Transcript+
It all comes down to computers communicating. The information superhighway can be a confusing mix of on ramps and off ramps. Bitcoin is worthless artificial gold. Is it still rat poison? Probably rat poison squared. We need to get into the world of OK, this is actually foundational. Technology. What the Internet of Money does is it creates a single network which can do a microtransaction to a giga transaction. The Internet is going to be one of the major forces for reducing the role of gun. The one thing that's missing that will soon be developed is a reliable E cash. Hey guys, welcome back to another episode of Final Settlement. This was an exciting and action-packed episode. No shortage of M&A deals and new products and releases in the ecosystem. Quick word from on Ramp, an on ramp business specifically, I'm not sure we've had a chance to share it here. We launched this a few weeks ago, incredibly excited about the product. We announced a case study with a large firm but also really foundational infrastructure needed for businesses across the landscape that are adopting Bitcoin as a treasury reserve asset. Not only is multi institution a superior way to custody the underlying than trusting a single custodian, but then naturally what's existed or what hasn't existed in the digital asset Bitcoin world is governance, access based controls and everything that generally exists in the traditional financial system has not been ported over when it comes to just treasury management of the underlying Bitcoin. And so with honor and business institutions, enterprises get access to multiple users. They get access to creating quorum of quorum so they can decide on who has access to check off or approve a transaction before the withdrawal takes place. And then you get complete audit controls as well as multiple wallets, different quorums, everything that a large scale institution would need. I'm really excited about this announcement. We're starting to onboard publicly traded companies as well as other large institutions. If you want to learn more, I'd encourage you to book a consultation or reach out. All right, on to the episode. I hope you guys enjoy. All righty gentlemen. Welcome back to another episode of Final Settlement. It is Monday, November 24th, 10:40 AM. We missed last week. Apologies to the listeners. The three of us were on the road. We were in Dallas. Maybe we can talk about some takeaways from the Dallas trip later in the show. But we are back, boys. How are we doing? Bitcoins in the shitter. We're in the 80s. What are we going to talk about today? Deals in the week. Bitcoin isn't indeed in the shitter. I'm glad you brought up missing a week. It, it pained my soul. But it was just scheduling. Scheduling was tough. But yeah, we're we're back. Turkey. Turkey Week What? We can. Be thankful for what? We can be thankful for and also how to how to approach the conversation. If you told your boomer uncle to buy Bitcoin last year at the Thanksgiving table, he's down 10%. I looked last Thanksgiving price was around 9697 K. So he's hurt and meanwhile the S&P is up 10%. So how to approach that conversation, how to tell how, how to tell your boomer uncle to zoom out on the price chart? Look, look a little, a little longer than one year, 12 month time frame. But let maybe let's get to the deals. There was a, a big one from last week that we obviously missed because we didn't record. But Kraken has confidentially filed their S1. They're going to go public and they raised 800 million at a $20 billion valuation from a number of players, most notably Ken Griffin and Citadel. Maybe I'll hand it to Liam 1st and he'd dug into this a little bit, but what do you make of this latest move on the IPO side? Yeah, I there were rumors about them going public for a while now and I know that they've done some layoffs and and tried to get a little bit fitter. They do publish a lot of their quarterly metrics too. And they've, you know, turned out to be pretty profitable as of recently too. They're they're operating pretty well. It just makes too much sense for the Citadel side just because when you think about crack into and you know, to a lesser extent some of these other exchanges, they do a lot of volume, especially of some of these are less liquid tokens as well. And they've really stepped up their game on the derivative side. Citadel does a great job of getting and aggregating all the different information in order to have a competitive edge versus everybody else. And this is a little bit scary almost because especially if you're in the crypto space and a trader, just because seeing somebody like Citadel stepping in and having all the information just like the did it with Robin Hood is just going to allow them to kind of wipe the floor with all those kind of day traders and crypto traders out there. But it's, you know, to be expected as more and more people come into the space. It's a relatively low lift way. It doesn't even matter necessarily if they make their money on the Kraken deal in particular over the long term, just because a firm like this is going to make it all back and information and asymmetry and how they play the game over a long time for him. And so that's why all these strategic investors who are somewhat strategic would pay massive premiums for these businesses as well. Yeah, I think there's a lot to, you know, the Citadel play. I think Citadel is a mate. I don't want to speak, but I think they're a major investor into Robin Hood. Is that right, Liam? I don't know that for sure, but I do know that they get all the information flow from Robin Hood. Too well, that's what they get the the app for. But either way, Citadel, I believe we'll check in real time and come back. But the the main point was there's or the main point I wanted to make was that there's not a lot of assets in this space. And specifically when you look at derivative traders or derivative trading firms coupled with all coin markets, the historical large liquidity providers like the finances buy bit, buy bits of the world are outside of the US And you look at one of the largest or the largest option trading firm, which was what who did Coinbase buy a dare bit. So you look at that market and if you're looking to get exposure into the space, whether it's from, you know, digital assets, you're looking at derivatives, you're looking at anything that's going to orchestrate stable coins. I think Kraken just came out last week with AB to B to C solution, which is very popular across the industry because ultimately, a lot of that flow passes through the market makers at these firms. And so the way they monetize is if you can plug in and leverage their infrastructure as a service via money transmission licenses and then they take up apps on that spread. And so I look at that into Liam's point. There's a lot of downside protection. They're going to IPO. That was obviously part of these discussions because right after the investment, it's kind of a crazy amount of capital to be invested. I think it was close to 800 million and Citadel came up with 25% of that. It's a very interesting dynamic. The interesting part about Kraken is that they've been around for a while. They have a very unique and tied relationship with Silicon Valley being based there. The CEO and Co founder was formerly at Social Capital, which is Chamoth's