[00:03:24] Dylan LeClair: So I kind of threw a lot at you there, but I mean this is nothing but a thing and it’s going to be a hell of the next 18 months, 24 months after this.

[00:03:31] Preston Pysh: Man. I just want to bottle up what you said and just pump it into my veins because you’re exactly right. Like Caitlin Long has been jumping up and down about this for at least a year.

[00:03:43] Preston Pysh: More than a year. More than a year. On the way up she was kicking and screaming. She’s just saying like they are companies out here creating paper bitcoins? And they are totally. Manipulating the price action. When she was saying it, I was like, yeah, I’m sure that’s happening, but how much? You know, I really wasn’t quite sure.

[00:04:03] Preston Pysh: But now it is becoming so abundantly obvious that what we’re watching is just a straight bank run for real Bitcoin. Everybody is saying, show me real Bitcoin and like FTX, they had a negative balance on their balance sheet. I mean, Dylan, I’m just thinking about all these people that are watching a commercial with Tom Brady or Steph Courier, any of these people, they’re downloading the app.

[00:04:31] Preston Pysh: They’re smashing by Bitcoin, right? And they’re looking at their FTX app and they’re thinking, I mean, how if you took all the people that had that app that had bought Bitcoin that thought they had it in their account, Only to find out that FTX had a negative balance of Bitcoin on their books.

[00:04:54] Preston Pysh: It’s insane.

[00:04:56] Preston Pysh: It’s insane.

[00:04:58] Dylan LeClair: Yeah. And really more so Preston, I think the paper Bitcoin thing a hundred percent. But also this Bitcoin exchange rate is taking a hit because you had Alameda and FTX run a Ponzi and pump, you know, what was the total Solana ecosystem market cap at the top of the 2021 cycle? Yes.

[00:05:14] Dylan LeClair: Like 250 billion of a liquid. Like some of these Solana coins present $40 billion market cap. Fully diluted market cap. Yeah. With, you know, a $1 billion current free float market cap. Right. And so like this whole and that an Alameda and Fdx stuffed that on their balance sheet and, you know, pumped it into everything else, right?

[00:05:33] Dylan LeClair: You had the L one trade, it was just a e-liquid levered beta, like, for, you know, for lack of a better germ. And it’s all unwinding. And the crazy thing was I knew that there was, and I was in an advocate, not an advocate, but it’s an interesting exploration into, you know, over collateralized Bitcoin borrowing and the reality that a 365, 365 day 24 7 market an over collateralized Bitcoin.

[00:05:56] Dylan LeClair: And if it gets less volatile, you don’t have to collateralize it as much. That’s a really interesting form of collateral for a lender of last resort, for a lender rather. I’m sorry, but these guys were levering against GBTC, against, you know, AVAs against Luna. The amount of risk taking on, and it’s all the same trade, right?

[00:06:13] Dylan LeClair: To the downside. It’s all the same trade and there’s no natural buyers of these things. And so ftt, imploding, and FTX not selling you the 70,000 Bitcoin. Paradoxically tanks, the price because their casino implodes. But what’s happening as a response because of the general, like lack of trust left in the system, which is great.

[00:06:32] Dylan LeClair: I mean, this is a shock that, you know, the silver lining is that this is what we needed or this is what Bitcoin needed. Rather to kind of separate itself from like this, you know, fraudulent pump and dump, unregistered security space that is crypto. Let’s be real here. Right? Like I had, and I’m seeing arguments about, you know, Ethereum and how it enables all this financial innovation and it’s none of its innovation, it’s just all, it’s all the traditional systems on a protocol.

[00:06:57] Dylan LeClair: Yeah. Oh, with governance tokens that somehow have a market cap because you’re feeding some of the protocol revenue back into the thing. It’s like perpetual motion machine financial leverage that’s obfuscated. It’s none of it’s innovation. It’s, and it’s all, you know, these token values, like gimme a break.

[00:07:12] Dylan LeClair: Right? Like, why are we here? Why are we talking about this magic internet money in the first place? Like, not repressing, we’re not interested in a casino. Like, I mean, casinos are fun. You know, go burn a thousand bucks. Sure. Right? Like, why you spend every single day talking about this space. It’s because we think it can solve the biggest problem in the world.

[00:07:29] Dylan LeClair: Which is a, like, like you, like say mutilated cost of capital. Yep. Right? Like if the cost of capital’s broken, everything’s broken. Like as investors, you started your podcast talking about Warren Buffet style investing. Why are you talking about magic? Internet money? Yeah. And it’s because the cost of capital is just destroyed.

[00:07:45] Dylan LeClair: It’s centrally planned. It’s, and it’s garbage. And it’s leading to its centrally planned economies at scale and it’s going to collapse this whole thing. Like they’re the fiat system at 120% federal that the gdp. And so, you know, the financial unregistered, financial securities and, you know, governance tokens and all like NPSs for God’s sakes.

[00:08:03] Dylan LeClair: That’s cool and fun and cute. You know, you can have your cool profile picture, but like, I’m really fascinated in the possibility of probability that we can fix global money or actually not fix it. But there’s only really one thing in the world that’s purpose built to be, you know, money for enemies.

[00:08:19] Dylan LeClair: Global neutral monitor, you know, settlement network for enemies and Ethereum and Solana and all of this stuff that happened in a bull market. I mean, I study it because it has an effect on the Bitcoin exchange rate and it’s, well, I’ve, you know, been able to point out a lot of these Ponzi for better or worse.

[00:08:35] Dylan LeClair: Yeah, they are pons, but like, yeah, but why wouldn’t I be interested in buying that? Like, I mean, I person, I mean I’ve shorted again out of these things on the way down the cycle, which I morally like not feel great about, but I have no problem with doing, like, maybe I shouldn’t be giving liquidity to these things at all, but like, not buying it, I’m just covering lower because these things are worthless.

[00:08:52] Preston Pysh: it’s just frustrating for me to see people who have a major influence on Twitter, for example, Jason Chatmath, Mark Cuban, all these people, right? They have a massive megaphone to do the right thing to highlight how broke the existing system is. And you’re literally watching videos of them at the top, joking about how they’re rug pulling on Solana and all of these activities, all these VCs out in silicon Valley.

[00:09:26] Preston Pysh: And you know what? You had, Jack Dorsey was the only guy I could see that was actually shouting from the mountaintops that they were the problem, that everything that they were doing to pump these scams. Where was the s e c? Where was anybody? And I’m not one of these people that are saying that we have to be saved by the S E c, I’m just saying it’s so blatantly obvious that what they’re doing is a scam.

[00:09:51] Preston Pysh: That, and it was like nobody did anything. It’s every, everybody’s just standing there laughing about it. In fact, it was almost like sport. It was almost that these people were being celebrated. For being able to scam so many people. And you know what? It makes me sick to my stomach. I am nothing like that.

[00:10:11] Preston Pysh: You’re nothing like that. I refuse to participate in such ridiculousness, right? The pictures of the monkeys, like just idiots people.

[00:10:22] Preston Pysh: Like, I just, I cannot, it was so obvious that we were hitting a high, watching all of these things and now it’s like I can’t, like, this thing cannot be torched hard enough.

[00:10:35] Preston Pysh: Like people think I’m joking when I’m online and I’m like, burn this thing to the ground. It’s like, just torch it. And if the Bitcoin price, you know, gets punished in the meantime, well so be it. I truly don’t care. I like, like you, I’m sitting on my coins. I hold my keys. I have nothing to worry about.

[00:10:53] Preston Pysh: Absolutely nothing. Torch it like, like they can’t torch this thing hard enough as far as I’m concerned because it’s a total cesspool.

[00:11:02] Dylan LeClair: And it’s still a lot further to go in that sense in terms of just the, whether it’s like, you know, the mark to market leverage that’s hidden. Right. Or these exchanges that definitely took an impairment.

[00:11:12] Dylan LeClair: Like some of these exchanges had their customer balances on fdx for what reason? I don’t know. Right. Yeah. But like obviously doing something wrong, like eventually there’s going to be more exchange in self because no one’s going to say they have impairment, they’re all going to try to survive through and they’re going to collapse.

