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Speaker 1

00:00

Hi, I'm David Rakel, Director of Sales at Paradigm. Welcome to The Big Picture. The ball

Speaker 2

00:05

is reverting, so the obvious trade is always the expensive 1 to carry.

Speaker 1

00:09

This whole peak inflation, peak rates narrative, peak Fed, which we've been talking about for a while.

Speaker 2

00:13

It's an expensive place to find out. Crypto ball, a potentially fatal place

Speaker 3

00:18

to find the crypto option markets are definitely showing some signs of life. Hey, guys, welcome everyone to another episode of the big picture, your weekly deep dive into the crypto derivative markets. I'm Joe Crui along side me.

Speaker 3

00:32

We have our in-house macro specialist, David Brickhell, as well as my fellow colleague, Steve Weingrof. I think this is Steve, what is this, your second big picture?

Speaker 4

00:41

Second time on.

Speaker 3

00:43

Yeah, excited to have you back. And today we're privileged to have Marty on. So Marty is a seasoned option trader, crypto option Twitter short vol sensation, and I would also say a meme master.

Speaker 3

00:57

So definitely give him a follow if you are not currently following him. But before we dive in, if you appreciate these discussions, you wanna hear more, help us reach a wider audience by hitting that like button, smash that subscribe button, help us continue to share this podcast to the world. Marty, super pumped to have you on today, man. And we're kind of intrigued, I guess, just to start, to understand your journey into the crypto world and brought you specifically into trading crypto options.

Speaker 2

01:28

Sure, sure. What's going on, guys? I think you missed that I also am the owner of a creepy discontinued giveaway hat business.

Speaker 4

01:36

Morris is a disbelief.

Speaker 2

01:38

Yeah, Morris is a disbelief.

Speaker 1

01:40

Marnie, I'm so gutted that I didn't get to the office this week to get my hat.

Speaker 2

01:44

I was honestly going to send all 3 of you a hat and you all had it on for the show. That would have been maybe too much. But yeah, I'm originally from the States but I live down here in Brazil full-time now.

Speaker 2

02:00

I'm not like a traditional trad-fi guy, you know, New Yorker that turned vol trader I'm more got caught up in I guess kind of where everybody starts trying to trade. I don't know you buy spot then you go to Drawing meme lines and I don't know ascending triangles and whatever some TA stuff and then you move into oh Well, what are these perps? So let's trade some perps then you go and how do we hedge these perps and slowly snowball to now we're managing a small boutique size options fund. But that's kind of where I'm at right now.

Speaker 2

02:37

I guess I started when Bitcoin was $100. So my first 10X was 100 to 1, 000. And like, oh my God, this is amazing. And It rolls into how do you keep the money right like you can hit these 10x's you can hit these big paydays But I think I wrote it all the way down right I probably didn't even make much at the end of the day then 2017 came around and

Speaker 1

03:02

2018

Speaker 2

03:02

and that was like the big hype. I think everybody was talking about it. I specifically remember a lady at the bus stop in Portland or Uber stop in Portland was like, oh, could you help me create a crypto wallet?

Speaker 2

03:16

She heard me and my buddy talking about crypto so that was like maybe it's time to sell. That was probably like Pico top and really got into the crypto vol side more recently. We were number 10 market maker on the FTX products, specifically the US stuff right. So doing more spot trading and things like that, spot market making, and really got into the options stuff more recently.

Speaker 2

03:44

Of course I've used them for a few years now but as a main income not focusing on Delta 1 stuff or spot stuff. That's where we're at now. What's more interesting recently is you have this ETF hype, you have the halving coming up, You have this presidential election, right? You have like these organic vol inducing events or vol bringing events.

Speaker 2

04:09

I don't know if I guess vol is a 40 handle right now, right? So the market isn't like, oh my God, it's coming back right now. Today's the day, you know, hip, hip, hooray, you know, BlackRock is going to carry us to Valhalla. We're not there yet.

Speaker 2

04:22

Clearly, vol's just been down to the right since November and the ETH merge was the natural or was the last kind of spikes. And since then, I mean, she's a 40 handle like I have a bet that if not, not a historical vol, but if if D vol goes into the 20s, I have to quit trading crypto options and stop selling vol until it comes back above. With 1 of my CFA buddies.

