Episode 108:

 

Teddy Fusaro

COO of Bitwise Asset Management

Transcript:

Chatting with Teddy….

 

Sasha:

All right. Hello everyone. Welcome to the huddle cast. Today is March 13th and we have a very special guest, Teddy Fusaro, the COO of Bitwise investments. Teddy, thank you so much for coming on today. I heard your recent podcast with Frank Shapiro, and you just had so much great information shared there about the state of the markets basically. And a lot of this happened just since that podcast. So I’m really looking forward to getting your take on where we are with things. You said in an email, we have a three headed monster going on right now, so maybe we could get started. I think everyone probably already knows who you are, but maybe just give a little bio, and then we can get into what’s going on in the economy.

 

Teddy:

Yeah. Thank you for having me back, Sasha. It’s great to see you again and be back on the huddle cast. I love being on that in first time. So happy to be here again. And it is Friday the 13th, which is something, as you hinted at, which the circumstances were better, it’s a unique time in the country and in the world really. We’re going through something that we haven’t really been through before. But before jumping in, like you said, my name is Teddy. I’m the chief operating officer at Bitwise asset management. We’re a crypto currency, and digital asset focused start up. We’re headquartered in San Francisco. I’m here from Connecticut today. Luckily, we implemented a firm wide, a work from home policy on Monday this past week, so all of our people are working from home. They’re safe where they are and with their families. So we’re happy to get that done earlier in the week. And if it was, we create investment products, so that people who may not be sophisticated in terms of accessing the crypto currency market directly themselves can access it through more traditional investment wrappers. And we also do a lot of research as you know, and we educate our clients, potential clients, institutions, and even regulators to the extent that we’re trying to get additional things done. We provide that research in those contexts. So it’s a lot of what we do, as you’re aware. And so that’s the 30 seconds on who I am.

 

Sasha:

And that’s why I’m so excited to talk to you about this. Your Bitwise research has been second to none. It’s in that report that came out last year, looking at the various exchanges, and the regulation, and how it impacted the truthfulness of the numbers coming out of there. I think that was a really ground, big breaking thing for the industry to see. Lots of people had doubts of the numbers that were coming out, but you guys just drilled down and showed how clearly, what a difference there was between the top 10 exchanges and the other 150 out there. So, what has your research been showing you this week? Maybe we can just start with the Corona virus, which is the main thing, but Bitcoin itself dumped a lot of assets, or a lot of value yesterday. And I maybe naively always thought Bitcoin would act as a safe Haven. It when this next financial recession was going to come. And so I was really disappointed and surprised, and a little panicking myself, when I saw it dropping so much yesterday. My husband started calling our lender, trying to get 50K out of our house. That was his response to it, but he wanted to buy as much as we could at the moment. What do you think caused that big crash yesterday?

 

Teddy:

Yeah, there’s so much going on holistically in financial markets, and it’s all really intertwined. And I think that many people don’t consider the fact that part of Bitcoin’s maturing, and it hasn’t matured yet, but part of Bit coin’s maturing is entering into an institutional world where it becomes more interconnected with the rest of the system. And that’s part of what we saw last night. And I’ll talk maybe just a little bit more about other dynamics before I jump into the Bitcoin dynamics, it’s connect it together. Part of the problem you said is, as we talked about over email, is that right now, we’re dealing with a black Swan events in the world, something that we just haven’t dealt with before. We’re in the middle of a financial crisis already. We’re going to be very shortly within the next five to 10 days in the middle of a public health crisis. And then we’re also likely at the very beginning of an economic crisis. So we have these three things that are happening at the same time. And the reality is that, we haven’t been in a situation like this, and maybe a hundred years, people are often looking to pattern match the last crisis onto the next crisis. And you know, he’ll hear people say this isn’t 2008, and it’s not 2008. It’s different. And in some ways, it’s scarier. In some ways, it’s more dangerous, and it means that the Christ’s seeds are going to manifest themselves differently, and we need to use different policy tools to try to combat them. That’s part of the backdrop in the global ecosystem. There are three different things that people need to think about. That is the most dire and urgent, which is the public health issue that we’re dealing with it, that you and I have talked about a little bit offline. That, to me is the most important one. It’s the most acute one because the reality is to affect many people, people that you and I know and love, are likely to be in severe dire straits because of their health, and America is just not still today is not prepared for it yet. So that’s the first problem that we have to deal with. It’s going to spill over very clearly into the economy. And I talk about the economy. It’s like all of the things that people normally do on a daily basis worldwide have ceased to happen the same way that they used to. Right? Like the engine of the world’s economy, which has been China for a long time, from a manufacturing standpoint, was basically closed for more than six weeks. And then as the health crisis spread across the world, everywhere it gets to, the economy there has the same issue, and it takes a little bit of time before people understand the economic consequences. It takes a little wire while for that data to really get processed, and you think about large scale economic data doesn’t come out for about a month or so after it happens. So we haven’t really seen much of exact precisely how severe the economic contraction is going to be. This is not going to be like a garden variety recession from an economic perspective. It’s like, think about things just ceasing to function the way they used to, right? What happened yesterday, we cancelled the N B A, cancelled the N C A A tournament. The N H L, Kansas golf tournaments are cancelled. We’re cancelling schools in Connecticut yesterday, at least where we are, our local township cancelled schools.

That is going to have a very severe impact on the economy, that many people haven’t confronted yet. And then the third thing, like it says three headed monster, because the third thing is the financial system. The financial system does tend to react quickly, more quickly than you can the then the economy can be reacted to. And what we’re seeing these this past week, in particular, is a severe reaction to people understanding the gravity of the situation, which is why yesterday was the worst stock market day since 1987. We’re seeing more severe signs of upstream and crisis in the fixed income market. And I can talk a little bit more about all these things, Sasha. In the fixed income market is not as visible to people. People tend to look at their 4 0 1 K, or they look at their investment brokerage and they see the ups and downs of the stock market. The fixed income market is much larger. The treasury market had real signs of stress yesterday and again this morning. And then it’s really against that backdrop that Bitcoin is a casualty. So to give you a little sense of how something might spill over into the Bitcoin market, if you’re a hedge fund manager, and I’m your risk manager, we work together, but I say Sasha, I’m the one who decides how much risk you can take and when, you do whatever you want, and you’re running, I don’t know. Just call it to keep things simple. We’ll say you’re running $100 worth of risk, and you have 60% equities, and some illiquid investments, like 38% of your portfolio and then 2% of your portfolio is in Bitcoin, very volatile. It’s getting bunched into that risk asset portfolio along with the equities, right? On Sunday, when Bitcoin really at this past Sunday, when Bitcoin really first took its aggressive leg down, during the day before the global public futures markets opens. If I told you to come into work on Sunday, and I said, Sasha, what you’re doing with your portfolio when the market’s open is you’re reducing risk. Guess what? You’re selling that Bitcoin too. And that’s the beginning of what happened here, in the beginning of the cycle in markets that’s happening with all risk assets. And then what happened last night was what I would characterize as a very technical market, micro structure related cascade, upselling orders being triggered as things got worse into what was a very structural sharp sell-off that included some of the large offshore futures exchanges for Bitcoin.

