Sam Bankman-Fried and Matt Levine on How the Crypto Market Really Works

around the market structure aspect of crypto. Well, it's interesting because all right, we did get this like sort of bare market, and I don't know if it's still in one, because as you mentioned, it's bounced back. But unlike say, you know, the sell off in or at the end of Seen, it doesn't feel like there's any slowdown at all in the pace of investment into this space, Like where is at the end of you know, is like all right, well, maybe this whole thing was a bubble

or a fad. This time it feels like no one's thinking that it's like full steam ahead on various business plans and so forth, at least in these early months since the peak back in April or May. Yes, indeed, And as a sign of that investment interest, we just had the crypto exchange f t X, which we've talked about on the show before it completed. I think it was a Series B fundraising of nine hundred million that

valued the company at eighteen billions. So to your point, I mean, the crypto ecosystem itself is clearly being valued by investors as a future investment. Eighteen billions pretty big, right, And of course f t X is the exchange we talked to the to the founder, it was not that long ago. I think it was either maybe like March or April, and it feels like his star, his significance within crypto has only probably like gone up like ten x uh since like literally like the last three or

four months. Yeah, I think that's fair. So we're gonna be talking to the f t X founder of Sam Bankman Freed again on this episode, but we wanted to do it a little bit differently this time, so we've also brought on Bloomberg columnist Matt Levine, one of the best, probably the best financial writer out there if we're being honest, and he's going to join the conversation and we're just going to talk about what ft X has been doing

and where it might go from here. Okay, wait, let's do it all right, Uh, Sam and Matt, thank you so much for coming on the show. Yeah, thanks for having us, Thanks for having me. So, Sam, nine nine million dollars is you know a lot of money. What are you going to be doing with that? Yeah? So it's um, I think we're looking good on the yacht front. Don't need any more are but no I acquisitions to

serve the based answer? And you know, I think especially as crypto starts to bleed into the rest of the financial ecosystem, there's more and more points of overlap and potential uh you know, potential collaboration could expand what you mean by that? So what do you say crypto is going to bleed more into the rest of the financial system? How much of that is? Okay, we know that all of the big banks or traditional brokerages they're like thinking

about like, well, what is their crypto play? How are they going to get in on this action? How much of it is? Are you talking about that? And every day there's some new uh announcement from like a legacy institution about something they're doing in the space, as opposed to crypto itself encroaching on areas of business, lines of business that we think of as traditional, where perhaps crypto has a potential to userve some of that activity. It's

pride merrily so far been the former. And some of this is the you know, sort of traditional highly regulated financial institutions starting to get their toes in. Some of this is also fintech, and so you know, I mean when people say fintech, they're sort of an increasing chance that they're referring to, you know, a crypto company over time.

But but even outside that, many of the definitely not crypto companies in fintech, a very large fraction of those are reaching out to you talk about like like and imagine that you're some customer facing fintech business right and you know you don't offer a bitcoin right now? Like, what, what do you think the most frequent requests you get from your customers is? But he's definitely to add bitcoin, Matt,

what's your understanding of what FTX actually does? Because you know, Joe and I have spoken to sam Um a few times before. Now I think we have a decent idea but what's your impression of it? I like this question exposing my ignorance question. Uh, my understanding is FTX is like one of the biggest crypto exchanges and that it's a particularly like uh, derivatives and structured product focus crypto exchange. Is that like about right? Yeah, that's that's that's pretty good.

And you know, we're one of the newer exchange, certainly the newest of the big ones, you know, started up a couple of years ago, and more than half our volume historic based been derivatives. I think the big reason for that is basically, like they're the harder products to

get right. And you know, I think a lot of the exchanges had serious issues when we started up and uh, and those issues just became much more transparent and played a much more devastating role when they tried to manage you know, margin and drivetives than with SPOT products, which are relatively simpler, although we do have a pretty wide

range of products on the site. So I mean, I saw Sam someone made a joke on Twitter the other day that like, you know, you weren't even like a real player or active in the industry, like you know, the last bullmarket. I mean I don't think that's totally true, because on the last episode you told us the story of the U the Japan Premium, which is an incredible story and people should listen to it. But so much of your success really has come like in the last year or year and a half, and now f t

X is this huge thing. What do you explain, like, what was it? It just sort of broadly and then we'll get into like the details, but you sort of mentioned some of the operational aspects of running a derivatives exchange versus just a pure spot exchange. You know, in the US people really know coin based globally people really know buyinance. But what was it in your view that you know, you have this thing, Okay, we're going to

create a product for traders. What was it that f t X had that really allowed it to just explode

seemingly out of nowhere, uh, in the last year or so. Yeah, And I think a lot of these things were things you might even just assume with TRUF all exchanges things for two, but that isn't And so one example is when you look at margining, the norm in crypto was you isolate everything, And what that means is if you want to go trade if against USD futures, you have to go like by Spot etherory and move it into your USD futures wallet and use that as margin. Trade

your each features. If you then want to trade you know, Bitcoin against US Spot, you have to go move that e thout sell it for US or Bitcoin, move that into your US you know Bitcoin Spot margin wallet and use this collateral there. You had a margin you know, managing literally hundreds of wallets on one venue, each of which basically only supports one product um as this massive minigame to manage to be liquidated on any one of them independent if your collateral on others, you have no

flexibility on margining. The liquidation engines were not up to the task, Like they're losing millions of dollars per day of customer assets um to failing to liquid eight in time. You know, there was just like match engines fault fell over whenever markets got volatile, and so it's just like all over the place that was like not a great customer experience, and you know in sort of like really significant ways. So this is like raised the question that

I have. So you come from a sort of like high tech, traditional finance background, you're a chain street and like one story you could tell here is like this is about like applying sort of best practices from traditional finance to like the wild West of crypto exchanges, where well, portfolio margining is a totally well understood thing, but to

portfolio margining for crypto products. Um, But I'm curious, Like I've always thought that like a lot of the appeal of crypto is like all these people from like backgrounds like yours, who like work in like the coal mines of market structure and whatever and have like a list of things or like this is this like traditional financial thing is stupid and I could do it better if