Speaker 1

04:50

Marley, you seem to have caught the move pretty well. What was it that you were looking at over the last few months that kind of really sort of got you on that wave of being short

Speaker 2

05:02

vol? Just kind of looking at nothing, right? There was nothing coming There's no besides another black swan or time. You're not gonna dig yourself out of this this vol hole is what I say, right?

Speaker 2

05:15

November was what like a hundred and 40 eith or something like that and we hit like 70 or 80 handle during the The Chappelle move the ETH update and besides that nothing's changed There's no, you know USD liquidity. No, no ventures really getting back like there was in the hype cycle There was just nothing to look at right? So what are we gonna do? We're just gonna short vol and manage the Greeks That's all we can do until the vol regime changes and I know I say that a lot recently but and I get a lot of questions well when is it back when is it back I don't know nobody knows right so maybe we do get our face ripped off 1 day but essentially we've been selling this short dated stuff and trying to buy some long dated Vegas so if there is a pickup hopefully we should profit from that pickup.

Speaker 2

06:04

But like we can't time when vol comes back. It's not like, Oh yeah, on Q3 or Q4, it's going to come back. I think that we have the halving in the presidential election as some like natural organic vol inducing events, but nothing like, I don't know, I, when are we going to go back to trading 100 handle 140 handle again? You know, I missed those days.

Speaker 2

06:26

Those were fun. This is boring. This people want crypto Twitter getting more meaner by the day.

Speaker 3

06:34

No, I, I know I, I totally, totally hear you there. And it definitely seems like some of the flows that I have on screen is just, you know, a lot of people kind of seeing the moves and in spot and vol, like what we saw late last week, and then just like completely top taking this thing, right? So these are all flows that were coming through when, you know, you know, ETH was breaking out, you know, around 2k.

Speaker 3

06:56

And, you know, BTC was above 31. And, you know, it was quite interesting. We just saw this like massive upside and, and gamma gamma buying on the spot, move higher from the XRP ruling, especially in a theorem that, that is just completely played second fiddle to BTC pretty much all this year outside of the Chapela, which you mentioned. And, you know, it was pretty much all 1 way flow.

Speaker 3

07:22

And it turns out these guys completely top tick this thing. And from your Twitter, Marty, it kind of seems like something that you saw coming, you know, in plieds now are back in the mid 30s. Looks like Marty wins again, right? Like, so when you saw this spike higher in spot and vol, like, did you see this as kind of an opportunity to initiate some new short vol positions, you know, that, you know, would have paid off well, or, you know, were you managing risk of short vol positions that you had on and, you know, potentially temporarily offsides on the move?

Speaker 2

07:57

Sure. Yeah, front end picked up like a lot, especially in ETH, but not necessarily Bitcoin, because I think ETH was riding this ETH is not a security hype right so that was like instant pickup on the front end but you never saw like the uptick in vol a little bit later right You never saw the end of the year, you never saw March, you never saw June even pick up like at all. If I remember correctly, it might have even been down. And it seemed crypto Twitter was euphoric like always, right?

Speaker 2

08:27

You can only be on Twitter so much. You can only, you know, don't listen to anybody on Twitter. There are only like 5 people know what they're talking about. Besides that, we're all there for fun and games.

Speaker 2

08:36

And you saw like ETH really pick up in this short term stuff. We covered a lot of our shortfall positions, but it wasn't like, oh, like, oh my God, we got blown out. Loris is like baking a cake, you know? Like it wasn't like, it wasn't like this grand inducing event, like if we would have saw the backend pickup, we would have made a lot more money.

Speaker 2

09:02

It wasn't like a super crazy day for us. Put some more positions on towards the end of that hype cycle, but it wasn't like, we probably could have just stayed where we were and made even more money. But we still collected data every day. And unfortunately, we don't have like a billion dollars to play with, or I think it would be a totally different story.

Speaker 2

09:24

I'm pretty comfortable where we're at managing this little boutique, sub $20 million micro boutique fund. We have a lot of say on what we can do and not a lot of chief investment officer trying to make a play or traders trying to make a play.