venture firm. I think it still exists now he runs Tribe Capital. Then he stepped in to be CEO. So they're, they have very high like not only 10 year acumen, but backers. And so they're an interesting play. But the counter to all of this is that there's not a lot of sophisticated institutions that leverage Kraken. You most flow is going to go to like a Coinbase. And then if you're outside of the US, you're going to finance and there's some intermediaries in between like a Cumberland. But this really feels like you have to make a play. There's only so many assets Coinbase has already spoken for, and that's where Kraken has been able to command a King's ransom. Yeah, I think that's exactly right. The obviously Coinbase is is spoken forward to a certain extent already public etcetera. So there you know, there aren't a lot of options to your point in terms of either partnering with or investing in crypto native infrastructure where there's distribution. And really, you know, what's stuck out to me is what what Liam, you alluded to around just the, the parallel or similarity to their relationship with a Robin Hood where they want to see that overflow, they want to see the data. And so I, I just looked this up in real time. So does not actually have an equity stake in Robin Hood. So it is just a partnership and they're their largest market maker. So no direct equity stake there. But yeah, it feels similar to that in the sense that you want to get closer to the data, you want to get closer to the underlying clients and that order flow. And so it doesn't make sense from that perspective, just given there's not a lot of assets out there to acquire that that have that those qualities or those assets underneath them. So it makes sense. Yeah, and Kraken too is is no scrub. Like they published their financial data and their assets on the platform is just under 60 billion and Adjusted EBITDA last quarter is almost 200 million. So they've gotten super fit, have gone from negative to like pretty positive Adjusted EBITDA. And, you know, being able to monetize all that information flow and assets on the platform is definitely something that, you know, others are looking at is is a big player and just the brand and the fact that they haven't, you know, blown up is a way that, you know, lends some sort of credibility to them. Platform yeah that is something worth calling out the longevity and Lindy being around since I think I believe around Mount Cox time. I will say that I'd be very curious on some of those numbers when you think about like the Billings and assets on how many are illiquid tokens, right, Because that's an easy like that's the knock is that crack. It is not looked at as an institutional partner. They have the specifically around custody. They have the license in Wyoming. I forget the speedy and they do have an institutional arm there, but it's understood that there's not a lot of capital specifically when it relates to Bitcoin and a blue chip like that. No other assets TBD, but that's a big component of it. And then when you look at the revenue, you think about like it's very similar to like the trading revenue or the trading volume on a lot of these assets and where they're making their money in the flow and who they're passing it back to, especially given what we know about Gemini. Not to say that they're the same, but like last year was a very interesting year in the market when it comes to how many net new buyers were stepping in and where they like revenue came from. But either way, I think like we're saying that the the aspect, the last aspect I would like add to it is that there's not a lot of blue chip assets, but then also there's nothing really that looks differentiated. And so you start to see these privies, these bridges, the cracking acquisitions, they're going to play towards the volume and the speculation when it comes to the the markets, what is like the polymarket and Calcis of the world. But there's not really long standing businesses looking to help people preserve their wealth, educate them and grow it over time. And so we expect that as the asset, you know, Bitcoin goes until you all time highs and grows. That's really where the Citadel's and maybe it's not citadel, but other large financial institutions are going to look at like who's closest to the unblind and who's closest to custody in it and offering financial services, the monetization that wrap around the monetization of Bitcoin. We're just so early in like traffic by stepping in. They're still looking at the like fast moving volume. What are the Robin Hoods of the crypto world? They're not looking at wait, where are the smart money putting their Bitcoin? And that's where we see a lot of the big opportunity, at least for us and what we're investing in. Yeah, it's a really good point because if you have basically a longer term view on the underlying, IE Bitcoin relative to all of these other cryptocurrencies, then you build in a different way. You build products and services in a different way. That maps more to a long duration holding as opposed to this high frequency trading in and out of all these coins that are super far out the risk curve. Like it is just a different mental model of, like you said, getting closer to the underlying, but the underlying actually being the long standing sort of long duration asset that is Bitcoin as this sort of reserve asset, this digital sound money. So it's just a very different set of products and services that people need to basically have a financial plan around that asset that is a long term allocation. It's just very different from trading in and out of XYZ new protocol, new new shit coin. So I think that that that we're in the very early days of of those learnings. But maybe related to this one was another deal that was one of the bigger ones from last week and similar. And, and I say it's similar in the sense that, you know, Michael, to your point, like there aren't a lot of assets out there in terms of crypto native, native exchanges or even lenders in this case. So this is tether making a strategic investment in Leaden. Leaden's been around for a while as a lender in the space. I think earlier this year they sort of ceased support for other assets. So I believe now they are actually Bitcoin only focused firm. But just think this was interesting just given sort of Tether becoming this behemoth, not only in terms of their reserve assets and sort of stranglehold on on stablecoin market, but now making these strategic investments into other infrastructure and other players in the space. So what do you guys think about this one? Yeah, I'm happy to jump in. I think Heather likely is trying to make a move as one of their bigger lenders on the lending side. And so there's probably, if I would have assumed like they just negotiated their way into being able to have some sort of upside of based on the amount of capital that they bring to let in or just like a small equity stake. Because, you know, if letting is profitable, as they say they are, that it doesn't necessarily make sense to raise outside capital unless you really think of some strategic way. And I think that the lending side is is enough. But I think it makes sense, a ton of sense for Tether to just to get closer to the underlying both where the custody is a lot of them is institutional partners on the Latin side and