I were designing the system from scratch. And you kind of went and designed the system from scratch, right like you started like a big exchange in a in a product universe that is not really beholden to any traditional rules or you know, customs. And I'm wondering, like are there places where you were like like what we do here at chanceer it or what we do and like,

you know, the stock market is really dumb. Like if I were doing it, I'd do it differently where you actually went and did that at f t X totally, and I do think the answer is really sort if you look at each place and you're like, who's doing it right? You know, it's sort of like the crypto norm, correct, the crypto exchanged norm, or like the traditional exchanged harm and kind of sometimes it was one and sometimes it

was the other. So like some examples of places where I think crypto has like at least an argument for doing it right now, I personally think they probably are. One of these is moving funds around. This is obviously one of the first things that comes up with crypto, But I at least sort of just assumed it was easy to get your money wherever you wanted before I'd ever tried to do that. But as soon as I I tried to ever move money around, I realized how

difficult it was. Anyone who sent an int like an international wire transfers immediately regrets having to do it. And then you look at like a c H and credit card payments to take months to finalize, and so either

these all these limits huge, he's on them. There's so many roadblocks in the system because like there's two months of fraud risk there, and so just doing things like funding your account or what do you what if that even needs to find your account on traditional exchanges is like very messy and can take a while, whereas on crypto, like the goals to make it as clean as possible, and when you're sending cryptocurrencies in that's obviously like basically

instant on sort of you know, the wire transferred time scale. But even with with fiat sort the emphasis is like anyone, whether you're you have two hundred dollars to your name or you're the world's second biggest d F t F, you can go to the website, submit kyc infote, create an account directly with the exchange, and then there's like the deposit button and it has like as many options as possible for how you can fund your account. And

so it's just like a massively easier process. And you know, when when you're serve in crypto, what you quickly realize like you never want to send FIAT that's like the hardest thing to do, and like everything gets settled with stable points if if you can get away with it. Another thing I'll bring up is it's different nature of

the products. So when you think of what he's like Nazi or cem me or something like they're mostly matching engines, like you know, they sort of match bids and offers from like a few institutions against each other, but they

don't do anything else in the trade process. Right, There's like separate companies that do like custody clearing, m ok I see customer on boarding, branding, advertising, mobile app, website a p I. All of those are like different companies, and you end up with like, you know, ten companies stacked together. And first of all, that means you have

ten rounds of fees stacked together on trades. But but second of all, it means you if this really fractured experience where you know, access to the actual ultimate liquidity and order books is basically restricted to like a very very small number of institutional trading firms going through some prime broker, and everyone else sort of has this like very abstracted away experience going through you know, two peef off firms in a dark pool and a broker. You know,

so somewhere in the middle. In crypto exchanges are full stack products and so everything I mentioned from you know, rereading an account, submitting m l k C information, depositing funds, um using wold lack gooey website submitting in order, all those go straight through the exchange. And so you have like small retail customers and giant HFD firms all having the same exact access to the ultimate you know, order

books and and and system. And I think that creates in some cases and much much more streamlined and frankly fair experience. So can I ask just on the margining idea. So one of the things you did, um, I think it was just in the past week er two, but you changed, um the amount of leverage that you allow on the platform. So I think the maximum people can do now is twenty times, which seems like a lot to me still, but like it's a vast reduction from

what it was. Uh, walk us through the thought process on that, And would you consider changing the margin requirements as well? Yeah, so I guess maybe on your last point, we talked about changing that the marginal requirements, and when we talked about margin leverage, we usually think of them is basically the same thing, like one is just one

divided by the other one. And yes there's like initial versus maintenance, like how big of a position you're allowed to put on versus at what point your account actually starts getting liquidated. But but this this sort of affected both of those um and so you know you have to post five percent margin now on all positions, and at least in many cases much more than that I would deserve, equivalent to saying twenty leverage. The thought process behind it, the first thing is that it's actually not

that big of a change for the site. Less than one percent of the volume was trading with leverage higher than that before. And the reason is that basically your margin requirements go up as your position size goes up. So if you want to put on a big position, you need to post way wey weay more than that collateral anyway, and you're only able to put on really tiny positions with very high leverage. And so it's served by definition, not where most of the volume or open

interest or users were coming from. And so so it wasn't like a big part of the exchange. It wasn't super relevant to to us or to most of our users or their experience. It's also not super economically like useful frankly, like when when you talk about you know, hedging something or having on some spread or or one of the many reasons that you might want to do

a margin trade. If you get down to one collateral left, you can't really use that to hedge something because you can get liquidated in like a print, like in like fifteen seconds. You know, markets could move enough that you're out of margin, and so it doesn't make sense for any like long or even medium term position that you're planning to hold for any reason. You're sort of like almost definitely opening yourself up to serious liquidation risks if

you get anywhere close to that amount of leverage. And it's like most of the things that I think, like frankly could justify as like the more economically useful parts

like don't require high like super high leverage anyway. And then the last species frankly, like it's something that a lot of people look on a scans like you know when when you talk about I mean reporters, but regulators as well, like not that they're like specific regulations around this in most jurisdictions, but like there probably will be eventually, and and it's sort of like clearly the direction of the world's going in and so start of combining all

those together, like it wasn't important important part of the site wasn't super healthy part of the site necessarily. It was like a part that was going to start receiving a lot of negative attention, and it just seemed like it was like it was time to get rid of it.

Talk to us a little bit more about the technical aspects of building um a system in which there was you know, as you describe it, the one wallet where everything is you know, cross margin, and so you don't have, okay, your bitcoin futures wallet and your future's wallet and so forth two things. So like how hard is that to build?

But also we know that like with a lot of the legacy or it's weird to talk about legacy, the legacy crypto exchanges, they tend to go down a lot during periods of high volatility, which is a source of frustration, and we see it We've seen with coin based for example, where everyone's starting to like slam into one thing and suddenly social media has lit up. You like to point out, like on Twitter it's like, well, ft X another another day of a hundred percent up time or whatever it is.

How much are those things connected? This sort of like the difficult stress of legacy liquidation books versus and just keeping the site going up. Yeah, So the thing that really causes the stress there is actually the interaction between two different effects, one of which is cross margining. One advantage of isolated eargining, and one reason that some exchanges do this is you can completely parallelize different products, right. You can just like completely separately, say like all right,

there's our bitcoin EOS market, here's our eight futures. They have nothing to do with each other, Like, are none of our systems need to look at the other one. You have completely parallel margin checks, risk checks, order books, and it's easy to rent another server, Like if you could scale up your business just by buying ton of servers, that is the easiest thing to do, and like we would do that in a second. The problem that you run into is that doesn't increase increase like the clock

speed of any one process. And so whenever you have these bottlenecking things where everything needs to feed through one process, like buying more computers doesn't help because there's just the

one computer that's computing that one bottle necking thing. And the worry with cross margining is if I send an order in an bitcoin US order book, that immediately affects the amount of margin that I have available for an ethereum futures position, and so you can't treat them as completely separable from each other, and you sort of have in the end this one process, which is keeping track of the master amount of margin and collateral that each

account has available, and that thing has to like every single order on every order world has to feed through that process, and all of a sudden paralyzation is way harder. And that means that your risk of that process falling over when things get busy, and if that process gets bottle lets, you can't accept orders in any order book because you don't know if the person has enough margin corps.