Speaker 1

09:41

Right. And Marty, What are the core kind of strategies you tend to put on to express this view?

Speaker 2

09:50

Short everything. Do you like short straddles? Yeah, I mean the more complex it gets, you could just really just 1 line, 1 simple word is just sell more vol, right?

Speaker 2

10:03

Just trying to do as much volume as we possibly can so we get, you know, OKEx and ByBid and some of these other guys, you know, hopefully we get a gold star from them and they like us. And then hedging out the Greeks with some perps and some spot. And it's all become automated now. It used to be like, I don't know, let's short this strangle with a few clicks.

Speaker 2

10:25

Let's put this on and let's rehedge every hour, every 30 minutes at like the very beginning. Right. And then instantly saw like, oh, that's only going to work so well if you're only playing with a small chip stack, we need something that can scale.

Speaker 4

10:42

Marty, so like, you know, broadly, you

Speaker 1

10:44

know,

Speaker 4

10:45

investment management space, like in crypto, it's kind of all about like how well you can manage your capital. So how do you go about sort of managing like cross exchange and like different margin requirements and C5 or C5, like how does that look for you?

Speaker 2

11:00

Sure, The problem that I'm seeing now is there's money to be made because in CFI and DeFi or a mix of all, there's a different price on every exchange of every hour of the day. The issue that, and maybe the reason why it's not fully arped out yet is because of capital requirements, right? On some of these DeFi things, you need 100% margin.

Speaker 2

11:23

So, oh my God, you're going to put, I don't know, a million dollars on a smart contract, let's say, to make $1, 000. Oh, God, please let's not do that, right? You can only, it would be a lot easier if there was some more margin. It actually be better if there was a prime brokerage for all DeFi.

Speaker 2

11:42

And if somebody is making this, just ping me because I would love this. If there was a margin, like 1 margin for all DeFi of all the protocols, this would be a game changer for sure, right? You could play SYNQUOTE, you can play AVO, Avocado, they post the avocado. So I always call them the avocado exchange.

Speaker 2

12:03

You could play these guys on 1 margin book and oh my God, it would be life-changing. But I think all of these different pricings would be priced out instantly. You have Lyra, Premia, Synquote, all these guys, right?

Speaker 3

12:16

I wanna talk a little bit about, it's a pretty interesting case of short vol going wrong. That happened over these past few weeks. We've discussed continuously on the big picture, the presence of this large Ethereum overrider in the market that was very active throughout Q1 and Q2.

Speaker 3

12:41

These guys don't trade on paradigm, so we're happy to talk about it. And we've been tracking the positions of this overrider. And what's very interesting is on last week's XRP driven rally, we saw this entity in what appears to be complete panic covering mode, you know, buying back a large amount of their short upside positions. Most notably, it was these March 2300 calls, which was the largest open position of this entity.

Speaker 3

13:10

I think in the March 2300 calls in early June, they sold around 400K vega of this thing. And they sold it. So if you'll see on that chart, the majority of this flow was occurring where that left arrow is and being sold at 44 vol. And when they bought it back last week to cover this thing, he was paying roughly 52 vol.

Speaker 3

13:33

Yeah, and The as I mentioned, you know the Vega trade initiation in this strike was a roughly around 400 K So on the vol move alone, they lost 8 vols on this and you know 8 vols on 400 K And you know, this is an underestimate to you know, given the Vega exposure being dynamic in both spot and vol. So just looking at where this guy opened and closed this trade, they crystallized a 3 and a half to $4 million loss on this thing. And we saw this, and honestly, we weren't really surprised to see the covering when we saw, you know, the large move in the long dated fall. We, 1 thing that we've been working on a paradigm is this thorough Deribit Ethereum wallet analysis, basically looking at the inflows and outflows into the major Deribit wallets from the start of when this program was going up.

Speaker 3

14:25

And the main takeaway of that is we did not see inflows into Deribit that would have been enough to sufficiently collateralize these positions on the move higher, unless they already had a ton of funds that were just sitting there dead on Darabit, which seems like a pretty inefficient use of capital to me. So the natural conclusion is that they needed to cover all this risk. And, you know, we would assume that the program is over for the time being and could be, I could be wrong. It's, it's impossible to know for sure, but like, you know, Marty, you have firsthand experience in shortfall strategies.