[00:11:26] Dylan LeClair: Right. Obviously because if you announce you are, you’re going to bank run immediately. So they just try to stave it off and have to PR and up their chest out like SPF and Alameda did. Right? Like also just Alameda was just like, let’s be clear here, they were a Ponzi since 2019. Right? When you look at, when you look at what they were doing, giving Bernie Madoff star returns and when did the money stop?

[00:11:45] Dylan LeClair: You see Suzu literally tweeted this in 2019. I, we stumbled upon the tweets. Between, oh, the guys that run outta money can, you know, offering 20% fixed rate loans to run their Ponzi, what do they do next? Spin up a BitMax competitor and launch FTT token. Right. And the white paper literally is like proposing the Ponzi out.

[00:12:02] Dylan LeClair: It’s like unbelievable. So yeah, wash it all out, right? Like the Bitcoin only companies, you know, it’s obviously tougher when the Bitcoin price is 80% from the eyes and Bitcoin certainly wouldn’t have gotten as high as it did without, you know, it had native speculation as well. Like, like, let’s be clear, you know, but all of that open interest, all of that Bitcoin collateralized 20, 40, 50% annualized to pay leverage the whole DHI ecosystem where stable coins you could farm stable, that 20% apr, like none of that was innovation.

[00:12:32] Dylan LeClair: People mistook defi as like this thing that, you know, cryptography and like the public blockchain enabled you to get more APR on your savings or something. It’s like, no, these are,

[00:12:44] Preston Pysh: If I was going to say the only thing that has come out of all of this cesspool is just immediately clearing dollars or immediately, yeah.

[00:12:54] Preston Pysh: Clearing euros. Like that’s value to be able to, because let’s face it, most of the world’s debts are denominated in fiat, large fiat currencies. If you can immediately clear those in one of these, you know, third world countries or whatever, and immediately send it to somebody and they can take custody of that token, and it actually represents, this is the big if the people managing these stable coins actually have the backing that they say they’ve got, then maybe there’s some innovation there to help bridge the transition to this new world where we actually have a free and open cost of capital because we have a unit of account that can’t be manipulated.

[00:13:35] Preston Pysh: That’s the only thing I’ll give them. That’s it. Yep. I don’t know what else there is that’s come out of it that actually potentially provides any sort of value whatsoever, other than a stable coin.

[00:13:47] Dylan LeClair: Yeah, no, I agree. And it’s just like, it’s just, you know, bank reserves on a blockchain, like it’s a, it’s privilege blockchain.

[00:13:52] Dylan LeClair: It’s not this, it’s not this open immutable thing, right? Yeah. Like Exactly. It’s a centralized, it’s a centralized ledger that assists centralized.

[00:14:00] Preston Pysh: That assist an immediate clearance. That’s the innovation. You don’t have to wait for ach. So let’s go to really kind of, by the time this airs, who knows what the heck’s going to have happened here?

[00:14:10] Preston Pysh: Genesis Digital Currency Group, DCG. This seems to be like the really big next domino, potentially to fall after FTX. Also Silver Gate, you have been really kind of, ringing the bell on Silver Gate and just looking at their stock price and it’s just plumbing and they have a major dollar clearing network between exchanges.

[00:14:33] Preston Pysh: Talk to us a little bit about some, both of those two ideas and kind of where you see them stacking up in the grand scheme of things.

[00:14:40] Dylan LeClair: Yeah, I mean, so Genesis similar to FTX and might have, it might have been dead in the water already, seemingly, or their loan book took some impairment. I mean, they literally swapped, Genesis did, they swapped a billion and half of Bitcoin for UST to give the Luna Foundation Guard.

[00:14:55] Dylan LeClair: They’re Bitcoin reserves, right? So, so who knows what they had?

[00:14:59] Preston Pysh: This is back, how long ago was that? This was a while ago.

[00:15:03] Dylan LeClair: This was June, or you know, before bap, Ponzi may, June or something. Everything, it all blend together now. But they swapped a billion half Bitcoin for the ust. And presumably, I mean, maybe they dumped it out, but like there was a rush of exits in ust, if you remember, and who knows how much of an impairment loss they took there.

[00:15:19] Dylan LeClair: Right. They had 170 million on FTX and, you know, maybe some liquid blog find and just people should understand when they say, you know, it’s like duration, misma, mismatching, or, you know, liquidity concerns or blah, blah, blah, blah, blah. If they have to halt withdrawals in this market without a lender of last resort, they’re marked to market and solvent.

[00:15:39] Dylan LeClair: I mean, this is a traditional banking system thing, right? Where they have a lender of last resort and where they have regulations and whatever to, like, these things supposedly shouldn’t happen. But we have Wildcat Bank. There is no lender of last resort. So DCG, if you have to stop Genesis, if you have to stop withdrawals and you’re no longer extending credit, you’re marked to market in salt.

[00:15:59] Dylan LeClair: Right? And there’s impairment loss everywhere in the space. That’s why immediately, I think it was a day or two after Luna UST imploded. Put out a thread and I didn’t think it was a threat immediately. Half the time I post threads, I just post a thought and I link another thought, and I link another thought.

[00:16:11] Dylan LeClair: But it’s like, get the hell outta yield products. What are you guys thinking? And this whole thing was inflated from nothing, right? It was a financial perpetual motion machine, but there was, you know, 60 billion or however many billion of Luna, and then 20 18 billion in ust, right? And then the mechanism of like, you commit to ust, you burn lus.

[00:16:30] Dylan LeClair: So Luna Supply shrinks and it increases the market cap and the price. And it’s like, and on the way down, you had 18 billion poof gone, right? And there was basically three kind of drivers to the yield thing.

[00:16:41] Preston Pysh: Dylan, this is really important. The $18 billion was like never there. It was all capitalized, right?

[00:16:48] Preston Pysh: It’s all capitalized, which means it can contract just as fast. What happens is they go out after they’ve capitalized this and materialize it outta nowhere. They then go and fractionalize lever it, right? By borrowing and saying that this is, people are treating it as if it’s actually there when it’s not.

[00:17:08] Preston Pysh: It’s been capitalized. And so that’s the thing that I think is totally lost in these games that are being played, is they are fractional reserve games from the old system and people are coming over into this new system and this is what Caitlin keeps beating the drum about. They’re playing these game, these fractional reserve games from the old system, fully not recognizing that they are now playing in a space that is equity based.

[00:17:36] Preston Pysh: And the two are, they, it’s like mixing oil and water. They do not go together. And for people in the future that think that they can step in and play these games, really. Like Sam, he would’ve told you he’s the smartest guy in the room. Right. And he steps in and he’s so brilliant. He was doing all these strategies from before.

[00:17:57] Preston Pysh: But you know what, he was a total moron. He had no clue what he was stepping into. He didn’t even understand the basis of what this is all about. Right. And he got absolutely annihilated, like, annihilated looked like a total idiot. I’m sorry. Keep going. I’m, it’s just important cause people don’t understand how it gets capitalized.

[00:18:21] Preston Pysh: They don’t understand the multiple and then how those receipts are then gone out and traded against. It’s just, it’s crazy.

[00:18:28] Dylan LeClair: Yeah. And I mean, it’s literally like just leveraged the entire thing up and people mistook this as innovation. Yeah. Like this, like a problem we’ve had for like currencies and currency pegs.

[00:18:36] Dylan LeClair: Like this is an age old economic thing with the currency tria and managing this. You know, the capital flow is setting a fixed interest rate, setting a fixed exchange rate, and Luna and T basically backed the stable coin with volatile collateral. And then as this Luna, basically a liquid token increase in value, people would exchange that to go farm UST and decrease the circulating supply, increase the price.

[00:18:59] Dylan LeClair: You had 20 billion earning 20% yield from what subsidized from our ico. They realized it was a shell game and said, what? We’re going to go buy 80, 80, 80,000 Bitcoin, a hundred thousand Bitcoin, we’re going to be the biggest Bitcoin holder in the world. And it was interesting, Preston, because before I really understood the mechanisms, the mechanics of the lun Poncy particular, do you remember like stocks and bonds were melting down and you know, post Ukraine invasion?

