What is going on with the Bitcoin ETF!? And the future of Crypto Market with Omid Malekan

30:18And they kind of, you never see what's going on behind the scenes. Just like it is right now with a brokerage. You don't know when you buy shares or something, you don't know what exchange you're buying it on. Like you might be buying on the NASDAQ or NASDAQ OTC or some weird options market. So there just needs to be human interfaces to some extent, which is not the complete dream of crypto from the technology side. But I think that's what makes it usable. I agree. I'm also not a, I think these purists that will tell you. So there's a smaller and smaller corner of crypto that still holds on to this radical decentralized dream that I never subscribe to that.

31:00Like everybody will have their own self-hosted wallet and will own all of our assets in a non-custodial way, which then those people are now outraged that there's going to be ETFs, which I think is kind of hilarious. Because if you own Bitcoin, you should really want there to be a Bitcoin ETF. Yeah, you want to make it easy for grandma and grandpa in Indianapolis. Nothing against Indianapolis. You want to make it easy for those people to buy a Bitcoin. Otherwise, how is it going to be used? Like these people, this is what people never, by the way, this happened with the internet. So I mentioned 1992.

31:35That's when I believe AOL opened up the floodgates so that their members, you know, AOL wasn't on the internet, but they opened up the floodgates. I think it was 92 or 91 where their users could use Usenet, which was a subset of the internet involving news groups. And I remember the most tech people I knew were like storming to my office. Like, can you believe this? Like AOL, we're going to have like, you know, these idiots on our message boards. And people were like planning to do an internet 2.0. That was in discussion, like, you know, a place where quote unquote, but we can all hang out without being bothered by those AOL idiots.

32:18I didn't know this. I remember when I started using AOL, there was like the 12 things you could do. 11 of them were just on their servers, like their newsrooms and their games and their e-commerce. But then there was like the 12th tab was World Wide Web. Yeah. And you would click and a browser would open up. At the time, I had no idea that really that's the internet. or that's the part of the internet that'll matter in 5, 10, 20 years, which I think should be a stark warning for all of these corporate people working on their enterprise blockchain and private blockchains and stuff like that. That's not the future.

32:57But looking at that as a historical example, that shows why the rise of crypto is an eventuality. AOL was a centralized network. Internet was decentralized. And money right now is centralized. And there's all sorts of problems with that. But as just like with the internet, as the customer service arrived, as people became comfortable with it, as it became easier to build a website and easier to log on no matter where you are, then the usage went up exponentially. It wasn't exponential until that happened. And then, you know, short while later, it reached a billion users, which, you know, crypto is on the way towards as well.

33:37But I do think there's an entrepreneurial opportunity with creating some convenient user front ends that are fully regulated. You don't have to worry about taxes and the law. Now there's these new tax laws involving crypto, which, again, people view negatively. If you sell crypto and make$10 ,000, you have to report it to the IRS. But this is not an unusual type of law. And to me, it shows that the government, including the IRS, is taking crypto as a legitimate form of, it's assuming crypto is a legitimate form of payment. Like when you take$10 ,000 cash out of the bank, the bank reports it to the IRS.

34:18If you bring$10 ,000 into the country from another country, you have to report it. So the IRS is aware. If you win more than$10 ,000 in a casino, you report it. So the IRS is aware. Now, finally, crypto is being regulated in the same way as the dollar. And everyone's agitated. What does this mean? Are they trying to stop crypto? No, they're actually opening it with the same open arms that the government does with all other forms of currency now. Yes and no. I'll halfway agree with you. We've certainly come a long way from the point where most people in governments would just five years ago, they'd probably be the people at the IRS who would say, who cares?

34:55It's all going to zero anyway. But the danger is when governments and regulators say, well, we already have rules, so we'll just treat crypto according to those rules. And they don't take into account what makes crypto special. So one of the reasons we have all of these cash reporting rules, whether it's casinos, bank withdrawals, is because cash is completely untraceable. Crypto is traceable. It's pseudonymous, but it's traceable. So I think there's going to be this chaotic period in the middle where the powers that be try to say, you know, like Gary Gensler has been doing like, oh, well, you know, we have the 1930 securities laws and the 1940s SEC, sorry, the Supreme Court rulings.

35:44And that's all I need to know to determine what's a security. That's nonsense. It's deliberate nonsense that's meant to hurt and hold back the industry. And there's the tax version of this as well. There's the anti-money laundering version of this. I think the chaotic period will be the industry pushes back and says, wait a minute, like this token that's part investment, part fan club, part meme is not the same as the shares in Apple. It's preposterous to treat it as such. So we need new rules. And then the same thing will happen with the traceability that like, hey, you have a transparent universal ledger that gives you a lot of information about who is doing what.

