Jane Street's Secret Plot to Kill Bitcoin

Jackson Mikalic (00:00.185) me anymore man. shit we're back it's the last trade we have an interesting one this week we have Michael and Liam joining we don't have Brian we don't know where Brian is we may find out next week but TBD on that Michael good seeing you last night we were down in Miami we ended up in an uber ride for two hours Michael said some crazy stuff as you might imagine and you know maybe that could be a Michael (00:01.539) Yeah. Jackson Mikalic (00:30.179) Next time we do a TLT meetup or a TLT event, maybe some listeners can get a taste of what Michael has to say. There's a lot on this guy's mind. There's no doubt about it. Michael (00:40.47) Well, this is like the Palm Beach edition. We're up in Palm Beach for some events and we couldn't set up the pod studio and in times we were recording remotely. But as we were driving, we had this conversation of like, it'd be pretty interesting to do like on-ramp Uber sessions. And we just like get in a car if we live in the same city and just go somewhere for 30 minutes or when we're on the way to a meeting. and then just start recording. So if that's something you'd like to hear or something else in that same vein, just drop a note in the comments because it sounds like there's a lot people are interested in what we're doing. Jackson Mikalic (01:16.035) Yeah, I mean, I just felt bad for the Uber driver last night. Had to hear what Michael had to say for two hours after a couple of drinks. You can imagine what might come out of this man's mouth. was it was interesting to say the least. But yeah, Liam, what's going on with you, man? How are things up north? All's well. Liam Nelson (01:31.663) Everything is well. Yeah, all is good. Just trying to figure out who controls Bitcoin this week. It seemed like Epstein last week and maybe it's Jane Street this week. So all is good here. A of snow, but a lot of confusion out there in the Bitcoin market. Jackson Mikalic (01:49.955) Yeah. So tell me, Liam, I'll kick it over to you to start. There's been this expose on Jane street and it's been a little bit hard for me to follow because it seems like there's a lot of details, a lot of new information that's coming to the surface. Maybe you could just tell us high level what's happened here and then we can just go from there riff on, what makes sense, but everyone's talking about it and there's a lot of different angles and I know you've been paying probably closer attention than I have. So what are your thoughts on it? Liam Nelson (02:17.719) Yeah, just before getting into it in detail, just for a little bit of context on Terra, UST, et cetera, for the folks who weren't paying attention then, this is a algorithmic stable coin that was very popular back in 2021. I think it had a total supply of about 40 billion and it had its own token that was free floating associated with it as well. So anytime that the token would go under one dollar, they would actually like they're a stable point they would issue or burn more of the Luna in order to create more scarcity and anytime it would go over one dollar they would issue or no I have their over so anytime it would go under more one dollar they would create more Luna driving down supply and anytime it would go over they would burn more And so, you know, they had a massive run and became insanely popular because there was this anchor protocol that, you know, was yield generated and able to get like 20 % on their dollars, which was incredibly popular and drove a ton of demand there. But they didn't actually hold any U.S. Treasuries. And so they had a... Michael (03:32.044) It was Bitcoin backed. Liam Nelson (03:33.719) Yeah, exactly. They had Bitcoin and a ton of other assets too in there. so this got extremely popular. But what happened for Jane Street and then obviously blew up back in 2021. And that may or may not have caused some funny business that went on with FTX. But essentially what happened was Terraform had hundred fifty million dollars withdrawn of UST from Curve 3. After that, Jane Street withdrew 85 million or sold 85 million worth of UST and that crashed the price under $1. And why that's interesting or there's funny business going on was a former UST employee actually worked at Jane Street and so there is alleging a lot of backdoor dealings because who actually knows if Jane Street can know 10 minutes later that Tarot did a big withdrawal and they sold $85 million in one block, likely to actually try to crash the price. So I'll pause there too, but this is all being alleged right now. There's no confirmation or anything. Michael (04:49.549) Yeah, I think the thing to simplify, you know, it was 22 when the crash happened. Ultimately you have two levels of stable coins you have stable coins that are backed by US treasuries and then you have stable coins that aren't backed one-to-one and they have different flavors of that there's historically in in crypto been different flavors of how do you back something maker Dow was one of the first that parked aetherium into it and then off issued this like die token there's been other things there was like base and then there's obviously this UST backed via algorithmically Bitcoin and other assets part of the notion of this is that from a traditional finance and digital asset infrastructure and a new administration it's something that is super counter to what you would want to see proliferate because you ultimately you get the value of the US dollar and the pegging of that from what people understand but you have no tie to direct Treasury or demand and if you know, again, this goes a little bit on the conspiratorial side, but if you start thinking about demand for dollars and treasury yields, we end up with these like shadow bank layers versus one to one pair. So it's always been speculated that Terra Luna was established just to basically fail because a lot of the new administration, that specifically the Genius Act and other acts have directly, specifically talked about no algorithmic stable coins and they specifically call out Terra Luna. So it's always been understood by the backdrop that that thing was always a little shady. And then you enter in Jane Street, and the manipulation that's being speculated about pulling that amount of liquidity out to cause the crash, that's kind of like the status of that. And then we'll let Liam talk about basically now the next level of James Street's muckery or what's being talked about online, which is shorting BTC naked or whatever it is, then potentially crashing their price daily. Jackson Mikalic (06:47.941) Yeah, right. And just to add a little context and I'll ask the question genuinely as well as then there was some lawsuit that happened this week. Right. So I didn't quite fully follow that just with the travel. so, Liam, if you could plug in some of the gaps there, describe what happened to lawsuit and then subsequently to Michael's point, what has happened with the price action or what was alleged with the price action and what has changed this week? Liam Nelson (07:08.953) So. Tera Luna or the bankruptcy proceedings of Tera Luna went and sued Jane Street because they alleged that there was, you know, WhatsApp groups or something like that. And they sued the co-founder, one of their former employees who went to Jane Street and somebody else for having insider information and trading on that within like 10 minutes after the token was withdrawn from the Curve 3 pool. And so that's the new, that's what's kind of come to light here. And so that's that. then now everybody is saying, OK, well, Jane Street is manipulating Bitcoin market because at like 10 a.m., you know, almost every day, there's a little bit of a selloff in the Bitcoin price. And people are saying like, well, Jane Street is going out and actually, you know, just manipulating the market. And that I just don't honestly really buy. think that there is, you know, only a limited amount of Bitcoin out there. They can do some naked short selling for a very small period time, but ultimately, like there are just people out there that are, you know, have more data points. They know the market