Bitcoin And The Crypto Market LATEST Update – Chamath, Friedberg, and Sacks
It turns out, you actually may not actually own them at all. You thought that you were properly lending them out, you actually dont. There is no enforceable contract, it turns out, and so i think, thats going to be an entire set of different legal issues that are now going to come to the service, because people who actually legitimately lent this stuff out, for example like if you short, a stock And you go and borrow stock from any one of us: theyre really tight guard rails. You know if you wanted to go and put a credit derivative swap on against that theres, a central clearinghouse that makes sure youre not over levered. You know you have to go and get audited by a bank to even get in the kind of account that allows you to put these derivatives on. None of that was possible in the light of the recent cryptocurrency crash. There has been a lot of news about crypto firms going under as a result of extreme market conditions. Popular crypto, lender, blockfi, coinflex, a minor crypto exchange and celsius network are some of the cryptocurrency firms undergoing severe liquidation issues. Then theres the now infamous three arrows capital. Two days ago, the embattled crypto hedge fund filed for chapter 15 bankruptcy. Several creditors have sued over the firms, inability to repay loans. Last week, crypto broker voyager digital, said three arrows capital defaulted on a 675 million dollar loan, causing the broker to pause traders, deposits, withdrawals and rewards for customers.
The loan included 15 250 bitcoin and 350 million dollars worth of usd coins at bitcoins. Current price of nineteen thousand seven dollars the loan is now worth a little over 650 million dollars. Last week, sam bagman, fried the billionaire founder of fpx, also warned about the dangers of certain crypto exchanges and brokers. The billionaire investor and entrepreneur has been involved in a string of bailouts of ailing crypto firms. He is now the single largest shareholder of voyager digital and is also reportedly in acquisition talks with blockfi in the latest episode of the all in podcast chamf pala hapatia, david freeburg and david sachs. Take a critical look at the cryptocurrency industry, primarily the many unregulated exchanges that offer unbelievable yields to investors. Theyd also discuss what they call the crypto bubble, which they all agree was caused by the incessant money printing by the federal reserve. Please watch like and share this video and drop your comments about the discussion in the appropriate section below also remember, to hit the like button subscribe to the channel and turn on post notifications for more videos like this thanks and enjoy the video bitcoin activity as a Function of year and value nick, can you just put that up just so that we can look at that together. The crazy thing about this chart when you look at it and its pretty obvious, is that we are collectively in one way, shape or form basically trading up, uh ever since 2018, really with all the stimulus, because if you look at you know the mean price of Bitcoin of 2018, it was a nothing burger.
You know what we were talking about was you know, a price that was sort of between a few thousand dollars, two three thousand ten three thousand you know and then all of a sudden, when all of the stimulus money hit the market, look what happened to it, But i think something unique also happened, which is that people really understood how to run these very complicated off chain. Bitcoin arbs, and i think we should explain what those are, because those are whats behind the three arrows capital. Its behind you know, i think sam had this kind of oblique tweet. That said, you know, some of these exchanges are actually already insolvent, theyre already the walking dead. So the first thing to keep in mind is that you know this is a completely unregulated market right. There are no middlemaker market makers per se that actually have reporting requirements to any regulatory authority. There arent any clearing houses there isnt a way for us to understand systemic risk as it builds in the crypto market. So what happened starting in 2018 and 19? Is people realize the following things were true its sort of what we talked about last week you go and do some crazy round. You uh, you know, mark up some phantom equity in a company that company then issues tokens. You then list the tokens not on. You know a blockchain per se, obviously but uh in a place where trades can happen off chain right and theres, a bunch of exchanges where these things happen off chain because its one, you know uh company, and then they have a bunch of segregated sub accounts and What happens is when these things initially get listed? Retail goes crazy.
The price goes up folks, basically dump on retail um, and you know you spin that loop as fast as you can and you can extract an enormous amount of money along the way. All these things, like d5, all of a sudden popped out of nowhere and its like hey, you can earn 15 16, 17 18, just deposit the bitcoin, and so folks would deposit bitcoin. But then what would happen is like the places where those deposits were held. Would then need to obviously find places to make that 11, 12 or 13, and so then they would go off chain to some other random person. Who was offering to pay them even more than that, and they would try to arb the difference. But it all catches up with you, because when something like a terror goes to zero, all the bitcoin that was used to basically, you know, uh run that defy process around tara vanishes. You know and then all of a sudden you, the lender, are like hey. Can i have my uh bitcoin back and the broker is like well, actually i dont have it i lent it to somebody else. Let me ask that someone else and theyre like im. Sorry, i dont have it, but i have these tara coins. You know, because i was running some arb and now it went to zero and thats. Essentially what were seeing right now. So we have two big problems and then i think we have a third thats kind of funny.
