The Mark Moss Show Nov 18, 2022

the world every week. It's making my job easy. There's always so much to talk to, and this week, specifically in the finance space, more specifically in the crypto space, we have I guess, for lack of a better word, it is blowing up. I'm joined in the studio with Joe Consorti, a friend and somebody who helps me with my research. By the way, shout out to Joe. Follow him on Twitter at Joe Consorti. Um, he does great work. And uh, Joe, welcome to the show. Welcome back. Yeah,

most definitely signed a chat man. Uh, it's always good to chat. You know. You help me out so much with a lot of the research that I'm doing on my YouTube channel, which, by the way, just this morning we broke the four hundred thousand subscriber mark, so pretty excited about that. If you're not following me on YouTube. You should just check it out. Mark Moss on YouTube. Joe helps me out loud out over there. But Joe uh Man, big news this week. Um, the frame this

up just a little bit. UM. I covered it quite a bit. UM. The crypto industry UM and bitcoin took a massive hit. Um when Tara Luna blew up and Tara Luna blew up, and then we saw, um, you know the trickle down effect from that, the domino effect, if you will, And then you know, Celsius went down, and three arrows capital went down, and you know who knows what else went down. F t X came to be the savior. They came to be the Federal Reserve, if you will, to backstop all of these institutions. I

pulled a couple of things here. Um. In May SPF he said, or May said that the leader as he was built at the exchange. I said that some of these exchanges are already secretly insolvent. He said some of them were too far gone. Uh. Then he went to say the month after, in July, that they have up to two billion dollars for further bailouts if they need it. And then uh, in October, just a couple of weeks

October twenty six, he said that no more bailouts. He clarified the company will no longer pursue baillout type acquisitions and they were actually looking to raise money at a thirty two billion dollar valuation just a couple of weeks ago. Um my, my my, how quickly things change, right, Yeah, yeah,

that's right. I mean, I think Celsius really did act as that de facto or not Celsie's rather with fp X acted like that de facto lender of last resort, similar to the Federal Reserve and in our own financial institutions. But really, and I was speaking with Dylan Leclair about this, it seems like a lot of it was, you know, a peacock flaring out his feathers before you know it

get gets pounced on by a predator. Um. Really, it seems like in hindsight, that quote that you said a lot of these exchanges are secretly insolving, you know, it reads more now like an ominous warning about f t X than you know it did obviously was addressing under exchanges at the time. And it seems like in you know, in a in a poetic irony sort of way, in a twist of fate, UH, f t X and net orver extended themselves and they found themselves in a precarious

capital position. UM in finance pounceling. You know, I want to talk about this and then we'll talk about it from a wider standpoint back into kind of what we're seeing in the traditional financial space as well with with countries doing this. We won't dig into it, but really this kind of got put onto my radar with the famous Black Wednesday when George Soros famously broke the peg of the Bank of England and going into the terror Luna. I would say that all pegs are meant to be broken,

uh traders. As long as traders are gonna trade, they're gonna do what they're gonna do. They're always going to try to break these pegs. But I'm curious, um, you know, with the SPF thing, that the f t X thing, I should say Sam bankman Fried for those listening, he's the CEO, the founder of of f t X. UM you said that maybe he was secretly warning about himself being insolvent. Maybe he over extended himself to kind of what you just said about trying to protect all these

other exchanges. But do you think that's really what it was? Or was it that he was using something fake and made up and as long as the public thought it had value, he was able to use it. But it was when the public decided it no longer had value than he just wasn't able to use it. So it wasn't so much about being overextended as it was too he was living on borrow time, living in an imagine world,

and when that imagining world ended, his game ended. That's precisely right on both f t X and alumy his balance sheet. A lot of what they were borrowing against, a lot of the assets that they held that they were they were borrowing against was f t T now exactly, So you're so, you're so, you're deep in the weeds on this, Joe. You've been talking about this extensively. Let's back it up a little bit for those just tuning in, and let's kind of frame this up a little bit.

