Episode #77: 🛸 The Binance Time Machine and the Rally No One Understands

We rank 5 theories about why Bitcoin is rallying, then talk about the Binance Hack and CZ’s “suggestion” to roll back the ledger and get his money back

Coin Talk
Coin Talk
Jun 6 · 39 min read
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CoinTalk 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. (You can also subscribe on Apple Podcasts, Google Play, download the MP3, or email us at hi@cointalk.show)

Show Notes

  • 5 theories about why Bitcoin is rallying ranked
  • CZ is just curious if maybe we could use the crypto time machine to get back the $40 mil that Binance lost
  • How to solve the problem of exchanges

Transcript

Aaron Lammer: Jay, what a beautiful day to talk.

Jay Kang: Yeah. Well, it’s pretty crappy here in New York, but I think this is the first time that I can remember in a year, or more than a year, where you and I are recording an episode … and generally it takes us about a day or two to get this thing edited by our editor, James Nicholson, and out in to the world, and this is the first time-

Aaron Lammer: Why you gotta dox James that way-

Jay Kang: I thought we mentioned at the end of our show.

Aaron Lammer: That’s true, that’s true, that’s true.

Jay Kang: Where I’m worried that when people hear the episode tomorrow that the crypto world will be very different, that the price will be totally different now. That used to happen all the time, which is why we even started the sort of robot voice at the beginning. It was almost joke, right? Saying well, we have no idea what the Bitcoin price is going to be, but when we recorded this, this is what it was. The is the first time I can remember I’m just like, well, who the fuck knows what the price is going to be tomorrow?

Aaron Lammer: This is the first time in a while that I’m not sure what the price is going to be at the end of our recording. The price is currently 7,782, but it’s up 10.5% in the last 12 hours. So, I would not be surprised to end the show over 8,000, and I would not be surprised to end this show at like 7,100.

Jay Kang: Yeah, and tomorrow when the episode comes out, I would not be shocked if Bitcoin has crashed back down to like 6,000, or has gone up to 9,000.

Aaron Lammer: I mean, I went to bed last night and it was at 7,000, and I have no indication … like every single theory I’ve heard about this stuff, every piece of TA that anyone’s said, has just been either proven immediately wrong or made no sense to me.

Jay Kang: All right. So, yeah, let’s [inaudible 00:02:43] table a little bit then, right? So, what is going on in the crypto world right now, at least to me doesn’t seem to have any sort of reflection on why this is happening. So, before, we could come up with pretty plausible narratives when the bull run was happening of 2017, which is that, hey, there’s really a crypto craze. Everybody’s writing about it, everybody’s doing TV segments about it. All these people across the world are laundering money through it, especially in China through Korea. There’s a whole remittance economy that’s springing up, right? All these types of things could contribute to the price heist in Bitcoin, but right now it doesn’t seem like we have any of those.

Aaron Lammer: Well, there’s an alternate history to that period, which is the Tether printer/market manipulation history, which basically suggests what we understood to be a consumer retail mania may really have all been a Wizard of Oz style mirage. I don’t actually particularly buy that, and I think my position has actually been strengthened by what’s come out about Tether, which is yes, it was incredibly shady, but the Attorney General report did not suggest the Tether printer theory was accurate. But I feel like during that whole period … correct me if I’m wrong, Jay, but whenever we would try to bring order to what was happening, you would be like, you’re just copying and pasting the news onto what’s really random market [inaudible 00:04:18].

Jay Kang: Yeah. So, I still feel that way.

Aaron Lammer: Now we don’t even know what copy and paste on. I don’t even know what phony story to make [inaudible 00:04:25]

Jay Kang: Yeah. That’s what I’m saying is that there’s not even a narrative to affix to any of this that might convince people to buy into it, or even might … it’s not even that. It’s just it makes order of the world to tell yourself a story about why something is happening. I don’t know. I just find it so interesting because, let’s see, from the Kang line at 3,300, we’re well over 100%, right?

Aaron Lammer: Yep.

Jay Kang: There’s been a huge jump in the last two weeks alone.

Aaron Lammer: Would you say I called that, or no?

Jay Kang: Sure. I think you did call it. Yeah.

Aaron Lammer: Thank you. Thank you.

Jay Kang: Yeah, ’cause you said it’s going to keep going up.

Aaron Lammer: Look. I mean, most of my calls are wrong.

Jay Kang: You called 10,000 though. So, we’re not quite there.

Aaron Lammer: None of this is investment advice. If you go through all the episodes, I’d say I’m 20% right.

Jay Kang: Let me push you a little bit further down the take, like the freezing-

Aaron Lammer: Yeah. [crosstalk 00:05:18]

Jay Kang: … cold takes [inaudible 00:05:19]. Do you know that account, like that Twitter account that if you make a sports prediction, they’ll retweet it when it’s wrong?

Aaron Lammer: I’m not familiar with that account, but I’m familiar with the hazards of being Paul Pierce and Charles Barkley during the playoffs now, where you’re like a lifelong shit talker and now you are shit talking live on national TV with Twitter watching.

Jay Kang: Yeah. Well, okay, do you think it’ll go to 10,000?

Aaron Lammer: Yes.

Jay Kang: Okay. I’m going to hold you to that. I’m going to hold you to that. I have no idea. I don’t-

Aaron Lammer: Am I betting that it’s going to go directly to 10,000? I will say 10,000 June 1st. We’ll have at least at one point crossed 10,000 before June 1st [crosstalk 00:06:00]

Jay Kang: Yeah. That is pretty directly.

Aaron Lammer: Well, look, it could go down to 6,400 right now and then eventually run up to 10,000 pretty quickly. Now that it’s volatile, I can just imagine … even if it takes a big loss, it could also take a huge jump after a big loss.

Jay Kang: But that’s like a 5% loss. For crypto, that’s like being down 0.5%.

Aaron Lammer: Yeah.

Jay Kang: Okay. I would be equally surprised if that happened and if that didn’t happen. I’ll just put it that way.

Aaron Lammer: I sent a tweet to you, which I think I actually saw retweeted by Haralabob, Grantland, and the [inaudible 00:06:39] Haralabos Voulgaris. Am I pronouncing that correctly?

Jay Kang: Voulgaris, sure.