just the similar to what we talked about with crack And it's both the information flow of, you know, when our clients actually getting liquidated, if at all. Like, does it seem like very frothy? Are they are a lot of people taking out loans and then maybe Tether would slow their acquisitions of of Bitcoin or are there, you know, more liquidations at the moment and maybe it's a a better time to step in? And then, you know, Tether obviously does a lot on as being trading pair for Bitcoin all across the world. So I think it it just makes more than it just makes so much sense for Tether to, you know, get more involved here. But it also just speaks to the limited amount of number of large players out there and just the fact that you want to be close to both the information as well as all the businesses that are, you know, creating different products and services out there. Yeah. I think the common theme with all of this is there's only so many relevant or reputable assets. There's only so many lenders that exist in North America that institutional or high net worth would go to. That's been around. Again, at the end of the day, you're going to want somebody regulated license human you can speak to in this world. And so tethers naturally making their play over the past year publicly across the world bets in Bitcoin and around Bitcoin adjacent industries. There's natural exposure into the market as it grows, letting right for acquisition. So from an investment perspective, they can get the return, but then also they have excess amount of dollars parked with them and if they're able to generate something over the nominal fed funds rate or the interest rate on treasuries to park it to lower the cost of capital for let in. So it makes complete sense. I think it'll be interesting to see where I mean, the last part is just really like the notion of international companies trying to get exposure. We talked about Tether launching USAT in the US and potentially North America. There's just a reality that you need to get people evangelizing, advocating for Tether. You need to be in there to be able to access Tether when you take a loan out. There's a lot of strategic reasons. There's not many lenders. So yeah, I think it makes it makes complete sense. Maybe a question for you guys that comes to my mind is like, you know, why, why couldn't or why wouldn't Tether just build out a lending business themselves? Like why would they go this route of investing in a leaden instead of just building it out themselves in some sense, right? Like I think. Well, there's two, there's two big angles there. One is it's kind of the notion of do you want to lend out a billion dollars or do you want to lend out $100 billion? And it obviously being a little hyperbolic, but then if they set up a lending desk, well then you look competitive to other forces. So there's that, But then the other aspect of it is the scalability of generally lending licenses depending on where you're based are required. And then there's the operational, it's, it's highly operational intensive because you know when you get into these margin call areas, you have desks that are usually stood up overnight. Even if they say they automate it, you still have to have some human component because you're looking at where their other assets are sitting. And so you add operational complexity, which others, you know, pride themselves on being lean. But then you also just add the, the aspect of Leaden has a desk there. Well, maybe in Latin America, Canada, North America, people are less prone or open to them getting involved and seen under the hood on the growth versus just being the the underlying partner for them. Yeah, yeah, 100% agree. It's just like, I think they just primarily want to focus on their core area and like they're doing so many different things. They could probably be the best gold custodian if they wanted to in the world and the best gold lender. But it's just like I think that they want to focus on doing investments in that space rather than making that the core business sign. Because the further that you get out of, you know, being the stable coin issuer, the less strategic competitive advantage. Now you can necessarily as they get to larger and larger scale, do essentially the Microsoft play and you know, run businesses at negative gross margins for long enough to bleed your company, your competitors dry and then you're the only player in the space. And then you can, you know, pretty much command whatever type of margin you want, but I just don't necessarily see them doing that right now especially, but you know, converting USDT over to USAT, they probably just have a lot of other things on their plate. Yep, that all makes sense. All right, through other deals to get to, I'm going to pop through a few. Liam, you brought this one. I've never heard of this company. Lighter raises 68,000,000 at a $1.5 billion valuation as VC bets flood back into Perptex infrastructure. What does light lighter do and and why might this be relevant? Yeah. I just brought this up because it's pretty much a lot of what we've been talking about just getting further and further away from the underlying asset and focusing on essentially things that don't have a lot of staying power and value in the long term. I don't know necessarily why perp Dexes are bringing a lot of value to the end consumer and just seeing founders fund Reba capital, really large VC in the space, just looking at everything under the sun other than Bitcoin itself just kind of shows how early we are. And like, regardless of you know, all of those blow UPS that you see by some of these other, you know, everything in the crypto space, I just don't necessarily see quite as much demand for these types of things long term. And the just the numbers are staggering because I'd never heard of lighter before and raising at 1 1/2 billion with $68 million valuation. The only plausible move that I can see is that they launched some sort of token and these guys get some sort of insider scoop on it. Otherwise, just looking at this deal it it kind of makes no sense and just brought it to my attention or brought it to attention because there's just a lot of the industry that's focused on the wrong metrics and wrong types of businesses in my deal. Yeah. I mean, the chart up on the screen now shows, I think you know, from their perspective why they would be interested in in a deal like this. Because you know, if you are thinking about what are other crypto block chains or platforms being used for today, it's high frequency gambling style bets, whether that's options, derivatives, perpetuals, etcetera. You can see the growth on this chart of of, you know, the the largest ones here are hybrid liquid and Aster, which is a newer entrant. But there has been growth in this area. And part of that speaks to what you know, we've talked about on on past episodes around just the nihilism of generally younger generations who don't feel like they can get ahead. So they are more prone to look towards gambling or higher risk bets to try to make money. Very short term thinking, generally speaking. But I think if I'm just putting myself in the shoes of these, these PC firms, whether they're crypto native or or trat 5 ECS like this is where you know, if you're looking for like actual on chain activity on these other protocols, like it is