So that that's sort of like the fundamental tension that you that you get too quickly when you frost margin, and inherent in that is like then you say, well, okay, how about traditional exchanges, like don't they cross margin? And the real answer is that it gets back to a previous point. In traditional finance, the exchanges aren't the primary risk check. The exchanges aren't like analyzing correlations between different

assets and someone's portfolio. Generally, the exchanges are just processing the orders. And then you have things like prime brokers who are the actual risk check engines. They're not doing it in real time really, at least not like tick by tick or order by order. They don't have to be as high throughput. They're just sort of like periodically checking on people's portfolios. And then you say, okay, well, why can't we take it out of this critical process

and just check it every hour or something. And the reason is, well, what if they went bankrupt in that hour? Right, which you now get to surface other piece, which is the fact that we allow everyone access to the site, including people who aren't like, you know, one of the five biggest trading firms in the world that you definitely have legal recourse over and they have tons of assets outside of your exchange that you can claim if they want net negative Like that's not how it works in

crypt and crypto. We have everyone, and so if any account goes net negative value, like realistically speaking, we might never be able to like proclaim that, and and you know, we just end up eating that. And so we have to be real time monitoring the risk of all of the used years and and that's sort of like one of the easier parts to accidentally get sort of bottle

necked on. Can you talk about that from like a perspective of your capital So, like, you know, exchanges are sort of notably thinly like in the in like the traditional finance where all the exchanges are not like particularly capitalized because they're not particularly capital intensive. Clearing houses have like weird capital you know, positions and drawing rights. And then prime brokers are giant banks who are who are

like very heavily capitalized. Um, Like for you, like, do you have billions and billions of dollars to cover customer losses or is it more like you're a sort of technological situation where you can you're confident you can blow people out fast enough that like customer losses are not your problem? Or am I just thinking about it round? No, that you're thinking about exactly right? Um. And that's a really good question to ask. And different exchanges come to

different answers that questions. Let me give you a little bit of a palette of like how one could answer it. One answer, which used to be very popular is that's not our problem, that's are you years problem? And you might say, what you mean if users negative, you can't get funds from them? Twix respond sure, but that means some other users positive, and maybe you consider of see

where that's going. You know, there are these things called the positive user doesn't isn't actually positive exactly right, it's the clawbacks is sort of like the word that people used for that. And there are exchanges where like each week they say, like, congrats, you did good trading. You get paid eighty six point two percent of your penil this week. You know, the other thirteen point went to bail people out, and and it just happened week after

week after week. There's millions off per day of losses of customers to that, which is not how you want to end up, right. That's sort of like breaking this like seemingly really inherent inviolable property of a future, which is that if you buy a bitcoin future what like

whatever something, interest rates, something something. But when all of a sudden done in the end, you have a bitcoin right have like bitcoint goes up to make it finically goes up ten thousand dollars, you make town thous dollars if you're like holding its expiration or what effort. But all of a sudden, if you're on a getting paid back your PNL, you don't really quite have a bigcoin. You have something that's kind of like a bigcoin, but

maybe it's only most of a bigcoin. We'll see. So that's like not a good answer, but that is an answer, and that is what what some exchanges said. Other exchanges give sort of the worst dancer. That's not a good answer. Was not the worst answer. The worst answer is going bankrupt, and that's not what we want to see. But you know, there have been some exchanges blow out in crypto, and especially the smaller ones, which gets to your point of

like how much capital is actually backing these exchanges. One of the most dangerous things about using a dinky exchange. There's there are two scary things. First of all, they probably don't have like very sophisticated tack, so like the

hacking risk is way higher. But second of all, they probably don't have a billion dollars of capital, and so if there is a loss, like they don't have anything backing back, you know, like they they they have you know, two million dollars back in they if they lose five

million dollars and customers lost three. Okay, So so that's sort of like another bad answer, but it's the answer you've seen on on some of the smaller venues, and then you get sort of like about the biggest venues, and the answer to your question is really, yeah, they

do have a lot of capital backing. Like if you look at the actual effective amount of capital backing the books on on the largest exchanges, it is and the billions and you know, obviously we just raised nine hundred or so, but you know, we we we had a

bunch of profits before that. And then on top of that, there's sort of you know, effectively the equity value of the exchanges, which are you know, well should be implicitly backing these you know, for sort of people exchanging that if you have a billion dollar loss, you can like go ris a billion dollars and people are like, well, you know, to have equity. Yeah, And so the answer is for the biggest exchanges, yeah, there is effectively a

lot backing it. But but once you start going down in the pegging or or to exchange where you don't trust that they wouldn't do that, that they would kind of go do whatever it took to make their users whole. Yeah, there's real risk there that you know, if their liquidation engine is enough to task neither world their users you know, b and if you're like a big exchange with a lot of capital, like the empirically, how good is the risk management? Like do you guys regularly have like bloods

that you don't uh that you're not made hole? It's a good question. So we um, we we put a bunch of thirst engine we don't have the issues like we've never had a day I think where there were there's more money that we lost in blowouts too, revenue that we made just from trading fees. So and on most days it's effectively zero dollars cost. So this is not like a big deal for for us. I mean, it's a big deal think about, but like economically it

has been a big cost to us. So you're not doing like a leverage on big positions, is right, And that's that's why it gets down to exactly right, like are your you are are your parameter is good and reasonably as their liquidation into like reasonable in real time and stuff. In some cases the answer that has just effectively been no. And and you know we've we've stared

pretty hard to keep it like pretty effective. But you know, when you look at the biggest blowouts historically, especially back in like is the kind of thing you like you would just look at that and be like that doesn't work, right, Sam,

and be like, yeah, you're right, that doesn't work. Like he's just like, yeah, fifty to one leverage on a three hundred million dollar bitcoin position and just like Okay, that's interesting until it is exactly It's like, can you liquidate like three million dollars a bitcoin consistently with less than two percent impact plus slippage plus movement during the time it takes you that Like, no, you can't. Can

I ask you about? I don't. I don't really know the phrase liquidation engine, but like, um, like my my understanding is that like there's like a stereotype in like the crypto world where when people get blown out of margin positions, they it is done as like sloppily as eggs can be imagined, and like prices like move right jerkily and mechanically in a way that like you know, like I'm just I've been thinking about you know where recording this on the day of the Archagos report coming

at where like you know, in traditional finance, like when a big position gets blown out, like they don't necessarily do a good job of it. But they sort of sit down and think, what is the way to liquidate this position with minimal and back to the bank, Whereas, like my understanding is that in crypto exchanges it's all automated, and often automated in a sort of like predictable and dangerous way. Yeah, it's been getting a little bit better over time. It's not great, i would say, for us

to space, but it used to be terrible. So let me tell you some horror stories here which are like, here's like one really bad example that we did see, you know, back in like when when things were really messy, someone had, you know, a two hundred million dollar position

in bitcoin futures. First of all, it very very strongly seemed like there's a human they're clicking, and that human was sometimes to sleep, and and so maybe markets moved while that human was asleep, and then the account was net negative by the time the human weight woke up.