36:31Maybe in a world where that exists, you don't need me to surrender every bit of personal data every time I want to open a bank or brokerage account. Right, because your point is that just like my paycheck, I don't have to report every single time I get paid because it's in the system. The banks do it. Your point is that because it is a traceable system to some extent, then it is different from cash laws. And I agree with that, but I do think it is hard to wrap your head around it since it's also a global payment system. That's right. who's tracing what becomes the question. The IRS doesn't have the capability really to trace this, so they kind of want to be more transparent than that.

37:19I think that's an argument that will be ongoing. Yeah, and the IRS is actually very sophisticated on this. In fact, some of the major busts of people, like the multi-billion dollar attempted money laundering is on chain. If you look at the court documents, it's IRS investigators that helped. Is that the one where I dated the woman who was involved in that? Yes, that's right. That's scary. Your ex's undoing was partly fueled by an expert at the IRS who was really good at using on-chain forensic tools. Well, good for that guy. But the global nature of it is good. We want a global financial system.

38:00When U.S. government officials tell me that, well, that's not going to work for us, my response is, I say it respectfully, but I'm like, too bad. The world doesn't exist to make your job easy. And in fact, part of the reason the rest of the world is increasingly moving to adopt crypto is because it reduces the power that the US government has over how financial regulation is done everywhere.

38:41This, plus your mention of Gary Gensler earlier, segues into current events. Yes, I think the, A, the weaponization of the dollar this past year, for good or for bad, has turned countries away from always relying on the dollar as kind of the global reserve currency. I think also central banks are looking for better ways to do payments. I mean, the swift wiring system is 51 years old, something like that. It's an antique already. it's funny I actually ran into the creator of it a few weeks ago I was in Amsterdam and he was at the same we were both observing a chess tournament and the chess tournament he used to organize a chess tournament called the the swift chess tournaments and I always just thought that was a cool name for a chess tournament and I say so what do you what did you do for a living when you were sponsoring all these chess tournaments and he's like oh I created this swift wiring system and i had no idea like my worlds converged and so i started asking him all these questions and he agreed it was kind of an antique but at the same time he wasn't a hundred percent believer in crypto because he's loyal to his antique so yeah not surprising yeah so so so but like so all these catalysts are happening you know dollars you know people don't like the dollar in other countries inflation, the dollar has to get debased at some point just because of all, you have to pay down this debt somehow unless the economy like grows too fast.

40:09So all this, everything's in place for crypto to be a new global infrastructure for finance. What's going on with Bitcoin ETFs? We got this report yesterday from Matrixport saying that, A, the SEC is not just going to roll over. And this is what the report says. They're all Democrats. So they kind of like don't like crypto for that reason. I'm not sure I totally agree with that. And the concerning part with this report is that the guy is known to be bullish on crypto in general. So everybody got concerned. Oh, this bullish guy says ETFs aren't going to happen. Although he didn't say they weren't going to happen.

40:47He says it's going to be a Q2 thing, which drastically changes how people have been interpreting this report for one thing. But like what else? What's really going on, you think? Well, particularly on that, all the serious people I know who know about crypto, Wall Street and ETFs dismiss that as a non-serious report. All the evidence otherwise points to the fact that approval is imminent. I don't know if that means this week, next week. There are various deadlines that are relevant here. But you've had all of the dozen or so companies that are trying to launch ETFs constantly meeting with the SEC.

41:32Even over the holiday season. I mean, the last amendments on, I think, BlackRock's ETF were filed with the SEC on December 29th. Like people, and you know they're not just doing it in a vacuum. Like their success rate is 99.999 % for ETFs. Like, you know, they're in touch with the SEC. They're not going to make fools of themselves here. Yeah. And also it was one thing if Gary Gensler is taking on a relatively small crypto company like Grayscale, it's another thing if he's going to sort of stick it suddenly to BlackRock and Fidelity and Franklin Templeton. Right. And to put it in perspective, when the financial crisis was happening 2008, 2009, the government didn't know how to deal with unwinding trillions of dollars of mortgage-backed securities that companies like AIG and the banks had.

42:21So guess who they hired to do it? BlackRock. They're not going to screw over BlackRock. I mean, BlackRock is essentially the government's financial infrastructure. I believe also in 2020, during the pandemic, when the Federal Reserve decided to bail out everyone and everything, one of the things that they did was they started for the first time sort of bailing out the corporate debt market and the junk bond market. And if I recall correctly, they did it through BlackRock. In fact, we can look this up, but I think the Fed actually was buying a BlackRock bond ETF as a means of propping things up.

43:01That could be. I mean, essentially then, the government owes BlackRock. It's not like the SEC is now going to reject BlackRock and the next time a bailout's needed, BlackRock's just going to wave their hands and not expect anything. This ETF's going to happen. The question is, is Gary Gensler going to pull one more trick and say, well, I got to wait now. And again, all the filings have been done and people were filing up to December 29th, up until the last possible day because they want it to happen now. Yeah, I don't see that happening. And also, let's not forget that the SEC lost a lawsuit. To Grayscale.