on the perpetual side, it is on the more gambling oriented stuff. So it is, it does seem just like they're chasing that puck, which, yeah, it's not great, but can see why. Yeah, I would make the case this is like one of the only investable areas because there's two aspects of this. And before even this chart being pulled up, I just thought about hyper liquid. When people look at hyper Liquid and the success it's had and the volume and revenue it's been generating, the obvious and only real use case for crypto is speculation. So you take that, it's my understanding from traders that perpetual futures are a better product than traditional futures because of the funding mechanism. And just like there's some other aspects to it where that's coming to equities. And so those products are generally crypto native. So you're going to need crypto native firms to build them. And then not only do they generate revenue because the volume, but then and velocity, but also they'll be right for acquisitions because like if Schwab or anybody if this is where the market's heading 12's not building out perpetual futures products. And so that's really where the acquisition, acquisitions would come from. But anyway. Yeah, that's a great point on the exit side. All right, here's another one. Obex Incubator, a $337 million incubator by Sky Ecosystem, Hive Framework and Layer Zero to fund stablecoin innovators and enable Sky to deploy 2.5 billion in USDS to selected projects. Yeah. Do you bring this one, Michael? Yeah, I thought it was interesting mainly because I think it's a, it's a fascinating format. There was a a couple aspects of this. So they raised $37,000,000 to effectively create some kind of like studio incubator flat platform to for people wanting to build stable coins with some kind of like real world like yield. And I think it's really interesting because I do think there's going to be other stable coins that will generate interest, whether they're US based or outside that will have other backings. So won't be necessarily like the one to one with the treasuries because I think that's embedded in the genius bill or like post it. They'll be other kind of mechanics on what's allowed and not allowed. And I do think like something like this would be interesting on a Bitcoin basis because there will be other formats to, again, we talk about like free banking and for issuers to create stable coins backed by Bitcoin, maybe other assets. How does that look? I thought that was the the biggest part. The other one that I didn't realize is Sky is a rebrand of Maker Dow, I believe. So that's the the aspect and they're kind of Sky's interesting or maker Dow is interesting because that was one of the first, not first kind of like algorithmic stable coins. Obviously it was backed by like Aetherium that has its own issues. But anyway, that was mainly the the thing to call out there. Yeah, it is very interesting. There's this whole dynamic around the stablecoin stuff where, you know, in an ideal world you hold a stablecoin and it, you know, bears some interest or yield as would a, you know, as if you were to holding AUS treasury bond, which is backing of these things. Now with the Genius Act passing, basically, you know, that piece of legislation has effectively ring fenced the ability to provide the yield so that underlying treasury yield to the stable coin holders. But it does seem like, you know, there are there's basically Gray areas surrounding that ring fence of effectively loopholes around like is it a reward? You know, if you call it something other than the US Treasury yield and it's some form of reward or maybe, you know, you're saving some other token as a a yield. So I think there's going to be a lot of this type of stuff where people are experimenting around the edges of how do we actually create competitive advantages or dynamics for, you know, our new XYZ stable coin. And I think a lot of that competition is going to come from these Gray areas around the loopholes around rewards versus yield, etcetera. So I think this is sort of foreshadowing out of it. Have you guys seen what slash is doing? No. They are, they're essentially a bank that's stablecoin first and they just hit 150 million in ARR within two years. They offer consumers rewards in terms of 2% of the stablecoin rewards that are passed back to their consumers. They seem to like get a start by like doing sneaker sales, like sneaker reselling stuff, but have really seemed to make a big indent within like kind of the startup and founder community and have gotten to an amazing like 150 million in AR within two years is pretty impressive to see. I don't know what the actual business model looks like in on the inside. I just put put a link in the chat, but seeing something like that just like shows how much demand there is for just better movement of money as well as the actual holding on to some funds on the other side. So I don't know what this looks like in the end, but there are definitely going to be people who you know, do more on this. It seems like it was built on like base. Interesting. Yeah, I hadn't heard of this one. Moving along, there was another raise here, not sure who brought this one, but Dopple raises 70 million Series C to outpace social engineering attacks led by Bessemer Venture Partners. The round focus or follows 3X increase in valuation in six months and adds new investors including Crowdstrikes George Kurtz. Hey, everybody. Hope you're joining the episode. Lots of interesting dialogue going on this week around stablecoins, AI and a lot of the M&A activity that's happening in the industry. Quick word from on Ramp and specifically around our inheritance product. We have no shortage of net new clients and existing clients that came over to on Ramp specifically because of inheritance. We've all been in this current situation where generally Bitcoin is male dominated. Our significant others are perfectly fine with us allocating or even over allocating depending on who you are to the asset. But they also don't want any exposure have to deal with management of private keys, what to do if something happens to the individual harbor to see phrases, all the things that account for self custody. And so while clients sometimes feel perfectly fine with self custody for themselves, it really comes to legacy planning, whether it's with inheritance, the dynasty trust release that we had. Inheritance comes with every product and every multi institution account included with also insurance Iras and trade. But inheritance is the thing that I want to call out simply because as the price appreciates, as we get older, we start to recognize that we have to legacy plan, we have to be more mature with this asset and so on. RIP really provides Peace of Mind there. Even if you're not necessarily ready for something like on Room, but you want to learn more how we solve for that and some of the other, you know, financial products we offer. As Bitcoin naturally matures, it needs serious products and solutions. I'd encourage you to book time or you can reach out to me directly, Michael, at honor@bitcoin.com. We're actually piloting out some flat reduced base pricing that we're testing out this quarter and we'll go into 2026 with. If you'd like to opt into something like that, reach out and we'll share more. All right, hope you enjoy the rest of the