CD94: Bank Crisis and Bitcoin with Jesse Myers

Happy Bitcoin Wednesday, freaks. It's your boy Odell here

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I also wanna apologize.

I

it's been a very exhausting last few days, so my brain is not working a 100%.

So I might be a little bit slower today,

but we have a great guest in town in Nashville at Bitcoin Park,

return guest. He was on episode 3 of dispatch

with Gigi,

then he returned for episode 23 of dispatch

with Gigi again, but also Gladstein, and now he's here by himself

during this global bank crisis

in Bitcoin Park, sitting across from sitting across from me,

we have Jesse Myers. How's it going, Jesse?

It's going great. Thanks for having me. It's

bizarre to be at Bitcoin Park sitting across the table from mister Matt Odell.

Thrilled to be here.

It's a crazy week. It's such a week.

You you've been busy this week. I've been busy this week. It's been,

of course, one of those weeks where all hell breaks loose when you're busy.

And this is, I think, the the point in time that we've been waiting for as Bitcoiners

since

the Fed pivoted

14 months ago. So that now is the next

changing of the

of the tide. Well, I feel like I've been waiting for this since 2008 before Bitcoin existed. That's that's true too. Like, if we if we zoom out a little bit further,

this has been the inevitable point in time that

that everyone who was at occupy Wall Street or

skeptical of TARP or anything like that

has been waiting for the next point in time when the can has to be kicked again.

And I I feel like there's a lot of told you so's that are going around, but I said historically that I would not do told you so's because I've just I've been calling it since 2008. I've just been wrong this whole time. So Yeah.

Being in Bitcoin is is one giant waiting to be able to say, I told you so. You know?

Just don't fucking dance. Yeah.

So where should we start?

Where do you where do you want to,

let when I had Dylan on,

they took Signature Bank out behind the shed and shot it, so I'm kinda hoping

I'm not hoping.

That'd be the wrong word, but we might have a bank failure while we're live on on air twice in a row, which should be pretty ridiculous. Be auspicious.

So let's talk let's just quickly

what are your thoughts on

the first three banks that failed,

Silvergate,

SVB,

Silicon Valley Bank, and Signature Bank.

Yeah.

So,

Silvergate and Silicon Valley Bank are are sort of interesting, slightly different stories that make sense to me. And then the the one that's really surprising is Signature, and I think that's a totally different

story and a and a darker story, possibly.

Silvergate, like, what happened with them

is that they had too much,

you know, all banks, all frank all back all banks are are fractional reserve. And so any volatility

in in inflows and outflows of deposits

means is amplified by that fractional leverage. Right.

And,

so that that's a risk to any bank at any time if there's a bank run.

You add in the the cyclical volatility of

crypto and banking, having your

banking customers be crypto companies.

And then, you know, in bear markets, everyone wants to get their money out of crypto,

you know, the the people who don't.

The the Johnny come latelies are ready to bail, in the bear market. Or someone like FTX where, like, FTX was a major partner, and they just blew the fuck up. So so I think Silvergate had built into their model. They were they were a better capitalized bank than than most banks because they knew they were serving crypto. They were almost fully reserved. I mean They were doing They had, like, an 85% deposit drawdown that they survived. I think they were doing everything right for their model and and knowing that they were serving a more volatile

industry.

And then what they missed and what they weren't they what they got blindsided by was FTX.

And so because they were they were the the bank for FTX,

that made a, you know, that took a hit on their deposit base because suddenly

that money doesn't exist.

But then it also creates the bank run because everybody's like, well, we can't trust Silvergate to, you know, what else have they screwed up? Regulators are breathing down their backs, everybody wants their money out, and that that becomes the the pinprick

that burst that bubble. So that makes sense. Silvergate screwed up by by not realizing,

I think, you know, what they should have caught is a little bit outside of the scope of what a bank is expected to catch. You know,

FTX was committing fraud

Right. And telling Silvergate that they weren't. You know? Right.

So

But they survived for a while. I mean, the bank run on Silvergate started in November when FTX blew up. Yep. They had, you know, 90 they survived 90% of their deposits removed.

Yeah.

I think they're still pay they paid out depositors in full, or they're still processing withdrawals over there Yeah. Without any government assistance.

And the latest yeah. It sounds like they're they're,

out of some crypto companies have come out and said they're, like, they're making people whole. Like, they're still sending them out now. Yep. They're, like, going through it and closing out their positions

and and paying people up. I think that latest rumors that they, you know, might be trying to to right the ship entirely, so I I don't know what'll happen on that saga. Okay. So let's put that behind us. Yep. Because we covered a lot of this with Dylan, so I wanna, like, get ahead of it, but I also want your opinion on these things. So then Silicon Valley Bank. Silicon Valley Bank, similar story for different reasons. You know, their mistake wasn't banking FTX. Their mistake was

putting so they they grew their deposit base by,

I I I think,

200%

or so. I think they were at around 60,000,000,000 in deposits. In, like, 2020, and then they went to 180 or something. Exactly. So they grew by a 120,000,000,000,

so massive growth there. And what a bank has to do is put those deposits to work. They have to lend them out to somebody in order to get a return.

Or at least fractional reserve banks. That's what they do. Exactly. Which is all banks now. Exactly.

And so what they did, because they couldn't put that much money to work all of a sudden, is they put 80,000,000,000 of it into treasuries.

So at at, I think, 1.5%

yield.

And there were 10 years. Right? 10 year treasuries.

So that is They lent they lent money to the government for 10 years Yep. At 1a half percent. Yep. Which we thought was a great rate That's fine. A year ago. Exactly. And so the that's a decision you make if you're not at all expecting interest rates to go up to 5% in the following month. Deposit to continue to go up. And, like, what you mentioned earlier when you were saying,

banks that bank, quote, unquote, unquote, crypto companies or Bitcoin companies is more volatile deposits. Silicon Valley Bank, by the name, you could tell its its venture companies and venture funds, which also have a volatile,

characteristic to them. Right? Yes. They do. They are more cyclical with, you know,

with VC funding cycles. Like, you know, when VCs are able to raise a lot of money and then put a lot of money into companies and companies have big war chests,

Everybody's happy out of that. When government's printing money, rates are low

It works. You're just getting flooded with deposits. Yeah. And then when rates go up,

the the All the funding starts to dry up. Companies start pulling on their reserves. Exactly. So if you if you raised $10,000,000

and now you're in this new environment,

no new money's coming in in the door, you're having to pay things, you're trying to execute on your growth plan, pay employees,

and you also know that

there's not gonna be any new money coming for a while, so you're starting to pull deposits out.

It it creates that,

the tides going out in terms of your deposits. It's, of course, less volatile than the crypto cycles, you know, but Right. It's also

cyclical in nature.

And then, so what they screwed up is that they

socked away $80,000,000,000

for 10 years at a 1.5%

rate.

And then,

you know, a year later, those

those treasuries that they're holding on their balance sheet are worth a lot less because rates are now 5 plus percent.

Right.

And

then because of all the deposits going out the door, they had to dip into this they had to to sell. They had to liquidate part of

this 80,000,000,000 that they weren't expecting to have to touch for 10 years.

And so they sold a quarter of that and realized a $1,800,000,000

loss in that sale. Right. Because rates went up. Yep. So,

the current value of those bonds

was down.

Yeah. So,

you know, at at the end of the day, a a bond is just a contract that promises to pay this coupon of of yield.

So, you know, like,

if you if you were to put in a $1,000,000

into a 10 year bond that pays 1.5%,

you're saying, okay. I'll take,

I'll give you this $1,000,000, and you give me 1.5%

return every year for 10 years, and then you pay me back the original 10 really

original $1,000,000.

So in that process, you're getting a 1.5%

every single year return,

and and that's the contract that you're you're going in on. Right.

And then, of course, you can after the fact, you can sell that contract to somebody else.

And the the sale price if if rates stay at 1.5%,

then you're able to sell that at a $1,000,000.

But if rates go up,

but your contract still is only offering a 1.5% return every year, then you have to sell it at less than $1,000,000

in order to compensate to offset

the foregone,

interest yield. And if rates go the opposite, then you're at a premium. Exactly. So so when rates go up, your bonds sell for a lot for less. Right. And then meanwhile, the Fed went on

this massive,

tightening cycle, massive raising rates, like, at a speed we've never really seen. Ever. Ever. Yeah.

For to go from effectively 0%

to 5%

in 12 months,

is outrageous. And they caught most of us off guard. I mean, I there's this cursed tweet by Marty that he was just like, they will never raise rates. I was like, Marty, you can't speak in absolute he's like, well, if they do, it'll be barely or whatever. And then they just went for it. So I, you know, I

run a little fund.

And at that time,

I was you know, my monthly updates to my investors were they they

if you look at the math,

the

the system can't handle raising rates. So, like, so they're boxed and they're painted the Fed is painted into a corner. They can't possibly raise rates.

If you you just look at the interest expense on a national debt, you know, we have $31,000,000,000,000

of of national debt now.

And

remember,

what Volcker had to do to break the back of inflation,

in in in the end the end of the seventies was

to,

hike rates, hike interest rates, fed interest rates above inflation rates. And so that meant getting interest rates to 15%

in in 1980.

And, you know, a year ago, we were looking at interest rate, inflation rates that were 8%. The official numbers.

Higher than that. The real number is double that or or more even.

And so if you if you have in inflation at 8%,

to break the back of inflation, you're gonna need to set your interest rates at 10%.

Okay. So what would that mean for interest expense on our national debt? We have $31,000,000,000,000

of national debt. So that's $3,100,000,000,000

a year

in interest expense alone

on your national debt if you if you let your interest rates get to 10%.

And we're already as a country, our record tax revenues was 2021 where we brought in $4,000,000,000,000

of of tax receipts.

And we've still been running

a a $1,000,000,000,000

deficit on average every year for the last 10 years.

So,

you know, we brought in 4,000,000,000,000 in 2021. We spent 5,000,000,000,000.