[00:19:22] Dylan LeClair: And Bitcoin was getting bid really hard. . And as it turns out in, you know, hindsight’s 2020, but as Bitcoin went from like 32 K to 30 to 46 or whatever it. It was like the kind of the, basically the crypto market cap Luna, like Ponzi, and that was kind of like this last gasp of juice, this last gas of inflows and since then, right?

[00:19:40] Dylan LeClair: Bitcoin is really the only thing in this entire space that has actual passive inflows and hots of last resort. , right? The rest of it, you know, like, yeah. Maybe say e but they don’t even know what they’re buying is the fundamental thing here. Yeah. There’s a reason that big corners have seen this thing over and over again.

[00:19:55] Dylan LeClair: Go down 85%. And so Yeah. I don’t even know what the original point here, but I agree. Turn down the fractional reserve gains, the yield farms, like, you know, how we get, where is the yield coming from? Like the shout out to Alex Sherington. Where is the yield on your 6% Bitcoin on your 8% stable coin that Gemini earn was offering last week.

[00:20:16] Dylan LeClair: Like, where is it coming from? And no one asks the question, and maybe it’s a predatory model because the exchanges are saying this is yield, right.

[00:20:23] Preston Pysh: Isn’t that Genesis’s Main thing is they’re the ones out there creating the yield and now they, you know, if you were using their product via Gemini or wherever, you can’t withdraw your funds right now, yet Barry’s going out there, you know, making these claims that he’s going to come back stronger.

[00:20:43] Preston Pysh: Meanwhile, nobody can even withdraw their funds. Like, talk to us a little bit about some of that.

[00:20:49] Dylan LeClair: Yes. I mean, it was a pretty wild day today. I was recording a safe actually, and, you know, news is dropping at the time about, you know, Genesis is, you know, it’s all or declining for bankruptcy. And then they’re like, no, we’re not.

[00:20:59] Dylan LeClair: And then Barry’s like, you know, everyone’s like Barry’s, she’s in trouble. By the way, like can we just acknowledge that, you know, Barry Silver been in the space for a while? I mean, surely knows what he is doing. Somehow you can’t just stumble into being that successful and big and large. And, you know, GDC was a good product for a while.

[00:21:14] Dylan LeClair: It’s since turned into a total nightmare due to market forces. But regardless, like, I mean, the guy was punching into Zcash and coins that the absolute top, like, yeah, there’s some lending bets that went back here, but like you’re buying 10 figures of a e-liquid alt coins. The aveor deals are, you know, OTC or whatever the heck you’re doing.

[00:21:34] Dylan LeClair: Maybe you’re just bidding on exchanges and now we’re kind of questioning like, oh, we got rent. Well, yeah, like, I think a lot of these guys got high on their own supply the cycle. Things that other like that, that weren’t built on any strong foundation. Like that’s why Three Arrows blew up smart skies in the room, right?

[00:21:49] Dylan LeClair: Three Arrows Capital, they punting into all these e-liquid levered beta alt coins. There’s some innovation here, like the reflexivity of these cycles, have people think that there’s something genuine and it’s all just lies essentially on the way down when Tide goes out and they’re all swimming naked.

[00:22:06] Dylan LeClair: And so, I mean, I don’t even remember the professional point.

[00:22:10] Preston Pysh: I’m random. It almost seems like their access to the printing press, like these guy, a lot of these guys that you just named their access to the printing press was very accessible and it almost sets them up for the failure because they start going out and getting too fancy because they’ve got so much money to move that they’re getting so fancy with it that it just opens them up to a major fall.

[00:22:35] Preston Pysh: The tide goes out like we’re seeing right now. I mean, and this tide’s going out hard and it doesn’t seem like it’s going to let up anytime soon. Now if they’re trying to raise, whether it’s 500 million or a billion or whatever it is, this is kind of a tough environment to go out and raise half a billion or a billion in the face of everything that’s happening in this space.

[00:22:56] Preston Pysh: I, I just don’t know that they’re going to be able to get, to go out and get it. Now, I know in the note today he said that he has raised 25 million, which is a start, but what are your thoughts on GBTC, because that also falls under this DCG, the digital currency group. What are, what’s your thoughts on GBTC?

[00:23:16] Dylan LeClair: I don’t know.

[00:23:17] Dylan LeClair: I may or may not buy it for a trade, but like, I mean, I guess maybe it’d be at that attractive level. People have been buying that dip for the whole year since basically February of 2020, looking to close that r and the arp keeps, aing them to the downside. I mean, it’s a terrible, not terrible product, but 2%, 2%, you know, leach on your Bitcoin holdings every year.

[00:23:35] Dylan LeClair: It’s not on bitcoin rails. It’s not self sovereign, it’s not immutable. We know those things, I guess here in a Roth or something else. There is some upside at that 50%, you know, discount to nav. That’s a pretty juicy trade if it ever comes even halfway close. But I think convertibility is a long way away, especially after all the fraud that has happened in the ecosystem.

[00:23:54] Dylan LeClair: The FCC or whatever, you know, three letter agencies are going to clamp down real hard and they’re going to probably, you know, they’re going to, they’re not going to want to unleash this flood that isn’t Bitcoin spot settled btf, right? With I imagine some form of transparent wallet address, which is weird because GB because Grayscale was like, Hey guys, like we have this, you know, revolutionary technology that’s the future of, you know, finance and we’re putting out Bitcoin versus gold commercials on CNBC for the last three years.

[00:24:18] Dylan LeClair: Oh. But the trivial thing, the thing I can do on my MacBook that I’m recording this Zoom call on Preston with software that I downloaded in three hours where I can sign a message with my keys and we can’t do that because of security purposes. When I competing etf, that’s much smaller. Admittedly, they only had one address, admittedly posted their address in a day.

[00:24:37] Dylan LeClair: They posted yesterday, said, Hey, we’re with Coinbase custody. Here’s our address. We’re a big US three Bitcoin trust. Right? Small trusts. Okay, but show us the keys and never mind that. The real question for me with Genesis and BCG was by the looks of it, it seems like you’re, there’s some form of liability relationship.

[00:24:53] Dylan LeClair: And they came out and were like, we have no official, you know, there’s no liabilities with Genesis Global or Genesis Capital or whatever it was. And it’s like, okay, but how easy is it to create another entity and you know, or some special purpose vehicle and do that. I mean, look at the EDA FTX org chart.

[00:25:07] Dylan LeClair: So you’re telling me like, so what’s that liability and how big’s the coal? And I think the worst case scenario for Dbdc is that the trust is liquidated. That I think is an extremely small chance. But, you know, 600,000 coin would certainly be quite the sell. And I imagine it’d be gobbled up the otc.

[00:25:24] Dylan LeClair: Yeah. Yeah. So I, I don’t know how to like quantify these things, but honestly how I’ve been kind of on the pulse on some of these things in the, you know, the last six to nine months is just ask questions. Like, I have no answers here. I don’t know who has a counterparty with the other, with another like firm, but I’m going to ask, or, you know, going to kind of think out these scenarios.

[00:25:45] Dylan LeClair: And oftentimes like some of these questions have found decent answers. And so, like, other than just preparing for these scenarios, I mean, so that person just stack stats, right? Like, but as someone that’s kind of in the weeds of this whole thing, it’s certainly been fun to kind of think through it and piece together that the puzzle pieces.

[00:26:01] Preston Pysh: If it got sold, let’s say that it did get sold because they had to raise funds and they weren’t able to do it by borrowing.

[00:26:08] Preston Pysh: So they have to sell their cash cow. Cause this thing’s a cash cow. This thing makes a lot of money for them.

[00:26:13] Dylan LeClair: If they fell in that bag, that’d be devastating. Yeah. Yes.

[00:26:16] Preston Pysh: So, but if they would sell it, let’s say they sell it to a Fidelity, they sell it to one of these other big banks, this turns into a major, I guess my question is do you see it returning back to nav if the sale goes through to another bank that then can maybe start buying shares back to try to push it back towards its nav?

[00:26:35] Preston Pysh: It seems like they don’t have any money to do it anymore. They were trying to do it. They ran outta money to do it. They got themselves in a bunch of trouble with some other stuff in their parent company. And so they’re not able to try to force the price back up to the nav because they don’t have the, they don’t have the money to do it.