So f t X and ALIMI what is that? What? What What what's the relationship there? Yes, so, f t X is the second largest cryptocurrency exchange in the world globally, and Alameter Research was co founded by these same CEO. Right, So, basically same owner, same CEO of both firms. Alameter Research is a prop trading desk, so they engage in crypto trading, and f t X is an exchange. So even though

they aren't the same company, they're essentially tied it the hip. Right, So for for my entire analysis, I've essentially considered them one of the same because of how closely intertwined they have been, and their activity over the last few days just just serves to prove that right. So m f t X is the crypto exchange, the crypto casino. You can go on there. You can buy all your different different crypto tokens that you want, your salonas, your ethereums, whatever,

exchange your bitcoin for whatever you want. And then Alameda was a sister company that he created, um too then invest into these types of crypto projects. Um so if I framed it up right, and uh fun fact I used to write a cryptocurrency research newsletter, I don't anymore my I hate to dock him, but my ex business partner who I decided to work with anymore. Um and we knew Sam Bankman freed from back in the day

before he went on to do all this stuff. And he reached out to him and said, hey, you know, um what what what new crypto projects do you think we need in for Salona And SPS said, hey, if we had this type of a project, I'm not going to ouch the whole thing. Um, then that would be something that probably beneficial from the market. And he said, great, if I build it, will you list it? And he said, well, if you can get Alameda to back it, then I will.

He's like, well, can you set up a meeting with Alameda? Sure, no problem, Uh, set up a meeting with Alameda. They said, sure, if you build it, will buy it. I think less than like six months from start to finish, he had like hired a couple of people off upwork, launched the token, cashed out a big chunk of money from Alameda. They took a huge chunk of tokens from them, right, That's what they do, which is relevant because now let's talk about what's on their book, and one of which is

a whole bunch of tokens that are probably worth nothing. Um. So, now that we've kind of framed up these two entities, um, like, so dig into how they were using this and kind of how we found the emperor has no clothes, I guess of course. So essentially the way that Alameda was borrowing was through what's called a flywheel scheme. Now essentially what a flywheel scheme is UM. F t X was responsible for creating this essentially worthless token, this internally printed

out of nowhere token UM. But it was described value right. You know, f t X sold it on the open market on its exchange, and then users would buy it, and then through having this f T f t T token, they'd be able to go off on the exchange and buy things at a discount. They'd be you know, instead of having a larger transaction fees. Basically owning this token

would allow them to have smaller transaction fees. Good. So essentially f t X created a market out of nowhere UM for for a feature, they created a security out of it, and then as a result of liquidity being pumped into this security, they were able to borrow against that security. Right, and then you can borrow against your security. UM. You go ahead and mark those on your books. You say, wow,

take a look, we take a look at this. We've grown. UM, you issue more of that security, and it's essentially you're creating uh, something out of nothing and then backing it with yourself, backing with your cash flowing business um and and encouraging customers purchased this for a normal feature that

you can include on your site anyways. And essentially it's creating this value out of nothing, which is allowing f t X and its sister company, Alameda to load a lot of this onto its balance sheet and then borrow against it. Right, so it's essentially borrowing against this vapor were token um and that's what we've seen him come

home to roost um. You know. Well, we'll talk about what occurred with finance, but essentially the moment that the veil started to slip and the balance sheet leaked and people started publicly realizing that essentially the entire you know, the net equity of this firm is essentially backed by nothing, that's when this liquid it he began to un Yeah. Yeah, and this is uh, this is a micro look at how the overall financial system works. So I want to

break all that down. If you're just tuning in, you're listening to the Markmas Show, We're sitting down with Joe Consorti. We're talking about the willow up in the crypto space with f t X Finance. What happened. We're breaking down the play by play, but like I said, I really want to kind of get into what this means for the greater financial system, the risk that we have. We got a whole lot to cover when we come. Come back. Don't go away, We're gonna be right back. All right,

