Could a Grayscale Bitcoin Trust collapse be the next black swan event?

Sa. Hey guys, this is Cointelegraph, the Market Report. Welcome everyone for another great show. I'm Marcel Petschman, I'm a writer here at Cointelegraph. I used to work for multiple banks including Deutsche and ubs. So I used to be a trader and I joined the crypto industry in 2017 and since then I have been a full time trader and Alice Alex analyst and I'm joined today borrow expert Sam Borgi.

Yeah, Marcel is the reformed banker. Right from, from, from, from Wall street, from the banking sector to the crypto sector. Right from one degen to another degen apparently given the way the industry has gone recently. Yeah. Hi everyone, my name is Sam Borgi, business editor, Cointelegraph. I mostly focus on a lot of the business news around the crypto and blockchain industry. I wrote my first bitcoin article back in 2012. I think it was around the whole Silk Road fiasco. So I've been in the space a long time but nothing could prepare me for what's happened this year, especially over the past three or three weeks or so. Never a dull moment in the sector as we're going to see with the articles this week.

That's, that's a good question, Sam. I've been here yesterday. I heard that, that the recent, the drop that we've seen over the past year or so was worse than what we saw in 2014 at Mount Gox. Do you think this is correct saying like, well, Bitcoin is down 72% in one year. I think it's down like 76 or 77% from the peak. Do you think it has any resemblance to what I've seen on Mount Gox in 2014?

Yeah, there definitely is a resemblance. Now Mount Gox had a bigger impact on the industry as a whole at the time. Given how small bitcoin and crypto trading was and the majority of the volume at the time was on, on mt gox. Now, now with ftx, the, the actual size of the losses are bigger in terms of how much money was lost given the size of ftx. But overall the industry is, is more diverse and bigger than it was back in 2014. So logic would dictate that FTX going down shouldn't completely annihilate the sector. But the issue we're going to have now moving forward is the contagion effect. And we've already started to see that several companies have come forward and stated that you know what, we have considerable funds locked up on ftx. So that's really where the concern is, is that what's the next domino to fall? Is there going to be another domino fall? That's really where the real concern is right now.

Okay, so for those who are unfamiliar with the case, I wasn't here in crypto industry back in 2014, but I know that Mount Gox had like a 70 to 80% market share. So comparing to what FTX had at its peak, which I think it was like 20, 25% of the volume, it is small, irrelevant, some might say. But the point is, in 2014 we did not have so much derivatives market like the open interest for the bitcoin futures at FTX it was like 25% of the market. And when you have such a big loss for derivatives traders, I think that the impact for the industry, I'm not saying for the holders of Bitcoin or the holders of Ethereum who have a long term mentality, but what I'm saying is for institutional investors, traders, lenders and all the ecosystem that has been forming, the venture capitalist that has been pouring money on altcoins and exchanges themselves, I think that money is going away maybe for a long time. I don't think that any reasonable institutional investor will see, okay, I understand that FTX was just an exchange. I understand that Genesis we're going to get into that was just a lending company. So I don't see there's a risk in crypto. I think it's just the opposite. The, the market, retail investors and institutional investors will be scared, at least for 12 months. So do you think we're going to see a longer winter, crypto winter because of that?