a lot better and they have all the expertise in trading. And so they can use whatever arbitrage they have in terms of information in order to, you know, a lot of times actually make money, you know, it's not going to happen forever, but it's also a very difficult game for anybody to try to play to kind of trade these markets on a really short term basis. Liam Nelson (08:41.785) They don't have the type of information that Jane Street or somebody like that has. And if it was just them kind of naked short selling, it doesn't make any sense that they would only do it at 10 a.m. in order to make more money. It's kind of overblown just because I think people don't have anybody else to blame for what's going on with Bitcoin right now. Michael (08:56.173) Yeah. Michael (09:01.131) Yeah, I mean, I will say I think there's a little bit more and maybe on final settlement we'll dig in as we have more time because I think there's something to do with the redacted files that were found or like when they went to. discovery that brought some of this stuff to light around like what's potentially happening. I will say most people don't like to talk about market manipulation because it sounds like hope, but I fundamentally believe like the price has been inorganic from a number of things when we think about just traditional bull markets, the way that the price kind of like from a volatility perspective where we sat from like net new adoption. I'm not saying that that's what this is coming from. But there instinctually has always been that. And there is the aspect of like Jane Street, their philosophical backings around effective altruism, where they think about like, it just blends, there's this version of. effective altruism where it looks good until it doesn't in the sense that if somebody else is an effective altruist, then like you have this competition with who is providing the most value to the world and you get to be cutthroat, more cutthroat than the other person. It's just this like dystopic communistic style. This is like effectively what Sam Brankenfreen spawned from and where he he ultimately validated or said this is where, you know, gave validation for what he did, taking people's money. But what I want to pull up, just to give a lens into State Street, because I think this is important and I'm pretty confident this is true, was looking at it last night, this, Jane Street's founder accidentally wired seven million for AK-47s, Stinger missiles and RPGs to overthrow the South Sudan government. He said he thought it was humanitarian aid. The coup plotter told federal agents his money made the whole thing possible, no charges, back to trading. Michael (10:45.521) So yeah, just so people know, I'm not saying they're doing this or not, but this is not, you're just Ronald McDonald Foundation, which probably there's crazy shit there too. Jackson Mikalic (10:45.637) What? No. No. Jackson Mikalic (10:58.873) Yeah, I mean, I don't don't fully know what to make of it, but I did see that it's on the Wall Street Journal. being covered. It's not in this echo chamber anymore in terms of some of this news. And when I say I don't know what to make of it, I don't know what to make of the market manipulation story in particular. I don't think it's unreasonable to think that the Bitcoin price is being manipulated. I'm just not smart enough to figure that out. But I will say that. I agree with you, Michael, like a lot of things feel inorganic. lot of the narratives that have emerged and have really been hammered home in the past six months kind of feel concerted in some way. I don't fully know why it's happening or how it's happening, but yeah, this, this, current drawdown that we're experiencing just, I think is a little unnerving unsettling for a number of people right now, because at least in 2022, was still a more immature asset class and everyone for the most part was subscribed to this this epoch four year cycle sort of deal. And we were already down like sentiment was already brutal. We were already trading low and then everything happened with Terra FTX three arrows, et cetera. And at that point it was just I think people accepted it like this was a bear market. This is a great time to accumulate. But I've had like I've had conversations with people over the past couple of weeks and they're a little uncertain. And some people are actually worried about what to make of all this, because there's no clear narrative. There's a lot of narratives floating around, but there's no clear reason as to why the Bitcoin price is behaving the way it has. And then the fact that last year was just a disappointing year, quite frankly, I think, if we're being honest with ourselves and you would make the case if you measure Bitcoin against gold, we haven't even seen any sort of bull market. So. Michael (12:43.405) Yeah, one thing just to add to that is like what this reminds me of in manipulation of markets is the same thing about like a gold bug or conspiracy theorists. like, so are you conspiracy theorists? It's like, well, yes, I believe people conspire. And when we think about market manipulation, I think it's crazy to believe that A, markets aren't manipulated, and B, that gold hasn't been manipulated for decades. And the price movement is potentially not even because you can't manipulate it for so long versus it was allowed to run for whatever reason. So if those things are true, the first one at least, gold's been manipulated. then I don't see why Bitcoin would not in the short run and potentially even middle to longer run have some ability to manipulate, especially in its infancy in the size of the market. When you think about like Bitcoin's price action historically because of the amount of float in the large wells, there's an understanding that that had, especially from the large traders, if you go back into seeing how Tether and Bitcoin traded and the amount of like capital that float in. You've seen this with the low float other tokens that it's obviously harder to do because amount of liquidity But I just don't believe that like all of that is free market. It's the closest thing We have to a free market. The last thing I'll say is I think there's either there's one or two things happening There's either a level of it. Maybe there are two there They're combined but there's a level of manipulation happening in the short run or there's also Bitcoin really screaming that we're gonna like end up in a very serious like you know like friction or like whether it's kinetic war or something else that happens because everyone you talk to independent of Bitcoin feels uncertain about the capital markets, whether it's AI, whether it's gold, whether it's bonds, like everything across the board feels very uncertain right now. And maybe that's a backdrop to some shoe that's about to drop and BTC is like already smelling that out and that's really why we're here. Jackson Mikalic (14:38.587) Yeah, I mean, it's a weird time in markets, right? To your point, there's a lot of uncertainty. The Darlene companies, the software companies that have just absolutely crushed it the past decade are now under pressure just from the technological forces we'll talk about a little bit on this podcast today. But things are moving really quickly. And I think, to your point, Michael, a lot of investors, even outside of the Bitcoin space, I think there's just this general risk-off sentiment. People are in cash. And it's challenging because we know at the end of the day Bitcoin Bitcoin is a risk off asset. It's counterparty free. It's a neutral reserve asset. It's scarce. It's sound money outside of the system, but it's still not even close to being widely understood. I think even people, you know, at the dinner last night that we were in at Miami, I think people are blindly optimistic that one day people just wake up to the fact that Bitcoin is appreciated for its sound money properties. And I am just, I'll take the other side of that. think it's going to be a while and maybe we could talk about it now because Michael, had a you had a topic on agents and stable coins. Like I genuinely think that the agents would figure out Bitcoin