Why Is Everyone So Bearish? | Weekly Roundup

There's only 3 options here. This is the start of a bear market. This is a pullback in a bull market, or this is the end of a 4-year cycle. I feel very convicted that this is not a bear market. So let me just like on the record, like this is not a bear market. 20% chance, 30% chance that like 4-year cycle's over and like a 70 or 80% chance this is just a bull market pullback. This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains. Explore the gas-free ecosystem at scale.space. ecosystem and follow their journey on X @ScaleNetwork. Thanks to SKALE for making today's episode possible. What's good?

Not much. It is one of those weeks, like just months. It's felt like a blur. Like the time, it's like the best. It's like the best. It was the best of times or the worst of times. Like I'm looking at my timeline and it's the opposite. Like, on one end, I'm seeing incredible headlines, like the SEC dropping pretty much every suit for every company. Um, you have major companies like Robinhood, Stripe, BlackRock, like doubling down. Like, Bank of America, Brian, uh, the CEO, just talking about stablecoins.

Yeah, yeah, yeah.

And then you look at the charts, and I don't— I'm not— I don't look at price. I have zero time to, like, to look at charts. But I could tell just from the timeline in crypto. And so it's very, it's very negative out there, isn't it?

It is extremely negative. I mean, the fear, the fear and greed index, which is kind of a pithy, you know, index, obviously, but it's like, it is kind of telling. It's a, it's at 10 out of 100, which I haven't seen it that bearish since like Luna Black Friday of— no, even Luna was like higher than 10. It was like Black Friday of COVID basically, or Black Thursday.

Wow.

Yeah, I mean, it's dark out there. I tweeted about having fun and people were like, who the hell are you to tell us to have fun?

I was like, you know, so like, okay, even someone like, you know, surprised me the most. Eric Voorhees.

What did Eric tweet?

He— I saw a tweet recently. He says like, I was feeling depressed about the markets and then I remember that Ross is free. Like heart emoji. Zoom out.

I just don't get like why people are depressed. Let's jump into the market. So like, Right now, I should have pulled this up beforehand, but what's Bitcoin? So Bitcoin's at 84, SOL is down to— is it still at 140, 135-ish, 137? Right. So SOL's down 50%, Bitcoin's down 50%. What is— what is that math? 15%. Yeah. I mean, people are just panicking on the timeline. What do you think? First of all, what do you think is causing the prices to do this?

Um, I think there was like, uh, well, I think we talked about in, in that last pod, which is Trump, the meme coin launch, Melania, Malay, and the Bybit hack. Like, the culmination of all that just was kind of the last push. Uh, look, traditional markets are also down. Like, so we can read a lot into Trump and the sucking of liquidity. Um, exposing what, you know, has been bad in crypto for a while. Um, but, uh, yeah, markets have also been really soft. Uh, you know, there's, there's macro worries, there's, uh, tariff concerns. Um, you know, uh, I, I went coming into the year thinking that NVIDIA is going to be the single most important thing to watch this year. And, you know, they—

it—

NVIDIA hasn't performed as well. So, um, like, I'm not a macro expert. Like, I can't explain or pinpoint— like, there's correlation, what's causation? Like, I don't know. But like, Objectively, like, zoom out. Like, when Bitcoin was like at $50K and you were telling me, hey, listen, like, even 12 months, it's at $85K, you would have been like, oh, you know, that's great.

Great. Take that all day. Yeah.

So was it the anchoring effect? It's like you have to reset. Like, what, you expect this thing to go up in a straight line? Seriously? How, like, even someone like Eric, like, how many fucking years have you been in crypto? But it's just like, You don't expect things to do just up into the right. Um, it's been a phenomenal 2.5, almost 3 years now in traditional markets. Like, you can't expect the market to continue to go up indefinitely.

Yeah, I thought Tuur, um, I remember Tuur tweeted this. Tuur Demeester, who like, I feel like a lot of new entrants in crypto don't know him, but he was a, he's a Bitcoiner back in the— I was a big— he's a Bitcoiner and runs a fund and stuff. I, I just love this. It was, uh, back in November, right around the election. He said, newbies will be adamant that $100K is the top. And most likely make Bitcoin sales that they'll deeply regret. Beware the wall of worry. Nothing goes up in a straight line. We could go to $110K, then back to $80K, and then fly to $200K. And then he just quote tweeted it and said, we hit $86K today. And it's just a good reminder, like there, if you think about the— I think the closest comparison in my mind is, okay, so let's talk about the big question on everyone's mind. It's is the 4-year cycle. There's only 3 options here. Bear market. It's a bear market. This is the start of a bear market. This is a pullback in a bull market, or this is the end of a 4-year cycle. You kind of got to select one of those things. I feel very convicted that this is not a bear market. So let me just like on the record, like, this is not a bear market. Maybe 20% chance, 30% chance that like 4-year cycle's over. And like a 70 or 80% chance this is just a pullback in a, in a, in a bull— this is just a bull market pullback. And for anyone who was around in 2021, I mean, people are very quick to forget in the middle of '21, Bitcoin drew down 56%, ETH drew down 61%, SOL drew down 67%, and a lot of other things in the middle of the year, in the middle of what we look back and think 2021 peak bull market, they drew down like 70 to 80%. And I just think people are very quick to forget that.

Yeah, I'm trying to look at like, there was a couple of tweets that I saw that I can't seem to find right now, but like every cycle there's, there's a, a number of drawdowns. Um, I think it was, uh, I'm looking at one here by Milk Road, like, so Bitcoin's down, that was like February 26th or yesterday. In 2017, Bitcoin witnessed 12 similar pullbacks. He's referencing that it's down 22% last month. 9 similar pullbacks in 2021. So it's like it's a volatile asset class.

Yeah.

Yeah.

Here's a 2021— or here's a— excuse me, 2017 one, which was price goes up, Hearn dump. I don't even know what the Hearn dump was actually. Then there's Bitfinex hack and Bitcoin fell from $850 to $650. People's Bank of China regulations. Bitcoin went, you know, quote unquote crashed from $1,200 to $800. ETF gets denied, goes from $1,450 to $900. Bitcoin Cash drama goes from $3,000 down to $1,900. So I just like, I don't know, these— you can't have the— Mark Yusko would always say volatility is a good thing. I remember when, you know, in the early days of starting Blockworks, we would actually work out of Morgan Creek's office with Pomp and Yusko. And Yusko said— I would ask him, like, just because he was a student of the markets and I was like 23 and I really didn't know anything. And I was like, how do you talk to these institutions about Bitcoin? And he would always say the most misunderstood thing is that volatility is a bad thing. So volatility is just volatility. It's amazing to the upside and it sucks on the downside. Volatility is neither good nor bad. It is just volatility. And you can't have Bitcoin— what, Bitcoin went up 100% in 60 days after Trump got elected? You can't have that and not have these violent pullbacks too.

So Yeah, I was looking at like just a couple of reports I got from like banks and sell-side, you know, research analysts and try to piece together the, you know, macro and what's causing the pullback. Everyone started to put like very sophisticated answers and TL;DR, everyone says macro data is weakening, policy uncertainty is increasing, Mexican-Canadian tariffs go live, yada yada yada. So I mean, I guess like people— well, there's a couple of phenomenons. I mean, there are certain assets that have been like severely punished. Like, uh, you know, Bitcoin's down 22%, but you know, some of the alts are down 80% even more. Um, you know, so, so if you're sitting in those, like, you're hurting quite a bit.