Yeah. You know, Marcel, you raised a lot of really good points about just how shot investor sentiment is at the time at present, in terms of the length of crypto winter. Right now for me, the case remains that we are in four year cycles and unless I see otherwise, I am expecting things to eventually turn around, leading into the having and then eventually another market recovery. But the situation going on right now cannot be overstated. Anybody who comes and says they, they saw FTX crash coming, you know, that's mostly a load of nonsense. I was always a bit puzzled as to how Sam Bankman Freed rose to prominence so quickly and why FTX was so popular. But there's, there's no denying the massive impact that they had on the ecosystem and it was a largely positive impact. If you take a look at the sponsorship deals, how much they were responsible for pushing crypto and bitcoin into the mainstream, to have them basically go belly up over a 48 hour period is basically what it took is very concerning. So yeah, I do think that as CZ even said that the CEO of Binance, this probably pushes back the industry a few years and I still, I'm still waiting for the dust to settle. I don't think the dust has settled just, just yet. If you take a look at price action, it looks like we could still be headed lower. But overall I think that investor sentiment has been, has been shattered to the core. And the FTX one in particular, that one is the one that stung the most because very few people saw it unraveling the way that it did. There were a few people who raised concerns about ftx but the chain of events, nobody could have predicted that basically SBF was a fraud and what he was doing was, was a complete and utter fraud. No one can really sit there and say they expected that to happen. You know those who were advertising FTX us, which is a regulated exchange, they did their due diligence in the sense that they were advertising a regulated exchange. Did they know that the founders were involved in an Enron level scam or an Enron level fraud? Unlikely. So yeah, I think investor sentiment is going to take a long time to come back. Right now you basically have the Bitcoin hodlers, you know the guys and gals who've been in the industry for a long time, we're hodling and then you have a few projects that are building but beyond that right now it's not looking good.

I agree 200%. I think Celsius and Luna we can say well those were like VC companies or it was a crypto project that was kind of risky. It was an algorithmic stable coin that changed in the way it was completely centralized. And so one can say okay, those were not directly related to Bitcoin and Ethereum so should have less impact. But the FTX as you said it was one of the main gateways, Fiat on and off ramp and as I said one of the main derivatives exchange. But the the topic for this week, quick shout out to the, to the guys on the YouTube chat. We have Rene Montenegro, Epic Crash to $10,000 is a week away. We have Capivara, we have Yana, we have at FTT by sa. Thanks guys for joining us. It's a pleasure being here. We also have Cardano Green on chat but Sam. So the topic of this week's show is the Grail Scale Bitcoin Trust, the Genesis and GBTC and the eventual collapse of those funds being the Next Black Swan event. So first I'm gonna give the viewers what I understand, that what DCG and Genesis is and then you jump in to correct me if I'm wrong or add other stuff. So dcg, DCG Digital Group or Digital Currency Group is a holding company. Right. They have a bunch of companies owned by Barry Silbert and they have Coindesk website, they have Genesis Trading, which is a market maker, OTC and lending firm. They also have the grayscale funds, which is kind of like an ETF because it's a fund which is traded on OTC markets on NICE and US markets. And this fund only holding is either Bitcoin or Ethereum or other cryptocurrencies. So it's kind of an etf, but it doesn't really have redemption once the owner of the fund buys in. The only way to get out is selling to another people on the open markets. So it's not really a good pro, good product. It charges 2% per year, but at the peak it had over $30 billion worth of Bitcoin and over, I don't know, four or five billion dollars worth of Ethereum. Of course as the market went down, so did the value of the, the BTC and ETH own those funds. So Grayscale, the company administers those funds, the GBTC and the Ethereum fund. But the problem is that Genesis, another company from dcg, the market making company, is underwater. We don't know, maybe they lost a billion, $2 billion. So there's a lot of speculation going here that because of Genesis the company is going bankrupt or it's missing money, it's insolvent, the assets on the Grayscale fund might be sold. So causing a Black Swan event, is that it, Sam? Is that what I understood correctly?

Absolutely. You, you nailed that on the head and I know that it's been reported that even at DCG's recent board meeting, the topic of a potential liquidation of GBTC was, was, was brought up. That's what's been reported. I don't want to FUD or anything like that, but at least it's been, it's been, it's been discussed and obviously that would have a pretty severe impact on the broader market. Yeah, so that's, that's basically where we're at. I know that. Also, DCG recently led a fundraising effort. Reports claimed they're trying to raise about a billion dollars to cover the, the massive hole in their balance sheet that's caused by what's going on with Genesis as you described so where there's smoke, there's fire. And apparently it seems like I received news that even the about us page on DCG was, was basically purged Team page. So that for me was an eye opening. We can't find the team. Now this was as of a couple days ago. I haven't checked now, but from what I saw, the, the team page was, was purged. So not looking good. I mean not looking good at all.

