: And remember there's no recking mess here or anything like that. Yeah,
Speaker 1: I was gonna say, like in in the US, like
Speaker 1: you know, every market maker is making markets on every exchange,
Speaker 1: but I guess there's no there's no reason to expect
Speaker 1: that in crypto yet, no, And so like the different exchanges,
Speaker 1: like Bitcoin USD on one exchange is like a different
Speaker 1: product from Bitcoin USD on another exchange. I mean, obviously
Speaker 1: it's basically the same thing, but it takes like an
Speaker 1: hour to turn one into the other through like transfers
Speaker 1: if you're lucky, and like a day if you're unlucky.
Speaker 1: And and there's no there's no nothing forcibly keeping those
Speaker 1: in line with each other. Right, So so that is
Speaker 1: one thing to note is you see divergences between different
Speaker 1: exchanges when markets are stressed and you usually these are
Speaker 1: tiny because there are over treasures, but like when they're
Speaker 1: big moves, sometimes they're percent. So it's that's sort of
Speaker 1: like one caveot to make it. And when you talk
Speaker 1: about which exchanges you see sort of these illiquid and
Speaker 1: so on, it's maybe not exactly what you think, like
Speaker 1: it's through served of the like dicky ones, it's also
Speaker 1: true of some of the better known ones. And in
Speaker 1: particular and this is like a huge, huge, huge factor
Speaker 1: any exchange that doesn't allow any leverage or margin, there's
Speaker 1: sort of competing intuitions for what would happen there. But
Speaker 1: in general it's less liquid. And the reason it's less
Speaker 1: liquities like the liquidy fighters don't have any ability to
Speaker 1: margin there. And remember this is like these needs to
Speaker 1: be deliverables. This isn't just looking at total value. You know,
Speaker 1: Let's say that someone tries to sell a hundred million
Speaker 1: dollars a bitcoin on it in a five minute period
Speaker 1: on a spot exchange with no no margin capabilities. If
Speaker 1: the market makers didn't have a hundred million US dollars
Speaker 1: basically custodied on that particular exchange at that particular time,
Speaker 1: they can't buy it ladies just run out of dollar
Speaker 1: spy and they might have another three hundred million dollars
Speaker 1: in their bank account or in other exchanges that didn't
Speaker 1: help them buy that offer, and it might take a
Speaker 1: day to get the dollars over there if there's no
Speaker 1: more ginning that. That also makes it way harder for
Speaker 1: market makers ride deep liquidity because again they're just like
Speaker 1: it's not capital efficient for them to keep seventeen billion
Speaker 1: dollars of reserves of every plausible currency on every plausible exchange,
Speaker 1: right because in the US you have to in like
Speaker 1: US equities, you need to put orders on every exchange.
Speaker 1: But in in crypto to do this you need to
Speaker 1: like actually capitalize like your maximum order everything that's change
Speaker 1: separately exactly. And this is the flip that this is
Speaker 1: a drawback to the cryptosystem where I sort of described
Speaker 1: the miracle of it, you know earlier, of like one
Speaker 1: integrated product and so you get so much efficiency out
Speaker 1: of like you know, you just have your funds there
Speaker 1: and you can do anything you want on the exchange,
Speaker 1: and like there are no intermediaries. Everyone can do it
Speaker 1: like this. There's no like stock loan business being completely
Speaker 1: just like separate and a separate company on a separate
Speaker 1: time scale from like the trades you need to be doing.
Speaker 1: You do get a ton of efficiency of this, but
Speaker 1: the flip side is you don't have one central prime
Speaker 1: broker that's capitalizing, you know, simultaneously all exchanges for you
Speaker 1: with the same apital, Like you have to separately capitalize
Speaker 1: each one, which is super super expensive, especially if they
Speaker 1: don't allow a margin. So that's sort of like one
Speaker 1: issue that you run into, which isn't an issue with
Speaker 1: overall crypto markets. Like, if you're looking sort of like
Speaker 1: the like blended average bitcoin price, that's not a huge deal.
Speaker 1: But if you're looking at like blowouts of one particular
Speaker 1: venue that is, then you get to like, okay, sure,
Speaker 1: but like like if you aren't that, like let's use
Speaker 1: just average bitcoin prices across all major exchanges. You're not
Speaker 1: worried so much about, Like, yeah, it sucks that there's
Speaker 1: like a little divergence, but like generally what's the bitcoin worth?
Speaker 1: Like you know, how much does that diverge? Yeah, you know,
Speaker 1: it's it's better than it was three years ago. Like
Speaker 1: the market makers are massively better capitalized than they were
Speaker 1: three years ago. Um, and so you know, I think
Speaker 1: something you saw is like on this drap in you know,
Speaker 1: may from like sixty k to thirty k. It was
Speaker 1: like very very orderly all things considered, Like is if
Speaker 1: a few percent drop in crypto markets like a one
Speaker 1: day period, but like and there's there's a lot of liquidations,
Speaker 1: but like there there weren't massive it liquid prints markets
Speaker 1: remained liquid and and and and worldly more or less
Speaker 1: to like an impressive extent given the volatility. Contrast that
Speaker 1: with a year ago in March, when crypto dropped from
Speaker 1: nine k to four k and like a two day period.
Speaker 1: There are people freaking out there that like they're going
Speaker 1: to be systematic failures in the crypto industry, and like
Speaker 1: you know, think about like it wasn't like our Chagos
Speaker 1: people are worried about it was two thousand eight. It
Speaker 1: was a a chain of liquidations of businesses started by
Speaker 1: a few and they are like people going around saying,
Speaker 1: we have no idea who's underwater here, Like it could
Speaker 1: be everyone, like lots of businesses and basically predicated their
Speaker 1: financing strategy on the notion that it was implausible depic
Speaker 1: when we go blew five thousand dollars for better for worse.