43:46To Grayscale, so they're also under pressure to comply with the court's findings. So I think now we can assume there's going to be an ETF. And the more interesting question is, what does that mean for Bitcoin going forward? And just to ask, again, I've been in the group, and I still firmly believe this based on everything I've been reading outside of this matrix report, I firmly believe it's going to happen basically any day at this point or within the next one week, two weeks. A lot of people expect it by January 10th. The prediction markets like Polymarket has January 15th as the date, but there's an 88%.

44:35It's basically the people gambling on this say there's an 88 % chance it happens by January 15th or earlier. So again, would you say that's your view as well that Bitcoin ETF happened and we should just ignore this report that caused that flash crash yesterday? Yeah, I think it's inevitable in the first half of January. But importantly, that does not mean that the price is going to go up. I'm not saying it's going to go down. I don't know. I'm enough of a reform trader to know that I should not try to call the short-term machinations in the crypto market. But I do think it's interesting as to what might be worth talking about for a minute why an American Bitcoin ETF is believed to be such a big deal.

45:33because on the one hand, you could say that there are now, unlike, say, three, four years ago, there are many places where people could get exposure to crypto, whether it's exchanges like Coinbase, you could get it through PayPal, Robinhood, Fidelity. There are private funds. And then there were sort of like this ETF-like products like Grayscale, the GBTC product. But But there's a couple of important things that even I've had to get educated on in the past year. One is that there are many legal or bureaucratic barriers for institutions or investment advisors to access Bitcoin more directly through those sources that I mentioned.

46:23Of course, like in their charters, almost every mutual fund's got to buy listed New York Stock Exchange or NASDAQ stocks. Right. And then there's also the question of it's currently difficult to access Bitcoin in something like an IRA or a retirement account. But almost any retirement account will let you buy a iShares ETF that happens to be backed by Bitcoin. There's the question of registered investment advisors who control some trillions worth of dollars of assets. They don't like to tell their clients to go things that are outside of their purview. Right. Right. So previously, if a client asked an RIA, say, hey, I want to get crypto exposure.

47:07I mean, sure, they could tell them like, well, go open a Coinbase account and buy some. But you don't want to do that because that's no longer money that you're technically managing for them. But again, a NASDAQ listed or New York Stock Exchange ETF, almost any RIA will be able to easily get their clients in it. And I'll throw a final one out there that I've discovered through actually some of my personal work and the consulting that I've done. There are many large American hedge funds that would like to get involved with crypto, particularly Bitcoin, just because if you have some billions of dollars in assets under management, you're not going to be trading some shit coin that doesn't have a lot of liquidity.

47:52You want to go with something that's mature, established, and liquid. And Bitcoin and maybe ETH are the only coins that qualify. And these funds have not... Today, they can have an institutional account at a Coinbase. There are prime brokers that they could use to get direct action. And they're sophisticated enough and they have the right people to figure out custody and trading and liquidity and etc. But what's been holding them back is the fear of how the SEC might respond. Not because it's illegal. Even Gary Gensler and his reign of terror has generally said Bitcoin's okay because it's a commodity.

48:36But I know from personal experience talking to the people who work at these funds, they tell me, look, yeah, we can go set up a deal with a custodian and exchange and start trading Bitcoin. But then we would have to report that. And we don't want the SEC to use that as an excuse to come after us. That's a good point. But also, any problem like that is why a Bitcoin ETF is so great. Because that means just, and you're just talking about American hedge fund managers, which is, admittedly, there are some huge hedge funds out there. But it's still a drop in the global wealth that's out there. but they're going to start buying Bitcoin only when the ETF is approved.

49:21So unlike a lot of news where there's run-ups in anticipation, and that's certainly happened with Bitcoin and Ethereum, there's anticipation. So speculators have been running up. No serious buying has occurred yet because the hedge funds, and we'll talk about the sovereign wealth funds in a second, they haven't started buying. They physically cannot buy yet. Yeah, where we are on the question of what's already priced in or not, I don't know. We have had a massive run in prices, particularly Bitcoin, in the last few months in anticipation of this ETF. So just basic market theory would tell you that some of it's priced in.

50:04But is it possible that there is a wall of liquidity just waiting billions or even more of dollars to come in as soon as it's available? Yes. But is it also possible that there are other people who've bought waiting to sell to those people? I may or may not be one of them. That's another option. And then the other thing I wonder is, I do agree that a year from now, this ETF is going to be a widely used, very successful product. I just don't know if that means that tons of money is going to go into it the day after it's listed, or it's just going to be a slow process across the span of weeks and months.

50:48I mean, look, you flew around the world for Citigroup talking to countries or extremely wealthy people about their appetite for crypto. Like in the Middle East, if you're Dubai or Saudi Arabia was sitting on, I don't know, whatever it is, a trillion dollar sovereign wealth fund, just like the hedge funds, you're going to think, okay, well, maybe I'll put 1 % of the assets into Bitcoin. But if everyone thought like that, you're talking about at least, you know, depending on how fast the buying occurs, we're talking about many multiples higher for Bitcoin. And by the way, I should mention, you and I both are more into Ethereum.