Speaker 3

15:00

Like, did you see this flow? Like, how do you prevent your shortfall strategies from significant drawdowns to the point where, you know, you're closing down positions and, you know, you might be out of the market for a while.

Speaker 2

15:13

This is the same guy that does like the on book quoting, right? It's the same main player that. That we suspect, right?

Speaker 2

15:20

For the last, I don't know, year and a half or whatever. I'm saying it's still that same major player.

Speaker 3

15:24

Yes. Yes, it is.

Speaker 2

15:26

Yeah. I mean, not every major player is always going to be right. I think that that guy. Won a lot and kept winning a lot, a lot, a lot, and kept winning over and over and over.

Speaker 2

15:36

And you can only win so much. Maybe it was a little too panicky, right? Because we instantly saw it just flow back down. And I don't know who he is or she is right we don't know I don't know if it's a minor or if it's an entity or if it's a fund or whatever right how when you're looking at this like they were they better off probably just holding on their positions or re-adding collateral I I think that this black rock followed by this XRP ruling really put a lot of people on tilt or on edge or off sides, whatever terminology you want to use.

Speaker 2

16:13

I didn't necessarily feel like super risky. I didn't feel like, oh my god, I need to cover everything. We covered some, but we still collected data the next day, right? It wasn't like, oh, we need to go long, super long dated stuff.

Speaker 2

16:27

We need to change our whole strategy today. Still, like I said in the beginning, there's still no real catalyst. We've had the catalysts. Like these were supposedly the black, the upside black swan catalyst.

Speaker 2

16:40

The BlackRock is coming to bring us to Valhalla. The SEC is probably going to lose every single case from here on out, right? Because now how are you going to say ETH is a security or not a security or some other coin? What was interesting there, which I don't think a lot of people even realized, was that the SEC said that XRP was a security when offered privately to funds, but it wasn't a security when offered to the public, which seems a little backwards, right?

Speaker 2

17:17

Yeah, if anything, it's a little backwards, right? I mean, they're going to go back to court. They're going to go back to the drawing board. This fight isn't necessarily over.

Speaker 2

17:24

When you see somebody like this, this ETH overrider guy win over and over and over. Of course, he's going to get his face ripped off once. But I think that it was maybe he was too jumpy you know like we're back at a 40 handle right like CPI was what like a 50 let's say right and we're below that like Jesus Christ like if we hit that 20 I'm done dude I can't come back until we get above 20. I got to go trade TradFi products, which is totally okay.

Speaker 2

17:54

I'll go trade some AI stocks and follow the shiny new toy if I have to. But yeah, I think just essentially the guy, team, whoever overreacted. I think that maybe they could have posted more collateral. They could have wrote it out for 48 more hours and come out on the other side of it as probably the fucking goat trader of all time if they wrote that 1 out.

Speaker 3

18:16

Yeah, Yeah, exactly. We were really surprised by how quick this guy was willing to cover. You saw where these things were printing too, right?

Speaker 3

18:26

It really only trades with what looks like 1 market maker. This market maker, I imagine, made an absolute killing on the way in and out on this thing.

Speaker 2

18:35

Yeah, you just have to look like...

Speaker 1

18:37

Go ahead. He needs 1 of your hats, Marty.

Speaker 2

18:40

Yeah, whoever is the market maker or whoever is this guy, I will send you a box for free. A 10 pack. I'll send you a 10 pack.

Speaker 2

18:50

Okay. Of the discontinued merch. Yeah, you need that 1 after that play for sure. No, it's just could have been 1 of these events like that.

Speaker 2

18:59

We saw 40 handle to 80 handle, you know, and imagine that loss that he would have accrued on something of this scale, right? Losing 3-4 million bucks after making, I don't know, we can go back and do the math, right? The last year and a half, I don't know, you made 100 million, let's say, just randomly. Oh, you lost 3?

Speaker 2

19:19

0, whatever. You know, still happy, right? Yeah, it definitely could have been a lot worse. It could have, I mean, we could have saw 70-80 handle, and imagine we'd saw that in 2 hours, like an FTX Black Swan or something like that.