 

Sasha:

Oh, that’s a great explanation, Teddy. Thank you. So how many hedge fund managers are there holding Bitcoin?

 

Teddy:

It’s really hard to say. We don’t know the answer, but when you hear about people talking about institutional adoption of Bitcoin. It’s not all good, right? Growing up is hard. So we don’t know the answer, but if you look at things like the growth of the C M E futures market, the regulated futures market, which Bitwise has argued, is one of the most important markets in the world, the growth of open interest on that platform, and the growth in volume there has been massive over the last few years. And that’s an indication of institutions using the futures to trade and take exposure and hedge. So you can assume from that data that institutions have increased overall their exposure to the asset. And we think, that’s a significant part of what has occurred to Bitcoin over the last week. We don’t think that what I’ll call the long term thesis, or the fundamental argument related to what Bitcoin is and what Bitcoin can do, is tarnished as a result of this week’s activity. You still think it’s intact, but I think it’s important for people to realize that there’s an expression that is in a panic, all correlations go to one, meaning everything starts to trade together. And that’s what happened this week.

 

Sasha:

Yeah. And so what the hedge funds, when, if they were told by their risk managers to take risk off, how conservative are the managers before they start putting risk back on?

 

Teddy:

Yeah. It’s hard to say. I mean, one theory would be, once they leave, do they come back? How long does it take for them to come back? Do you want them back? Have we quote unquote shaken out the weekends? So we’re participating in the market and now we have a stronger base to rally from? It’s so hard to say. I think with the Bitcoin market and with the equity markets and with the economy and with the public health crisis that we’re going to have, it’s really difficult to pin down when this will turn around. And I think that’s one of the challenging things about the economic issue, that most of the people that are still diluting themselves abut how serious the situation is, the economy is not like a car that you can turn on, and then turn off and turn back on. It’s very difficult for it to re-emerge from a standstill. And that’s why what we’re going to see, and we will talk with some of the longterm dynamics related to Bitcoin, but that’s why what we’re going to see, where’s the massive amounts of monetary stimulus from the federal reserve. We already saw twice, two instances this week where the fed had to step in on an emergency basis to help provide liquidity to the treasury market. That’s after on Monday, they already cut interest rates once emergency rate cut. Very rare activity to see happening from the central bank. So we already had an emergency rate cut once. I mean maybe they reduced the overnight rate. Then they stepped in yesterday when treasury markets were having a hard time functioning to announce a new repo program, which means they’re buying treasuries from the market and printing new money. And then today, they had to increase the size of some of those asset purchase facilities or repo facilities, as they call them, in order to support the market. That’s just the monetary side, and that’s going to expand massively. So the Fed’s balance is going to have to expand as they spend more money to support the market. And then we’re also going to see fiscal policy. So government spending that is going to have to what will eventually be branded as bailouts. Industries are going to need bail out very badly. Like imagine the airline industry, Sasha, you see pictures on the internet, right? They use a picture on Twitter and I’m not flying anymore. I typically fly three times a month.

 

Sasha:

I flew last week from Florida and it was empty. I went there on Tuesday, came back on Saturday. and both times, my mom was with me, we sat with one seat in between us, but we could have easily had the whole road to ourselves. It made me think, what am I doing flying here?

 

Teddy:

Yeah. How empty was the plane? Was it partially where there are entirely empty rows?

 

Sasha:

Yeah, there were about 20 people on my flight home.

 

Teddy:

Wow. You see? I’m not an economist, but it doesn’t take a statistical analysis of the data coming in to tell you that an airline that usually has that plane full, right? Your mom lived down there? Or your dad is it?

 

Sasha:

Well, my dad had a mini surgery, so we went down just to visit him, him and my sister.

 

Teddy:

So you take that flight fairly regularly, right? Couple times a year. And what is it the rest of the time? It’s usually full, right?

 

Sasha:

Usually in the middle row, but crammed between two people. Yeah.

 

Teddy:

Yeah. So this is why it’s hard to think about. It takes people a long time for some reason. And we’ve seen it actually with the onset of the virus. And I wanted to talk about this a little bit too, but it takes people a continual, a long time to sort of deal with the reality of a situation if they don’t like what reality is, right? And you don’t need to wait for the data to come out to tell you that the airline that operates that flight that you, that you take to Florida and back to D C area is going to have serious trouble funding their business because that’s happening every day. They’re used to having that flight fill every single day. So I think that as soon as this weekend, we might start seeing things like bailouts for airlines and hotels.

 

Sasha:

And all the staff, I saw some airlines are just laying people off, and there’s going to be a a lot of people losing money on it, but it seems for America anyway, Trump has made a commitment to try and give the individuals money so that while they’re home, sick, or caring for loved ones that are sick, they won’t experience an interruption in their monthly income actually happen though.

 

Teddy:

I hope that we can get something done like that. And I do think that eventually we will get something done. But the part of the challenge here, and you’ll start to see markets react to the discussion coming out of Capitol Hill and the white house, and we already have very sharp reactions to what they hear. But what’s getting done on the fiscal side? I really hope that what you suggest that gets done. But what happens is, inevitably, and in the political environment we have now, even more so, but inevitably getting the fiscal package from the white house and through Congress becomes a political issue. And so one side will put things into the bill, and the other side doesn’t want, or they’ll try to tack on funding to something that the other side doesn’t want funding attached to and there’ll be a fight. The sad thing is about that, Sasha, we saw this movie over and again during the great financial crisis in 2008, you probably remember it, what the market needs to see and the market will tell you is that, the federal government is going to step in to help the economy and the people who are going to need the most help are going to be those people that you’re talking about. The headline we see is that the N B A got cancelled. But you wonder what the saddest thing about that is? What about the people who work in the stand? Right? What about people who are in the concession stands? Given if you just stratify based on how much money they’re making, those people, oftentimes, they can’t afford to not go to work.

 

Sasha:

And they’re often not on a salary. Either they’re hired out by contractors who will just say, Oh, you’re not working. We’re not paying. So then they’re stuck two weeks or however long the N B A is cancelled without a job, and find a new job in the service industry right now. Nowhere.

 

Teddy:

Precisely. And that’s why it’s so important that the fiscal package that we get done doesn’t just go to companies and corporates and businesses, companies and corporates and businesses are going to need help. Don’t get me wrong, they’re going to need help, particularly in the hardest hit industries, but we need to figure out a way and we should all be hoping and calling on our elected officials to make sure that they find a way to support the people who need the help the most. And the other thing that’s really difficult, there are school cancellations for example, are the right thing to do to slow the spread of the virus. But the thing that’s really hard is, again, it’s those who are the least fortunate, or those who are the least wealthy who oftentimes can afford to not go to work, take care of the kids who now don’t go to school. And that’s why I say that this is unique. You typically have different policy tools to respond to different types of crisis, right? Different crisis. This is like all of the above, at once.