Adrian, Danilo, can you share the news of the gbtc? Black's one, the one posted on container? Okay, so here's the News post on November 21. So yesterday GBTC, which is the fund owned by Grayscale, administered by Grayscale. Is it the next bitcoin price? Next one. So can you scroll down a little bit Daniel, please? Yeah. So there we have a contagion in the world. Everyone lives as November grinds on. Just like the Teha collapse. The victims were Voyager or Celsius. And now the FTX contagion turns to gbdc. So my question, what I don't understand is if a fund manager goes bankrupt for whatever reason, what does the phone, the fund contents have to do with that? Or is it a special case for grayscale? What happened here that made people think if Genesis go down, the contents of the GBTC fund, the 650000 bitcoins might be sold? So, so what's the difference here?

Yeah, I mean the. I think that that's a really good point because I know that DCG has time and time again stated that their holdings are, are secure. They even had a coin, a coinbase attestation showing that the contents of GBTC are secure. I think the issue comes from Genesis being a liquidity provider halting withdrawals due to what they called, I think unprecedented market turmoil. So I think when you have the liquidity provider is, is potentially bankrupt, I think that's where the issues are arising. But yeah, at the end of the day it would require someone to come in and actually start selling off their GBTC shares. And I think there was a recent report from Bloomberg, a note that was released very, very recently saying that that's unlikely to happen right now. You know, why would you liquidate such a massive discount given the fact that there's so much market turmoil right now? So the connection isn't very clear. But what seems to be clear is that within the DCG umbrella of companies there are some issues right now and that's having some kind of trickle effect or contagion effect on, on, on, on on the broader company. That's based on the reporting that I'm seeing. So that's, that's the overview of, of where we are right now. It looks like between Genesis and, and GBTC and.

And why exactly is the fund trading below the, the contents, the BTC value it had. It has been going for I don't know, at least 10 months or 11 months that the GBTC shares were trading below par. Of course the discount is widening. I think it reached 50%. But do you think that investors already knew in advance that Genesis has a prop. Had a problem? So what's your opinion here?

I don't think they knew. I certainly didn't think there was any issue with, with Genesis up until recently. I just think this is all a symptom of, of the brutal bear market that we're in. And, and, and just, just a function of supply and demand. I mean this has been a down only market. This has been a meme market. Basically. It's been down only for the past 10 months. I mean you know better than anyone that during bear markets we get massive bounces, right? We even caught them back in 2009 during the financial crisis in, in bitcoin and in crypto it's literally been down only like if you would have told me a year ago that bitcoin is going to be basically a straight down shot for 10 months, I would have thought that that was, that would be completely unrealistic. Nothing falls the way that, that bitcoin and crypto have, have fallen this year. So I think that the, the effects of that are being felt across various asset classes. So I think you know, right now we're starting to see just the downstream effect of a brutal bear market even by, by crypto standards.

I agree. Well I think that grayscale funds are the elephant in the room right now and an event or liquidation of those 650000 bitcoins will trigger further panic. I, I have no doubt here. What a doubt is that anyone knows the correct answer to what's going to happen if Genesis goes down. Because Genesis is one company in grayscale. The fund administer is another. So one thing's for sure, managing the GBTC fund is extremely profitable. They earn 2% fees per year. Doesn't matter if bitcoin goes up or down. So having said that, I think it makes sense for Grayscale to sell some of their assets and companies. For example, they could sell gray scale the fund administering company. But in that case I don't see why would it would Trigger an auction for the bitcoins or force them to liquidity to sell the GBTC content. So I don't think that this doomsday scenario is going to happen. But do you think there could be another company relevant in the industry popping up as a dead body because of ftx? Are there other potential victims out there?