So that's like not a good start. And then you know, you see this position is obviously underwater, and and and what they would do, you know, let's say two percent underwater, is you know, they place an offer for two hundred million dollars of bitcoin futures two percent behind the b BO, right and just sit there. And and of course that was at the bankruptcy price, like hoping someone would lift through the book and buy two million, two million dollar offer.

Obviously that's not what happens, right. What happens is everyone sees the offer and things just like crash more, right, and it just gets like worse and worse. You know that. That's like an example of not a good liquidation engine, so to speak. Yeah, although honestly that's better, Like I sort of expected it was like if you hit some trigger, like some automated thing just puts in market orders to

sell the position. So we've seen that as well, which is sort of the opposite extreme, and it's sort of like different exchanges that did different pieces of this, like yeah, and I basically think like both those extremes are bad, right, and the market order thing goes about as poorly as you would expect, you know, So where have things been

moving over time? Like what's sort of like the reasonable system? Well, I don't know, but it's sort of like I think you would like if you just like had ten minutes write down something like better than either of those, which is like kind of a decent proxy um, which is basically like, you know, what do we do so whatever, first of all offices that we cut off opening your position, then if your accounted like it's further you know down in collateral, the first thing we do is we just

start sending orders on behalf of your account closed down the position. It's done in an automated way. It's done like bit by bit, like basically twalps it. And you know, we keep it to like a relatively low fraction of of of of underlying volume of the asset, so like we don't want to be in position where like the liquidation engine global volume, because then then it's just like that like the market doesn't have time to get liquidity

for that um. And and that's also sort of like one way to think of what happens if you send to market orders like volume for that two second period. You know, that just overwhelms order books and it basically sort of like chip away with that and and and hopefully that works or it's just like markets recover or go down depending on which direction their position was in. And you know, but before action, most their position has been liquidated, like we no longer have to liquidated and

and then we stopped. If that doesn't work, like things just keep moving against a position, and like the location engine is like going as fast as is willing to go in terms of like fraction of volume and and and like the digits closer and closure bankruptcy you have it spells backs oppliquity prior system where basically we just pass off their mating positions and value the account wholesale, like paraded to a bunch of liquidity fighters who have

agreed to seven like basically forcibly take on you know, liquidating accounts um and so that's what happens when it looks like the you know, first stup liquidation and shoul wouldn't get their time. And the thought is they're like, you know, these market makers have well collateralized, well capitalized accounts, and then they can figure out what they want to

do with those positions. It's not like perfect, but at least sort of like you know, the goal is to sort of like get rid of the unnecessary impact, right and like you're you're gonna have impact whenever there's a forced sale, but like at least you want to have that impact be like the correct economic impact instead of like five times that because it's done way too quickly or something. Can I ask them about like order books and market makers? Like what I'm interested in is an

intuition for sort of how liquid these crypto products are. Right, So, like you have like sort of in US equity exchanges, you have the stereotype of like there are you know,

high frequency electronic market makers. If you sell a lot of stock, the stock will go down by like a sort of predictable amount, and like people are willing to step up to buy at these declining prices a certain amount, right, Like there's there's like a certain amount of capital in the in the order book, there's a certain amount of like any time the market is open, someone is there

to buy. People complain that they're not as willing to sort of take risk as like the old school banks were, but like there's there's a sort of like predictable amount of liquidity like in crypto markets in particularly because they're so fragmented and there's so many products. Like if you want to sell a bunch, like does the price good zero?

Like are there a lot of market makers with capital who are sort of like committing capital everywhere and kind of like trading quickly or is it a little bit more of a like you never know where you're gonna get kind of thing. Yeah, if well, first of all, it depends on the ben years. If you're using sort of a dicky exchange, then like it's sometimes like who the hell knows what's going to happen, right, And you'll see completely wacky prints sometimes go up on liquid fund us.

And remember there's no recking mess here or anything like that. Yeah, I was gonna say, like in in the US, like you know, every market maker is making markets on every exchange, but I guess there's no there's no reason to expect that in crypto yet, no, And so like the different exchanges, like Bitcoin USD on one exchange is like a different

product from Bitcoin USD on another exchange. I mean, obviously it's basically the same thing, but it takes like an hour to turn one into the other through like transfers if you're lucky, and like a day if you're unlucky. And and there's no there's no nothing forcibly keeping those

in line with each other. Right, So so that is one thing to note is you see divergences between different exchanges when markets are stressed and you usually these are tiny because there are over treasures, but like when they're big moves, sometimes they're percent. So it's that's sort of like one caveot to make it. And when you talk about which exchanges you see sort of these illiquid and so on, it's maybe not exactly what you think, like it's through served of the like dicky ones, it's also

true of some of the better known ones. And in particular and this is like a huge, huge, huge factor any exchange that doesn't allow any leverage or margin, there's sort of competing intuitions for what would happen there. But in general it's less liquid. And the reason it's less liquities like the liquidy fighters don't have any ability to margin there. And remember this is like these needs to

be deliverables. This isn't just looking at total value. You know, Let's say that someone tries to sell a hundred million dollars a bitcoin on it in a five minute period

on a spot exchange with no no margin capabilities. If the market makers didn't have a hundred million US dollars basically custodied on that particular exchange at that particular time, they can't buy it ladies just run out of dollar spy and they might have another three hundred million dollars in their bank account or in other exchanges that didn't help them buy that offer, and it might take a day to get the dollars over there if there's no

more ginning that. That also makes it way harder for market makers ride deep liquidity because again they're just like it's not capital efficient for them to keep seventeen billion dollars of reserves of every plausible currency on every plausible exchange, right because in the US you have to in like US equities, you need to put orders on every exchange. But in in crypto to do this you need to like actually capitalize like your maximum order everything that's change

separately exactly. And this is the flip that this is a drawback to the cryptosystem where I sort of described the miracle of it, you know earlier, of like one integrated product and so you get so much efficiency out of like you know, you just have your funds there and you can do anything you want on the exchange, and like there are no intermediaries. Everyone can do it

like this. There's no like stock loan business being completely just like separate and a separate company on a separate time scale from like the trades you need to be doing. You do get a ton of efficiency of this, but the flip side is you don't have one central prime broker that's capitalizing, you know, simultaneously all exchanges for you with the same apital, Like you have to separately capitalize each one, which is super super expensive, especially if they

don't allow a margin. So that's sort of like one issue that you run into, which isn't an issue with overall crypto markets. Like, if you're looking sort of like the like blended average bitcoin price, that's not a huge deal. But if you're looking at like blowouts of one particular venue that is, then you get to like, okay, sure, but like like if you aren't that, like let's use