 

Sasha:

Yeah, in the bitcoin chats, hearing a lot of people summazing that there will be looting when the stores run out of food and if we end up all in the quarantine, with the US Marshalls standing outside with guns.

And saying, only one person, how they did in China, only one person can go to the store a day. And there’s only limited things at the store. That’s when prices really rise and fear and all this tension and it could disrupt into some kind of civil unrest. Hopefully not. But that’s another fear I think out there.

 

Teddy:

I think that events like these forced people to consider what the tail risks are, right? Is it likely to happen? Gosh, we all hope not.

 

Sasha:

I hope we just be sharing our supplies and that there’s no shortage, but the thought of like, Oh God, do we need to protect ourselves to that?

 

Teddy:

These types of events force people to consider what that looks like, and think about what happened in Iran, if you had to choose, we’ve seen massive outbreaks in China, South Korea, Italy, Iran, now the United States, and Europe. And it’s spreading around the world. All of the countries that have handled it the most, incompetently, it’s been Iran has been the worst, Right? Which is not surprising.

 

Sasha:

Since their leader is dead from the virus, leadership there and a lot of fear and panic probably.

 

Teddy:

Yes. And so the thing that you look at there is, that’s an incompetent response from the government. Right? And they’ve done all the things that you don’t want to do in response to a crisis, like no transparency, no testing, not telling people the truth about the numbers. Not educating people, unable to quarantine areas because people didn’t know how severe the risk is. And if you checked down the list, and you’re honest with the assessment of how we’re doing versus that, it doesn’t look great, it doesn’t look great. Now we’ve started to turn that around a lot this week. I think that yesterday was a turning point, in terms of people understanding the severity. So even you and I were talking a little bit before we went on air about how the stress and the anxiety can be almost worse than the virus for younger, healthy people. If you’re stressing out, you can’t focus, can get your work done. And I think that’s true. The flip side of that is, the increase in awareness causes people to do types of things that can slow the spread. And so I think that yesterday was a turning point. Commissioner Adam silver of the N B A, cancelling the season or suspending the season. I think that says to a lot of people who weren’t otherwise paying attention, Oh, maybe we should really pay attention to this, right? And so I think that yesterday was a turning point. And then just to circle back to the social unrest that we talked about, that is the tail risk, right? That is one of the tail risks in Iran. The point I was going to conclude on is that, earlier this week, they released 70,000 prisoners from jails. Because once the virus gets into a jail, there’s no stopping it. Right? People often live in the worst types of conditions where they’re sharing facilities, bathrooms, showers, places that they eat. The health care is poor already. There’s no type of healthcare that you’d have in a functioning market outside of the prison. So when you consider that’s what’s happening in Iran, what are those 70,000 prisoners do, how do they attract, did they go back to jail afterwards? It’s unclear, but it shows you that a virus that is spreading quickly causing a severe tax on the healthcare system, and then causing an economic shock and a financial shock. If you start to think about all of the related impacts that can have, there are a lot of things that you would consider.

 

Teddy:

But do you think we might still be overreacting because of the media? And I’ve gone back and forth on this all along. I thought we might be overreacting and then for two days I thought, Oh my God, we’re not doing enough. So with sars, we had 1% of the people who contract it dying. And with this, it looks like we have 2%. So it’s double the death rate of sars, but it’s still only 2% of the people who contract it. And I’ve seen numbers where it’s more 14% for the older population. We’ve been comparing the flu numbers to these numbers and noticing that there’s a lot more deaths from the flu. Or if you look at driving down the highway and people dying on the road, people dying of diarrhea, that was brought up from the toilet paper comparison, but more serious or higher death rate things happening that don’t cause us to shut the whole economy down. So why this one? Why are we reacting like this? Why do we care so much about these deaths? I guess is the question on a lot of people’s mind.

 

Yeah, that’s an important question. Why do we care so much about this? And why is this one different here? So here’s the reason, I would encourage everyone to look hard at the numbers in Italy. So the problem is with this virus is, one, we don’t understand it very well because it’s so new, right? It literally emerged in humanity and in the last days of 2019, but there are certain things that we do know about it. Here are the things that we know that make it so concerning. It spreads very rapidly. It’s very contagious. That’s one. Two is that, a high number of people who contract it need to go into intensive care in a hospital setting, right? And it’s because of those two factors, Here’s the real risk. Here’s what happens in every area that we’ve seen in. The health care system simply gets overrun. The healthcare system, what happens to healthcare systems? Imagine pouring water from a faucet into a cup. Eventually it just starts to overflow. That’s what happens to the healthcare system. Because of the fact that so many people need to go into the hospital as a result of contracting the virus. And because the virus is growing exponentially, what happens is you go from a situation on the first day that you think you have a problem. You say, this is fine. We can handle all the cases in the hospital, but because it’s doubling every one week. It’s every week. The number of cases doubles that you have when you have community spread. And after about three weeks of this happening, the hospital system runs out of room. Our hospital system is not elastic. Only in the U S you only have about 330,000 beds that are open at any time. So what eventually happens is you just run out of space in the hospital and then when you run out of space in the hospital, people start dying in terrible conditions the way they are in Italy right now. So in Italy, you have something around deaths as a percentage of confirmed cases at 7%, whereas we think that deaths as a percentage of confirmed cases, if you can treat everyone should be around 1%, but because you can’t treat everyone in the hospital because it’s growing so fast, the health care system just can’t respond to it. It is unable to put enough people in beds on ventilators and give them nurses and protect them. And that’s why you’re seeing such a severe response to shut things down. If you can delay at all, there’s this concept of flattening the curve of pushing the peak of the pandemic into the future. If you can slow down the spread, even if we’re all gonna get it the way that you said, if you can slow down the rate at which we all get it, you can drastically decrease the odds everyone needing to go into a hospital at once. Everyone needs to go into the hospital at once. It’s not just coronavirus cases that causes death. You have a broken ankle, needs surgery on it. Sorry. Everybody at the hospital has coronavirus, can’t go. You need open heart surgery. Sorry, can’t go. Because all the doctors are treating coronavirus patients. We don’t even have beds for them. And then the healthcare workers begin to get sick because it’s so contagious. And the thing that’s been frustrating in this country for a lot of people who have been watching this for a long time, is that given the statistics that we have, given the numbers that we can see coming out of China have to trust them. Who knows, coming out of South Korea, coming out of Italy, coming out of Iran is we know how it grows, and we know what you need to do to stop it. It’s fairly obvious what’s going to happen because we now have the data and we haven’t done the things that we need to do, and the things you need to do are really painful, right? They cause the second order of facts, like the economic and financial crisis that we’re going to have. You can’t really say, okay, we’re just going to let it run free and allow people to die in the hospital hallways. So that’s why I say it’s been a good week in terms of people figuring out that these are the things that you need to do to slow the spread of the disease.