welcome back. If you're just tuning in, you're listening to the Mark Moss Show. Of course, we're talking about the decentralized revolution. We're talking about bitcoin, and we're talking about the cryptocurrency space right now that is absolutely blowing up this week with big news of the maybe the first and second largest crypto exchanges battling out. I'm in the

studio with Joe Consortium Joe. Before the break, we were talking kind of we kind of framed it up, and we framed up how really kind of ft X and Alimeter kind of sister companies doing different things. Um, but they're both backed by something they created out of nothing. Now you know, I guess I say, all value is subjective, so everything is kind of created out of nothing and

then the market prescribes value to it. Like you said, Um, I remember when I was a kid, there was like these beanie babies and they they you know, or you go like to the tulip, the tulip mania rights. All of a sudden, everyone just thinks these tulips are super valuable. But then the value just disappears. And so they created these these f T T tokens out of thin air. And then to the point you made, right the value

the market prescribed value to them. The problem is that they were just holding that and that was this big asset on their books. Now, you did say that they were um leveraging it, borrowing against it, etcetera. Um, But even as much as they borrowed it and leveraged against it, they didn't really still have any other real world assets that didn't seem like that's exactly right. So if you take a look at the other assets that they had on their books, uh, it's basically a hodgepodge of of

nameless and very very liquid other cryptocurrencies. You know, I could rattle off the list all to live long day, but none of your listeners, you or I wouldn't know what they are. Essentially, what Alameda and FTX were engaging in was, uh, you know this rapid selling of all it. Well, you know, this ownership of all these relatively unknown coins with very very very small markets, they practically own the market.

And so you know, they were caught in this situation where they're basically owning every worthless thing under the sun that you could possibly imagine, um, and then having to sell it onto the open market for dollars. And you know, they're the most recent, you know, victim of this global golbal dollar shortage that we're facing, and unfortunately they're they

were caught holding the steaming pile of worthlessness. Yeah, I think I I tweeted on somebody I replied on I think it was Corey Clipston's uh tweet, and I just said, you know, it's back to this warm buffet thing, which is a rising tide lifts all boats. And he looked like this genius because he used massive amounts of leverage

at a time when the tide was rising. It made him look like a genius because he took way more risk than everybody else through massive amounts of leverage as well as all kinds of financial engineering, if you will fraud, if we might even go out that far to say that, um. But then as The second part of the buffet says that when the tide goes out, you see you swimming naked. So he looked like a genius using all this financial engineering, leverage going up, but as soon as the tide pulls out,

all of a sudden, he is swimming naked. Now it seems like it all really got started. Maybe and correct me if I'm wrong. But when I think coin base had broken article, basically they got I don't know, some sort of insider information showing what the assets actually were on their balance sheet. Absolutely. Yeah. So the entire impetus for this was coin desk actually leaking their balance sheet.

And it was revealed that within this coin desk report that had fourteen billion dollars worth of assets, right, which is you know, of course that number in and of itself means virtually nothing, right, Alameda is a relatively small company, UM.

But then it was revealed that at the already of their assets are actually the largest holding, not the majority, but the largest holding individual holding that they had was ft T Right, this is worthless token I was printed out of thin air, which is of course backed by f t x is reputation. UM did three three and a half billion of what was called unlocked f t T. They had two and a half billion of FTT collateral, which leads us to believe that it's called FTT collateral.

