Kraken’s IPO, Tether’s Power Play, & Why Bitcoin Still Wins

[music] It all comes down to computers communicating. >> The information [music] superighway can be a confusing mix of on-ramps and off-ramps. Bitcoin is [music] worthless artificial gold. >> Is it still rat poison? >> Probably [music] rat poison squared. >> We need to get into the world of okay, this is actually foundational technology. What the internet [music] of money does is it creates a single network which can do a microtransaction [music] to a giga transaction. [music] The internet is going to be one of the major forces for [music] reducing the roll of gun. The one thing that's missing but that will soon be developed is a reliable ecash. Hey guys, welcome back to another episode of Final Settlement. This was uh an exciting and action-packed episode. No shortage of M&A deals and um new products and releases in the ecosystem. Quick word from On-Ramp, an on-ramp business specifically. I'm not sure we've had a chance to share it here. We launched this a few weeks ago. Incredibly excited about the product. Um, we announced a case study with a large firm, but also really foundational infrastructure needed for businesses across the landscape that are adopting Bitcoin as a treasury reserve asset. Not only is multi-institution a superior way to custody the underlying than trusting a single custodian, but then naturally what's existed or what hasn't existed in the digital asset Bitcoin um world is governance accessbased controls and everything that generally exists in the traditional financial system has not been ported over when it comes to just treasury management of the underlying Bitcoin. And so with on business institutions, enterprises get access to multiple users. They get access to uh creating quorum of quorum. So they can decide on who has access to uh check off or approve a transaction before the withdrawal takes place and then you get complete audit controls as well as multiple uh wallets, different quorums, everything that a large scale institution would need. Really excited about this announcement. and we're starting to onboard publicly traded companies as well as other large institutions. If you want to learn more, I'd encourage you to book a consultation or reach out. All right, on to the episode. I hope you guys enjoy. >> All righty, gentlemen. Welcome back to another episode of Final Settlement. It is Monday, November 24th, 10:40 a.m. We missed last week. Apologies to the listeners. The three of us were on the road. We were in Dallas. Maybe we can talk about some takeaways from the Dallas trip later in the show, but uh we are back, boys. How are we doing? Bitcoin's in the [ __ ] We're in the 80s. What are we going to talk about today? Deals of the week. >> Bitcoin is indeed in the [ __ ] Uh I'm glad you brought up missing a week. It it pained my soul, but it was just scheduling. Scheduling was tough. Um but yeah, we're we're back. >> Turkey uh turkey week, you know, we'll talk about >> turkey week. >> What we can be thankful for. what we can be thankful for and also how to uh how to approach the conversation if you told your boomer uncle to buy Bitcoin last year at the Thanksgiving table. He's down 10%. Um I looked last Thanksgiving price was around 96 97K. Um so he's hurting. Meanwhile, the S&P is up 10%. So how to approach that conversation? How to tell how how to tell your boomer uncle to zoom out on the price chart? took like a a little longer than one year, 12-month time frame. Um, but maybe let's get to the deals. There was a big one from last week uh that we obviously missed cuz we didn't record. Uh, but Kraken um has confidentially filed their S1. They're going to go public and they raised 800 million uh at a 20 billion valuation from a number of players uh most notably Ken Griffin and Citadel. Um maybe I'll hand it to Liam first. I may have dug into this a little bit. Uh but what do you make of this uh latest move on the IPO side? >> Yeah, I there were rumors about them going public for a while now and I know that they've done some layoffs and and tried to get a little bit fitter. They do publish a lot of their quarterly metrics too and they've um you know turned out to be pretty profitable as of recently too. They're they're operating pretty well. it just makes too much sense for the Citadel side just because when you think about Kraken too um and you know to a lesser extent some of these other exchanges they do a lot of volume especially of some of these are are less liquid tokens as well and and they've really stepped up their game on the derivative side Citadel does a great job of getting and aggregating all the different information in order to have a competitive edge versus everybody And this is a little bit scary almost because uh especially if you're in the crypto space and a trader just because seeing somebody like Citadel stepping in and having all the information just like they did with Robin Hood is is just going to allow them to kind of wipe the floor with all those kind of day traders and crypto traders out there. Um but it's you know to be expected as uh more and more people come into the space. It's a relatively low lift weight. It doesn't even matter necessarily if they make their money on the Kraken deal in particular over the long term just because a firm like this is going to make it all back in information and asymmetry and how they play the game over a long time frame. And so that's why all these strate uh investors who are somewhat strategic would pay massive premiums for these businesses as well. >> Yeah, I think um there's a lot to you know the Citadel play. I think Citadel is a m I don't want to misspeak, but I think they're a major investor into Robin Hood. Um, is that right, Liam? >> I don't know that for sure, but I do know that they get all the information flow from Robin Hood, too. >> Well, that's what they get the the knack for. Um but either way, Citadel uh I believe ah we'll check in real time and come back. But the the main point was there's or the main point I wanted to make was that there's not a lot of assets in this space and specifically when you look at derivative uh traders or derivative trading firms coupled with altcoin markets the historical large liquidity providers like the Binance is by bit by bits of the world um are outside of the US and you look at one of the largest uh or the largest option trading firm which was um what who did Coinbase buy a dare bit. Um, so you look at that market >> and if you're looking to get exposure into the space, whether it's from, you know, digital assets, you're looking at derivatives, you're looking at anything that's going to uh orchestrate stable coins. I think Kraken just came out last week with a uh B2B TTOC solution, which is very popular across the industry because ultimately a lot of that flow passes through the market makers at these firms. And so the way they monetize is if you can plug in and leverage their infrastructure as a service via money transmission licenses and then they take ups on that spread. And so I look at that and to Liam's point, there's a lot of downside protection. They're going to IPO. That was obviously part of these discussions because right after the uh investment, it's kind of a crazy amount of capital to be invested. Uh I think it was close to 800 million and Citadel came up with 25% of that. Um, it's a very interesting dynamic. The interesting part about Kraken is that they've been around for a while. They have a very uh unique and tied relationship with