just average bitcoin prices across all major exchanges. You're not worried so much about, Like, yeah, it sucks that there's like a little divergence, but like generally what's the bitcoin worth? Like you know, how much does that diverge? Yeah, you know, it's it's better than it was three years ago. Like the market makers are massively better capitalized than they were

three years ago. Um, and so you know, I think something you saw is like on this drap in you know, may from like sixty k to thirty k. It was like very very orderly all things considered, Like is if a few percent drop in crypto markets like a one day period, but like and there's there's a lot of liquidations, but like there there weren't massive it liquid prints markets remained liquid and and and and worldly more or less

to like an impressive extent given the volatility. Contrast that with a year ago in March, when crypto dropped from nine k to four k and like a two day period. There are people freaking out there that like they're going to be systematic failures in the crypto industry, and like you know, think about like it wasn't like our Chagos

people are worried about it was two thousand eight. It was a a chain of liquidations of businesses started by a few and they are like people going around saying, we have no idea who's underwater here, Like it could be everyone, like lots of businesses and basically predicated their financing strategy on the notion that it was implausible depic when we go blew five thousand dollars for better for worse.

That that was like empirically true. Look love mining firms, there will leverage long bitcoin with like a bankruptcy price of like you know, like there's like a huge, huge swass of the crypto space that were like maybe in danger of being bankrupt at four k, and of course then you could have massive cascading effects and liquity and

markets was completely shot. None of the market makers had capital left to buy, even though they are obviously amazing purchases to do if you happen to have a billion dollars lying around and and and so it was just

like it was. It was a massive nightmare and like really dangerous for the industry in a way that like this serious crush was way more orderly, and I think partially the industry has grown a lot partially honestly, like no one's business was predicated on bitcoin never getting down to thirty cable again, like everyone sort of thought that might happen. Is that is that a way of saying

that the industry has less leverage like than it was. Yes, I think that's like basically right, that the industry is less leverage to present terms. Now, I think the dollars of leverage have gone up, but so was the market cap, and the market cap has gone up faster. This is what I was about to ask, because it feels like you're describing the system is being less levered and the market makers and the exchanges being better at liquidating positions, being able to do it in a more orderly way.

But I feel like, at the same time, so everyone always struggles whenever there's a big move in bitcoin, and I feel like over the past few months we've seen leverage come up again and again as a sort of excuse, or whenever the price is dropping, it's like, oh, levered positions are getting liquidated, Like is there a disconnect there? Like is that narrative of the market wrong? And then

if it is, what is actually driving the price of bitcoin? Like, if you were going to look at the past couple of months, what was the cause of the down draft? It's a really good question. So first answer is there's some truth to it. Liquidations and leverage were a cause.

One of the causes of the draw from it was just at a level which is large and absolute terms compared to two a year ago, but small relative to the capital in this space, and so you know, there are twenty billion dollars of long positions probably that got liquidated over a week long period during the base part of the drop in crypto. But the industry is able

to absorb that because a decrease in price. It caused a significant decrease in price, but it was like a surprising the orderly decrease in price in that like people weren't blowing out there there. You know, there are a lot of losses from some people, but they, you know, weren't generally going. You know, this is sort of like large players in this space were very well capitalized. The system's technology had improved, so exchange downtime was less bad.

I don't want to say he's great, Like mostly stages had serious downtime this time, but way less than you know, a year ago when most exchanges had twelve hours of downtime during the big crash. And so the infrastructure and the liquidity in this space held up much better under the liquidations than they did a year ago. But there were real liquidations and it was one of the contributors

to the crash. Now, one thing I think is worth noting there is like they're also one of the contributors to run up from ten k to sixty K. I think that's sort of like often people sort of like want to live in a fantasy land where like leverage can make markets go up but not out, and it's like not not really how it works, like for better

or for worse. Like I strongly believe that the crypto ecosystem is in a stronger healthier position today because of leverage than it would be if there was never any leverage, Sam, and I don't know how much work if we're going to really talk about this, but I actually want to just ask a sort of question related to the Defy ecosystem. And I know beyond f t X you're invested in

that there is leverage existing DEFY in different ways. So someone might post some stable coin to borrow more stable coins that they might post either to borrow stable coins, and then they might use that to invest in something else, so then they get another token. Are we gonna have to like how well do we have a handle? And I guess what I would say is leverage measures within defy.

It feels like whether we're talking about an exchange like f t X or traditional uh traditional trad five venue like we have these sort of like concepts of like how much open interest is there and how many like long futures are out there. Are we going to have to sort of like reconceptualize how we think about leverage in the DeFi space where perhaps there isn't a perfect analog to some of this stuff. And do we have a good handle on sort of like overall vulnerability to

disorderly liquidations? Yes, So I don't think we need to fundamentally reconceptualize it. I think they're very clear parallels, and I think it's like not that hard in some sense to think about. I think the big problem is that there isn't a guy who's in charge of it. When you sort of think about, like, you know, how do you figure out like who's in charge of like staying on top of the risk on fts? Like there's an answer, right, It's it's like it's me, right, you know, and my team.

I think when you can defy, there often isn't an answer for me in charge of of managing it. Also was in church of reporting it, and so I think it's just messy is the answer like like like no one need serve response taking responsibility and it's not obviously would.

And so I think that there's just like a ton of untracked stuff, and like you know what that means is like, yeah, it's just like there's uh more capacity for like wacky bad things to happen, because no one's in charge of making sure that when something wacky happens

is the good kind of wacky. You know, we were We're talking about how it's been an eventful a couple of weeks for crypto, and one of the things that happened, UM, which would probably fall into the sort of UM negative camp, was the new SEC chair Gary Gensler, came out and started talking about UM token ized stocks or synthetic stocks and making some noises about potentially going after those. UM.

So I'm wondering how worrying is that for you? Um, would you potentially CONSI they're delisting those I saw unite swap took them off of well at least the front end of unice swaps. You can still trade them on the actual unit swap code, but you just can't do it through the unit swap website. Um, is that something you think the industry is just gonna have to do

going forward? So? Right, so I think basically what what Againser said, which is frankly not that shocking, is like, if you tokenize the stock, it's or is still sort of a stock, and like it's not like it loses

all regulatory properties UM as soon as you tokenize it. Again, not not to put words in his mouth, but I wouldn't be surprised if you're start looking at some parts of the industry and being like that sure looks like and obviously unregistered security being offered with no email ky C registration or terms or conditions to anyone in the world, including Americans and restricted jurisdictions. That's not generally how brokerages were.