You're talking about adding another 3,000,000,000,000 of expense,

which would mean 8, you know, if you use those 2021 numbers, and and that's as rosy as it gets because that's in a bull market where you've got capital gains, taxes helping out,

on the tax receipt side.

You're talking about $8,000,000,000,000 in in expenses on a $4,000,000,000,000

tax receipt base. So spending twice as much, which which means

$4,000,000,000,000 of deficit spending has to come from somewhere.

You print that as new debt.

You know, you you can be fancy about how that comes out.

But at the end of the day, that is money printing. Deficit spending has to come from

money printed,

and that

adds to our national debt and makes the situation that much worse. That's the whole debt spiral

we are in. So a year ago, it looked like it was not possible. And besides that, I mean, also

raising rates

would result in crashing markets.

Yes. Yes. And potentially breaking other things that we couldn't even necessarily

comprehend the repercussions of, so they would never do it. Yeah. And that's when And then they went and just Leroy Jenkins what they thought that yeah. And I still don't know if I don't know if they

genuinely believed that they could do it. Like, I don't know if Powell thinks I can be Volker. Like, I've got the backbone to be Volker and pull this off. Or if it was,

with and that would be delusional.

I think a reasonable

stance could be, like, our only shot

is if we tactically

try to shock the market by raising rates

and and try to bring down inflation. And then once inflation some bad actors. Right? Try to just Like the Carvanas of the world, FTX. Exactly. Right? Like, just suck up a little bit of liquidity,

like, take out some zombie companies,

try to bring soften spending a little bit, you know,

the amount of

of purchasing that was happening a year ago after all the pandemic stimulus was

was impacting inflation.

We've reversed that trend now. People are spending less. So there's this very narrow window where they could pull off a soft landing.

You know, you could shock the market with interest rates for a few months. Or at least they could think they could. There's a there's a path to there was any there was no there was no path. So I think I think it's

feasible to have

abated inflation a little bit, just contracted a little bit, and then stopped. But I do not think the Fed has the tools or competence

to actually find the right timing

And execute. And execute on that. Because they were a year late to start hiking,

18 months late to start hiking interest rates. When they put out all the pandemic stimulus

Right. And and things started to run hot, they should have been raising rates right then. At that point, inflation was transitory.

Yeah. Right. And and instead of raising rates saying. For the first 12 to 18 months, they should have been, they were denying it by saying that this doesn't line up with our Keynesian model of the world.

It's it's gotta just be transitory.

So so they're they're not capable of executing the kind of

tactical

interest rate hikes that they embarked on.

And now we're perilously close to it being too much and, you know, triggering a depression.

Awesome.

And it's it's interesting because

because there is so much craziness,

there's always so much leverage and bullshit

in crypto markets.

We saw the signs first. Right? We saw

DCG get fucked. We saw FTX

go down. We saw all this liquidity get pulled out of the market, and it kinda hit these really speculative things first, which is in our

in our realm.

And then

so there's a lot of

narrative shifting that's going on blaming

Bitcoin or blaming, quote, unquote, crypto.

But my perspective, and I'm curious on your perspective, is that it was more of just a canary in the coal mine kind of thing. It's not like

as much as I hate shitcoins, like, shitcoins didn't cause this. Bitcoin didn't cause this. They were just

where a lot of the games were being played and and where liquidity got pulled out at first because they were considered more speculative, more risky bets.

Completely agree. I think that

the nature of this market is is one that reacts more quickly. It it's a smaller market.

It obviously moves faster because it's 247. It's, you know,

people who are

mainlining the Internet

all day every day.

So information moves fast, sentiment moves fast,

and it's the most liquid thing in everybody's portfolio. So if you are and this is what we saw in the COVID crash that in March 2020, March 12, 2020

crash that wiped out so many,

leverage

funds was

when everybody need to scramble to get cash,

you sell your Bitcoin, you know, or or your Ethereum or whatever. Bitcoin. Well, I I don't wanna group them together. But Yeah.

But but the We see Bitcoin fall first in these types of crisis moments. We and and from from

a more macro point of view of, like, if you're a hedge fund on Wall Street and you've got some tiny little, you know, segment of your hedge fund that's dabbling in crypto. And let's say, you know, you don't understand really what you're dealing with, so you've got some Bitcoin, You've got some Ethereum. You've got some Solana because your, you know, your your hedge fund

is connected to the VCs. Is it multi coin, and now you're bankrupt. Yeah. Exactly.

Sued by your LPs.

So those those guys, you know, in March March 2020 were, like, shit. We need we need cash. We need it now. Sell all the crypto, you know, lumping in Bitcoin with everything else.

So, yeah, the the this market just moves faster. It reacts more quickly, and it gets washed out. So we've already been cleansed. You know, the the tide has gone out. We've seen who's swimming naked.

The zombie companies have already been screwed. The the Ponzi's,

like FTX,

have have

gotten their due already.

And

the traditional

economy is a little bit slower for the tide to go out. So it's I think it's still going The Trad 5 Ponzis are getting Yeah. Are getting wrecked. Well, the yeah. The Trad 5 pod Ponzi's are the fractional reserve banks, and they are too big to fail.

So some of them will get wrecked, and

ironically,

it is the bigger ones,

the ones that, you know, were the big problem in 2008 that are now

being promised protection by the Fed. Well, so let's talk about this because this is what broke while I was on with Dylan,

on Sunday,

and we didn't really have any time to digest. We were just, like,

we were we were literally reading the press press release on air.

They announced on Sunday

that

they were shutting down Signature Bank,

backstopping all deposits on Signature Bank

that they so all depositors were made whole on Signature.

Shareholders were zeroed. So if you own stock and Signature, it's worth nothing.

Leadership was called and removed.

And the same thing SVB had already failed at that point, but the same idea with SVB,

Depositors made whole. They have this line. No taxpayer funds. Yeah. However, that's possible. That one.

But but different than the bailouts that we and you already see the narrowed narrative. It's not a bailout or whatever. Because bailout is an unpopular word after 2,000 But but it is it is that part of their announcement is structurally different than the bailouts we saw in 2008 Yeah. Because they removed leadership, and they zeroed out the shareholders. Yes. But then they added this other component

where any banks that had

these treasuries,

these longer dated durational treasuries

that were trading at a discount,

could loan

money from the US government

at par. So, like, when you were saying the $1,000,000 bond,

that's trading at 600,000 or whatever, they could borrow a $1,000,000 off of that, and they say for a year. You know, nothing's more permanent than a temporary government measure, but they say for a year. And what that was was a straight up bailout

of all the remaining banks Yes. Ahead of time. Yes.

If that existed,

SVB never would have failed in the 1st place

Yep. At that point.

So they're picking winners or losers. They're not removing

shareholders

or

leadership

on those banks that they provided that to.

But then at the same time,

so that was just straight up a fucking bailout for every bank preemptively. Yep. And then at the same time,

they were basically signaling to the market though that if you're a shareholder,

you could get 0ed. You could get pulled behind the shed and shot.

So the next morning, we still saw all the stocks go down tremendously. The equity positions in in these banks were going down a lot,

which obviously scares the shit out of people.

I mean, they should have been scared already, but it scares the shit out of people.

And then the runs continue. People continue to move their money out, and they think, where can I send my money?

Probably only the top four banks because those will definitely be saved. Right? Yep. Right. And so we've seen

JPMorgan,

Citi,

have a

sudden growth of their customer base and their deposits.

And Bitcoin went up 20% at the same time. And suddenly, it's like this this Bitcoin thing makes a lot more sense to a lot more people.

I had a lot of friends that, like, were on the edge or whatever that just have completely

Like, in the last week, it's been They they completed I was setting up cold cards this weekend. Oh, wow. Good.

Good. Yeah. It

Wake up call.

And, you know, my

you you know that my network is

my MBA friends and

folks from management consulting from my past life.

And

I wouldn't say that they're orange pilled now, but there's been an uptick of, like,

This is, kind of in line with

what crazy Jesse has been talking about. You know?

So that's where we currently stand.

There haven't been any I guess, First Republic what's happened with First Republic? Did you follow that at all? Yeah. Not closely enough.

There's been, obviously, a run on First Republic. The small regional banks are the Small regional banks.

First Republic,

in particular has been hit pretty hard,

and has sold off

quite hard. But it's still so far,

whole as far as I know. I I don't know enough about that one.

It Yeah. I don't think they fully went down yet. Yeah.

It does look like,

I think the most interesting thing

to watch is the credit

default swaps

on banks,

which, you know, for your

refresher on what those are, that's Yeah. We're just all simple Bitcoiners over here. We just stay humble in StackSets.

That's those are the those are the instruments from The Big Short from,

you know, the 2008 crisis where,

you know, Michael Burry and and those characters were buying these contracts,

credit default swaps that are betting against the solvency, the the

viability

of the banks.

And

those are what paid off. They were buying those against mortgage backed securities. And then when the mortgage backed securities were suddenly not viable, then the credit default swaps or the insurance against

the mortgage backed securities pay off.

We are seeing

credit default swaps on

a few banks,

start to float upwards,

meaning they're they're it's becoming more expensive to buy insurance

on

You can think of CDs,

credit default swaps as

insurance. Insurance against failure. But it's like market priced insurance.

Yeah. Right. And so these these are contracts that trade.

And Credit Suisse,

has been

shooting upwards,

in terms of its 1 year

the 1 year credit fault swap, meaning the chance of failure in the next year,

has, like, 20 x in the last week.

So the market is

is seeing something there. And, you know, these And the stock is at an all time record low, period. Yeah.

One of the biggest banks in Europe. Yep. I think Credit Suisse is down 27%

today

as as as we're speaking.

So

there is And they keep these markets are rigged, so they just keep halting trading of all these stocks as it's happening. Yeah. They have these circuit breakers to slow it down, but then

when trading reopens, you know, the idea there is that if you you stop a panic. So if people are being are being irrational, then you get rid of that. But then if there's something real,

you know, if it's not panic, if if it's actually, like, probable We have Space d d saying it's minus 13% right now. Oh, maybe that was from yesterday then.

But then they reopen trading. Right? And then it keeps going down. Yeah. So they're they're selling off like crazy.