51:28Like I wrote to my readers a year and four months ago, selling all my Bitcoin, replacing with Ethereum. So that's just Bitcoin, though, could go up several multiples, it seems. But what do you think? Do you think that's possible from just the wealth that you've spoken to personally? I think in the long run, it's inevitable. I actually, my theory of Bitcoin specifically is eventually it becomes everybody's backup, break glass in case of emergency asset. The questions we would have to answer, though, I agree with you that, yes, there are these foreign sovereign wealth funds or pension funds or whoever that have a lot of money and will want some exposure.

52:09I don't know how much they're dependent on a US listed ETF to get it. I would say they're worried about the same things though the hedge funds are. They don't want to do something illegal or that's going to get regulated so that the way they buy what their crypto will be confident. They just don't know. They're unsophisticated in some ways. And they want to just do it by the book. And the book is in America is the SEC. The other thing is, does some employee at the Saudi Arabia or the Yemen Sovereign Wealth Fund want to use SushiSwap and then screw up their wallet and everything gets lost? That guy's not just going to get fired.

52:50He's going to get killed.

52:54I agree. What I was saying is there are ETFs in many other countries already and other kinds of securitized products. they're even like a lot of the big banks already have they're exclusive and limited but they have like not so liquid funds that are backed by Bitcoin obviously a US regulated US listed dollar denominated ETF will be the cream of the crop and pass the test that has not yet been passed which is there always still is the question I mean I heard it yesterday when that matrix report came out, suddenly people on Twitter were saying, see, I told you, Bitcoin's going to be banned. It's going to zero.

53:36There's still that small group. And so again, you don't want the king of whatever yelling at you, how could you have bought Bitcoin? It's not even regulated yet. But once this ETF's approved, those questions are over. That's true. And the other underrated thing is the other financial infrastructure that can then get built on top of the ETF. So, for example, derivatives. Bitcoin, as large and liquid as it already is as an asset class, does not really have a good regulated derivative market around it. Most of the options that trade are over the counter. and there's a lot of counterparty risk for whoever trades it.

54:27The CME futures product is not a great product for various reasons. So you could also argue that, you know how like the spiders and QQ ETFs have this massive options market on top of them. Via an ETF, we might finally get that for Bitcoin. Yeah, I mean, there's a DeFi market for derivatives. There are many, but to your point, whoever doesn't want to get yelled at by the king for using the decentralized version. Also, importantly about Bitcoin, because the Bitcoin blockchain is very limited in what it can do, there's virtually no native Bitcoin DeFi. You don't have smart contracts on the Bitcoin blockchain, so it's almost impossible to do decentralized finance on Bitcoin.

55:23So Bitcoin as an asset does get integrated into DeFi on Ethereum and in other blockchains, but those are bridged or derivative products that have a lot of risk. So there too, you could say that, I've actually never thought about this before, but Bitcoin lends itself to financialization via the traditional securities markets more than say an Ethereum would, because on Ethereum, you could build whatever you want in DeFi. Do you think, though, once the Bitcoin ETF happens, the roadmap seems to definitely suggest an Ethereum ETF is right afterwards? And then people are even talking about things like an ETF for Solana and other currencies like that.

56:11Do you see that happening? Eventually. And there are, I guess, in anticipation of this, some of the more minor grayscale trust products have been trading at significant premiums. Where it gets a little bit more tricky is, one, the SEC still holds that almost everything in crypto is an unregulated security. I believe in the Coinbase lawsuit or the Binance lawsuit, they called Solana or Sol an unregistered security. Which is just ridiculous on that one. I mean, I agree some of them do seem like securities, but not Solana. I think it's mostly just obstructionism and absurdism. And history will not remember Mr.

56:56Gensler well, if it remembers him at all. But that does make it harder to then get a ETF. With Bitcoin, the CFTC declared it a commodity a long time ago, actually when Gensler was the chair there. With Ethereum, there have been some questions. But notably, because there are CME futures on ETH and because the SEC has already approved futures-based ETH ETFs, then the logic by which Grayscale won its lawsuit against the SEC also applies to ETH. that gansler can't come out and say we're not going to approve a eth etf for blah blah blah because then people would say well no the court already ruled that if you approve the futures etf you have no logical reason to not approve um a spot etf but then for every other coin the fcc could hold that line if it wanted to yeah no that's true and like look as you mentioned grayscale has a closed-end fund for just eth uh you know eth which is eth e that's the stock symbol for it disclosure i i actually switched out of all my crypto eth to eth e when it was trading in a 50 discount to its net asset value that discount now is closed to basically zero because people are anticipating uh an eth et they're anticipating grayscale will become an etf instead of a close-in fund yes i just looked actually ethe is trading at a 11 discount as of yesterday's close so first of all it was 51 discount congrats a year ago on an all-time great trade um i own a little bit too uh but i believe the if we wanted to use it as a uh if we use the discount to nav as a proxy for expectation of approval.