Speaker 1: That that was like empirically true. Look love mining firms,
Speaker 1: there will leverage long bitcoin with like a bankruptcy price
Speaker 1: of like you know, like there's like a huge, huge
Speaker 1: swass of the crypto space that were like maybe in
Speaker 1: danger of being bankrupt at four k, and of course
Speaker 1: then you could have massive cascading effects and liquity and
Speaker 1: markets was completely shot. None of the market makers had
Speaker 1: capital left to buy, even though they are obviously amazing
Speaker 1: purchases to do if you happen to have a billion
Speaker 1: dollars lying around and and and so it was just
Speaker 1: like it was. It was a massive nightmare and like
Speaker 1: really dangerous for the industry in a way that like
Speaker 1: this serious crush was way more orderly, and I think
Speaker 1: partially the industry has grown a lot partially honestly, like
Speaker 1: no one's business was predicated on bitcoin never getting down
Speaker 1: to thirty cable again, like everyone sort of thought that
Speaker 1: might happen. Is that is that a way of saying
Speaker 1: that the industry has less leverage like than it was. Yes,
Speaker 1: I think that's like basically right, that the industry is
Speaker 1: less leverage to present terms. Now, I think the dollars
Speaker 1: of leverage have gone up, but so was the market cap,
Speaker 1: and the market cap has gone up faster. This is
Speaker 1: what I was about to ask, because it feels like
Speaker 1: you're describing the system is being less levered and the
Speaker 1: market makers and the exchanges being better at liquidating positions,
Speaker 1: being able to do it in a more orderly way.
Speaker 1: But I feel like, at the same time, so everyone
Speaker 1: always struggles whenever there's a big move in bitcoin, and
Speaker 1: I feel like over the past few months we've seen
Speaker 1: leverage come up again and again as a sort of excuse,
Speaker 1: or whenever the price is dropping, it's like, oh, levered
Speaker 1: positions are getting liquidated, Like is there a disconnect there?
Speaker 1: Like is that narrative of the market wrong? And then
Speaker 1: if it is, what is actually driving the price of bitcoin? Like,
Speaker 1: if you were going to look at the past couple
Speaker 1: of months, what was the cause of the down draft?
Speaker 1: It's a really good question. So first answer is there's
Speaker 1: some truth to it. Liquidations and leverage were a cause.
Speaker 1: One of the causes of the draw from it was
Speaker 1: just at a level which is large and absolute terms
Speaker 1: compared to two a year ago, but small relative to
Speaker 1: the capital in this space, and so you know, there
Speaker 1: are twenty billion dollars of long positions probably that got
Speaker 1: liquidated over a week long period during the base part
Speaker 1: of the drop in crypto. But the industry is able
Speaker 1: to absorb that because a decrease in price. It caused
Speaker 1: a significant decrease in price, but it was like a
Speaker 1: surprising the orderly decrease in price in that like people
Speaker 1: weren't blowing out there there. You know, there are a
Speaker 1: lot of losses from some people, but they, you know,
Speaker 1: weren't generally going. You know, this is sort of like
Speaker 1: large players in this space were very well capitalized. The
Speaker 1: system's technology had improved, so exchange downtime was less bad.
Speaker 1: I don't want to say he's great, Like mostly stages
Speaker 1: had serious downtime this time, but way less than you know,
Speaker 1: a year ago when most exchanges had twelve hours of
Speaker 1: downtime during the big crash. And so the infrastructure and
Speaker 1: the liquidity in this space held up much better under
Speaker 1: the liquidations than they did a year ago. But there
Speaker 1: were real liquidations and it was one of the contributors
Speaker 1: to the crash. Now, one thing I think is worth
Speaker 1: noting there is like they're also one of the contributors
Speaker 1: to run up from ten k to sixty K. I
Speaker 1: think that's sort of like often people sort of like
Speaker 1: want to live in a fantasy land where like leverage
Speaker 1: can make markets go up but not out, and it's
Speaker 1: like not not really how it works, like for better
Speaker 1: or for worse. Like I strongly believe that the crypto
Speaker 1: ecosystem is in a stronger healthier position today because of
Speaker 1: leverage than it would be if there was never any leverage, Sam,
Speaker 1: and I don't know how much work if we're going
Speaker 1: to really talk about this, but I actually want to
Speaker 1: just ask a sort of question related to the Defy ecosystem.
Speaker 1: And I know beyond f t X you're invested in
Speaker 1: that there is leverage existing DEFY in different ways. So
Speaker 1: someone might post some stable coin to borrow more stable
Speaker 1: coins that they might post either to borrow stable coins,
Speaker 1: and then they might use that to invest in something else,
Speaker 1: so then they get another token. Are we gonna have
Speaker 1: to like how well do we have a handle? And
Speaker 1: I guess what I would say is leverage measures within defy.