And By the way, Freaks, just a reminder, Bitcoin has no circuit breakers. It trades 247.

Yeah. And and that's part of why should be. That's part of why it gets it washes out,

faster. Right? So Right. We saw that in 2020. They were actually halting

the entire s and p,

during

that March 2020 dip. Yep. Or Bitcoin just

just liquidated everybody

Yeah. That was trading at least. I'm trying to find that 26% I saw, but, but all the big your so the the word of the day or the word of the week is contagion.

Yeah. Right? And

talking heads will always go out of their way and say,

the worst is over.

There's nothing to fear. And that's what they were saying yesterday.

And then we essentially woke up to European markets in complete panic.

Yeah. And

and it it's all because of the same,

driver of

of this mismatch

of duration of your

your assets and your liabilities from from a bank's point of view. A fractional reserve bank, that's their bread and butter. They have to figure out how to balance

having enough cash on hand to to serve

withdrawals at any point in time. And, you know, that's all just formulaic, like, how much you expect,

your standard deviation spike of

withdrawals at any given period and then, you know, risk tolerance for how much you should have on hand in order to serve that.

And

banks everywhere are underwater

on the treasuries

or, you know, European bonds,

that they purchased

a year ago when markets were running so hot and deposits were

flush,

and they had to put them to work somewhere. And they they put them into sovereign debt,

you know, treasuries or European bonds. And now those things have sold off. And because they're these banks are typically,

25

x leveraged,

you know, they're they're,

Greg Foss was talking about this yesterday that,

they have,

you know, their their fractional reserve to such an extent that it equates to 25 x leverage and moves

Insane.

For their for the value of their,

securities that they've

used deposits to purchase. In practice, it means no bank

can survive

the majority of their depositors withdrawing, basically.

Yeah. Or few can. And Oh, yeah. Segregate

was the overwhelming majority. They were still surviving for a little bit. Yeah. The I think the the majority of depositors

withdrawing is is well beyond the models that that any bank is is expecting.

I think it it only takes, you know, a few percent,

beyond what you typically expect in a in a given month to for it to start to be a problem,

because because of the

requirements being at 0%, like,

since pan the COVID pandemic, the the

COVID crash

in March 2020,

regulators said, alright, banks. You don't have to your your new reserve requirement is 0%.

So that's been the law of the land for the last few years, and they haven't changed it back.

And that's just to allow banks this extra cushion of, like,

of of not having to have any specific deposit,

on their books at any given time in order to, you know, be

good in regulators' eyes. But that means that we've been extra risky, you know, extra susceptible to a bank run since March 2020 because banks get this updated

guidance of you of you only have to have 0%,

reserve,

at any given time. Absolutely insane. And they go, alright. Cool. We'll just jack up our risk by, you know, buying more long dated,

treasuries.

And then the the market moves against you,

And any influx of,

withdrawals suddenly means you have to liquidate

underwater secure,

bonds

and realize, like, silver,

like Silicon Valley Bank did a $1,800,000,000

loss.

And that massively hurts your financial position and your your shareholders' trust,

in your abilities to manage your bank.

And that precipitates a bank run and also

simultaneously

a sell out of your stock. So this is all happening to everybody right now because of this

systemic problem

of rates being super low a year ago when everybody had a ton of deposits.

And so you put your your deposits to work

in a

in a safe bond,

getting as much as you can 1.5%

or so. And

then fast forward a year, and all of those

long dated

bonds are massively underwater

while you're starting to have a bank run. So

this is a problem that everybody is faced. Every bank is facing because

of how they let interest rates get so low

and lull people onto a belief that they would stay there forever.

Because they should stay there forever based on the, you know, the level of debt that,

the US and Europe is dealing with.

And then fast forward a year, they've they've

created a recession.

And because the banks are Ponzi schemes.

Yes. The way they're set up. And then so a couple things. First of all,

Space DD corrected himself. He said that's on the New York Stock Exchange, Credit Suisse.

It's minus 20% on BYMA.

And then he goes, I don't know how these foreign stock tickers work.

Got it. And then Cantillon

John said that CS is classed as systemically important to the global banking structure, and the Swiss Central Bank commented that they are ready to step in and save the bank Oh, did they? The bank. Oh, okay. So that that's new in the last few hours, I think, because,

the latest I heard there was that Credit Suisse

was asking the Swiss Central Bank for support, like a statement of support. No. I mean, this is just

a freak in the comments, so I don't we have to verify that. But

Well, so maybe that happened. But, like, this whole system, this this so

obviously, freaks, Bitcoin fixes this.

This is exactly, you know, why Bitcoin exists. Bitcoin exists because

you shouldn't have to trust a company or government with your money. You should be able to have money without trust. You should be able to hold it yourself. You should be able to hold it without permission. You should be able to spend without permission.

This is exactly why Bitcoin exists. And if you've and if you've just been staying home on stacking sats, you hold Bitcoin in cold storage,

You've been learning the best practices. You've been getting comfortable with it. You're in a very good situation right now.

But all that aside,

there's a global banking crisis going on, so I wanna continue to unpack this.

I,

have this comment in the chat.

I was in some Twitter spaces,

and they said that the crash can only happen when people run to withdraw their money. If there's no withdrawals, then everything would just settle down. How true is this?

Yeah. That that's actually true.

So let But that's ridiculous. Like, you should be able to withdraw your money from the bank. Yes. So the okay.

I guess Silicon Valley Bank because we've the dust has cleared a little bit, and we know kinda what happened

is is the kind of the best example of what's going on, I think, everywhere.

And in that case,

you know, we talked about how they they had 62 $60,000,000,000

of deposits. Suddenly,

that went up 200%

in the space of a year.

They had a 120 new $1,000,000,000

of deposits. They put 80,000,000,000 of that to work in 10 year US treasuries at 1.5%.

Rates go up over the last year. Suddenly, the that $80,000,000,000

is worth

significantly

less.

That's fine still from the bank's point of view. So long as you don't have to sell

that $80,000,000,000

of of

long dated bonds

until they're back above water. Because they still have a they have a portion, but they have there for immediate withdrawals already. Yep. And then so, I mean, with Silicon Valley Bank, it was really interesting because

it almost appeared like they were doing

diligent risk management.

They were they were attempting to do diligent risk management,

failed on the execution.

So the way the perception was externally

showed a little bit of weakness, a little bit of trouble.

Right? They sold some of the bonds for a loss,

then they tried to sell some stock. And as a result, at that point

and the the CEO made one bad comment. It was a it was a really bad comment.

Something like, as long as everyone doesn't withdraw their money, we're good. Something to that effect. Yeah. Just don't run. Stock dumps 60%,

and Peter Thiel

goes out to all his founder all his founders with his fund,

his VC fund, and he's, like, pull your money ASAP. They and then this is a phenomenon

that I've been talking about

for months now

is this we're in the era of social media. In 2008,

when IndyMac was the first bank that went down and there was a run or whatever, you can only read it you can only watch it in mainstream media. Like, Twitter wasn't even really a thing yet.

In this case, in Silicon Valley Bank, people were tweeting about it. People were TikTok ing. People were texting their friends. It was immediately going into all the VC group chats. All the VC funds were all those crypto VC funds and Silicon Valley VC funds,

were telling all their founders to withdraw. They were all racing to withdraw, and they were all they didn't even have to go to the bank to do it.

They were wiring, you know, 100 of 1,000,000 of dollars out of this bank.

The social media risk. And there was no negative there's no negative for someone in that situation.

I mean, you could go to a worse bank accidentally.

But

if if there's a little bit if there's even a tiny bit concern

that your specific Ponzi scheme is the one that's gonna get run on,

You just withdraw, send it out, and you can just send it back in afterwards if if the dust settles and everything's fine. Yeah. It's it's

it's funny that, like, the crypto markets have learned more about

the risks here than

the traditional economy because

we've lived through so many,

shocks. And, basically, bank runs. Like, these exchange hacks, like, exit scams, those are essentially bank runs. Exactly. So so we actually know more about this than people in the broader economy be because we've lived through And there's never bailouts for for our shit. Yep. And so,

you know, and and I think that's part of why

so setting aside that, like, everyone should hold their own keys and, you know, not have their money on BlockFi or whatever.

But

if you're if you're

if you're still learning, if you're an idiot, whatever reason you you're engaging in BlockFi and stuff like that,

You've still learned that if there's any rumor,

if there's any whisper

of, you know, solvency problem

withdraw because there's no risk

to

you. You should withdraw as soon as you can. And at least a lot of people,

it's it's unfortunately,

it's a lesson that has to keep being learned over and over again as newcomers come in. We saw a lot of cocky newcomers that got caught up in FTX and block 5, but there's

there's a a a large amount of participants

that understand that if you're with a custodian, don't keep more with the custodian than you're willing to lose. Yep. No one feels that way about banks. Right. The traditional people you I mean, I never listened to that all in podcast,

but this one seemed like an important one because they're you know, Jason was in all caps on Twitter and shit, just freaking the fuck out.

And they just couldn't even comprehend this idea

that, like, their money wasn't in the bank. That's amazing. I didn't know that. That's great. Yeah. They had one on Friday as everything was falling to pieces. And then Jason

went on Twitter and was just in all caps, like,

this is the end of the world. Like, they have to they have to the government has to step in. He he was like, buy guns and ammunition. Like, he was just like he was com completely lost his mind. Yeah. Wow. Great.

It

this is this is such a great little microcosm of how,

Bitcoiners and crypto people, more broadly,

have had have had a crash course in true capitalism

in a way that

the traditional economy has forgotten.

It it

you you know, the

what is generally accepted wisdom

is the product of what has worked,

in in living memory. Right? Like, that's that's how we come across these

maxims, like, stay humble, stack, sats. That works.

That that works. Didn't just, like, wake up one morning, and I was, like, stay humble, stack, stats. Like Yeah. I was not humble, and I got wrecked Yep.

And multiple times. And you watched other people get wrecked, and you watched this keep happening, and you figured out that this this particular path is a path that leads to success and keeps you safe. So that becomes the wisdom

of people who have learned in this market.