is a better form of money before human beings will at a large scale. And the reason why is because they, the models are directly tied to the cost of energy. They need something that can instantly settle microtransactions, scarce, et cetera. And the legacy rails are just not going to keep up. Right. And so like, I feel Michael, you maybe could make a point that stable coins could be an interim solution, but I ultimately think Bitcoin is the end solution and it'll be incredibly interesting and it could play out quicker just by how quick everything's moving here. But it could be incredibly interesting to see like how dependent we become on these technologies. And those could be the four C functions of saying, you know, you need to have a Bitcoin wallet to pay your token costs to use Claude Opus, whatever 5.6 in the future. Michael (16:17.923) Yeah. Michael (16:31.693) Yeah, think all that's right. think part of this segment that I want to talk about is I think in general from a higher like a meta perspective is people especially listening to this and in general like in traditional tech are sleeping on stable coins and what they're going to mean and change from their daily lives from company businesses from just money movement in general and it I mean, there's not a lot of parallels. Like, there's the angle of copper and the internet. And then you think about movie rule and getting access to Starlink and there's just this like insane... multi-step function improvement and value you can derive. And then I think about like bank accounts, right? Think about how stodgy your bank account and like Mercury as an example, that we don't even know. Probably the closest one that now comes to mind is like a taxi before Uber. Because think about how many people either rented a car, didn't move before you could just hail this vehicle from it. And like, what does that open up from like even the delivery of others goods and services like DoorDash and whatever. drones dropping things off that the point being is when you don't have this like friction inherent regulatory burden to have to be able to step in to offer bank like services, but then also whether it's in the traditional meat space, whether it's online or the engend tick space that people are sleeping on it. And we're seeing this happen in real time, whether it's Meta now coming back to the market to launch a stable coin, Stripe, you know, I think they've added close to $50 billion in their market cap in the past call it 18 months and they paid a billion dollars for bridge, but they understood where this is going. It's going to be like one of those, you know, Facebook Michael (18:12.693) Instagram purchases where they understood where the attention is going and Stripe understood their business and how they can effectively bypass a lot of these companies are the rumored at you know acquiring PayPal which makes a lot of sense when you think about a lot of the users in PayPal and that direct interchange you have to pay and you can just move to a different level of that stack but with all that said maybe if you pull up that link because I think it's a really good no I'm sorry it was the the the link that was agent at commerce Jackson Mikalic (18:44.143) My bad. Let me correct that. Michael (18:44.414) Unless yeah, and then if you just play that video because I do think this is important that This is really where when I think about building in this space, but also investing, you have the crypto native people and the people that have been in TradFi and they really are the sharpest at this point in understanding stable coins because they're coming at it from that angle. So whether it's a Gentic and like anything related to AI or just fintech, this is where you see these valuations. This is where you see a lot of this adoption. You see a lot of acquisitions. Fidelity just came out with their FID token that at the end of the day, they also don't fully understand Bitcoin. So it's a logical thing where all the talent is moving towards the dollar, towards stable coins. But all of that ultimately will lead to BTC, and this is like a great kind of like example of what the problem is with just traditional dollar settlement via the traditional rails and stable coins. Jackson Mikalic (20:54.009) Yeah, I mean, that's the, I was just thinking, and go ahead. was just thinking that like in a future state having to imagine having to call up Chase Bank and explain to them about, a bunch of credit card transactions that were, you know, like, it was my agent. wasn't me. And they're just like, well, what the hell are you talking about? But I think incredibly insightful. And Michael, I'm curious what was sticking out to you there. Michael (21:11.63) Yeah. Michael (21:16.559) Yeah, like microtransactions just across the board. We talked about this before, but when you start thinking about where lot of the value in AI comes from is you have your model and then you're ultimately APIing into other data sources and those other data sources have costs associated. And so anybody doing this today has to go effectively set up credits, have to go set up manually the either MCP connection or the AI connection, the API connection. And then you have utilization versus what you're describing or what he was describing. And by the way, Dan Romero formerly early at Coinbase he now leads the Tempo team or as part of the Tempo team which is part of Stripe and Paradigm's version to build stablecoin rails for these exact use cases but the main there was two main points one is your the rails are going to need to be there from an agentic and Native space like a money online and so stable coins naturally fit into that But then the other key point where a lot of people are missing is you can squint and see what he's describing and naturally understand how Bitcoin will just be a better Tool for this whether it's because of its permissionless nature whether it's program build program ability But then also he's describing how you can start to isolate pockets of capital for these particular tasks. So whether it's subagents and spinning up a small wallet with some SATs or eCash, or you start to think about, you know, because you're going to top off these different wallets and your different risk profile, you'll start to see this stack grow versus like right now it's dollars, but that's really where the alpha and the opportunity sits. And I think it's going to happen faster than we expect. But what we really need is developers to understand this that live within, like he understands the topography of AI, dollars, stable coins, but the talent isn't there yet on the Bitcoin side as the Bitcoin side comes from that world and that's what a bull market will naturally bring. That's my main heuristic for a bull market or one of the main ones is has as net new people meaning your friends and family start asking about Bitcoin and they're adopting but that also is a product for the best talent in the world understanding this thing and then they're looking around and being like well X Y or Z can happen these dollars can be seized that they're gonna KYC this like blah blah blah blah and then eventually those people will say why don't I just use like this is kind of David Marcus's Michael (23:34.832) path with LightSpark. And so when that happens, that's when the fun really starts. And so the last thing with all of that is at the very minimum, people are going to be holding stable coins because they need to use this. And then when they realize that stable coins are going down in value and that you can just permissionlessly swap a stable coin for BTC, it's one level removed from people having it versus right now they have to wire funds to get any Bitcoin. Liam Nelson (23:56.804) Yeah, I think the biggest thing is most of these agents work directly on behalf of people and they just people understand dollars. They want more dollars. Most people don't understand the thesis behind Bitcoin at all. so stable coins just naturally make more sense and fit in the box for them. But yeah, once you have a agents running all over the Internet and interacting autonomously with other agents out there and the agents