Speaker 1: It feels like whether we're talking about an exchange like
Speaker 1: f t X or traditional uh traditional trad five venue
Speaker 1: like we have these sort of like concepts of like
Speaker 1: how much open interest is there and how many like
Speaker 1: long futures are out there. Are we going to have
Speaker 1: to sort of like reconceptualize how we think about leverage
Speaker 1: in the DeFi space where perhaps there isn't a perfect
Speaker 1: analog to some of this stuff. And do we have
Speaker 1: a good handle on sort of like overall vulnerability to
Speaker 1: disorderly liquidations? Yes, So I don't think we need to
Speaker 1: fundamentally reconceptualize it. I think they're very clear parallels, and
Speaker 1: I think it's like not that hard in some sense
Speaker 1: to think about. I think the big problem is that
Speaker 1: there isn't a guy who's in charge of it. When
Speaker 1: you sort of think about, like, you know, how do
Speaker 1: you figure out like who's in charge of like staying
Speaker 1: on top of the risk on fts? Like there's an answer, right,
Speaker 1: It's it's like it's me, right, you know, and my team.
Speaker 1: I think when you can defy, there often isn't an
Speaker 1: answer for me in charge of of managing it. Also
Speaker 1: was in church of reporting it, and so I think
Speaker 1: it's just messy is the answer like like like no
Speaker 1: one need serve response taking responsibility and it's not obviously would.
Speaker 1: And so I think that there's just like a ton
Speaker 1: of untracked stuff, and like you know what that means
Speaker 1: is like, yeah, it's just like there's uh more capacity
Speaker 1: for like wacky bad things to happen, because no one's
Speaker 1: in charge of making sure that when something wacky happens
Speaker 1: is the good kind of wacky. You know, we were
Speaker 1: We're talking about how it's been an eventful a couple
Speaker 1: of weeks for crypto, and one of the things that happened, UM,
Speaker 1: which would probably fall into the sort of UM negative camp,
Speaker 1: was the new SEC chair Gary Gensler, came out and
Speaker 1: started talking about UM token ized stocks or synthetic stocks
Speaker 1: and making some noises about potentially going after those. UM.
Speaker 1: So I'm wondering how worrying is that for you? Um,
Speaker 1: would you potentially CONSI they're delisting those I saw unite
Speaker 1: swap took them off of well at least the front
Speaker 1: end of unice swaps. You can still trade them on
Speaker 1: the actual unit swap code, but you just can't do
Speaker 1: it through the unit swap website. Um, is that something
Speaker 1: you think the industry is just gonna have to do
Speaker 1: going forward? So? Right, so I think basically what what
Speaker 1: Againser said, which is frankly not that shocking, is like,
Speaker 1: if you tokenize the stock, it's or is still sort
Speaker 1: of a stock, and like it's not like it loses
Speaker 1: all regulatory properties UM as soon as you tokenize it. Again,
Speaker 1: not not to put words in his mouth, but I
Speaker 1: wouldn't be surprised if you're start looking at some parts
Speaker 1: of the industry and being like that sure looks like
Speaker 1: and obviously unregistered security being offered with no email ky
Speaker 1: C registration or terms or conditions to anyone in the world,
Speaker 1: including Americans and restricted jurisdictions. That's not generally how brokerages were.
Speaker 1: I think it's sort of like where you know, awfully
Speaker 1: that was coming from UM, and I don't think that
Speaker 1: was a super shocking announcement. I think, like I think
Speaker 1: when you contrast it with what we have on FKS,
Speaker 1: like it's a pretty different situation where we have like,
Speaker 1: first of all, we email ky C everyone fully who
Speaker 1: is able to touch you know, stock and f kis
Speaker 1: at all. Second of all, we restrict it's such that
Speaker 1: Americans can't access them, neither can a number of other jurisdictions. UM.
Speaker 1: We ensure that they're backed, we have an actual license
Speaker 1: from often to offer the products. Um, And it's much
Speaker 1: more like just how like you know, interactive burgers are
Speaker 1: introducing burgers to them operate. And so I think that
Speaker 1: like Gazer wasn't saying like if you tokenize the stock
Speaker 1: it makes it evil. I think like his point was
Speaker 1: like it's it's kind of still stock, you know, if
Speaker 1: like you wouldn't have been able to offer stocks at all,
Speaker 1: like queery, whether you could offer tokenized stocks. Is the
Speaker 1: long term goal that you are offering token of stocks
Speaker 1: to Americans, like either by regulatory changes or by like
Speaker 1: registering as a US exchanged, Like, is this like a
Speaker 1: sort of crypto it's the financial system kind of player.
Speaker 1: Is this like you're a crypto exchange of since and
Speaker 1: I'll let you do. No, it's definitely the first thing
Speaker 1: you said, um, like yeah, very very clearly, that is
Speaker 1: like our our goal here. And I think that like,
Speaker 1: like there there's sort of a roadmap for this in
Speaker 1: the United States, at least sort of the tooganizing party
Speaker 1: think is complicated in the United States. And I do
Speaker 1: think that like no one has quite issue claritite clarity
Speaker 1: on exactly what it means in the u S regulatory
Speaker 1: context to have a token ized stock. I think against
Speaker 1: the start of saying like, well, it certainly isn't like irrelevant,
Speaker 1: like like that's still kind of a stock. Um, It's
Speaker 1: not like when you talk about tognizing it, like what
Speaker 1: does it mean for it to be toganized? Is it
Speaker 1: free floating? How does that work? Who's thesure? Like there's
Speaker 1: a lot of st complicated questions there, but maybe just
Speaker 1: taking a step back, like how it stalks in the
Speaker 1: first place, like just normal non tokenized stocks. Um, I
Speaker 1: don't know. I mean like we f g x u
Speaker 1: S did recently get a Burger dealer license? Like or
Speaker 1: you know, make of that what you will. So in theory,
Speaker 1: one day rather than maybe you know, like I have
Speaker 1: a Schwab account, or I have my like SMPTF and
Speaker 1: a couple other basic things you could there is a
Speaker 1: day in theory in which I could just have I
Speaker 1: might have all that on f t X dot us.