Speaker 2

19:33

Yeah, he would have literally had his face ripped off and Loris would have baked the cake for sure.

Speaker 3

19:42

Yeah, yeah. We're kind of of the assumption that, you know, maybe, you know, this program, you know, might be over a little bit for the time being, but as you said, right, all look at all the other trades that had done quite well, would not be surprised if this guy's, you know, back ready to play again and, you know, Q3, Q4.

Speaker 2

20:00

Yeah, just go look at like all these people trying to buy vol, especially in like a directional way. It's like if you don't get that big move and if you don't get that big move fast, essentially you lose every day. Every time you pay theta, you get, you know, my God, this even like retail.

Speaker 2

20:16

I had a buddy who, oh, I put on some directional plays of decent size for retail and I was like, oh, have you looked at your theta tab? He was paying like $2, 500 a day. And I was like, Do you even know what that means? Or are you just straight out punting 100K option long, like 100K cash long?

Speaker 2

20:40

And he was like, yeah, I'm just over here gambling, basically. So I don't know. Besides the smart vol players and the trad by guys that have come to the vol space options is still just still like a whole new

Speaker 4

20:53

Yeah, we see it. We see we don't even know the word see like especially like an execution style and kind of like what Joe saying earlier and how people like will top ticket and like the flows and then the last side of it. You know, people just, because people come from the, like from paradigms like view, right?

Speaker 4

21:08

So we have, you know, like a, let's say like a group of takers and that are just directional, directional traders that will come in when like an XRP ruling comes out or like CPI day or things like that. And when they come in, they come in, the flows are just so aggressive and like just so violent and they're always on the move. And then the next day it's nothing, like you're collecting data, you know, like there's not really much, it just is so quick. And then I feel like they're on the wrong side so often.

Speaker 4

21:32

But I agree with you that the big players and the smart Shopify guys who do like size bigger and they're usually like in a little bit earlier, like obviously are the ones, successful at the end of the day. But yeah, we do see so much of this jumpy flow.

Speaker 2

21:48

Jumpy flow. Marty. I like that.

Speaker 2

21:50

Go ahead.

Speaker 1

21:51

What's your, obviously right now as well, we're very much in this positive spot vol correlation world. So I'm always interested when someone who's kind of running consistently short vol, does that overlap with a view that spot's not going anywhere soon? Or are you kind of neutral on that?

Speaker 1

22:18

If we just grind higher and grind towards $35K, $40K, you know, vol's not going to do a lot on that. How are you viewing spot within that, within the vol view that you have?

Speaker 2

22:30

Yeah, I mean, when we trade on Darabit, or I guess even OKX, right? It's all coin margined, right? So essentially you want the vol regime to shift and you want to be just balls long and you want to be coin margined and you want to double dip in the profits.

Speaker 2

22:49

But right now, it just seems for us just to be collecting more coins. Every day, let's make a little more coin, a little more coin. And I can't wait until the vol regime shifts. Whenever it comes and just be balls long and just make a killing and put out new memes and the you think the short ball means are good wait till the long ball right I'm just trying to pass time right now I'm trying to have a laugh you know essentially it's been boring but boring is good right especially as a short ball ball player you want just to be boring You want to collect data every day.

Speaker 2

23:23

You don't want this spot. I'm happy right here, 30K and 1900. I don't want it to move, right? It's been like, I don't know, so long in this range, like of ETH, 1600 to 2000.

Speaker 2

23:37

I think it was like 100 plus days. Like, that's amazing for us, right? I don't want this, I don't know, let's say

Speaker 1

23:45

1500, 3000, 1500, 3000.

Speaker 2

23:47

I want these more tight, shorter ranges for longer periods of time whenever the vol regime shifts and we're not super max short right now like we were I think we're positioning for Q4 and Q1 of next year, kind of like everybody else, hoping that this, maybe there's even a front run of the halving and that brings back some flows, to just some more, not macro, but more bigger picture plays instead of oh my god it went from 43 to 42 and the next day it went from you know for 42 of 43 to 42 handle or today it's 40 like we're still just down and to the right if you just look at the default chart, right? If I really want it just to come back organically without a black swan, because you don't want a black swan like Binance going down to bring back vol. That would not be good for anybody, and TradFi will continue to laugh at us, right?