episode. Yeah. I thought this was fascinating because there's a component of crypto or digital assets, but it's really related across the Internet. I don't fully know how they integrate this, but there's a notion of like human risk management that they site across different tooling, whether it's fintechs, AI, obviously digital assets. Having a bearer instrument that can be stolen or socially engineered is like one of the prime use cases for how do you mitigate bad actors, specifically around social engineering, AI, deepfakes. And I expect to see more of more and more of this get integrated Now, I still, I've seen different firms like this pop up and there's it's really like ephemeral, you can't touch in the way that they mitigate it. So there's an angle of like executives at a company where they put higher like thresholds and hygiene around how they manage, you know, their digital presence and maybe even some of their like permissions when they set up their passwords. So I don't necessarily know how much of it is like actual AI proprietary software versus like client services and implementation, but I just expect to see more and more of this. We're just not prepared as a society to deal with the Internet and specifically AI. We see all day long these pictures, It's kind of crazy. The past like 2 weeks, I think it's Gemini or whoever's new implementation that you can like insert your picture next to somebody else. And so I just expect to see more on both sides to combat the losses that will happen in the Canary is generally digital assets because it's the easiest to steal. But then you can imagine the social engineering will continue across to different, you know, podcast groups that, you know, you throw something else that's looks like it's that person, but it's not actually them. There's all this content out there. So that that was interesting. And $70 million is a pretty large amount of capital to be invested. Yeah, this is, this is certainly interesting. This is a real risk that, you know, we talk a lot about just in terms of the sort of unique custodial characteristics of digital bear assets and how you need to protect against not only physical threats, but really increasingly these digital social engineering attacks. And, and really, you know, why this is such a large issue, at least in my mind. And, and where most of this occurs is on, you know, single counterparty exchanges like a coin base, where a scammer or a hacker will impersonate the customer support reps of a coin base or another wallet provider or an exchange. And they will say, you know, something's happened to your account. And in order to protect you, I basically need your credentials. And once the individual, the end client hands over those credentials willingly, even though they're being socially engineered, basically they've, they've given up any recourse. And so that's, that's the really sort of insidious part about these types of attacks is because Coinbase basically can wipe their hands clean of it because the end client actually agreed effectively to give up their credentials that allowed their, you know, their account or their wallet to just be wiped, you know, immediately. And so it's a real problem and it's only going to accelerate from here, as you mentioned, Michael, with the onset of AI, deepfakes, etcetera, just really adding tools to the arsenal of these types of attackers from a technology standpoint. And so this is interesting to see, like you said, like it's, it's hard to suss out like how exactly they're going about this, whether it's proprietary tech or it's more just manual in terms of like putting more layers and redundancies in place in order to move funds like that. Ultimately, you know, I think, you know, when, when we think about what we do on, on the on our side with multi institutional custody, it's really this idea of like, it should be difficult to move these assets ultimately. And so you should, you should have multiple layers of redundancy that protect you against the assets moving quickly because they are digitally native and their assets, they can be moved quickly. And that's part of why these attacks are so frequent at the coin bases of the world, because they don't have those sort of layers that make it more difficult to move. Yeah, and there there's a real barbell problem here. I don't pretend to have the exact solution, but like when you think about it, you can either change like the logic and ROI of violence by building the right products and services that would cost more for social engineering and more thought. And so then you keep people from focusing on your business. When you think about what multi institution provides not only from like video verifications to additional logic to additional authentication methods all the way to offline, you know, signing versus the other side. What Brian's referencing the finances, Coinbase's large institutions, what one of the solutions that they provide is really like canvassing the Internet and looking for like different levels of phishing related to that website. So whether it's spinning up a website that looks like a domain that's similar to Coinbase to the different types of emails that you get. And then really helping police that and send out emails and try to get them down if they're especially threat, like various other reputable sites that somehow got, you know, corrupted or however they were to push those links out. But the problem is to to Brian's point, like that's especially in the age of AI that is continuing to grow. And so it's like a whack A mole. And and so there's a we'll see how it plays out, but my instincts tell me the way you change that is at the product level, because when you at the product level, if you make it really hard for those assets to be lost or stolen, well, then bad actors are going to go to the lower hanging fruit. And that's really where we think about like multi institution from a market structure perspective, even from being able to steal somebody's assets, generally people know that you have like 1° of movement, whether the hardware device sits in your house or you can authenticate with one institution. So people target. I think it was like this past week, there was like 3 different crazy events that happened with kidnappings and ransoms that happened with people in digital assets. But that starts to become less and less likely when you know that there's an actual process around the movement of those assets. And so we're still so early and this is going to be the key part for like the fidelities and large institutions of the world because they're just not prepared for that because that's just not how they manage and have built their businesses. So I do think they'll be more and more needs for like firms like this. And it'll be interesting to see how they grow with kind of like as the attack vectors grow. Very well said. Maybe switching gears a little bit. Michael, you brought this one with the caption, your chain is my chain. Do you want to elaborate on what you meant by that? There was basically some issues with Cardano this past weekend and the FBI was somehow involved. Yeah. So, I mean, I, I'd heard about this and then it popped up. Basically somebody leveraged some AI tooling on and I don't know exactly the implementation method, but it, it created AI want to say a double spend on Cardano's validator