Silicon Valley being based there. The CEO and co-founder was formerly at Social Capital, which is Chimoth's um venture firm. I think it still exists now. He runs Tribe Capital. Then he stepped in to be CEO. So they're they have very high like um not only tenure acumen but backers and so they're an interesting play but the counter to all of this is that there's not a lot of sophisticated institutions that leverage Kraken. Most flow is going to go to like a Coinbase and then if you're outside of the US you're going to uh Binance and there's some intermediaries in between like a Cumberland. Um but this really feels like you have to make a play. there's only so many assets Coinbase has already spoken for and that's where Kraken uh has been able to command a king's ransom. >> Yeah, I think that's exactly right. Um you know, obviously Coinbase is is spoken for to a certain extent already public etc. Um so there, you know, there aren't a lot of options to your point in terms of um either partnering with or investing in uh cryptonative infrastructure where there's distribution. Um, and really, you know, what stuck out to me is what what Liam, you alluded to around just the the parallel or similarity to their relationship with a Robin Hood. Um, where they want to see that overflow. They want to see the data. And so, I I just looked this up in real time. Cidel does not actually have an equity stake in Robin Hood. So, it is just a uh partnership and they're their uh largest market maker. So, no direct equity stake there. But, um, yeah, it feels similar to that in the sense that you want to get closer to the data. you want to get closer to the underlying clients uh and that order flow. And so it does make sense from that perspective uh just given there's not a lot of assets out there to acquire that that have that those qualities or those assets underneath them. So it makes sense. >> Yeah. And Kraken too is is no scrub. Like I'm uh they publish their financial data um and their assets on the platform is just under 60 billion and adjusted EBA last quarter is uh almost 200 million. So they've gotten super fit, have gone from uh negative to like pretty positive, adjusted EVA and you know being able to monetize all of that information flow and assets on the platform is definitely something that um you know others are looking at is is a big player and just the brand and the fact that they haven't you know blown up um is a way that you know lends some sort of credibility to the platform. >> Yeah, that is something worth calling out. the longevity and Lindy um being around since I think I believe around Mount Gaus time. I will say that I'd be very curious on some of those numbers um when you think about like the billions and assets on how many are e-liquid tokens um right because that's an easy like that's the the knock is that Kraken is not looked at as an institutional uh partner. They have the um specifically around custody they have the license in Wyoming and I forget the speedy and they do have an institutional arm there but it it's understood that there's not a lot of capital specifically when it relates to Bitcoin and a blue chip like that. no other assets TBD. Um, but that's a big component of it. And then when you look at the revenue, you think about like it's very similar to like the trading revenue or the trading volume on a lot of these assets and where they're making their money and the flow and who they're passing back to. Um, especially given what we know about Gemini. Not to say that they're the same, but like last year was a very interesting year in the market when it comes to how many net new buyers were stepping in and where that like revenue came from. Um, but either way, I think like we're saying that the the aspect the last aspect I would like add to it is that there's not a lot of blue chip assets, but then also there's nothing really that looks differentiated. And so you start to see these privies, these bridges, the cracking acquisitions. they're going to play towards the volume and the speculation when it comes to um the um um the markets uh what is like the poly market and calies of the world but there's not really long-standing businesses looking to help people preserve their wealth educate them and grow it over time and so we expect that as the asset you know Bitcoin goes into new all-time highs and grows that's really where the citadels and maybe it's not citadel but other large finan cial institutions are going to look at like who's closest to the unblind and who's closest to custodying it and offering financial services the monetiz that wrap around the monetization of Bitcoin. We're just so early in like Trafi stepping in. They're still looking at the like fastmoving volume. What are the Robin Hoods of the crypto world? They're not looking at wait where are the smart money putting their Bitcoin? And that's where we see a lot of the big opportunity at least for us and what we're investing in. Yeah, it's a really good point because if you have basically a longer term view on the underlying, i.e. Bitcoin relative to all of these other uh cryptocurrencies, then you build in a different way. You build products and services in a different way that maps more to a longduration holding as opposed to this high frequency uh trading in and out of all these coins that are super far out the risk curve. like it is just a different mental model of like you said getting closer to the underlying but the underlying actually being the long-standing uh sort of long duration asset that is Bitcoin as this uh sort of reserve asset this digital sound money. Um so it's just a very different um set of products and services that people need to basically have a financial plan around that asset that is a long-term allocation. It's just very different from trading in and out of XYZ, new protocol, new new Shitcoin. Um, so I think that that that we're in the very early days of of those learnings, but maybe related to this one was another deal um that was one of the bigger ones from last week. And similar, and I say it's similar in the sense that, you know, Michael, to your point, like there aren't a lot of assets out there um in terms of crypton native exchanges or even lenders in this case. So this is um Tether making a strategic investment in Letin. Uh Lebin's been around for a while um as a um lender in the space. Uh I think earlier this year they uh sort of ceased support for other assets. So I believe now they are actually Bitcoin only uh focused firm. Um but just think this was interesting just given um sort of Tether becoming this behemoth not only in terms of their reserve assets and sort of strangle hold on on the stable coin market uh but now making these strategic investments into other infrastructure and other players in the space. So uh what do you guys think about this one? >> Yeah, I'm happy to jump in. I think Tether likely is trying to make a move as one of their bigger lenders on the um lending side and so there's probably if I would have assumed like they just negotiated their way into being able to have some sort of upside based on the amount of capital that they um bring to letin or just like a small equity stake because you know if letin is profitable as they say they are that it doesn't necessarily make sense to raise outside capital unless you really think of some strategic way and I think that the lending side is is enough. Um but I think it makes sense a ton of sense for Tether too just to get closer to the underlying both um where the custody is a lot of