could perhaps be working on behalf of bad people and paying them like these They're just going to try to KYC the internet so hard because imagine if an agent goes out and pays somebody that is working for or on behalf of North Korea. They're just going to try to figure out what the AML and KYC rules are just going to get so much more crazy as there is a native currency for the internet. And I don't know how that leads anywhere other than directly to Bitcoin long term. Jackson Mikalic (24:55.321) Yeah, I mean, on the QIC and the internet, think one of the topics I wanted to pull up was just the fact that the privacy is already really under threat. And it would obviously be worse if the internet was locked down in some way to require government-issued IDs to access. Like, that's very dystopian, but I don't think it's unreasonable to think that there's a future that looks like that. But I think what more people should be paying attention to is the fact that whatever privacy you think you have online, for probably not 90 % of the people, you're not actually private at all. There's probably a 10 % or maybe if it's even smaller, I'd imagine, if we're looking at total internet users, but if we speak specifically to our audience, probably like 90 %-ish of people are leaking way more data than they actually realize. And so this came to my attention this morning just because the core thesis, or not thesis, but the core takeaway from this is that LLM's can now unmask your anonymous accounts online and they have about a 60 ish 70 % accuracy rate 90 % precision and it's a dollar to four dollars per target. And so look this is um Tie this back into Bitcoin. I mean this would be this should be incredibly concerning or at least a motivation for thinking Through your privacy or OPS act a little bit deeper because at end of the day people who interact online with the non-accounts. I used to be in and on Twitter and I long gave that up and I definitely didn't have any privacy best practices personally. But the issue with all this, right, is that there's a lot of information that you're leaking unknowingly on the internet. And then if you take it to a Bitcoin perspective as well, if you've used most of the major services out there, your information as it relates to Bitcoin has been exposed several times by ledger leaks, multiple times. I'm on that list. Coinbase leaks, Coinbase employees selling data to people abroad. Like there's a bunch of information out there on you, your ownership of Bitcoin and your online activity. And I think this is unfortunately a much bigger problem than people realize in this industry, because if we were to think about this from just a infrastructure and financial services perspective, most people are still holding their own keys and they're holding their own keys for Jackson Mikalic (27:21.302) a lot or all of their Bitcoin. And imagine a future state where Bitcoin continues to appreciate, as we all would expect over time, becomes more more valuable. Your information becomes more more compromised. And there's a higher and higher incentive for people to come after you for your Bitcoin. Like that is incredibly problematic. And I don't say that to scare anyone. I say that because this is a problem that needs to be addressed. And quite frankly, the only way I think this gets addressed is because you can't really cannot unless like you're in the top 1 % or 0.1 % when it comes to all of your online privacy, you're not going to be able to address it from that front. So it ultimately comes back to the infrastructure and the solutions that exist to protect you and your assets and your family at the end of the day. so like, look, I don't say this is scary people. really don't because this is just something that you should be mindful of. And you have kind of two options at this point. You can continue down the path that you're on and hope to clean up as much information, contact, do like the data broker, remover, all that stuff. But I genuinely don't know how much that moves the needle given what's already out there on us. Michael (28:30.124) Yeah, there's you know, part of doing and building this business that we've been talking about, I didn't expect things to move this fast, but it was always the rational understanding that we lived in this nice world for the first 15, 17 years of Bitcoin where the price was, you know, one, 10, a hundred, even a thousand dollars. And when we look back 15 years from now, we will kind of be shocked at that. We parked this amount of capital on our person, near our family or with a centralized custodian. because the price will be so great and the risk will grow with it, these new solutions will come about as we talk about what we built with multi-institution and the notion that there's delays in either the signing or locking for 24 to 30 under 65 days, and then really requiring physical, whether it's in-person or multiple videos from independent custodians. The point being that you have two main problems here. One is the models are moving at light speed and all the data is out there. And so now if you go and download any of those lists and you plug them through a data report, they'll even help you and basically say these are the highest targets. They can go pick the age, right? As a demographic, like whatever the number, if I was putting my mind as a white hat. white hat, you trying to think about how would I do this? It's like you can go and effectively triangulate on like the different tiers on how do you go and manipulate. And there's the digital bad actors where everyone is familiar listening to this because their lists are out there that they get the calls, they get the texts. We work with elderly folks that have gotten a text message that they're going to come to their house and like kill their family if they give their Bitcoin. Like this already happens, but it's going to happen at scale as more bad actors online have powerful tools at their fingertips. And then there's a physical side, which is once people in the physical world that are breaking into people's cars and houses for their Rolex starts to proliferate and they understand that this stuff lives in people's homes, that grows. Then on the other side of it, you start to also understand where the leaks are and who has assets on these third party platforms. And then you can start to manipulate the data and be able to determine or pretend like you're that person and take their centralized custody. So this was always the path forward because it's the rational thing to do. If you have this power. Michael (30:43.792) technology and it's a form of money that can't be reversed. There's always bad actors in the fraud world and you see this happen with bank accounts and all the things associated. Well, the incentive is even greater because it's a smaller cohort with larger amounts of capital and there's no recourse. The second it's gone, it's gone forever. So to Jackson's point, it's not about scaring, it's about education and like our main goal has always been whether it's the DAT stuff and just calling it out because people, you know, being underwater and we look at ourselves as like safeguarding of clients capital. or on the other side of risk and how do you think about risk? Because the core idea is you want to plan for this ahead of when it happens because it's when the price runs that everything gets chaotic. The risk gets chaotic, the custodians collapse, people get kidnapped, and then people make really crazy moves to figure out what do they do versus the best time to do it is right now when everything's quiet or generally somewhat quiet, you can figure out your plan. It's not to even say you have to come and work with us or you have the majority of your stack, but it's to really think through or a time that the price is $100, $500, a million dollars and what does that world look like and how do you protect yourself in that world? Jackson Mikalic (31:52.239) Yeah, if I could just jump in real quick before Liam. One of the questions I get a lot is what are other people like us doing? Right? So to Michael's point, even if you just want to have a conversation and get framework