Speaker 1: That's right, And I think that there's like a lot
Speaker 1: of advantages that system, because like it's sort of like
Speaker 1: never fun when you're like, oh boy, I want to
Speaker 1: go like do this thing with my money. Oh wait,
Speaker 1: it's in the wrong pocket. Like you know, I I,
Speaker 1: like wanted to go buy a banana, but it was
Speaker 1: in my Proverge account, or like I want to buy
Speaker 1: a bitcoin, but it was in my bank account, or
Speaker 1: like I want to go buy Tesla, but it was
Speaker 1: on my crypto account. And it takes like three days
Speaker 1: to transfer, you know, between those Unlike like, it's not
Speaker 1: a good user experience. You know, you have to have
Speaker 1: decided days ahead of time what you're most likely to
Speaker 1: want to use your funds for. UM and so I
Speaker 1: do think that there's like real advantages to having a
Speaker 1: single platform where you know, for all the most common
Speaker 1: things you'd want to do with your funds, you can
Speaker 1: do them. And you know, we're moving in that direction
Speaker 1: on the con sumer side in the US, like we
Speaker 1: have obviously Crypto. We have lots of methods here at
Speaker 1: both Crypto and Fiat on and off the exchange. We
Speaker 1: have a debit card that you can get tied to
Speaker 1: your FDS account UM, which will spend whatever you happen
Speaker 1: to have their whether it's Crypto or FIATO or whatever.
Speaker 1: UM and and so you can you know, have your
Speaker 1: funds there you can do your crypto trading, and you
Speaker 1: can also go buy bread and you know, I have
Speaker 1: like for her dealer license coming online and and and
Speaker 1: so I think that is like definitely a part of
Speaker 1: the vision. In the last time that we spoke to
Speaker 1: we talked a little bit about this, but basically, every
Speaker 1: time someone who's sort of like crypto skeptic starts first
Speaker 1: thinking about the space, one of the first questions they
Speaker 1: always ask is about tether. And we talked about this,
Speaker 1: and you're you as a UM I guess the exchange,
Speaker 1: but also with your trading. You're a tether user, and
Speaker 1: you talked a little bit about some of the advantages
Speaker 1: of it last time. But can you talk a little
Speaker 1: bit further about the full experience of interacting with tether
Speaker 1: because people, you know, people of all kinds of conspiracies like,
Speaker 1: oh the money's out there. You never actually no one
Speaker 1: has ever actually sold their tether and gotten us dollar back.
Speaker 1: So forth, can you just talk a little bit about
Speaker 1: your experience, I guess as a tether user and customer
Speaker 1: of what happens when you use tether, when you want
Speaker 1: to redeem tether, etcetera, and how that works as an
Speaker 1: actual tether customer inside totally. I'm actually a little bit
Speaker 1: curious before I jumped in, just like what like, like
Speaker 1: Matt having like, I'm sure there's something that you've like
Speaker 1: seen a lot of people chattering about, Like what's your
Speaker 1: takeaway from what the chatter is like, and also what
Speaker 1: sort of like your trying to like summary or like
Speaker 1: thoughts are on that you know, based on that, and
Speaker 1: then I can sort of dive into what what our
Speaker 1: experiences has been like, ah were to be careful here.
Speaker 1: Um like, tether Is has a strange public relations strategy,
Speaker 1: I guess. I mean, like they talk a lot about
Speaker 1: wanting to get an audit and then don't get an audit.
Speaker 1: They talk a lot about their like high quality commercial
Speaker 1: paper holdings, but don't disclose them because counterparty confidentiality is
Speaker 1: very important to them, which is not true of any
Speaker 1: other holder of commercial paper in the world. Um Like,
Speaker 1: you can just look at like the complete holdings by
Speaker 1: QUSIP of every money market fund, but forgether. It's very
Speaker 1: important that they keep it secret. So if they were
Speaker 1: doing something shady, they sound like what they sound like,
Speaker 1: which doesn't prove that they're doing something shady, but it
Speaker 1: is like it is confidence undermining. I think, yeah, I
Speaker 1: think that's a pretty reasonable way of putting it. I
Speaker 1: think like a pretty pretty odd public relations strategy is
Speaker 1: not an unfair characterization. Um. And I think I'm generally
Speaker 1: sort of like often sort of thought of as a
Speaker 1: tether apologist or something. Is maybe how some people would
Speaker 1: would phrase it. Um. I certainly wouldn't necessarily want to
Speaker 1: say that they've like historically always chose them the best
Speaker 1: PR strategy or or anything that sounds vaguely like that.
Speaker 1: You know, I can serve a case where there's a
Speaker 1: lot of smoke, but but I don't think there's really
Speaker 1: much fire. But but I like get like there is
Speaker 1: smoke and like you know, and I think that's sort
Speaker 1: of like what's what's going on? Well, for one thing
Speaker 1: is sort of like curious PR strategy, But putting that
Speaker 1: that aside for a second, like, you know, how about
Speaker 1: creating redeeming tether, Like can you do it? You can
Speaker 1: do it, we have done, We've done billions. It's a
Speaker 1: messy process, like it works, but it's you know, you
Speaker 1: sort of look at creating redeeming USCC and it's like
Speaker 1: all right, like they have their U s dollars in
Speaker 1: a US bank account is the same bank that every
Speaker 1: Nelson crypto uses. Takes like thirty seconds to you know
Speaker 1: transfer even like go created, yeah, thirty seconds later they're
Speaker 1: they're sending you the tokens. You can redeem it thirty
Speaker 1: seconds later, like you see the funds in your account,
Speaker 1: no fees. A very very kind of like straightforward, smooth process.