[00:26:51] Preston Pysh: But if you get it to another bank that then owns the product, is that how it gets back up to nav or do you think that there’s more to this than that simple deduction

[00:27:03] Dylan LeClair: that would be an interesting bidding war. How much would, you know, some of these financial institutions pay for the GTC product?

[00:27:09] Dylan LeClair: Essentially just wrapped on, you know, their institution and I bill like, you know, a lot of money. This thing’s spinning off 30 Bitcoin a day right now, 635,000 Bitcoin, 2% a year, you know, divided by 365. It’s like, 30 Bitcoin a day. I think I did that a few days back,

[00:27:24] Preston Pysh: Dylan. I don’t understand why nobody else has built another trust.

[00:27:27] Preston Pysh: Why is Barry the only one that has this product?

[00:27:31] Dylan LeClair: Yeah, I think is they’ve been around for a while. They got the first step and then there’s kind of this, you know, network effect I guess, right? Everyone was sleeping on it really until 2020 and that’s when it went berserk. And part of the reason I think Bitcoin had such an aggressive upcycle and then kind of faltered was the, you know, Three Arrows, capital gtc R where they were going to Genesis, pledging Bitcoin, getting GTC shares back, pledging those shares to borrow more money to do the trade over again.

[00:27:57] Dylan LeClair: And then they got caught when that, you know, premium got AED so hard with the six month lockup that it went to a discount and three AC eventually blew up. Genesis eventually blew up and you know, DCGS was borrowing hundreds of millions of dollars to close this arb. And then they got bull dos. So, I mean, I, it’s like, no worry to me, I think there’s a extremely small, like infant ally, small chance that, you know, barrier or gray scale is doing some form of like, like fraud.

[00:28:23] Dylan LeClair: Where like, you know, a lot of the bitcoin’s gone, right? I think everything after this past two weeks, everything is a non-zero chance of happening. Like people should just think what if it does? Yes, but I think I do I think these guys running a buck shop? No. Like, I think potentially the worst case scenario is you know, Barry’s lever to the hill, right?

[00:28:39] Dylan LeClair: They had a 500, 600 million credit line and they got in November of last year. Since then, they bought back a whole bunch of GBTC shares. They punned it in, they announced that they bought the mirror, which is another one of these ll one old coins. I mean, how much, how many millions do they put into that?

[00:28:55] Dylan LeClair: Right At like local tops and they’re down 80% cent. So I have no idea what their balance sheet is, but it’s probably not pretty. Right. And if they’re forced to sell this thing, that means they’re in deep trouble, which is quite theum. But I digress. Silver Gate . Yeah. So this was one of the things where after the definitive implosion of FTX, once it was clear to me that Fdt was imploding.

[00:29:20] Dylan LeClair: The real question was who were the counterparties? Is it, was it Genesis? Is it the night a or a block fi? And I couldn’t answer the question, who was willing to accept FPT collateral with no natural buyer? And the more that I thought about that question, and we talked,

I think on Wednesday, the Wednesday before the Monday FTX collapse, I think.

[00:29:39] Preston Pysh: Yeah.

[00:29:40] Dylan LeClair: And I mean, I we were both pretty confident. You, I think you shortly after, shortly before tweeted out compared Sam SPF to the Enron ceo. But like it was pretty obvious. I think once he pieced it together, that the only people are, you know, firm that was willing to take an FDTs collateral. Cause they were obviously levered as their balance sheet said.

And then after they implicitly Caroline admitted it in the most hilarious tweet of all time. Insane. The dumbest Tweet of all of all time.

[00:30:07] Dylan LeClair: So true. Just showed their cards. Showed their cards to the entire table. So dumb. The classic speculative attack. And it was okay once 22 broke and you saw, you know, a hundred million of open interest on FTX just evaporate that to me.

[00:30:21] Dylan LeClair: We wrote to, we, we published actually right as the FTT broke 22, we send on our Bitcoin Magazine pro issue to 15,000 people were like, this thing’s ilo. You have two coins of FTX beyond a reasonable doubt. And you know, do we know they’re insolvent or not? No, we can’t say this but like not looking great.

[00:30:41] Dylan LeClair: And you know, they help them withdrawals within 12 hours. And it was pretty shocking. Can’t say it was unexpected, but just in terms of the amount of trust that a figure like Sbf had as the smartest guy in the room as the savior, the JP Morgan of crypto was, you know, if it wasn’t so sad, it’d be laughable.

[00:31:00] Dylan LeClair: It almost is laughable in away, and, you know, it’s what, one of the largest bunch of frauds of all time in absolute terms, right? Like, I mean, definitely in absolute terms, what a mess.

[00:31:11] Preston Pysh: Absolute disaster. Yeah, I mean, I just I don’t understand the mindset and I guess it’s maybe people are just so new to the space that they don’t even know what Mount Cox was or, you know, maybe their cousin told them to buy it and they’re just, they think it’s like a bank where Yeah, you know, they’ve got a deposit.

[00:31:27] Preston Pysh: Of course it’s still going to be there tomorrow. And like this space is nothing like that.

[00:31:33] Dylan LeClair: I didn’t answer your question. It was the Silver Gate piece on-

[00:31:35] Preston Pysh: Silver Gate. Yeah, go ahead. Hit the Silver Gate piece.

[00:31:36] Dylan LeClair: Well, okay, so I don’t really have any answers, but. Once I really realized there’s two main banks in this space, Silver Gate and Signature.

[00:31:45] Dylan LeClair: And I go on Silver Gate’s website and on not the homepage, I think it was one of the side pages, or maybe it was the homepage. It was literally, I can’t make the stuff up, quote from SBF saying Silver Gate has really revolutionized the blockchain industry and banking for blockchain companies. And it was like, okay.

[00:32:03] Dylan LeClair: And then the following days I see people saying, how could we not see the signs? When I wired mon, this is what it showed me when I wired money to FTX.com and it was Alameda Research, Silver Gate Bank. That insane. Like you would literally, and they said like Sam Trabuco, you know, the former CEO who retired to go sailing, you know, two months before this whole thing imploded.

[00:32:28] Dylan LeClair: You know, like, he’s like, no, don’t worry guys. Like I just like, like my. Rats jump in the ship two months before consulting imploded. They’re like, well, or I guess at the start of 2022, I think it was a Coin Desk interview or something. They’re like, what’s the relationship between you guys and FTX Ed and FTX, he’s like, there’s an ironclad wall between us.

[00:32:45] Dylan LeClair: And in the meantime you have people that are wiring money to FTX singing to an ED research bank account. And just to think of, you know, for Silver Gates terms, like they’re already being investigated for money laundering, I think South America or South Africa. . . again, like we’re talking about securities here, not, I’m not a banking analyst, not financial advice, but some things ugly.

[00:33:03] Dylan LeClair: Right? There’s, and there’s going to be a clamp down. And as a bank, like the main thing you have to look out for is deposits. . We need deposits to be able to lend out. Right. And so you see Falcon X as an institutional player, they said, we’re not working with them. And the Send network here, the SDN network, you know, circle Coinbase, Packo, Gemini.

[00:33:21] Dylan LeClair: Like all of these firms, then half of them that have their tentacles in this thing are settling dollar balances on, on silver Gets network. And so when I see silver gets equity, you know, it’s fallen, fell 50% a month before fdx and it’s fallen another 50% or something, or 30, 40%, whatever it is. And so I, I don’t know what’s, what can happen with that, but all I have to ask is like, how would that be an net benefit or not for liquidity in this space that’s already running up?

[00:33:47] Dylan LeClair: This is the thing I just can’t wrap my head around. So like when you establish a business, you know it, it has its own EIN number. It’s like a social security number for the business. So FTX would’ve had their own business number and same with Alameda. They would’ve had their own business. So then when you open a cash checking account with a bank, you have to just like an individual where you give them your social security number to open the bank, you provide the EIN number for the business to open a cash account.