them is institutional partners on the letin side and just the similar to what we talked about with um Kraken it's both the information flow of you know when are clients actually getting liquidated if at all like does it seem like very frothy are they are a lot of people taking out loans and then maybe tether would slow their acquisition of of Bitcoin. Um or are there you know more liquidations at the moment and maybe it's a better time to step in. Um and then you know Tether obviously does a lot on as a being trading pair for Bitcoin all across the world. Um so I think it it just makes more than it just makes so much sense for Tether to you know get more involved here. But um it also just speaks to the limited amount of number of large players out there and just the fact that you want to be close to both the information as well as all the businesses that are, you know, creating different products and services out there. >> Yeah, I think um the common theme with all of this is there's only so many relevant or reputable assets. There's only so many uh lenders that exist in North America that um an institutional or high net worth would go to that's been around. Again, at the end of the day, you're going to want somebody regulated, licensed, human you can speak to uh in this world. And so, Tether's naturally making their play over the past year publicly um across the world bets in Bitcoin and around Bitcoin adjacent industries. There's natural exposure into the market as it grows. let in and right for acquisition. So from an investment perspective, they can get the return, but then also they have excess amount of dollars parked with them and if they're able to generate something over the nominal uh Fed funds rate or the interest rate on treasuries to park it to lower the cost of capital for let in. Um so it makes complete sense. I think um it'll be interesting to see where I mean the last part is just really like the notion of international companies trying to get exposure. We talked about Tether launching um USAT in the US and potentially North America. There's just a reality that you need to get people evangelizing, advocating for Tether. It needs to be in there be able to access Tether when you take a loan out. Um there's a lot of strategic reasons. There's not many lenders. So yeah, I think it it makes it makes complete sense. >> Maybe a a question for you guys that comes to my mind is like, you know, why why couldn't or why wouldn't Tether just build out a leting business themselves? Like why would they go this route um of investing in Aladdin um instead of just building it out themselves in some sense, right? Like >> Well, there's there's there's two big angles there. Um, one is it's kind of the notion of do you want to lend out a billion dollars or do you want to lend out a hundred billion dollars? Um, and obviously being a little hyperbolic, but then if they set up a lending desk, well then you look competitive to other forces. Um, so there's that, but then the other aspect of it is the scalability of generally lending licenses depending on where you're based are required. And then there's the operational uh it's it's highly operational intensive because you know when you get into these margin call areas you have desks that are usually stood up overnight. Even if they say they automate it, you still have to have some human component because you're looking at where their other assets are sitting. >> And so um you add operational complexity where Tethers, you know, pride themselves on being lean, but then you also just add the aspect if letin has a desk there. Well, maybe in Latin America, Canada, North America, people are less prone or open to them getting involved and seeing under the hood on the growth um versus just being the the underlying uh partner for them. >> Yeah. Yeah. I 100% agree. It's just like I think they just primarily want to focus on their core area and like they're doing so many different things. They could probably be the best gold custodian if they wanted to in the world and the best gold lender, but it's just like I think that they want to focus on doing investments in that space rather than making that the core business line because the further that you get out of, you know, being the stable coin issuer, the less strategic competitive advantage. Now you can necessarily as they get to larger and larger scale do essentially the Microsoft play and you know run businesses at negative gross margins for long enough to um bleed your company your competitors dry and then you're the only player in the space uh and then you can you know pretty much command whatever type of margin you want. But I just don't necessarily see them doing that right now especially with you know converting USDT over to USAT. They probably just have a lot of other things on their plate. Yep. Now that all makes sense. Um, all right. Few other deals to get to. I'm gonna I'm gonna pop through a few. Liam, you brought this one. I had never heard of this company. Lighter raises 68 million at a $ 1.5 billion valuation as VC bets flood back into perpex infrastructure. What does Lighter do and and why might this be relevant? Yeah, I just brought this up because it's pretty much a lot of what we've been talking about, just getting further and further away from the underlying asset and focusing on um essentially things that don't have a lot of staying power and value in the long term. I don't know necessarily why perexes are bringing a lot of value to the end consumer. Um, and just seeing Founders Fund, Ribbit Capital, um, really large VC in the space, just looking at everything under the sun other than Bitcoin itself, um, just kind of shows how early we are. And like regardless of, you know, all of those blowups you see by some of these other um, you know, everything in the crypto space, I just don't necessarily see quite as much demand for these types of things long term. Um, and the just the numbers are staggering cuz I'd never heard of Lighter before and raising at 1.5 billion with um $68 million valuation. The only plausible move that I can see is that they launch some sort of token and um these guys get some sort of insider [clears throat] um scoop on it. Otherwise, just looking at this deal, it it kind of makes no sense and just brought it to my attention or brought it to attention because there's just a lot of the industry that's focused on the wrong metrics and wrong types of businesses in my view. >> Yeah. I mean the chart up on the screen now shows I think you know from their perspective why they would be interested in in a deal like this because you know if you are thinking about what are other crypto blockchains or platforms being used for today it's high frequency gambling style bets whether that's options derivatives perpetuals etc. You can see the growth on this chart of of you know the the largest ones here are Hybrid Liquid and Aster U which is a newer entrant but there has been growth in this area and part of that speaks to what you know we've talked about on on past episodes around just the nihilism of generally younger generations who don't feel like they can get ahead. So they are more prone to look towards gambling or higher risk bets um to try to make money. um very short-term thinking generally speaking. Um but I think if I'm just putting myself in the shoes of these uh these VC firms whether they're cryptonative or or chat VCs like this is where you know if you're looking for like actual onchain activity on these other protocols like it is on the