Speaker 1: And I think you look at Tether and it's like, well,
Speaker 1: it's a messy process, and I think like every piece
Speaker 1: of mess in the process like makes it much harder
Speaker 1: for them to have what would look like is self
Speaker 1: evidently reasonable process. Like it just sort of like you know,
Speaker 1: makes it sort of like really heightens the sense of
Speaker 1: like something weird going on. I think that that's sort
Speaker 1: of like is the answer though, is that like it
Speaker 1: is messy, but but like the like the funds are,
Speaker 1: they're like we see like real which admitting flows into
Speaker 1: Tether from a lot of places, like massive ones that
Speaker 1: you know then lead to market makers selling and creating
Speaker 1: and sending you know, real billions of dollars to Tether's
Speaker 1: bank account, you know, to create it and like you know,
Speaker 1: have have relationships with like father and the banks and
Speaker 1: and everything else involved, and like every think sort of
Speaker 1: checks out in a in a messy way, and then
Speaker 1: you can start of give to the question of like,
Speaker 1: all right, well, what's their business? Mouth is probably getting
Speaker 1: yield on the dollars? How are they doing that? I
Speaker 1: don't know, you know, like some commercial paper like stuff, um,
Speaker 1: and you know, I think it's like one of these
Speaker 1: things were like if you want to try and argue
Speaker 1: but whether it t other's worth likes or like a
Speaker 1: dollar in a penny, I think that's like a pretty
Speaker 1: reasonable argument, and like I don't I don't want to
Speaker 1: take a strong stance on that, Like I I certainly
Speaker 1: don't want to like strongly are you against any any
Speaker 1: stance there? But but I think that like when the
Speaker 1: argument gets like is it worth like about a dollar
Speaker 1: or like about thirty cents, like anything answers about a dollar,
Speaker 1: and like you know, the reason that it is fundamentally
Speaker 1: like basically backed by like you know about the right
Speaker 1: number probabble bit more than the right number of like
Speaker 1: kind of dollar like assets just in like a system
Speaker 1: which is like a little bit messy in every possible place,
Speaker 1: so they might stretch for yield, but like by buying
Speaker 1: like slightly nice your commercial paper where they might break
Speaker 1: the but go to like rather than that's like yeah,
Speaker 1: that that's my like and so I say this without
Speaker 1: knowing like exactly what their commercial papers like this is
Speaker 1: sort of like that that's a twist on it, which
Speaker 1: I'm just sort of inferring the details of that last
Speaker 1: piece based on like all the other interactions that serve
Speaker 1: if we've had with them. They could be putting it
Speaker 1: all into bitcoin, but that would just be sort of
Speaker 1: a strange move on their part because like they they
Speaker 1: have like a good business putting it into commercial pactly
Speaker 1: like they've got lots of legitimate, profitable good businesses. They
Speaker 1: don't need to do that. Also is unclear why they
Speaker 1: would do that, Like it's sort of like incredibly risky.
Speaker 1: Any of the other thing is like you get to
Speaker 1: know that people involved here they're not like that they
Speaker 1: really really aren't scammers. Like it's really not like you
Speaker 1: come away dealing with them, you're like they're selling me
Speaker 1: stake oil, Like they're too waitly lying about everything, and
Speaker 1: like I'm pretty sure that like nothing is like that's
Speaker 1: not at all sort of like the interactions that that
Speaker 1: people have with them. Did you watch the CNBC interview, Yeah,
Speaker 1: there is that, the one with the um with the
Speaker 1: legal counsel. Yeah. Yeah. I think they back themselves into
Speaker 1: a lot of positions where like they sort of like
Speaker 1: make it probably basically correct claims, but ones in which
Speaker 1: they're not going to, as you said, like they don't
Speaker 1: feel comfortable elaborating maybe for like just sort of like uh,
Speaker 1: you know, ethical reasons, maybe because like the truth is
Speaker 1: like a little bit messier than they'd like to say. Um,
Speaker 1: but but before a reason to make these claims and
Speaker 1: then like refuse to back them up, and and that's
Speaker 1: like never a good look. Although I think it is
Speaker 1: not that like there's no relationship between the claims and reality.
Speaker 1: I think he's just like one of those other cases.
Speaker 1: This might be an unfair question, but I'd be interested
Speaker 1: in your answer, Like if if the worst of the
Speaker 1: conspiracy theories were true about Tether, like I don't know,
Speaker 1: say it's investing, it's investing in commercial paper, but it's
Speaker 1: investing in like Chinese commercial paper and commercial exactly, and
Speaker 1: it all goes like bottom up, which which is a
Speaker 1: rumor that's out there. Of course, um and tether collapses.
Speaker 1: What would that mean for bitcoin and the wider crypto space? Yeah,
Speaker 1: so I do you want me to take like the
Speaker 1: fantastical version if that word tether goes to zero or
Speaker 1: dru me try and take like what I think sort
Speaker 1: of the most approximate, like vaguely plausible version of it.
Speaker 1: How about both? So maybe first I'll talk about the
Speaker 1: sort of plausible version. So like what if they took
Speaker 1: a third of the money that they had and put
Speaker 1: it in like sort be here commercial paper from China,
Speaker 1: like be here for China commercial paper, and and then
Speaker 1: you know, there's sort of a run in the bank
Speaker 1: in China as looks like you know, however that that
Speaker 1: could happen, um and uh, And it turns out that
Speaker 1: like this beat your commercial paper like to bolded on
Speaker 1: average or something, And so you ended up with like,
Speaker 1: you know, a twelve percent loss of the tether treasury, right,
Speaker 1: you know percent or something like that. Like let's say
Speaker 1: that's where you ended up, which at the like you know,
Speaker 1: sort of like very negative but like not completely implausible outcome.