Yeah, I thought Quinn had a good note if you want to actually think about like what the macro folks are thinking about the markets today. It's I'll just read some of the stuff from Quinn. It's the Fed, Treasury, and broader government have provided further guidance on their policy priorities and is not near-term market friendly. If DOGE is to achieve its goals and reduce the budget deficit, it will cause a near-term economic growth problem as the government is the number one driver of US job growth. The go-around there, there is a risk that unemployment rises as DOGE cuts take hold. but the government doesn't respond as much or quick enough with stimulus to soften the blows. All right. So that's about Doge. Then there's the near-term— he talks about near-term liquidity, says the near-term liquidity outlook is also not very attractive with the first Fed cut months away and a depleted RRP liquidity facility. I don't actually even know what that means. The dollar is weakening for bad reasons. Slowing growth, not good reasons. Fed liquidity. It's important to understand this given the dollar strength has helped to attract inflows to US assets over recent years. Combined with record high valuations, the risk-reward probability distribution is becoming increasingly negatively skewed. Crypto momentum and sentiment is worsening. Who is left to buy who hasn't already? So I think that's a good insight into like the mind of a crypto hedge fund that trades very short term. I would say, like, I know Quinn very well, very good trader, but his time horizon is weeks, I would say. When I would say your time horizon, my time horizon is many years. Like someone asked me, I, so I, Hood is, I own 4 stocks. I own Coinbase, Robinhood, Alibaba, and Nvidia. And Hood is, Robinhood is the second largest stock I own behind Coinbase. And someone asked me like, oh, there's all these short-term dynamics. And I was like, I'm not thinking about Robinhood on like a 3-month time horizon here, right? I'm trying to, you know, buy these stocks and just hold them for 5 to 10 years. So I think one of, and the reason I call this out is One of the things that I think drives this, like, fear on the timeline is people, the big names on Twitter, the Ansems and Quinns and things like that, they're trading on week-to-week time horizons. They're not just sitting in these things and holding them like maybe you are, you know, like I am.

So yeah. Omar from Dragonfly sent me a report by Morgan Stanley on probabilities. You know, I talk a lot about thinking in probabilities. Yeah, of course. I'm trying to pull up the report, but it's just fantastic. I tweeted something that— so it's like a 30, 40-page report. Um, and I've written, I've written, I've, uh, read a few reports from this guy and he's very, very insightful. I want to pull up this particular insight if you bear with me. Hmm. Research shows that investors commonly overprice stocks with lottery characteristics because they overweight the probability of a high payoff. And like, I guess like, it got me thinking around, okay, is everything in crypto— does everything in crypto have lottery characteristics? Yes or no?

I think right now, because people don't look at the fundamentals, but as the fundamentals actually become— I know it's a bit of a meme, but as fundamentals become more important to crypto assets, which I really, really, really strongly believe they will, and we can talk about that If it's interesting, then, then we move away from this lottery idea.

That's my take. But like, okay, so like the marginal bit, the person that's buying Bitcoin, are they buying it because it has lottery characteristics?

I don't think Bitcoin's become that, is that anymore. What about Solana? I also don't think Solana is that anymore. And same with Ethereum. Got it.

Let's go down or higher up the risk spectrum. AI coins? Yeah, that becomes a lottery ticket. What about memes? Full lottery. Yeah. And so yeah, I agree with that. So I think like coming into the year, like, you know, we were here, we're on the record saying that this is going to be a good year. I don't know if we're in a bear market. I mean, technically speaking, we are, right? If you were to like What is the definition of a bear market?

By the technical definitions of a bear market. I'm talking more like the crypto cycles of a bear market.

Yeah, in crypto, like, we, we don't consider this like a bear market because we've seen multiple pullbacks during this 4-year cycle, which has become this sort of standardized thing for all normies out there listening. Um, and so people always look to the rainbow chart, the 4-year cycle, the supercycle. Um, but yeah, there, there, there is far more volatility in this asset class. Than, than in others. Um, but yeah, I, I think there was a lot of expectations. The, the thing about the casino is that you— I think it was, uh, Travis from Ikigai who had a quite a sober take about what's happening in the quote-unquote casino. Um, and he said some of the effect of how toxic meme coins have been And he compared it to like, imagine walking into a casino and the casino drops a little bit of fentanyl in every drink. Initially everyone's like really hooked and then everyone kind of drops dead. And then you— it was such a very sober analogy. But I mean, I'm not suggesting that that's correct, but it just makes you think about the— you always, when you think about markets, I'm sure Quinn, I'm sure traders obsess about this far more. It's What's a, what's the composition of the incremental buyer? Is it an institution stepping into buying the ETF? Like, what are they buying? If $100 flow into, into allocate to crypto, where's that going to go? Yeah. And now I think you have many, many different products. You can buy the ETFs, you can buy MicroStrategy stock, you can buy options and other derivatives to express that view. You can technically buy stuff like Robinhood. That gives you crypto exposure. You can of course allocate to crypto funds. You can, you know, go to Pump.fund and go to— and but, but yeah, I guess looking back, like, I don't, I don't know if there's a perfect way to do this. I know you guys have research aspect, but like, it would be nice to just understand like where the flows are coming from. Yeah. And because if everyone's just coming to the casino, then that I think is a very it's just a very different flow. That is, like, the duration of that flow is very short, the LTV of that flow is really short, and that I think impacts how assets are priced. Because if everyone is buying the lottery ticket, then of course there's going to be more volatility in markets. But, um, you know, of course we could also talk about, like, in prior episodes I've talked about open interest, how much open interest is out there, how much leverage is in the system. There's a lot of things that I think you can, you can like look at to infer how the market is positioned.

Yeah, let me throw out my idea and sorry about the— I don't know if you can hear the heater clanging away in this. You mean the rats?

You mean the rats going through the pipes?

Yeah, I think until April, I think we're just stuck with this. This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains with a gas-free, invisible user experience, instant finality, and robust security. SKALE allows for limitless scalability and has already saved its 50 million users over $11 billion in gas fees. SKALE's high throughput, zero transaction costs, and powerful Web3 infrastructure make it the ideal platform for gaming, AI, and other high-throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X, at Skale Network. Thanks to Skale for making today's episode possible. This episode is brought to you by zkSync. In 2024, zkSync took a step toward a multi-chain future by transforming from a single L2 into an ever-expanding network of zkChains, the Elastic Network. To onboard the whole world into crypto, many specialized chains must be able to coexist, work together, and share liquidity. Institutions and global financial leaders choose zkSync for unmatched security, scalable infrastructure, better onboarding, gasless transactions, and privacy-first design. Join over 20 chains including Abstract, Sofon, and Kronos in the Elastic Network today. Behind zkSync is the zkStack. It is a one-stop platform for building private blockchains on Ethereum. The stack solves all the typical privacy, regulatory, user experience, and deployment concerns of blockchain without compromising performance or security. Join the Elastic Network today at zkSync.io/empire. Thanks to zkSync for making today's episode possible. Probably a mid-curve take on this, but I think that, okay, who's the, who's the buyer? There's only one buyer in the market today, and it's Michael Saylor. There's, there's one net new buyer in the market, and it is Michael Saylor. And that is why Bitcoin— I mean, he's bought $20 billion of Bitcoin in the last, I think, what, 60 to 70 days? He's bought $20 billion of Bitcoin. And that is why Bitcoin remains at like $85K to $90K. If Saylor wasn't flooding, you know, pumping $20 billion into the market, Bitcoin probably is actually down closer to like $60K. So I do— first of all, I do think it is important to recognize that. The second thing that I think is happening is there are, like you said, all these other things that retail can use to— you use the word lottery ticket, like to buy lottery tickets, right? It used to just be like, let me buy the coins, let me buy the alts, let me buy the new L2. And now it's like, I mean, you can just in your Robinhood app buy Bitcoin options. You could go 10x levered long on Bitcoin. That— it's like, why would I go buy the new L2 which you— it's like the last cycle, the lottery tickets were the altcoins. Now the lottery ticket can still just be on Bitcoin, right? You can just do like— you could just, you could 10x lever long on Bitcoin right now inside of just Robinhood with options. I mean, I think I haven't done that, but I'm pretty sure you can just do that. Or you could do the same with Coin or Hood or something like that. And if you really want the lottery ticket, you can just go straight to the memes. Now that the memes have died, I actually think it opens up a really— there's two, there's two things that I think could pull this back. So the memes are dead right now. Like, no, no ifs, ands, or buts. The memes are dead right now. I think actually that will change. And I actually do think memes will come back, and I'm sure a lot of people disagree with me on that. But so the memes are dead. So crypto-native capital needs to park their money somewhere, and they still want the upside that's beyond Bitcoin, ETH, and SOL. So I think they'll start looking at other things. So where do they start looking? I think they start looking— and I know this is a total meme and like mid-curve take, but like, I really do think they look at things with fundamentals. And the reason that it will start happening now and that it couldn't happen any time in the past is because look what's happening with the SEC. The SEC is dropping— they just dropped their suit against ConsenSys today, Gemini earlier this week. Coinbase obviously was a massive one. But the most important one in my mind was, was Uniswap. They dropped their case against Uniswap. And what does that mean for these tokens? It is the most exciting thing right now because why don't these tokens have fundamentals? Because the, the government and the agencies haven't let there be fundamentals.