59:00GBTC is at a 7 % discount. ETHE is a 10.5%, 11 % discount. So the market is saying, yes, likely conversion, but perhaps not as imminently as the Bitcoin one. Yeah. I mean, the Bitcoin's first and foremost, and that's the one in everyone's mind.

59:32so okay we agree on that this etf stuff is that was kind of like whatever you call it fake news from yesterday although i still don't know i mean that guy's gonna be embarrassed if he's wrong and he's a prominent commentator on crypto but maybe he figured people won't remember him if he's wrong and they'll praise him forever if he's right. Kind of like a Nouriel Roubini in 2008 situation, Dr. Doom. What was that joke about Roubini that he's predicted nine of the last two recessions or something like that? Oh, I mean, he always, his thing is, every time you would talk to him, the market's going to go down 20 % tomorrow.

1:00:13But of course it never happened until COVID. He's also now famous for predicting the demise of crypto, testifying in Congress as to how it was all bad and going to zero. And then as of a couple of weeks ago, he had a blog post or op-ed in the Financial Times talking about his so-called stablecoin that he's now developing. It's kind of a nonsensical idea because it's basically like a mutual fund that invests in eight different things. And he's calling it a stablecoin and And it'll be appealing to people in emerging markets and blah, blah, blah. But yeah, it's the one thing that's been fun in the past couple of weeks is all the people that were once certain that the demise of crypto is imminent having to publicly walk that back.

1:01:05Yeah, I agree. But you know what, though? I have yet to see someone. Well, this is not true. I have started seeing people recognize the ones who have been bullish on it all along. But it's not as much as when things go down. Everyone's like, see, I told you. Famously, Jim Cramer came around just this week. To the chagrin of... Yesterday, in the same hour as the flash crash. Right, which some people actually blamed him. Like, oh man, Cramer helped create the bottom by telling people to sell everything last November. He might be helping create the top by coming around. I actually think Kramer's, you know, he's a super smart guy.

1:01:51One of the smartest guys I've ever met in all of the financial industry. And yeah, the problem he has is every time he's on TV, he's got to have a new opinion. And so that's difficult to be right a thousand percent of the time on 500 opinions a year. So people hold on to the negative ones and completely forget the many positive things that have worked out that he said. But let's talk about another major catalyst, which has been sort of undernoticed in this ETF news, which is that on December 31st, Vitalik Buterin, the founder of or initial creator of Ethereum, he laid out the product roadmap for Ethereum.

1:02:30And although we've all kind of known the roadmap, a lot of it is in 2024. Like, you know, and there's the Verge, the Splurge, the Scourge, I don't know. There's all these things that rhyme with urge. And the net goal, though, is to make Ethereum be able to process more transactions than Visa per minute and at cheaper fees. So with more applications that you can do. And adding more security, what you were talking about earlier, like adding zero-knowledge proofs and all this kind of stuff. So that's pretty impressive. I think that's actually long-term a bigger catalyst. Ultimately, you need use cases.

1:03:09and you need users. You don't need just speculators. So ultimately, to me, that's a bigger long-term catalyst. I actually think the ETF is in some ways overrated as the catalyst for why crypto has rallied so much in the past year. I mean, sure, it's a good meme. Billions of dollars will come in through it, whether next week or next year. That's all great. But I think the most important thing is for people like you and I, who have always believed that crypto is the inevitable future, then the last year has shown significant strides in maturation. And the scaling aspect of it is a big one because Vitalik is just highlighting what comes next.

1:03:58But let's take a moment to reflect on what's already happened just in the past year, which is that this layer two roll-up centric vision of how Ethereum would scale is live. There are roll-ups now with a lot of users, a lot of activity. There are days actually where there are more users on the roll-ups than there are on the Ethereum main net, which you would expect because it's cheaper and faster and made for like the every man or woman. And not only have these roll-ups launched, they're starting to mature what they do. One of the big improvements expected this year that Vitalik alluded to is changing sort of like the fee market on Ethereum layer one in order to make it even cheaper for rollups to operate.

1:04:49So that's already happening. This is something that's been on the roadmap for years and it's real now. We saw the launch of a very particular roll-up base, which Coinbase, the company, developed, which is actually very exciting because Coinbase has, I don't know, over 100 million global customers. It also has all the other infrastructure needed that when combined with their own roll up, it could really take us to sort of that like AOL moment that you were alluding to with, you know, they have a wallet and they have all sorts of other services. They have partnerships. They have people whose job it is to think about the UI UX of crypto.