I think it's sort of like where you know, awfully that was coming from UM, and I don't think that was a super shocking announcement. I think, like I think when you contrast it with what we have on FKS, like it's a pretty different situation where we have like, first of all, we email ky C everyone fully who is able to touch you know, stock and f kis at all. Second of all, we restrict it's such that

Americans can't access them, neither can a number of other jurisdictions. UM. We ensure that they're backed, we have an actual license from often to offer the products. Um, And it's much more like just how like you know, interactive burgers are introducing burgers to them operate. And so I think that like Gazer wasn't saying like if you tokenize the stock

it makes it evil. I think like his point was like it's it's kind of still stock, you know, if like you wouldn't have been able to offer stocks at all, like queery, whether you could offer tokenized stocks. Is the long term goal that you are offering token of stocks to Americans, like either by regulatory changes or by like registering as a US exchanged, Like, is this like a sort of crypto it's the financial system kind of player. Is this like you're a crypto exchange of since and

I'll let you do. No, it's definitely the first thing you said, um, like yeah, very very clearly, that is like our our goal here. And I think that like, like there there's sort of a roadmap for this in the United States, at least sort of the tooganizing party think is complicated in the United States. And I do think that like no one has quite issue claritite clarity on exactly what it means in the u S regulatory

context to have a token ized stock. I think against the start of saying like, well, it certainly isn't like irrelevant, like like that's still kind of a stock. Um, It's not like when you talk about tognizing it, like what does it mean for it to be toganized? Is it free floating? How does that work? Who's thesure? Like there's a lot of st complicated questions there, but maybe just taking a step back, like how it stalks in the first place, like just normal non tokenized stocks. Um, I

don't know. I mean like we f g x u S did recently get a Burger dealer license? Like or you know, make of that what you will. So in theory, one day rather than maybe you know, like I have a Schwab account, or I have my like SMPTF and a couple other basic things you could there is a day in theory in which I could just have I might have all that on f t X dot us.

That's right, And I think that there's like a lot of advantages that system, because like it's sort of like never fun when you're like, oh boy, I want to go like do this thing with my money. Oh wait, it's in the wrong pocket. Like you know, I I, like wanted to go buy a banana, but it was in my Proverge account, or like I want to buy a bitcoin, but it was in my bank account, or like I want to go buy Tesla, but it was

on my crypto account. And it takes like three days to transfer, you know, between those Unlike like, it's not a good user experience. You know, you have to have decided days ahead of time what you're most likely to want to use your funds for. UM and so I do think that there's like real advantages to having a single platform where you know, for all the most common things you'd want to do with your funds, you can

do them. And you know, we're moving in that direction on the con sumer side in the US, like we have obviously Crypto. We have lots of methods here at both Crypto and Fiat on and off the exchange. We have a debit card that you can get tied to your FDS account UM, which will spend whatever you happen to have their whether it's Crypto or FIATO or whatever.

UM and and so you can you know, have your funds there you can do your crypto trading, and you can also go buy bread and you know, I have like for her dealer license coming online and and and so I think that is like definitely a part of the vision. In the last time that we spoke to we talked a little bit about this, but basically, every time someone who's sort of like crypto skeptic starts first thinking about the space, one of the first questions they

always ask is about tether. And we talked about this, and you're you as a UM I guess the exchange, but also with your trading. You're a tether user, and you talked a little bit about some of the advantages of it last time. But can you talk a little bit further about the full experience of interacting with tether because people, you know, people of all kinds of conspiracies like, oh the money's out there. You never actually no one has ever actually sold their tether and gotten us dollar back.

So forth, can you just talk a little bit about your experience, I guess as a tether user and customer of what happens when you use tether, when you want to redeem tether, etcetera, and how that works as an

actual tether customer inside totally. I'm actually a little bit curious before I jumped in, just like what like, like Matt having like, I'm sure there's something that you've like seen a lot of people chattering about, Like what's your takeaway from what the chatter is like, and also what sort of like your trying to like summary or like thoughts are on that you know, based on that, and then I can sort of dive into what what our experiences has been like, ah were to be careful here.

Um like, tether Is has a strange public relations strategy, I guess. I mean, like they talk a lot about wanting to get an audit and then don't get an audit. They talk a lot about their like high quality commercial paper holdings, but don't disclose them because counterparty confidentiality is very important to them, which is not true of any other holder of commercial paper in the world. Um Like, you can just look at like the complete holdings by

QUSIP of every money market fund, but forgether. It's very important that they keep it secret. So if they were doing something shady, they sound like what they sound like, which doesn't prove that they're doing something shady, but it is like it is confidence undermining. I think, yeah, I think that's a pretty reasonable way of putting it. I think like a pretty pretty odd public relations strategy is

not an unfair characterization. Um. And I think I'm generally sort of like often sort of thought of as a tether apologist or something. Is maybe how some people would would phrase it. Um. I certainly wouldn't necessarily want to say that they've like historically always chose them the best PR strategy or or anything that sounds vaguely like that. You know, I can serve a case where there's a lot of smoke, but but I don't think there's really

much fire. But but I like get like there is smoke and like you know, and I think that's sort of like what's what's going on? Well, for one thing is sort of like curious PR strategy, But putting that that aside for a second, like, you know, how about creating redeeming tether, Like can you do it? You can

do it, we have done, We've done billions. It's a messy process, like it works, but it's you know, you sort of look at creating redeeming USCC and it's like all right, like they have their U s dollars in a US bank account is the same bank that every Nelson crypto uses. Takes like thirty seconds to you know transfer even like go created, yeah, thirty seconds later they're they're sending you the tokens. You can redeem it thirty seconds later, like you see the funds in your account,

no fees. A very very kind of like straightforward, smooth process. And I think you look at Tether and it's like, well, it's a messy process, and I think like every piece of mess in the process like makes it much harder for them to have what would look like is self evidently reasonable process. Like it just sort of like you know, makes it sort of like really heightens the sense of

like something weird going on. I think that that's sort of like is the answer though, is that like it is messy, but but like the like the funds are, they're like we see like real which admitting flows into Tether from a lot of places, like massive ones that you know then lead to market makers selling and creating and sending you know, real billions of dollars to Tether's bank account, you know, to create it and like you know, have have relationships with like father and the banks and

and everything else involved, and like every think sort of checks out in a in a messy way, and then you can start of give to the question of like, all right, well, what's their business? Mouth is probably getting

yield on the dollars? How are they doing that? I don't know, you know, like some commercial paper like stuff, um, and you know, I think it's like one of these things were like if you want to try and argue but whether it t other's worth likes or like a dollar in a penny, I think that's like a pretty reasonable argument, and like I don't I don't want to take a strong stance on that, Like I I certainly don't want to like strongly are you against any any