and guidelines for how I think about it personally or what I'm hearing a bunch from our clients or people who are interested in what we do, just reach out. mean, you can shoot me an email, Jackson at onrampbitcoin.com, but like we're more than happy to help get on a call and just help you think through it because at end of the day it is about education. And it really will just accelerate at a rate that I don't think any of us expect. The final point as well is anyone who has some capital still in the traditional system, which is probably most of our listeners, I don't know how many are 100 % on BTC, but anyone who has some capital in the traditional system, imagine a world where someone could break into your house and like liquidate your fidelity or Schwab or... Goldman Sachs account, right? It just, doesn't exist. And if it did exist, then there would be far more incentive for violence and we'd have a lot more problems in this country and in the world. And so where we need to get to as an industry, in my opinion, is just solutions that will prevent that. And what I hear online sometimes is, well, you know, if you just geographically distribute all of your If you use a multi-sig yourself, geographically distribute hardware, wallet, seed phrases, et cetera, then you can solve for these types of attacks. And I would say, look, I don't want to have an attack in the first place, right? So I would rather just have solutions that prevent them to start. And there's always a trade-off. Another thing people think about is, well, how do you think about the risk of government confiscation or some sort of regulatory crackdown versus these other things? Jackson Mikalic (33:40.027) At the end of the day, it's all going to be how you personally assess risks and concerns as it relates to your Bitcoin wealth. And I personally, like this is just me, if I had to choose between the government taking Bitcoin that was held somewhere online in cold storage still, like confiscated from some sort of platform versus putting my family in a situation where they could be harmed or worse, or at least have some sort of traumatic experience, I would always choose the former. And so when we're talking about tail risks, like frameworks to think about, these are both unlikely scenarios, at least they are right now, but you should just think about what situations are worse and how do you maybe manage your Bitcoin in different diversified ways across different solutions to mitigate as many trade-offs as possible. Liam Nelson (34:32.259) think that's very well said. would say the one other thing that we didn't mention yet is that a lot of this is, even if you're being careful and try to protect your privacy as much as you can, a lot of this is going to be done by options that you didn't even opt into. So for example, there was the Experian credit hack a few years ago, and then just recently in the news this week, there was somebody who used Claude to go out and I think they got 150 million taxpayer records from Mexico and so obviously people you know you got to follow the law and so get that and then that just puts a massive target on people's back you know if they're just a wealthy person and obviously Mexico there are you know, too many kidnappings already and there's some craziness going on with the cartel down there anyway. But that's just exactly the point of why multi-institution custody is so important. And also just a broader concern about financial privacy and just privacy in general in this world that we're moving towards. think that almost everything is going to be exposed online and honestly, I don't think that there is a great solution out there for any average person who is not necessarily an expert in this. Michael (35:53.88) Yeah, maybe this is a good, this ties into it, but you know. I think like most people aren't necessarily just, you know, let's just say like these guys are talking their book or I'm not ready for it or whatever. think the main point is to continue to just educate and talk about this because different it's just similar to Bitcoin, like multi-institution of Bitcoin are very similar in that a lot of people either dismiss it or the people that think it's interesting. It's like either not for them or maybe in the future. And it just takes multiple touch points, multiple realizations, different things happening because we didn't even talk about like If you hold Bitcoin, you need access to treat it like money, well then how do you do that in this world? But this is a recent report that will contextualize a lot of this, which is, I'll summarize, it was a individual, a, you know, an open thinking, whatever, a tinkerer, who bought one of those robots, a $2,000 robot. I didn't really actually know this because we have one at home that are these are like effectively little computers in your house one of the first versions of AI because they're kind of using you know whatever to manage the whatever it's called the not topography but floor mat floor plan mapping and Netnet is the guys decided he wanted to manage this with his Xbox controller so he went to Claude and he was effectively able to figure out how to API into the vacuums but whatever that was set up between that he was able to gain access to seven thousand vacuums. And so he was able to get access to live vacuum camera feeds everywhere, inside homes across 24 countries, full floor plans of the mapping data. So there's some guy somewhere in the world that has full access to people's houses with this one thing because he... Jackson Mikalic (37:37.765) That is insane, I didn't see this. Michael (37:39.339) He prompt injected and so like I just I just beg like people the world is moving so fast that when you think about like counterparty risk What do you do? Why you maybe want to even increase your position to BTC, And then as you start to think about like tail risk for you and your family and your bitcoin You just got to really have your head on a swivel because it's only gonna get more chaotic from here and that chaos Breeds a lot of desperate things from people and these tools are becoming insanely easy where bad actors that weren't technical maybe had this barrier but now that's just completely moving away and I expect to see a lot more of this there's no shortage of stuff on anthropic and other kind of big frontier models that do these bounties and they're just like capturing all these smart contracts BTC or like crypto that's out there and so I just fully expect this to just grow especially as we get more you know stable coins and wallets natively online Jackson Mikalic (38:35.865) Yeah. I mean, that's, that's a mess. we got to go analog. We were talking about that a little bit last night, even the cars, right? The cars are going to end up, there's going to be some crazy stuff that happens with all the software and the cars. And so my next car purchase, whenever that may be, it's probably going to have to be some sort of analog vehicle that has no technology in it for a number of reasons. one other thing that we can get, there's probably a few other things, but the next thing we could talk about, was We can talk about quickly, but there's a few things on the mining side. So Bitdeer sells a thousand other Bitcoin at the bottom. Liam, is something you pointed out. I wanted to add to that as well that American Bitcoin, which is involved with the Trump family, I think the company is 20 % owned by Eric and Donald Trump Jr. They actually had a good quarter. So I'll pull up Eric Trump's tweet real quick. And this is always my left bell curve take. mean, I don't know, I could certainly be proven wrong, but I generally think that Did that not work? Michael (39:39.151) Did we lose Jackson Yee back? Jackson Mikalic (39:43.355) Hey, can you hear me? Michael (39:45.037) Yup. Jackson Mikalic (39:46.555) Okay. So what I was saying was my left bell curve take is that typically if you're in a position of power, you don't get yourself involved with things that you expect not to do well. And so the Trump family is involved with American Bitcoin. Maybe I won't pull up the tweet just because it seems like my internet is a little bit faulty