 

Sasha:

Yeah. And, what about the health care costs? Coming from Canada, it was a really quite a scary thing for me. The first time I got strep throat down here, I didn’t know where to go. I didn’t have a ton of extra money. I didn’t have health insurance. But now I’ve got some, but I don’t know that whether or not it would cover an overnight hospital stay, could be in the thousands of dollars. And people were talking about Corona virus tests costing $3,000. Or I saw one tweet from Mike and space, said a teacher, a third grade teacher, I forget what state it was, went into the hospital wanting a test. They didn’t give her the test, sent her home, and then she sent her a bill for $10,000 for going in without even getting a test. I don’t know if that’s trend. Long story short, she only had to pay $75 of it, but that’s what the overall build the system, and the insurance companies was. I think that’s a prohibitive factor for a lot of people that don’t have health insurance.

 

Teddy:

Yeah, you put your finger on two things that are really important, Sasha. The first is that the cost of doing this is another thing that we talked about before, is a class issue. Because someone who is wealthy and understands what their options are from private health providers will likely have a better go of it than someone who just rolls into the emergency room. Those who doesn’t understand what they’re going to do to get their coverage. And we’ve seen emerging horror stories about how much it costs people to get tested. So included in that fiscal package that Congress needs to get done. Hopefully even now. I know that the president is scheduled to be giving a briefing at 3:00 PM. I don’t know if he’s giving it right now. But hopefully, it includes covering the cost of everyone getting tested. because people will then not want to go if they think they have to pay a lot for it because they can’t afford it. And that’s the opposite result of what we want. We want more people to get tested. And the first crime that we have committed in terms of trying to slow this outbreak in America is that, we are unable to test enough. So if you look at what the playbook is for dealing with the viral crisis, is one, test early, test often, test everyone you can. And then those people that have been tested, isolate, quarantine, contact trace, test the people that have been in contact with them, isolate and quarantine the ones that test positive, right? That’s what South Korea did very aggressively, very efficiently. And it looks like they’re starting to bend the curve of the virus in South Korea. That’s what theoretically China did. If you trust the numbers coming out of China, there’s a lot of controversy over whether or not you can trust the numbers coming out of China. But if you can do those things, you have a chance at staving this thing off. It comes at a very high cost, and it’s very difficult politically to achieve because you need to convince everyone, and you know how hard it is to convince people of something that they don’t believe. You need to convince everyone that this is the right thing to do. And even now, I have a really difficult time convincing people that what is about to happen is going to be very dramatic, and very bad for the health and many people. But we need to do is do that testing early and often. And the problem we have in America, the tragic, sad, devastating story that we have in America, is that right now, we still can’t test well. So we still don’t know what the problem is. We can’t solve it.

 

Sasha:

Teddy, why do you think that is? I was kind of thinking about it yesterday, and I was wondering if it has something to do with not wanting to look like we didn’t do a great job reacting to it. So keep our numbers low. So if we can’t test and confirm that we have thousands more cases than what are showing, then Trump looks a little bit better. Do you think there’s anything to that? Or why does South Korea able to test everyone coming off a plane and we can’t?

 

Teddy:

Yeah, the reality is I don’t know the answer. I’ve seen that story for sure. The reality is I don’t know the answer. What we can say based on the facts that we know for sure is that, if you were paying attention to this thing two months ago, when many people in Silicon Valley and San Francisco in particular were. Then you knew that you needed to get the testing ramped up fast and you needed to get the testing ready to go for as soon as this thing got here. And we failed to do that. It’s an abject failure. It’s very sad. It’s going to cause a devastating loss of life. The reason we didn’t do it is unclear to me. We know that the C D C, the center for disease control in the United States, the federal agency that’s responsible for handling these types of things, we know that they attempted to develop their own testing kit early in the process. They didn’t want to use testing kits purchased from other countries. And we know that their first attempt to do that was a failure. It didn’t work. So that’s what we know. We don’t really know much beyond the fact that it didn’t work. And now we’re playing catch up. So we’re playing catch up. It’s left us in a position where we were basically unable to do that first thing, which is try to contain and stop the spread to means that now we can’t stop the spread. So now what we need to do is try to reduce the speed of the spread, and reducing the speed of this spread is what results in us cancelling things like mass public gatherings in schools, and social distancing measures in general.

 

Sasha:

Yeah. I’m scared, like I mentioned, we flew from Florida and she’s 71. She’s up in Toronto, it’s really unnerving. And Trump, and Bernie, and Joe are all in their seventies, so it’s got to be scary for them as well. Facing this and trying to ward it off.

 

Teddy:

Yeah, I was going to say, politicians in particular, we’ll see many of them contract it and statistically we will sadly and tragically see many of them, several of them die, because politicians are uniquely susceptible. One, they’re typically old, two or older. They’re an older demographic. There’s many of them are in their sixties or seventies, which is the most dangerous group, Two, they typically travel a lot. Three, they’re in large groups a lot, and four, they shake a lot of hands, and those are high risk activities. Prior to the crisis becoming so acute, I also would’ve joked that they typically don’t understand how to do math well. Because I think that one of the things that’s interesting about this crisis is, if you’re willing to look at what the numbers are showing you, and you understand exponential growth, which is what this virus is doing, is growing exponentially, then you become very acutely aware of what the risks are. I think one of the reasons that Silicon Valley San Francisco culture in general, was so early in identifying this as a massive concern, is because one way to think about Silicon Valley venture investors, early stage startup entrepreneurs is that, they’re a finely tuned calibrating machines that are always looking for exponential growth, right? Think about a social network. Think about start-ups that do well. What you’re looking for is the term used to be viral growth, not terms going to be retired. But that’s what they’re looking for. So when they see it, they know it. And humans do not Intuit exponential growth. It’s something that I’ve been trying to explain to the people that I love, that are older in my life, that I’m like you, I’m concerned about them, because they’re not taking it seriously, not oftentimes. Next week will not be a little bit worse. It will be twice as bad. And then the week after that would be twice as bad again. And I think that’s the thing that humans don’t like. Humans understand things that are linear. This is growing exponentially, and that’s a different conversation. So that’s something that I’ve been trying to talk with people about because like you, your mom is in the demographic, my parents are, my in-laws are in the same demographic. So I share your concern.

 

Sasha:

And so when you mentioned San Francisco too, there’s such a huge homeless population there. I wonder what will happen to all of them, if it just wiped through everyone, and they all get sick, and the hospitals probably are not going to take them ahead of someone who has a have a job and a health insurance.

 

Teddy:

Yeah, that would be tragic. It’s another thing that people have raised with me. I don’t know how the system will handle that, and I’m hopeful that now the types of things that we’re doing, limiting people being in public, and slowing, using that phrase, flattening the curve. I’m sure that you’ve seen the graph that shows the two different curves. If you can slow that spread and flatten that curve, you increase the odds of the medical system being able to deal with everything, being able to deal with all the sick people that contract the virus. And I’m hopeful that the things that we’ve started to do this week will allow us to slow what would be the worst of it.