[00:34:17] Dylan LeClair: So, FTX would’ve done that. Alameda would’ve done that, and Silver Gate is literally taking cash deposits and sending them to a different business entity than the one that’s associated with the deposit. It doesn’t make any sense. It’s ludicrous. Like, I just don’t even know how that’s possible to do that on these rails.

[00:34:44] Dylan LeClair: It’s not great, and I’m not one, like you said earlier, to, you know, call for the heavy hand of the state actually far from it, you know, for all I’m concerned, you know, let it be the wild west and people just, you know, suffer. Yeah. Suffer the consequences for your own incompetence.

[00:34:56] Preston Pysh: I’m perfectly fine with that.

[00:34:57] Dylan LeClair: That, yeah. Well, but you know, I understand that we live in the system we do today and probably all of this leads to further regulation and whatnot. So, I mean, I think that, you know, the legacy system, nevermind stable coins, nevermind what, whatever the heck they’re building over on that monstrosity, that is Ethereum.

[00:35:16] Dylan LeClair: I think it’s all going to be top down OFAC compliant, you know, cbdc type of control. The government doesn’t give this stuff up and actually they, they only steadily encroached upon you more. So, like this whole, you know, stable coins are interesting or like, you know, nevermind this, the send network and what that would mean, just like the trend is so obviously like censorship control, surveillance and when I think of any other option besides something that cannot be controlled, it can be surveilled.

[00:35:48] Dylan LeClair: Obviously the transparency, Bitcoin is a feature and to some it’s a bug. But the reality is like nothing else, there’s no other rail that you’ll be able to clear. Other than this orange coin, there’s nothing else.

[00:36:01] Preston Pysh: So, Dylan, when you say you think everything’s going to an OFAC compliant, clearly you don’t think that about Bitcoin, but you do think it about every, everything else Is that correct?

[00:36:10] Dylan LeClair: Well, yeah. I mean, if you break down the most simple sense people, the people that say security budget I have to roll my eyes because right now the security budget is subsidized by the issuance of coins. Right? And that every having that declines and it goes from, you’re paying, everybody’s paying for the security budget dilution of your, not your stake, but a dilution of your share of the circulating supply.

[00:36:29] Dylan LeClair: Yeah. Right? So as more coins, 900 Bitcoin a day got, you know, got mine today. Right? So, so our stake in absolute terms, in terminal terms, our percent of the Bitcoin ownership hasn’t declined at all. But in, you know, current terms it has, and that’s paying for minor security. But in the future where the block, like this is the key point here in the future where the.

[00:36:48] Dylan LeClair: Subsidy is zero and the block reward is only fees where mining is brutally competitive and difficulty is ratcheted up so high and are so efficient that you need free energy to compete with this thing at all. You need free energy essentially. Yeah. Yeah. That future you paying with your private keys and your Bitcoin, you are paying for your security budget with fees and there’s will be OFAC compliant pools and there will be, you know, whether it’s like the United States and then the Russia and all these others, but you individually are paying for a profit and minor that is nothing but economic incentives at play to include your transaction in the block.

[00:37:25] Dylan LeClair: And maybe there is an, you know, a compliant pool or two. But the reality is this black market, you know, gorilla mining landscape, that’s just pure modern warfare and capitalism in the most pure form. There will be someone that minds are blocked regardless of if it’s OAC compliant or not. That’s right.

[00:37:41] Dylan LeClair: Because it’s purely a profit gain’s. Right. It’s only about economics, economic incentives. And if you’re getting censored on a transaction theoretically, which this doesn’t happen, right? Everyone kind of boo marathon for even proposing the idea. You don’t even have to rely on marathon. That’s the thing.

[00:37:55] Dylan LeClair: Just pay up your transaction fee. Just raise your tax per bike. Like this is the most basic thing. There is no security budget. You are the security budget. , but your coins your payment, whether it’s dilution because a blog subsidy being issued and everybody’s subsidizing this or it’s a purely transactional fee basis.

[00:38:13] Dylan LeClair: Yeah. Where you’re paying to not get censored and all of the stuff that’s happening on the EAM with proof of stake and minor extractable value. And I mean I spent 110 hours to be wrote an extensive report about. I mean, I understood Ethereum before and the basics of it, but I spent hours upon hours, days upon days putting together this thing on Ethereum and reading about the history of minor extractable value view, and proof of stake in all the proposals and all the top down initiated hard forks and difficulty bombs and what a mess.

[00:38:41] Dylan LeClair: And to think now that, you know, 50% plus of these blocks are OFAC compliant, and two weeks before the merge you do have Ethereum developer call say, well guys, you know, if we do release, if we release this thing, it’s going to be OAC compliant from the start. And the response is like, okay, well, we’ll code up a solution, we’ll code up a different, you know, block builder or we’ll, you know, we can flash their stake.

[00:39:04] Dylan LeClair: We can slash their stake if they’re censoring guys, but we still need to code that part of it. We need to code the ability to untake and as like, I’m not an engineer, but I think I understand that engineering a basic level, and I’ve listened to a lot of smart engineers talk, whether it’s about computer science or just basic systems.

[00:39:21] Dylan LeClair: And if all of these things are so trivial, why didn’t you release it from the start? Why not wait until your network was bulletproof and ready for anything to go forward with this? And when I look at Ethereum as an investible asset, as a protocol, like, as a supposedly neutral protocol, I just think it’s ation and fundamentally, and people, a lot of these people have no idea what they’re investing in.

[00:39:45] Dylan LeClair: You know, you’re inve, you’re investing in, it’s a venture bet. It’s a and that’s what it is. I mean, and they can be a high upside venture bet. Sure. I mean, there is a reality where Ethereum is as a, you know, sensor network and be worth a trillion dollars. Sure. I’ll maybe I’ll give you that. But I mean, the purpose, now let’s be clear.

[00:40:01] Dylan LeClair: It’s building casinos, it’s building, you know, speculative trading, valueless token casinos or JPEGs or ICOs that DS or whatever the world computer narrative changes to next.

[00:40:13] Preston Pysh: I think it’s, I think it’s so obvious that if you took the whole ecosystem, like every one of these alt coins, the Bitcoiners, you took all of them and you lined them up.

[00:40:26] Preston Pysh: A majority of people are not here for anything other than trying to make a bunch of money real fast. And they’re greedy and they’re not here for any other reason. And you know, I like to think that the people that are just here for Bitcoin are here for what you had originally opened this conversation with, which is if we can fix the money, we can actually create a free and open market and a free and open cost of capital.

[00:40:54] Preston Pysh: And we can actually get efficient productivity happening in the world where we get real prices and not manipulated prices. That’s why Bitcoiners are in the space, all this other stuff. Like when you’re getting into the OFAC compliance of Ethere, I don’t think people in Ethereum give a crap about what we just described there with, you know, fixing the cost of capital in the world and what that brings to humanity.

[00:41:22] Preston Pysh: They’re there because they want to make a bunch of money, and they’ll wrap it around this idea that they’re innovating with tech. But when you look at what the innovation is, like, there’s no equity behind any of these tokens. There’s no productivity, there’s no product behind any of this stuff.

[00:41:42] Preston Pysh: They’re just casino tokens and they’re just trying to get rich and dump their bags on somebody who’s dumber than them at a moment in time that, that, you know, Silicon Valley VCs pump their bags and they’re just trying to get in harmony with that pump. Like it is sick. It is, it’s a disaster.

[00:42:00] Preston Pysh: And the validation process on e. It’s a train wreck. Like, and the argument I saw online from a person, they were like, like, well, if people are doing the fairies things, don’t you want the government, don’t you want them to be OFAC compliant? And I’m thinking that’s the system you have right now, right?

[00:42:19] Preston Pysh: That somebody can come in and censor you. Like what happens when you’re on the wrong side of the censorship, just like we’re seeing with free speech on some of these platforms. Like how do people not understand that it’s only a matter of time until they’re on the wrong side of the censorship?

[00:42:37] Dylan LeClair: It’s so simple. It’s ridiculous. I mean, I summarize this. I talked with a Twitter interaction with David Hoffman, who is basically, he, you know, the Bankless guys, he posted a tweet earlier and. Basically, you know, the last two cycles were just better pons on top of each other, referring to 20 17, 20 21 or whatever, and how, like the whole thing is just ponies.