So it's like, you know, I was looking at that tweet by Joseph Lubin. The SEC just dropped their, their suit against them as well. Right. Literally every single action that the SEC brought against a crypto company has been dropped in the last, like, 72 hours. Right. So, I mean, let me just— Coinbase, uh, Robinhood, ConsenSys.

Hold this up. I'm going to show you just because I'm showing you Radium because this is the most recent dashboard that we just created. But Radium, I mean, let's look at them. All right. I'm looking at the monthly profits of Radium, like $64 million in profit last in January. Swap, swap revenue, right? Like, quarterly swap revenue in Q4 was $90 million, right? These things are profitable, incredibly profitable businesses. You could actually argue that's one of the most valuable things that crypto has created is the ability— if SaaS made it so that you can create companies with 10 times less employees, 10 times more profitable, crypto just made it so you can create companies even 100 times more profitable with 100 times less employees. And I wanna reference this.

That's so powerful. Yeah, there's a great tweet by Ryan Connor from your research team. I just shared it with you, I think, if you wanna show it on the screen. Sure. Hold please.

All right.

And he says something to the effect of like everyone's saying, oh, you know, Malay Libra killed, you know, profitability, Solana's going to zero kind of thing. And he's like, well, no, like let's look at the data and what you seeing there is pretty instructive. Like, he's looking at application revenue from Pump. And, you know, it's actually, you know, yeah, it's come down quite a bit, but it's not, you know, pretty much says like 15% of all crypto app revenue has been unchanged since May. And he's referencing that Pump. So I just think that that's pretty I guess like you always, you always see people that very quickly try to like, yeah, correlate or develop some sort of theory as to why the market's down. Um, I don't know, I feel like you always should look at like what's going on in the market, but, um, A, I'm of the mind that memes are definitely not dead. Sorry to break it, they're going to be, continue to be a thing. You just have to always think about like where the flow is coming from. And traditional markets have been pretty hit, pretty battered. So the question then is what is going to cause the incremental marginal allocator to come in crypto?

I think what you're saying is exactly what I thought. Ari Paul had a good tweet, which was people, especially funds, are positioned bullishly. Which actually we should talk about in a second. Problem is we're not getting enough daily fresh inflows to offset the extractions. Not about paper hands, which what he's referencing is not about just people selling and, you know, being paper-handed. He said, in my opinion, it's just there's just not enough new contributors. We need a huge amount of new fiat and daily just to keep prices steady to offset exchange fees, market maker and arbitrage profits, on-chain fees, bugs, hacks, etc. Right now, SAILR is it. So that's what I'm saying. SAILOR is the only buyer. We do need these new inflows. It's the exact same thing as this is. Yeah, this is what we're saying.

Yeah. I mean, obviously I've been talking about it here at length, so I don't want to bore people. But the thing that is, if you look at the fee stream, we need a little music for the inevitable inversion plug that is coming.

It's like—

Goddamn, I was going to say something about, you know, Something else. Yeah, sure. All right.

Well, now I opened the door. You can do the inversion plug.

You see, you see, I'm just, that's like the, no, like Connor, Connor says something like, like Pump has stabilized revenue. Like their, their market share has been stable since Libra. So like Pump from a, like if $100 are generated on chain, the percentage that Pump.fund encompasses of that has remained stable. Obviously the aggregate fees have come down in Solana as they have come down in every other chain. He said something that I'm not looking at, like, I don't think he— there's no chart here, but let's just take his word for it. Um, and hopefully we can— he can tweet about this. He says ETH revenue has fallen more than Solana revenue since Libra.

Well, here we can, we can pull it up. We've got the data. So Let's see. You can see ETH. I'm not sure he's right about that.

Let's see. Maybe it's a percentage.

Oh, ETH revenue has fallen more. Okay, so ETH, let's go to New Year's. When— wait, when do you want to take it from? Okay, so New Year's, call it— yeah, check. ETH was 40, Solana was 63, and now ETH is 17, Solana is 30. Okay, so he's saying the percentage Decrease. Yeah, drop is higher. Yeah.

So I mean, that's interesting. Yeah. Should we talk about the positive stuff? Because like, I don't know. Yeah.

Okay. Let me— yeah, let me— let's say— let me take us into this because there is— this is why I'm— oh, actually, before we get into that, the very last thing I'd say is you said this word expectations, Santi. The— that is, it's the positioning that is causing people to be bullish or excuse me, bearish right now. It's the expectations of what we thought was going to happen. And everyone is basically positioned with their portfolios. I sent this tweet out, which was like, and this will take us into the bullish take, which I said, I'm confused by who's not bidding here. Do you genuinely think the cycle is over? Do you think that Trump won't do everything in his power to pump the market? Do you think pro-crypto regulations that we've waited on for several years will have zero impact? Do you think that you sound smart by pontificating about macro and being bearish? Do you not see every major financial institution, fintech launching Crypto products, do you not believe? It's kind of a fluffy, fluffy tweet. But what— but actually the most interesting thing were 250 comments and folks were basically saying, I've got no cash, brother. I've got, I've got no, I've got no cash. So I think your word that you said is spot on, which is expectations. Everyone's just— everyone was gigalong going into this year. As soon as Trump, you know, got elected, everyone basically full risk on. Full gigasend. And that is— people are positioned offsides for a— I think everyone thought short-term bullish right away. And what Trump has done with tariffs has obviously— I think probably tariffs are one of the main reasons this market's down. I also think one of the main reasons the market is down is uncertainty, which ends up, funny enough, being in my mind is very bullish. Everyone's like, I listen to these macro podcasts. We've got one, Forward Guidance. Everyone's saying like, get into cash. But the reason they're saying get into cash is because there's uncertainty in the markets. I'm like, there's no uncertainty here. Trump is doing these short-term tariffs probably to try to strong-arm Powell to reduce rates. Like, long term, you think Trump is not going to end his first 100 days with the market up?

Like, come on. Um, look, I just want to like— so I was like, um, listening to Founders. I go on these like sprints of listening to Founders Podcast, and I've been listening a lot to the Buffett and Munger ones because I read a note like Berkshire Hathaway's— I think he's holding record amounts of cash and he's been downsizing a lot of positions. And it's something that is pretty impressive. Like, they've been like— Berkshire Hathaway has been known to like for many years just sit on cash. I think there's like, I don't know if them or some other, um, like hedge fund like held cash for like a record amount, like decades, just waiting for the right market conditions. And like naturally, so like when most people think of holding cash, they're like, it's eating at you, right? It's like, I'm not earning, I'm not earning yield, I'm being inflated away, and you want to do something. There's like this natural tendency to do something with the money. Fine, okay, speculate, do stuff. But there's just times where just sitting on cash is like a very, a very— if you're, if you're a fund, you have to kind of be always allocated. It feels kind of dirty to hold cash. Yeah. And I think that's always the problem. Like you want it like probably no one has cash out there to bid right now, even though you want to bid. And there's only very few people that just have the discipline to hold cash. Um, and you're right, I mean, it just goes back to the expectation, like everyone was probably gigalong coming into January. It probably didn't help that a lot of funds were not properly allocated over the last 2 years and they entered some trades pretty late, late-ish. I say late in, in a short time frame, you know, a lot of funds probably best believe bought, you know, SOL when it started to run up from $100 to $150, maybe, you know, caught it at $200. And so You know, they're feeling like quote unquote idiots, but they got to look at themselves and just ask themselves, like, where's this headed? Do you have redemptions or do you don't have redemptions? Because if you have a 5, 10-year horizon, this is very much unchanged. Yeah.

Yeah.

Like holding cash in this asset class never hurts, but it's painful. It's, it's super painful because it rips in your face and you're like, shit.