here, but Eric Trump says incredibly proud of our team at American Bitcoin. We just finished our quarterly earnings call. What an amazing story. We increased the Bitcoin on our balance sheet 58 % quarter over quarter and mined at 53 % discount to the market price of Bitcoin. Decreased difficulty became our friend allowing for substantial additional mining while most other competitors went quiet. In approximately six months since going public on the NASDAQ, we have accumulated over 6,200... Michael (40:44.077) Yep. Michael (40:52.227) Well, Jackson, Working through that I think in Liam you brought up the bit dear stuff secure is what your take there is but I think also You know We're starting to see like some of these Dats We're just going over those segments Jackson, but like some of these Dats starting to puke the VTC I don't even know never heard of GD culture, but it looks like they liquidated 7,500 other Bitcoin as a share repurchase as nav discount widens But I think that there was a few others that aren't off the top of my I'm not on the top of my head right now, but that are like getting outside of their positions. And this is something that was naturally gonna happen as like these MNFs widened and what's going on. I think there was like reported that now that some of these DATs are like buying stretch, which I don't fully understand because the version was to hold Bitcoin. But curiously I'm on any of that and any of those other links that Jackson was talking about. Liam Nelson (41:46.211) Yeah, for sure. I mean, there's one other out there that I don't have off the top of my head or the link for, but there is a shareholder fight to try to get another one to sell their Bitcoin. I think that there is just a lot of fear and confusion out there in the market and specifically as it relates to Bitcoin mining. Some of these folks want to be DATs in general. It sounds like Eric Trump, you know, he's been friends with Sailor for over 20 years. He's probably just focused just on getting as much Bitcoin as possible and try to align the investor base. And obviously he's got other things there too, but Bitdeer selling almost a thousand Bitcoin at the absolute bottom just kind of shows the sentiment of where public investors are looking at the moment. They are kind of pivoting towards, you know, more of an AI strategy and evaluating opportunities to deploy the capital better there. And they're still mining Bitcoin, but it just shows that the public markets in general, are looking more so for AI mining energy as a whole rather than just rewarding companies for holding Bitcoin. And I think we're seeing that across the board. would imagine that, especially if Bitcoin hangs out around here for a little bit, there will be continued pressure from shareholders in order to try to sell the Bitcoin or to get management to change, etc. It's just kind of a sign of both mismanagement of some of these companies as well as publicly public investor sentiment towards Bitcoin in general. Michael (43:20.237) Yeah, you always know. Like... I've experienced this at businesses and during these cycles where when the froth is going on in the market, it's hot, like everything's fine from cultural to across the board. Diligence is softer. But the second like the tide goes out, everyone starts to like just get real kind of, you know, hairy and like kind of just start looking at people sideways. You start looking into this and this was already always known, but there's no shortage of stuff on Twitter where you'll see these data management teams taking anywhere between 20 to $50 million in compensation. I think it was Jackson and I talked about this yesterday. It's like anybody knows that invest or just in general, like if you show me the incentives, you'll understand the outcome. And so you generally want people aligned with you from a cap perspective, from a incentive perspective on growing your KPI, growing more value for shareholders. And if the like, it's effectively a form of rent seeking, if you're taking this like management fees, well that eats into your natural MNAV from a whatever the thing is like the value of the underlying and what you're holding versus all of This is the purpose of like why these things are closed end funds and they should trade at a discount to nav because there's natural management of the of collateral of the asset so they should be lower not higher and then you take 50 million dollars that's eating into your Bitcoin that you've been that has been accumulated But nobody does that math. Nobody's looking at it I think at this point everyone's just banking that if the Bitcoin price runs that hopefully Dats run better or run higher. What is it called now? It's a great it's a great term I don't follow this but then when I see it I'm like man, that's it they call it amplified Bitcoin That's what it's called. So yeah. It's better than better Bitcoin. Amplified Bitcoin. Jackson Mikalic (44:53.633) Yeah. Jackson Mikalic (44:57.41) Yeah. the debts man with let's let's skip on more dad talk today had enough of that one. But I agree with you. Liam Nelson (45:06.573) Well. Michael (45:06.573) You don't like digital credit? Liam Nelson (45:10.16) Well, one of them that's kind of related that actually is a very positive sign is at the same time, French energy utility giant, NG, which is 60 or $75 billion in market cap is considering adding the installation of battery storage systems for Bitcoin mining data centers in order to help with the transmission of power and due to the constant curtailment of renewable loads down in Brazil. So at the same time that, you There is a bunch of maybe funny business, maybe just nonsense in general that happened at the time when... you know, Bitcoin was hot, was a good sexy thing that you could do in order to improve the, you know, shareholder value or whatever. Like at the same time, there are very pragmatic companies out there who are just trying to, you know, use Bitcoin in a way just because it improves their business or improves their life too. And so there is a, it's not all over. Jackson Mikalic (46:16.843) That's what I tell myself every morning. It's not all over. Well, you know, it's funny real quick is a Michael (46:17.135) I'm just thinking about. Jackson Mikalic (46:26.389) I saw this morning Goldman Sachs CEO says he owns very little Bitcoin. So CEO David Solomon of Goldman, the first time he ever publicly said that he owns Bitcoin. And it was at Mar-a-Lago last week at the World Liberty Forum for 2026. But then he later goes on and says, I'm still trying to figure out how Bitcoin behaves. I own a little Bitcoin, very little. I would just say like David, if you're listening to this podcast, you might be a frequent listener. We're all still trying to figure out how Bitcoin behaves, but maybe you should own a little bit more than a very little amount. how about to wrap up here just because I know we're coming up on time is the block fill stuff, unless there's anything else that you would be, more interested in discussing because Michael, you're going to be a little, go ahead. Michael (47:13.443) Yeah, maybe before, or let's do block fills and then I'll come, wanted to share one thing before we wrap. Jackson Mikalic (47:18.229) Okay. So Susquehanna backed BlockFills up for sale after 75 million lending loss. Michael, you want to take that one? I don't even know like what happened there. So why don't you explain what happened and what is BlockFills for the people who don't know. Michael (47:33.505) Yeah, I'll let Liam go with it and then I'll add some color because I've been, I mean, I obviously know what happened, but I'm not as close to where they blew up. know they're an institutional lender versus more of a retail, like a BlockFi style business. Liam Nelson (47:48.183) Yeah, so they have over they did over 60 billion in trading volumes in 2025. They have an unsecured lending business. They work with mostly institutional clients and a lot of them are Bitcoin miners that I don't haven't gone through the financials of what was that one that sold all their Bitcoin that sold 1000 maybe it's it could honestly be related or there could be a little