[00:43:00] Dylan LeClair: And I was like, no, the whole thing isn’t pons the thing that you’re promoting as like this innovative thing is purely based on, of Ponzi, on, on creating ponies, right? Yeah. So, so Ethereum isn’t a Ponzi, it’s an asset. The funny thing is also, you know, the Ethereum Foundation, the guys that spun up this spun up, this token, this ico, right?

[00:43:18] Dylan LeClair: F mine, they said originally on the website I can’t find it. I tried to find it recently with the internet archive, but I’ve seen it on the internet archive before, like this was like two years ago. Ethereum is not competing to be a money like Bitcoin. Ethereum is purely a gas based asset to be used for compute.

[00:43:35] Dylan LeClair: Right?

[00:43:35] Preston Pysh: Yeah. And that’s the sales pitch. Yeah.

[00:43:38] Dylan LeClair: And then six years later, Ethereum via top down centralized fork. And it wasn’t, you know, the community said, you know, community, this decentralized governance architecture said it was fine, right? I mean, the miners said saying, it’s fine. Let’s be clear.

[00:43:52] Dylan LeClair: The miners said no. The Ethereum Foundation for all these changes said yes. Yeah. And all of a sudden Ethereum via e i p 5 5 1 55 9, the miners didn’t say no to this. But all of a sudden the theory of is ultrasound money, right? A theory of the deflationary, it’s such a good money, it’s deflationary.

[00:44:09] Dylan LeClair: It’s just, it was just interesting to cycle what the animal spirits get brought out in terms of people thinking that there was some genuine innovation here. And not stripping it back to, like, I, I keep coming back to a simple point. There’s only really one thing here in this entire I think entire world, the digital age that is purpose built, engineered, constructed to serve as global money, global neutral money for enemies.

[00:44:31] Dylan LeClair: There’s one thing, never mind the energy market infrastructure and all the things that, you know, the rabbit holes there. And that’s Bitcoin and your proof of Steak Token is cute and is really, you know, cool and I hope you win a casino trip.

[00:44:46] Dylan LeClair: But, it’s probably talking about here.

[00:44:47] Preston Pysh: If there is any purpose, it’s just going to assist governments in making sure that their dollars can immediately clear in a scenario That speed is the, network seeds of the s that works.

[00:44:56] Preston Pysh: I know it works better on Tron. , dude, I had a, I had dinner with Pierre Rochard out LA when I was out at the conference and, you know, we’re talking about all sorts of things and I’m there with him and his wife and I said, Pierre, you know, maybe the only purpose of these things is to.

[00:45:15] Preston Pysh: Help dollars and euros and yen clear fast enough so that when we go through the eye of the black hole and everybody’s trying to move their currency as fast as humanly possible, it provides an immediately clearing mechanism because you’re going to need that at that moment in time. And I asked him, I said, I don’t know that he was really buying that argument.

[00:45:39] Preston Pysh: I’m just trying to, you know, take the other side of an argument to try to, you know, come to a truth or an understanding of what we think. So something is, and so I asked Pierre, I said, how much would you pay? Like if I was going to send you $1 of Tether on Ethereum? I said, how much would the fees be on something like that?

[00:45:57] Preston Pysh: And he just burst out laughing. And he goes, it’d be like $5 . And I said, come. I said, come on man. You can’t be serious. For me to send you $1 worth of value on a stable coin over the Ethereum network, it cost me $5. And he goes, yeah. He says, why do you think everybody’s using Tron and why do you think they’re using the Binance smart chain to, to do those activities right now.

[00:46:18] Preston Pysh: And I said, are you, have they truly tried to optimize for everything and therefore like basically solved nothing? Is that, what’s, is that what’s happened with Ethereum? And he just burst out laughing and he says that is exactly what has happened.

[00:46:34] Dylan LeClair: There are no solutions, there are only trade offs. And by trying to do and be everything, they might just end up, and this is not today.

[00:46:44] Dylan LeClair: You know, they might just end up with nothing in the end here. And, you know, maybe if you like, never dies or whatnot, but whether it’s death by a million forks, death by a million copy paste of your coin, you know, of your protocol taking liquidity away. The Binance Smart Chain, you know, the, so Salon a Solana was just ultimately a a bunch of Alameda stealing after using a deposit bombing into ecosystem.

[00:47:09] Dylan LeClair: They’re all, they , all are, and yeah, I mean it’s certainly not, it’s not vindicating because bank bitcoins also down a bunch. Like, but people believe that believed the narrative, whatever it was, whether it was ultrasound money or Yeah. You know, that Luna was this, you know, innovation or what that salon was like, a productive asset, right?

[00:47:28] Dylan LeClair: Like, what are you talking about?

[00:47:29] Preston Pysh: They’re all centralized in some sort of way. And I think that the magnitude of how much they’re centralized, people who don’t understand the tech just don’t have an appreciation for how centralized they are. If the government really wants us to come in and shut down a transaction on Ethereum, I think that at this point they’re there.

[00:47:43] Preston Pysh: And as far as Binance or Tron or any of them, like if they really wanted to dig in and start making things difficult, I think they could definitely do that from a technical standpoint. Anyway. Alright, let’s go ahead and let’s talk. How about some of the hacker stuff with the FTX? So there’s coins that start moving, I think it was a Friday after the, after everything blew up.

[00:48:06] Preston Pysh: There’s all these coins that start moving off of the FTX. Like people can see the public addresses and they’re saying, what the heck? Who’s taking these coins? Talk to us about this story. What was going on? What has happened? Where are we at right now?

[00:48:19] Dylan LeClair: So, I’m not fully caught up in the last day or two, but I know that they, you know, there was some, it was, I mean, it was definitely an inside job in a way.

[00:48:28] Dylan LeClair: And people said like the web got, the web app got hacked or whatever, but ultimately it doesn’t matter, the front end got hacked or the front end released a software update. You need the private keys on your Ethereum accounts or whatever to move this stuff. So it was an insider job, right.

[00:48:41] Dylan LeClair: There’s no debate about that. They take all, you know, the state even turn into e I think it was Tether and turn it into die, you know, which is a supposedly decentralized. Stable, collateralized, stable Ethereum, that 50% of the collateral circles, U S D C, but I digress, they dump all of their, you know, centralized assets for more decentralized assets.

[00:49:02] Dylan LeClair: And I think the interesting thought experiment here is if, you know, you have all these OAC compliant blocks, right? 50% of the block production. And then if you just look at like, you know, Coinbase bases, finances, Krakens Lido, which Lidos governance token, which you know, supposedly is decentralized, is held all by US regulated PCs.

[00:49:22] Dylan LeClair: And you look at, you know, from block production standpoint, what might happen if these people, you know, may maybe they stake the coins. Like, I have no idea what happens next with this. Maybe they, you know, I think they’re dumping it off for some rap Bitcoin asset or something. But if it’s the wrapped asset, right, or if it’s like, if there’s a pressure choke point.

[00:49:39] Dylan LeClair: I think this is the key thing here. I don’t know what’s going to happen with a hacker or whatnot, but if there’s a pressure choke point, And it’s not defendable by, you know, basically open source code and economic incentives. It’s going to, you know, not whether it’s break or be tested. Right. And I, I don’t think there has been that test yet.

[00:49:57] Dylan LeClair: I think the test is coming. Clearly. And so, yeah, I, it’s, I mean it’s clear the differentiation between Bitcoin and mal for me, I think for a lot of people, surprisingly, they haven’t made that, that distinction yet. But I don’t really know what happens with the hacker when they dump it or whatnot.

[00:50:12] Dylan LeClair: But I know the whole thing is like, we talk about a massive fraud. And I mean, they should all be in prison for what? You know, I’m concerned.

[00:50:19] Preston Pysh: Dylan, back in 2021, you wrote an article and I’m sharing this right now so people can see, so the article you wrote, the conclusion of the long term debt cycle and the rise of.