perpetual side it is on the more uh gambling oriented stuff. So it is it does seem just like they're chasing that puck which you know is not great but can see why. Yeah, I would make the case this is like one of the only investable areas because there's two aspects of this. And before even this chart being pulled up, I just thought about Hyperlid. When people look at Hyperlquid and the success it's had and the volume and revenue it's been generating, the obvious and only real use case for crypto is u speculation. So you take that it's my understanding from traders that perpetual futures are a better product than traditional futures because of the funding mechanism and just like there's some other aspects to it where that's coming to uh equities and so those products are generally cryptonative. So, you're going to need cryptonato firms to build them and then not only do they generate revenue because the volume but then and velocity but also um they'll be ripe for acquisitions because like if Schwab or anybody if this is where the market's heading >> uh Schwab's not building out perpetual futures products and so that's really where the acquis acquisitions would come from. Um but anyway, >> yeah, that's a great point on the exit side. Um all right, here's another one. uh OEX incubator, a 300 uh a $37 million incubator by Sky ecosystem hive framework and layer zero to fund stable coin innovators and enable Sky to deploy 2.5 billion in USDS to selected projects. >> Did you bring this one, Michael? >> Yeah, I thought it was interesting mainly because I think it's it's a fascinating format. There was a couple aspects of this. So, they raised $37 million to effectively create some kind of like studio incubator flat platform to um for people wanting to build stable coins with some kind of like uh real world like yield. Um and I think it's really interesting because I do think there's going to be other stable coins that will generate interest whether they're US-based or outside that will have other backings. So it won't be necessarily like the one to one with the treasuries. Um because I think that's embedded in the genius bill or like post it. There'll be other kind of mechanics on what's allowed and not allowed. And I do think like something like this would be interesting on a Bitcoin basis because there will be other formats to um again we talk about like free banking and for issuers to create stable coins backed by Bitcoin maybe other assets. How does that look? I thought that was the the biggest part. The other one that I didn't realize is Sky is a rebrand of Maker Dow I believe. Uh so that's the the aspect and they're kind of Sky is interesting or Maker Dow is interesting because that was one of the first not first >> kind of like algorithmic um stable coins obviously was backed by like Ethereum and that has its own issues. Um but anyway that was mainly the the thing to call out there. >> Yeah, it is very interesting. There's this whole dynamic around stable coin stuff where um you know in an ideal world you hold a stable coin and it you know bears some interest or yield as would a you know as if you were holding a US treasury bond which is backing of these things. Now with the genius act passing basically um you know that piece of uh legislation has effectively ring fenced the ability to provide the yield so that underlying treasury yield to the stable coin holders. But it does seem like, you know, there are there's basically gray areas surrounding that ring fence of effectively loopholes around like is it a reward? You know, if you call it something other than the US Treasury yield um and it's some form of reward uh or maybe you know you're receiving some other token as a a yield. Um, so I think there's going to be a lot of this type of stuff where people are expend experimenting around the edges of how do we actually create competitive um, advantages or dynamics for you know our new XYZ stable coin and I think a lot of that competition is going to come from these gray areas around the loopholes around uh, rewards versus yield etc. Um, so I think this is sort of foreshadowing that a bit. >> Have you guys seen uh what Slash is doing? >> No. They are um they're essentially a bank that's stable coin first and they just hit um 150 million in ARR within two years. They offer consumers rewards in terms of 2% of the stable coin rewards that are passed back to their consumers. They seem to like get a start by like doing sneaker sales, like sneaker reselling stuff, but have really seemed to make a big um indent within like kind of the startup and founder community and have gotten to an amazing like 150 million in AR within two years is pretty impressive to see. I don't know um what the actual business model looks like in on the inside. I just uh put put a link in the chat, but seeing something like that just like shows how much demand there is for just better movement of money as well as uh the actual holding on to some funds on the other side. So, I don't know what this looks like in the end, but uh there are definitely going to be people who, you know, do more on this. It seems like it was built on like base. >> Interesting. Yeah, I hadn't heard of this one. Um, moving along, uh, there was another raise here. Not sure who brought this one, but Doppel raises 70 million series C to outpace social engineering attacks led by Bessemer venture partners. The round focus or follows a 3x increase in valuation in 6 months and adds new investors including Crowd Strikes George Curts. >> Hey everybody, hope you're enjoying the episode. Lots of uh interesting dialogue going on this week around stable coins AI and a lot of the M&A activity that's happening in the industry. Um quick word from on-ramp and specifically around our inheritance product. We have no shortage of net new clients and existing clients that came over to on-ramp specifically because of inheritance. We've all been in this current situation where generally uh Bitcoin is male-dominated. Our significant others are perfectly fine with us allocating or even overallocating depending on who you are to the asset. But they also don't want any uh exposure, have to deal with management of private keys, what to do if something happens to the individual, hardware devices, seed phrases, all the things um that account for self-custody. And so while clients sometimes feel perfectly fine with self- custody for themselves, it really comes to legacy planning. Whether it's with inheritance, the dynasty trust release that we had. Inheritance comes with every product uh and every multi-institution account included with also insurance, IRA and trade. But inheritance is the thing that I want to call out simply because as the price appreciates, as we get older, we start to recognize that we have to legacy plan. We have to be more mature with this asset. And so on really provides peace of mind there. Um, even if you're not necessarily ready for something like on-ramp, but you want to learn more of how we solve for that and some of the other, you know, financial products we offer as Bitcoin naturally matures. It needs serious products and solutions, I'd encourage you to book time or you can reach out to me directly, michael@honorantbitcoin.com. We're actually piloting out some flat reduced base pricing that uh we're testing out this quarter and we'll go into 2026 with if you'd like to opt into something like that, reach out and we'll share more. All right, hope you enjoy the rest of the episode. Yeah, I thought this was fascinating because