Well, well, we've seen some smaller scale companies. I know that the whole blockfi fiasco was part of that. Right now I can't really predict who else could be exposed. I know that its creditors, its top 50 creditors of FTX have basically lost billions and that could take years before that whole bankruptcy process goes through the motions. So I can't predict which other companies can go down. All I know is that this, the effect of FTX going down has been basically an earthquake on the industry and the tremors will probably be felt for, for a while longer. So that's just my general takeaway. It's hard to predict in these kinds of, you know, I think FDX could maybe be looking at an actual black swan in the sense that nobody saw it coming so. Or very, very few did. So that in of itself the second largest crypto exchange in the world going down, I think is hopefully this is the end of it. You know, hopefully this is the end of it or else. I don't know if I can do another year of this, Marcel. I don't know if I can do another year of this.

My body can't take it no more. I can't take more sleeping pills for more than a month. I'll be dead. But in my opinion the biggest risk right now is the mining sector because one, those guys are sitting on a ton of hash rate and if they eventually shut down because of those firms becoming insolvent, I think other players in the ecosystem will also collapse because the miners typically post as collateral for funding to pay their bills and even to pay the, for acquisition of the ASIC miners. They put those ASIC miners as guarantees as collateral. So once this go, once the company goes down, you're going to hand out those machines to the lender and what, what the lender is going to do with 10,000 ASIC machines in a bear market? Nothing. It's basically worthless. So I do think that crypto prices can suffer even more if those events unfold. So it's going to drain liquidity from the system and add pressure on the liquid assets, maybe triggering sales on Bitcoin and Ethereum. But in the long term it's going to, I think it could Be meaning that miners will no longer be able to operate using leverage, which is going to be good. But in the short term, lower hash rate will be seen as negative. Do you agree with that?

Yeah, yeah, I agree. I mean I think that the relationship between hash rate and price has always been, there's always been like a debate about that. But yeah, in the short run. In the short run, definitely. And you know, crypto right now and bitcoin, we're in the, the midst of the great deleveraging effect right now. Everything is being delivered, a lot of the excess is being taken out of the market. And that also applies to the mining sector as well. So I do think bitcoin of course will survive. And bitcoin is battle tested. You know, the network will survive and thrive. But in the short term for holders, for investors, for those optimistic about the space, you know, bitcoin just invites attack over and over again, you know, because it's very, very rare that somebody can look at a asset like bitcoin and just be neutral about it. More you learn about it, the more you develop a very strong opinion one way or the other. So in terms of sentiment, I think the mining issues going on that you described will have a short term impact. But long term, I think that bitcoin is still on track. Good.

Quick shout out to YouTube floors here we have Neuromancer. Big question is, big question is what is the next CI to implode? Well, Sam already said his opinion is really hard to predict. Even ftx. If we asked any analyst a month ago, the odds of FTX imploding, no one would say ftx. So I don't think it's worth doing such an exercise. We have Lucas Zarifi. Great show and discussions today. Congratulations Crypto Glenn. We are par for the course for the four year cycle. But don't panic. Just continue to build positions in projects with great utility and in 2025 you'll be fine. Exactly what Sam did. We're doing the, the four year cycle. I think the Bitcoin halving is like 400 days away or so. So the best time historically to buy it's a year ahead of the halving which is going to happen over the next 90 days. So I think it's a good time to reposition crypto Glenn, the news is doing the thing they do down here talking about, okay, so some guys are asking for more data and I, if I had something to present, well, I can prove that tether is solvent, I can prove that binance is or is not Insolvent, we would be doing that and we would be earning a lot of money. But the problem with cryptocurrency, especially with decentralized entities, is the lack of transparency. A subject that I want to discuss over the short. I think it's set for later on. It's the proof of reserves, but we can discuss that right now. So recently we've seen, we saw some exchanges doing the proof of reserves, and Binance, for example, had $62 billion, including the BNB token and the BSD, the, the stable coin issued by Paxos or whatever, but held under Binance code wallets. This could be seen as a step towards transparency as the viewers are requesting. So, yes, we can discuss about it and we can express our opinions on what those exchanges are doing, but it's not the huge, the ultimate growl. That's not what's going to tell us if the exchange or the stablecoin is solvent or not. So what's your take here on crypto's exchanges? Proof of reserve, Sam?