 

Sasha:

And then back to what you had said about the treasuries earlier. That’s a market I don’t know as much about as I wish that I did. I saw Jill Carlson tweeted yesterday that her mother was trying to get cash out of an ATM and she had to go to a lot of different ATMs and there was no money at them. And she pointed to the weakness in treasuries and saying that there is a potential that we could see or run on the banks. Can you walk us through that scenario or the probabilities of it? and what it would look like?

 

Teddy:

Yeah, I saw that tweet from Jill as well and she said that that was in the Massachusetts area, I think suburbs of Boston. One of the things that I’ve said in previous conversations is that, the most important thing in financial markets is actually trust. And people forget that during the good times, but they remember it very clearly during panic and crisis times. And the reason that the most important thing in financial markets is trust is because our financial markets operate off of people giving money to someone else, banks giving money to other banks, and expecting to be able to get the money back when it’s due back. And when that starts to online, when that trust starts to unravel, that’s when we start to have truly acute panic, like situation that spills from the financial situation, from the financial markets into the streets and into the broader economy. And one of the reasons that people often overlook, particularly in the Bitcoin community, right? We have a number of people in the Bitcoin community who are mistrusting of central banks and federal governments. And I’m sympathetic to a lot of the arguments that they make, but in times like these, the federal reserve is the lender of last resort. They need to fill the role of the only entity that can be trusted, where you can go to them to get money, and they’ll give you money because they trust you to pay it back. They’re like a source of trust. And when the way that you start to see that it gets into the financial system, people stop to trust each other in a real human way that the trust is gone. It manifests itself in people stopping to trust their banks. So going to the ATMs to get physical cash out of banks, so that they don’t have to trust that the bank is going to be able to give it to them when they want. And that’s where you see in real panics and financial crises like we had in 2008 like Greece had in what I believe was 2012, is people go to get their cash out of the banks. They don’t trust that the bank can give it back to them. And when that happens, you have a real panic physically in the streets because as we all know from watching, it’s a wonderful life. Like the money’s not all in the bank at once. And that’s why the first thing that you see, the first sign that something severe is happening in a market, is what we saw this week from the federal reserve, which is stepping in to first reduce rates, make money easier in the first instance, try to get more people to borrow. And then in the second instance, they stepped in yesterday to start buying treasury securities from banks. That is another way of getting more cash out into the system. So you try to pump liquidity into the system, so that the banks have money, the banks will lend the trust, they’ll lend to each other. And that’s how you see the central authorities try to keep the system moving, so that hopefully you don’t have spill-over from the financial markets into the economy, which can be a very negative feedback loop.

 

Sasha:

Do they need to buy it from the treasuries? Or can they just print new money to fill the stimulus?

 

Teddy:

Yeah. So this is where we can start to get into that interesting conversation about the philosophies underlying Bitcoin, and why I think true believers in the underlying philosophies related to Bitcoin are still strong. What the federal reserve does when they do repurchase repo, which is what they did early on week, they call it repo, which is known as repurchase, which is really a short term loan that’s collateralized by treasuries, is guess what? one point five trillion dollars, 500 billion dollars, in three different operations they call them, is invented out of thin air. It’s like me and you or the central bank, Sasha. We would have just written that number in a spread sheet, and then we would have transferred the number in a spread sheet to banks that held bonds and said, just let us hold your bonds for a little bit, and you can now have this one point five trillion dollars worth of new U S dollars. You can now have 500 billion dollars worth of new cash that we’ve just invented. That’s how money printing occurs in the modern society. So it doesn’t come from anywhere and the central banks are authorized to do this. But one of the things that we truly do not know is how long can this go on for in this type of environment? Post financial crisis in 2008, we’ve been on this longer than a decade now. Period of time where central banks had kept rates exceptionally low, unlike any other period of time throughout history. And they also did play these financial engineering ways of getting more cash into the system, which has historically been called quantitative easing, or some people think repo, but when they announced this week is a form of quantitative easing, which is that, the federal government issues treasury bonds, they get into the system and then the federal reserve, which is responsible for the money supply goes up and buys the treasuries from people in the market, thus printing new money. So when you start to think about it, where’s the money coming from? Because the federal government’s borrowing money, but then the central bank ends up owning the obligation. And some people say, well, this is just something that can go on forever. What can really hold value? We need a type of me to store a value that has a fixed supply that we can also transfer amongst each other, that nobody controls and can manipulate the supply distribution off. And that’s what we should really base our wealth on top of. And I need to be outside of government control, and that’s Bitcoin. Does it work? Realistically, none of us know, it’s 10 years old. How does it behave in a crisis? Well, we’re getting a sneak peek at bat right now, so far doesn’t behave well, my view on it is not that we know the answer because of the way that it’s traded in the past week or two. It’s more that, wow, those long-term theory got really fascinating. This is the simulation that you were planning for. If you thought you wanted a fixed supply asset that had its own monetary policy, that couldn’t be changed by anyone acting unilaterally. And I think people should separate, there’s a real need for the U S government and its institutions, to intervene with what’s happening in the market, to help everyday Americans financially, so that they can get out of this three-headed crisis. Alright, so to help them from a public health perspective, and to support the financial market, so that it doesn’t get worse for everyone. And I think it’s okay to have that view on the one hand, and also continue to think that Bitcoin may be the next version of monetary policy, that helps get off of this cycle low interest rates, and periodic crises tied to debt monetization.

 

Sasha:

Thank you, that helped me understand it a little bit better. And hopefully everyone else too. Now, one other thing that ties into that. If you can try and explain. So last year when the yield curve went inverted, a lot of people were signaling that that negative yield curve had also happened in 2006, right before the real estate, right before everything blew up with the great recession. And we’re kind of pointing to this current negative yield curve that we saw last year as a precursor for what might be what’s happening right now. So this yield curve, do you think that is the best leading indicator of economic hard times to come?

 

Teddy:

Glad you brought that up Sasha. It’s not clear to me precisely what that means, besides the fact that something weird has been happening with the treasury market in the last year, and something weird was happening in the short term funding Margin last year before this occurred, before this Corona virus inspired dislocation occurred, something was up. We don’t know exactly what, but if you think about it just logically, right? If someone is going to make you alone, you should have to pay them back something if they’re going to a little bit, if they’re going to pay you back tomorrow, but if it’s in six months, you should pay a little bit more. If it’s in 10 years, a lot more, it’s in 30 years, well, you’d think even more than that. Right? And when the yield curve inverts, and that’s no longer the case, something’s weird, right? Something is up. People are no longer buying those assets that have those yields attached to them for the reason that they would otherwise be if they were just making a decision about yields, about what’s the right way to be compensated for holding this instrument. And I don’t know precisely what it meant or what it was signaling at the time, many people, as you said, were indicating that it was indicating a recession, an economic recession. I’m not sure about that. But it does say to me that that along with other things that were going on in the market at the time, such as we’ve had, there was another whole debate about the increased usage of repo, which we talked about at length earlier, but there’s an increased spike in repo during 2019, a few different periods where the funding markets got pretty wacky short term repo had to be, it had to be dramatically increased. There were various explanations that were brought to the market. Some people bought them, other people didn’t. So I think that we’ve been in a period of time with the financial system that people have been sort of wondering, what’s been happening for a while. I’m questioning how things had been developing, and we haven’t had a needle to trick the bubble. People have been shouting warnings for 10 years and we can’t do this, and nothing has caused that yet. And there’s a real chance that what has caused it to pop is this global new Corona virus. And I hope that’s not the case. By the way, all the negative things I’ve said, for the record, I’m an optimistic person, and hope they’re all wrong. I hope I’m wrong. I hope we stopped the coronavirus and its tracks. And we’d get under control tomorrow, and I hope that we did financial crisis and the economic recoveries and be shaped. But that’s the type of thing that people who are critical have looked at for a while.