Speaker 2

24:49

Yeah, coming out of that, it's just. I can't wait until we're just balls long and it's just so much easier. Just you could just hold spot and 10 X. Like, that's always fun for everybody, you know, but I have to make money every quarter.

Speaker 2

25:00

I can't make money every 10 years. I'm not a 10-year fund. People can redeem every quarter. And we're not that big.

Speaker 2

25:07

We don't have a billion dollars. If you redeem, I don't know, 10 million, you redeem half the fund, like, oh, geez, maybe I'm out of business.

Speaker 3

25:16

Right. But if I want leverage and, you know, long vol exposure, and I look at some of the performance of these crypto equities, right? Like, sure. Like BTC looks like a complete dog, you know, compared to some of these, compared to some of these equities that actually has decent option markets.

Speaker 3

25:38

I'm looking like MSTR, Marathon. I have a chart here. Right here. If I want to play that sort of long vol, and look, I understand that you're going to be paying much more premium for these things.

Speaker 3

25:53

These things are trading around

Speaker 1

25:54

110, 120

Speaker 3

25:56

vol. But Marathon and Riot up

Speaker 1

25:59

400%,

Speaker 3

26:01

MSTR 215. I have NVIDIA there just for comparative purposes. I mean, fucking Coinbase, certainly it's a different animal, but like it's up 90 percent or whatever over the past month, right?

Speaker 3

26:12

If you want these sort of, you know, upside, convexity, long vol sort of plays. Sure, agree, you're paying for it. No, nobody's denying that, but like kind of seems like the better place to be paying it, playing it. And I think in like existentially, you know, it's 1 of these, when I think about the current state of the crypto option markets.

Speaker 3

26:32

Let's say like I am just some retail guy, right? You know, whether I'm offshore or onshore, retail guy, I'm sitting on the sidelines. I have some dry powder. Like why would I go long vol in Deribit BTC options If I'm looking for that upside convexity to capture, you know, this next bull cycle, if I want leverage, just trade the crypto equities.

Speaker 3

26:56

These are leveraged crypto businesses. If I want leverage on leverage, Why don't I just trade options on these crypto equities? Right. Look, no one's denying that 80% upside in BTC is, you know, it's still a damn great performance.

Speaker 3

27:09

And of course, you're going to expect magnified moves in these crypto equities. But like, when I think about it from an adoption standpoint, and look, I'm not shilling paradigm Kool-Aid by any means on this, because obviously we want this BTC crypto native option market to grow. But I know my funds are going to be safe at Fidelity or Schwab or wherever the hell I'm trading this thing, I can earn 4.5% on my cash by keeping my money in the Fidelity account. Sure, I'll pay more premium on like a Bitcoin miner equity, but the thing realizes a lot more and it outperforms.

Speaker 3

27:45

And if I'm a retail guy, I'm trading directionally anyways. I just want gamma and convexity. I don't need to deal with managing funds on multiple venues. I don't need to deal with lack of regulatory clarity.

Speaker 3

27:55

And the crypto vol market, on Derib is a full of vol sellers like Marty that just grind the market to a halt. So like, am I crazy here? Like if you can access crypto vol exposure in already a relatively clean way with a lot less headaches and things to worry about, right? Cross-margin, whatever.

Speaker 3

28:18

Like, why wouldn't, as a speculator, wouldn't somebody just trade crypto equity options?

Speaker 2

28:23

Yeah, yeah. For us personally, right, we're a crypto-only fund. So it's like, it would be illegal for me to go take that money and go trade stocks, right?

Speaker 2

28:31

So let's not do that. But my personal portfolio is up big right january and march publicly on the twitter I was like balls long nvidia just super some leaps super long leaps 1 2 year leaps and shares and I was like in amd if if that's the future I don't know chat gtp was like this hype in I don't know january or february that this time everybody was using it. I was like, if this is the future, then essentially chips are the future, Just go buy the chip makers. Well that that played out on my personal portfolio, right?

Speaker 2

29:04

And too bad, I don't have 10 billion dollars to go make 50 billion, right? But I Don't think that even retail thinks about what you just said essentially, maybe that's why they need to watch your pod, right? They're just like oh bitcoins the best performing asset or ETH is the future of money or the internet and I just want to be long crypto. But they don't realize that they could go make a billion dollars in the stock market and be able to bank that money.