1:05:35And you have a lot more flexibility with the design of a roll up. So I believe Coinbase already announced this. If not, they should or they will. But with stable coins, which is the other big thing that in the past year, as far as maturation is concerned, they've really began to take off in certain countries. you could have a world where on its roll up coinbase says hey anybody who has a coinbase wallet has usdc which is the stable coin that they're a partial issuer of up to a thousand dollars you get free instant payments gasless payments as we call them so now suddenly this infrastructure becomes a rival to a paypal but on a global scale using crypto infrastructure in a wallet where somebody can be sending dollars back and forth, but they could also be investing in ETH, participating in DeFi, collecting NFTs, concert tickets, whatever.

1:06:37So I think we're at the point now where you can actually take a step back and be like, wow, we're finally getting all of the infrastructure in place for mass adoption to show up. Yeah, I agree. And I think this has been a critical barrier to getting to that billion user moment. like you mentioned, Coinbase is 100 million users. Let's say there's another 100 million outside of Coinbase. That's 200 million. But again, with the ETF, there'll be a lot more users or owners of crypto in some form or other. But then with Ethereum and the various projects actually started to become usable and used by real customers, I think that's basically the moment where crypto takes over.

1:07:22and I don't know where we are on the tipping point for that, but this year, next year, this could easily happen. And that's the real tipping point. I agree with you. The ETF's overhyped, except for the fact that as a speculator, it's reasonable to speculate that a Bitcoin ETF will drastically increase the price of Bitcoin, which of course increases the price of all the tokens. And we've seen that happen. So the other tokens go out much more than Bitcoin. And so I think it's reasonable to bet on that just as a speculator. But what's going to really keep it going is when people start using it. And we're not even in any one of the use cases, I believe.

1:08:09Agreed. And we should also give a shout out since we're talking about what's changed to Solana. because as a layer one sort of Ethereum competitor, Solana has a very unique approach to scaling and consensus. And a lot of people, including me, had sort of written it off for dead a year ago because one, it had these series of outages. Like there's one thing you can't do as a blockchain is to just go down because decentralization is supposed to be far more resilient than central infrastructure. And then Solana was also very closely affiliated for various reasons with FTX and Sam Backman-Fried. But it had a passionate community of entrepreneurs and developers who believed in it.

1:08:55It has a founder who I actually really respect because I find him to be very open-minded and humble in ways that most crypto people are not. And it survived. Right. And suddenly, as of a few months ago, I mean, the manifestation of it was that the sole token has been one of the best performing tokens. But I think importantly, it showed that like, hey, you know, perseverance works. And if you have unique infrastructure that has a special value prop, which Solana does have, almost every other Ethereum competitor, I think, is going to go away because their whole shtick was, well, we're more scalable Ethereum, but now Ethereum itself is scaling.

1:09:36So you serve no purpose. Solana is just architecturally fundamentally different. I'm not 100 % sold that it will withstand the test of time, but it's great that it's there. And I think the way it survived, and also I don't know if you've ever used it, but from a UI UX perspective using solana is just a lot more like the more traditional internet experience that you and i are both saying crypto is going to have to develop so that's it's been an exciting thing and it's really exciting to see what gets built on there in the next year or two yeah and and i do think like you know i recommended my writing these various tokens and even a year ago i normally wouldn't have recommended Solana because I didn't personally know any projects being built with Solana.

1:10:29I mean, you would hear about it, but it wasn't like anything exciting to me. But just, and I was just lucky in this, just as I felt like I needed some diversification to Ethereum. So I basically recommended Solana, Cardano, which I don't believe in at all, but it's still moved. And Hedera, HBAR, because that one - believe in at all. Yeah, but I actually met people using it for games because it's so scalable right now. But I agree with you. As Ethereum completes its product map, the use for it goes close to zero. So unless it's already entrenched somehow in some projects. I doubt. I haven't looked into it in years, but it was a private permissioned blockchain, which to me is just a really bad database.

1:11:17There were grandiose plans that in the future they would make it permissionless. I doubt they've done that. But anyway, neither here or there. I think competition is good, as you know, with technology. While there's a tendency eventually to coalesce around one or two standards, it's not always clear ahead of time which the better standard is. Competition helps the market sort that out. So I think it's great that we have viable technology in Solana, which is in what we call the monolithic blockchain, like just put everything on the layer one and figure out how to make it as scalable as possible.

1:11:59That's one philosophy. And then we have the, what we call modular philosophy on Ethereum with layer twos and layer threes. Maybe the future is actually both of them just for different use cases, but there is like an excitement and vibrancy now that I think ultimately has also translated to token prices. Yeah. And I think, again, the product roadmap with Ethereum, which includes sharding with the verge and then the purge and the splurge, like I think there's a lot of features that are going to make the need for these other tokens that aren't as maybe aren't as safe or secure in various ways just there's going to be no reason not to use ethereum unless somehow fees you know rise higher than expected but um which speaking of which we have the halving coming up in a few months everybody there's a lot of i statistically i think it's total bs like any anticipation going into the the halving because we just we don't really know it that it's quote unquote correlated to bitcoin going up but you only have four instances so who knows there's no real evidence that the having means anything um other things have been going on in the world that has caused bitcoin going up like right now anticipation for an etf but but people are also arguing anticipation for the having but when the having happens and let's say it happens again and again and again do transaction fees for bitcoin start going up a lot more because miners aren't making as much money.