set. So Cardano has its own node infrastructure. And whatever happened, there was a like split between some of the validators were picking up the traditional change or the the chain that should have existed. And then another one had some kind of like level of spend that corrupted it and nobody knew what was going on. And so it effectively had a halt. The exchanges had a halt trading and it was I believe like a relatively low cost effort to do what they did. But it ultimately shows that this is the ability or susceptible to any blockchain, any crypto currencies because of their lack of decentralization. Cardano was just the natural first one for it to happen to a recent one. In this, they try to like hide that Hoskinson reaches out to the FBI and that this was a one off and the guy that did it or who was behind it said he didn't know. But when you read in this article, they basically explain how they did this on test net before they actually implemented on the the main protocol. Like so this was coordinated. So anyway, I think that the real angle here is that a, you can roll back these chains, a you can double spend. And ultimately, whether they're proof of work or proof of stake, there's not enough hash rate or decentralization, So you can effectively change the Ledger. And when you do that, a it's proving that just notion of fundamentals, but then also you end up with these things where it shows that you can turn them off, you can revert them. And this is effectively all crypto currencies and block chains, including like tempo and everything else. And so I thought it was just good to highlight because I know we talked about all this stuff and it seems like either for I know there's definitely people listening that are like long other crypto assets or maybe think like, well, you know, close minded curmungeons, Luddites. The other crypto has some value. It's just like it doesn't because fundamentally it does not have it doesn't have the fundamentals required to be decentralized. And this was just the most recent example. And this is a cryptocurrency that's existed for eight years. So I mean, and that's been out in the wild for a while. Imagine another cryptocurrency that's relatively new. So yeah. Yeah, no, it's, I'm glad you brought this because it really is a sort of textbook example of when we talk about this notion of decentralization theater like this is a just a perfect example of it. And when things actually do breakdown, you, you start to see where those vectors of centralization actually reside. And just to add a few more details to this. So this is. This is the Twitter thread of the guy who actually did the exploit explaining the exploit. Basically saying sorry Cardano folks, it was me who endangered the network with my careless actions yesterday. It started off as a let's see if I can reproduce the Brad transaction personal challenge and then I was dumb enough to rely on AI instructions and how to block traffic. So basically he vibe coded this exploit. A few other details from this. This was some of Nick Carter's thoughts on it. A chain split between two node versions in which one of the forks has to be later discarded. Discarded is downtime because a exchanges wallets have to stop accepting processing transactions which occurred, if not, they're vulnerable to double spends and B if you transacted on the poison chain, your transactions will be discarded which equals downtime as well. The network is effectively down during a chain split situation even if block production continues. And then he said, regardless, a single amateur using AI to create a poison transaction, creating incompatibility between different nodes implementations is notable because it shows the extreme fragility of a major network. And yeah, I, I think last I checked, like Cardano's market cap is still like $20 billion, which is just insane to think about. But yeah, the real take away here is this is just a great example of, of decentralization theater. And when shit hit, the shit hits the fan. We can halt the chain. We we can make changes and you start to see those vectors of of centralization appear. Yeah. And and where this is really important to call out is it's always sad when you see really well run large multi decade over sometimes 100 year old financial institutions adopting crypto currencies because on a long enough time horizon, this is at the the end state. Like if you think about these assets accumulating 20 billion, 40 billion, sixty, eighty 100 billion market cap and you think about a global competition for corrupting, stealing, like what happens when North Koreans, bad actors, wherever they are, are looking to do these kind of exploits because there's a larger bounty. And then if you're a large institution that's offering Salon or these other cryptocurrencies and you have a sizable weight behind your marketing engine and client base exposed to them and they wake up and realize this can happen or worse, they lose assets. What does that do to your brand and reputation? So this fundamentally goes back to the thesis of not only building and investing around this one asset that is the market and everything else is just hiding around it, generating some money generally for the venture capitalists and founders that are able to, you know, take secondaries and take private capital back into their personal accounts. This really is just on a lot of times and where all of this goes. But everyone just it's the same thing as like bond V negative yield. And nobody talks about it because the system is used to perpetrating or propagating that we're, you know, we can't because our existing businesses are heavily indexed to bonds or it's just not part of the common sentiment yet that we can say. And so this is just a real great example of it. It's funny that Nick's calling out because like, these guys invest in crypto currencies and there's what what makes Cardona any different than like any other asset? Yeah, it's all. Oh, go ahead, Brian. I. Was just going to say, what I have up on screen is this, this person on Twitter, Hunt and Grie who's been just doing this, this running thread of looking at all coins effectively and just pointing out all the bullshit. And so this was his one for Cardano. He said Cardano raised 62,000,000, zero revenue, one transaction per second. Entire ecosystem is basically 1 decks and one lending protocol that maybe 7 people use. Ghost Chain guarded by an illiterate cult at the gates. It's at $21 billion full fully diluted valuation. So we need more of this. We need more people just calling out what these things are. This is another one in the thread, but go ahead Liam, I'll cut you off. No I was just going to say Cardano is looked at at a as a blue chip cryptocurrency. I just looked it up and it's the 10th largest one in the world and 8th if you don't include circle and tether. So you know, people look at these things and they see you know, that's why all honestly, Bitcoin is still looked at it as a scam like everything else, because people still group Bitcoin in with the rest of these crypto currencies. They think Cardano is the same as FTX or and the same as Bitcoin. And they're honestly, it's not enough education on why these things are actually different. And I'm seeing those people out there who offer everything under the sun and say that crypto is and Cardano is the same exact