They're probably borrowing against that at least at two point one six billion dollar portion, and then two two million of locked FTT. Now, the reason this was concerning is because the entire free float market capitalization of ft T is less than four billion dollars. At the time that this coindesk article was released, it was revealed that Alameda was holding more FTT on their books than was regularly in circulation. And so that's essentially the you know, the

straw that broke the camel's back, if you will. And it really started to get these market participants scared of what they were holding and the solignty of the Alameda and f t X. Yeah, so the tide starts going out all of a sudden, you go, shoot, they're swimming naked. They don't have my money. And what happens is psychologically everybody know, most people haven't really taken the time to

stop and think about this. But if I give my money to the bank or I give my money to an exchange, whether it's the trade charl shwab or f t X, there's a chance I maybe don't get my money back. And uh, I think a lot of people willingly participate in Ponsi schemes. A lot of times people say what do you mean cardanos a scam? Like look how much money I've made? Well, people make money in Ponzi schemes. Uh. The game is can I get in and ride it up and get out before everybody else

tries to get out because we know that there's no money? Um, and I think you know, once people saw this number and went, oh, shoot, they don't have enough money, then the smart people start getting out, and then everybody starts rushing for the exits and it just really started to go down, so that that started happening. Um, I haven't I looked at the chart. I didn't actually try to coordinate the the plunge of ft T. It looked like it really kind of started over the weekend on Sunday.

I guess right, Um where the coin Desk article? When did that come out? That was November two, So it looked like it kind of held on a couple of days. But who knows how much they were defending that peg so talk about that. So so then UH, that article comes out, it starts casting doubt. Then, um, I guess c Z, who's the founder of Finance, which I think is the largest cryptocurrency exchange, basically says, hey, we're holding a bunch of these tokens and we don't want them anymore.

We're just gonna go ahead and sell them. Um. We for whatever reason, we see there a scam, we see there's no backing. We we want to be the first ones out of the exit. Is that what really kind of took it to them? That is what took it to them. If you take a look at the chart

a few days afterwards. This is actually on the sixth, so four days after the coin Desk article released and the fear started moving through markets, c Z, obviously the owner of the largest UH cryptocurrency exchange, came out and said, we hold two point one billion dollars USC equivalent of f t T. We're gonna sell it all. We plan on selling it all on the market. Due to the limited liquidity in the market, We're gonna sell it over

the next couple of weeks. And that sparked imminent panic. Essentially, you saw the price whipped down and then whip back up, and then strangely, for the next twenty four hours roughly, um, you know, until last evening when the strawbert of the camel's back. You saw essentially the price trying to move down and then getting defended at the twenty two dollar level.

And why was this, Well, it seems like Alameda and f t X were engaging in currency defense, that they were essentially selling all of their assets in order to buy f t T and defend it. Now, why would you want to do something like that, Well, if you have a margin call level that's at or around twenty two, that's the kind of behavior that they were engaging in.

We saw on chain both Alameda and f t X were really selling everything that they had in their books that had a liquid market and flipping it into f t t UM. And as we saw, there was just too much cell pressure to contend with on top of c Z, on top of the short sellers, UH and the spots sellers, um, you know, f t X in and of themselves didn't have enough liquidity in order to you know, maintain this twinty through all our peg. It eventually broke and UH and yeah, not a very pretty picture.

It all really started with coin desk, and then c Z was the one who exactly like you said, he said, I'm out, Yeah, I want to. I want to. I want to walk through what this means for c Z because he had two billion dollars over two billion dollars of the token. The market cap was almost three billion at the time. Today the market cap is uh less about five hundred million or less. So we'll walk through that.

If you're just tuning in, you're listening to the Mark Moss Show, I'm in studio with Joe Consorti, and we are trying to sort through the big mess, the big blow up in the cryptocurrency space of the largest crypto exchange f t X becoming in solvent, being taken over by its largest competitor, and uh, what's really no better

way to describe it as a speculaive attack. We're gonna break that down and then we're gonna I want to pivot into the greater financial system and show you how countries are basically doing the same thing, and you don't want to get caught off guard. A lot more to cover. We come back, don't go away, We're back all right, welcome back. If you just tune it in, you're listening