1:13:30No, because one of the very interesting design choices in how Bitcoin works is that the one thing that always stays constant is capacity. So mining could go up 10x the amount that is today or it could fall by 90%. That impacts the security of the network. It does nothing to improve the capacity of it just because the protocol has an effectively hard-coded limit on what the size of a block is and more or less mining does not change that even though the even though the rewards get cut in half yeah so here's why the halving in a way could be problematic um you know i remember like the halvings when i first started paying attention eight years ago, that one.

1:14:23And then even the one four years ago, they were interesting because like they were great advertising for what crypto represents to people who don't normally pay attention to it. That was like, you know, in 2020, it was actually perfect because that having happened just as every central bank on earth was going into overdrive, printing money because of COVID. So from a mimetic marketing standpoint, to be like, there's only one currency on the planet now that's ratcheting down its inflation while every other currency is exploding it. But at a certain point, Bitcoin inflation right now is already very low.

1:15:01And to go even lower actually becomes a cause for concern because of what you said about minor profitability. And it matters because the hash rate, the aggregate amount of mining is at an all-time high. but there'll be one day in this spring where miner revenues effectively get cut in half from one block to the other. And if a bunch of them turn off their machines and go away, that's not going to do anything for capacity, but it's going to be bad for security. Right. Because you like a lot of miners because it's more reason to believe the validity of every transaction. Right. And so then maybe this will be the final interesting catalyst that goes underrated.

1:15:49People have been talking about what to do about the future of Bitcoin, because unlike an Ethereum, where the transaction fees make up most of the income that they're not miners anymore, we call them validators or stakers, but almost all the money they make is from fees and something related called MEV. With Bitcoin, historically, the inflation has been 80%, 90 % of miner revenue. And there's been this question out there for the last couple of years, which is, what happens as that trends towards zero? Because right now, the inflation rate is six and a quarter Bitcoins per block, which is what, $300 ,000, something like that.

1:16:34But after this halving, it goes to three and an eighth. And then And another halving, and it's like, wait, if miners are making less than two Bitcoins per block, that's significantly lower revenue. So the one thing that would make up for it would be a significant pickup in fees. Right, that's my worry. Right. So we've already had that, though, because of ordinals and inscriptions. I don't know how closely you followed this, but this has been a very controversial and massive development in the world of Bitcoin in the past year. And basically through a sort of like a jerry-rigging, MacGyvering kind of process, smart people have figured out how to embed data into the Bitcoin blockchain, which means you could also issue NFTs on the Bitcoin blockchain.

1:17:31and even do fungible tokens. Sort of like we have the ERC-20 tokens on Ethereum. They now call them BRC-20 tokens in Bitcoin. And these have jacked up fees because it's very expensive to do all of this because Bitcoin is not designed for this, right? And whereas like Ethereum is designed for people to issue fungible tokens and non-fungible tokens, Bitcoin wasn't. So the process of doing it is very fee intensive. And this is really like divided the hardcore Bitcoin community. Because on the one hand, you have people like me who are like, this is great. One, it's experimentation. It's fun. I actually took the cover of my last book and a hash of the content of it.

1:18:19And I embedded that into the Bitcoin blockchain. Because it is the most decentralized network in the world. And I'm like, now I can't change it. If I do, people could be like, hey, the hashes don't line up. And people are doing all sorts of other interesting things. And people like me, more revenue for miners is good for the security of Bitcoin. The other side are like the hardcore libertarian, hard money, gold buck type of maxis who believe in Bitcoin as money. That's their religion. So to them, this is a form of blasphemy. You know, how dare you waste block space on stupid JPEGs when, you know, when the world ends, this is going to be the money that we all use to buy coffee and live off of.

1:19:07And you're now pricing out people in El Salvador who would buy coffee with Bitcoin because the fees are an order of magnitude higher than they were prior to the invention of ordinals. But nobody really takes them seriously. And I think the fact that the Bitcoin economy now has this new source of experimentation, innovation, fees, there have actually been startups that have raised VC money because they plan to do cool things with inscriptions. That's also been a underrated bullish development for Bitcoin. Yeah, and that's kind of like, let's say, an easy use case. You don't need a country to say, OK, we're going to use Bitcoin as our currency now.