And

that is that's that's how it always works. That's,

to go on a little bit of a side rant, like, that's why

your everyone tells you to get a mortgage

and and plow money into your 401 k. It's because that worked over the last 40 years where we went from 15% interest rates to 0%, and financial assets get bid up. So real estate goes up,

and your And let's just talk about that relationship.

Yep.

Rates go down,

so

buying a, quote, unquote,

a risk free return in a a short term t bill, a loan to the government for 3 months or a loan to the government for 1 year,

that return is less

because rates are down.

And then

because that is the case,

people are looking for greater return somewhere else, so then they go out and they bid up stocks. They bid up real estate. Right? They bid up homes.

They the liquidity pushes out

other places. Right? That's basically the premise?

Yeah. I think it's a it's a different driver. I think that is in parallel also happening.

I think what you're sort of talking about here is, like, if if you can buy a a t bill that's returning 15%,

hell, yeah, you're gonna do that. You need to outperform that 15% to invest in a stock. Yeah. And so everything else in a company or Everything else becomes a lot riskier, and you're more likely to to be in the bond and and stay safe that way. But at the same time, inflation is running hot too. It's maybe around 15%, and so you're you're ultimately just treading water.

FYI, Cantel and John just came in with the don't trust, verify,

an official

Swiss link that says that they will provide

the Swiss Central Bank will provide,

a backstop with liquidity to,

Credit Suisse. Amazing. So this is the the market in action of, like, the the bank

pleading for help from the the central bank, and then the central bank within the space of a day responding with

official support saying Right. They will in some way backstop it and and try to instill confidence in the market. Sorry for interrupting you. No. Yeah. That's that that's it's

a financial market history,

real time right now.

So to get back to that, though,

you're gonna sit in the bond because it's the safe thing during this time of of turbulence,

high inflation.

And if you can get interest rates, you know, if you can get a 15% interest rate, you're gonna sit there even though you're just treading water. And your real rate might be negative. It might be 0 you're you're getting 5% on a

on a t bill, but real inflation is 8 or Yep. 12% or whatever, then you're actually losing 7%.

Totally.

So I think that the real trend happens

over time here. It's not it's not so much about,

that moment in time when you're choosing the bond.

It it's about when rates are 15%,

how does that impact the valuation

model for different asset classes? So with real estate

valuations,

the stocks are easier to to do. So

with stocks,

the value of a company is its expected future cash flows

divided by

the

discount rate that you have to apply to those cash flows. And that means the current interest rate or the expected interest rate over the the time of those cash flows.

So when

when you line up all of your ex you know, all of the expected cash flows by year

for the next 30 years for a certain company,

but you have an interest rate of 10%

or more, some something like that.

And you're discounting

the future cash flows based on that

interest rate pretty quickly,

you know, after, like, 2 or 3 years, the value of the future cash flows drops down to, like, nothing.

So it doesn't matter,

in that valuation model what your how much cash flow you're gonna have in 5 years. It it the math amounts to it not really matter. But as you get closer, as you drop interest rates and you get closer to 0,

suddenly the future cash flows the cash flow that happens in year 30

is just as valuable as the cash flow that happens in year 1

because you're not discounting it by much. So that means that, suddenly, this this company looks a lot more valuable,

in terms of its its current

valuation. So

that's why as interest rates drop, the

value of a company gets bid up because

the Right. People are just reacting to the math and what that does to the expected future cash flows.

Sort of a similar story with,

real estate in in regards to, like, your expected future cash flows of rental or properties or commercial properties. But then the other driver there is,

mortgage rates. So

as interest rates come down, mortgage rates come down. Right. Suddenly

General cost of capital comes down. You can borrow money super cheaply and then invest in and things. So you can you can afford a $1,000,000

mortgage

if rates are, you know, 2%.

Right? But you sure as hell can't do that,

if if your rates are at 10%.

So, you know, therefore, you're willing you know, what you're willing to spend on a house

is not $1,000,000

at 10 at 10%. It's, like, you know, 300,000 or something like that,

just just based on interest rates. So it's all very susceptible

to what's going on with interest rates there.

So that's why,

yeah. Sorry to to finish out that. No. That's good. No. This is good. This is good. Since 1980,

you know, 1980

over the following 40 years, if you look at the Fed Funds interest rate, it started at 15%.

There's noise along the way, but it's pretty much straight line for 40 years down to 0. Right. So

people who bought houses in 1980,

the boomers who were, you know, are in millennial age then,

They got houses for cheap because interest rates were were high, and so the

cost of service in that mortgage was high. And so the the cost of the house couldn't be very high.

They got in then and then watched interest rates come down. Money get cheaper and cheaper and cheaper. Gets cheaper and cheaper. You can afford a bigger mortgage. Asset prices go up. Asset prices go up. So that so as interest rates come down, financial assets, so that means

stocks, but also means real estate,

get bid up. Right. And that's the climate that we've been in for the last 40 years, and that's why the accepted wisdom for the, you know, that we've been told

to follow

is just get a mortgage

and

put money into your 401 k because that's what works. Right. And the hidden thing is that inflation's running this whole time

Yeah. That people don't factor in as well.

Yes.

That that's because the money is cheap. Yeah.

Yeah. And

so but, you know, looking forward so we've received this wisdom of just do this. Right. Hey, millennials. Just just shut up and get a mortgage. Right. You know, like, that's what we've been taught told to do.

But

now

we're entering the the the winds have changed. The opposite is now now has to happen.

We're basically looking at 19 seventies stagflation, like,

at minimum.

Either that or or something like what we had to do in the forties to pay for World War 2, which was just, you know, let inflation run hot for a while.

That's what we have to do. There's no way around it. And so the asset classes that did well over the last 40 years,

will

underperform

in the in the opposite

prevailing winds.

So that, you know, they had a tailwind for the last 40 years, and now they're facing a headwind.

And they're gonna go sideways in nominal terms and down real terms, I think. I think that's what the math points to. But isn't there another aspect here? At at least let's go back to the house thing. Yeah.

In America, at least, and this is not common in the rest of the world,

we have it's very common for getting a 30 year fixed mortgage Yep. Fixed rate mortgage. Most of the world, they have,

variable rate mortgages that adjust as rates change. Right?

So your monthly payments go up when when rates go up, and they go down when rates go down.

If inflation is running hot

and we're in a situation we've never been before. Right? Like, we've never we've never had

this much government debt.

We've never

we we've we've

strictly never been in this situation before of all these different variables.

If inflation keeps running

hot, which it seems like it will

because they can't significantly raise rates without breaking things even further.

Then

is it that crazy

to lock in a 6%

30 year

loan?

Yeah. That's a good point where

it could

it yeah.

Interest rates could could and probably will go up over the next few years. So, you know,

we could end up with, like, 10% interest rates, and you're looking back at at 6%. He's not gonna lend you money for 30 years

at a rate that's significantly less than real inflation.

Yeah. It and and this I I guess to put this in context, this comes back to, like, that fastest horse idea from Okay. Paul Tudor Jones of, like, what was the fastest horse the last time these conditions existed in 19 seventies? It was gold. So hard money was the thing to hold. It it fucking rocked in 19 seventies.

And that's gonna happen again, I think. I think I think gold will do well, but, obviously, I think Gold's been kinda stagnant during this whole situation. And and and I don't know enough about the gold markets or the mechanics there to really speak on it be in particular because,

the ability to do paper gold

manipulation,

is this giant elephant in the room. Right. It's one of the main advantages Bitcoin has. Exactly. Because there's still paper Bitcoin, but at least you can easily hold it yourself. You can easily verify it yourself. And when there's paper Bitcoin so FTX.

And easily trade it yourself in large volumes.

Yep. Yeah. It's, like, it's hard to trade large volumes of physical gold. Like, what are you gonna trade $5,000,000

worth of physical gold? Who are you trading it with? How many trucks are you gonna use? Right. Exactly. So you end up having these promissory notes, these paper gold dominates the market,

and and Bitcoin has that advantage. And FTX's

FTX did this. They had paper Bitcoin. They had paper Bitcoin. Yeah. We woulda had 200 k by conference day if it wasn't for that meddling SPF. Quite possibly.

I I do I ran the numbers on that when when that went under, and,

it looked like the amount of paper Bitcoin that they

had

promised,

and they had they had liabilities

of x amount of Bitcoin. I forget how many Over a $1,000,000,000.

Yeah. It was, well, 1.4

is the number I remember.

It was I forget, like, 30 1,000, 50,000 Bitcoin, something like that. But then when you run the math on how much, Bitcoin has been mined in the last year,

ostensibly when this paper Bitcoin was was created,

that increased, quote, unquote, increased the amount of new Bitcoin being created

over the last year by 25%.

So they added 25%

to the newly created Bitcoin. A fake newly created Bitcoin.

And, you know, that screws up your to the extent the stock to flow is a real thing that really messes with it. I think there's I think it is directionally correct. Okay. Well, before you die on this hill,

so I have this thesis with Bitcoin

that there will always be people playing games with paper Bitcoin. Yeah. But because of the properties of Bitcoin, and the properties being that you can easily self custody it, and you can easily verify

it yourself with your own node. Yep.

As long as people continue to stack and I think

adoption increases and more people will continue to stack, but even just the existing holder base that stacker base or whatever, stackers are setting the floor.

As they continue to stack, they will eventually expose

these schemes. Yep. And you'll have kind of a bank run type of situation.

Then the market will normalize, spot Bitcoin will take over again,

and then it will rinse and repeat all the way up, basically,

is my thesis. Fully agree. I think that we will keep having new

flavors of

paper Bitcoin

companies,

Ponzi schemes

that then get washed out. I think you're you're right there. Like,

as the price of Bitcoin goes up,

your

liability the size of your liability if you've if you've created paper Bitcoin

grows with it. So, like, you know, if if you promise Nearly exponential is, like, insane amount. Yeah. Well, if if you promised you know, if you have a 10,000 Bitcoin,

paper Bitcoin hole. Right? Like, where you've Right.

That's what you owe.