thing as Bitcoin is. What's going to trip up many of these institutions when they look at coming into the space? And it's going to take a lot of re education in order to actually get to what's the signal versus the noise. And that's why, you know, a lot of people have really stayed out of this industry thus far, too. Yeah, it's a great case study as we expand our team and go after institutions and and higher education for like certain segments of that to show this as an example. Because if this can happen here, I think it it also ties back to, I don't know who this is giving more credit to, but like Cardano's like a version of the poor man's ripple. Because what makes this whole like circle work is you raise capital from asset managers, venture capitalists that either get the the warrants on the token, some of the equity they get heavy war chest. Bitcoin doesn't have any marketing or direct budget. So you naturally have these companies that go out and evangelize. And that's what Hoskinson's done. He did a lot of it in Wyoming. You build this version, then other people host events, won't call any out, but there's really nice conferences we've been part of. But then they have like card on a sponsor because they've given a money and it's really hard to make money in Bitcoin space. You don't have them spending a lot of capital and that's how you end up with this reflexive like circle of everyone believing there's some like value or innovation happening when it's all, it's all for naughty. So anyway, it's very interesting incentive model. Yeah, it's very well said. And it's it's unfortunate that there's still that massive conflation. And to your point, Michael, part of it has to do with literally just like the lobbying efforts and like, you know, these these projects basically print money out of thin air with their tokens. And so they have, you know, quote UN quote money to spend on lobbying efforts and marketing efforts. And so it it adds to that conflation, which is unfortunate, but we can move on. I think where I wanted to go next was this article by Michael Green, which is make making the rounds over the past 24 hours or so. So Michael Green, he's really a trap by guy. He's long been sort of anti crypto, anti Bitcoin. But I saw this, I saw this last night starting to sort of percolate across crypto and Bitcoin Twitter, because basically what what he describes in this long form article is he does a deep dive into the metric of the poverty line and basically how that's been calculated over the years. And the reality that actually that calculation hasn't changed in several decades. So basically the, the take away here is the poverty line calculation or metric was created in the 60s. And effectively it looked at families that spent roughly a third of their income on food. And so the poverty line was effectively 3X the cost of a minimal food plan effectively. And so this worked in the 60s effectively because the other expenses to someone's living was were relatively cheap. So housing was relatively cheap, healthcare was relatively inexpensive, childcare was mostly done at home or by the family and and colleges were way cheaper. And so the formula that 3X sort of food inflation adjusted has remained consistent over decades while the rest of those expenses have increased dramatically. So looking at sort of the statistics today, food is really only 5 to 7% of household budgets, not the 33% that it was in the 60s. So housing now eats 35 to 45% of that income. Healthcare takes another 15 to 25%, and childcare is anywhere from 20 to 40%. And so basically if you're taking that multiplier that 3X that you know comes from the original calculation, it really looks more like a 16X multiplier today. And So what Michael Green is arguing in this is basically that the real poverty line today is more like 130,000 to 150,000 in annual income relative to what the current stated poverty line is around 31 grand. So, you know, some of the some of the comments to to this article are saying, you know, he was being way too aggressive with some of his estimations of current living expenses. So, you know, maybe this number is too high. The take away to me though, is that like the, the current poverty line number is wrong. And it's probably somewhere in between those two numbers, the 13140 and the the 30. And so, you know, I think why this got picked up by Bitcoin folks and crypto Twitter is effectively because he's outlining the problem which we talked about, which is the money is broken and the debasement concerns here and the sort of acceleration and living expenses beyond the growth in in real wages. Now he doesn't identify the, the sort of actual problem in his article or a potential solution in, in Bitcoin or a better form of money, but he does pretty accurately layout part of the issue here. And what is causing basically, because this metric is so outdated and old, a lot of things stem from people making other calculations and other assessments and forecasts around what the what they think the poverty line is. And so if that's as majorly distorted as he's suggesting, then that has a lot of implications for, you know, how we think about how the economy is doing, generally speaking. Yeah. I mean, I, I think this relates to businesses in the sense of where the long enough time horizon. The thesis has always been that how we used to have a savings account, you'll just generally see in your bank account, it'll be dollars and BTC and the market will just wake up to there's a better savings technology that exists to offset this. Because I didn't read the article, I skimmed it, but it reminds me very similar. Just like the debasement trade or the denominator being broken is when the underlying unit that everyone's either receiving their payments in their salary or their savings is in including if their investments, they're just losing purchasing power and it's not keeping pace. And CPI is another great example of just like the distortion from what this is describing to like what actual CPI is. And so of course, if all these things are manipulated, then you're losing purchasing power. And on a long enough time horizon, I think within the next like 3 years, there'll be some emetic factors that's like, well, I just hold this money. And because the volatility will also tempt like loose and or like the volatility won't always be there where Bitcoin, it'll be easier to like offset what annual inflation is versus Bitcoin volatility where you'll just hold large and larger positions. And that's how it kind of like moves away from crypto and gold probably ends up sitting there as well. But that's like, the biggest thing I take away from this is that the market is slowly waking up. So the dollar is not retaining its purchasing power. And if it's not doing that, then everything else is getting more expensive, including like what it costs to eat and all the goods he's referencing. Yeah, that's very well said. And it just goes to how many false signals there are in the world. And everybody still thinks that the, you know, risk free rate that they should be chasing is the 10 year treasury yield, which we all know over a long time frame has been actually negative yielding in terms of adjusted for the increase in money supply. And so that is, you know, the base calculation for all economic activity. And it's it's wrong the fact that you