there's a component of crypto or digital assets, but it's really related across the internet. Um, I don't fully know how they integrate this, but there's a notion of like human risk management that they site across um different tooling whether it's fintex, AI, uh obviously digital assets. Having a bare instrument that can be stolen or socially engineered is like one of the prime use cases for how do you mitigate bad actors specifically around social engineering, AI, deep fakes. Um, and I expect to see more of more and more of this uh get integrated. Now I still I've seen different firms like this pop up and there it's really uh like ephemeral you can't touch in the way that they mitigate it. So there's an angle of like executives at a company where they put higher um like thresholds and hygiene around how they manage, you know, their digital presence and maybe even some of their like permissions when they set up their passwords. So I don't necessarily know how much of it is like actual uh AI proprietary software versus like client services and implementation, but I just expect to see more and more of this. We're just not prepared uh as a society to deal with the internet and specifically AI. We see all day long these pictures. It's kind of crazy the past like two weeks. I think it's Gemini or whoever's new implementation that you can like insert your picture next to somebody else. Um and so I just expect to see more on both sides to combat uh the losses that will happen. And the Canary is generally digital assets because it's the easiest to steal. But then you can imagine the social engineering will continue across um to different you know podcast groups that you know you throw something else that's looks like it's that person but it's not actually them. There's all this content out there. So I thought that was interesting and $70 million is a pretty large um amount of capital to be invested. >> Yeah, this is um this is certainly interesting. This is a real risk that you know we talk a lot about just in terms of the sort of unique custodial characteristics of digital bearer assets and how uh you need to protect against not only uh physical threats but really increasingly these digital social engineering attacks and and really you know why this is such a large issue at least in my mind um and and where most of this occurs is on you know single counterparty exchanges like a Coinbase where um a scammer or a hacker will impersonate the customer support reps of a Coinbase or uh another wallet provider or an exchange and they will say, you know, something's happened to your account and in order to protect you, uh I basically need your credentials. And once the individual, the end client hands over those credentials willingly, even though they're being socially engineered, basically they've they've given up any recourse. And so that's that's the really sort of insidious part about these types of attacks is because Coinbase basically can wipe their hands clean of it because the end client actually agreed effectively to give up their credentials um that allowed their you know their account or their wallet to just be wiped um you know immediately. And so it's a real problem and it's only going to accelerate from here as you mentioned Michael um with the onset of AI deep fakes etc. um just really adding tools to the arsenal of these types of attackers um uh from a technology standpoint. And so this is interesting to see like you said like it's it's hard to sus out like how exactly they're going about this whether it's uh proprietary tech or it's more just manual um uh in terms of like putting more layers and uh redundancies uh in place in order to move funds like that ultimately you know I think you know when when we think about what we do on on on our side with multi-institution custody it's really this idea of like it should be difficult to move these assets ultimately and so you you should have multiple layers of redundancy um that protect you against the assets moving quickly because they are digitally native and bare assets. They can be moved quickly and that's part of why these attacks are so frequent at the Coinbases of the world because they don't have those sort of layers that make it more difficult to move. Yeah. And there's a real barbell problem here. Um, I don't pretend to have the exact solution, but like when you think about it, you can either uh change like the logic and ROI of violence by building the right products and services that um would cost more for social engineering and more thought. And so then you keep people from focusing on your business. when you think about what multi- institution provides not only from like video verifications to additional logic to additional authentication methods all the way to offline you know signing versus the other side what Brian's referencing the Binance is Coinbases large institutions what one of the solutions that they provide is really um like canvasing the internet and looking for like different levels of fishing related to that website so whether it's spinning up a website that looks like a domain that's similar to Coinbase to the different types of emails that you get and then really helping police that and send out emails and try to get them down if especially if they're at like various other reputable sites that somehow got um you know uh corrupted or however they were to push those links out. But the problem is to to Brian's point like that's especially in the age of AI that is continuing to grow and so it's like a whack-a-ole and and so there's a we'll see how it plays out but my instincts tell me the way you change that is at the product level because when you at the product level if you make it really hard for those assets to be lost or stolen well then bad actors are going to go to the lowerhanging fruit. Um and that's really where we think about like multi-institution from a market structure perspective even from being able to steal somebody's assets. Generally people know that you have like one degree of movement whether the hardware device sits in your house or you can authenticate with one institution. So people target I think there was like this past week there was like three different crazy events that happened with um kidnappings and um ransoms that happen with people in digital assets. But that starts to become less and less likely when you know that there's an actual process uh around the movement of those assets. since we're still so early and this is going to be the key part for like the fidelities and large institutions of the world because they're just not prepared for that because that's just not how they manage and have built their businesses. So I do think there'll be more and more needs for like firms like this and it'll be interesting to see how they [clears throat] grow with kind of like as the u attack vectors grow. Very well said. Um maybe switching gears a little bit uh Michael you brought this one uh with the caption your chain is my chain. Um, do you want to elaborate on what you meant by that? There was basically some issues with Cardano this past weekend and the FBI was somehow involved. >> Yeah. So, I mean, I I I had heard about this and then it popped up. Uh, basically somebody leveraged some AI tooling. Um, and I don't know exactly the implementation method, but it it created a I want to say a double spend on Cardano's validator set. So Cardono has its own node infrastructure and whatever happened there was a like split between some of the validators were picking up um