bit more carnage going for the Bitcoin mining ecosystem in general. I'm not But essentially what they did is very similar to what happened in the 2022 winter with Block 5 Voyager, Celsius FTX, was Bitcoin lending and then rehypothecation of the underlying collateral. Then when clients went to withdraw or take some either US dollars or Bitcoin out, they halted withdrawals. They have reported $75 million in losses and now they're trying to fund a buyer, which means they're almost likely underwater. likely insolvent if everybody would actually take out their money at the same time. But it really just does highlight the real need to do diligence on who you're working with, especially if you're partnering Bitcoin with them. Even if you're not taking out an unsecured loan, you shouldn't leave your Bitcoin with them because, you you're even the clients who left Bitcoin with them but weren't actually taking out loans can't get their money out. And so just just like back in 2022, it's really important to know your counterparty that they're doing things above board and have the proper due diligence. Michael (49:25.614) Yeah, this is like a, it's just market structure 101 that has to be fixed because as Liam shared, like the way I think about custody and counterparties in this space is it's the version of most people listening understand that you don't, nobody should essentially plan the money supply. And for a number of reasons, or no even central. manager of Bitcoin because at a long enough time scale, humans are fallible and you would manipulate, some some coercion, your family member, something happens to them, you have to do things. Point being is you don't want to be a single, you A, as a counterparty, don't want your, or as a client, don't want your counterparty to have unilateral control because of what I just described, humans are fallible, things can happen. you know, whether it's like bad actors, whether it's malicious, whether it's collusion, what happened with bybit where there was a social engineering. And then to Liam's point is like there's a black box because most, if not all custodians, park all their Bitcoin in an omnibus wallet. Just me, it's a fancy word for like one wallet. You have no transparency into how much of your Bitcoin and liabilities are sitting there. And point being is like, I think on a long enough time scale, we'll wake up with this radically new asset and realize that no entity, when you're participating in financial services, wants to have unilateral control because you never want to have that ability to lose all of the money. That's how I've always thought about building and respect a lot of businesses like the Kossas. and on chains because they've always been in that position to never have the government come to them and say, me all my clients Bitcoin. They just fundamentally can't do it. We can't do that as well. And I think that's just an important function. If you're going to work with a counterparty, you want at least transparency into where the asset sits and what's going on there. Michael (51:02.735) So this is gonna happen more. It's naturally this is just one I think this also ties into because you have this open ledger in this open system That is somewhat of a free market that you're always gonna have people hunt out positions because they know where leverage sits So whether it's them whether it's the dat stuff and eventually having to puke out this Bitcoin or other things that are exists I think this is what is gonna make you know the the system Anti fragile is because as it grows it finds out where the weakest points are liquidates them and then it goes back up, That's the beauty of Bitcoin It continues to find higher lows and higher highs and so as long as more people are stacking more people understand this You will get to these points and there will always be more sophisticated people doing random stuff to steal people's Bitcoin But as the market gets more sophisticated, as the products get more sophisticated and have better market structure around fault tolerance, transparency, you won't have this. But this is a small blip. can promise, I can guarantee, as long as Bitcoin goes up, we will see this. But at scales that make 2022 look small in comparison, and that's why all of these concepts make a lot of sense to listen to, or least follow, and research. Liam Nelson (52:10.293) Exactly. think the fact that it was Susquehanna backed means that they likely grafted on their due diligence for collateral management and control and how they have done that in the past to that new firm and that new asset, which just isn't necessarily the same. And yeah, I think that's just how a lot of these bigger firms like the Morgan Stanley's, JP Morgan's are going to continue to do that moving on as well as they get into the space too. Michael (52:27.343) Whoa. Michael (52:38.829) Yeah, I mean, just I'm fairly confident Susquehanna was a big investor in BlockFi. Like they should know better. They should know better, but. Liam Nelson (52:45.401) Checks out. Jackson Mikalic (52:49.229) Some people never learn their lessons, do they? Michael (52:52.215) Yeah, we never, yeah, I bring it up. one just last thing I wanted to pull up really quick is, you know, for our weekly AI part of the pod, there was this tweet that basically said, there's never been a better time to start an AI first business to disrupt an existing market because all the people in that existing market are busy running their business rather than leveraging AI and using words like AI first rather than actually being AI first. I think there's like just no true or tweet, whether you're at a firm, you're thinking about starting something, you know, we got, consider ourselves very lucky because we started with a lot of learnings from the industry and also just, you know, right around the AI pickup. I think about when we were launching pods Jackson and we had people put us in touch with like producers that would manage this pod and it was a thousand dollars an episode. And we were like, yeah, I think we'll be pretty good with $29.99. side and you know there's just like no shortage of AI tools that like can pull this whole thing together and that was always been embedded where I really think of us as like an AI first firm because that's just naturally you know doing more with less and being prudent with headcount. And I think like people don't even realize how outside their skis they are with like crazy head counts because you're ultimately flipped the world on its head where most kind of people in existing companies or when you go raise money, you, you, badge of honor is how many employees you have. And that is going to become a liability and people don't even know it yet. And it's a liability because obviously that is a leverage that is leverage against your margins. That's leverage against competitors that are able to come in and undercut you. now. You have to figure out what do you do? Do you lower your price? Do you like get more optimized? But if you optimize then you have all this like headcount that you have to figure out is it able are you able to do it from a cultural perspective a lot of these tools They're like black and white where people either use them or don't use them So I just can't I I pinch myself like I read Jackson I talked about this a lot yesterday about Up there with Bitcoin and you may be greater than Bitcoin just because the feedback loop is so tight and you can see how this is gonna Michael (54:59.627) transpire throughout the economy that this stuff is just insane and the stuff we're able to do with it is just growing and it's just really exciting for other entrepreneurs to be able to leverage this and see the amount of value that's delivered to the world. Jackson Mikalic (55:14.049) Yeah, I would say. I would say even though it may be unpopular say on a Bitcoin podcast, but this is more exciting than Bitcoin because you actually have more agency in your life to use the technology to further whatever mission you have, whether it's professionally or personally. Whereas with Bitcoin, like you can build a Bitcoin business or contribute, but there's only so much you