1:19:44This is just like you use it, like people use this. So again, is there a solution when the rewards get too little? I don't quite understand how the fees don't go up automatically. Well, the good news now is that I'm looking right now in the past seven days, Bitcoin has actually generated more fees than Ethereum. That used to not happen at all in recent years. Just because you would look at Ethereum and be like, there's a million things to do on Ethereum. They all generate gas fees for the miners or validators. Then you look at Bitcoin and be like, there's literally one thing to do, which is send other people Bitcoin, which has limited utility.

1:20:26It's great to save in Bitcoin, right? But like, no, I don't want to buy coffee with my Bitcoin. I expect it to go up in value. I want to buy coffee with my fiat money. You'll be like this year's version of the pizza for 10 ,000 Bitcoin guy from 13 years ago. Indeed. But now it's like, oh, well, we can do all sorts of interesting other things in Bitcoin. And I actually don't think we have yet found the product market fit. With everything in crypto, like the DGens show up and do mostly stupid shit like NFTs and meme coins and stuff that will probably end up worthless. But if you say Bitcoin is the most decentralized, resilient network, digital network on planet Earth, and you can now embed whatever information you want, even if it's not financial, into it, then might there be use cases in the future where important contracts, peace treaties?

1:21:24Yeah, absolutely. Like, look, one of the initial predictions for crypto in general, but Bitcoin in particular, was it's going to replace all contract law. And that was kind of a side benefit of Bitcoin as a currency because of the smart contracts. But it's like what we were talking about earlier. We haven't even begun to see use cases in decentralized computing, which essentially makes every supercomputer a slow computer compared to what happens when you have millions of regular computers processing on a parallel problem. And then we have not seen the use cases for crypto in marketing. So imagine when every company, like let's say Uber, issues an Uber coin to customers who ride frequently, issues Uber coin to drivers who get high ratings and drive frequently.

1:22:13So that's a form of mining. And then you can use Uber coin later to buy rides. So you borrow from future profits to do marketing right now by issuing these coins. which by the way, if those coins become part of the ecosystem of every product out there, plus they're fungible through exchanges, that actually does a lot to change the inflation equation because you're not just talking about dollars buying goods, but other currencies. So I think that's going to be an enormous multi-trillion dollar use case that not even one dollar has been spent on that yet. There are brands and projects playing around with it, But I agree with you.

1:22:54I think it's the future of everything. I don't know. One of the things I'm very excited to see is there's going to be differentiation. Like we might have a world where there's Bitcoin, Ethereum, Ethereum Layer 2, Solana, etc. And then the market will decide which one is more appropriate for the use case. And I actually think part of the calculation will be like how vital and important is the activity. because some things like I foresee a future where a, if there's a future, you know, breakaway nation like America was, and they need a declaration of independence, that will be embedded into Bitcoin.

1:23:34Because this is like the founding document or constitution for a new country that you want to be in the most decentralized thing in the world. And if it costs you$500 worth of Bitcoin to do that, it's almost better that it's expensive, right? But then if you you're like Uber or doing coupons that are NFTs that also have some art associated with them. Well, that you can do on a layer three because it doesn't need that much security and decentralization. It's still better than existing in Uber's database. There are benefits. And there's going to be this self-selected market segmentation based on decentralization and security versus cost.

1:24:15Yeah. And look, again, I agree. I don't think we've even seen the potential. Kind of just like with AI. We haven't even fully seen the potential. I would say AI is just ahead, though, in terms of consumer awareness. Even if you've never tried ChatGPT, you could try it in one minute from now. Whereas Bitcoin, you can't. It requires some knowledge, which that starts to end the day that Bitcoin ETF happens, which I think is in part why it's so important. But Omin Malikhan, as always, I learned so much talking to you. You're a valuable resource in this whole area. Let me say the names of your books because I can never remember them in part because the books were amazing.

1:25:00Titles, not as good. Although, what do I know? I told, so Jocko Willink, you know who he is? Yeah. Yeah, so Jocko Willink, he's a regular on the podcast whenever he has a book out. And I once said, oh, so what's your, this is like years ago. I said, what's the name of your next book? and he said dichotomy of leadership. And I'm like, oh, that's a horrible name. But of course it came out, it was a New York Times bestseller. And Jaco did say, see, I told you so, but at least he didn't kill me. Wish he could. Oben Malikhan, author of Re-Architecting Trust, The Curse of History and the Crypto Cure for Money, Markets, and Platforms.

1:25:42And then, okay, this is a better title. Oben Malikhan, The Story of the Blockchain, a beginner's guide to the technology nobody understands i like that title i will give you the the right to name my next book chains because the story of blockchains that's pretty good uh what else what's your next book uh do you have a next book planned no no nothing planned yet what about you i do but it's on a completely different topic which my listeners have heard about so but but I'll tell you offline. I've been working hard on the next project, which is very different from all my other book projects before.

1:26:19Cool. But thanks once again, Omid, and hopefully you'll come back and we'll do this a lot more. Would love to. Always enjoy it. Thanks for having me. Thanks, Omid.

1:26:42You