Yeah, well, we're recording tomorrow with Pranav and Dave Kolk. And Pranav, I think Pranav flipped to like all cash in January. I'm pretty sure. And I think we'll release that episode this coming Monday for folks who want to listen. And I just want to hear about the conviction to flip to all cash because in the moment it's so hard. It's one of the hardest things to do. I've never been able to do it in the right way. Okay, let's talk about the— let's talk about the bullish stuff. Before we do that, I'm— I just pulled up Slack and I'm getting incessantly pinged to say, did you promote DAS at the beginning of the episode? I forgot again. So, okay. All right. We have DAS coming up. It's going to be a banger event. Empire 10, that's your code. Actually, the speaker lineup is insane. It's like really, really— it's okay. Let me read you the speaker lineup. Mohamed El-Erian, Who's the— uh, he's chief economic advisor of Allianz. Massive, massive name. Yeah, yeah, PIMCO chairman, I think. Um, okay, we've got Michael Saylor, Cathie Wood, Richard Tang, the CEO of Binance, Novogratz, Brad Garlinghouse, Shervin Pishevar. Uh, we just added Tom Emmer today, Caitlin Long, Toly Tapiero, uh, Congressman Wiley Nickel, Amy Oldenburg, who's head of emerging markets at Morgan Stanley. Ledger CEO, Mike Cagney, who used to run SoFi, Eric Peters, you know, Jessica Peck from the US Department of Justice, The Mooch, Robbie Mitchnick, who's head of crypto at BlackRock, Joe Lubin we just added, you know, Matt Hogan from, you know, CIO of Bitwise, Steven Goldfeder. So the list goes on, like, just a very good list. Santi, you know, good, good crew. I like, by the way, look at the— look at this list. Look at, look at these people's headshots and then look at—

am I the only one that has that? You're the only one.

That's, that's why. Yeah, I think you're the only person with a— what's wrong with the world? Non-boring headshot.

By the way, like 2 or 3 years ago, every—

like the amount of people were like— actually Omar's got a decent headshot. That's not bad. Yeah. All right. Anyways, Empire 10, go get your ticket. Also, the other thing is we launched a new podcast today. Oh, really? Yeah, we launched a podcast called Supply Shock. So been trying to hire this guy for like literally 5 years. This guy, Pete Rizzo, he was the first reporter at CoinDesk. Yeah, he ran editorial at CoinDesk from 2013 to 2019, and then he went and helped The Street launch their crypto arm. He was editor-at-large at Kraken and most recently has been chief content officer at Bitcoin Mag. Literally been trying to hire this guy for 5 years. He is, he is amazing. He's like the most crypto OG. He basically started crypto media is how I think about it. Um, and, uh, yeah, timing was never right. We, I, you know, would call him every like quarter, be like, is it time? Is it time? And finally, end of 2024, we saw this good opportunity, which is what we call internally like the Bitcoin Renaissance. There's just all this amazing stuff happening with Bitcoin. It's like nation states are buying, institutions are launching products, And there's all this cool stuff actually being built on Bitcoin. So yeah, we just launched our first ever like Bitcoin-only brand supply shop. So that's awesome. All right, back to the— This episode is brought to you by SKALE, the next evolution in Layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, SKALE allows for limitless scalability and has already saved its 50 million users over $11 billion in gas fees. SKALE's high throughput, zero transaction costs, and powerful Web3 infrastructure make it the ideal platform for gaming, AI, and other high-throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X @skale_network. Thanks to SKALE for making today's episode possible. This episode is brought to you by zkSync. In 2024, zkSync took a step toward a multi-chain future by transforming from a single L2 into an ever-expanding network of zkChains, the Elastic Network. To onboard the whole world into crypto, many specialized chains must be able to coexist, work together, and share liquidity. Institutions and global financial leaders choose zkSync for unmatched security, scalable infrastructure, better onboarding, gasless transactions, and privacy-first design. Join over 20 chains including Abstract, Sophon, and Cronos in the Elastic Network today. Behind zkSync is the zkStack. It is a one-stop platform for building private blockchains on Ethereum. The stack solves all the typical privacy, regulatory, user experience, and deployment concerns of blockchain without compromising performance or security. Join the Elastic Network today at zkSync.io/empire. Thanks to zkSync for making today's episode possible.

Yano is always doing the plugs. I got to do the plugs. I appreciate it. I got to do the plugs.

All right, let's talk about some of the bullish stuff. So, okay, this is, this is what I'm hyped. So let me just pull up some of these. I'll pull up— I think Ryan's tweet from Bitwise might be a good one. Good place to start, which is Ryan Rasmussen. He said— who's— he's head of research at Bitwise. So Matt Hogan and I just presented the case for Bitcoin to 350 wealth managers, JPMorgan, Wells Fargo, etc. 53% of them plan to allocate to crypto in client accounts, including 33% in the next 6 months. Meme coin nonsense can't stop this train. And, you know, I know it's like, it's just the— I've never seen such discrepancy on the timeline between like retail who's just clearly trading. And like I said, very positioned offsides, first people are just zoomed out and like understanding what is actually happening in this industry, which is there's a horde of institutional interest coming right now. And I think right now, institutions don't think Bitcoin is stopping. No, no, no institution right now is sitting there being like, oh my God, Bitcoin just pulled back from $105K to $85K. Like, is the bear market happening? That's a very, like, weirdly crypto-native thought. I think they just say, oh, hey, this is a pretty nice entry right now. Okay, so that's the first thing I was looking at. Second thing I'm looking at is, is Stripe's letter. So Matt Huang from Paradigm called this out. Just a great tweet. Uh, this is Patrick Colson, um, in the Stripe 2024 letter, quote, we are already in discussions with some of the world's largest enterprises, helping them assemble stablecoin strategies such as faster global expansion or easier custody of funds. Boom, you've got the world's largest payment company doing that. All right, let's flip over to Bank of America. Bank of America CEO, uh, Brian Moynihan says the bank will launch a stablecoin. It's pretty clear there's going to be a stablecoin which is going to be fully dollar-backed. It's no different than a bank account. It's like, okay, so you've got Bank of America, you've got Stripe, then you've got like what I was mentioning too, which is I thought Jonah put it— Jonah from 1000x Podcast put it nicely. I'm ready to bet the farm on this. Trump is not going to preside over a 2008-style crash. This is not his preferred legacy. Furthermore, he has all the tools at his disposal to prevent one. Thus, if things start to look bad. They don't yet. Buy everything you can with leverage the second you start to see signs of fiscal stimulus or quantitative easing. I'm like, to me it's just funny. Like, I don't know. I don't know about the second part about, you know, leverage to the nines.

Skip the leverage and sell the house and the kidneys. Yeah, maybe.

Maybe don't mortgage the house to buy crypto right now. But it's like, man, I mean, go— Bank of America launching a stablecoin. Stripe is helping enterprises onboard via stablecoins. Bitwise is doing God's work talking to all the financial advisors. It's like, I don't know, just I don't know how you could not be bullish right here.

It doesn't make any sense. I mean, it's like volatility for ants. Seriously. I mean, like, what did you expect? Like, you know, you're coming into a volatile asset class that is in pure price discovery. Of course you're going to see these drawdowns. Like, I don't know how else to describe it. You, you should expect to see 40%, 50% pullbacks in Bitcoin, and then you, you, you run, uh, 1.5, 2, 3 beta on that technically, you know. And so you should expect severe drawdowns. And so you either do one of two things: you hold cash, because psychologically you're going to be in a good spot to bid when stuff gets ugly. But if you don't have any cash, you're not going to bid, and you're not going to borrow against your stack at that point to go like gig along. And so it's like people talk about risk and you're like, there's no perfect blueprint to what you should be doing. But if holding— like, there have been times I was actually talking to Pranav about this, like, during middle last year where things like, like actually March of last year was stuff like kind of took a hit. And we were just going through this exercise over the weekend, like, and I was like, I'm going to hold a little bit more cash. I don't think the fundamentals like long term have changed. I think we end of the year higher, like all this stuff that I've been saying. But I'm like, I just want to hold cash because psychologically I'm going to be in a better spot. And if prices go down another— so said differently, like, okay, to put it in perspective and where we are now, so stuff has gone sold off quite a bit. Um, I like going into the year, for instance, like I think the year is going to be great. So I have $100, $100. I'm already pretty exposed. My cash allocation, say, is very little, say 0%. Um, I have certain scenarios, one where we go to 150 Bitcoin, you know, Solana, ETH double kind of thing. And so those $100 can go to 150 or 175 or maybe 200 in some sort of probability weighted scenario. And so I run the math and say I can stay 100% allocated, fine, I capture all that. Great, you know, then maybe got to figure out when to take some profit and whatever. And but in that process, I'm like, there are scenarios where it comes down quite a bit. Again, factoring in that most likely there will be a time where there's like a drawdown of 30, 40%. And I can say, oh, fine. The problem doing this scenario is that like you pick one point and then you pick another. And then you— but you have to figure out what happens in the interim, right? Because there will be a temptation. There will be the emotional, like, freaking out when things go really bad, right? When these drawdowns happen. And so when you run that kind of Monte Carlo simulation, whatever it is that you're doing in your brain, you say, oh well, let's play the extreme scenario where things— that $100 goes down to $70. You're still going to end the year at maybe $175 if you don't touch that. But let's be real, you're not going to do the trade, log off, go surf, come back like Chris Berninski. Most humans will not be able to do that. And so, because you're here, you're glued, right? And so you tweak and you play with different portfolio constructions where you say instead of being 100% allocated long the market, expressing this view that on a probability, like an expected outcome, you're going to end the year either between 140, 170, or whatever. But it's really the variance of that. The vol that you have to look at, because that's what really psychologically puts you in a bad spot. And I think it's a difference between holding zero cash and 5% cash or 10% cash or maybe 20% cash, maybe— certainly not like, not 100%, but there is an optimal allocation of cash that I think it is very personal. And you just say, okay, in those moments, if it goes to 70, I'm gonna have cash. I'm gonna feel great. And I'm also not— not only that will I have cash to bid, but I will most definitely not feel compelled to sell because I have this buffer.