Speaker 2

29:31

Right? Go try to make a billion dollars in crypto, then go show up at Bank of America. And, oh, hey, you guys want to take my billion dollars? They're like, no, sorry.

Speaker 2

29:40

You have to go find some other wealth manager to go handle that money for you. I was telling my wife, I guess like a month or 2 ago, kind of when like the world was ending in the crypto. What is it? 16K, I don't even know when that was, November, December.

Speaker 2

29:54

I was like, maybe I'll go back to stocks, right? Maybe we'll, you can make a billion dollars and go bank that money and not have any regulatory issues or anything like that. But I decided to raise a new fund and stick with crypto and I live in Brazil. I guess we could transition a little bit into that like the regulatory US versus Brazil.

Speaker 2

30:15

But Brazil is coming out with a full regulatory framework for crypto essentially as long as it's the one-liner is if it's not a scam it's okay you can't advertise derivatives to retail like on Twitter by bit and somebody else finance by bitten finance got in trouble for doing this But let's say if you go to Bybit's website and it's in Portuguese, if you change it to English, you can still trade derivatives. It just can't be like publicly on Twitter or on billboards and things like this, like the advertisements. I think that Brazil is probably the next bigger player, right? I just had lunch with a few guys that were in Brazil for some business in the crypto business.

Speaker 2

31:01

I'm not going to name them, but this is becoming like the next hub. We're going to be the first ones to do the digital currency, we'll be the guinea pig, right? The digital heyao will be the guinea pig for the rest of the world. We're 220 million people with sound financial system and soon to be crypto regulated markets and all these other things.

Speaker 2

31:22

Right now it's like this, still a little wild west, but as long as it's not a scam, it's totally okay. You can trade any crypto, you can have leverage, you can trade options. It's unlike the US where you can't even get on Darabit, right? You can't even get on any sort of derivative exchange.

Speaker 2

31:39

You're stuck trading on Binance US, Kraken, and I think that that's it, right? Ledger X is finished in the US. So where are you gonna trade Coinbase? Yeah, but then you pay fees.

Speaker 4

31:51

So many reasons.

Speaker 2

31:52

But again, retail doesn't even think about that, right? I think it just goes back to maybe stupidity, like, oh, I'm long Bitcoin. I'm a Bitcoin maxi.

Speaker 2

32:01

I'm sticking it to the government while still paying your taxes or you know whatever else. Back to your thing Joe, like yeah I just don't think like people even think about that. Imagine you bought Riot, Mara, NVIDIA, any of those players for upside. Even if you're just holding shares, you have less risk than holding Bitcoin outright.

Speaker 2

32:20

You don't have to self-custody it. You don't have to worry about a DeFi hack. You don't have to worry about a bridge hack. You can bank the money.

Speaker 2

32:27

Yeah, I just don't think people even think for themselves a little bit, right? They're just like, oh, I'm a Bitcoin maxi and that's it.

Speaker 3

32:36

Yeah, no, that makes sense.

Speaker 1

32:39

And what are you guys

Speaker 2

32:40

doing where you guys are, like in terms of regulatory? Like, I know in the States it's screwed, Brazil's open. I haven't even followed up on Europe, David.

Speaker 2

32:48

Maybe you could give some

Speaker 1

32:51

insights. I guess particularly the UK, we've probably got quite a good history in terms of exploiting that regulatory arbitrage angle. There's definitely a very of constructive approach to regulation here so it's very consultative and yeah we're in the process of sort of laying out a framework within which we can work and Europe as well, very similar. So it definitely feels a lot more friendly, an environment, I guess.

Speaker 1

33:27

And yeah, 1 that's open to, I think, I think, and I'm very critical always of the regulator and the UK government, but we seem to be taking a sensible approach, recognizing that we can't necessarily shoehorn existing regulations into crypto. So yeah, it's very open. I mean, Rishi Sunak, our Prime Minister, he's very keen on crypto. He said in past he's bought crypto, traded it or have you.