And then the price of Bitcoin, 10 x's,

it's it's as if you have a had a 100,000. If we're in a post fiat world, like, even the purchasing power goes up, whatever, you price it in cows or whatever.

Yeah. Yeah. The perch as the purchasing power of that Your hole gets bigger and bigger. Your hole gets bigger and bigger in purchasing power. Blow the fuck up. Up. And, eventually,

that the all the hole itself in terms of the number of Bitcoin that you owe can can stay completely flat. It could even go down. It could even go down, and you

become more and more insolvent and more and more unable to hold hide that.

So it eventually will reveal itself. And the FTX situation is a very obvious example

because

we know how much they owe

users, and we know they had no Bitcoin on their balance sheet when they went down. But, also, this applies to to me, this also applies to things like BlockFi, which is, like, rehypothecation

as a service. They were taking people's Bitcoin, then they were lending it out to a counterparty. We'll lend it out to another counterparty. We'll lend it out to another counterparty.

Yep. And that that's has the same effect. And what I hope Similar effect. What I hope happens,

and, this might be me placing a little too much faith in humanity

and business people. Many such cases. Yeah.

Is I hope that the examples of BlockFi and FTX

make it And GBTC

and DCG?

Yeah. Yeah. In different ways, make it a little hard harder for

that to happen again. You know? So, like, the the surface area of grift,

reduces over time,

you know, because people wisen up to They get burned, and then they learn. Yeah. At least some people do. And A lot of people won't, but some people do. Yeah. And the question there is, like, what what

percent of learning is retained over time? Right? Like like, will you totally forget the lessons of FTX 5 years from now? You know, the what's the Well, that's what happened. Like, people forgot Mt. Gox. And, I mean, you can go back in my tweets, and I was, you know, I was saying not your keys, not your coins. Very simple tweets, and people were calling it FUD, and they were saying the market's mature, and we're past that point. Yeah. But but it's the newbies who never learned that lesson in the first place. Right? Like,

say humble stacked stats comes from Mt. Gox and experiences like that. Years of experience. Yeah. And so the people who lived through that

get that they have some back stats. Yeah. Yeah. And yeah. Hopefully, the majority do. Or they just lose all their money, and then they And if they ignored it over the last few years, maybe now with FTX

or in the banking crisis, they're starting to see it. Point is, like, what Gox was, like, 9 years earlier. Right? Yeah. So you have, like, these

Right. These time periods, and then anyone who came in,

there was other failures after Gox, like,

MintPal. There was a bunch. Right?

And the question is how much do you learn from

like, how much do newbies learn from the lessons of Gox,

you know, in that elapsed time? Like,

I think I think the market got a little bit smarter, and that meant that FTX had to be a little bit more sophisticated in its deception.

And I think that trend continues forward. So

this is in a way

Bitcoin and and crypto more generally as, like, with its properties as an asset class,

creates this antifragility

of, like, it it

you learn lessons that you wouldn't learn in the dollar world. Because there's no bailouts. Because there's no bailouts. No one's holding your hand. No one's no way to hide when the trading goes out. Yeah.

That's why, like, people that

there are some people that presumably learned their lesson because they didn't have access to their money for 72 hours at at SVB,

But there's a whole class of people

that are like, I'm gonna keep my money with SBB now.

They're the safest place in town because the government is backstopped.

Ironically, they've become a safer place because they have this official stamp that the government is going to protect them. But like those people didn't learn their lesson.

Partially because they got bailed out. Yes. Yeah. So no less yeah. That's a great example that Like, I had normies coming to me. They're like, oh, no. My on, like, Friday. They're like, oh, my SVB wire will process next year. I'm like I'm like sorry for your loss. I was because I'm used to you know, I haven't seen real bailouts since 2008.

I've seen all these collapses.

I like, as soon as FTX started having issues or whatever, I was like, they're done. Yeah. It's over. No one's coming to save you. Yeah. It's gone. You have a harder mental model of how

this goes because

in crypto

and Bitcoin and and crypto,

you know, it's it's weird to lump them in and with this. Yeah. I hate that you keep lumping them in. I'm like, well, I'm rolling my eyes over here. The lessons apply of, like, you

get fucked,

to both. But, you know, obviously, for

one one has merit and the other doesn't, but the the hard lessons are true across both.

Yeah. And if anything, it's it's easier to learn a hard lesson quickly if you're

if you're playing the shit going games. Yeah. Yeah. And and and that's how I ended up becoming a Bitcoiner. It was like There's

there's connection here. There's,

some kind of metaphorical relationship between, like, yield farming yams

and yield farming on SVB.

Yield farming yams. Remember, like, they had all the yams and shit coin or Yeah. Well, they had all the Ethereum tokens that everyone was yield farming, like, a year and a half ago. Sushi and things. Yeah. They were all different names of foods. Right. The food. And you were getting, like, 40% staking yield off of them or whatever. Yeah. Or liquidity providing yield. And the the Fed doesn't step in to backstop

yams. But they they stepped in to backstop USDC.

Interesting.

That's an interesting Because USDC had 1,000,000,000 of dollars on SVB.

So first time

The credit was being helped by. Yeah. First and and

USDC backs DAI and

DAI and USDC make the majority of the DeFi backstop.

So they actually this bailout

is the first time we've actually seen

federal government come in and protect

the crypto ecosystem. I don't think it protected the Bitcoin ecosystem. I think if anything, USDC if USDC faltered there, which it looked like it was about to, there would have been a significant flight to safety to Bitcoin. It would have been a very big

learning lesson for people that Bitcoin is the only stable coin. Yeah. And they kinda save the Ethereum, DeFi ecosystem

by backing up USDC.

My

I I guess for a long time, I've sort of viewed those the stable coins as they're they're not even crypto. They are they are Fiat with a crypto wrapper. Yeah. And

so, I guess, it's not surprising that the Fed, you know, FDIC had to step in to save

I mean, they're Fiat. And BlackRock backed. Yeah.

It that's part of the fiat ecosystem. It's not even crypto.

Yeah. But Yeah. And it backs up the DeFi's shit.

Yeah. It it

it does.

But, you know, as we know, that's It would have been crazy to see, like, what and and what happened is so when you have these types of bailouts is

the next time is significantly worse and grander and bigger and more devastating.

And, like, there was a lesson that could have been learned here Yep. That trusted third parties or security holes, and you shouldn't back. So, like, the first letters of DeFi are supposed to stand for decentralized finance.

Like, you if you back that whole ecosystem

by a centralized third party that's backed by Goldman and BlackRock DynoFi.

The whole thing can just get destroyed overnight if that thing goes down. Yeah.

And now that people didn't learn the lesson, so how much is how

like, USDC is, like, $40,000,000,000

under management or something. It's, like, $50,000,000,000.

Then the next time this happens, if USDC even survives this cycle, which I'm still not convinced it will because you're a fucking idiot if you're holding significant amount of money in USDC

right now. But it could be at a 100,000,000,000 or a 120,000,000,000. Like, that's what I was saying about FTX when FTX fell. Like, we should be grateful it fell when it did. Yep. Because if it survived the cycle

It would have been way bigger.

Way bigger next cycle.

Yeah. And and

to bring it all back to, like, this is antifragility

in inaction, and you can only have an antifragile system if lessons are learned.

Right? And so if you prevent the lessons from being learned because you're, you know, daddy government and you're stepping in You have training wheels. You never learn how to ride a bike. You never learn.

So

crypto can never be as antifragile

so long as USDC is being,

you know,

back to all the way down there. Or, you know, Ethereum is very centralized. All these things are Yeah. And and so Bitcoin, it has that leg up of, like, it is truly antifragile because there's nothing hold holding it up. Nobody controls it. Nobody can change it. No one's back stopping it. There's no balance whatsoever. So it's the most antifragile system because it's just doing its thing, and we have we have to learn the lessons to accommodate how

our actions can best interact with Bitcoin and not any other version of that.

Crazy times, Jesse. Crazy times. Yeah.

I have a couple more things I definitely wanna cover

while I have you.

There's an interesting

perspective that I had never considered before

in this fractional reserve

Ponzi banking system we have.

So Caitlin Long in Wyoming has been trying to stand up this new bank called Custodia Bank.

I forgot what she what was she called it previously before custodia?

Oh, I forget.

But she's been trying for years Yeah. And she needs the Federal Reserve's permission Yep. To enter the Federal Reserve System.

And the whole idea of her bank is instead of being fractional reserve,

where you have a 0% reserve requirement,

she would hold herself by charter of the bank to a 108% reserves. So if you put in a $100

and you're a customer of the bank, they would hold a $108

in reserve

for your deposits. And as a result, if all Avanti was the name of it. Right. Right. Thank you, Vince, in the comments.

As a result, if all the depositors pulled out their money,

they would get their money as one would expect a bank would work. They hold your money and they do it. And then everyone says, oh, how would that bank would make money? They would charge fees.

They would charge transparent fees

for offering you protection

over your

money, which, historically,

before the fractional reserve banking system was how banks operated.

It was a reputational business

that you you were trusting someone else to store your wealth for you, and you were paying them in return for that.

Now

I had always and there was always

a Bitcoin and crypto element to it. You know, she wanted to to bank

Bitcoin companies. People don't realize that the reason Tether exists in the first place is because we used to have

a banking blockade on Bitcoin companies. It's really hard to get a Bitcoin bank accounts. So there there is a Bitcoin crypto element,

and a lot of people said that's why the Federal Reserve wouldn't let let her in.

They denied her the most recent time, like, 2 days before they bailed out SVB and announced all this other stuff.

And Lynn Alden made a really interesting point

that I never considered,

which is in a world of Ponzi banks,

if you have one bank that is responsible, that is that is very safe.

All the deposits are a significant majority of the deposits will run from the Ponzi banks to the safe bank, and you will actually bring down the entire system. You can't have

a full reserve bank. Yeah. In a fractional reserve banking system, because in in this exact situation is exactly what where could happen where people start losing confidence, they start running, and they all run to 1 or 2 banks that are that are deemed safe, not because they're gonna be bailed out by daddy government, but because they're actually practicing full reserve. Yep. If you if you have crazy. You've got a a barrel full of bad apples. You can't have a good apple in there to really show how bad all the other apples are. Everyone will run to the good apple. Yeah.