stance there? But but I think that like when the argument gets like is it worth like about a dollar or like about thirty cents, like anything answers about a dollar, and like you know, the reason that it is fundamentally like basically backed by like you know about the right number probabble bit more than the right number of like kind of dollar like assets just in like a system which is like a little bit messy in every possible place, so they might stretch for yield, but like by buying

like slightly nice your commercial paper where they might break the but go to like rather than that's like yeah, that that's my like and so I say this without knowing like exactly what their commercial papers like this is sort of like that that's a twist on it, which I'm just sort of inferring the details of that last piece based on like all the other interactions that serve

if we've had with them. They could be putting it all into bitcoin, but that would just be sort of a strange move on their part because like they they have like a good business putting it into commercial pactly like they've got lots of legitimate, profitable good businesses. They don't need to do that. Also is unclear why they would do that, Like it's sort of like incredibly risky. Any of the other thing is like you get to know that people involved here they're not like that they

really really aren't scammers. Like it's really not like you come away dealing with them, you're like they're selling me stake oil, Like they're too waitly lying about everything, and like I'm pretty sure that like nothing is like that's not at all sort of like the interactions that that people have with them. Did you watch the CNBC interview, Yeah, there is that, the one with the um with the

legal counsel. Yeah. Yeah. I think they back themselves into a lot of positions where like they sort of like make it probably basically correct claims, but ones in which they're not going to, as you said, like they don't feel comfortable elaborating maybe for like just sort of like uh, you know, ethical reasons, maybe because like the truth is like a little bit messier than they'd like to say. Um, but but before a reason to make these claims and then like refuse to back them up, and and that's

like never a good look. Although I think it is not that like there's no relationship between the claims and reality. I think he's just like one of those other cases.

This might be an unfair question, but I'd be interested in your answer, Like if if the worst of the conspiracy theories were true about Tether, like I don't know, say it's investing, it's investing in commercial paper, but it's investing in like Chinese commercial paper and commercial exactly, and it all goes like bottom up, which which is a rumor that's out there. Of course, um and tether collapses.

What would that mean for bitcoin and the wider crypto space? Yeah, so I do you want me to take like the fantastical version if that word tether goes to zero or dru me try and take like what I think sort of the most approximate, like vaguely plausible version of it. How about both? So maybe first I'll talk about the

sort of plausible version. So like what if they took a third of the money that they had and put it in like sort be here commercial paper from China, like be here for China commercial paper, and and then you know, there's sort of a run in the bank in China as looks like you know, however that that could happen, um and uh, And it turns out that like this beat your commercial paper like to bolded on average or something, And so you ended up with like,

you know, a twelve percent loss of the tether treasury, right, you know percent or something like that. Like let's say that's where you ended up, which at the like you know, sort of like very negative but like not completely implausible outcome. What happens then? So tether is sort of in some some mystical sense, is worth eighty eight cents or well it's worth it at least eight eight sense, right, like you can redeem it sort of maybe for eight cents.

You know what's the loss? The loss there's like ten billion or something. One possibility, obviously, is like nothing happens, right, like unless people try to redeem almost all the tether and existence like they could keep processing. Maybe it doesn't even comes out. Maybe it comes out and for whatever rective because system doesn't seem to care. Um. That is like I think a plausible answer, right, it's just like

weirdly things continue on as if that didn't happen. Um. But also maybe there's a little bit of a run on tether um the their banking partners start to get nervous redeeming. It becomes very difficult. Maybe they don't give you a dollar on the dollar for redemptions, maybe they limit them. They say, look, the world can only redeem one billion dollars per week total of tether maximum, and the world wants to redeem billion, and so there's like a race to redeem your tethers, and most people are

not getting filled on those redemptions. Tether crashes down cents on the dollar, and markets you know, there's a lot of people who are stockpiling tether have losses of you know, and then I think sort of like, you know, there's some regulatory crackdowns on stable coins, and these mostly continue on as they were before, except that like you know,

ten billion dollars total was lost between tether holders. Um, maybe they recover that eventually, right, Like if the tether is effectively backed by the combined equity of bit finex and tether, then like maybe that's like maybe it all ends up kind of okay, although like certainly, like you know, not in the liquid sense, you know, frankly, I think they could probably do a lot of things to try

and plug that in the meantime. But like that that's sort of like I think roughly how that that would end, Like you would see each other. It gets sort of like repriced to like you know, ten cents center or whatever, fifteen cents center, I don't know, you know, it'd be like it's dock split and tether it'xcept you know where you didn't get more tethers and yeah, bitcoin tether and start training a different price price from bitcoin USD on

major exchanges. The pig would like mostly break, there'd be like this absolute race redemptions fees for a dem would go up to a percent or two. They kind of slowly get through. People make a bunch of money doing the arbitrage. It would be a really bad look regulars who cracked down and stable points in crypto in general, and life would go on and probably the bitcoin crashes ten percent on like the bad pr that's like sort

of roughly my guests like how that would play out? Um, I think it's like, would not be disastrous for the cript because systems, but clearly bad. Now we can start to take this other hypothetical of like what if it's worth as a row, Right, what if they like put a percent of it was in commercial paper of like one company and that one company goes bankrupt or something sort of equivalent to that, Right, Like what if somehow they lose the vast majority of the tether treasury. That's

that's way worse. Like now, all of a sudden you have like a seventy billion dollar loss or whatever in crypto. I can't remember the current market gap, but like that's that's the order. You know, what's that mean? Well? Tether like BTC tether markets due to infinity, I guess you know, like like he probably gets it's it's you know, delisted from some venues. So there are a lot of bitcoin

tether futures out there. Now this kind of a fun one, right, what if you have a quarterly bitcoin tether future and tether goes to zero? Like, what's your future expired? Too? Is? You know, sorry infinity? And like how do you like what's the pen l transfer there? Like are you trying to transfer infinity tethers each resido dollars from the losers the winners on that from the shorts of loongs like okay, so that that like some exchange you would have to

contend with that. And there really are a significant open interests in bitcoin to other futures. Now, if it's a ten percent move, maybe something a little whacky happens. A lot of people thought they had a hedge and their head was not really a hedge. Um, but like you still expirem just like expires of forty four k instead of for d k. Right, if it's actually going close to zerow honestly think that a lot of exchange, would

you sort of lie? Right? They just like silently removed the t from the end of the markets and hope no one noticed, and like the indexes would be steriously change and then there would be like like thiss of open interest in them which was collateralized fifty by tether from users, and the tether's now worth zero, and the exchange would have to choose between taking a massive loss or doing a massive claw back, or you know, it

would be a mess. In other words, like like like a tether, like a bitcoin tether future is implicitly a Bitcoin us D future, and when tether starts being us D, they just sort of say, well, we really mentioned in us that's like my honest guess about what would happen on some venues like and and But of course that doesn't solve It's it's an interesting question because it's like, if you are like taking a position on tether, are you implicitly taking a U s D position or are