the traditional change or the the chain that should have existed and then another one had some kind of like level of spend that corrupted it and nobody knew what was going on and so it effectively had a halt. uh the exchanges had to halt trading um and it was I believe like a relatively low uh cost effort to do what they did but it ultimately shows that this is the ability or susceptible to any blockchain any cryptocurrencies because of their lack of decentralization. Cardono was just the natural um first one for it to happen to a recent one in this. They try to like hide that Hoskinson reaches out to the FBI uh and that this was a oneoff and the guy that did it or who was behind it said he didn't know, but when you read in this article, they basically explain how they did this on test net before they actually implemented on the the main protocol. Like so this was coordinated. Um, so anyway, I think that the real angle here is that a you can roll back these chains, a you can uh double spend and ultimately whether they're proof of work or proof of stake, there's not enough hash rate or decentralization. So you can effectively change um the ledger. And when you do that, a it's proving the just notion of uh fundamentals, but then also you end up with these things where it shows that you can turn them off, you can revert them. Uh, and this is effectively all cryptocurrencies and blockchains including like Tempo and everything else. And so I thought it was just good to highlight because I know we talk about all this stuff and it seems like either for I know there's definitely people listening that are like long other crypto assets or maybe think like well you know close-minded form lites that other crypto has some value. It's just like it doesn't because fundamentally it does not have um it doesn't have the fundamentals required to be decentralized. And this was just the most recent example. And this is a cryptocurrency that's existed for eight years. So imagine that's been out in the wild for a while. Imagine another cryptocurrency um that's relatively new. So yeah. >> Yeah. No, it's um I'm glad you brought this because it really is a sort of textbook example of when we talk about this notion of decentralization theater like this is a just a perfect example of it. Um, and when things actually do break down, you you start to see where those vectors of centralization actually reside. Um, and just to add a few more details to this. So, this is this is the Twitter thread of the guy who actually did the exploit, explaining the exploit, basically saying, "Sorry, Cardano folks, it was me who endangered the network with my careless actions yesterday." It started off as a let's see if I can reproduce the Brad transaction personal challenge. Then, I was dumb enough to rely on AI instructions on how to block traffic. So basically he vibe coded this exploit. Um a few other details from this uh this was um some of Nick Nick Carter's thoughts on it. Uh a chain split between two node versions in which one of the forks has to be later discarder discarded is downtime because a exchanges wallets have to stop acce accepting processing transactions which occurred. Um if not they're vulnerable to double spends and b if you transacted on the poison chain your transactions will be discarded which equals downtime as well. the network is effectively down during a chain split situation even if block production continues. Um and then he said regardless a single amateur using AI to create a poison transaction creating incompatibility uh between different nodes implementations is notable because it shows the extreme fragil fragility of a major network. Um and yeah I I think last I checked like Cardano's market cap is still like $20 billion. Um which is just insane to think about. Um but yeah, the real takeaway here is this is just a great example of of decentralization theater and when [ __ ] hit the [ __ ] hits the fan um we can halt the chain. We we can make changes um and you start to see those uh vectors of of centralization appear. >> Yeah. And where this is really important to call out is um it's always sad when you see really well-run large multi-deade over sometimes 100y year old financial institutions adopting cryptocurrencies because on a long enough time horizon this is the the end state. Like if you think about these assets accumulating 20 billion, 40 billion, 60, 80, 100 billion market cap and you think about a global um competition for uh corrupting, stealing, like what happens when North Koreans, bad actors, wherever they are, are looking to do these kind of exploits because there's a larger bounty and then if you're a large institution that's offering Salana or these other cryptocurrencies and you have a sizable weight behind your marketing engine and client base exposed to them, and they wake up and realize this can happen or worse they lose assets. What does that do to your brand and reputation? So this fundamentally goes back to the thesis of not only building and investing around this one asset that is the market and everything else is just hiding around it generating some money generally for the venture capitalists and founders that are able to you know take secondaries and take private capital back into their personal accounts. Um, this really is just on a lot of times in where all of this goes, but everyone just it's the same thing as like bonds being negative yield and nobody talks about it because the system is used to perpetrating or propagating that we're, you know, can't because our existing businesses are heavily indexed to bonds or it's just not part of the common uh sentiment yet that we can say. And so this is just a real great example of it. It's funny that Nick's calling out cuz like these guys invest in cryptocurrencies and there what what makes Cardano any different than like any other uh asset. >> Yeah. >> It's all Oh, go ahead, Brian. >> I was just going to say what I have up on screen uh is this this person on Twitter, Hen Gree, who's been just doing this this running thread of looking at altcoins effectively and just pointing out all the [ __ ] And so this was his one for Cardano. He says Cardano raised 62 million, zero revenue, one transaction per second. Uh entire ecosystem is basically one DEX and one lending pro protocol that maybe seven people use. Ghost Chain guarded by an illiterate cult at the gates sits at $21 billion full uh fully diluted valuation. Um so we need more of this. We need more people just calling out what these things are. Uh this is another one in the thread. Uh but go ahead, Le, I'm going to cut you off. No, I was just going to say Cardano is looked at at a as a blue chip cryptocurrency. I just looked it up and it's the 10th largest one in the world and eighth if you don't include uh Circle and Tether. So, um you know, people look at these things and they see, you know, that's why honestly Bitcoin is still looked at as a scam like everything else because people still group Bitcoin in with the rest of these cryptocurrencies. They think Cardano is the same as FTX or and the same as Bitcoin. Um, and there honestly is not enough education on why these things are actually different. And seeing those people out there who offer everything under the sun and uh say that crypto is uh and Cardano is the same exact thing as Bitcoin is what's going to trip up many of these institutions when they look at coming into the space. And it's going to take a lot of re-education in order to actually get to what's the signal versus the noise. And