And and that's exactly what would happen right now, and and it becomes a systemic risk to this shitty fractional system. So

it's a funny logic of, like, it actually makes sense from the, you know, regulators' point of view that they can't introduce this risk by allowing a decent actor. I mean, to be clear, they don't say that's why they're not doing it. Yeah. Of course. Of course not.

But that that that oh, I didn't I never thought of that perspective of it. Yeah. I think I saw the same tweet, and and I also was, like, oh, yeah. That is that is how

money would flow. It would be a net, you know, you the osmotic flow towards a safe bank,

which would put a jeopardy the unsafe banks. And it's so funny. Like, there's 2 different,

conclusions people can come out from that. I had a bunch of Bitcoin friends reach out to me. They're like, Matt, you have a big audience. Like, you have to put all your weight behind supporting Custodia Bank. Like, this is the this is the fight. I was like, no. This is not the fight. There's a Bitcoin fixes this. They will never I was like, now I know for sure they will never let that bank happen unless everything fucking collapses first. Yeah. Because they can't let it happen. If they let it happen,

it it'd be even more chaotic than it is right now. Yeah. With with, with Caitlyn's

presence online, I've I've I've always, like

it seems to me that she has some faith that, you know, in the system still.

I I think they're suing the Fed. Yeah. And I think she's been surprised

at

the, the roadblocks that have popped up in her way of, like, no, you can't you can't do this totally,

honest version of a bank. Like and I think that surprise comes from a place of, like, she you know, she's been in this

world her whole career. I think she believes that these are good people,

and that they can obviously see that this is a good and honest business model, and so they'll allow it.

And and

I was hoping that she knew something about, like, the decency of the system that was still there. And I think that this That we were missing something. Yeah. I was And I have ton to be clear, I have tons of respect for Caitlyn. Like, I

I think I'm not rooting for her to fail. I just

am, am jaded and pragmatic about the system that especially from this perspective, like, they just can't let it happen. Yeah. I I would love Custodia

Bank to exist. I would probably use Custodia Bank,

and that's why they can't allow it. Right?

And so yeah. You know, this whole time that Caitlin's been on this this

crusade to try to get this version of banking out there in the wild, I've been hoping that she's her you know, what she sees or what she believes,

is possible was actually possible, but I think the cynic

in both of us,

was more right on this one.

Yeah.

That's crazy. I mean, it's

I will say

I mean, I they burned a lot of money trying to stand up that bank.

So, I mean, it's up to those investors whether or not they think it's worth it.

But to have the

the contrast and the perspective of this bank literally could have existed, and you denied it 2 days earlier because it would break the whole system

that is failing right now,

to me, is a massive

benefit to humanity that that that distinction

is so clear as day because of of the effort she put in and and the money that investors, you

know, essentially burned trying to support Custodia's mission.

Completely true. Like, if if the takeaway from that is

is

for people who are paying attention, and, that's probably the the big key here is you have to be paying attention

in order to learn that lesson here of, like, no. They really are not going to allow,

decency

in in banking,

because the system is so fragile that it can't allow that. Yeah. So then the last so then the ultimate conclusion there in my mind should be

you can't ask permission

from

if if your solution requires permission

from the corrupt individuals that are in charge of the corrupt system you already have, you're doomed to fail, And that is why we need Bitcoin in this world because it doesn't ask permission. It just routes around the entire system. It gives every person the ability to just say fuck you and opt out. Yeah.

Yeah. That

completely. And and, you know, obviously, you you focus on that side of, of Bitcoin,

more than I do. I

I tend to just get obsessed with what it means to to people,

as a savings vehicle and and how its

properties

deliver,

purchasing power appreciation

over time. Only if you hold self custody. Yep.

All true. And so it's it's a it is just amazing that Bitcoin has managed to to deliver such incredible

such an incredible value proposition in terms of,

you know,

permissionless

finance.

And simultaneously,

this is the best,

savings vehicle ever. Right. It's just incredible that those 2 can simultaneously exist in 1 Well, you need both together. Otherwise, it doesn't It's Like, if the token Bitcoin doesn't

have at least stable value,

then then you can't actually transfer value using the protocol.

And it's impossible

to have stable value without a trusted third party.

So

the result is a strictly scarce deflationary

token because

that will increase in purchasing power. You need to have it at least you you should can't go down in purchasing power. Yeah. Otherwise, you can't it has to have some kind of value. It needs to accrue value over time. Well, like, Satoshi could've

made the mistake

of releasing all 21,000,000 Bitcoin upfront.

You know? And then then there would be no incentive to adopt.

Like Right. Like,

yeah, you'd have this permissionless network,

but you wouldn't have a reason to hold your your Bitcoin

because you're specifically because you are recognizing the mechanics in place, and you're speculating

that it the Bitcoin you hold today will be more valuable 4 years from now. Right. And so then you wouldn't have this flywheel of adoption, this network effect that

has this viral coefficient that's positive and leads to people

And specifically with mining,

you're able to get into this system without permission from existing holders. And that's because with proof of stake, you you literally need a in a pre mined proof of stake situation,

you need an existing holder to sell you the token.

In in a proof of work system

like Bitcoin,

anyone can plug in a miner,

connect it to the Internet,

and

provide work, verifiable work,

and get paid out in in Bitcoin without anybody's permission, period.

Yeah.

It it

does it ever, like I'm sure it it does, but

does it ever just, like, hit you sometimes how in insane the perfection of these various incentives,

like, all combined in this single system are? But the fact that you've somehow

managed to create

a a minimum bidder for global energy

at the same time that you've created permissionless finance Yeah. It's fucking insane. At the same time that you've created the first ever increasing scarcity, absolute scarcity asset on the global landscape? I would I would push back on the word perfection.

Sure.

But, yes, it's absolutely insane. The the crazy part to me is

is,

it's, like, just the right balance

of

all these different variables

that when Satoshi originally created this protocol,

really hard to comprehend, like, what the different knock on effects and how this thing would Totally.

Change

at scale adoption. And we're still not really at scale adoption, but we're at significantly more adoption than I think whoever created Bitcoin in the beginning

could comprehend. Yep.

And it's almost like

good enough.

Yeah. Yeah. Right? Like, rather than perfect. Right? Like and that that's sort of the hole the shit corners get in because they nitpick little things, and they're like, oh, what if we tweak this variable or tweak that or whatever?

But

It's good enough. And it is better than anything else. Yep. And it's not controlled by anybody. And then immutability

ends up mattering more than than any that all those shit corners Right. Think.

It needs to be

you you can't have the hard forks because of that precedent that's that's set there. And

and,

thank goodness that Satoshi

got the good well above the good enough bar. And then left

and then disappeared. Was humble enough to walk away. So important too.

Didn't let greed short term greed cloud his judgment on that. Yeah. There's very few peep and then somehow

have the best OPSEC of any person in in the Internet era. Yep. I like, that's insane.

Every year that goes by, we're, like, no one knows the identity. Absolutely.

Yeah. I I just wrote a piece on this for to the all 21,

who will be having their,

I believe, their last, The 21st issue. Right? Issue will be the 21st issue, I think, coming out copy. In the oh, wow. Nice. I have a couple of the the first

few. It's hard to get the first edition. Yeah. Yeah.

Yeah. So I I I have been thinking about this and and writing about this recently. I was like, it's just remarkable that I like,

what Satoshi did for

I think most people and and then me until recently,

assumed that Satoshi

mined Bitcoin because,

you know, they believed that there would be value to this thing and that they might as well have some.

But I

and and maybe you got here years ago, but

and I think most Altcoiners and certainly Bitcoin skeptics haven't gotten here,

is I don't think Satoshi really wanted any of that supply.

Not really.

I think what all Satoshi was doing was making sure there was enough hash power to provide a base for the network to keep it going until there was enough hash rate that

he could step away. Right. So it was never about accumulating a 1000000 Bitcoin.

Well, what most people don't realize is,

you know, we don't have definitive proof if if

if Satoshi did accumulate that that a 1000000 Bitcoin that people point to, the Satoshi blocks or whatever. But even if it was those that even if that was Satoshi and those blocks haven't moved, those coins haven't moved,

doesn't mean that Satoshi didn't

after stepping away from the project or whatever, mine separately and has, like, completely separate stash that

that he's been spending off of this whole time. Yeah. I

Yeah. I think that that's probably likely. I think, you know, I forget the

the exact tech,

earmarks of this, but

there's something about the nonces The nonces. That are different with the Potosi box. And so I think that that was that was, like, a knowingly done thing. And maybe And then just burn those keys. Boom. Done. Yep. And then maybe Satoshi was, like, quietly mining with some Like a regular computer or whatever. Without that, you know, tag

there. So

so in in that world, you know, they could easily have a 100,000 Bitcoin

that's, you know, privately theirs.

And That part really blows my mind, just like the humility and the forethought of that.

Yeah. And And realizing that that he was a central point of failure. When I was writing this article, I was thinking about,

I was thinking about v for Vendetta

and how that came out in 2005.

And

I can't help but imagine that Satoshi was, like, deeply inspired by using this mask

to no longer be a man, but instead an idea. You think Satoshi watched V for Vendetta before he created Bitcoin? Yeah.

I I think, you know, not not to say that Satoshi would not have made Bitcoin

without having watched that. It's a take. It's a take. But I think that I think that that was,

like, certainly inspiring,

you know, assuming Satoshi watched this,

which is not guaranteed at all. But but I think that the the the takeaway from that for Satoshi

have been, like,

make sure to let the idea be what

be the figurehead.

And in doing Right. The idea is bigger than a man. Make sure that there's no man who can be

pointed to and or, like, manipulated or or turned or, you know, like, all the past transgressions of a human

being used against Bitcoin

and in terms of marketing or smear or whatever like that.