you implicitly like betting on the credit risk? And the answer is, if you're taking a tether USD future like a U S T T gets U S T U s D futures position, you're clearly taking a credit risk position. But if you're putting on it, yeah, but if if it's a bitcoin tether. It's probably exactly no when he's using that, not no one but like open interest is

trying to bet on bit, not tether. On this note, uh, And I want to just talk a little bit, make sure we get a little bit more to some of the interesting products you have f t X. There is like you have like this, it's an inverse or there's like a short tether. Is it a short tether future or like a three x short both and yeah, both, But actually like that's been a fantastic performer because or what is it, like a three x long tether thing that's just been like this position product that he's done

pretty well. That's just because basically harvesting premium from all the people that are betting on tether's collapse. Like explain that product. I think it's basically right. So like right now I look at the tether. So we have on ft X, we have a U S T t against us D future. It's you know, a cash settled future on the USD price of tether. And so this is

explicitly a credit risk product. And you know, and so you can ask what is it trading at so spa U S D t U s D is currently at one, so it's it's trading at a dollar and there's millions of dollars bid on both sides of that one basis point wide market. Now you look at the quarterly tether futures, so these are futures expiring in about two months September um, and they're currently there's forty million dollars of open interest right now on these on FTX and they're currently trading

forty cents under you're training. What that means is that, like, you know, the market, if you wanted to read it this way, is pricing in you know, forty BIPs per month or per two months, so twenty a month of credit risk and tether every month that tether doesn't crash, like everyone who thought it was betting it was getting crash like bleeds a little bit, and every who bet that it wasn't giving crash gains a little bit and not surprisingly, like the world is divided into two people,

not three people. These people are the people who think it won't crash and the people who think it will. There aren't people who think it's gonna go up to two dollars. It's like a massive bowl on the price of tether like one dollars through what you're shooting for. Um. And so because of this, like no one is like trying to buy this up above a dollar, like the words between the people shorting in at a dollar and the people who are lunging it below a dollar. So

it's gonna settle below a dollar almost certainly. With with some cavats we get to actually there's some weird market dynamics.

But um, but you know, because you always create blow a dollar basically and it never has blown down, right, and so like just you know, I think this is a prediction market, right like every year exactly every year that tether doesn't default, Like that's a little bit of basing en update against the like tether is going to default philosophy, and it's a little bit of enoughing towards

the like tether is worth a dollar philosophy. Um. So if you think about a CDs, right, twenty pips per month, that's what that's like three two and a half percent a year that this is trading under. You know, is that first of it's not an insane number, right, if there's a something that yeah, that's right, you know, if this we're training at twenty percent under that would be

an insane number. Like that's the kind of thing where like it's been five years and tether hasn't imploded, like already your your your like your thesis is not looking so good, Like at two and a half percent a year, I think that's too big of a discount, But like I could be wrong on that, you know, I certainly like you know that you can't look at history and be like two percent years obviously too big of a discount.

I would say that's tight versus their pr. Oh yeah, absolutely right, this is serve And that's sort of what's going on, right, Like it's sort of trading halfway between their pr on the one hand and the fact that that people successfully redeem it on the other hand. Right, Yeah, I think that like if you have like some experience and trap by like the fact that people have a success where he deemed it for some like single digit

number of years is like only so incouraged. And I don't want to frame that as like this should make you infinitely encouraged about it or anything. And I really don't want to push back into people who think it should be at a two percent for your discount, not not not saying necessarily agree with them, but like I

don't think they have a crazy position at all. Right, The thing I wanted to push back into the people who think it should have like at per your discount, you know, this is like just not worth anything like a dollar position, which like I think there's a lot of evidence that that position is like not really right, um, Whereas I think when you get to the questions like should this be worth a dollar or like a little

bit less? Think of his commercial paper, right, like what you tell the commercial paper trade at you know, a sort of synthetic commercial paper, commercial paper whatever, you know, And the answer is like, I don't know, yeah, you know sort of like, um, I could tell we could we could talk about this for like another hour and a half probably, um, but I know Matt has to go because the Archagos Report is calling him and I

have to go feed a puppy. We should try to Maybe we should make this like a regular catch up that we can do every once in a while. That would be fun. I would love to do that. Yeah, this is this is This is a real treat And thanks to both of you for coming out, and absolutely would love to do it again. Yeah, this is super fun. I totally do you great? Yeah, me as well, Thank you guys, Thanks gov Um well Joe. I enjoyed that conversation.

It was nice to catch up with Sam as always, and I am very curious to see what he does with million dollars um. One thing that struck me was his sort of vision for the ultimate end state of the exchange, Like this idea of centralizing all your money in one place, not just as not just for your investments, so you're investing in stocks, in crypto, but also for payments like that was pretty intriguing. Yeah, I thought that was really interesting, and I, you know, it really does

speak to the scope of the ambition. But again, you know, here's someone or here's an exchange that literally almost nobody had heard of a year ago, and now it's one

of the most powerful players in the entire world. So it's like you're like kind of skeptical, like betting against it, and like, would it shocked me if a bunch of Americans had like there you know s P y E T F and t L T and all that and uh F t x U S one day uh based on the trajectory not I also thought that was like a really good episode just because, like, you know, a lot of these like crypto conversations, you know, they could be a little bit like it was just nice to

like sort of like strip away or get past some of the whole conversation about what this is all for, which is again another time, but also just like how it really works, and I think learning a little bit about just like this idea of like how crypto like collapsed as a lot of this stuff like whether it's the clearinghouse and the exchange and the broker, it's all sort of flattened into one and thinking about the implications. That was very interesting to hear Matt and Sam sort

of riff on riff on these topics. But yeah, also just weird to hear Matt Levine, of all people referred to the financial industry as trad five Like I was not. I was not ready for that. Um, but that kind of shows how far we've come. Um. The one other thing I would say is I still think there's an open question around tether and we are certainly not done discussing it on on the podcast, So we're gonna have to, um, We're gonna have to dig into that one a little

bit more, I think. Yeah, I mean it's like it's interesting. Like I was surprised because just having followed um Sam and his colleagues and even last time, I got some answers to questions, but now I have more questions. Yeah, so we'll have to do another We'll collect all our questions and uh and get back to the listeners. Um. Shall we leave it there? Yeah, let's leave it there. All right. This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me on

Twitter at Tracy Alloway and I'm Joe Wisntal. You can follow me on Twitter at the Stalwart. Follow our guests on Twitter Sam bankman Fried He's at SBF Underscore f t X, and follow Matt Levine on Twitter at Matt Underscore Levine. And be sure to follow our producer Laura Carlson. She's at Laura M. Carlson. Followed the Bloomberg head of podcast, Francesco Levi at Francesca Today, and check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening to