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Episode #7: Giancarlo 2020 (Senate Hearings on Bitcoin) / Augur’s First Prediction Market
COIN TALK is produced in partnership with Medium and hosted by Aaron Lammer and Jay Caspian Kang. Press “Listen to the story” above to play the episode or read the transcript below. (You can also subscribe on Apple Podcasts, download the MP3, or email us at firstname.lastname@example.org for our upcoming mailbag show.)
On the official podcast of Bitcoin crashes, Aaron & Jay:
- Listen in on CFTC Chairman J. Christopher Giancarlo’s hero-making comments to the Senate
- Try to understand why exchanges like Binance are so opaque during downtime (even if they didn’t actually get hacked)
- Consider the first prediction market on the Augur (REP) platform which is on “whether Augur will get hacked”
Show Notes (50 minutes)
- 13:20 Forbes’ First List Of Cryptocurrency’s Richest: Meet The Secretive Freaks, Geeks And Visionaries Minting Billions From Bitcoin Mania (Forbes)
- 14:33 @CZ_Binance
- 16:01 Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money(Nathan Popper, Harper 2016)
- 19:16 Augur (REP)
- 19:30 Augur Ahead? One of the Oldest ICOs Is Almost Live (Coindesk)
- 26:37 Giancarlo defines “HODL” for the Senate
- 33:51 Giancarlo discusses whether Bitcoin is a commodity
Robot: This episode of Coin Talk was taped Thursday, February 8th at 9 a.m. Eastern Standard Time. The Bitcoin price index was $8,348.
Aaron Lammer: Hey, welcome to Coin Talk. I’m Aaron Lammer here with Jay Kang. Jay Kang on the road.
Jay Kang: Yeah, once again.
Aaron Lammer: You’re a traveling man, always leaving on a jet plane.
Jay Kang: Last few weeks have been a little rough, but, you know, the hotel is not so bad this time, so that’s where I’m recording right now.
Aaron Lammer: That’s a beautiful thing. So this is the second time we recorded this week, but the last time was a guest appearance on LedgerCast, @LedgerStatus’ podcast, so I haven’t talked to you since then. When we taped that we were at the absolute rock bottom, and I mean emotionally rock bottom, of the crash. Three days have passed. It’s not like we’re up that much since then, but I feel up.
Jay Kang: Yeah, well, I do too, which is strange, because I remember panic selling at 8,500 and then it was going up.
Aaron Lammer: Hey cheers to your panic sell. Cheers to your panic sell.
Jay Kang: This is like four days ago or whenever it was at $8,500 ,and then it went up to like $8,900 and then I FOMO’d back in immediately and then I was like, oh, good job, good job. You know, at least when it goes back to $14,000 this will all be, okay. And then of course it crashed further. So, you know, the psychology of it is pretty interesting because it’s not like you or I really bought the bottom aggressively because we’re not … I guess we’re not so brave and so we’re actually just still down the same amount we were four days ago and we were really depressed, but we feel better about it.
Aaron Lammer: Yeah, I think that for me like the difference between a few days of stability at the bottom versus the moment we hit the bottom couldn’t be more different. In some ways, and we’ve talked about this, I feel like now that the market has corrected, even though I’m just utterly racked, as someone who is holding about 50% alt’s during that whole thing, I feel like a little bit more solid. I feel like the foundation of the house is a little bit better built now, am I crazy?
Jay Kang: Well, I mean, if you look at any sort of market cycle, right, then I think … Well, look, this is not something I’m an expert on, but I’ve seen some Tweets on that. It’s very unhealthy to just blow the top off and this sort of correction was probably necessary. We can say that in hindsight, but the speed with which there is adoption. The flourishing of shit coins everywhere, and the sort of completely unregulated mess that was happening with Bitfinex and Tether, we don’t know how much impact it had, but, you know, I don’t think that anyone at this point is completely convinced that even if you don’t think it was important or had any effect, I don’t think that you feel good about what was happening and think it was all on the up and up. All that was bound to come back down. I was just shocked at how far down it came and the strength of the correction, but I guess like in retrospect it just kind of makes sense.
Aaron Lammer: Yeah, I think I always thought and I believe the sort of prevailing belief is as it hovered above 10,000 there when it was in that $10,000 to $12,000 range, that institutional buyers were sort of grabbing the dips and stopping it from dropping below $10,000. And I had believed that there was enough institutional interest and sort of whale interest that no one was going to let it go anywhere near $6,000, that there was just too many people who are going to shark it up.
Aaron Lammer: But one of the things I’m slowly learning about Bitcoin is Bitcoin feels huge when you’re within it, but within the financial system as a whole, it hasn’t taken over the entire thing, so there aren’t hundreds of these wells and institutional investors out there. Once a few people have put in a few big buys, you can tap out the support fairly quickly. Am I just reading too much into the tea leaves?
Jay Kang: I mean, I think one of the fun things about Bitcoin is how little we know. So we don’t know. I mean, generally you should be able to see market manipulation, especially on a distributed ledger that’s available to everybody, and you should be able to time it with futures markets opened and closing in volume and make a decent case that maybe it’s not a case that’s perfectly causative, but you could at least show compelling correlation. And the fact that nobody can do that, either means that the people who are sort of thinking about crypto are all kind of bad, you know, or new at this, or it just means that everything is completely opaque and we have no idea. We can just kind of say, oh, it’s Asia, you know, and throw up our hands. That’s where I’m at.