Yeah. Well, you're— what you're really getting at is even if you can just have 5% cash, yeah, you— it will make you excited when the market goes down. Like, I see, I see. I mean, so I feel like I'm, I'm trying to stop talking about specific tokens because people are just called Blockworks a VC shill if I call out a specific token. But like, there are tokens that I'm now— I'm buying. Like, I just started. I just started buying this week. And, and what you're saying is like, for me, so let's use SOL, for example. When I see SOL go to $135, I get really excited, right? Because you've got a little bit of cash. But if you have zero cash, you see all the coins go down and there's no— there's no— there's nothing to get excited about.

So, yeah, there's this great— again, back to this report, Morgan Stanley probabilities. That I'll link in the show notes. So Danny Kahneman and Amos Tversky, these behavioral economists, they have this book Thinking Fast and Slow, phenomenal kind of seminal book on behavioral economics and how humans are incredibly irrational. There's this theory of loss— what is it, loss aversion? And the basic premise is humans go to greater lengths and feel a loss much greater than a corresponding gain. So if you lose a dollar, you feel it twice as much as gaining a dollar. And it's sort of— and not only that, but it's like— and so if you take that, then you say, this is what I'm saying, like a 5% allocation of cash insulates you against that psychological predisposition of feeling that loss extremely painful. Because to your point, instead of being obsessed about, I'm an idiot, like I was up at 100, I was up 120, then I'm at 70, I should have sold at 20. Like I keep telling myself every cycle that I'm going to take some profit and just really be in a bad spot where objectively speaking, you should be buying an asset that you loved at 100 that is now at 70. That's a discount. You should go and buy there. That's like the— but if you don't have any cash, you can't do it. But even if you have 5-10% allocation of cash, Um, then you, you flip from a negative, bitter state to avoid this, like, loss aversion that is always going to kick you. It's always going to drag you. The way I practically do that is I set just stink bids on an exchange. I'm like, in this moment in time, if I can get this asset at 100 or this asset at a 20-30% discount, I will, I'll buy. But, but, and so, and so I, I think of, like, the number of units that I want to have in a particular asset. So I want to have X amount of units of Bitcoin, X amount of units of Ethereum or Solana or whatever project. And so I said, I have 1,000 units right now. I can buy the same 1,000 units at all these different price points. And I'm going to allocate like 20% of the cash position, 20% of the, like a cash position that I have on principal today. And so that's how I like back into having cash always available to hit that, to pick, to lift when, when the market draws down and there's a WIP, like a cascading liquidations. Um, it's probably not perfect. People might be listening like, why is he just like sitting, sitting, the cash is sitting there in an exchange, why are you not earning yield on that? And that's honestly a product that like some of these exchanges could really offer. Like just if, if you have like that USDC parked or USD parked.

Well, you can do it on Coinbase. I think if you just sit on USDC, they give you a—

Yeah, but I'm not sure if you're sitting on USDC when you put in the bid. I think you're sitting on USD. I don't know if they'll share the yield.

Oh, I see. Like sweep.

But like, I'm sure there's like a sophisticated strategy to do this. I'm like, fine. I mean, I'll just hold cash.

So let's make it a little more tactical. So what are you— are you putting in bids right now? Do you put in just like a market order? Are you— do you have, you know, limit orders at lower prices? What are you doing right now?

Yeah, limit orders. I have— I have— I always have some limit orders for all the assets that I really like.

I have alerts. Are you comfortable? I know people know that you like SOL. I don't know if you still like SOL, actually, but what do you like right now?

Yeah, very much just continue to add to my portfolio. It's very much concentrated, so I do like SOL. Let's just talk about SOL because I've talked about SOL extensively. There's other assets I like, but like SOL is at $138. It is basically you're getting SOL at the same price that you'd have gotten at October of last year.

So are you buying at $138? Not right now.

I'm not adding to the position because I am like, I, I bought a lot for the FTX sale, so I'm unlocking, but I'm not like touching that. I have some bids, limit orders. Let's see, this is on a percentage basis. 120, like basically like in 5 increments is like very simple. 120, 115, 125, 135, 130, 125, 120, 115, 110. $105, $100, $90, like all the way down to $80. Hmm.

What, what other assets do you have that for? Either stocks or crypto?

Coinbase, HOOD. For stocks, I do this product that I was talking about in the other podcast. Yeah. But so I always, on a week like this one, I do a lot of stuff to capture the higher vol because things are priced better. What do you think about the fundamentals thesis in crypto right now?

Are you looking at tokens with, you know, with fundamentals? Do you get excited about that? Do you think maybe it comes but not yet? How do you think about that idea?

I mean, it's going to matter. I don't— I've been realistic. Like, I like Maker, for instance. I don't know. That's always been like the fundamental trade, right? Yeah. But it never has really materialized. Shout out to Ben. He always was like, but look at Maker on a P basis. I'm like, yes, 100%. Um, I, yeah, no, not really. Like, I'm very concentrated now, especially now that I'm building. I like, I will have less time to just be tactical. So, or just, so I, I'm very con— I will, let's just say I did a technical RFP for the last like 2 months and I'm looking at different protocols, different look, to interact with different teams of like, where should I build? I mean, I would be lying if I didn't tell you that I've considered swapping some tokens for Avalanche. I just think that's where I'm building. So there's a reason why I picked it. And so I have increased my allocation to Avalanche as a protocol. And look, none of this is legal or whatever advice, but yeah, there's no, there's no Surprise.

I was wondering, I was wondering if you were going to start, if you had bought Avalanche.

And the swap is very simple, uh, SOL for Avalanche. Doing that trade. Um, I just think that, that I think that more projects, um, off the grid, far away, obviously inversion, like more and more teams will appreciate launching their own chain. Uh, Akimo, we're very impressed by the quality of their team. I think their BD muscle only becomes more important when traditional institutions are willing to interact and launch maybe their own chain. I think they'll do it there. Like, I guess you could also say other high-throughput blockchains are interesting, like Aptos, SuiSei, you have Monad. That is coming. You have, um, bear. So there's like other ways to express that thesis. Um, but I, but I, I think about that a lot. Like, okay, what is the moat of Solana? Is that asset fairly priced? In the same way that I thought, and I couldn't explain, like, I still can't explain the relative valuation of like Ethereum to Solana. I continue to believe that that spread only compresses based on revenue, based on metrics, based on projects launching there. Like that thesis in type. But then you also— I've thought a lot about, okay, how does that relate to the valuation of something like Avalanche relative to Solana? You know, you have to believe that all these are on an absolute basis are worth what they are, which is a separate conversation on your point around fundamentals. And my point is none of these networks are worth what they are on a cash flow, like a discounted cash flow basis. None of them. It's like you can do the craziest assumptions on a 10-year period. Like when you're doing a financial modeling cash flow for 10 years, you cannot justify— you have to basically come up and derive some sort of terminal value valuation. Yeah, terminal value, the component of when you run a discounted cash flow in banking, private equity, whatever, or a hedge fund doing analysis. Like you do your own discounted cash flow for 10 years or whatever, and then you have like a terminal value assumption of this asset is going to continue to grow and compound at X rate, and this is the discount rate, and yada, yada, yada. And this is the— and so I, in none of the craziest projections, you could get to the asset be worth what it is without believing that like at least 90% of the valuation for any— all of these networks is based on some terminal value assumption that is pretty wild.

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Excellent point. Yes. Yeah, I mean, that's really the— we haven't really been able to express or call these things what they can be. And so the— we've talked about fee switches and value accrual to these tokens. I mean, quote unquote governance tokens, but in a world where you have more regulatory clarity. And I mean, yeah, like some, some analysts have started to compare Uniswap with Coinbase, right? Yeah, that comparison, it's like on a volume basis or on a per-employee basis, on, uh, you know, all of that computes, right? Um, I, I think so. Yeah, that's it. I don't think we're there yet, but I'm not as close to the regular regulatory like, I mean, I don't know how quickly that happens and when that will be priced in. Yeah. Which, which on regulation should we talk about? Like some interesting developments on, I mean, there's a few other like newsworthy stuff that we should talk about. Obviously the hack, there's the stablecoin proposal that impacts stablecoin issuers. There's a number of things.

Yeah, I mean, on stablecoins right now. So Vance had that tweet about regulatory capture, etc., etc. But I mean, my understanding of what's happening in DC around stablecoins right now— spoke to someone last night who was in a lot of those meetings— was stablecoin legislation is moving forward. And actually, Casey at Blockworks had a great piece on this. It's stablecoin legislation is moving forward. I think we'll get something done. It's just that the industry is a little bit torn on what to do here. And I think specifically— don't quote me on this, I could get this wrong— but it's that it really comes down to like Circle wants one thing, Tether wants another thing. Circle is fully buttoned up, very regulated, has gone through all— has got all the licenses. Tether has not done a lot of that. But Tether is also in bed with, you know, Cantor Fitzgerald and Howard Lutnick. You know, is, you know, part of Trump's very close inner circle. So there's these two competing factions and really two competing companies and ideas on, on this. And I think it comes down to, should these non-regulated entities or maybe regulated outside of the US be a really core part of the US payment and banking system, really? And should they be allowed to be one of the largest buyers of US Treasuries in the world? So it seems like we definitely will get some stablecoin legislation. Will it be more? I guess Circle wants something in there that says you have to get— be very buttoned up and very licensed. And, you know, and I understand Circle's point here. There's a lot of like— Vance had that tweet and other people piled on being like, you know, Circle's lobbying against the industry. It's like, honestly, everybody's lobbying in DC right now. Coinbase is lobbying, Ripple's lobbying. Hell, you know, Uniswap is lobbying. Everybody's lobbying, and everyone wants their own interest. That's what lobbying is.

For people that don't know, like, there's key lobby groups, right? It's the Blockchain Association. There are, but there are other groups, right? Are companies directly going to DC and meeting with lawmakers?

Yeah, I mean, there are the trade groups, and then there are lobbying firms, right? So there are, like, there are the lobbyists who will get paid by The FSBs of the world. Yeah, exactly.

To help you and facilitate introductions with congressmen. And, and you go in there, you talk to them, say, hey, listen, your constituent base really cares about Bitcoin mining because, you know, there's, you know, it employs 20% of the people in this county. You should care about that. Exactly, exactly.

So, um, and look, the big lobbyists, it's, it's Ripple, I think, is the largest. I think Coinbase is the second largest. I think Andreessen Horowitz is the third. Right. I'm pretty sure actually Jump Crypto is the fourth largest. Oh, interesting. But, you know, other people are doing it like Circle. I'm sure Tether is doing it. Uniswap is doing it. The Winklevoss twins, like, yeah, it's very normal.

So everyone is probably advocating for whatever is in their best interest. How— is this also the case for other industries like the oil industry or the pharma industry or— the Israeli, you know, lobby, you know what I mean? Like, there's— everyone has to— lobbying is like a thing. Um, but how unified is, is the crypto front? Because I, I've heard that someone might go in there with a very specific agenda, and then it, it is very confusing when another person goes in with a totally different agenda. And because crypto is one of those things they don't even understand— they understand oil, they understand pharma, but they don't understand like what this So that is the role of the Blockchain Association.

Like, the Blockchain Association, I don't think is— they're not lobbying in the traditional sense of lobbying, but they are kind of the talk— they're the voice of the industry in a sense here, and they're bringing everyone together. Some people are in the Blockchain Association. I think they have like 100 or 200 members and some are not. But yeah, I mean, look, pharma spends, I would guess, half a billion on lobbying a year. Insurance is probably a quarter of a billion. You know, oil and gas, I would guess, is $100 to $200 million. Real estate, probably $100 to $200 million. Airlines, probably $100 to $200 million. Like, these things are big. It's a big industry. And big tech companies do it too. Like, I think, you know, Oracle, Microsoft, Apple, they're— I would guess they all spend tens of millions a year on lobbying alone. So Um, so that's what's happening with stablecoin legislation. Yeah. I mean, the big thing with Bybit, let's talk about Bybit. So the big update from our conversation last week is that everyone thought this was, you know, Bybit really screwed something up. And by the way, I don't want to put all the— I think Bybit came out with this report. They came out with the Bybit hack forensics report. The report basically put a lot of the blame on actually SAFE, previously Gnosis. And they said the compromise was basically, they said the compromise was not Bybit, but actually Safe servers. And they hot-swapped, I think, let me, let me think about it. They hot-swapped the Gnosis Safe UI with JavaScript code that only targeted Bybit's cold wallet. So, and you could actually, if you've ever used like archive.org or like the Wayback Machine, you can actually go look at the code on their front. So basically they hacked the front end and this allowed— I'm like 80% sure I'm going to get this right, but it's a little beyond my technical understanding. It's like this— the UI of SAFE was compromised, which then allowed access to AWS and their S3 bucket. And you had this malicious JavaScript from Lazarus Group, which is obviously North Korea. There was malicious JavaScript that got pushed into the S3 bucket, and that eventually got distributed. And then the malicious JavaScript code targeted specifically the Bybit contract address, which then changed the content of the transaction during the signing process. So not good for SAFE. Honestly, I don't— I mean, like, yes, this is bad for SAFE, but like, I think the industry is realizing how big of an issue Lazarus is here. And like, I think, I think people, I think this is the wake-up moment for, you know, people like Tay, like just big shout out to Tay, ZachXPT. They've been saying for a while, like just how bad Lazarus in North Korea really is. And I think people think like, yeah, sure, it's an issue, whatever. But like, man, I'm, I'm pretty sure North Korea is just out there sitting in some big protocols right now. Like this just tells me they are so much more sophisticated than any of us have realized. And it's, I mean, it's pretty— I think it's a big problem for the industry. I really think it's a big problem because first off, you start to lose trust in some of these things and that's very bad. But second, like if you're the US government and you see that we just funded, we just gave North Korea $1.4 billion and they're selling it off through mixers like It's a bad look. It's a bad look.

No, no, absolutely. I mean, I think this is a lot of, in large part, what Tornado faced because it allowed the laundering of, I think it was at the time, it was the hack of Sky Mavis, their chain Ronin. Yeah, yeah. Launder a bunch of funds. No, it's very concerning. Tay, I have immense respect for. She has her way of communicating that is very jarring, but she is right. I mean, she has buttoned up and she's been on the trenches. Like, you listen to Tay. And I think it's in many ways like, like the Lazarus Group has been just exposing all the different holes of, of the tech.

The—

I think the like, like, of course, now that this attack vector has been exposed, like a few things have happened that are positive. One, you understand that this is now a possibility. And like before, people just assumed, oh, you know, SAFE is just, you know, the sacrosanct, the best way to go about signing like a multisig. Um, the, and so it just reinforces Tay's point, which is you can't assume people to like read zeros and ones and then understand what the contract's going to do. So if I'm not a security expert, but I found two things quite interesting, a couple of things interesting. Bybit then created the bounty website and put pressure on everyone in the crypto ecosystem to cooperate and to freeze assets. And very clearly you expose people that are not. And so that exhibits bad actors very quickly.

Yeah, but they— I mean, the main— I mean, who the main person Tay was calling out here is Thorchain, right? Look at— yeah, yeah. Look at— I mean, let me show you this data. So 150,000 ETH, 7,000 addresses, 10,000 transactions, and $1.4, $1.5 billion Bybit hack. This is If you look at this volume right here, this is the Thorchain volume. I mean, you can clearly just see like where North Korea is moving. It's clearly just selling, is using Thorchain to move this out. And this is Tae saying 200,000 ETH has moved from Ethereum to Bitcoin so far. That's $500 million in 5 days. A third of it. We deserve to be cooked for this. And there was this funny thing. It was, yeah, you know, someone said today was the most volume Thorchain's ever done in one day. And it's like, yeah, I thought John Charbonneau had the best meme. It's like, where's the volume coming from? Like, where's the volume coming from? Yeah.