I think that was that was essential to to do, and, you know, probably, Satoshi would have figured that out without v for Vendetta. But And most people don't have,

you know, don't have the self control

for the low time preference

or the humility to do that. Yeah. Like, the overwhelming majority of people do not. I mean, we've seen

Yeah.

We've seen public Bitcoin figures that have significantly less influence than Satoshi ever would add,

And they go crazy on power trips. Yes. Right? I mean, Roger Ver is, like, the classic example, but also I would say Barry Silbert is 1 too. Yeah.

I suppose if you embark on creating this

thing and you know what it is because you've made it,

you know that it could take over the world of money, and you know that it could be a become a $10,000,000

a coin thing.

Like, end state that, you know That's also what's crazy is

I personally don't think Hal was Satoshi.

Yeah. But that

Hal user number 2 on the network, like, some of his Bitcoin talk posts from the early days,

just so that he could even comprehend Right. That no. These kind of possibilities

Yep. Was insane.

I I agree with you, and I also think that that is who

that is who I say if I'm, you know, if if somebody presses me who's who's Satoshi, I say, how?

Because I think He's just talking to himself. I think it's a good person to have been Satoshi, like and he's gone. You know? Yeah. And that that's a good

I I think that's almost, like, our responsibility

to participate in Satoshi's absence,

you know, and and to not allow for,

you know, living

characters being on the list. I just wanna say

that

if Satoshi, with his amazing OPSEC,

also

simultaneously trolled us by tweeting out running Bitcoin in 2009

from his doxed account

would be

epic.

Unlikely, in my opinion, but that would be pretty fucking

ballsy. Yes.

And may and that's the argument. The argument is is

no one would believe it's him because that'd be ridiculous.

But still, like To have gone through all that and then Then you just tweet it out from your public Twitter account. Because you because you're expecting that that

casualness

means that nobody will suspect you truly.

Yeah.

Okay. What else? I want to cover,

this idea

that

I always kinda push back on

the pump school of Bitcoiners

for many different reasons. But they had this one idea

that I also kinda push back, the the get off 0, like, go to 1%.

Mhmm.

I kind of

question,

to me, there I mean,

maybe I actually do kind of agree with get off 0 because I think that's part of why stay humble, stack stats is important because people have trouble dipping their toe in the first time. Like, people will go back and forth. They'll be like, oh, like, if you had just aped in at this point instead of starting your DCA

and and slowly accumulated Bitcoin, you'd have way better performance or whatever. But that misses the point because most people aren't willing to just simply put their life savings in Bitcoin,

and then they get into decision paralysis. So if they just put a little bit in, they get comfortable over time, and then ultimately, it ends up just eating their entire net worth and just all all they hold is Bitcoin.

But we're kinda I think we're kinda seeing this play out in on the corporate side. Mhmm. Now

most Americans

have just been absolutely crushed by our economy and our

financial decisions

at the federal level for years,

to the point where

most of their savings are under the FDIC insured cap, the 250 k cap. So it doesn't really matter which bank they're in. They already have this guarantee on paper that if worst comes to worst, the government will debase everybody

and give them their 250 k or less. But

with SVB, it was a very interesting aspect. And maybe it's a different perspective for me because now,

I'm a partner at at the largest Bitcoin only venture fund. But, like, these corporate

bank accounts are significantly

larger than 250 k. Right? Yep. These are these are companies that maybe raised $5,000,000,

and they're trying to figure out where where to safely put that money. Right? 60 60%

of all deposits

are At SVB. In in the whole banking system are over 250 k. Right. And and a lot of them are are corporate

accounts. Yes. And SBB specifically

had

a significant majority were corporate accounts, so they a lot they've lot more than, like, your average

regional bank or whatever,

that is just banking small communities and has smaller balances in each individual account.

These companies

were in a situation I have a friend

who works she works at a non Bitcoin tech company. They had their entire treasury. It was a hot start up,

and their entire treasury was at SVB.

Right? And

on Friday,

the call went out from the CEO.

We're not going to be able to pay payroll, and we don't know when we're going to be able to pay payroll.

And I think there's a very strong argument, and I wonder how I mean, there's a massively strong argument for it. But I wonder how much

the perception changes among those founder types

where,

yes, Bitcoin is volatile short term. But if you have 10% of your treasury

in Bitcoin self custody or collaborative custody with something like Unchained where it's not rehypothecated,

where you have a threshold of your keys,

You insulate yourself from those situations where you can't pay payroll, where you can't pay business expenses, where you can't pay all this different stuff. Like, maybe you still keep 90%

or 80%

treasury and different banks, and then you do the crazy split thing where you have 2 2 and a half 1000000 across 10 banks, so they're all under the FDIC insured amount.

But I think

it'll be a wake up call for a lot of these corporate types that

it's prudent. And

the classic example is like the Michael Sailors of the world where they're like, the entire treasuries in Bitcoin, and then they leverage up, and it's even more than that. But

there there's strong arguments that that can become very reckless

if your company is trying to do something other than be a Bitcoin holding company.

But a 10% allocation or a 20% allocation, these are large numbers.

I guess, Jesse, what I'm asking you, are the institutions coming?

Like, are the are the corporate accounts coming to Bitcoin? Yeah.

They they are, but just like every everyone else, every other type of adopter,

it's a it's a adoption curve.

And I think this moves the needle.

Like, I hadn't thought about this aspect of of the outcome here of how this makes the case for Bitcoin a little bit better quite a bit better,

for exactly what you said that that makes sense.

You have to think about it, though, or you have to hear about that idea.

And and odds on on people getting there are low for the most part. However, there's

some group on the margin

who are very close to getting Bitcoin, like, very close to incorporating Bitcoin into their treasury,

probably because they already believe in it. But they you know, maybe they've felt like

it's too much of a fight for me to have to justify this to my VCs,

so I'm not gonna pick that fight. But now this happens,

and they see how this could have protected them, and now they're gonna pick that fight. But even more than that,

because so, like, the argument

that the sailor school of thought is is that you keep your treasury in Bitcoin because you want to not get debased, the melting ice cube. Right? Yep. A portion of your treasury, you know, should be long term held in Bitcoin to to accumulate that increased purchasing power.

This is a flip of that script to a degree. Right? It's it's

constant

liquidity all the time. Yeah.

And I think there's an argument.

So like with SVB, which was really interesting is the VCs a lot of VCs banked at SVB,

and then they would tell their founders they had to bank at SVB. Right. There'd be loans contingent on them banking on SVB. They were telling them to do it. I wonder how many

and, I mean, there's a whole another aspect that a lot of these VCs are just straight Fiaticians

and,

you know,

hope they they get wiped out like the dinosaurs.

But

there could be a situate I mean, we're Bitcoin VC, so we've always been telling our companies this. But they go to their founders and they say,

I'm gonna fund you. I'm gonna give you this

$2,000,000 check, but you have to put a portion into Bitcoin just in case the bank fucking runs. Yeah. And it's possible that, like, VCs like Tim Draper

Yeah. Might do that, who who are fundamentally in the Fiat world,

but believe in Bitcoin. And now they see mean, what what we talked about earlier was, like, I'm obsessed with how Bitcoin grows purchasing power over time.

And, you know, there's this whole other world that you're much better at

about, like, the value of permissionless finance.

And the sailor, the MicroStrategy school of thought has been, I wanna I wanna own the ice cube ice cube that gets bigger. You know? I want my purchasing power to grow. So so they made that choice that move

strategically

because entirely because of the

store value properties and and the the, you know,

the havings and why Bitcoin goes up, number go up.

But now

this is the first time I think where we've seen

permissionless finance have enough of a leg to stand on that it overcomes

the

the dismissive

thought of, yeah, you don't need that because you're not doing anything shady. Right. You know, you haven't needed Bitcoin's permissionless properties because if you're a VC funded company, you you you haven't needed it. But now You have access to the, quote, unquote, best banking system in the world. And now that's faltering. So you might want some permissionless

flow of money.

So, yeah, I think

I think very few people, sadly, will will get that message out of this,

but some will.

And that

even if it doesn't persuade some people, it adds to the case. It adds to the overall Lindy

of Bitcoin as a thing that could be useful to have as part of your strategy.

It's super interesting to me.

Yeah. And I think that's how,

you know, I think that's how adoption moves. Right? Like,

there every the entire world is hearing about Bitcoin,

and for the most part, dismissing it.

But they cannot help but

file away how Bitcoin's reputation has shifted

over time. Like, you know, you hear about in 2013, it was just drug money on the Internet. Like, I don't wanna touch that at all.

And then, you know, fast forward a few years and MicroStrategy is doing this thing. You hear about it. You're like, okay.

Maybe may that sounds like a bold gamble.

But just in there, you've shifted from drug money to bold gamble. Right. And that trend continues until

until some tipping point for you individually.

Some point where the activation energy of you deciding, okay, I can't miss out on this anymore is enough. You've you've cleared that activation energy and and you buy some Bitcoin. And maybe it's 1% to start, but then you start learning about Bitcoin, and, inevitably, it'll grow.

Yeah. I mean, I could see the framing, like

you know, and you see this in the VC world all the time. Like, how much runway do you have? Right? Well, maybe 3 months runway should be in Bitcoin so that you know you can run this business for 3 months regardless of what happens. And it's an exciting thing for Bitcoin VCs to be, like, championing. But then think if you think about it that way, like,

it's the opposite rebalanced strategy too, because

the rebalanced strategy of melting ice cube theory

is

the purchasing power increases, so then you rebalance down in your Bitcoin position,

if purchasing power increases because it becomes too much of your treasury.

In this

perspective,

if Bitcoin goes down 80%, you need to add more Bitcoin to your treasury to make sure you have your 3 months,

runway. Yeah. True. That's true.

So,

yeah, on on net, you would

expect it to go up over time so that you only need to hold a smaller smaller amount in order to get 3 months of pay. Yeah. That's interesting. Yeah. And then last but not least, so I'm not, like, a fatty leaves guy,

but maybe you are.

So

the next

Fed meeting is in a week. Mhmm.

And I guess

would the ECB meets first or the ECB is tomorrow?

Yeah. I'm not sure, actually.

What are you thinking on?