that's why, you know, a lot of people have really stayed out of this industry thus far, too. >> Yeah, it's a great case study. um as we expand our team and go after institutions and and higher education for like certain segments of that to show this as an example because if this can happen here I think it it also ties back to um I don't know who this is giving more credit to but uh like Cardono is like a version of uh the poor man's uh Ripple because what makes this whole like circle work is you raise capital from asset managers venture capitalists that either get the the warrants on the token some of the equity They get heavy war chest. Bitcoin doesn't have any marketing or direct budget. So, you naturally have these companies that go out and evangelize. And that's what Hoskinson's done. He did a lot of it in Wyoming. You build this version, then other people host events. Won't call any out, but there's really nice conferences we've been part of, but then they have like Cardono a sponsor because they've given up money and it's really hard to make money in the Bitcoin space. You don't have them spending a lot of capital. And that's how you end up with this refle reflexive like circle of everyone believing there's some like value or um um innovation happening when it's all it's all for not. Uh so anyway it's very interesting incentive model. >> Yep. It's very well said and it's uh it's unfortunate that there's still that massive conflation and to your point, Michael, part of it has to do with literally just like the lobbying efforts and like you know these these projects basically print money out of thin air with their tokens and so they have you know quote unquote money to spend on lobbying efforts and marketing efforts and so it it adds to that conflation uh which is unfortunate but um we can move on. Um, I think where I wanted to go next was, uh, this article by Michael Green, uh, which is make making the rounds over the past 24 hours or so. So, Michael Green is really a Trappy guy. He's, uh, long been sort of anti- crypto, anti- Bitcoin. Um, but I saw this I saw this last night starting to sort of percolate across crypto and Bitcoin Twitter because um, basically what what he describes in this uh, long form article is he does a deep dive into the metric uh, of the poverty line and basically how that's been calculated over the years and the reality that actually that calculation hasn't changed in several decades. So basically the the takeaway here is the poverty line uh calculation or metric was created in the '60s. Um and effectively it uh looked at uh families that spent roughly a third of their income on food. And so the poverty line was effectively 3x the cost of a minimal food plan effectively. And so this worked in the '60s effectively because the other expenses to someone's living uh was were relatively cheap. So housing was relatively cheap, healthcare was relatively inexpensive, child care was mostly done at home or by the family and colleges were way cheaper. And so the formula that 3x sort of food inflation adjusted has remained consistent over the decades while the rest of those expenses have increased dramatically. So looking at sort of the statistics today, food is really only 5 to 7% of household budgets, not the 33% that it was in the '60s. So housing now eats 35 to 45% of that income. Healthcare takes another 15 to 25% and child care is anywhere from 20 to 40%. And so basically if you're taking that multiplier, that 3x that you know comes from the original calculation, it really looks more like a 16x multiplier today. And so what Michael Green is arguing in this is basically that the real poverty line today is more like 130,000 to 150,000 in annual income relative to what the current stated poverty line is around 31 grand. Um so you know some of the some of the comments to to this article were saying you know he was being way too aggressive with some of his uh estimations of current living expenses. So you know maybe this number is too high. The takeaway to me though is that like the the current poverty line number is wrong. Um, and it's probably somewhere in between those two numbers, the 130, 140, and the uh the 30. And so, you know, I think why this got picked up by Bitcoin folks and crypto Twitter is effectively because he's outlining the problem which we talk about, which is the money is broken and the debasement concerns here and the sort of um acceleration in living expenses beyond the growth in in real wages. Uh now he doesn't identify the the sort of uh actual problem in his article or a potential solution in in Bitcoin or a better form of money. Um but he does pretty accurately lay out part of the issue here. Um and what is causing uh basically because this metric is so outdated and old. A lot of things stem from people making other calculations and other assessments and forecasts around what the what they think the poverty line is. And so if that's as majorly distorted as he's suggesting, then that has a lot of implications for, you know, how we think about how the economy is doing generally speaking. >> Yeah. I mean, I I think this relates to businesses in the sense of um where the long enough time horizon, the thesis has always been that how we used to have a savings account, you'll just generally see in your bank account, it'll be dollars and BTC and the market will just wake up to there's a better savings technology that exists to offset this because I didn't read the article, I skimmed it, but it reminds me very similar just like the debasement trade or the denominator being broken is when the underlying unit that everyone's uh either receiving their um payments in their salary or their savings is in including if their investments they're just losing purchasing power and it's not keeping pace and CPI is another great example of just like the distortion from what this is describing to like what actual CPI is and so of course if all these things are manipulated then you're losing purchasing power and on a long enough time horizon I think within the next like three years there'll be some ametic factors of like will I just hold this money And um because the volatility will also temp uh uh like loosen or be or like the volatility won't always be there where Bitcoin it'll be easier to like offset what annual inflation is versus Bitcoin's volatility where you'll just hold larger and larger positions and that's how it kind of like moves away from crypto and gold probably ends up sitting there as well. Um, but that's like the biggest thing I I take away from this is that the market is slowly waking up to the dollar is not retaining its purchasing power. And if it's not doing that, then everything else is getting more expensive, including like what it costs to eat and all the goods he's referencing. >> Yeah, that's very well said. And it just goes to how many false signals there are in the world. And um everybody still thinks that the you know risk-free rate that they should be chasing is the 10-year Treasury yield which we all know over a long time frame has been actually negative yielding in terms of uh adjusted for the increase in money supply. And so um that is you know the base calculation for all economic activity and it's it's wrong um the fact that you know businesses should not be considered based on the base calculation of how many more dollars they can make because the dollars keep on growing in value. maybe even inflation adjusted dollars for the amount of money uh the amount of new dollars that are created is a little bit