I mean, this is, this is where, like, what is the response of Thorchain to that?

The response was not— I mean, basically, Tay and this guy Michael Perkin really got into it. I mean, Tay is like, let me be extremely clear about something. Thorchain have currently only frozen legitimate people's funds. You failed to not freeze funds. You failed to freeze any stolen funds. You failed both ways. Grow up. You're a disgusting joke. That was, that was her take.

Yeah, we've gone back. We've— of course you represent my position.

This was Thorchain said, I think you've misrepresented my position. I wish we could have an adult conversation. I want to bring criminals to account just as much as you do. And she said, bitch, 95% of all stolen Bybit funds are going through Thorchain. That's 95% of over 200,000 ETH in 6 days. That's over $100 million per day of stolen funds on a single route. Don't you dare come up with some high horse thing.

I'll save that. This is the instance where like, yeah, we're building, uh, there's permissionless protocols, but in this particular, like, we keep coming back to these instances where like, you have to act, you have to freeze. Like it's, it's, Of course you're not going to roll back. Like, you know, in the early days, like, you probably would have entertained a discussion around rolling back the chain. People have done it, right? Yeah. But you freeze. Like, like, here's the thing, like, if you're Thorchain, if you're a protocol and you're going to sit on a high horse and say, oh, we're not going to, we're not going to freeze because, you know, then, then it, it diminishes credibility of what permissionless is. And then developers are not going to feel the certainties and the guarantees that they're going to be deploying on immutable code and all this, you know, valid theoretical arguments. But then as an industry, we use USDC and USDC has a stop feature. Like, do you not like that? I do. Like, that's just like people get into these discussions of like, oh, I get the protocol, but it's like, then why do you— then if you're Mike, Michael, and you've ever interacted with USDC, And you're like, then what's the difference? But you're going to use like some sort of purely pure ETH-backed coin? Yeah, like, no. So, so no, I, I, I feel very strongly about like, as an industry, of course, like a lot of times like these theoretical debates and arguments like are put to test and people are not practical enough and are not focused on what the most important thing is. Yeah, we are here to create a very marginal step, like a step function improvement to the current financial system, to the current other systems. That doesn't mean like, but we shouldn't be like, lose the forest for the trees. Like, is it going to be perfectly immutable and 100% sensor resistant? Like, no, no. Like, I think that's like a pretty delusional take. I think you have to just be very practical and say, what What is the most important thing? I think the most important thing is to guarantee the integrity, the convincing people to use these, these systems because they are better. Unequivocally, they're better. But I think taking the position that like this pie in the sky, like perfectly decentralized, perfectly censorship-resistant system is how we're going to like thrive and win. I don't think that's without a very clear response because facts are a huge, huge problem. And if this continues to happen, like, it sets us back many, many years. Yeah, I mean, like, you could almost imagine at the board level of BlackRock saying, hey Larry, what's going on with that hack? It's a lot of money in North Korea. Like, are you sure you want to work with these people? Like, they seem pretty, pretty loony. Like, you know, like, like, they could have frozen funds, but they didn't because, because, because what? Like, I don't understand. I don't get it, Larry. Like, maybe we should just 'You know, Larry, just, just drop the whole Bitcoin to $250K, $700K thing, you know. Let's just like not risk it.' And, and if 2 or 3 of these things continue to happen, I think Larry's going to feel a bit more pressure. Larry as like the chief— yeah, Larry, our Lord Savior.

Yeah, Larry. Yeah, Larry. I think, I think North— I think this North— I think North Korea is an issue. Like, look, this is, uh, Jito. This is, um, Lucas from Jito. Um, someone said squads go brrr, and he said, unfortunately, if the squads front-end deployment API key got leaked, it would probably suffer the same.

To be fair, you, you could interact, like Hasib's tweet, like you can interact directly with a contract. The problem is most people don't, right?

Yeah. Yeah. So I mean, I, I, I see that.

Who, who's? Go to CZ's profile. Okay. Uh, I wanna, I wanna open up a tweet about Go down. He had a tweet around this particular incident of SAFE. Go down. Okay, here, here, here. Read that and tell me what you think.

Okay, I'll read it out loud. I usually— this is CZ talking about quote tweeting SAFE's blog post. I usually try to not criticize other industry players, but I still do it once in a while. This update from SAFE is not great. It uses vague language to brush over the issues. I have more questions than answers after reading it. 1. What does compromising a Safe Wallet developer machine mean? How did they hack this particular machine? Was it social engineering, a virus, question mark? How did a developer machine have access to an account operated by Bybit? Some code got deployed from this developer machine straight to prod, uh, production, question mark? 3. How did they fool the ledger verification step at multiple signers? Was it blind signing, or did the signers not verify properly? 4. So was $1.4 billion the largest address managed using SAFE? How come they didn't target others? By the way, great question. That's— I've, I think we got really lucky that it was only $1.4 billion. Um, and 5, what lessons can other self-custody multisig wallet providers and users learn from this?

All that are really good questions. Go up. Yeah. Uh, question 3. Um, he's never used SAFE before.

You're saying because you— by the way this question was asked.

Yeah, yeah, that very clearly tells you. And he had another tweet about, uh, using a, uh, a decentralized exchange, and it's like, uh, it's very apparent that he hasn't. Where, where's the decentralized—

where's the DEX thing? Or it's a while ago?

Yeah, it was like a couple days ago. Uh, dude, have you ever used it? Yeah, but I agree, like the verification steps, like you're signing a transaction, but the transaction will not like tell you the, like, you know what I mean? Like you're not fooling the Ledger verification step. There's like no verification, just like verify you're signing an actual transaction is the point.

Yeah. Yeah. I mean, this wasn't on Ledger to verify, but by the way, I think it is kind of on Bybit too. It's like, I know everyone's talking about SAFE's frontend, but Bybit needs— I mean, not just Bybit, every centralized exchange needs to catch a pretty— this was actually a pretty simple hack from what— once you get to the signing part of this, I think there's— you got to be able to— there's really— I think it was Hasu who said this perfectly. There's no excuse for not verifying message integrity on a second air-gapped machine when moving $1.4 billion dollars of funds. You just got to do that if you're—

Yeah, the whole point of multisig is you have like 3 or 4 or n of— Yeah, yeah. X signers to reach quorum to compose and, and submit the transaction. Yeah. At some point everyone should like— someone in there should have been sophisticated enough to like understand what the zeros and ones— like what that contract was going to do.

My thought on this is you got— I mean, if you were sending a—

okay, you know, you know, like there's certain wallets like that will verify exactly what will happen and will show you the end result of the transaction. Yeah. There's a few out there that will simulate, basically it's called a transaction simulator. I think that the—

These guys are the best at it, Blockade. They're these Israeli security guys. They're now natively embedding inside of wallets.

Exactly. So you should embed this in every single wallet, including a multisig. Like, not because it's a multisig should you assume that you should you not do this step. Like, you should, in a perfect world, we have every single transaction is simulated and then, and then you have to, as an added step, verify that you actually read that, understand that that is the behavior that you want from that transaction, right? Right. Because in a, in a, in a perfect world, how could this have been avoided? Safe's keys got leaked, AWS or whatever, they were able to compromise that and then render the Bybit multisig signers, a compromised version, that they unassumingly signed this transaction, each thinking it's a normal flow, no problem, we're going to sign, nothing's wrong, we're signing, you know, we don't have reasons to believe that our devices are compromised or like surface area is pretty narrow. Okay, fine. What a step there that I'm sure now they're going to embed in every single multisig signer is now going to embed is having some sort of system that has a transaction simulator. Which is at the end, even SAFE, if they're listening, they should have this natively like there for their customers, which is even if you have 100 signers, if none of them check what that transaction is going to actually do once it is approved by all the signers, then this will likely, you know, you haven't solved anything. You've just introduced more delays to composing a transaction to reach quorum, but you still are exposed to like none of those 100 people, 1,000 people, 1 million people, it doesn't matter. Like no one's checking what the transaction is going to do. You're still going to be exposed to this. So yeah, I would like to see more of that. Like, basically the flow would be everyone signs, and before the last person releases, or when everyone goes and signs, says, assuming everyone signs and you reach quorum, this is what is going to happen. $1.3 billion is going to go to a different address that you want to send to. Is this— that really what you want to do? And, and the lights are like blinking, you know, or, or certain, certain logic, like, which is And I've seen it in some bridges. I've seen it in some transactions. I think even MetaMask has it. It's like, are you sure that you want it? Like when, kind of like there's like a natural delay function, which is if, for instance, you want to send to one of your wallets and you just sign, no problem. But if you want to send to like an external wallet that you've never used before, it will be like, hey, Jason, just, you know, you're interacting with a wallet that you've never interacted with. Are you sure? That that is what you want to happen. Yeah. Or this contract logic will be changed. You've never done that before.