Is this is this the pivot? Is this, like, do the does the Fed keep raising rates, or

do they raise it less than I guess, the expected before all this happened was supposed to be half a percent, 50 basis points. 25, 50, basis points was the expectation. And now it's a big question of

what are they gonna do now?

It's possible they could still raise because

having put in this, like, infinite backstop,

they could say,

we'll put you more underwater

banks, but it doesn't matter because we'll backstop you anyway.

So they could, like, gives them a path to do it. But I think that the, I think right now, the most important development in finance,

as as far as I'm concerned,

is what 0Hedge just,

has been tweeting out of the the change over the last week

in the Fed futures rate.

So the expected

Fed interest rate,

over time into the future. So

and and looking at looking forward, one is kind of the the most helpful

or the end of this year, what's the most help that's the most helpful pricing

in a pivot, basically. Yeah. So before all this happened,

those charts are crazy. Yep. It's it's incredible to watch happen day by day. 0 had tweeted out, like, the this same chart

over the last 7 days and how it has changed.

So a week ago, it was you know, we were expecting

the the the Fed futures market was expecting, and these are the smartest people out there on this topic. They were collectively expecting a 1%

hike in rates over the next year,

a week ago.

And that has changed, has dropped rapidly

day by day over the last week. He's almost showing, like, 12 hour changes. Right? This is the zero hedge account. Right? Yeah. Yeah. The most recent one.

Yeah. He's got yeah. He's got 12 hour changes.

And now,

the market, the Fed futures market is expecting a 1% drop in the Fed rate a year from now. So 2% swing in expectation over the last week. Yeah. That's insane. Yeah. And and that signals that this market, the futures the Fed futures market

thinks the pivot is here.

That's what that means.

And that means that they're saying they can't keep going. They the the tightening regime they've been on

has broken,

the Fed market was wrong.

Yeah. At the at this all this whole time.

Yeah. They're

always they're always wrong, and they're always the fastest to to incorporate the changed environment at the same time. Like, you know, longer term, they're always wrong. But near term and trend wise, they're

they're they're right. But, anyway, that means essentially

I mean, I'm pretty we're in qe5 right now.

The easing psych the next easing cycle has begun. Yeah.

And that means assets should go

go up. Yeah. So we Right. And Bitcoin should go up the hardest is the is the Bitcoin thesis, essentially. Right? Yep. We've had 14 months of QT before the Fed

has now has to blink in my opinion. They can't keep going.

And then

then it's about hard assets,

you know, doing great,

when when we print money.

And then inflation is gonna run even hotter. And inflation is gonna run even hotter. And that that's why, like, that's sort of cements this 19 seventies

reality for us. But it could be hyperinflation. Right?

Yeah.

Like, it could just run completely out of control.

Like, am I crazy for just

I'm I'm kind of I'm operating under a hyperinflationary

environment. Yeah. Like, pre hyperinflation.

And I I think that's where this inevitably goes, but I think that the public confidence in

our institutions in the dollar and so on,

allows the Fed some runway to, in in particular,

allow,

inflation to run hotter,

than interest rates.

And in doing so,

bring down the debt burden, the debt to GDP

burden,

which is now, like, a 130%

debt to GDP.

How does it bring it down?

Oh, because the interest payments are lower?

So if,

yeah, if your

if your GDP is growing because in inflation is hot, so your nominal

GDP is going up,

But your,

your debt burden is not growing

as fast, and you're not paying as much interest on that debt burden because you're holding interest rates below inflation,

then you can allow the the

the,

numerator to grow faster than the denominator. Wait. So can we talk about this? Let's just unpack this for a second because I'm a little bit confused.

The US

America has this unique privilege

where we're able to print the money

that our debts are denominated in. Yep. Like, if Argentina

Argentina doesn't, like, get to pick the interest rate,

They borrow money peep from people. Like, if if I mean, Argentina has gone through multiple defaults, and as soon as there's a little bit of

concern,

their rates go crazy. Right? Like, the like, what like, has I I think there's a stat. Like, Argentina has never paid out a 30 year bond or something. Right. Wow.

There's a situation.

Am I correct in thinking that there's a situation where inflation keeps running hot,

and then the the US dollar loses reserve currency status,

and then we stop having

we we stop being able to borrow denominated in dollars,

or

am I maybe I I jumped a step. Maybe

we lose control of the rate that the US government can borrow at. Like, why is

why do people why are people willing to lend the US government

money for 30 years Yeah. At 5%

when they have a horrible track record? They're increasing. And inflation's increasing.

So who is buying this debt? Yeah. Increasingly not

peep not other countries. It's mandates. Right? It's, like, bank mandates and stuff. Yeah. So we're we're pointing a gun at people and saying, like, you will buy some of our newly issued debt. But then increasingly,

the buyer of last resort is the Fed. So where this goes is Japanification

of, like, the central bank owns all debt debt monetization.

That's right.

Yeah.

And and it's it's kind of the inevitable stage right before hyperinflation

or, like, leading into hyperinflation

and that we are now

in beginning

in my book. Like Have you read The Mandibles? I haven't read The Mandibles. I know you're a big fan. I haven't read that one. A big fan is an interesting word. But

Yeah. But I think that Kinda what's gonna happen.

I I guess I don't even know it enough to opine on. It's just US in the hyperinflationary environment. Okay. Yeah. You know, when money dies is how it goes. Like, all I think she just read when money dies and then made a fiction book about it set in New York. Okay.

Then, yes, that's gonna happen. That like, that's the inevitable end of any fiat currency. Even if you are the reserve currency of the world, this is the dollar milkshake theory theory,

where

when we pull this stunt,

where we're gonna

let inflation run hot,

and interest rates, you know, are gonna be high, but not

as hot as inflation.

We crush other currencies

that have to pay their debt in in US dollars, and and they have to source that from somewhere. So they print more of their stuff

in order to come up with the money,

you know, by trading that into dollars at at worse and worse rates. So they they screw over their currencies

fast. Right. And then the dollar is the last one We basically we export the inflation

abroad everywhere. Yep. And the weaker economies collapse first. Yep. And then the US dollar collapses.

And then we're the last we're the last one standing,

but we still owe

all this money. And there's nobody left buying, so we print it,

and the Fed buys it. And all we're actually doing is,

debasing

existing

dollar holders. So then my theory at that point,

then the confidence in the dollar gets lost,

then the world

tries to move to some kind of commodity backed currency

that inherently requires trust

because someone's gotta be actually holding the commodities that back it. Yep. And then that proves to not work because trust just completely breaks down and then

Bitcoin standard.

Yeah. That's kind of my that's kind of what I'm operating under. Yeah.

I you know, I think, like, the BRICS nations will come up with their, like, gold oil backed

currency, and that'll be, like, an option for people to shift towards. But why are you gonna do that? Then they'll rug each other. Exactly. Happen. Why would you do that? Why would you trust China to, you know, invest in their currency?

That seems like a fool's errand when you could trust a trustless,

store of value asset. Right. So

all roads lead to Bitcoin,

ultimately.

And So freaks can just

ignore our last two hours of conversation. Yeah. They can just stay humble in StackSats,

and they should be they should be in a very good place compared to everyone else. If you if you have somehow

already found the conclusion,

which is the case if you're listening to this,

then this doesn't really impact you because you already know to just

accumulate Bitcoin and, you know, keep your head down and keep your exposure. Not get wrecked along the way. The dollar and everything else minimal. Yeah. Lower expenses,

increase cash flow,

and put it into Bitcoin long term Yeah.

AKA Stamblestack sets.

Yep. You nailed it there. Correct. You nailed it with that one. In fact, you've got this, Citadel

logo

of of yours, and I used it in,

in in my American West article of this is great story of,

the earliest Oregon Trail,

the, like, the the first, like, big wave of adopters

from 19

1839,

going from

Illinois

to Oregon, and there were, like,

19 of them.

19 men just gonna go make their futures.

And they carried a flag with them, Oregon or the grave.

So I used your citadel Ride or die. Created a Bitcoin or the grave. Well, this was made by a rider the the flag was made by a rider die freak, and he sent it to me. Oh, cool. That's awesome. It's pretty awesome.

Jesse's looking at the flag that

sits behind me in the studio

in the Citadel flag.

Jesse, this has been fantastic. I mean, we have a 150 people coming to Bitcoin Park today,

for our monthly meetup. Standing room only. We were gonna be talking about the

economic incentives of Bitcoin,

which we had planned almost a year ago already, which is insane that's happening during the bank crisis. But,

there's probably people already outside

getting ready for it.

Me and you are doing a panel. We're gonna have to switch it up a little bit. Yeah.

But,

so, I mean, before we wrap it up, do you have any fine first of all, I wanna thank you for joining me for the 3rd time. Thanks for having me. That's one of there's there's very few there's very few that have been on the show,

that many times.

First time we've ever met in person. We've only been Internet friends. Yeah. It was, for everyone out there, surreal to meet Matt in person. The gravitas is very real.

I I appreciate that.

Do you have any final thoughts for the freaks?

Well, I guess I sort of covered them already there of, like, all this all this points back to all this points back to is stay humble and stacks hats. It's it's just that the world is

still on the old model, the model that you're told to follow.

And

increasingly,

things are going wrong, and increasingly, people are going to be like,

Wait. This isn't supposed to happen.

I don't like this.

What can I do about it?

And then that leads

inexorably

towards people taking interest in the solution that has already existed for the last 14 years

and increasingly

will be adopted.

Well, thank you, Jesse.

Huge shout out to the freaks who joined us in the live chat

and the freaks who continue to support the show with Bitcoin.

Reminder, you can support the show by going to sale dispatch.com/

donate.

While this all unfolds, freaks, I would like to remind you all

that the stakes are high for a lot of people out there that don't know any better,

that have just been absolutely destroyed by the system over and over again. People are gonna lose their jobs. People are gonna lose lose their livelihoods.

Don't be assholes.

Just be be kind, but don't be naive.

Take care of your own. Help your friends and family.

Stay on both,

and I'll see you next time. Thanks all. Thanks, Jesse.

Peace.