to the Mark Moss Show. We are talking about right now the blow up in the cryptocurrency market where f t X, the second largest cryptocurrency exchange, just got taken out by its biggest competitor, got taken over. I'm in the studio with Joe CONSORTI. Um, Joe. When we were just before we went to break, we were talking about how or you had said that c Z had put out this tweet. Let's talk about why he put that

tweet out. But what he said in the tweet was, as you already said, right, we have over two billion dollars of this token and we want to get rid of it. We're gonna do it orderly. UM. So what happens is for people that don't know, when you're doing a big purchase or sell, a lot of times you want to do that over the counter, meaning that's off the market, because if you do a big buy or you do a big cell where people see it, it could move the price up or could move the price down,

and either way, typically you don't want that. It's what's known as slippage. So, for example, if I want to buy a million dollars worth of a certain token that had thin liquidity. If about a million dollars a bitcoin, it probably wouldn't matter so much. But you buy a million dollars off a token that has thin liquidity, the price will start going up, and so then that means

I'm paying higher and higher and higher amounts. Likewise, if I have a million dollars I want to sell, I also want to do that off the books, because as I'm selling it, it pushes the price lower and lower and lower. And so typically you want to do that without telling people. Um, in this case, he specifically told everybody what is gonna do. He told him in advance, which is really the opposite of what you want to do. So talk to talk to us about why that happened, Joe.

But then also if he had over two billion dollars and now it's at million, did he get attacked by I mean, did he kind of crush himself? Did he uh? Did he get this slippage on the way down? What's your speculation there? For sure? And I think the reason and for this was it was very cunning, it was

very deliberate. Um. I tend to think that this wasn't. Uh, you know, if he was in the game, if he was selling his ft T in order to salvage it for its fair market value, he would have taken that over the counter deal to sell it all for twenty two dollars, as alime To Research CEO said. But CZ had absolutely no response to that. He had no response to that, and so through dumping all of this two point one billion dollars worth of f t T onto

the open market, he wanted that slippage. So what does that tell us, Well, it tells us that he wasn't selling this FTT in order to make a profit and turn it into dollars because he didn't want it on his books anymore. What he did was he saw that f t X, its second largest competitor, the second largest exchange in the world, was in a very fickle capital situation where it was holding this token that the public was increasingly seeing his worthless, and essentially, you know, they

pounced right. CZ saw it as the opportunity for a speculative attack to rather than engaging in the over the counter deal, which would have less damaging effect on Alameda's balance sheet, on ft on ft x's balance sheet, because we know that they hold a lot of this. He instead chose the path of maximum pain, right, So that's that's sort of why I tend to think that this is a deliberate move um. And you saw exactly what

occurred as a result of that. You know, essentially, f t X was like this wounded gazelle, and it was it was running away from you know, the binance, right, And why on earth would finance let this opportunity slip away? It was selling under the open markets that it could make this token relatively worthless and push f t X and Alameda closer to margin calls. Yeah, but what about the slippage? So, I mean that's great, he he he attacked his opponent. He he won, um, but he could

have cost himself a billion dollars. I mean, do we have any way to know through on chained data how that worked out for him? For sure? Yeah. There's several hot wallet monitors and throughout this entire process, CZ was actually actively tweeting that, uh, they have fine liquidity. Their liquidity is totally fine. When the market was solely focused on attacking f t T and shorts were piling in, uh, you know, the futurist contracts the short short side of

futurist contracts. Twenty four or excuse me, twenty million new short futures contracts opened now moving the last two days along. So cz wasn't worried about his own liquidity. He actually tweeted during this not not his own liquidity, but if he had, if he had two billion dollars of that token, he wants his two billion dollars in cash. But maybe he was only able to get one billion out of

the two billion or something like that exactly. And and he obviously was you know, he has the beneficiary and that slippage unfortunately. Um. But since that is the case, it seems like he valued devaluing f t XS assets to a point that he could scoop them up and he could be the liquidity injection. Now he owns his biggest competitor. He valued that more than he did that you know, one billion dollars that he lost his slippage. Yeah, so, I mean, we don't know what he lost the slippage