can do as it relates to broadening Bitcoin adoption. And it's a longer game. And I think, Michael, you mentioned the feedback loop. The AI stuff, think, is more exciting because it's more tangible. Like, I can't do anything to make the Bitcoin price go up. And I can't do anything really to make more people, even in my own life, buy Bitcoin, right? Like, we've all been there. People who listen to the show have been there trying to explain things over and over again. And most people just don't, they don't care, quite frankly. And so AI, think, is more exciting to the extent of you don't need anyone else. You don't like Bitcoin. You don't need anyone else's permission, but you're also just like in a position with AI that you can just further. You can build businesses quicker to Michael's point and more efficiently, but you can also just start learning new skills. Like if you have something that you're curious about, but you never knew where to start, you can actually just ask Claude exactly what to do and you'll get an output or at least a framework to do it. And so I think it's more exciting because at end of the day, It's more actionable right now and it's more, it's just higher agency. So it's cool. I'm excited. It's a good time to be alive. It might be the best, even though look, Michael said some stuff last night and there's a lot of bad things happening. That's all, but that's always been true. Right? I don't know if it's more bad right now than it was 50 or a hundred years ago, but there's always bad. think we're just more aware of it, but there's also a lot of good. Michael (56:47.247) E. Michael (56:54.641) God. Jackson Mikalic (57:06.317) And so I want people to lose sight of how many good things are actually happening and the technologies can be used for good and can better your life. Michael (57:06.723) Sit. Michael (57:14.094) So, I mean, I'll just share this, like, if people are still listening, right, and then for Liam, you know, I discount, like, the things in my head that are going on. And then I just was sharing with Jackson, but I forgot that he's been just perplexed in a pretzel since then. Because the Uber driver's one thing, but I don't work with them, and I'll see him, and hopefully his life changes or whatever. But Jackson's just, he talked about it on the front end, he talked about on the back end. He's just like, we talked about things that I just thought were normal because they're in my head, but they just have them really. But anyway, that's where kind of just anybody listening, that's Jackson right now. He's just a little shell shocked from a night talking. But just going backwards because I do like, I don't wanna say disagree. I just wanna share, cause this is the same thing we talked about yesterday is. The AI and Bitcoin thing are literally, it's the same coin, it's different sides, and they will play off of each other. So to Jackson's point, they will allow for Bitcoin to proliferate and accelerate because there's insane amount of leverage. You think about like Marty's come on the pod and talked about the crazy videos that they were able to create about the Federal Reserve that can't, and that will help and pull Bitcoin. But then there's the other side of it, which is as efficiencies grow, And as deflation happens, all this counterparty risk is going to come to the forefront because there's air pockets where people capitalize these businesses that are going to not be relevant and not be able to pay back their debt. And so ultimately, you're going to want to, with the proliferation of this, be able to store your money in a better form of money. And then the other side of that is also, even if you have no interest in furthering or working on Bitcoin, you still can take all that high leverage Jackson reference and go stack more Bitcoin at 50 % off. Michael (58:55.663) So you can go and learn this stuff. You can learn your nights and weekends to go build products, go generate additional revenue for your personal balance sheet, and then pull it into Bitcoin. Part of what this made me think of Jackson is because we're thinking about new content and mediums, it's like, wonder if we have daily or a couple times weekly how we're using AI for the business, actually contextually explaining. Because we're thinking about yesterday with the people we talked about. explaining these little projects that we're working on. I don't think people like once you hear it it's like opens the aperture for like I can do X this you know I can do this. I think that might be interesting ways and we'd obviously have to tie it back to Bitcoin but there's something there because I don't think a lot of people really understand what this stuff can do. Jackson Mikalic (59:37.025) Yeah, and just real quick, it's a great point. I meant to make it, but I got sidetracked. Michael (59:43.133) He was thinking about the conversation last night. Jackson Mikalic (59:44.621) Yeah, I was scared. But no, it's a great point because that Michael makes that I want to reinforce is you can use this to better your life in many ways that I kind of alluded to, but also the fact that you can acquire more Bitcoin for yourself and for your family. so, yeah, it's interesting times because Bitcoin is down 50 percent, they're Bitcoin and AI to your point. They are going to proliferate together. And so use that to your advantage. Use the arbitrage of Bitcoin being down and AI really starting to accelerate now to acquire as many sats as possible. Don't be like David Do not be like David Solomon. If you own a very little amount of Bitcoin and you're still listening to this podcast, that's a problem. We're not doing a good enough job. So reach out and tell us what we could do better. Michael (01:00:18.723) Yeah, what? Michael (01:00:29.389) Yeah, if I wanted to stack more sats and wasn't busy having to deal with Jackson, I would go on Upwork and set up an account and go and find people looking for different tools and then just take that and try to go figure out via cloud cowork or whatever. And you'll do trial by fire. You can even do them undercut. But I think that's just an easy way to stack more sats, even if it was a couple hundred bucks a week or a month. We talked about everywhere I look now, just see opportunity because effectively everything hasn't adopted a more efficient way to build whatever they need. There's no shortage, I won't go into it here, but yeah, it's an amazing time. Liam Nelson (01:01:10.506) It's very exciting to Bitcoiners are generally extremely high agency as well. And so I know that they're going to be the first ones who can use these tools in order to actually stack more Bitcoin. And so would second what everybody said here, just the fact that it's so easy to do things that would have taken a very long time in the past. No better time to be alive. Jackson Mikalic (01:01:35.297) Boom. Yeah, I love it. all right. And so before we wrap, just please, my life depends on it. Please like the video, subscribe, rate five stars if you enjoyed the content and also leave feedback on what can be improved. I read every comment I reply to most of them. the ones they don't reply to are typically because they're, they're inappropriate or for whatever other reason, but if there's a constructive comment or it's just a comment of support and feedback, those are always welcomed. And gentlemen, anything else before we wrap? Michael, am I going to see you later or are you just going to be checked out on the beach for the next couple hours? Michael (01:02:11.991) No, we'll meet up, you know, just to throw it out, like there was probably a hundred topics that we talked about that Jackson's mind's all messed up right now. So if you tag him on Twitter or tag both of us and ask, like, we'll just go down the list and whatever thread that gets started and we'll just start dropping. We'll try to be kosher so like we won't, you know, scare anybody too much, but we can just like start adding. Cause I feel like it'll be a good recap. So I know exactly what was said. Jackson Mikalic (01:02:37.549) Great. All right. Thanks, gentlemen. Michael (01:02:41.38) Thanks guys. Liam Nelson (01:02:41.519) Thanks, John's.