of a better metric but uh plus some additional risk premium but it's all going to change as you as it relates to what is the base calculation in order to uh retain your purchasing power over time and that's going to be a scarce asset and then you can layer on equity risk premium on top of that and ill liquidity risk and whatever else you want um and you early riders is pretty early to this trend, but um and it's going to take a while just because you can see these false metrics being really a benchmark for a really long time. But those who um you know continue to look at these false signals as the North Star are going to continue to um underperform as it relates to you know both allocating capital as well as you know being able to just save and uh grow your purchasing power over time. Yep. Agree with all that. Very well said. The the sort of parallel to just thinking about other government issued statistics like a CPI um that we know is understating the true level of debasement and uh currency devaluation. This is very similar. The this is just understating uh what the actual line at which a family is struggling effectively in the United States. And so we just haven't even updated this methodology in you know 60 years. And so there are going to be knock-on effects of that in terms of how we're using that data to forecast other things and you know get a general sense for the health of the economy and the health you know the health of citizens. Um we're not getting a real picture of that today. Um yeah maybe this ties in because I know we have limited time. Uh we didn't get to chat last week. We don't have to pull it up, but the square launch and a lot of the tooling they're providing for uh SMBs is really important here because the same way an individual can't recognize the problem, the same problem exists with businesses um in the sense of whether their unit economics and margins are decreasing or going out of business, they naturally need a better form of money to manage their treasury. And so that's going to be a huge lift um given I think that 54 million merchants. And so there's more and more tooling, more and more education that will come. And I think that similar with like the stable coin proliferation combating deep fakes. There's going to be multiple implementations. This is a like global phenomenon when you think about uh deep fakes, when you think about money movement, and then when you think about savings technology. And so this it's going to be a very interesting area to watch play out, but also invest in because there's going to be a number of winners. uh there won't be one implementation or one like counterparty that wins all when it comes to accepting and saving the better form of money. >> Yep. Agree with all that. Um unless you guys had anything else uh want to end on perhaps a slightly bullish note as we mentioned at the jump the prices in the 80s. Um but you know maybe something to to bring to your your boomer uncle who you talk to on Thanksgiving. We used to joke about crashing to 85k. So, this is a this is a tweet from CZ back in December of 2020. Waiting for the headline, Bitcoin crashes from 101K to 85K. Save the tweet. Um, and this is this is one of many of these types of tweets from four or five years ago where people were memeing the notion that we would be crashing to these much higher levels from where we were back then. And that's exactly what's happening right now. And people are acting like the sky is falling. But ultimately, this is, you know, frankly, how we all expected it to play out. We're going to make higher highs and higher lows. And that's kind of just what's happening. So, don't get shaken out. We're 30 35% below alltime highs from, you know, a month and a half ago. Um, so zoom out, have some context, and um, tackle that that conversation with your boomer uncle who who you had buy at 97K. >> Yeah. And I mean, if we're if we're doing the Thanksgiving advice, we also have to re recommend uh you know, it's cherry cherry-picking where we're at for a year time frame from last Thanksgiving. But if you look across any asset class um in any time frame that's generally not 12 to 24 months, Bitcoin has outperformed everything else. And so I think that's the angle. And then obviously making sure they size it appropriately so they can do the education uh and go and understand well if it crashes 25% it's not get out of the trade it's just this is park horse. Um so yeah should be think I think we'll have an exciting 2026. It shouldn't be too too too uh you know it could be a lot worse Thanksgiving. Imagine this is sitting at 25,000 or 35,000. There's been some very awful >> Could always be worse. >> Could always be worse. >> Back in the day in 2021, we crashed from 69 to 58K and uh and I was screaming at everybody in my family to buy Bitcoin then before going down all the way to 16,000. So, uh we we've been through this rodeo before and and that turned out fine. Um even though they may or may not have uh been happy the next Thanksgiving, but it's all about a long-term approach. >> Long-term approach. Sads are on sale. Black Friday came early. Um yeah, that's the right that's the right mentality. Anything else, gentlemen? Want to wrap? Well, the the one thing I was going to call out was um the 2022 um Thanksgiving must have been very tough because if you remember 2021, I think it was like near 5060s and 2022 that was a $17,000 Thanksgiving. Um so yeah, things are all worse. can always be worse. [laughter] >> All right, thanks boys. See you next week. >> Hey guys, I hope you enjoyed the show. Uh, if you liked it, please give it a like and a share or subscription. Um, like I mentioned, we'll be out in Dallas. The team from Early Writers and On-Ramp will be hosting a few events. If you're curious on what Early Writers have been up to, you can go to early writers.com, see some of the uh, portfolio companies. We haven't publicly announced yet. There's some very exciting announcements that are coming in the uh next few weeks when it comes to you know looking at from the first treasury company uh Bitcoin treasury company business in the space that we backed uh when it looks at the quoteunquote debasement trade that's now being talked about today um backed a company playing in the gold and bitcoin space all the way to new uh firms building globally on multi-institution custody. There's a lot of exciting things including the stables with the accelerator that we launched and then we have new teammates joining across the world from investment banking to um traditional portfolio management. We are really building uh a very exciting platform that should be pioneering um what asset management on a Bitcoin standard looks like. If you're interested in getting involved, I'd encourage you to reach out or you can shoot me an email.com. All right, hope you guys have a great week. We'll have a awesome podcast this week and see you next Monday. Thanks for listening to this week's episode of the show. If you found the information valuable, please share the episode with a friend or leave a rating on your favorite podcast app. All the links we discussed in today's show will be in the show notes inside your podcast app. Before we finish, a quick reminder that Onra Media is forformational and entertainment purposes only, and nothing should be construed as investment or legal advice. Regardless of where you are on your Bitcoin journey, we'd love to hear from you. Visit onrampbitcoin.com/cont to schedule a consultation with one of our private client adviserss.