Speaker 1: What happens then? So tether is sort of in some
Speaker 1: some mystical sense, is worth eighty eight cents or well
Speaker 1: it's worth it at least eight eight sense, right, like
Speaker 1: you can redeem it sort of maybe for eight cents.
Speaker 1: You know what's the loss? The loss there's like ten
Speaker 1: billion or something. One possibility, obviously, is like nothing happens, right,
Speaker 1: like unless people try to redeem almost all the tether
Speaker 1: and existence like they could keep processing. Maybe it doesn't
Speaker 1: even comes out. Maybe it comes out and for whatever
Speaker 1: rective because system doesn't seem to care. Um. That is
Speaker 1: like I think a plausible answer, right, it's just like
Speaker 1: weirdly things continue on as if that didn't happen. Um.
Speaker 1: But also maybe there's a little bit of a run
Speaker 1: on tether um the their banking partners start to get
Speaker 1: nervous redeeming. It becomes very difficult. Maybe they don't give
Speaker 1: you a dollar on the dollar for redemptions, maybe they
Speaker 1: limit them. They say, look, the world can only redeem
Speaker 1: one billion dollars per week total of tether maximum, and
Speaker 1: the world wants to redeem billion, and so there's like
Speaker 1: a race to redeem your tethers, and most people are
Speaker 1: not getting filled on those redemptions. Tether crashes down cents
Speaker 1: on the dollar, and markets you know, there's a lot
Speaker 1: of people who are stockpiling tether have losses of you know,
Speaker 1: and then I think sort of like, you know, there's
Speaker 1: some regulatory crackdowns on stable coins, and these mostly continue
Speaker 1: on as they were before, except that like you know,
Speaker 1: ten billion dollars total was lost between tether holders. Um,
Speaker 1: maybe they recover that eventually, right, Like if the tether
Speaker 1: is effectively backed by the combined equity of bit finex
Speaker 1: and tether, then like maybe that's like maybe it all
Speaker 1: ends up kind of okay, although like certainly, like you know,
Speaker 1: not in the liquid sense, you know, frankly, I think
Speaker 1: they could probably do a lot of things to try
Speaker 1: and plug that in the meantime. But like that that's
Speaker 1: sort of like I think roughly how that that would end,
Speaker 1: Like you would see each other. It gets sort of
Speaker 1: like repriced to like you know, ten cents center or whatever,
Speaker 1: fifteen cents center, I don't know, you know, it'd be
Speaker 1: like it's dock split and tether it'xcept you know where
Speaker 1: you didn't get more tethers and yeah, bitcoin tether and
Speaker 1: start training a different price price from bitcoin USD on
Speaker 1: major exchanges. The pig would like mostly break, there'd be
Speaker 1: like this absolute race redemptions fees for a dem would
Speaker 1: go up to a percent or two. They kind of
Speaker 1: slowly get through. People make a bunch of money doing
Speaker 1: the arbitrage. It would be a really bad look regulars
Speaker 1: who cracked down and stable points in crypto in general,
Speaker 1: and life would go on and probably the bitcoin crashes
Speaker 1: ten percent on like the bad pr that's like sort
Speaker 1: of roughly my guests like how that would play out? Um,
Speaker 1: I think it's like, would not be disastrous for the
Speaker 1: cript because systems, but clearly bad. Now we can start
Speaker 1: to take this other hypothetical of like what if it's
Speaker 1: worth as a row, Right, what if they like put
Speaker 1: a percent of it was in commercial paper of like
Speaker 1: one company and that one company goes bankrupt or something
Speaker 1: sort of equivalent to that, Right, Like what if somehow
Speaker 1: they lose the vast majority of the tether treasury. That's
Speaker 1: that's way worse. Like now, all of a sudden you
Speaker 1: have like a seventy billion dollar loss or whatever in crypto.
Speaker 1: I can't remember the current market gap, but like that's
Speaker 1: that's the order. You know, what's that mean? Well? Tether
Speaker 1: like BTC tether markets due to infinity, I guess you know,
Speaker 1: like like he probably gets it's it's you know, delisted
Speaker 1: from some venues. So there are a lot of bitcoin
Speaker 1: tether futures out there. Now this kind of a fun one, right,
Speaker 1: what if you have a quarterly bitcoin tether future and
Speaker 1: tether goes to zero? Like, what's your future expired? Too? Is?