Aaron Lammer: I find one of the more fascinating themes in our chat is that the whole system feels completely opaque, yet the system is set up in a way that it couldn’t be more transparent. Literally anyone can go look at the entire ledger. If I was pitching the blockchain to someone and it didn’t yet exist, I would say we’re going to solve all of these problems of opaqueness and we’re going to root out all kinds of scam-iness, because everyone will be able to see, everyone’s going to play with their hands up. So if someone puts a fifth ace into the deck, we are all going to know about it.
New Speaker: In reality, it’s been quite the opposite. It reminds me of like the era of big data on the web where there’s just like such a huge amount flowing through the bottleneck that even though everyone can see it, no one can make any sense out of it. Like we should be able to solve this Tether thing and we should be able to figure out what’s going on, yet all these smart people are looking into it and it’s crashed the market and yet we still don’t really know what’s going on.
New Speaker: Okay, so what I wanted to talk to you about was if I were to describe this crash and I said what was the number one cause of it, I think I probably would have ranked Tether. I think the issues around Tether were the biggest single driver at least among individual sentiment along this stuff, and the crazy part to me is that, you know, I logged on to Bittrex yesterday morning after my traditional mourning period, I logged on to Bittrex, and I was like oh shit, all these U.S. dollar Tether markets are still there. Like we scared the shit out of ourselves with Tether, but we didn’t actually root Tether out of the system. What does it mean that we’ve had a crash, but even if we start going back up now we’re always going to have Tether in the rear view mirror?
Jay Kang: Well, they’re not printing as many in the same sort of suspicious timing I think that alerted people.
Aaron Lammer: Could they just be lying low right now? I thought that was the assumption.
Jay Kang: We do know that the company was subpoenaed, right?
Aaron Lammer: Yes. On December 6th was the date of the subpoena.
Jay Kang: And so we do know some things. I think it would be very hard for Bittrex to just kind of like cancel the Tether markets immediately after and without any sort of actually hard evidence. And I do think a study came out recently, maybe yesterday, that there was very little correlation and that, you know, it echoed a lot of what people are saying, which is that hey, this stuff is shady and yes, we should look into it, but this sort of narrative that this is like the user Willy that was on Mt. Gox that was like driving up prices by himself, that maybe this is a bit of an overage. I’m still in that space.
Jay Kang: I would agree with you that in terms of the way in which the media pushed the November to December retail user, like those people, the media then turned around and pushed this Tether story and I think it scared a lot of these people away, especially with the price crashing anyway for reasons that had to do with Asian markets and stuff like that. I think it gave a lot of people a very convenient excuse to exit. And so yeah, I think that the Tether … If we had to rank them, I think I would put Tether number one, but it wouldn’t kind of like the way that you would rank NBA teams where the Warriors are clearly number one and then everybody …
Aaron Lammer: Thank you I appreciate that analogy.
Jay Kang: That everyone else is kind of like fighting for a number two that doesn’t really matter.
Aaron Lammer: Yes, okay.
Jay Kang: I think that Tether might be number one, and then sort of Asian regulatory problems number two, and then three is just this sort of like life cycle of when it’s sort of almost a gambler’s life cycle of when you get super into something and you buy in at $17,000 and you’re expected it to go to $34,000 immediately.
Aaron Lammer: Guilty.
Jay Kang: Yeah, and that it doesn’t, and so you’re just like well, I’m just going to cut my losses and I’m going to just go back to my life and I’m never going to pay attention to cryptocurrency again, because you know, it’s a bunch of like Libertarian dudes who are screaming at me all the time. I think there’s some of that as well where it’s just sort of like market fatigue. Like how many days in a row or how many weeks in a row could Coinbase have reasonably expected to be signing up hundreds of thousands of people a day. Like at some point you just run out of people who are interested in that space.
Aaron Lammer: A lot of crypto news is cyclical. You think oh, the China ban, like a crash, but actually there’s been a China ban crash like every six months for a period of years.
Jay Kang: How many China ban crashes have we been through?
Aaron Lammer: I’m guessing we’re going to hear from Tether again. I think that this Tether issue has not been resolved, and I agree with you, there’s no easy way to just root Tether out of the system in a day, but it’s disturbing to me that we clearly identified a problem, the media identified a problem, investors identified a problem, and we didn’t correct course at all, we didn’t like kick Tether out of the club. So I think that’s something I’ll be looking at going forward.
Jay Kang: I mean is the volume of trading with Tether going down at all?
Aaron Lammer: I haven’t really seen any indications. The Tether “Stans” were like partying on it saying like, “Yeah, look, Tether is trading at $1.03 and fuck y’all.”
Jay Kang: I did see that.
Aaron Lammer: So …
Jay Kang: It was the only green coin for a while.
Aaron Lammer: And so we didn’t hurt Tether. I mean like when I trace these narratives I was thinking about that guy, there was that New York Times story about Puertopia, Nellie Bowles story, and Brock Pierce who’s one of the founders of Tether, is down there trying to form a like crypto utopia while fear of Tether is bringing down the market. There’s no consequence for any of this. Whoa.
Jay Kang: Well, I mean the exchange is still I think are the most vulnerable way for … I mean, we’ve said this thousand times.
Aaron Lammer: Yes.
Jay Kang: But I think the opacity of the market and of Bitcoin honestly is because of the opacity of the exchanges. So let’s talk about one of those exchanges, you want to Aaron?
Aaron Lammer: Yeah, I’d love to. I’m assuming that you want to talk about Binance.
Jay Kang: Yeah, so Binance was just featured I think in Forbes where the head of it who goes by CZ who the Binance is in Hong Kong and I think also in Tokyo, that he came out and, you know, they’re sort of featuring him as one of these billionaires.
Aaron Lammer: I think it was the list of the-
Jay Kang: Like he’s the new hot thing.
Aaron Lammer: Richest people in crypto Forbes list.
Jay Kang: Yeah, so it was like the Vanity Fair cover where they say the new Hollywood, they do it every year and it’s a big deal. Annie Leibovitz photographs it. This is the crypto version of it.
Aaron Lammer: Also because there’s a guy in the set who looks like a poor man’s Johnny Depp. Like Brock Pierce looks like a crypto millionaire impersonating a Hollywood star.
Jay Kang: Yeah, well, avoid the Forbes crypto list curse here I guess. So Binance shut down and you couldn’t buy or sell. You can really access your wallets, and most importantly and I think most frighteningly for everybody, you couldn’t withdraw any of your funds. And so CZ came out on Twitter and did a lot of like, this is not a hack, this is not a hack, this is not a hack, this is a data sync problem, this is a data sync problem.
Jay Kang: Nonetheless, it was a big enough problem I think given the sort of atmosphere around the crash and sort of the FUD’ing that’s going around that the Financial Times wrote about it, and they didn’t seem to exactly know what had happened, they were just sort of writing a news story about it, as one does, and I wanted to point out what CZ’s response to the Tweet of the article was, because I think it’s indicative of something, but I also just find it funny. They write a Tweet, they say, “Crypto currency exchange Binance suspends trading and withdrawals.” and CZ’s response is, “Thanks for the coverage and advertising. We still have lots of room to improve, we are hiring.” Which is the most crypto response ever.
Aaron Lammer: Yeah, troll on.
Jay Kang: It’s like, dude.
Aaron Lammer: Troll on.
Jay Kang: Dude, like your exchange just shut down and all your customers can’t withdraw their money.
Aaron Lammer: Yeah.
Jay Kang: Like how about you not troll the Financial Times right now?
Aaron Lammer: Well, also the fact that he’s trolling the Financial Times, like okay, do you think someone running an exchange would be honest if they did get hacked? I mean, some of them eventually they would be.
Jay Kang: Well, empirically-
Aaron Lammer: Some would be, but I feel like most people would be like is there a way that we can hide this hack by moving assets, which is my understanding of basically what happened at Mt. Gox was that they were moving around the deck chairs on the Titanic for a while seeing if they basically not admit what happened and the fact that there’s this kind of flippant tone around it, I’m like that guy I would definitely not care about lying to me.
Jay Kang: Yeah, well, I mean, we do not know. CZ, if you’d like to come on the podcast.
Aaron Lammer: I’d love to have him on the podcast.
Jay Kang: Please come on.
Aaron Lammer: I mean, I like his swagger and style, what can I say.
Jay Kang: I mean, empirically what you’re talking about is that after Mt. Gox I think this is in the Nathaniel Popper book, Mark Karpeles, the guy who was running it, started going around to other exchanges in Asia and being like dude, like what if we joined forces and you kind of like fronted me for a while and eventually everyone was just kind of horrified and like dude, you have to tell somebody.
Aaron Lammer: “What if we merged and all my records were lost in a fire during the merger, would that be something you were interested in?”
Jay Kang: Yeah, exactly. It’s like if someone robbed Bank of America and Bank of America went to Chase and was like, all right bro, how about we merge right now and you float me a little bit of money so that if people want to take $80 out of Fash Cash at the ATM that they’re not going to get a zero notice for a bit, and then in the meantime we can just print money to fill it back up. I mean, it made absolutely no sense.
Aaron Lammer: It’s kind of the same problem we’re dealing with with Tether right now, which is just that there’s no transparency that exchanges slash companies like Tether actually have all the stuff that has been custodially left with them and the fact that we don’t know. There’s really no way to know because the first, you know, 50% of people who withdraw are going to get their money anyway even if you’ve lost half the money.
Jay Kang: Yeah, Aaron, are you a Binance customer?
Aaron Lammer: I’m not a Binance customer, no. I think there’s different … We talk about different generations in crypto. I feel like Binance was a little bit before our time.
Jay Kang: Oh, no, no, no. I mean, I think it was a little after Bittrex.
Aaron Lammer: Oh, a little after our time? Okay, yeah.
Jay Kang: Well, I mean I do have a Binance account.
Aaron Lammer: Oh, you do have a Binance account?
Jay Kang: Yeah, and for a while I had my rather heavy 0x bag on it.
Aaron Lammer: Oh, okay.
Jay Kang: And then the only reason I signed up was because I wanted to buy 0X. And you know what, this is the first time I think I’m going to do this on the podcast, but I think I made a good decision.
Aaron Lammer: Wow.
Jay Kang: Because at some point I exited-
Aaron Lammer: Okay, time to shut down the show.
Jay Kang: I pulled everything off of Binance, not for any reason, just because, you know, it was almost like a feng shui type of thing where I was sick of having to mentally add up all the money I had across all these accounts. So I sold all my 0X into Bitcoin and then pulled that back into a hardware wallet, so that when I loaded it up I didn’t have to do mental math, because I’m that dumb and lazy.
Aaron Lammer: Yeah, I think this is something we talked about when we were on the Ledger Cast. One thing I’m considering doing is limiting myself to what I call the blockfolio front page rule. So you can see seven things without scrolling on the front page of your blockfolio. I’m strongly considering limiting myself to seven coins at a time. There’s a few reasons for that; one is just something Ledger said, which I think is true, which is it’s just hard to keep track.
Aaron Lammer: It’s hard to really stay on top of everything if you’ve got all your investment spread over so many coins, but I also think you’re highlighting a secondary issue, which is if you got a gazillion coins, you’ve probably got them on a gazillion exchanges and we’re seeing pretty clearly that not every exchange is going to get hacked, but some of them are going to have some kind of problem. And it just feels to me like the more exchanges you’re spread out over, the more exposed you are to that.
Jay Kang: Okay, I want to talk about Augur (REP), which is a prediction market, and it’s one of the oldest ICO’s. It’s one of the oldest projects.
Aaron Lammer: First altcoin I ever bought.
Jay Kang: They’re going to launch a product finally after all these years and they’re going to launch a prediction market that involves one question which is, will Augur be hacked? Now this harkens back to sort of the history of prediction markets.
Aaron Lammer: Wait, wait, wait. They’re posing that question?
Jay Kang: Yeah, that’s the only question that you can bet on Augur during this sort of soft launch. This harkens back to the actual history of prediction markets where the first question ever posted on our prediction market was, where will be the next place that there will be a terrorist attack, and that some people in the DOD working with DARPA I believe, decided to do this because they felt like if you could introduce financial incentive, that there might be someone somewhere in the world who actually would have knowledge of this and would try and profit in that they would put in a bunch of money on one of the questions.
Jay Kang: And so I think that is a question and obviously that eventually became banned because it’s an incredibly ghoulish way, and now we have a robust prediction market economy that involves everything like when will Sean Spicer be fired or like when will Scaramucci get fired, all that sort of stuff is out there. Augur is a prediction market in that way, but it is interesting to me that they’re sort of starting with the same idea that prediction markets started before. I mean, how do you feel about this? Are you going to bet on this?
Aaron Lammer: Well, one thing I’ve always wondered what these prediction markets is like how big a hack? Like how do they define what a hack would consist of?
Jay Kang: Well I mean, like any sort of profit they would have to figure out what that means. So for example, you can bet on Bovada right now if Danica Patrick and Aaron Rodgers are … Their relationship is going to last ’til the end of this year, but the way in which you have to confirm that, is that TMZ has to confirm it. And so I don’t know. I think that they would have to build something like that in there, and that actually is one of the problems with prediction markets is just like there’s so many different ways you kind of need a central authority to actually adjudicate some of this stuff.
Aaron Lammer: Well, it’s interesting because usually you’re doing it in a real world thing that the people who are making the market have no control over, but in this case the people making the market are the same people who would be hacked so they could like hide some kind of a secret formula and say, you know, this will be confirmed when, you know, this code is hacked, basically.
Jay Kang: Or they could just hide the hack.
Aaron Lammer: Let me just rewind slightly and say I don’t quite understand Augur. So is the idea of Augur that anyone’s going to be able to make a prediction market of any question and then people will be able to bet on it, on the Augur platform? It’s like a roll your own predictions or they going to supply the predictions?
Jay Kang: I think that it is a fully decentralized prediction market in which people can create their own prediction markets. And so I think it’s closer to something like, you know, if you are living in my neighborhood, for example and you want to make a prediction market on the city council election, you can’t find that on PredictIt. You can find the New York mayoral election, but you can find these hyper local things. And so I think the idea is that people can sort of set their own odds and that you have a completely free, non-centralized thing. Because right now if you go on PredictIt, all the adjudication is done through PredictIt, and the bigger problem is that you have a massive fee structure that is built into PredictIt.
Aaron Lammer: Damn those fees!
Jay Kang: Well, I mean it’s crazy. They have a 4 to 5% withdrawal fee.
Aaron Lammer: Yeah.
Jay Kang: So like any amount of money that you make, any volume of money that you make, you have a percentage that’s chopped off of it, and I think that that’s been very frustrating to people. And I think the idea of Augur is that if you introduce it decentralized, and people can make their own rules and you can create whatever type of protection market you want.
Aaron Lammer: Do you think people will use it to create financial products within crypto? Like I’m thinking about like if me and you had a bet, crypto up or down in January, I believe was our bet.
Jay Kang: Yeah, I won that one.
Aaron Lammer: You won that one by … If we were weighting it, you won it very handily.
Jay Kang: But you won the other one, which was will Ripple (XRP) be worth more than a dollar at the end of January.
Aaron Lammer: Oh, yeah.
Jay Kang: You cursed that one.
Aaron Lammer: Sorry Ripple holders. Sorry.
Jay Kang: And our settlement was one Ripple.
Aaron Lammer: So you owe me a Ripple?
Jay Kang: No, we both owe each other a Ripple.
Aaron Lammer: Okay, we’ll exchange that off air. But my question is, could we have set up that bet on Auger?
Jay Kang: I don’t think that we could upload Ripple and have that be settled. I think everything is on the Ethereum network, which is its own problem with traffic and everything like that, so I think everything would be settled through-
Aaron Lammer: Oh, sorry. I didn’t mean settled actually with Ripple, but I just mean like could we make bets on Augur that are like in some ways futures.
Jay Kang: Yeah, yeah, yeah. Of course, yeah, yeah.
Aaron Lammer: So in some ways, Augur can be used to make bets with in the crypto market. Like instead of actually buying a coin, me and you could like bet against each other on the future of Bitcoin.
Jay Kang: Yeah, yeah, yeah.
Aaron Lammer: It opens up whole new avenues of fraud and scam-iness-
Jay Kang: Yep.
Aaron Lammer: In trying to manipulate Augur bets. If any of these Augur bets get enough … And this first one is a great example. Like how much money is going to be sitting out there to hack Augur? You know, what’s the pool of that? If I see someone making a huge bet they’re going to hack Augur, I wouldn’t want to take the opposite side of that bet, because they probably know how to hack Augur.
Jay Kang: Yeah, they’re probably about to hack Auger. I think that it is a fascinating project, and it’s one that’s going to have larger ramifications for all betting markets honestly, because if it does work without like a fully centralized adjudicating authority, then it’s going to be totally fascinating, and I think most people who are involved in gambling would say that that’s impossible, but who knows.
Aaron Lammer: All right, let’s … You wanted to talk a little bit about the Senate hearings that happened.
Jay Kang: Yeah.
Aaron Lammer: Let’s talk about like actual news, like normal people.
Jay Kang: Yeah, they were scintillating. I have to admit, I didn’t watch them at first. At first I was like, oh I’ll just like read the Tweets, but then I did get around to watching them and they’ve kind of made a star of, I believe he’s the Honorable J. Christopher Giancarlo. Who’s the chairman of the CFTC and already I would say one of the top ten most beloved figures in crypto now.
Aaron Lammer: I think he’s number one.
Jay Kang: I mean …
Aaron Lammer: I think he’s like the Bruno Mars of crypto.
Jay Kang: I like the guy. I like him.
Aaron Lammer: Everybody loves him.
Jay Kang: He’s got that kind of handsome bald man thing going on too, which I’m always like who’s the guy who is Top Chef?
Aaron Lammer: Colicchio.
Jay Kang: Colicchio.
Aaron Lammer: Tom Colicchio.
Jay Kang: Yeah, I feel like him and Colicchio could be like long lost brothers. He’s got kind of like a swagger to him. And I also kind of like the way that he wasn’t all business. He was willing to bring up … When he was talking about, I love the part … Let’s play the clip when he’s talking about I think it’s like his niece buying Bitcoin. Okay, let’s play that.
Recording: Chairman Giancarlo: “And in fact, what we hear a lot of is people buying and holding. If you go onto the Twitter universe, you’ll see a phrase, H-O-D-L, which means Hold On for Dear Life, and the thinking is that they buy it and hold it. In fact, I mention in opening remarks my 30 year-old niece who bought Bitcoin years ago and she’s an HODL. She says I’m going to own it, I don’t know what’s going to come of it, but I want to hang on to it. And she’s not a fraudster or a manipulator, she’s just a kid and believes in it and, you know, I was fascinated talking to her and I think she represents a lot of folks that think there’s something in this, I want to hold onto it.
Recording: And so, in that regard it’s a … From our point of view, it’s a commodity and if there’s a derivative on that, we regulate it. The problem is, in the cash market we don’t have regulatory authority, which means we can’t set the standards, but what we will do and we are doing is looking for fraud and manipulation, and we intend to be very aggressive if nothing else, so that people like my niece can have some security that there’s not fraudsters and manipulators out there, and there are a lot … too many … far too many of them.”
Aaron Lammer: Okay, so this is something that comes up a lot. Like I think when Jamie Dimon was talking about Bitcoin, he also brought up his daughter buying Bitcoin, but Giancarlo is kind of going in the opposite direction here where he’s like saying look, you could tell me there are millions of scammers out there. You can’t indict the entire system because of these scammers. Because like I know this person, this is my family member, and I understand their motivations and their intentions, and their intentions are pure.
Jay Kang: Yeah, yeah, yeah. And I think that’s a powerful thing. I mean, you know, that’s why every politician from Hillary Clinton all the way back to, I don’t know Abraham Lincoln, will sprinkle in some personal anecdotes, and I just thought it was very effective. He bridged the gap in a lot of ways between, you know, people who look at Bitcoin and just see a morass of angry Libertarians with anime avatars shit posting all day, and, you know, like a lot of the people who did get in in the past year who might have some philosophical reason for it and who have benefited from it, maybe not financially right now.
Aaron Lammer: Yeah.