Yeah, like you mentioned, it doesn't really say anything about solvency per se. I think there were even some, some reports about exchanges sending crypto back and forth to one another to take snapshots to prove their reserves. I think proof of reserves as a concept is very intriguing. I think it's useful as a concept. People want to know that the assets they have on their centralized exchanges are actually being held and cold in cold storage, for example. They want to know that they're actually collateralized as opposed to doing what FTX did, which is taking client deposits and basically sending them off to the sister, their sister firm, Alameda, to do whatever they want with it. So, you know, proof of reserve as a concept I think is, is really important. I think you're going to probably see more pressure on that moving forward. But what does it say about actual liquidity, about the company's actual, actual health? That's still up for debate, especially the shenanigans we saw last week with certain exchanges sending crypto back and forth to each other around the same time that everyone was talking about proof of reserves. That was a bit peculiar to me.

Yeah. Adrian Danilo, can you pull up the news from Cointelegraph like CoinMarketCap launches proof of Reserve tracker for Crypto Exchange. I think it's going to be very helpful for users at least to know where to look for the information. I think that's the job that cointelegraph and us as analysts and editors and writers are doing. Had we, if we had A crystal ball to say, well, this data is good or this data is not reliable, we'll be feeble to reach. But it's simply not possible to do that with a lack of information because of centralized entities. So there you got the news from outward by Savannah Fortis 4 hours ago CoinMarketCap launches proof of reserve tracker for crypto exchanges. The tool allows users to monitor exchanges reserves through displays of total assets and public wallet addresses, along with the balance and the value of wallets displayed. Yeah, so there's the CoinMarketCap post on Twitter. So the new feature of exchange proof of reserves, I believe that other providers such as Nansen had already been doing that for a couple of weeks. But shout out to the industry, I think it's the path forward. But there's a point that I want to highlight. Let's take a step back here. So why are those centralized crypto exchanges needed in the first place? We already have smart contracts, we already have digital assets. So sure, one might say they facilitate the fiat on and off ramps, meaning the ability to convert fiat currency into crypto and vice versa. The problem is those exchanges rely mostly on stablecoins and external payment gateways. So theoretically a user can buy USD Coin or Dai or Pexels using PayPal and traditional fintechs from that point on exclusively rely on decentralized markets, the dexs to trade. So we need to understand that most traders, they are addicted to the benefits of centralization, namely the fake liquidity and the derivatives like we saw on ftx, even after the second biggest exchange collapsed and was proved Ponzi. So I think those guys are simply addicted to the centralization even if there are benefits on decentralization. So what's your take here Sam? Do you think that those centralized exchange will continue be a key driver for the industry over the next couple of years?