Speaker 1: You know, sorry infinity? And like how do you like
Speaker 1: what's the pen l transfer there? Like are you trying
Speaker 1: to transfer infinity tethers each resido dollars from the losers
Speaker 1: the winners on that from the shorts of loongs like okay,
Speaker 1: so that that like some exchange you would have to
Speaker 1: contend with that. And there really are a significant open
Speaker 1: interests in bitcoin to other futures. Now, if it's a
Speaker 1: ten percent move, maybe something a little whacky happens. A
Speaker 1: lot of people thought they had a hedge and their
Speaker 1: head was not really a hedge. Um, but like you
Speaker 1: still expirem just like expires of forty four k instead
Speaker 1: of for d k. Right, if it's actually going close
Speaker 1: to zerow honestly think that a lot of exchange, would
Speaker 1: you sort of lie? Right? They just like silently removed
Speaker 1: the t from the end of the markets and hope
Speaker 1: no one noticed, and like the indexes would be steriously
Speaker 1: change and then there would be like like thiss of
Speaker 1: open interest in them which was collateralized fifty by tether
Speaker 1: from users, and the tether's now worth zero, and the
Speaker 1: exchange would have to choose between taking a massive loss
Speaker 1: or doing a massive claw back, or you know, it
Speaker 1: would be a mess. In other words, like like like
Speaker 1: a tether, like a bitcoin tether future is implicitly a
Speaker 1: Bitcoin us D future, and when tether starts being us D,
Speaker 1: they just sort of say, well, we really mentioned in
Speaker 1: us that's like my honest guess about what would happen
Speaker 1: on some venues like and and But of course that
Speaker 1: doesn't solve It's it's an interesting question because it's like,
Speaker 1: if you are like taking a position on tether, are
Speaker 1: you implicitly taking a U s D position or are
Speaker 1: you implicitly like betting on the credit risk? And the
Speaker 1: answer is, if you're taking a tether USD future like
Speaker 1: a U S T T gets U S T U
Speaker 1: s D futures position, you're clearly taking a credit risk position.
Speaker 1: But if you're putting on it, yeah, but if if
Speaker 1: it's a bitcoin tether. It's probably exactly no when he's
Speaker 1: using that, not no one but like open interest is
Speaker 1: trying to bet on bit, not tether. On this note, uh,
Speaker 1: And I want to just talk a little bit, make
Speaker 1: sure we get a little bit more to some of
Speaker 1: the interesting products you have f t X. There is
Speaker 1: like you have like this, it's an inverse or there's
Speaker 1: like a short tether. Is it a short tether future
Speaker 1: or like a three x short both and yeah, both,
Speaker 1: But actually like that's been a fantastic performer because or
Speaker 1: what is it, like a three x long tether thing
Speaker 1: that's just been like this position product that he's done
Speaker 1: pretty well. That's just because basically harvesting premium from all
Speaker 1: the people that are betting on tether's collapse. Like explain
Speaker 1: that product. I think it's basically right. So like right
Speaker 1: now I look at the tether. So we have on
Speaker 1: ft X, we have a U S T t against
Speaker 1: us D future. It's you know, a cash settled future
Speaker 1: on the USD price of tether. And so this is
Speaker 1: explicitly a credit risk product. And you know, and so
Speaker 1: you can ask what is it trading at so spa
Speaker 1: U S D t U s D is currently at one,
Speaker 1: so it's it's trading at a dollar and there's millions
Speaker 1: of dollars bid on both sides of that one basis
Speaker 1: point wide market. Now you look at the quarterly tether futures,
Speaker 1: so these are futures expiring in about two months September um,
Speaker 1: and they're currently there's forty million dollars of open interest
Speaker 1: right now on these on FTX and they're currently trading
Speaker 1: forty cents under you're training. What that means is that, like,
Speaker 1: you know, the market, if you wanted to read it
Speaker 1: this way, is pricing in you know, forty BIPs per
Speaker 1: month or per two months, so twenty a month of
Speaker 1: credit risk and tether every month that tether doesn't crash,
Speaker 1: like everyone who thought it was betting it was getting
Speaker 1: crash like bleeds a little bit, and every who bet
Speaker 1: that it wasn't giving crash gains a little bit and
Speaker 1: not surprisingly, like the world is divided into two people,
Speaker 1: not three people. These people are the people who think
Speaker 1: it won't crash and the people who think it will.
Speaker 1: There aren't people who think it's gonna go up to
Speaker 1: two dollars. It's like a massive bowl on the price
Speaker 1: of tether like one dollars through what you're shooting for. Um.
Speaker 1: And so because of this, like no one is like
Speaker 1: trying to buy this up above a dollar, like the
Speaker 1: words between the people shorting in at a dollar and
Speaker 1: the people who are lunging it below a dollar. So
Speaker 1: it's gonna settle below a dollar almost certainly. With with
Speaker 1: some cavats we get to actually there's some weird market dynamics.
Speaker 1: But um, but you know, because you always create blow
Speaker 1: a dollar basically and it never has blown down, right,
Speaker 1: and so like just you know, I think this is
Speaker 1: a prediction market, right like every year exactly every year
Speaker 1: that tether doesn't default, Like that's a little bit of
Speaker 1: basing en update against the like tether is going to
Speaker 1: default philosophy, and it's a little bit of enoughing towards
Speaker 1: the like tether is worth a dollar philosophy. Um. So
Speaker 1: if you think about a CDs, right, twenty pips per month,
Speaker 1: that's what that's like three two and a half percent
Speaker 1: a year that this is trading under. You know, is
Speaker 1: that first of it's not an insane number, right, if
Speaker 1: there's a something that yeah, that's right, you know, if
Speaker 1: this we're training at twenty percent under that would be
Speaker 1: an insane number. Like that's the kind of thing where
Speaker 1: like it's been five years and tether hasn't imploded, like
Speaker 1: already your your your like your thesis is not looking
Speaker 1: so good, Like at two and a half percent a year,
Speaker 1: I think that's too big of a discount, But like
Speaker 1: I could be wrong on that, you know, I certainly
Speaker 1: like you know that you can't look at history and
Speaker 1: be like two percent years obviously too big of a discount.