Jay Kang: But they’ve benefited from the same way that you and I talk about all the time about which is that before this like you and I were financial illiterates. You know, I mean, like I did not … I had a stock portfolio and a retirement fund, but I never looked at it. If you told me the market was doing something, I’d be like I don’t care, you know, and even just sort of psychological, philosophical ideas about money I hadn’t really thought about. And I think that what he did bring forward in this talk was that look, this is actually something that is not just a bunch of scammers trying to get rich. Like some people really do believe in this and those people happen to be young. A lot of them are bright and some of them are people that you probably know and I think that was a very powerful message.
Aaron Lammer: I totally agree. I thought it was … Me and you I think are like outcasts, black sheep in crypto, because we believe in the idea of regulations, like we are not yet vehemently against regulation. We can have an odd standpoint there. I think a lot of people are like, hey, if you believe in regulations, get the fuck out. “Insider trading should be legal.” Roger Ver. But what I think the path that Giancarlo is charting here is really interesting because he’s obviously someone who believes in regulation himself. He is the chairman of a regulatory association.
Aaron Lammer: But what he’s saying is, people have the right to invest in the things they believe in. Like if you believe in Bitcoin, the CFTC should not say you cannot invest in that. You cannot put your money where your mouth is. We’ll regulate it and we have an interest in in regulation and rooting out the worst actors in the system, but that does not involve us infringing on the rights of someone who actually believes in this stuff. And so that feels to me in the long term like we’re going to figure out how to make this work. You don’t give that speech if you’re even considering a ban.
Jay Kang: Yeah, and I think that him going in front of the Senate and saying all of this where a lot of the senators clearly did not know what crypto currency was or Bitcoin was and they had just sort of I’m sure read a brief or heard about its crashes. I think that by directly comparing it to the early Internet, which is a comparison that happens all of the time.
Aaron Lammer: Very much so.
Jay Kang: You hear from somebody like him-
Aaron Lammer: I like the way that Jameson Lopp talked about it when we interviewed him on the show.
Jay Kang: Yeah, yeah, yeah.
Aaron Lammer: Yes. Check that out.
Jay Kang: It was a clear and simple way to describe things and look, you and I talk about this all the time and I think it’s because of our place in media. It’s about like the messaging of the crypto community and how it can’t … While I think that this thing would not exist without cypherpunks, without Libertarians, it is their vision, primarily. I think that mainstream adoption is going to take some sort of adjustment to the messaging so that you can get across this idea that this is a revolutionary technology, it is philosophically interesting to anybody who is frustrated at all with what’s happening in the global economy or even within sort of the corporatization of this country. If you have problems with that then you don’t have to like Bitcoin, but you should at least think about it, you know, and I think that was essentially his message and I think it was one that’s necessary.
Aaron Lammer: Yeah, I was impressed also that he noted like when we were talking about Korea, one of the things that I brought up with Nathan Park who was our guest on the show was Korea is already so crypto crazy, at a certain point politically in Korea does it make sense to just say instead of fighting crypto let’s become the crypto country. Let’s bet on crypto, let’s push our national interest with it, and if crypto goes crazy worldwide, well, this is a great moment for Korea.
Aaron Lammer: And I think that part of what I read into some of the statements the Giancarlo made before the Senate was, look at all the bounty that the Internet has brought America and how important was it to the American economy in the growth of the tech economy that the Internet not only happened, but it happened in America, it came out of American government institutions, and we wouldn’t have wanted to miss out on that.
Aaron Lammer: And I think that what I ultimately took from what he said was, crypto is going to happen and we should take advantage of it as Americans. Like America should be part of the crypto story. We should be a leader in crypto, and we should regulate it and become like a model for how to deal with this, rather than fighting against it. Because if we fight against it, we’re probably missing an opportunity of the Internet scale. That’s my extremely hyperbolic optimistic read. I don’t offer that was all quite in there.
Jay Kang: Yeah. All right, what’s the second clip you liked?
Recording: Q: Is Bitcoin or are these currently being traded, are they a commodity, or are they a security, or are they both?
Recording: Chairman Giancarlo: What’s so challenging about Bitcoin is it has characteristics of multiple different things. One of the phrases that’s often used is that Bitcoin is a medium of exchange, a store of value, or a means of accounts. Well, those three things have different connotations to them. If it’s a means of a … A medium of exchange, then it’s like a currency like instrument, and yet as we’ve seen, a number of means of exchanges have been closed to Bitcoin. It was recently a Bitcoin conference that stopped accepting Bitcoin for registrants because they couldn’t process the payments. So … But yet it’s still spoken of as perhaps a means of account, which in that case it has implications from the Fed and currency. From our point of view, when it’s used as a store of value, then it’s very much like an asset, like a commodity.
Aaron Lammer: This is sort of the central debate about like what confuses people about Bitcoin. Is it cash? Is it a stored value? And I mean, just to praise Giancarlo a bit more, I’m impressed that this is like … You know, sometimes do you read the Supreme Court opinions ever?
Jay Kang: Yeah, I mean, I used to read a lot of them.
Aaron Lammer: I know you’re an argumentative person, so I assume that you probably have read Supreme Court opinions. There are certain people who write Supreme Court opinions like they’re high school debaters and they’re just like I’m going hard on this side, you know. And then there are some Supreme Court justices whose opinions I enjoy more where it feels like they’re like working through the logic themselves and are in a genuine exploration of the ideas.
Aaron Lammer: And I feel like in this hearing, Giancarlo is like look, it’s not exactly one or the other. Like all these things are being developed simultaneously, and when you’re like is it a security or is it a commodity, or is it a store of value, you’re asking a question about a moving narrative that actually hasn’t been decided, it has elements of multiple things. So i just thought it was cool that like it seemed like kind of took it on like a, you know, stoned college student researching Bitcoin on the Internet and kind of like explored all the angles.
Jay Kang: Yeah, yeah. I think that it was very much like that. I think that’s a perfect way to put it. I mean, it did sound like he had like arrived at some clarity.
Aaron Lammer: Yeah.
Jay Kang: You know, perhaps a chemical altered clarity. And he was like, all right, let me break it down for you. It’s neither. What if it was neither?
Aaron Lammer: I love it.Wwhen you see this video, there’s also kind of a quality of that Lloyd Blankfein video we played, when he was talking where like these guys who have spend their lives in finance and economics kind of take Bitcoin … Take crypto seriously for the first time, and they’re like yeah, I looked into this and it’s pretty cool, there are some pretty crazy ideas out there. Like it’s just exciting to me that people who could be skeptics, when they sort of look into it, whether they’re for it or against it, they’re at least like, it was pretty fascinating.
Jay Kang: And I do think that it is overall, look, we’re in a bad time for price right? The market is not good. But I do think that it made me much more … And that’s something I think I was texting you, which is that it makes me more bullish on crypto in general that this is happening even when the market is down, because it makes me think … Like, you know, for example, I had actually think that the news out of Korea was essentially pretty good, which was that, you know, they too want to compete to be the Silicon Valley of crypto. United States it seems like at least through Giancarlo, we don’t know what’s going to happen. I mean, he’s not the king of all financial markets or the president, so he doesn’t get to have too much say on this, but if you [crosstalk 00:38:03]-
Aaron Lammer: Giancarlo for president? I’m down.
Jay Kang: If he ran for Bitcoin president right now, he would win in a landslide.
Aaron Lammer: I feel like a Giancarlo campaign funded by like those Portopia dudes. That’s enough money to get someone going pretty fast.
Jay Kang: I think that his war chest would be massive and highly liquid.
Aaron Lammer: Yeah, he would be like the front runner and then get hacked and then drop off.
Jay Kang: Yeah, someone would send him like two million dollars of Ubiq, and he’d be like, I really don’t know what to do with this. What just got sent to me? Do I need a wallet for this? I think that if that is a world that we enter next year or the year after that where there are a lot of … Where some of these scam-y things are weeded out and there are legitimate companies who are competing across the world to try and make the best products and that there is some sort of easier barrier to entry for normal people like you and me or any other people who have, you know, downloaded Coinbase to invest in these companies through, you know, token securities or something like that, I think that’s like the world that we wanted when we got into this, right? And it seems like it might be more realistic right now, even though the price is down, honestly, this is probably the most bullish you’ve ever heard me, Aaron.
Aaron Lammer: I know I feel like-
Jay Kang: It seems more realistic right now than it did-
Aaron Lammer: I feel like your happy place is like Bitcoin $5.00. Once we’re there you’ll be like walking around with a Bitcoin T-shirt on.
Jay Kang: Like, we’re going to do this. I have so many Bitcoins right now, let’s do this.
Aaron Lammer: Jay is only happy when it rains. Okay, so to tie up here a little bit. We’ve now I hope rock bottomed here. For your own backs, starting for me literally at square A, right back where I started, are you going to do anything different this time?
Jay Kang: Well, I mean, one thing that we talked about on Ledger’s podcast and, you know, the reason why we talk to him so much is because we trust his general sense of the markets and we find him to be an engaging and thoughtful thinker.
Aaron Lammer: I like his slow Southern accent also.
Jay Kang: It does remind me of my childhood. He suggested that … He didn’t suggest. There is no financial advice here, let’s be clear, but he did say that, you know, historically in the past that alt’s have bounced back harder than Bitcoin during these periods, and so I would think that maybe once I am certain that the market is going to turn back to bullish, that I should redistribute into alt’s.
Jay Kang: The other thing though that I think that he has been saying on his Telegram channel or that I’ve also noticed is that there just is not that much volume on places like Bittrex. And so I’m a little bit worried about it, honestly. I think that they probably will bounce back to a certain extent, but honestly, I don’t think it’s worth the headache and this Binance thing also scares me. Like if I wanted to go out and buy 0X, which is a coin and a project that I really like, like how would I even do that right now, you know, and how can I do that confidently thinking that these exchanges are going to stay up? So I think I’m just going to stay mostly in Bitcoin.
Aaron Lammer: Yeah, I’m going to reverse my general embrace of all things shitty when it comes to coins and say this crash taught me … Well, one thing it taught me is there’s no way I’m going to like slip out of alt’s just before the crash. I’m just like too sloppy, too slow, too likely to hold when I should sell there. So I think I’m going to go a little safer this time up. I’m mostly going with the projects. I’m holding myself to my block folio rule, which will be seven coins, which means I need to shed five coins.
Aaron Lammer: So these are the coins I held all the way down; Bitcoin, Monero, Ubiq, Ethereum, Sumo, Proof of Stake Wallet, PoSW, Power Ledger, Bancor, Saw, Qtum, Trust, and of course my favorite delisted from Bittrex coin that I can’t move but still own, Darcrus. So not counting Darcrus, because I don’t think it should take up a slot since I can’t get rid of it if I want to, I got to shed like five of those, and that doesn’t leave many slots. Like if you assume like you know I’m a Monero fan. I think it makes sense to hold a little Bitcoin and Ethereum. That means I really only have four altcoin slots.
Aaron Lammer: So my goal is to like find stuff I really believe in. I think I’d like to get back into Aragon, because I did really well on that and everyone has always been like very … People I know who are not into shit coins and are not into bullshit, are very pro Aragon, so I’ll probably add that back in, and then it’s just going to be some hard decisions about what I actually want to ride both directions, you know. Because I think we’re going to have more big crashes. Do you feel like we were rooted big crashes out of our system?
Jay Kang: No, no. They have them like clockwork and it just depends on the severity of it.
Aaron Lammer: Yeah.
Jay Kang: They’re easy crashes, like the one we had before Christmas where, you know, you and I were BTFD’ing the whole way down, and then it snapped right back up and we’re like whoa, if it’s always like this, it’s going to be amazing.
Aaron Lammer: Yeah.
Jay Kang: And then it crashed again and it was nothing like that at all, and it was much worse than if we had DTFD’d we would be crushed right now.
Aaron Lammer: Yeah, I think I’m also going to stop trying to buy dips, because I was like … We talked about this a little bit on Ledger Class also. This time on the way up, I was buying dips, like when it dipped from like 17,000 to 15,000 I was buying, and I think those dips … I think that as it got really high, I thought like oh, it’s down $2,000, dip city. That is not a dip in Bitcoin. That’s just like a normal day in Bitcoin.
Jay Kang: Yeah, that’s like someone took a share.
Aaron Lammer: Yeah, that’s like someone mistranslated one word in a Korean document. That’s that dip. So I’m going to be only looking for these mega dips I think going forward.
Jay Kang: Yeah.
Aaron Lammer: Anything you’ve heard about? Any projects that are exciting you? Anything that … Because I know, Jay, I know you’ll get a little self-righteous and say I’m only doing the legit stuff and then I usually hear a creeping like urge to get involved in some altcoin shade-ry from you. What do you add on that?
Jay Kang: Yeah. I do not practice what I preach in any way.
Aaron Lammer: Well, you do for like a day, and then you start preaching-
Jay Kang: Yeah, although this one I will say-
Aaron Lammer: Generously.
Jay Kang: I’ve been pretty close to all Bitcoin and Ethereum and Monero for like almost two months now, which is very, very, very, very rare. Two months might actually be overselling it, let’s say five weeks. No, honestly, 0X is something that I do like, but, you know, it was mostly traded on Binance and Binance is down and look, if Binance snaps all the way back up and, you know, everybody on Binance feels great about it in a couple days and, you know, volume doesn’t drop precipitously, which I don’t understand in any scenario, even if Binance is totally intact structurally, I don’t understand how people don’t stop trading there.
Jay Kang: Yeah, so I still believe in that project, I just have a hard time buying it right now because, you know, this alt crash was brutal and I guess I just kind of feel like look, if Bitcoin takes off then, you know, alt’s aren’t going to do so well either. So, yeah, I’m going to wait until we see a little more stability.
Aaron Lammer: I’m going to let you go ’cause I know you’ve got a shoot to get to there. I want to send out … I’m hoping that we can start giving some recommendations of stuff we’re enjoying on the show. For people who listen to the show, I enjoyed this week, it’s on Netflix. There’s an Alex Gibney series of documentaries called Dirty Money, but they’re by different directors each one. I recommend the one, I think it’s number three, that Aaron Lee Carr directed about Valeant, which is the company that later Martin Shkreli sort of mimic their tactics and raised drug prices. It’s really a fascinating story and it’s mostly about the short sellers who really exposed Valeant by sort of figuring out what was really going on there. I totally recommend it to our listeners and I recommend it to you, Jay.
Aaron Lammer: And it brought up in my mind the fact that these short sellers kind of actually almost perform a regulatory service on stocks where their investigations often expose corruption and bad actors in the system. But what this documentary showed me that I thought was interesting was that these people who are short sellers are almost like investigative journalists. They’re really digging into the companies, and right now there is no one who is digging into a lot of these altcoins and seeing what’s really going on, and there should be a financial incentive for exposing fraud.
Jay Kang: Yeah, and you’re going to have funny results. Like when Bill Ackman tried to short Herbalife and then Carl Icahn was like, nope.
Aaron Lammer: And Bill Ackman is also in the Valeant story, but he’s on the other side. Bill Ackman is like buying up Valeant and being like, it’s not a fraud.
Jay Kang: No one has gotten more publicly wrecked, by the way, than … If you feel bad about your crypto getting wrecked and everyone making fun of you, just check out what’s happened to Bill Ackman. Every time something gets wrecked like Chipotle or something, anything that gets totally wrecked it’s like, and Bill Ackman was heavily invested.
Aaron Lammer: Cool. All right, well, I’ll see when you’re back in New York, yeah?
Jay Kang: All right, cool. Good talking to you.
Aaron Lammer: Later.