know, businesses should not be considered based on the base calculation of how many more dollars they can make because the dollars keep on growing in value, maybe even inflation adjusted dollars for the amount of money, the amount of new dollars that are created is a little bit of a better metric, but plus some additional risk premium. But it's all going to change as you as it relates to what is the base calculation in order to retain your purchasing power over time. And that's going to be a scarce asset. And then you can layer on equity risk premium on top of that and illiquidity risk and whatever else you want. And you know, early riders is pretty early to this trend, but and it's going to take a while just because you can see these false metrics being really benchmark for a really long time. But those who, you know, continue to look at these false signals as the North Star are going to continue to underperform as it relates to, you know, both allocating capital as well as, you know, being able to just save and throw your purchasing power over time. Yep, agree with all that. Very well said. The the sort of parallel to just thinking about other government issued statistics like ACPI that we know is understating the true level of debasement and currency devaluation. This is very similar. The this is just understating what the actual line at which a family is struggling effectively in the United States. And so we just haven't even updated this methodology in, you know, 60 years. And so there are going to be knock on effects of that in terms of how we're using that data to forecast other things and, you know, get a general sense for the health of the economy and the health, you know, the health of citizens. We're not getting a real picture of that today. Yeah. And maybe this ties in because I know we have limited time. We didn't get to chat last week. We don't have to pull it up. But the Square launch and a lot of the tooling they're providing for SMBs is really important here because the same way an individual can't recognize the problem, the same problem exists with businesses in the sense of whether their unit economics and margins are decreasing or going out of business, they naturally need a better form of money to manage their treasury. And so that's a going to be a huge lift given I think that 54,000,000 merchants. And so there's more and more tooling, more and more education that will come. And I think that similar with like the stablecoin proliferation, combating deep fakes, there's going to be multiple implementations. This is a like global phenomenon when you think about deep fakes, when you think about money movement and then when you think about savings technology. And so it's this, it's going to be a very interesting area to watch play out, but also invest in because there's going to be a number of winners. There won't be 1 implementation or one like Counterparty that wins all when it comes to accepting and saving the better form of money. Yep. Agree with all that unless you guys had anything else want to end on perhaps a slightly bullish note as we mentioned at the jump, the prices in the 80s, but you know, maybe something to to bring to your your boomer uncle who you talked to on Thanksgiving. We used to joke about crashing to 85 gay. So this is a this is a tweet from CZ back in December of 2020, waiting for the headline Bitcoin crashes from one O 1K to 85K Save the tweet. And this is this is one of many of these types of tweets from four or five years ago where people were meaning the notion that we would be crashing to these much higher levels from where we were back then. And that's exactly what's happening right now. And people are acting like the sky is falling. But ultimately this is, you know, frankly how we all expected it to play out. We're going to make higher highs and higher lows. And that's kind of just what's happening. So don't get chicken out. We're 3035% below all time highs from, you know, a month and a half ago. So zoom out, have some context and tackle that that conversation with your boomer uncle who who you had by AT97K. Yeah. I mean if we're we're doing the Thanksgiving advice, we also have to recommend, you know it's cherry pick cherry picking where we're at for a year time frame from last Thanksgiving. But if you look across any asset class in any time frame that's generally not 12 to 24 months, Bitcoin has outperformed everything else. And so I think that's the angle. And then obviously making sure they size it appropriately so they can do the education and go and understand well, if it crashes 25%, it's not get out of the trade. It's just this is Park horse so yeah should be think I think we'll have an exciting 2026 shouldn't be too too too. You know it could be a lot worse Thanksgiving. Imagine this is sitting at 25,000 or 35,000. There's been some very. Could always be worse, could always be nice. But back in the day in 2021, we crashed from 69 to 58 K and and I was screaming at everybody in my family to buy Bitcoin then before going down all the way to 16,000. So we've been through this rodeo before and that turned out fine, even though it may or may not have been happy the next Thanksgiving. But it's all about a long term approach. Long term approach sales are on sale. Black Friday came early. Yeah. That's the right. That's the right mentality. Anything else gentlemen want to wrap? Well, the the one thing I was going to call out was the 2022 Thanksgiving must have been very tough because if you remember 2021, I think it was like near 50 sixties and 2022, that was a $17,000 Thanksgiving. So yeah, things are on there. Could always be worse. Could. Always be worse. All right? Thanks, boys. See you next week. Hey guys, I hope you enjoyed the show. If you liked it, please give it a like and a share or. Subscription, Like I mentioned, we'll be out in Dallas, the team from early. Writers and On Ramp will be hosting a few events. If you're curious on what early. Writers have been up to you can go to early writers. Com See some of the portfolio companies we haven't publicly announced. Yet there's some very exciting announcements that are coming into the next few weeks when it comes to, you know, looking at. From the first Treasury. Company Bitcoin treasury company business in the space that we backed when it looks at the quote UN quote debasement trade that's now being talked about today. Back to company playing in the golden Bitcoin space all the way to new firms building globally on multi institution custody. There's a lot of exciting things, including the stables with the accelerator that we launched and then we have new teammates joining across the world from investment banking to traditional portfolio management, we are really building. A very exciting platform that should be pioneering. What asset management on a Bitcoin standard looks like. If you're interested in getting involved, I'd encourage you to reach out or you can shoot me an e-mail at michael@earlywriters.com. All right, hope you guys have a great week. We'll have a awesome podcast this week and see you next Monday. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that Onramp Media is for informational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/contact to schedule a consultation with one of our private Client Advisors.
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