Yeah, I do think they will be Marcelo. Like I said, centralized exchanges. I mean, look, centralization isn't always horrible. I mean there's certain benefits to working on a centralized exchange or certain conveniences. I know it's a lot more intuitive and easier for a lot of traders and investors to simply buy Bitcoin on a centralized exchange, especially when there's such a clear fiat on ramp. It's a lot easier for example to buy on Coinbase than to, you know, create a wallet, a browser wallet and then connect to a decentralized exchange, you know, so I think the ease of use aspect of it will make centralized exchanges still popular moving forward. I mean, you see it in a lot of other Brokerages in the traditional finance world, I mean they're all centralized and there's not a lot of issues around that. I mean, obviously Bitcoin and crypto, there's a different spirit that guides Bitcoin. That's decentralization ultimately. Look, if you're going to use a centralized exchange and you're an actual investor who's looking at this asset class as a long term value proposition, you probably want to buy on the centralized exchange and then withdraw your funds to a hardware wallet. That would be my way of using a centralized exchange. I use centralized exchange. You know, I have a few exchanges that I use, but I'm not storing my, my Bitcoin on them or if I did have some, they're all coming off now or they've all been off after what we've seen the past few weeks. So use centralized exchanges at your own risk, but at least have a plan like if you're going to use them because it's an easier way to buy Bitcoin, you know, consider taking your bitcoin off the exchange at some point. So the real issue I think though is going to be decentralized lending platforms. The, you know, the yield, the promising. Imagine giving up your keys to earn 5% APY, right? Like we saw the risk of that with BlockFi. You basically gave up your keys because you wanted to earn 5% APR, whatever the hell it was. Well, look what happened. So I would never touch any of those platforms. And if you can't answer the question, how do they get the yield, know that you are the yield. So.

Yeah, just remembering the audience that everything is that said, here is our own exclusive options. It does not reflect what context of the company thinks or about the industry or any competitors. It's just our own opinion here. So for the proof of reserves, I think yeah, it's, it's better than nothing. But unless each user, each depositant has a hash to verify their own account within the exchange balance, the mechanism doesn't work. So I think it's better than nothing. But you can't really say that. Yes, Binance is completely Solvent. It has $62 billion on its cold wallets. Okay, so how much did the clients deposit? 62, 90, 50. We don't know about that. So I see that guys on the chat are asking for some data and charts and I'm gonna show you on the next segment there's a news, an analysis that I did yesterday. Data shows traders are slightly bullish even as crypto total market cap falls under $800 billion. So, so Danilo, Adrian, can you share the news on coinvillegraph, please? So the total crypto market capitalization has dropped under 800 billion. But data highlights a few reasons why some traders are bullish. So can we show the chart of the total capitalization? Yeah, if you can increase the chart please, Adrian and Danilo, so the viewers can. Yep, yep, there you go. So we've seen that the 800 billion dollar level has been holding for the past three weeks. And today we saw another mini pump to 3% getting us above the 800 billion dollar market cap capitalization line. So it, it seems an important level to keep an eye on. Okay, so the causes of the collapse are ftx, Alameda, then dcg. The genesis, which is the main topic of today's shows the grayscale funds with $650,000 Bitcoin and all of these risks of the fund contents being sold. So thank you, Daniel, can you scroll down the news a little bit please? A little bit? Yeah, a little bit down so we can show the balance leverage between bulls and bears. A little bit down further, please. The next chart. Yeah, there you go. So the perpetual contracts, so the futures, also known as inverse swaps, they have an funding rate which is charged usually every eight hours. So how do professional traders uses such data, the funding. So can you increase the size of the image please? Yeah, so if the funding rate is positive, it means that the buyers, the loans are paying the fee. So in order to buy using leverage, you're going to pay a fee to the seller. If the funding rate is negative, it means that the shorts, those betting on the price downside are, are paying the fees. So what we, what we saw over the past weeks, this is seven day accumulated data, is the prevalence of negative funding rate. So we saw bears doing leverage bets that the market would go down. So initially we can say. Yeah, well looking from the perspective of the funding rate, we can say that markets were bearish. But that's not the only data point you need to analyze because for instance, if I'm a buyer, but I think that the exchanges are insolvent, I'm going to remove coins from exchange and reduce my leverage. So the buyers could have gotten scared and run away. So to confirm if those investors are really bearish, you, you should also look at the bitcoin options markets. So can we show the next chart please? Danilo, Adrian. Yep, there you go. So the options put and call. Rachel, that's the chart. What's an option? A call option. It's a right to acquire to buy the cryptocurrency at a later date. So it's a boo neutral to boo instrument and the put is a sell option, so it gives the buyer a right to sell. So it's a protection. It's like you're buying insurance. If the price go down, you get money from the option. So whenever the chart goes up, it's a put to call. Rachel. So whenever the chart goes up, it means traders are getting more bearish. So currently there's like 40% more calls, so more rights to acquire Bitcoin at a later date. So in general the market is not bearish. So what we saw of the negative funding rate was likely caused by the FTX insolvence and collapse itself. It's more of a system systematic risk because the current ratio of the put and call options does not tell us that the markets are bearish. Yes, it went from 0.53 to 0.55, but still we have more prevalence of call bullish, so, so the neutral to bullish call options. Thank you, Danilo. So on aggregate, what the article says, and it shows data, is that there's some resilience among the professional investors. Nobody is willing to short below $19,000. It doesn't seem to make sense on a risk reward. Rachel. Do you agree with those professional traders, Sam, or do you think that they could have gotten it wrong?