[00:50:33] Preston Pysh: This is a fantastic article. I know it’s a little bit old, but I want to highlight this for people that are pulling this up, clearly you’re pulling some pictures and graphics and talking about Ray Dalio’s long-term debt cycle, and then you start talking about the end game and you show this awesome, you know, effective federal funds chart where you’re really kind of seeing this 80 year cycle playing out graphically.

[00:50:56] Preston Pysh: Talk to us about this article. What were you trying to accomplish by writing this and any key points that maybe have changed or that you’d like to add to some of the things that you put in here since 2021?

[00:51:10] Dylan LeClair: Yeah. So the basis of the article and honestly my Bitcoin thesis is that the end or we’re extremely close to the end of this long term debt cycle that we’ve seen play out throughout history.

[00:51:20] Dylan LeClair: But essentially these, you know, there’s the traditional short term debt cycle, you know, eight to 10 years, whether you understand economics or finance or business cycles in general. You kind of, people will know that recessions happen for some reason. Every once in a while. Sometimes things are good and bad and these things are, you know, naturally cyclical in nature.

[00:51:36] Dylan LeClair: But what’s not often understood is like the long term debt cycle and at these short term debt cycles and their own cyclicality lead to these longer form cycles of money and credit. And if you just look at the interest rate chart, right? We’re 51 years into this global fiat experiment. We’ve done, you know, these long term debt cycles before, but it’s been on a gold back standard, right?

[00:51:56] Dylan LeClair: And every time these debt cycles go bust, what they do is they devalue in some way. And that traditionally was, you know, like the US has defaulted on its debt twice. They defaulted in 1933. They defaulted in 1971 when they broke the gold peg now. Right. Interest rates went to 20% in 1980. And since then they went down only Right.

[00:52:16] Dylan LeClair: And Covid 2020 once again at the zero lower bound and had, you know, how many trillions in stimulus globally. And I think the key thing and the thing that, I mean, Preston, you’ve been beating the drum on this for years on end mathematically, what’s the way out here? Yeah. Right. Greg fos talked about this for 38 hours a day, and he does shout out to Greg what is the way out when real debt to gdp, or I’m sorry, and, you know, debt to GDP is 120% federally, 400%, you know, globally.

[00:52:44] Dylan LeClair: And nevermind all the off balance sheets stuff like, what’s the way out here, guys? Because the last time we’ve been this indebted, or here’s a good stat for you. The last time stocks and bonds both fell 20% in the year, two years, Preston, 19 31, 19 69. Yeah. Right. I just, I love that statistic stick because.

[00:53:02] Dylan LeClair: Because what happens after these huge bursts and destructions of wealth, especially in a historically over indebted economy, what happens and what happens is a real devaluation and devaluation in real terms and creditors in the situation, creditors and savers get screwed. . And so here we are and the feds raising rates to 5% and we’re tightening the belt.

[00:53:23] Dylan LeClair: And, you know, bonds had a historic draw down, the greatest drawdown in the tenure, treasury, and recorded history inter year. I’m not sure if we’re still there. I think we are, but you know, stocks are 20% from the highs and clearly the, you know, the drain is circling. And so what comes in the next 12 to 18 months as the historic bubble in, in, you know, tax receipts is no longer there.

[00:53:46] Dylan LeClair: Right. The everything asset bubble, this is the thing. The cost of the real cost of capital is, you had nominal negative yielding debts, nevermind real negative yielding debts across Europe and Japan. You still, I think there’s still some short end debt in Japan that’s negative. Maybe you had 20 trillion in negative yielding bonds.

[00:54:01] Dylan LeClair: Insane contracts guaranteed to lose money. I give you a hundred bucks and I get 99 back in 30 years like insanity. And it was. And it was because you had, you know, this disinflationary environment at C P I for so long, I repeatedly referred to like I was posting throughout the year as this bond market bubble was unwinding.

[00:54:17] Dylan LeClair: You know, kind of me posting like big short clips and stuff. Inflation. CPI inflation goes from three to five to six to seven to eight. And they’re saying it’s transitory. Meanwhile, Russia, bay, Ukraine, and these, you know, this global, these globalization forces, this unipolar world order.

[00:54:34] Dylan LeClair: I mean, I’m not geo like a geopolitical historian by any means, but I listen to the really smart people and they’re saying, Hey guys, the structural forces that we had for the last 40 years, they may be going any other way. . And so is any of that disinflationary or deflationary? And I don’t think, I didn’t think, and I still don’t think it is.

[00:54:54] Dylan LeClair: And so what does that mean for bonds?

[00:54:57] Dylan LeClair: As you’re buying 30 year debt at 2% yield, wake up guys. And so we’ve seen that, we’ve seen that cost of capital dramatically reprice as, I mean, energy essentially forced it to reprice. And because the cost of capital is reprice, we’ve seen the valuations reprice.

[00:55:11] Dylan LeClair: And now I think we see, you know, the real economy in the way reprice. Yep. And the results are going to be quite interesting. For, you know, if we just look at past tightening cycles, past disruptions of wealth, at this magnitude we can forecast some pretty crazy outcomes.

[00:55:25] Preston Pysh: So I’m just going to say the recap there is phenomenal.

[00:55:29] Preston Pysh: Straight off the top of his head. You gotta check out the article. He does a masterful job laying this out in depth and then talking about Bitcoin and how it kind of fits into this as well, which he didn’t cover right there. So, Joe was wanting to hear your thoughts on the bond yield curve in the next six months.

[00:55:47] Preston Pysh: I’m just kind of curious because I’ll be honest with you man, I don’t know what to really kind of expect in the next six months with the yield curve I can find a ton of articles, especially over in Europe where things are just dire and not getting better anytime soon. And then, you know, I see some other things that, that kind of seem like maybe the recession’s really starting to kick in and.

[00:56:10] Preston Pysh: You know, some of the, maybe some of the demand that they’re trying to suck out of the market is maybe going to play out and maybe we see some of the inflation start coming down and maybe the bonds start getting bit, a little bit. So I just, I don’t know what to expect from here. I just expect a lot of volatility and I expect the recession to fully start setting in here very soon in, in the next six months.

[00:56:29] Preston Pysh: But how do you see the bond yield curve going?

[00:56:33] Dylan LeClair: Yeah. I don’t, I think there’s times in across DAA classes I can say like, I have an edge or maybe I understand things a little bit more, especially that, you know, put some financial capital behind. I don’t feel strongly one way or another in terms of like, I mean, I’m not like, let’s be clear here.

[00:56:47] Dylan LeClair: I’m not a buyer of duration debt for a long term whole year. Yes. Maybe for a trade, but like, I’m not going to, I don’t really get that cute sometimes. Like, I mean, I mess around cross asset classes, volatility, you know, rates, whatever, but like, I mean, I’m at the end of the day, I’m just trying to buy more Bitcoin.

[00:57:04] Dylan LeClair: And so for all of the year, or not all of the year, I mean really since the spring, it’s just been stacked in that cash pile. And so, I mean, I don’t really know where rates are going to go over the next six to 12 months. But, you know, I think Joe thinks they’re going to go lower, bonds go higher, and he very well be right there.

[00:57:20] Preston Pysh: Yeah. I’ll tell you, like you I’ve been stacking cash all year, but I’ve just deployed all of it, the Bitcoin,

[00:57:25] Dylan LeClair: All of it. Chat, chat, move. Nice. Bye. Yeah.

[00:57:29] Preston Pysh: Now, who knows where it goes, you know, could it go down to 10,000? I think that’s totally in the cards. If some of these other things start blowing up and who knows what, you know.

[00:57:38] Preston Pysh: Heck, if GBTC asked the liquidate, I could only imagine what that could do to the price. But like you said, it might happen in the OTC market. I don’t know. But I do know that. I’ve participated in markets long enough to know that once you start getting some decent prices and you think that you’re within, call it a six month window of things, of the tide kind of changing.

[00:57:59] Preston Pysh: Like you just can’t be greedy and think that you’re going to nail the absolute bottom. Like that’s a fool’s errand. And so I’ve just started, you know, it’s, I didn’t start I’ve done it. I’ve taken the cash from 2022. Got it. And deployed it in the Bitcoin and we’ll see how close I get to whatever bottom. I fully expect that we eventually reach.