unless you have some way you've calculated that. But theoretically, I mean, he could have lost half. So he's basically gave up a billion dollars to kill his competitor and absorb them essentially. I mean, that's what we're seeing. Obviously, this is a lot of second, third, and fourth order of thinking. Uh and and some people may call it conjecture. But if you take a look at the markets and you take a look at the aftermath of what all this uh, you know, of what everything of how all

of this unfolded? Um, you know, f TX essentially had a bank rum at the biggest consumer confidence was dropping to such a point at the same time that it was buying basically the entire market of f T T. So you know, it couldn't last forever. They were in an incredibly fickle situation. Um, you put two and two together. Finance was the one that acquired them. You know, some see its conjecture, but it seems like it was deliberate based on what we've seen. What's interesting is, you know,

I want to jump to more traditional financial stuff. I'm gonna stick on this just for a little bit more.

But um, you know, we look at like China has massive holdings of US treasuries, right, and then you see this, you know, with the Russia Ukraine war situation, and it's China citing with Russia and if they want to de dollarize, and if Russia really or if China really wanted to stick it to the US, they could dump all the U S. Treasuries sort of like what CZ what Finance just did f t X, So they could dump all

the U S. Treasuries. But then a lot of people would say, we why would they want to do that, because they would just they would just shoot themselves in the foot. They would just wipe out their own holdings that they have as well, um, which is a logical thought. But apparently Binance didn't care about that. UM. So it's interesting. Maybe China wouldn't care about that either, And that's a

whole different hypothetical. I guess. Yeah, absolutely, you're seeing the exact same behavior, and I'm sure we'll get into it um from sovereigns around the world. I tweeted out a week or two ago. I actually in the middle of October suits a little bit ago. Now, I said my themes for Q four were fragility rising for agility across

you know, global central banks. Uh so the Bank of England, the Bank of Japan, they've had to intervene in their own bonds and ex because of the immense self pressure we've seen UM an intervention, right, and so the ultimately these central banks come in and they backstop their own currencies in their own bonds. I didn't anticipate that we

can see this in the crypto space, but here we are. Ultimately, you know, these sort of animal kingdom dynamics, they proliferate across markets, and at the end of the day, a lot of what we're seeing here UM with fd X essentially stop hunting UM all right, excuse me, with finance stop hunting ft X and then coming in for the kill. That's a lot of what we're seeing in global markets too. Yeah. Now, uh, I know a lot of people have been saying and they're afraid of of what happens after this UM does.

Does this hurt the crypto industry even more? Does this cause regulators to come in and regulate things even more? You know? UM all kinds of questions like that. You know, from my opinion, of course, my always answer is no, we don't need more regulations. It's these types of things that will force people to become more disciplined and more resilient. To your point, you said your key theme was fragility and when we get into these easy monetary systems, you

would put out a tweet thread kind of talking about that. Right, We're in this easy monetary system with zero bound rate and you know all this liquidity, and it causes all types of malinvestment and all types of bad investment and all types of risk. It's what we're seeing is more symptom of that type of a system. Now, what happens is when you start seeing like, oh, shoot, we're actually in this free market and these guys could hunt my

stops and could take me out. I maybe shouldn't be as risky and maybe instead of being so fragile, I should make myself more resilient. And so you know, if the regulators would just leave this alone, I think the trend would be too. Like, how about we not get so over our skis. I mean you can look at you know, Swan for example, and they sell bitcoin by it's a bitcoin exchange. They're not participating in these types of risky things, right, so they're not putting themselves into

that danger. And we could see these types of companies do that. So unfortunately we're seeing the people knocking at the door saying, oh, we need regulators. We need regulators, you know, come save us. Uh. In my opinion, that's the wrong way to go. But let's let's pivot now and talk about into the greater financial system because, as you already said, what we're seeing with the Bank of England,