 

Sasha:

And then one more thing with the yields, so when oil started tanking on Monday, I was looking at some charts and it looks like, and again, I used to have a general knowledge of the entire market when I was working in mutual funds, but since 2014, I would spend three years in law school, and now three years really narrow vision on Bitcoin. So looking at the oil markets, I didn’t know what was going on with them. And then now I’m just trying to play catch up, but it looks like there’s a ton of bonds that are coming due that are about to get downgraded to double B, which means they’re forced out of all, when you said like the hedge fund managers have to take risk off while they can’t hold them if they’re double B’s. So how does that play into everything as well?

 

Teddy:

Another dynamic that you’re raising, Sasha, you think about all of the things that are happening in the markets right now. It’s almost too much to throw into the simulation at once. Right? And as you know, oil is such an intertwined, complex geopolitical battle between the oil production States in the middle East, Russia, the U S here, that involves the dollar, and it’s throwing that into the mix. It’s really just another complication that unmoored the anchors that we have in the market that people rely on. And I’m sympathetic to the argument that consumers see lower prices at the pump, and that’s a good thing. And I don’t disagree with that. Everybody’s happy to pay less and have their gas bill go down. But the reality is that, it makes things very difficult. For example, for energy companies, shale companies in the U S now can’t make money based on the price of oil. They used to have a way to make money, which was they could make it sell and they’d have money to service their debts. But now you think about what happens in something that’s going to start happening in that, in the airline and hotel industry very soon, isn’t they’re just not going to make enough money to cover their debts.

 

Sasha:

All the cruise ships are no longer purchasing either.

 

Teddy:

Cruise ships aren’t purchasing, airlines aren’t purchasing. People are traveling less. And that’s why I think you have the initial, a massive move down in the price of oil on Sunday night, which I should mention, all by itself, if nothing else happens in the markets this past week, and there was no virus to speak of, a 30% decline in the price of crude oil, which happened on Sunday night, will be something that we’d be talking about for weeks. And it would be having major impact and ripple effects throughout the market. And then the economy. And it’s just one of many things that we’re now dealing with. And I think you’re right. So Saudi Arabia decides effectively seeing what’s happening to aggregate demand, probably. Based on the fact that we’re having such a sharp economic slowdown, we need to cut the cost of what we’re willing to sell oil at, in order to be able to continue selling enough. And it’s a very aggressive move, right? Because if Saudi Arabia says, we’ll sell oil cheaper than you will, they can put you out of business. What they’ve done is, they’ve made this move to sell oil cheaper. That puts a strain on all other oil producing countries and companies. So it’s a very challenging dynamic.

 

Sasha:

Yeah, agreed. And a little bit, maybe geopolitical with it too of when you get into it, I’ll put my tinfoil hat on, but we have Russia, not very many Corona viruses there. And anyway, I don’t really want to say all the things that have gone through my head are all the conspiracy theories I’ve seen around it, but anyway, weird time right now, and it’s scary, and I personally got more scared yesterday seeing Bitcoin react the opposite of how I expected it to react. I don’t know what the price is doing now, but hopefully, I think Bitcoin will do the V where the rest of the economy does a kind of longer recovery.

 

Teddy:

Well, I’ll be checking as I’m sure you will, as soon as we get off. And I only have just another minute cause I’m saying it’s three 30 here on these coasts. But I wanted to add your geopolitical thought. It’s easy to try to stop yourself from thinking about those things. But I think that one of the things that was obvious to me, being amongst people who were trying to raise awareness about the Corona virus from an early stage is that, it’s very difficult socially to have a view that everybody else doesn’t have. And I think people underrate just how hard it is to have a non-consensus view on anything. If you were three weeks ago telling people that we needed to close the N B A season, and shut down schools, they would have laughed you out of the building you are in.

 

Sasha:

Benton was, and everyone was so mad at him saying, what’s this guy doing? But then he sold all of his Bitcoin in his Atlantic financial at 91 hundred lasted on Monday or something.

 

Teddy:

Is that right? Yeah. So I think that there’s such an incredible urge from the intolerant majority to shame people who have a view that is not consensus, that many people are pushed into just believing whatever everybody else believes. And I think that if you start to think about some of the knock on effects of what’s happening now, like China is out on their government ministers from the Chinese communist party are now out blaming the United States for the start of the crisis, speculating that the United States brought the virus initially to Wuhan China, which is where it originated. Iran is joining in that chorus. I expect Russia will do the same thing soon. China is also now out shipping ventilators, masks and medical equipment to Italy. So in other words, believe for sure that this is a geopolitical tool that China is going to use. China is going to use this as a type of propaganda to suggest that they’re the leader of the world and they’re helping save, pull the world out of this crisis, while the U S is here unable to even deal with our own problems. And the sick sad thing about that is that, there’s a little bit of truth to how poorly we’re dealing with the crisis thus far. And that’s what really makes you feel unhappy and unsatisfied with the response that we’ve had so far. But I’m still optimistic that we can turn it around and do what I think Americans usually do in the end, which is the right thing. And turn it into our finest hour, and a way to try to save lives and get things back on track.

 

Sasha:

Yeah. Thank you Teddy. I have all these questions to ask you about the S C Cs, response to Bitwise is the ETF proposal, but it just feels like everything is pale in comparison to what’s going on this week. And we didn’t get to those questions, but you did such an amazing interview with us in tech Frank, I think, last week with the blocks. So if people want to know more about Bitwise and the ETF and the goings, I highly recommend listening to that podcast as well.

 

Teddy:

I had so much fun with Frank. The sad thing that I wasn’t able to see you in person is, if you listened, I brought him that Italian delicacy.

 

Sasha:

Do you still have any of those meats? They sounded so good.

 

Teddy:

I was going to bring a stick for you and we’ll do it again. We’ll talk more about the ETF, which is what our business is, and what we’re focused on. But we’ll have to find another time to do it, and we’ll have a good time. Hopefully we’ll do it in person and hopefully I can bring you some Italian soup from Western.

 

Sasha:

Oh yeah. I would love to try that. My mouth was watering, listening to you.

 

Teddy:

All right, Sasha. Thank you for having me on again.