Well, I mean, they could always get it wrong, but the, the value proposition of Bitcoin continuing to fall below 19k, I guess diminishes. And yeah, I mean it depends on, on what your strategy is. I think that we're probably gonna bottom out sometime soon and where that bottom is exactly. I'm not sure. It could be in the 14s, it could be in the 13s, maybe as low as 10. I'm not making a price target. I am a bit surprised to see a reluctance to short below 19,000, to be very honest, given where we are in the market and where we are in the cycle. But you know, as an investor, someone who's not trading it, I don't really see any, any reason to nitpick on where Bitcoin could potentially bottom. But I guess these are traders, so I just find it interesting to see that they're unwilling or more unwilling to short below 19k, even though it seems like there's still quite a bit of room to fall before we capitulate for the cycle.

Next one event, I don't know if it's going to be the grayscale funds or it's going to be tether or it's going to be Binance or another centralized exchange. If there's another black swan event, we can definitely see even Bitcoin and ethereum going down 30, 40% from here. But I think that the biggest risk lies on altcoins. I'll give you an example. Solana at the peak had $10 billion of TVL the value deposits on Defi and remaining smart contracts applications and the number went down to $260 million. So from $10 billion to $260 million so the risks for the altcoin is simply losing 50%, losing 90. I don't think the same risk can happen to Bitcoin and Ethereum right now. I think Ethereum has problems of its own. It's going to unfold over the next years. If they do do deliver on or not the promises of low fees and low latency and high security using proof of stake, it's still got to be proved. And Bitcoin has problems of its own. Like the recent week we saw a huge spike on the network fees because a centralized exchange was gathering a bunch of addresses and consolidating in a single wallet. So that can give some users some idea of well, Bitcoin doesn't work. We need Lightning Network to start working right now and Lightning Network is not ready right now. Lightning Network is Bitcoin's one of Bitcoin's scaling solution but it's not ready. You can test it, you can play it with a little bit of a hundred dollars, two hundred, but no one, no developer would recommend you yes, put all your money online network, it's safe. We just saw some bugs, some major bugs. No money was lost but the network itself got shut, shut down for a couple of hours. So but my point is Altcoins currently have much downside risks than Bitcoin and Ethereum. So for the last topic of today's show, Sam, there's Adrian Danilo. If you can show the Fidelity news US Senators Huge Fidelity to reconsider its Bitcoin offers AFRA FTX blows up so Sam, can you explain to the viewers what is Fidelity and what is their relationship with Bitcoin and what are the senators asking here?