I mean, this should be industry standard in Phantom, Backpack, MetaMask.

You don't have to be a security expert to like start thinking like, like that, which is, I'm sure, like I was thinking like, so this is a pretty clever hack. How did Lazarus like think about doing that? Well, they said, okay, maybe, you know, the IP address of like the signer. Because I think they sign in a very, um, periodic and very defined, uh, process. So there's no randomness. If there's no randomness, you're— if there is no randomness, you become a bigger target. If you always take the route A to B from work, you can get kidnapped. Oh, at that point, you always kind of have to just maybe take a different street.

That's why I leave my home at the same exact time.

Randomness produces produces more security. Yeah, when you generate stuff, right? Okay, so, so, so fine, don't ever maybe do it at the same time. But once they know that what these people do, then they were thinking, okay, well, what if, if we know that they're going to do it at this day, at this time, we can very quickly hot swap and do it without triggering alarms. So, but if it were random, they don't know. And so it becomes harder, it becomes easier for SAFE to, to say, oh shit, their systems would have picked up this, right? So that's one thing. Don't sign always the same time. But also just, they were probably thinking, because it's a multisig, they're never going to check. They're never going to assume that the safe front end was compromised. Yeah. That's clever.

That's very clever. It's smart. You know who else should really look at this closely are funds. Funds who are sitting on a lot of capital because you get into a really, I mean, you know this 10 times better than me, but like, Maybe a portfolio manager gets in a nice flow with an analyst and says, let's make this trade. And maybe every— you start to notice that like it tends to happen like Wednesdays around 10:00 AM, the analyst gets pinged and boom, email comes in, approve the Fireblocks transaction. Boom, Wednesday, 10:00 AM, approve the Fireblocks transaction. Boom, Wednesday, 10 weeks in a row. Analyst sees it in the 11th week and auto-approved it.

You're on autopilot. There should always— I mean, there's a great book called The Checklist Manifesto, by Atul Awande. He's a doctor, and he talks about you need to implement a checklist, and every single time you're going to do something, go through every single item in that checklist. And once they implemented that for pilots and doctors, it really decreased accidents. So I think, I think that should be— that, that should always, always be the flow. Like, you should have a very well-defined checklist that you have to go through no matter how many hours, how many times you've done it. You always kind of will do call the other person, video, like real world things, like call the other person, verify, 2FA, that flow, like you just do it and you never deviate from it no matter what, no matter if you want to, if the market's down 40% and it's a generational buying opportunity, like slow down. Right. For sure. But yeah, the sign, the simulation of transactions, I think there are a number of players out there. Hopefully, if there's any one of these guys are listening, I would love to have a podcast. Tae, you know, maybe, you know, and other folks, all the wallets. I think it's really on them. It's an opportunity to build a massive business.

I think. Agreed. Agreed. I think I really think Blockade is the thing. They just raised like, the reason I keep mentioning it, there's no like token is I'm not an investor. It's just, a SaaS company from these like Israeli defense people who are just trying to solve this. I think they just raised $50 million from Ribbit. Yeah. All right. Anything else?

No, we should probably leave it on a positive note. Anything positive, noteworthy? I tweeted a lot about this. So the Collison brothers, the Stripe earnings came out, or I think there was like an annual conference day or something. Simon Taylor interviewed one of the Collison brothers. He specifically asked about the Bridge acquisition. Zach from Bridge, who has been on this podcast, go listen to that, like reference that. So go on his tweet, Twitter and find his posts. A lot of really interesting things happen, like the Brian, the Bank of America stuff, like pay attention to that. All of these, all of these newsworthy things go unnoticed when markets like are very intensely like volatile. And so people like lose sight of that. They're very, they're very positive developments.

The last thing I would say, maybe just to end on this note, is if you are really miserable right now and you are not having fun, I would— first of all, get off Twitter. I would think about, are there things that do bring you joy in life? And I would actually lean into doing some of those things. Maybe it's cooking, maybe it's going to the gym, maybe it's going on runs. I would figure out ways to not tie your happiness to the price of crypto. What— for me, It's very simple. Work on long-term projects with talented people, get more sunlight. Like, I really get exhausted by Zoom meetings. So like, I try to spend more time with people IRL. I don't, I don't really drink much. I don't have Twitter on my phone anymore. So those are just what works for me, right? But for you, it could be completely different. And it's— I think you can tell Santi and I are having a lot of fun right now. If you don't find your fun, you won't, you won't last long here. And you just got to— crypto feels like a short-term— it actually masquerades as a short-term game, but it's an incredibly long, long game here, right? A new industry is being built. It's going to take decades and decades. And if you get sucked into the day-to-day news stories and price action, you'll— you just won't make it, honestly. Just find your fun. It would be my thing.

That's excellent advice. I mean, not to do a self-shill, but I shared with you something that I I felt compelled to write to people because I've been in a bad spot. And it's exactly what you're saying. Like, it was 2017, 2018. And I'm always reminded of that. I'm like, you need to develop an identity outside of work. It is essential. And I guess like I tweeted a long, like, rant about it, which you don't have to read. But, but some of the key, key things that I want to share with people that was so useful for me is So say you go and talk to your closest, the closest people in your life, your parents, your siblings, your wife, your husband, or whatever, your partner, and you ask them, define Jason for me. Do you think they're going to say anything remotely related to your net worth? Absolutely not. The fact he's a kind person, he remembers every— he remembers my birthday every time, he calls me every week, he brings me coffee. Like he's just very a kind person. He's intensely passionate about what he does. Like, I admire him for X, Y, and Z. The reasons why people admire you have very little to do with your net worth. But there was a time in my life where I didn't think that I was worthy of being loved until I reached a certain number. I'm going to say that again. I felt that I didn't— I wasn't worthy of being loved until I reached a certain number. How crazy is that? I grew up in a great family. I got so much love from my parents. And yet I still, I still went in that. And by the way, I had not lost money. I'd made incredible return, but I didn't, you know what I mean? Like, you're anchoring to, I want to get to a billion, I want to, I want to become a millionaire, I want to do X. And the problem is that never stops. If you don't develop an identity, you're never going to feel fulfilled because, you know, money doesn't, money doesn't buy that. Money is great, by the way. I'm kind of deeply skeptical of people that say that they don't need money. No, money is an amazing energy that you can use to like share it with your friends, buys you time maybe sometimes. But yeah, there's like some— like focus on that. Like if you at any given point that you're really in a bad spot, go call 5 people, friends, maybe even friends you haven't talked to in years, and ask them, hey man, like why'd you hang out with me? Like what about it? Like what do you like about me? Honestly, it's a just— and they'll tell you something that is totally unrelated with the fact that you're like a degen and bought Doge at like the hype, the pico bottom and gig along it. Like, I don't care about that. In fact, I may complain about that. He's like, oh, you're just always busy in that shit. Yeah, you never give time anymore. You're like— so anyways, don't do stupid stuff. Fine, go watch a series or whatever. White Lotus is out. I haven't seen it, so maybe I want to. Um, but yeah, it could always get worse, by the way.

It could always go— yeah, always get worse. All right, therapy session with Santi. That was a good message. Uh, We're over time. That's the pod. Thanks, everybody. Hopefully it was a good note to end on. Yeah, we love hanging with you guys. We'll see you Monday.

Any, any good episodes coming out other than this one?

We've got the— on Monday, it'll be Dave Kalk and Purnav Markets. It'll be really, really good. Santi and I don't really know what we're talking about, but these guys do good, good markets folks. So anyways, we'll see you Monday.

David and Purnav are the people that I go to to talk about markets, by the way.

Yeah. So I'll see you Monday, folks.

Bye, take care, guys.