Speaker 1: I would say that's tight versus their pr. Oh yeah,
Speaker 1: absolutely right, this is serve And that's sort of what's
Speaker 1: going on, right, Like it's sort of trading halfway between
Speaker 1: their pr on the one hand and the fact that
Speaker 1: that people successfully redeem it on the other hand. Right, Yeah,
Speaker 1: I think that like if you have like some experience
Speaker 1: and trap by like the fact that people have a
Speaker 1: success where he deemed it for some like single digit
Speaker 1: number of years is like only so incouraged. And I
Speaker 1: don't want to frame that as like this should make
Speaker 1: you infinitely encouraged about it or anything. And I really
Speaker 1: don't want to push back into people who think it
Speaker 1: should be at a two percent for your discount, not
Speaker 1: not not saying necessarily agree with them, but like I
Speaker 1: don't think they have a crazy position at all. Right,
Speaker 1: The thing I wanted to push back into the people
Speaker 1: who think it should have like at per your discount,
Speaker 1: you know, this is like just not worth anything like
Speaker 1: a dollar position, which like I think there's a lot
Speaker 1: of evidence that that position is like not really right, um,
Speaker 1: Whereas I think when you get to the questions like
Speaker 1: should this be worth a dollar or like a little
Speaker 1: bit less? Think of his commercial paper, right, like what
Speaker 1: you tell the commercial paper trade at you know, a
Speaker 1: sort of synthetic commercial paper, commercial paper whatever, you know,
Speaker 1: And the answer is like, I don't know, yeah, you
Speaker 1: know sort of like, um, I could tell we could
Speaker 1: we could talk about this for like another hour and
Speaker 1: a half probably, um, but I know Matt has to
Speaker 1: go because the Archagos Report is calling him and I
Speaker 1: have to go feed a puppy. We should try to
Speaker 1: Maybe we should make this like a regular catch up
Speaker 1: that we can do every once in a while. That
Speaker 1: would be fun. I would love to do that. Yeah,
Speaker 1: this is this is This is a real treat And
Speaker 1: thanks to both of you for coming out, and absolutely
Speaker 1: would love to do it again. Yeah, this is super fun.
Speaker 1: I totally do you great? Yeah, me as well, Thank
Speaker 1: you guys, Thanks gov Um well Joe. I enjoyed that conversation.
Speaker 1: It was nice to catch up with Sam as always,
Speaker 1: and I am very curious to see what he does
Speaker 1: with million dollars um. One thing that struck me was
Speaker 1: his sort of vision for the ultimate end state of
Speaker 1: the exchange, Like this idea of centralizing all your money
Speaker 1: in one place, not just as not just for your investments,
Speaker 1: so you're investing in stocks, in crypto, but also for
Speaker 1: payments like that was pretty intriguing. Yeah, I thought that
Speaker 1: was really interesting, and I, you know, it really does
Speaker 1: speak to the scope of the ambition. But again, you know,
Speaker 1: here's someone or here's an exchange that literally almost nobody
Speaker 1: had heard of a year ago, and now it's one
Speaker 1: of the most powerful players in the entire world. So
Speaker 1: it's like you're like kind of skeptical, like betting against it,
Speaker 1: and like, would it shocked me if a bunch of
Speaker 1: Americans had like there you know s P y E
Speaker 1: T F and t L T and all that and
Speaker 1: uh F t x U S one day uh based
Speaker 1: on the trajectory not I also thought that was like
Speaker 1: a really good episode just because, like, you know, a
Speaker 1: lot of these like crypto conversations, you know, they could
Speaker 1: be a little bit like it was just nice to
Speaker 1: like sort of like strip away or get past some
Speaker 1: of the whole conversation about what this is all for,
Speaker 1: which is again another time, but also just like how
Speaker 1: it really works, and I think learning a little bit
Speaker 1: about just like this idea of like how crypto like
Speaker 1: collapsed as a lot of this stuff like whether it's
Speaker 1: the clearinghouse and the exchange and the broker, it's all
Speaker 1: sort of flattened into one and thinking about the implications.
Speaker 1: That was very interesting to hear Matt and Sam sort
Speaker 1: of riff on riff on these topics. But yeah, also
Speaker 1: just weird to hear Matt Levine, of all people referred
Speaker 1: to the financial industry as trad five Like I was not.
Speaker 1: I was not ready for that. Um, but that kind
Speaker 1: of shows how far we've come. Um. The one other
Speaker 1: thing I would say is I still think there's an
Speaker 1: open question around tether and we are certainly not done
Speaker 1: discussing it on on the podcast, So we're gonna have to, um,
Speaker 1: We're gonna have to dig into that one a little
Speaker 1: bit more, I think. Yeah, I mean it's like it's interesting.
Speaker 1: Like I was surprised because just having followed um Sam
Speaker 1: and his colleagues and even last time, I got some
Speaker 1: answers to questions, but now I have more questions. Yeah,
Speaker 1: so we'll have to do another We'll collect all our
Speaker 1: questions and uh and get back to the listeners. Um.
Speaker 1: Shall we leave it there? Yeah, let's leave it there.
Speaker 1: All right. This has been another episode of the All
Speaker 1: Thoughts Podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway and I'm Joe Wisntal. You can
Speaker 1: follow me on Twitter at the Stalwart. Follow our guests
Speaker 1: on Twitter Sam bankman Fried He's at SBF Underscore f
Speaker 1: t X, and follow Matt Levine on Twitter at Matt
Speaker 1: Underscore Levine. And be sure to follow our producer Laura Carlson.
Speaker 1: She's at Laura M. Carlson. Followed the Bloomberg head of podcast,
Speaker 1: Francesco Levi at Francesca Today, and check out all of
Speaker 1: our podcasts at Bloomberg under the handle at podcasts. Thanks
Speaker 1: for listening to