[00:58:19] Preston Pysh: My last question for you, Dylan, is really this. You’ve been posting some of these charts where on chain metrics are showing that there’s a whole lot of coins that aren’t moving and there’s a lot of addresses that are consolidating and buying at these prices. Talk to us about some of these metrics and what you think that they mean.

[00:58:40] Preston Pysh: And I think this is a really important thing that people that aren’t intimately familiar with the space do not understand about Bitcoin.

[00:58:49] Dylan LeClair: Yeah. On much controlled a little bit because, you know, in, in 2021 a lot of these things looked super, super strong. Yeah. And then price obviously drew down and the whole crypto thing imploded like we covered for the first half of the show.

[00:59:00] Dylan LeClair: And here’s the thing is that the supply in elasticity of Bitcoin, like, you know, people always just throw out, oh, it’s absolutely scarce. And like the people that aren’t in the weeds with all this or don’t understand Bitcoin or that think it’s just a speculative bubble. We go, okay, it’s absolutely scarce.

[00:59:13] Dylan LeClair: But the supply in elasticity of Bitcoin, the price agnostic buyers and accumulators of Bitcoin, Don’t part for the majority. I mean, you know, people will trim tops and we can see this in data, you know, where they’ll, you know, let some coins go after a thousand percent increase in price. But for the most part, you have a cohort of people that are always acquiring this thing and somewhere on the planet and not selling it.

[00:59:36] Dylan LeClair: And right now we’re seeing levels of whether it’s like, you know, 83% of supply all time low hasn’t moved in like three months. Right? Or I think it might be higher than that. You have coins flowing outta exchanges at a massive level. You have, this is just going to snap so hard the other way. But I think right now, you know, price is set at the margin, obviously, and you’re going to see Wall Street I’m pretty confident in this.

[00:59:58] Dylan LeClair: You see Wall Street step in, you know, like sharks in the water. Some of them will be buyers. But from an institutional perspective, the asset class, you know, the posts are child of crypto just imploded. Asset class is somewhat untouchable. Paradoxically, despite it being the cheapest it’s been in a while.

[01:00:14] Dylan LeClair: And so I think they’re going to really lay into the short end on cme. On Beto, on, on the short inverse etf. , like Beto is 600 million bucks of nav CME futures in Bitcoin terms is at an all time high. It’s like 1.6 billion or something, but the top that was like 4.5 billion. But in bitcoin terms, in Bitcoin’s denominated units, which it’s not denominated, it’s in dollars, it’s an all time high.

[01:00:35] Dylan LeClair: And so you have a few things happening. Max away from exchanges because everybody doesn’t trust anything anymore. You have coins getting accumulated by people that, you know, enjoy getting, you know, kicked in the teeth and just stacking and don’t, yes, we do. Yes we do and at the same time you have the Wall Street guys shorting, you know, anything and everything.

[01:00:53] Dylan LeClair: GDC micro strategy. C e futures as you know, 30%, 33% short interests on the BW ETF. And also like when you’re the crypto ca casinos, the derivatives exchange is mostly Binance at this point. As we go lower and lower, more of this open interest, a greater and greater percentage. Like it’s at the top, it was like 70% was crypto collateralize, now it’s like 30% and the rest is stable coin margin.

[01:01:17] Dylan LeClair: And now we see all the things like the quarterly futures, the perpetual futures. They were paying 40, 50% to long at the top. They were paying 10%, 15% futures basis, you know, perpetual futures, funding rate manualized without, they were paying to long Bitcoin this entire way and just now they’re not paying, they’re not getting too overly aggressive, but just now open interest is going up up.

[01:01:38] Dylan LeClair: And they’re starting to get a little ballsy on the short side. And I think we can just, you know, whether we consolidate here or where we go next, I don’t know, but I imagine we just chop around for a bit and as coins continue to get pulled off exchanges. And people, you know, the miners have some coins left, but not at all that many.

[01:01:55] Dylan LeClair: You have all these lever justs that have puked up, you know, people that are just scared that have just been selling. And if this is, if 16 k or maybe lower, maybe higher, if this is where we find that equilibrium like the three K of 20 18, 20 19, or the $200, the bear market before, whatever that level is, I don’t know.

[01:02:12] Dylan LeClair: But there’s a level where the marginal buyer is stronger than the marginal seller in the asset class. And the lower it goes the easier it’s right. I know for a fact via data and anecdotal evidence that there are passive buyers of this thing every single day that hold it in their own custody. And so at some point the marginal seller gets exhausted and you have a historic level of short interest that gets utterly destroyed.

[01:02:35] Dylan LeClair: And I don’t think we’re there yet. But what this thing will do on the other side of this as price reinforces the narratives in the face of potentially global economic Armageddon is pretty wild to think about. In terms of what happens next? I mean, I just, I, you should, some of the slides I dropped for you, you should just, you know, cycle through, maybe be in the YouTube or edit on later.

[01:02:56] Dylan LeClair: Like, people should look at some of this stuff because it’s just it’s going to rip so hard. So it might happen the next 12 or 18 months, but whatever the timeline, I don’t know, but I’m certain that people don’t understand the supply demand dynamics here and what’s going to happen once the price starts to reinforce the story like it always does.

[01:03:14] Preston Pysh: Well, you haven’t had any momentum shift, you know, the traditional metrics that a lot of wall Streeters, a lot of whales use when they’re looking at just kind of the momentum shift, whatever cash they have on the sidelines, like none of that’s been demonstrated yet, at least not on any type of long duration where, you know, a lot of whales would be what they would be using to step back into the market.

[01:03:37] Preston Pysh: You haven’t seen that yet, but I can only imagine when you do have that momentum shift. And you’ve had the supply suffocation that clearly has taken place. You can literally see it on, you know, you can pull that data straight off your node. It’s going to be a whopper, it’s going to be a whopper, and I am totally here for it.

[01:04:00] Preston Pysh: And God, I love this space. Everything that’s happening, at least from my vantage point, it just shows me that we are dealing with an asset that’s truly free and open that can actually bring the cost of capital in a free and open way to the world because the bad actors are exploding. What an exciting time to be alive.

[01:04:22] Preston Pysh: That’s all I can say, Dylan. And what a pleasure it is to bring a person like you on the show. All right, so Dylan, thank you so much for making time coming on the Investor’s podcast. We love having you. If people want to learn more about you or they want to follow your feed or whatever, give them a handoff to where they can learn more about you.

[01:04:41] Dylan LeClair: Cool. Yeah. Well, I spend way too much time on Twitter learning and posting, so you can find me there at @DylanLeClair_. I’m working with Bitcoin Magazine, kind of posting a lot of these thoughts with a newsletter with, that we put on with Sam Rule and Jeff Frost has joined the team. And we’re putting out kind of all of this stuff from, you know, we talk as a Bitcoin focus newsletter.

[01:04:58] Dylan LeClair: We talk about bonds and volatility and Bitcoin and the collapse of all these bucket shops and everything in between. And so check that out as free tier, page tier. Otherwise, I mean, you know, my dms are open. I’m sorry if I don’t get to them and I don’t really like email or LinkedIn for all, for that matter.

[01:05:14] Dylan LeClair: But, you know, I love this community. It’s great to, to get to meet and talk to some of the smartest people in the world about all these different things. So, you know, find me on Twitter. I appreciate you having me on Preston. I mean, you’ve been a mentor to me in many ways, so it’s awesome to catch up on a chat and have it blasted after the world.

[01:05:30] Preston Pysh: Honored to have you, Dylan, and you always bring just. Unbound amounts of knowledge and thoughts and critical thinking, and I love it and it’s an honor to call you a friend. So thanks for coming on.

[01:05:42] Dylan LeClair: Likewise.

[01:05:43] Preston Pysh: Cheers. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use.

[01:05:50] Preston Pysh: Just search for, we study billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener if you enjoyed the show or you learned something new or you found it valuable. If you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm.

[01:06:09] Preston Pysh: So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next. Thank you for listening to TIP. To access our show notes, courses, or forums, go to the investor’s podcast.com. This show is for entertainment purposes only.

[01:06:28] Preston Pysh: Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permissions must be granted before syndication or rebroadcasting forecasting.