Yeah, I think this was tabled by Elizabeth Warren if I'm not mistaken, which that's all you really need to know about this. But Fidelity is, you know, one of, one of the, it's a major mainstream institutional investment firm and under Abigail Johnson they've been pro Bitcoin for a long time. I mean they've been exploring the space, exploring, mining, exploring digital assets for several years. And now apparently some of some Congress people, some senators are using the FTX debacle to warn Fidelity against further expanding its bitcoin offerings or to, you know, seriously reconsider their bitcoin offerings. You know, despite the fact that the fiasco that happened with FTX was less about crypto and bitcoin and more about fraud. Okay. That we have laws in place that are supposed to prevent people like Sam Bankman Fried from doing what they did. Right. From doing what they did to customer funds, from doing what they did with a sister firm that is trading funds from another firm. So we have laws that protect investors against fraud. Right. But what they're using, they're using the whole FTX fiasco to go after bitcoin, which is what I predicted was going to happen. How successful they're going to be, I'm not quite sure. But the issue that we saw with FTX goes beyond, you know, bitcoin and crypto. There are several crypto specific risks that we have in the market. The massive spade of hacks that we've seen, for example, that's a huge problem. There are a lot of crypto specific risks, but the shenanigans of SBF go far beyond that. So it looks like they're trying to urge Fidelity to reconsider its bitcoin offerings and its pro bitcoin stance because of what happened at ftx. I guess we'll see if they heed that advice, but I think probably not.

Yeah, I think that the main view that we should give to our viewers audience is that yes, Fidelity is a giant, like $7 trillion worth of funds under management. But Fidelity crypto, it's a separate business, it's small. I don't think Fidelity holds more than $200 million for their funds for the clients in bitcoin and cryptocurrencies. But I think it's a good thing for them to have the option, yes, we want to invest in real estate. Yes, we want to invest in bitcoin, in Ethereum, in gold. So the more investment options available for the general public, I think it's a net positive. Of course, they shouldn't be exposed to scams and there should be some kind of regulations because they are not buying the cryptocurrency directly. They are using the ETF or the fund. So there should be some kind of regulations for those kind of investors, people that don't want to invest in cryptocurrencies directly. So, but I Don't think that, yeah, I agree with Sam. I think it's Elizabeth Warren and a couple of legislators that have always been anti crypto. No matter if it was trading at $70,000 or $16,000, they have always been anti crypto. And I want to thank the audience for sharing their time with us. I asked, I really honestly hoped that, that we answered all of those, those questions. And I want to advise you guys to log in to pro.cointelegraph.com It's a full powered trading station. So Cointelegraph Markets Pro. It's really easy to use. It has a complete dashboard and it uses the same technology of the institutional investors. There's alerts, there's news and there's going to be a flash signs when there's buying opportunity when the coin gets listed. So login to proCointelegraph.com and make sure to use it. Get to know the trading station and how it works. You feel free to chat us on Twitter. If you have questions, just tag Cointelegraph or either me or Sam. We're going to be gladly able to help you with that using Cointelegraphs pro. So Sam, any closing thought for today?

In a bear market like this, the key is to survive. And if you survive, you make it through. There is always light at the end of the tunnel. And you'll see in a year from now, maybe longer, we'll be looking back at this period as a formative period in crypto and in bitcoin. But to survive and you'll be okay.

Yeah, I agree with Sam. It's a long term investment. I do think that governments will run out of money because they are trying to reduce the taxes to stimulate economies or they're trying to keep the rates artificially low so it doesn't cause panic, it doesn't cause market crash. But inflation and energy prices are not going away. So they're going to be forced to print another trillions and trillions of dollars and that's going to be extremely good for Bitcoin. So even if you don't love bitcoin, even if you, even if you think it's not the best solution in the world, it's what we have right now. Yes, there are other cryptocurrencies that offer some different experience and some different benefits. You should, if you want and if you study, you should also have exposure. But at least if you're going to invest in crypto, leave at least 30% exposure in the biggest cryptocurrency, which is bitcoin so that's my tip for today. Thank you guys. Thank you guys. Thank you, everyone. Thank you, Danilo. Thank you, Adrian. And thank you everybody at Cointelegar that makes this show happens. Make sure to like and subscribe. We're here every Tuesdays. Thanks for joining us.

Sa.