The first big problem is like, obviously, in the absence of any regulatory oversight. This stuff is going to happen. Systemic risks are going to build up thats. What were facing right now is an enormous amount of systemic risk, largely around bitcoin, a bunch of this money. I think has been essentially just vaporized, and so all these people that try to find their deposits, especially in custodial accounts in off chain brokers, may be sol at some point and i think thats just going to be a huge show. If that actually happens and to be clear chamath they dont have the keys to their own bitcoin. They gave money to a custodial account. They then did this lending went out to get them to fifteen percent and they dont have any recourse here. They cant get there. Well, look at this bitcoin owners put them in a wallet and own the keys. Does anybody have recourse to this three arrows capital and all this other interrelated parties that are now you know, gone completely bankrupt because of this camp? The answer is absolutely not um, so that thats, the first problem, you have absolutely zero oversight, which means systemic risk has been built up in the system. David freberg, the chairman of the board of directors of metro mile, also gives his opinion about bitcoin and the rest of the cryptocurrency industry, the billionaire investor and ceos. The production board sees some potential in bitcoin, but not so much in the rest of the crypto industry.
He states that there are at least two things he finds particularly unsettling about. The space here is david frieper, im, no crypto expert and ive not been an investor in crypto currencies. I read the original bitcoin white paper makes sense. Bitcoin itself to me makes sense as a potential uh initially was kind of interesting as a potential alternative currency, but the transaction fees were very high, and so it never really seemed to make sense as a replacement for traditional financial networks until those transaction fees dropped below Those of the traditional financial networks, the biggest concern ive always had, which ive mentioned multiple times on the show, is that whenever anyone talks about a quote cryptocurrency, they talk about the price of it in dollars and if it really is meant to be an alternative to The us dollar, why are you talking about it in the price of us dollars and its up and its down relative to dollars? And that implies ultimately that the intention would be to transact back to us dollars, which implies that the intent is not to be a replacement for the u.s dollar, which was a lot of the early prognostication of bitcoin. Was it was going to be a replacement for the us dollar, its going to be an alternative to traditional monetary systems, but ultimately, if youre just measuring this in dollars and its up and its down everyones freaking out every day about cryptos up cryptos down? That means it really is more like a security except securities.
Definitionally are supposed to have a secured interest in some underlying set of assets and theres, no underlying asset, its not actually a security, because it doesnt provide you a secured interest in anything. So it is effectively a bet on some systems of computers that are meant to facilitate some set of activities that you know. Ultimately, people really only seem to value in us dollars so um. So i i dont know i mean like: where does it all go? It seems, like i mentioned at our predictions uh episode last year that all of these smaller things are going to get blown out. These quote unquote cryptocurrencies, even though many of them dont really act like a currency, and you know maybe bitcoin itself persists, and it seems to me like thats, always going to have good staying power. Entrepreneur and investor david sachs also weighs in on the issue. Saks explains that the 2020 and 2021 boom in the cryptocurrency market is directly tied to the excessive money printing done by the federal reserve in the same period. He adds that crypto advocates only hijack the whole issue, make it seem like the u.s dollar was weakening and investors were going to get wrecked without crypto. There is um a future technology platform here with crypto, but i mean ive been saying this for the last year that just because theres, a future technology platform, doesnt tell you what the pricing should be and the price action got decoupled from the level of progress in The space you know you should always be looking at what is the real usage use cases, customers, revenue things like that, and people stop doing that, and i think part of the reason why the narrative was so powerful.
If you go back to last year and the chart that shmosh showed about the the increase in the price of bitcoin, which is really the root of everything right because you know first bitcoin appreciates and then, if you think about it, like ethereum, is ethereums market cap Is like a derivative of of the bitcoin market cap, its been roughly 40 and then the all coins sort of get the market cap? The all coins is sort of derivative off ethereums market cap, so the whole thing kind of moved up in in sync and the reason why bitcoin moved up so much is that as the fed kept printing more and more money, you had fans of bitcoin saying: look The fed is debasing the us dollar were going to need an alternative currency that was a powerful narrative that the fed seemed to be vindicating, and there was a positive feedback loop, which is the more the fed debased the currency. The more that the price of bitcoin went up now, the reason the price went up was not because they were debasing the currency. It was because they were creating so much liquidity that that it created a liquidity effect that then drove up the price yeah. You saw an increase in speculative investments across the board, including, but not limited to crypto. So again you know when the fed prints too much money. It creates asset bubbles but theres a powerful reinforcement because, as the fed was printing, bitcoin and supporters of bitcoin had a really great explanation for why bitcoin was going up, which is theyre destroying the us dollar were gon na need an alternative soon.
Now i think, in the very very long term could bitcoin be a non fiat currency. Yes, i mean, i actually think the technology works. You could create a a new kind of currency thats, backed by math and by cryptography, as opposed to fiat government, but that could take a really long time. I mean that could be decades in the future and but what happened is the market started thinking? Well, thats. Going to happen soon and thats, where it just got ahead of itself, that was the tulip part of it with each new day becomes more glaring that the total damage to the crypto space as a result of the terror collapse exceeds the 60 billion dollars. That went up in flames two months ago. It has also weakened the reputation of the crypto space as a whole and given naysayers, more ammunition to denounce the space, but its all noise. The blockchain industry is shaping up to be a great replacement for the ailing traditional finance industry. It might take a few more years before we are actually there and more people realize, but its only a matter of time.