Speaker 1

34:01

So he gets it, he gets what the opportunity is. Maybe in a post-Brexit world we're kind of looking to protect the city of London a little bit as well. So being open to, you know, we don't want to be closing too many doors there. But yeah, it's, there's quite a good buzz, certainly in London and definitely I think across Europe.

Speaker 1

34:23

And it feels like the regulators are kind of getting their ass into gear. Same I guess across Asia and the Middle East. There's, yeah, it feels like the US are kind of falling behind everyone else at the moment.

Speaker 3

34:39

Yeah, I mean, everyone that we see, you know, us just just more and more and more, you know, companies just just moving offshore, whether those are crypto banks or trading operations or VC firms. Anderson Horowitz, obviously the main example setting up office in the UK and yeah, I mean even even me and me and Steve going going down in Brazil for for a month or so and then, you know, we'll be over in the UK shortly, you know After that, you know, it's very clear, you know, the writing, the writing is on the wall, you know, the UK, Europe or Asia or Brazil are kind of, you know, the places to be.

Speaker 1

35:25

I think as well, like, you know, we live in increasingly like globalized world. And I guess crypto, you know, is kind of like the next evolution into like this kind of borderless world. So it's very, very difficult for even, Let's have some respect for the US in terms of its size and importance.

Speaker 1

35:51

These businesses now tend to be global in a way and they can then move and go to where the regulatory regime is going to welcome them and make business easy. So I kind of am expecting the US to do an about turn at some point when they when again that money talks at the end of day and once they see money walking out the door and they you know there's some pretty lumpy fiscal deficits that they've got a they got a service so I think I think what's the saying that you know politicians they do the right thing once they've exhausted every other avenue. It kind of feels like the US will get there, but they need to do it quick because things are building pretty rapidly elsewhere and we're actually seeing it right? We're seeing businesses move out the US now and go set up elsewhere in more friendly jurisdictions.

Speaker 1

36:42

And Marty, yourself, you're out in Brazil.

Speaker 2

36:45

Yeah, no, I think what's funny there, being a burger originally myself, like, the burgers only think that there's only burger land. There's not the rest of the world, right? And the SEC is the enforcer of the world financial markets.

Speaker 2

37:01

Well, that's not how it works, right? And I think that recently they've really overstepped their grounds on just, I don't want to get too into it, but essentially, like how are you going to enforce something when you don't have any rules? You have some book from the securities laws from 1940s, amazing. Can we just rewrite those rules?

Speaker 2

37:20

And if you just clearly state that this is illegal and this is not illegal, this is a security and this is a commodity, if you just state those simple things and if you do this then it's illegal and if you do this then you're okay to do whatever and have clear sound financial markets then none of this would be happening right they wouldn't be losing out on innovation and I know that USD is the world reserve currency but I I'm not at the point I was at the point but I'm not like a Bitcoin maxi anymore after going through everything I used to be maybe I'll be wrong right but I don't think that like oh my god we're gonna move Bitcoin from central bank to central bank to settle debts like yeah maybe when I'm dead cool have fun you know but like today that's not how it works in the next 05:10 years I don't know unless the US goes bust or something in the next 50 years I guess then maybe but No other currency right now looks fit to be the world reserve currency. And that's not a burger statement.

Speaker 1

38:23

Right. That's a... Yeah, no, no. Yeah.

Speaker 1

38:25

I mean, we spoke about on here before, like we've kind of debunked the whole de-dollarization sort of narrative. I mean, particularly in the world of foreign exchange, you know it's a relative game right and who else is going to take over that that reserve sort of mantle, certainly not China, you know unless you're going to open your capital markets and and have free capital markets there. So yeah, I'm kind of with you on that. I'm not

Speaker 2

38:52

seeing that. I'm not seeing that with China, right? Like, Sequoia just had to totally separate their China fund and the US fund.

Speaker 2

38:59

Now it's like Sequoia China. Like, it's not owned by the, well, it's probably owned somehow, you know, somebody has some stakes somewhere, but it's not owned by like Sequoia Funds, you know, San Francisco or wherever they are, Stanford, I guess, right, next to Stanford, right? And it's like, oh, 1 of the biggest players in the game is totally like cutting off their China arm. Of course, it's still gonna run.

Speaker 2