 

Sasha:

Oh, thank you so much for making the time, and really shedding a lot of light on what’s actually happening out there, and how it’s all so intermingled. So thank you, Teddy.

 

Teddy:

You’re welcome. All best to you and your family as we get through the crisis, we need to check in on each other, and take care of the older people in our lives for sure.

 

Sasha:

Yes. Thank you.

 

Teddy:

You’re welcome. Bye. It’s good to see you.

 

Sasha:

You too. Bye.

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Sasha Hodler · #HODLCast Bitbonics - #Platinum Welcome to the HODLCast BITBONICS! Today is March 21, 2020 and today's twitter search was #platinum. Here are the top five tweets!   Number 5, from @atraderdiary: #Platinum follows a similar trend as #Silver....

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Sasha Hodler · #HODLCast Bitbonics - #tether These are the top five tweets about #tether on March 20, 2020. Number 5 @___CryptoNews said, Tether Stablecoin Launches on Its Seventh Blockchain: The world's largest stablecoin by market value is now live on the Bitcoin...

#Bitbonics #Top5 Richard Burr

Sasha Hodler · #HODLCast Bitbonics - Richard BurrToday's #bitbonics twitter search was about Richard Burr. Here are the #Top5 Number 5 @AshaRangappa_ said, “So, I know people can be savvy investors but Richard Burr sold lawn equipment before he became a senator in...

Top 5 #VirtualMeeting Tweets

Sasha Hodler · #HODLCast Bitbonics - #VirtualMeeting These are the top five tweets about #VirtualMeeting on March 18, 2020. Number 5 @MedStuCo said, We may not have had our usual Eboard meeting this week, but that didn’t stop us #virtualmeeting #medfieldps. Number 4...

Top 5 #ExponentialGrowth Tweets

Sasha Hodler Welcome to the HODLCast BITBONICS. Today is March 17, 2020 and today's hash tag twitter search was #ExponentialGrowth. Here are the top five tweets. Number 5, from @kennekai    “Around Feb12 there was a change in diagnosis classification which may have...

Top 5 #Ventilator tweets

Sasha Hodler · #HODLCast Bitbonics - #Ventilator Welcome to the HODLCast BITBONICS. Today is March 16, 2020 and today's twitter search was #Ventilator. Here are the top five tweets. Number 5 from @EndCoronavirus “We are expecting a shortage of mechanical breathing...

Top 5 #Inflation tweets

Sasha Hodler · #HODLCast Bitbonics - #inflation Welcome to the HODLCast BITBONICS. Today is March 14, 2020 and today's twitter search was #Inflation. Here are the top five tweets. Number 5 @XRPDrop said, “Less supplies and more money paying way for #inflation” Number...

Bitbonics #Top5 #Oil

Sasha Hodler · Bitbonics - 2 - March 11 #oilWelcome to the #HODLCast #Bitbonics - Today is March 11, 2020 and the #top5 tweets about #OIL were: Number 5 @incugneto said, My dad had a saying when oil would have a significant crisis or price shock of some kind that sums...

Transcript of Ep. 65 – Moon Math Win

Transcript of Ep. 65 – Moon Math Win

Episode 65:   Jared of MoonMath.WinThe Cathedral and the BazaarSasha Hodler · The HodlCast Episode 65 with Moonmath.winTranscript:  Sasha: All right. Hello everyone. Good morning. Today is February 6th, 2019. This is the HODL cast and we have a special...

HODLCast Weekly Newsletter

  HODLCast Weekly Newsletter  March 9, 2020 I hope everyone is doing well and staying healthy, this virus feels pretty scary. Some rumors suggest that China has actually cemented some of their quarantined population into their dwellings. Business seems to be...

The HODLCast Transcript – Leah Wald

The HODLCast Transcript – Leah Wald

Episode 104:   Leah WaldDiscussing Bitcoin's EcosystemSasha Hodler · Gator's Bitcoin Babes with Leah WaldTranscript:    This is the first transcript I’m putting out. While editing, I sometimes shortened or changed sentences. To hear what we said in real...

Documenting Bitcoin History: David Foox on HodlCast 102

Documenting Bitcoin History: David Foox on HodlCast 102

Episode 102:   David FooxDocumenting Bitcoin HistorySasha Hodler · Ep. 102 with David Foox, creator of the amazing Bit x Bit: In Bitcoin We Trust documentaryOn this installment of the podcast, Sasha Hodder catches up with David Foox, who is something of a...

Crypto Mom to the Rescue!

SEC Commissioner Hester Peirce Proposes 3-Year Safe Harbor Period for Crypto Tokens Coindesk reported today that SEC Commissioner Hester Peirce (“Crypto Mom”) has formally proposed a safe harbor to give token projects the ability to sell tokens, and a three-year...

John McAfee Goes Wild!

John McAfee Goes Wild!

Sasha Hodler · HodlCast Ep. 98 - John McAfee Discussing Congress Coin & the McAfee DexThere’s a lot of things you can call John McAfee, probably with good cause. One thing you can’t call him, though, is boring. Listen in on episode 98 of the HodlCast to get an...

Wallet Education & Innovation – Ballet

Wallet Education & Innovation – Ballet

Sasha Hodler · Hodlcast Ep. 101 with Tatiana Moroz and Bobby LeeHodlcast 101 with Tatiana Moroz & Bobby Lee In this new installment of the Hodlcast, Sasha gets in touch with Bobby Lee (no, not the one of Mad TV fame) to discuss his entry onto the wallet market...

The PredictionCast

Sasha Hodler · The PredictionCast - 2020!Written by Emoji Nakamoto & Artwork by Indelible Trade Ups, Downs, Forecasts And Laughs in this Year’s PredictionCast 2019 was an incredible year for Crypto. As the fog of bull market mania lifted, clear eyes and productive...

LLC, PBC, or NonProfit?

Many startups struggle deciding what type of business entity will be right for them. Here, we will identify the differences of each structure, the Limited Liability Company, Public Benefit Corporation, or 501(c)(3) Nonprofit Organization. All three structures offer...

Ready for your Title 31 Exam?

The Internal Revenue Service (IRS) is auditing companies who registered with the Financial Crimes Enforcement Network (FinCEN) as a Money Service Business (MSB) involved in the Bitcoin space – it’s called a Title 31 Exam. These exams were typically reserved for Indian...

International Breach of Contract

How to deal with a breach of contract when the breaching party lives in another country? I’ve seen this a number of times when an American company contracts with a foreign company for services in the cryptocurrency industry -- and then the foreign company fails to...

THE LONG ARM OF NEW YORK

THE LONG ARM OF NEW YORK

WILL BITFINEX AND TETHER PROVE THEY DID NOT DO BUSINESS IN NEW YORK? Today Bitfinex and Tether, replied to the OAG with two documents, an affidavit by their attorney, Stuart Hoegner, and a Reply Memo supporting their Motion to Dismiss. Bitfinex and Tether are...