Aaron Lammer: That said basically if you look at the last … or actually the whole run Bitcoin really, almost all of the gains are usually concentrated within 10 days of the year.

Jay Kang: Yeah. Yeah. And then every other day of the year it’s like a net negative 20% or something. Yeah.

Aaron Lammer: So if you are just sitting there on a day by day basis trading, and trying to decide whether Bitcoin is going up, you’re almost sure to lose. It feels like right now … I’m not going to say, oh, everyday is one of those days, but if we just had a couple of those days, I predict a couple more of those days will happen in the next month or two.

Jay Kang: Okay, sure.

Aaron Lammer: It feels like we’re in the hot season of the year, except for altcoins, which continue to be in the toilet and I continue to make the exact same mistake I’ve always made in crypto, which is losing Bitcoin value as Bitcoin goes up.

Jay Kang: I would make fun of you, but I just lose Bitcoin value through losing Bitcoin through gambling. So, I think that’s actually worse.

Aaron Lammer: You got to lose it somehow. I mean, I’m not gambling on shit coins anymore. I’m holding prestige alts, but Zcash has just been getting rocked.

Jay Kang: Is there such a thing? Is there such a thing as a prestige alt now?

Aaron Lammer: Prestige alt, yes.

Jay Kang: I feel like the one thing that Saifedean Ammous was right about is that they’re all shit coins.

Aaron Lammer: Fair enough. Well, this is consensus week, so I do feel like F has been looking kind of peppy against Bitcoin. I think we could also be seeing some of the big F days of the year.

Jay Kang: I hope so for you, even though-

Aaron Lammer: Well, and I also will say that if there’s one theory that I’ve seen in fairly mainstream media about why the price is going up, it is all of this fidelity, Ameritrade, E-trade stuff. That stuff primarily speaks to the very top of the shit coin chart.

Jay Kang: Hold on, hold on. I’m going to cut you off. Do you want to just go down a list of theories and talk about it?

Aaron Lammer: Sure, sure. Okay, okay. I’ll hold my fire.

Jay Kang: Let me read these to you. This is from an article in Business Insider by a guy named Theron Mohamed, and it’s five theories for the Bitcoin price spike. I’m just going to read them to you and we discuss them. Does that work?

Aaron Lammer: Okay.

Jay Kang: Okay. So, the first is that … and these are things that he got from Reddit. So, these are the five theories that he found that he thought was most compelling, right? So, this is not an endorsement of the article or a neg of the article.

Aaron Lammer: This is just reporting at its finest. Some rising Reddit for you.

Jay Kang: I’ve done that. No shade to you-

Aaron Lammer: No. Hey, you’ve saved me having to go on Reddit. You saved me a shower.

Jay Kang: Okay. So, the first is safe haven. “It’s possible that a great number of rich people know that the traditional markets are F’ed eight ways to Tuesday”, wrote [DIYDude2 00:09:44] on the RBitcoin thread [inaudible 00:09:47]. This guy is really-

Aaron Lammer: Shouts to DIYDude2. Definitely a lesson.

Jay Kang: So, this has to do with the global market sell off, regarding what Trump is doing with China, all the tariffs, and everything like that. The market is certainly down in the past couple days of the market. It is getting crushed today, and that perhaps smart investors are basically saying … especially those who work with China are saying, hey, we need to put money into something that is not stocks. And so, we will put into Bitcoin. How do you feel about that theory?

Aaron Lammer: Well, I feel like this a theory that I was espousing during the last bull run, which is kind of always true of Trump. As long as Trump has been president, there has been a reason to think that the world is potentially on the brink of disaster. Whether it’s North Korea nuclear talks … I mean, I feel like … perhaps I’m wrong, but was Brexit kind of happening during the last bull run? If you want to find a reason for people to think that traditional markets are about to catch on fire, there’s kind of always a reason. So, I’m going to say that a couple years into all this China trade stuff, yes, the stock market is down, but this doesn’t feel like an inflection point of market fear. Does it to you?

Jay Kang: No, it’s the same stuff that’s been happening. The market is still up overall, and I would think that some of these people would actually use this type of down drafting to buy back in. And honestly, one of my crazy conspiracy theories if I was on Reddit is that I think that maybe some of this is market manipulation, ’cause the timing of Trump getting mad at China and the markets freaking out, I don’t know, if you knew it a little Bitcoin beforehand, you would profit wildly. The second-

Aaron Lammer: I think you do not have to frame that as one of your craziest conspiracy theories.

Jay Kang: Okay. Yeah.

Aaron Lammer: I would call it medium warm. I would actually put it back in the microwave [crosstalk 00:11:48]. I don’t think that theory is that hot at all, also because Trump, who is the crypto president, acts like a person in crypto. You know with Tether I’m always like, yeah, there was a Tether scandal, but it’s not like Tether went away. All we know is that there’s going to be another Tether scandal. China has a trade standoff with Trump and the market reacts, and then six months later there’s going to be some other sort of Trump trade standoff.

Jay Kang: Yeah, or in six weeks.

Aaron Lammer: I don’t see why now … This does not feel like the moment in history where I’m like, God, everyone in on Bitcoin, particularly also because if people were going to pile on Bitcoin out of market fears, the smart people were doing that below 5,000.

Jay Kang: I’m with you. I think that this is one your great theories, which I will attribute to you-

Aaron Lammer: Thank you.

Jay Kang: … is the Trump hedge. Like Trump disaster hedge. I don’t think this is a Trump disaster hedge point.

Aaron Lammer: No. No. But as we approach the 2020 elections, look out for some Trump disaster hedge opportunities traders.

Jay Kang: It’s not even that … I don’t even know if the Trump hedge is the problems with the markets going into 2020. This has nothing to do with my personal politics, and I’m just talking about in terms of the market.

Aaron Lammer: We’re cold, hard, unskilled traders.

Jay Kang: I don’t know if Wall Street … actually, I do know. Wall Street is more afraid of Bernie or Elizabeth Warren being the president than they are about Trump. And so, in terms of going into the 2020 election, if Warren or Bernie … and right now it really doesn’t look like they’re going to be able to pull it out, but if they’re the nominee going in and it looks like they might win, you’re going to see some market freakouts and some dumping into other things unlike anything before. All these tech companies are going to start freaking out. All these Wall Street people … anything that if there’s big anti-trust push, which this morning the Supreme Court allowed anti-trust stuff to go ahead Facebook, is it? Or is it Apple, right? I don’t know. It’s going to get crazy. I don’t think it’s necessarily Trump in that.

Aaron Lammer: Can I put on my conspiracy hat for just one moment here?

Jay Kang: Yeah, sure.

Aaron Lammer: Give you some lukewarm conspiracy. All of these big Goldman Sachs, the people who are going the Uber IPOs, all the people who profit off of the stock market, don’t want a bunch of people to pull their stock money out of the stock market and go dump it into crypto. And for that reason, I feel like … Do you feel like that’s actually happening? No.

Jay Kang: No.

Aaron Lammer: I feel people are much more going to prop up stocks and prop up Bitcoin so people can move their money over.

Jay Kang: Yeah, yeah, yeah.

Aaron Lammer: Hey Bitcoin, people aren’t rooting that hard for you. I know it’s easy when you’re a hometown fan to be like, “Everyone in the world loves the Oakland A’s.” That’s how I felt when I was a kid too.

Jay Kang: That’s a joke.

Aaron Lammer: But most people are like, “Yeah. I guess I would profiteer on Bitcoin if I got the opportunity, but I’m doing great on this whole stock game over here.”

Jay Kang: Yeah. Although to be fair, when you were a child in the Bay Area, the Oakland A’s were probably one of the most popular teams worldwide, don’t you think?

Aaron Lammer: Oh, yeah.

Jay Kang: The Bash brothers, Dave Stewart, Bob Welch.

Aaron Lammer: The greatest sports related moment on this show was when we discussed the long term value of a Carney Lansford baseball card. Maybe we should go back to listen to that episode. I think that is our … I’m just going to say that right now. I think that is our finest episode.

Jay Kang: Yeah, me too actually.

Aaron Lammer: Number one. Okay, what’s theory number two?

Jay Kang: Mainstream appeal. Institutions are scrambling again and ahead of the brokerage’s launch of Fidelity, Ameritrade, E-Trade, so they can dump on the next wave of retail investors to enter the space, wrote-

Aaron Lammer: That Reddit user’s name is named SavageX. Shouts to SavageX.

Jay Kang: Okay. So, let’s talk about this because this is what you were starting to get into before I cut you off.

Aaron Lammer: Okay. So, this is kind of like a weird pants-on-backward take, which is … the simplified take would be the markets are going to go up when people can start buying in these places. And maybe a few people would be buying it knowing that there was a … what we talked about with the ripple buyers where you’re like, hey, let’s think about this like a really dumb person. Really dumb is the idea that you should buy a coin ’cause it’s under a dollar. We thought that people were going to do that ripple. They did. So, I think a reasonable theory is people are going to buy on Fidelity, Ameritrade, and E-Trade, therefore you should buy right before they launch. This whole idea that people are buying to dump on them kind of feels more like a day trader take on this than I feel like … I don’t know, what do you think?

Jay Kang: Well, I can see what they’re saying, which is that if you can buy in now, right? If you could buy in at 5,000 or 6,000, and all that action gave an illusion that Bitcoin was back, right? And that once these things launch, people look at the charts or they look at the price and they’re like, wow, maybe Bitcoin is back and maybe now that it’s out of its slump, it can go all the way back up to 18,000 and I’ll sell there, right?

Aaron Lammer: Yeah.

Jay Kang: And then once they buy in, it goes to a certain amount and these people who have targets set maybe at 10,000, 12,000, then they dump there, and the new retail investors have the legs cut out from under them. I think that’s what the argument is, but I-

Aaron Lammer: Yeah. I’m actually kind of buying it.

Jay Kang: I don’t know. I would give that a seven plausibility. Obviously this is not a zero sum game. There doesn’t have to be one cause and one cause only, but I do think that this probably does factor into it a little bit.

Aaron Lammer: Let me read this a slightly different way, which would be there’s a bunch of people who would profit if there is another bull run. Fidelity, Ameritrade, E-Trade would profit. All the exchanges would profit. People who were able to dump quickly and had algorithmic trading strategies would profit. So, if you’re telling me that all those people would maybe throw in a few bucks to get the wheels greased if they thought they could get another bull run, I’d kind of buy that. I’d kind of buy that people would want to get the wheels running ’cause people know how profitable it was, and some of these people in the case of the exchange really need that to happen to get bailed out of their whole ’cause no one trades when Bitcoin is down.

Jay Kang: Do you think that … can we buy Bitcoin on Fidelity and E-trade even though we live in New York?

Aaron Lammer: I have a Fidelity account. I have a feeling not. In fact, I think the exodus is going the other way. I had to take my coins off of Bitrex ’cause they’re completely banning New York users. So, I got them over there in an atomic wallet now.

Jay Kang: Oh, so you don’t think that we can … you don’t think we’ll be able to trade.

Aaron Lammer: I feel like if it’s on a state by state basis, New York is almost always the number one no state.

Jay Kang: Yeah. We can’t do Robin Hood either. Okay. Next-

Aaron Lammer: Okay. So, let’s move to Puerto Rico. Okay.

Jay Kang: Or New Jersey. So, the number three reason is exodus from all coins. “The ICO experiment is over,” wrote [Consolus82 00:19:04] in a thread about the Bitcoin spike, referring to the recent boom in crypto currency launches, known as initial coin offerings. People are waking up to the realization that Bitcoin is a much larger idea than any other blockchain phantasmagorias people have been trying to push for the past couple of years. There’s evidence to support the idea that investors are shifting funds from other cryptocurrencies to Bitcoin. From purely looking at the data, one factor could be that at least the BTC rally is conversion of all coins into Bitcoin. Wow, you know what? For a second there, I slid back into my TV narration voice, which I was always-

Aaron Lammer: Yeah. I liked it. It was very soothing. I actually kind of stopped paying attention weirdly when you went into it, but it was skilled.

Jay Kang: Thank you. I spent two years practicing to get myself to a 4.5 out of 10. So, all right. So, what do you think about that theory, that everyone’s just dumping alts into Bitcoin and that’s what’s happening?

Aaron Lammer: Okay. So, let me frame this how I came to think about this over time, and I think there’s something to it. You brought up that Saifedean Ammous, our former guest and not a fan of rap music, says that everything’s a shit coin. That would mean that if you take all of crypto, the entire value of crypto is Bitcoin, and the entire value of everything else is nothing. That’s an extremist position, but I think it’s one that you can a pretty good case for actually. I think you can make a better case for it today than you could two years ago actually. So, the entire market cap of all of crypto is $231 billion. And of that, $138 billion is Bitcoin. So, if you told me nothing else has value and people are willing to put $230 million into the overall crypto sphere, that means Bitcoin is wildly undervalued right now.

Jay Kang: Yeah.

Aaron Lammer: You buy that?

Jay Kang: Well, yes.

Aaron Lammer: Bitcoin would be close to double. I mean, the crazy thing is Bitcoin basically already is the whole thing. I mean, it’s nearest competitor is Ethereum. We think Ethereum is this enormous thing. Ethereum’s market cap is $21 billion. This isn’t that much.

Jay Kang: Yeah. So, basically the idea being that every alt coin is just a Bitcoin in hiding, converted to a useless form but which can one day be converted back into Bitcoin. And therefore, when all that starts happening, you’ll see a surge in the market activity of Bitcoin. Yeah, that makes sense.

Aaron Lammer: Or you could say it’s a winner takes all war, and the more it looks like Bitcoin is going to destroy everything and win, the more of the money should just tip toward Bitcoin. There’s still a lot of tipping to go right now if you think that’s where it’s going. And look, I think there’s a reasonable case for that. When I look at the top 10 currencies right now … okay, from 10 down: Stellar, Cardano, Tether, Binance Coin, Eos, Litecoin, Bitcoin Cash, Ripple, Ethereum. If all of those disappeared with the possible exceptions of Ethereum and Tether, I don’t think anyone would even notice.

Jay Kang: Absolutely not. I mean-

Aaron Lammer: People would notice Tether just because people love to dunk on Tether, and people will be enjoying Tether scandals deep into their retirement. Ethereum, I think you could reasonably say there is a real community that would miss it.

Jay Kang: It’s also a huge … not huge, but outside of even just consensus, there are big Silicon Valley projects that are built off Ethereum, and those people would … it’s not like Ethereum has just been this dormant coin that people just trade. There’s been a lot of movements to try and build things off of the platform.

Aaron Lammer: Well, here’s an interesting way to think about it. If I just look at these top 10 coins and I assume that all alt coins are shit coins except Bitcoin and Ethereum … if a put them both in the rarefied, religious super cult air, who gets those losses? I would say Litecoin and Bitcoin Cash clearly should flow into Bitcoin. Eos, Stellar, and Cardano probably should flow into Ethereum, and I would say Ripple probably should flow into Bitcoin. So, that’s kind of how I would divvy up the [crosstalk 00:23:27], and I guess Tether should probably flow either into Bitcoin or you could argue that-

Jay Kang: Maybe into cash.

Aaron Lammer: … Tether should literally be burnt in a pit because it never existed in the first place.

Jay Kang: Yeah. I don’t disagree with those divvying ups, and I actually … I’m going to give this one a 5 out of 10 in terms of plausibility.

Aaron Lammer: 5 out of 10? Wow. Okay. What’s next? What else you got on here?

Jay Kang: All right. Number four, the Bitfinex scandal drove Bitcoin purchases. The Bitcoin rally could also be a product of the Bitfinex scandal. You already know about this, blah, blah, blah, blah, blah. We even talked about it on the show. But Sanderson22, who is a Reddit user, said, “I think Bitcoin is going up because of the whole Bitfinex thing going on. I think they’re having a lot of issues fulfilling withdraw requests. I think a lot of people are buying Bitcoin and getting out of Tether. I think a crash will come if Bitfinex’s house of cards collapse and they wound up losing a lot of people’s money.” Other commenters voiced similar views. I’m just going to read this because I don’t think it’s so clear yet.

Jay Kang: “It seems to me, as soon as the Tether-Bitfinex scandal started to come out, the price went straight up,” wrote SWT23. “Could this not be from people that had a lot of the money stored in Tether, deciding it might be safer to move out of Tether into Bitcoin?” So, this is similar to the alt coin theory that we just talked about, right? It’s just people dumping out of one coin into Bitcoin, and that’s why Bitcoin is going up. What do you think about this one?

Aaron Lammer: I mean, I really feel like almost this should just be 3D. Instead of thinking of Tether as an intentional fraud, which it is … you just think of it as a shit coin, which it also is … yes, I think people, probably anyone intelligent, is trying to get out of Tether and into Bitcoin. And when there’s a rush in one direction, that does inflate the price of Bitcoin. It’s funny though, these whole kind of class of Bitfinex-Tether critics who I generally have a respect for and I think that they get more crap than they should, but they always kind of want it both ways in a market sense where they’re like, “When this Bitfinex fraud is revealed, it’s going to crash.” And it’s like, nope, went way up. It’s like, it went way up ’cause people are dumping and they can’t withdraw. It’s like, you call your shot one way or the other.

Jay Kang: That’s being a little unfair to them I think.

Aaron Lammer: Okay. Okay. Tell me why.

Jay Kang: Well, because I think that we’re too early to know what is happening, right? So, if Bitcoin went from let’s say 5,000 or … it was idling around 6,000 and spikes up to 8,000, and then crashes back down to 3,000, I think that’s still a crash.

Aaron Lammer: I’m pull refreshing as we’re on here, by the way. I’ll let you know if anything happens, but pull refreshing about three times per minute.

Jay Kang: Are you back on that, you drained half of your phone battery by updating the value of your portfolio?

Aaron Lammer: Jay, when did I ever stop? I was doing that when were stagnantly at the bottom. Even when it wasn’t moving I was still pull refreshing [crosstalk 00:26:27]

Jay Kang: Wow. I haven’t done that in years.

Aaron Lammer: It’s like a comfort gesture.

Jay Kang: I will say that it was very exciting when I was doing that too, but once I was done with it, I didn’t miss it because it was taking up too much of my brain space. Speaking of which, I quit Twitter again.

Aaron Lammer: Oh, congratulations.

Jay Kang: Thank you.

Aaron Lammer: Sometimes when we have to take a week off, I’ll get James to just make a super cut of you quitting and rejoining Twitter across the arc of the show.

Jay Kang: I almost rejoined last night because I had some scorching hot [NBA 00:27:01] takes, but I held off.

Aaron Lammer: Look, you know how in AA you have a sponsor?

Jay Kang: Yeah.

Aaron Lammer: If you have any takes that you absolutely have to get out there, feel free to text them to me and I can post them from my Twitter account. But I’ll credit you on them. Or you could save all your hottest NBA takes for the show, and then tell people if you want my NBA takes, you have to tune into Coin Talk.

Jay Kang: Oh, that’s a good idea. Yeah. I won’t bore you with them now, but they have to do with Joel Embiid crying and how I don’t think that that’s a sign of anything except the fact that he cried. Everyone was like, “Oh, he cried. He’s so passionate. He’s going to learn from this.” I’m just like, he’s out of shape. He didn’t play one of the games and he played like shit throughout the whole series. Him crying is not because he cared that much. If he cared that much, he would’ve, A, played all the games of the series, and B, not played like shit because he was totally out of shape the entire year. He just cried. Anyway, that was my take.

Aaron Lammer: Didn’t he have diarrhea?

Jay Kang: Michael Jordan had one of his best games when he had the fucking flu. Okay. All right, let’s move on.

Aaron Lammer: Cheers to Jay getting off of Twitter. All right, what’s the last theory?

Jay Kang: The finance hack proved Bitcoin’s integrity. All right. This one is going to be a …it might be a … I don’t know if it’s going to hit the one in credibility for me. After [crosstalk 00:28:25]

Aaron Lammer: Yeah. Everyone put on your oven mitts for this take.

Jay Kang: “After hackers stole $40 million of Bitcoin from Binance last week, the cryptocurrency [inaudible 00:28:34] CEO, CZ, proposed a rollback of the blockchain to reverse the illicit transactions and recover the funds. The [inaudible 00:28:41] backlash to a suggestion may have bolstered Bitcoin’s image as a legitimate currency, and fueled demand for it. I think Binance might have helped Bitcoin a lot with their suggestion to roll back the chain,” wrote [2BTC20000Pizzas 00:28:56].

Aaron Lammer: Shouts out to these Reddit handles.

Jay Kang: Yeah. No, that’s a pretty good one. “That notion was swiftly shut down by the community’s users, devs, and [miners 00:29:07], almost within a single day. Bitcoin’s advocates claim that cryptocurrency as censorship resistance and scare became more tangible when the very notion of tampering with a blockchain was shut down within hours. I really think for a lot of people, this might have shown a light on why Bitcoin, more than any other alt coin, has value, and isn’t just stupid internet money.” Aaron Lammer, what do you think about that?

Aaron Lammer: Well, I want to talk about this issue. So, I feel like … can we stick a pin in what it means for Bitcoin, and discussed what happened a little bit here? ’Cause this is the next thing I want to talk about on the show is this Binance hack.

Jay Kang: Yeah. It’s a perfect segway. All right. Go ahead.

Aaron Lammer: Okay. So, for people out there, Binance … we talk a lot about Binance a lot on this show. We actually said something on this show about Binance’s CEO, CZ, that was picked up as real news.

Jay Kang: Yeah. It was really weird.

Aaron Lammer: I don’t know if it was me or you who said it. I’m just going to take credit for it.

Jay Kang: I do think it was you.

Aaron Lammer: Okay. I made what I took to be a joke, calling CZ the Mark Zuckerberg of crypto, and my meaning was that he sees it as a winner take all game the way Mark Zuckerberg saw social media as a winner take all gam. And he intends to eat all of crypto with his exchange, which is evidenced by the BNB coin, etc. Now, I don’t really mean that I think he is like Mark Zuckerberg or is the same chances of succeeding in taking over the world, but this was picked up as news and I guess got back to him. He said, “Oh, so here’s why all these people are talking about this,” and he mentioned our show. I invited him on the show. I haven’t heard back from him. I guess he’s been kind of busy in the last week. I’m going to say, CZ, I understand why you haven’t replied to my email. You’ve been dealing with some shit.

Jay Kang: He did tweet about it too, so that was … Having CZ on actually would be … I think he would be really funny as a guest.

Aaron Lammer: I want to know more about his backstory. I want to know what his whole deal is. But he has not been handling this very well. Sorry. Sorry, CZ.

Jay Kang: Okay. So, tell the listeners what happened.

Aaron Lammer: Okay. So, one in a long line of hacks, of exchanges, the hot [inaudible 00:31:24] of Binance was hacked. I think about $41 million worth of coins were taken. It represent-

Jay Kang: 7,000 Bitcoin.

Aaron Lammer: 7,000 Bitcoin, which represented about 2% of Binance’s overall holdings. So, basically CZ has said that they’re solvent, they can cover the loss, it’s not going to affect anyone’s deposits … which is kind of a crazy statement in its own right. When these exchanges say that, either they’re lying or they’re like, we’re making so much money, it’s not a huge problem if we lose $41 million.

Jay Kang: Well, it’s $56 million now.

Aaron Lammer: Yeah. Everyday, possibly as a result of the hack, the hack gets more expensive, seen in a certain light for Binance, but CZ basically casually suggested maybe one way that we could deal with this hack would be a … and I’ve never heard this term before, a chain reorg. Have you ever heard that term before?

Jay Kang: No. I didn’t even know that could be done.

Aaron Lammer: Well, so … now, technical people may say I’ve misunderstood this. To be fair to me, I had never heard of it before and it sounds pretty crazy. So, if I misunderstood it, sorry. The idea is to wheel the chain back to a time before the back when Binance still had the coins, and pay miners for their loss … all the coins that they no longer have that they’ve mined during that period, and I’m assuming some premium for this VIP white glove service of returning to four days ago. So, this created an interesting situation [crosstalk 00:33:11]

Jay Kang: I mean, that’s terrible. It just reminds me of all the sort of insider trading stuff where … they have a scene in The Big Short about this, where you can’t get a certain type of license to a certain type of trade unless you have $30 billion of fund money. That’s a terrible idea. That immediately makes a cabal of coin power people who just get to do whatever they want.

Aaron Lammer: It’s such a bad idea, that I almost take it in a weird conspiracy-ish way. There’s no way he thought they were actually going to do that, right?

Jay Kang: Yeah.

Aaron Lammer: It would be so damaging. It would instantly make Bitcoin less valuable the second they did it, so much that it would be a huge loss to the miners in that they loss those coins, got paid back for them, but then tanked Bitcoin. That’s not even the larger issue here.

Jay Kang: It’s so bad that it’s like, if you’re in a fantasy basketball league say, and two people are friends and they run the league, and then they push through some trade that’s basically … it’s the equivalent of one guy trading to his friend, like Kevin Durant and Kawhi Leonard for a guy who doesn’t even play in the league. It’s that bad. It makes no sense. Then everybody else would just quit or protest. It’s just that bad. Yeah.

Aaron Lammer: It’s a wild power play by Binance, I guess would be my number one conclusion about it. Maybe they’re like … it’s kind of like a wild [inaudible 00:34:41] check that you’re like … it’s not like anyone supported it. It wasn’t like, oh, there was a fight and certain people were in favor and certain people were against it. I did not hear anyone supporting this vision who did not work at Binance.

Jay Kang: Also, a 7,000 BTC hack is really [crosstalk 00:34:56]

Aaron Lammer: It’s very minor.

Jay Kang: But it’s pretty small compared to the other BTC hacks.

Aaron Lammer: Well, also what about all the other people who have gotten hacked before and they didn’t wheel it back then for more money when Bitcoin was worth less? So, if you look at how big some of these hacks were, and today’s closing in on $8,000 Bitcoin, they’re enormous. It’s almost like Binance just sort of thought of itself as so … like too big to fail within the ecosystem, that they were like, yeah, other people can’t get that, but come on, it’s Binance.

Jay Kang: Okay. Hit me with your conspiracy theory.

Aaron Lammer: Well, okay. So, if he knew this was going to be a hard no, right?

Jay Kang: Yeah, which I think he almost certainly did.

Aaron Lammer: Right. So first of all, by getting the hard no, he got to air it, and the integrity of Bitcoin was upheld, right? Which caused an upward market pressure. And additionally, I feel like he basically casts exchanges as the victims of this kind of stuff. The way that CZ positioned this was that it would discourage hacks in the future, right? If people knew that if you hacked, they would just invalidate those coins by rolling back the blockchain … I know this is a totally unworkable idea, but just follow me. Then that would discourage those. So now he’s sort of changed that idea, and now it’s like, well, I guess we’ve got to figure out some other way to stop the hacks, or we can’t be accountable.

Jay Kang: Okay. He’s right about two things there, right? The first is that these hacks are a real problem. We have no idea if Coinbase has been hacked or not, but at this point they’re sort of the only big exchange that hasn’t been hacked at least a little bit, right? Or it had some sort of fraud.

Aaron Lammer: I think they’re really the secret winner of this week.

Jay Kang: Well, we don’t even know if they’ve been hacked or not. Wouldn’t you assume that maybe they have been hacked?

Aaron Lammer: The fact that we’d even believe they hadn’t been hacked is a huge win for them. Everyone else has been confirmed hacked.

Jay Kang: I don’t believe that they haven’t been hacked though.

Aaron Lammer: Really?

Jay Kang: Yeah.

Aaron Lammer: I kind of believe it.

Jay Kang: I just don’t-

Aaron Lammer: They have better people working there.

Jay Kang: I guess. You think in the history of Coinbase … maybe now, but you don’t think in the history of Coinbase, they covered up a hack or two? I imagine they did. So, this is a problem.

Aaron Lammer: Okay. I’ll buy that. I think they haven’t been hacked in 2019.

Jay Kang: Okay. I’m with you there. Like if we extend the timeline back, every exchange seems to get hacked. The numbers, when you put them out, they’re just mind blowing to the point where a $56 million hack we’re just like, it’s not so bad. A way to fix that would just be like, look, every coin that’s ever stolen, we’re just going to roll back and it doesn’t exist anymore, and now we have a new coin. Absent that, I don’t actually know how to discourage these hacks or how to fix it. It seems like an actual solution to me. Now obviously, then Bitcoin ceases to be Bitcoin and the exchanges hold all this power, and nobody can trust it because at any point, anything can be rolled back. Then Bitcoin is in a far worse situation than the hacks themselves, which is why you can’t do it.

Aaron Lammer: Yeah. It’s like solve one problem, but make Bitcoin have no value in the process.

Jay Kang: Yeah. It’s like fixing a tire and blowing up the rest of your car to fix that tire. That’s another reason why I just feel like maybe CZ wasn’t being totally forthright about this, or maybe he was just throwing out takes. He was like, “Well, what about this?”

Aaron Lammer: He is kind of like a troll also. Like, you could just be trolling. It’s kind of like … Okay, I remember this time I moved. I was so exhausted, and I went to get a pizza in [inaudible 00:38:42]. I was walking out and I just dropped the pizza, and it flips up and landed face down on the filthy floor of this pizza place. I gave the guy a look that suggested, whoa, you could just give me another pizza. He gave me just a withering, you can buy another pizza. I feel like CZ was a little bit like, hey, can I get a refund over here? And they’re like, no. He was like, okay, couldn’t hurt to ask.

Jay Kang: All right. Well, so how do you get … I honestly think that … I’m going to give that explanation a 7 out of 10. I think he was just like, look, why not? It doesn’t hurt to ask.

Aaron Lammer: It’s kind of like when you’re checking in a hotel, do you ever just say something like, “Hey, is there any way I could get a suite upgraded comped for free?” It’s like, if you ask 50 times, you’ll get comped a few times.

Jay Kang: Yeah, no. I mean, I don’t do that, but what I do is when I’m traveling with the kid, I always just go up to the … even when I book two days before and it’s very, very clear they’re not going to let us sit together in a good seat, I always just go ask because why not ask? I just go, “Hey, can you put us up front? All three seats together.” They’re always like, “No, I’m sorry. We can’t do that.” And then I’m like, okay. So yeah, you might as well shoot your shot if your shot is free.

Jay Kang: So, what do you think about this theory then, that … I think we both know. I’m going to give it a 0 out of 10 because it’s basically arguing that if somebody is tweeting, “Hey, why don’t they just make all baseball games have no pitchers and all the position players have to pitch, and all the games are three innings long?” And everyone is major league baseball is like, no, that’s not a good idea. Then them saying, well [inaudible 00:40:43] baseball’s integrity. It’s just like a crazy crackpot idea. It doesn’t prove anything about Bitcoin. What do you think?

Aaron Lammer: Yeah. I mean, I do think while it doesn’t prove anything about Bitcoin, every time that Bitcoin doesn’t screw up I’m like … a little bit like, win for the Bitcoin maximalists. Like, here are two grand unified theories about crypto that we’ve espoused on this show, I think almost since the very beginning.

Aaron Lammer: Number one, the biggest vulnerability in the ecosystem is exchanges. And if there is some crazy catastrophe that takes Bitcoin to zero, it’s going to start with the exchanges. That’s grand unified theory number one.

Aaron Lammer: Grand unified theory number two, the tilt of the universe generally favors the Bitcoin maximalists. So, it’s weird, but a totally disparate set of things like an exchange hack is somehow is good for the stake crowd. You know what I mean?

Jay Kang: Yeah. Yeah. No, I agree with that.

Aaron Lammer: I also wonder if this is probably good for the Fidelity, TD, Ameritrade crowd because at a certain point, you have to look at the amount of these exchanges, whether it’s Quadriga, Bitfinex, Binance, that have if not lost their customers money, at least lost their own money, and go, I think these guys could probably do a better job and they’re backed to a level that I think they could easily cover it in the case of say, losing $40 million. Fidelity is like, $40 million? That’s our budget for the Christmas part that we throw for the staff.

Jay Kang: That’s a good question. How do you think these places are handling security, because how many people do you think are really able to do crypto security in the world right now?

Aaron Lammer: I don’t know.

Jay Kang: And how many of those people do you think already work for Binance or Coinbase, and then how many of those people do you think could be lured away to work at a Fidelity or an E-Trade? It seems pretty low. If you were a guy who could do this type of stuff, and your choices were between working at Coinbase and getting a stake in the company and a very, very high salary I imagine, or working at Binance and being able to do the exact same thing over there, and then E-Trade is like, look, let me tell you about our 401K plan and here’s your set salary. There’s no way you would take that. I’m curious about that, and are they going to hold [inaudible 00:43:12]? Are they going to distribute Bitcoin, or are they just going to have one big cold storage wallet and credit you with a Bitcoin, and if you want to take it out then you can do that? I have no idea how they’re going to do this.

Aaron Lammer: Yeah. I mean, one one level I would say, well, they’ve managed to do this for decades with banking and stocks without getting hacked. On the other hand, they’ve had that replay protection that Binance doesn’t have that whole time. They could just reverse transactions. There’s no way you can hack people’s stock. They’re like, nope, still my stock, right?

Jay Kang: Yeah, yeah, yeah.

Aaron Lammer: So, it is a new problem. I think that they’re probably underestimating the reputational risk of what it would mean if Fidelity’s Bitcoin got hacked. Like, how bad it would be for the reputation of one of these companies to get hacked. It’s like, yeah, other than Coinbase, pretty much everyone has gotten hacked. So you would assume that if a bunch of these financial institutions get into crypto, at least one of them is going to get hacked.

Jay Kang: Yeah. No question. You can argue they’re bigger, and you can argue that they are better at things because they’re bigger, but we’re talking about a new world in which there aren’t that many people that can do this thing. You can hire 30 people to try and do this, and they might be worse at it than the one person who works at Binance, who by the way, got hacked. So, I don’t know. I am curious about that. But like you said, I don’t think that there’s an amount really that you could steal off of those exchanges that they couldn’t just cover very easily and write off as a hard cost of doing business type of thing.

Aaron Lammer: Yeah. I think that they could write it off, but I do think that the news story would be very damaging because Fidelity-

Jay Kang: Oh, yeah. It would be horrible.

Aaron Lammer: … is not used to being hacked because you can’t hack banks. I mean, the way banks have this set up makes a lot of sense. They’re just like, nope, we have the money ’cause we say we have the money, and if you somehow digitally take the money, we’ll just say you don’t have the money. It is a cartel.

Jay Kang: Yeah, or stocks. They’re like, “Oh, I stole 15 of your Amazon stocks.” They’re like, “No, you didn’t. I still have them here. What are you talking about?” Okay, cool. Is there anything else you want to talk about?

Aaron Lammer: Well, the last thing I wanted to talk about was just speaking of what you can do with things after you steal them. So, we know that the biggest hack, Mt. Gox, those coins ended up on BTCE. Or another way to describe that would be BTCE existed as a storefront for the sale and laundering of those coins, and the owners of BTCE and the thief were in league to extract Fiat profit from the million and millions of dollars worth of Gox coins. So, now that things are a bit more sophisticated in terms of how people are tracking these coins, people have been tracking what happens to these Binance coins. And it has always been a curiosity of mine, like if you steal a huge, huge amount of crypto, is there really enough infrastructure there for you to actually be able to get back to Fiat with the bulk of that money?

Jay Kang: Yeah. I’m curious about that too. Okay, go ahead.

Aaron Lammer: So, it seems like what their strategy is, is to … it’s moved onto other exchanges. It’s going from being a bunch in one big wallet to going to many wallets, many small transactions, many sends. They’re basically shotgun pellet scattering the proceeds to the point where, well, there is still a thread of where they’re going, I don’t know that you could really pursue legal action on every single one of the stolen coins. Like at a certain point, they become Bitcoin coin and they become such an insignificant amount of money that it wouldn’t be worth tracking them. So, maybe that’s the new thief methodology, is don’t start your own exchange, just keep exploding these smaller and smaller. The Bitcoin network is much bigger, has far, far more places that you can move coins to, launder coins, do transactions. It’s a more opaque network really than it was when Gox was hacked. There’s more exchanges, more wallets, more everything.

Jay Kang: What do you think the total percentage of Bitcoin out there right now that is being controlled by somebody who stole them?

Aaron Lammer: That’s a good question. Like, who’s the biggest thief that is still [inaudible 00:47:49]? Is that basically what you’re asking?

Jay Kang: Yeah. Like this guy, he just stole 7,000 Bitcoin, right?

Aaron Lammer: Right.

Jay Kang: How many of the Bitcoins in the world do you think are held by people like that?

Aaron Lammer: Oh, the total supply? I would have to … if I were to over-under, I’d put the line at 10% of the world’s supply is in the hands of thieves. Would you take the over or the under if I set the line at 10%?

Jay Kang: I don’t know. That’s pretty close to what I was thinking about. Maybe 10%.

Aaron Lammer: I mean, I think more than that have been stolen, but my belief is that probably a lot of the stolen coins are themselves dead or lost at this point.

Jay Kang: Yeah. No, I agree.

Aaron Lammer: And I do wonder on certain of these cases … this is Bitcoin. So, I think if you got 7,000 Bitcoin and you’re savvy enough and connected enough, you can, for a fee, probably get non-Bitcoin assets with that and get away scot free. But remember when … I think $500,000 worth of NEM was stolen? Remember that Japanese coin.

Jay Kang: Oh yeah, off of the Japanese exchange.

Aaron Lammer: It’s like, the NEM market is not nearly as broad as the Bitcoin market. So, I think probably those NEM are just dead NEM at this point. Which I also wonder on a certain level … this take is going to be a little hot, Jay. Do you have your mittens on?

Jay Kang: I’m ready.

Aaron Lammer: If a lot of the coins that get hacked end up dead or put into situations where they’re never going to move again, does an exchange getting hacked put positive pressure on Bitcoin price by disabling coins and limiting the overall supply? Let’s say we get a super tool to track these coins and people are able to somehow extinguish them, right? I don’t know that you can do that, but let’s just say there was a magical tool that people figured out how to destroy hacked coin. They couldn’t get them back, but they could destroy them.

Jay Kang: It’s like a Bitcoin assassin or something like that. Yeah.

Aaron Lammer: It’s like a Bitcoin super cannon that you can just blast with. If that was true, we would be lowering the supply of Bitcoin overtime, and each time there was a mega hack, it would make the leftover Bitcoin in the whole world more valuable.

Jay Kang: Yeah. I don’t-

Aaron Lammer: I would say based on your tone, that was about a 2 out of 10 [crosstalk 00:50:08]

Jay Kang: I just think the market would adjust after that. The panic over all that stuff would deflate … there would be an inflationary effect. I don’t know if it would make every Bitcoin super valuable. I do think it would be better for Bitcoin in general long term, for people to really actually know what the supply was. Like the circulating usable supply. But I can’t imagine that’s ever going to happen, especially given that one million of the Bitcoins are on a wallet that nobody seems to know what it is or who controls it.

Aaron Lammer: I mean, I think we are headed for an end game if you’re a maximalist, if you’re a scorched earther, that you imagine that of the 21 million coins, less than 10 million probably still exist. And of those, less than one million are ever moving, and the majority of the coins on earth are just holding wealth like a gold vault somewhere, and are getting … they’re going through generations, and this very, very tiny amount of Bitcoin dust is all that actually moves and changes hands.

Jay Kang: Sure, agreed.

Aaron Lammer: Come see the movie in theaters this summer. The scorched earth Bitcoin cinematic universe.

Jay Kang: All right. Well, I feel like we-

Aaron Lammer: I think we got to the bottom of that hack.

Jay Kang: And I also feel like we did not explain what the price was, but … why the prices … what’s the price right now? [inaudible 00:51:37]

Aaron Lammer: 7,792.

Jay Kang: So, I think we at least know what it’s not. Do you expect … and we’ll end with this question. Do you think that … you said that you think we will for to $10,000. What percentage of you is totally confident that this run up right now is organic and sustainable and all good news? How much of you believes that?

Aaron Lammer: I will never believe again that Bitcoin is sustainable, organic, natural, in any way. I’m just hoping that the printer’s on. I’m seeing … when I read the chicken guts or the tea leaves, what I see is that this would be a good time for a bull run, and that a lot of people who are powerful and can manipulate markets would profiteer from that. So, I’m looking at 10,000 and I’m like well, I think 10,000 is kind of the short term goal here. The bigger question is, can we exceed the all time high?

Jay Kang: Oh, God. Okay. Wow, that’s so optimistic. Yeah.

Aaron Lammer: Yeah. Well, we had someone write into the show. I think they DM’d me. Here, I’m going to read their DM. “Morning, hope all is well. I wanted to reach out and thank you for continuing to peruse entertaining content. Although I sort of resisted it at first, due to the [pod-screwing 00:53:02] pessimistic, I’ve become a regular listener. Anyway, I finished your latest podcast and was curious, what keeps your pod going? It seems like Jay doesn’t really believe in crypto, and you talked about exit points if you reach a break even point.”

Aaron Lammer: Okay. So, basically this person is like, why are you guys … neither of you seem to like crypto anymore. I still think Bitcoin is a great idea, and I think it’s a very manipulatable market. I think both of those things are true. So, feeling like we are in the lower half of a very manipulatable market that has a real thing of value behind it, those feel like just two positive signals to me. And the reason I talk about my break even point is, for me, reaching my break even point is like winning in the NBA finals. It would be incredible if I ever get back there. With the alts that I was holding during that last crash, I got wrecked.

Jay Kang: Yeah. Well, I would just say that there’s always part of my brain that is still interested in anarchic ideas outside the government. And so, Bitcoin will always be interesting for me for that reason, philosophically. But I don’t really think it’s a good investment tool right now. So, that’s why. If the show feels negative, it’s not ’cause we don’t believe in Bitcoin, it’s just we think these markets are crazy and that we already got wrecked once, and maybe we don’t want to get wrecked twice.

Aaron Lammer: Yeah. I’ll say one final thing to the listeners, which is we’ve been doing this show for over a year and it feels like 100 years. So, if you’re just coming to the Bitcoin as a new listener during this bull run, we could use your positive energy. Send us an email, hi@cointalk.show. Thank you, Jay. I’ll see you next week.

Coin Talk

Written by

Coin Talk

The official podcast of Bitcoin crashes. Hosted by @aaronlammer and @jaycaspiankang. Mailbag/contact: hi@cointalk.show

CoinTalk
CoinTalk
CoinTalk

About this PODCAST

Come ride the crypto rollercoaster with hosts Aaron Lammer and Jay Kang (and guests) as they laugh their way through the week in Bitcoin and beyond.

Come ride the crypto rollercoaster with hosts Aaron Lammer and Jay Kang (and guests) as they laugh their way through the week in Bitcoin and beyond.

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