SUMMARY of the May 9 FinCEN Guidance

SUMMARY of the May 9 FinCEN Guidance

“This guidance does not establish any new regulatory expectations or requirements.” https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf TL;DR An MSB needs to register with FinCEN, (it’s free, you file Form 107), get an...

The Saga Continues… USAG v. Bitfinex/Tether

The Saga Continues… USAG v. Bitfinex/Tether

Sasha Hodler · HodlCast Ep. 81 A deep dive into Bitfinex with Amy Castor The saga continues — NYAG v. Bitfinex/Tether Quick Summary of the recent NYAG Decision and Order: IN THE MATTER OF THE INQUIRY BY LETITIA JAMES, ATTORNEY GENERAL OF THE STATE OF NEW YORK, v....

SUMMARY of the May 9 FinCEN Guidance:

FinCEN's recent guidance begins with the caveat, “This guidance does not establish any new regulatory expectations or requirements.” https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf TL;DR An MSB needs to register with...

The FinCEN Travel Rule

The FinCEN Travel Rule

I came across a new (to me) aspect of the Bank Secrecy Act recently — rule [31 CFR 103.33(g)] (the “Travel Rule”) which requires all financial institutions to pass on certain information to the next financial institution, in certain funds transmittals involving more...

Now You Can Blog from Everywhere!

We’ve made it quick and convenient for you to manage your blog from anywhere. In this blog post we’ll share the ways you can post to your Wix Blog. Blogging from Your Wix Blog Dashboard On the dashboard, you have everything you need to manage your blog in one place....

Design a Stunning Blog

When it comes to design, the Wix blog has everything you need to create beautiful posts that will grab your reader's attention. Check out our essential design features. Choose from 8 stunning layouts Your Wix Blog comes with 8 beautiful layouts. From your blog's...

Grow Your Blog Community

With Wix Blog, you’re not only sharing your voice with the world, you can also grow an active online community. That’s why the Wix blog comes with a built-in members area - so that readers can easily sign easily up to become members of your blog. What can members do?...

Bitcoin Hedge Fund Rules

Bitcoin Hedge Fund Rules

In today’s article, we will explore whether a Bitcoin hedge fund requires Securities and Exchange Commission (SEC) or Commodities and Futures Trading Commission (CFTC) registration. What is a Bitcoin Hedge Fund? A Hedge Fund (or Private Fund) is when you put two LLCs...

Florida Money Transmission after the Espinoza Opinion

Florida Money Transmission after the Espinoza Opinion

On January 30, 2019, the State of Florida appealed forcing Mr. Espinoza to relive the trial for his 2013 and 2014 localbitcoins.com sales to undercover cops. See http://www.3dca.flcourts.org/Opinions/3D16-1860.pdf. The counts against Mr. Espinoza include: Count...

Bitcoin & the FBAR

Bitcoin & the FBAR

I had the opportunity to participate on a Legal Panel with David Silver at the Unconfiscatable, Bitcoin not Blockchain Conference put on by Tone Vays in Las Vegas. It was quite an honor to be part of it; the conference was hands down the best Bitcoin event I’ve...

The Bitmain Lawsuit

The Bitmain Lawsuit

Gor Gevorkyan v. Bitmain, Inc., Bitmain Technologies, Ltd. And DOES 1 to 10 A lawsuit was filed in the Northern District of California against Bitmain on 11/19/2018. See https://www.scribd.com/document/393971649/Bitmain-Class-Action In a brief summary, the Plaintiff...

SEC’s November 16 Comments

Ready or Not, Here They Come, You Can’t Hide, Gonna Find You and Make You Register & Refund First and foremost, today’s expansive press release was made with the following disclaimer: “This statement . . . is not a rule, regulation, or statement of the Securities...

Operation Choke Point

I was skimming the facebook page of a soon-to-be-podcast guest, Kingsley Edwards, and came across a disturbing article describing Operation Choke Point.[1] The name of the Operation struck me as odd and after a few lines of reading, I knew it was the problem facing...

Know Yo Customer

Know Yo Customer

This is not legal advice, just my opinion. I’ve met many brilliant entrepreneurs bravely navigating the alphabet soup of the American crypto regulatory environment. Today’s post is focused on the importance of knowing your customers (“KYC”) if you are a Money Service...

OCC Banking Charter for FinTECH

OCC Banking Charter for FinTECH

Is this The End of State-by-State Money Transmission Licensing? The Office of the Comptroller of the Currency, U.S. Department of Treasury (“OCC”) came out with some big news on Tuesday, July 31, 2018. Now crypto (fintech) companies can apply for special-purposes...

Mr. Terpin v. AT&T

Mr. Terpin v. AT&T

Terpin v. AT&T Inc., AT&T Mobility, LLC, and DOES 1–25 One of the biggest news stories of the week was Michael Terpin (“Mr. Terpin”) suing AT&T after getting his sim-card hijacked. These types of hacks through the phone company are not a new phenomenon,...

Removing a member from an LLC

Removing a member from an LLC

Unfortunately, business relationships don’t always work out as expected, and you may need to remove your partners from their equity ownership / member position in your LLC. Hopefully this process is clearly defined in your Operating Agreement. If not, it can quickly...

Giving Tokens the Hammer

Giving Tokens the Hammer

The 2009 invention of Bitcoin has forever changed financial technology. Through the rise of economic innovation, Cryptocurrency makes it possible for any person or company to create a coin or token linked to their brand—and to give it a plethora of functionality. Some...

CFTC Employees are now allowed to Trade Crypto

CFTC Employees are now allowed to Trade Crypto

Upon first seeing this headline, my thoughts were, “uh oh, things are going to get a lot less productive over at the CFTC!” I remember my first few months of trading, it can be highly addictive!  The important thing here is that we got another layer of clarity to...

Bitcoin & Estate Planning

Bitcoin & Estate Planning

Bitcoin & Estate Planning Agenda: 1. Get a will 2. Make a tax plan 3. Dig some holes in your backyard (or find an executor you trust) Disclaimer – This is not legal or investment advice. T'is the season to be... morbid. Have you thought about what would happen to...

Bitcoin & Taxes

Bitcoin & Taxes

After the recent ruling in the case with Coinbase, Bitcoin Tax has been a hot topic, and I wanted to try my hand at navigating it. This is not legal or tax advice.Only 800-900 Americans reported any bitcoin tax related events between 2013-2015, even-though there were...

What is Bitcoin

What is Bitcoin

What is Bitcoin? Over the past few weeks, as the Bitcoin price has soared, lots of people have been reaching out to ask me, "What is Bitcoin?" It prompted me to start this blog- and while I am a licensed attorney in Florida - I want to preface that this is not legal...

Celebrity Backed ICOs

Celebrity Backed ICOs

Anyone who endorses ICOs or any kind of Cryptocurrency should be careful not to overstep the Securities Laws and potentially be prosecuted for a Pump and Dump scheme. After the recent Senate Hearing on Feb 9, 2018, Securities and Exchange Commission (“SEC”) Chairman...

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