um the guilt markets still having problems over there. Obviously Bank of Japan is in a tough situation doing the exact same thing, selling treasuries, buying their currency to prop it back up, the same thing. So let's jump to that. If you're just tuning in, you're listening to the Mark Moss Show. We're talking about, of course, each and every week, the decentralized revolution. This week, specifically, we are talking about what's blowing up in the crypto market, and that is

the ft X Exchange. I'm in the studio with Joe Consorti. He's a market analyst with the Bitcoin Layer. He also helps me out on the Mark Moss Show. We're gonna be back and more talking about that financial system in a minute. Don't go away, you don't want to miss it. We'll be right back, all right, Welcome back. You are tuned in to the Mark Mash Show, and I am in studio with Joe CONSORTI. We're talking about how the ft X exchange just got taken out, assassinated, hunted, hunt

chase down, hunted, and taken over by binance. Maybe we still don't know if finance takes them over. They have a non buying neen l o I, so this could be even more for d chs to even just take them out. Even more so, we don't know if bans is gonna take them over, but they did. They did put them down for the kill. But if we pivot out a little bit, Joe, unless you want to add to that, but if we pivot out a little bit, um, explain how Japan is basically kind of doing the exact

same thing. For sure. So Japan, since you know, the eighties and nineties, they've historically been one of the worst sovereigns when it comes to fiscal and monetary policy. They have struggled to get inflation. Their consistently deflationary environment. Really the yen and Japanese government bonds are the laughing stocks of the world. And what we've seen in Japan has been systematic yield curve control, which is essentially the Bank of Japan becoming the marginal buyer the buyer of last

resort of Japanese government bonds in order to pin yields. Um. You know, because they've struggled with inflation to such a high degree. Their ideas, Okay, if we pin yield at a certain level, that will encourage credit creation, and how I'll get us some inflation. And unfortunately that hasn't worked for them for a very long time. But what it has, let's let's let's let's break that down a little bit

for everybody listening. So um, the Bank of Japan, UM, they need money, so they need to borrow it, so they issue bonds. The problem is nobody wants to buy those bonds because they know that the Bank of Japan isn't really able to pay that back. So they have their Bank of Japan, the Central Bank of Japan, buys the debt of the government and funds them with money they're printing on their own right. The problem is is as they continue to print that money on their own,

expand the monetary base. When you increase the money supply, those the existing money buys less and less goods, which creates inflation, so prices go up. So they're printing the money buying their own debt, but they have massive inflation that that basically sums it up, right, that's exactly right. They've engaged in this what's called debt monetization, so they buy their own government bonds UM. As a function of it, it floods the system of money UM and that we're seeing.

We saw that exact let's same kind of inter rate invention with with f t X and buyance. They became the marginal buyer of last resort. And now Japan has done the exact same thing. They've sold records amounts of their foreign exchanged reserves, which is largely comprised of US treasuries UM, which is pushed domestic United States field higher and higher and higher. In Japan has become the largest

marginal buyer. Right, So they are the ones when times are tough, when liquidity is you know, when liquidity is drying up, they're the individuals who buy their own Japanese government bonds. And actually there are several reports out now that are estimating Japan owns the entirety of the off the run UH ten year Japanese government bonds, so they own one hundred percent of that market. So it's no longer uh an interest rate that's set by people buying

and selling these bonds. It's now owned entirely by Japan. That's something we almost saw with f t X. If that intervention had continued, chances are they owned the entire ft T market. But you know, eventually somebody swooped in and helped them out and had a liquidity the interrection. But globally with Japan they never have that issue. They can they can essentially print the difference. If they run out of liquidity to buy these bonds, they can create

more of it. So whereas with finance, um it was it was a matter of put it was a clock that was running down. Because money can be created out of thin air from these central banks. It's an issue that you know will will persist, right, It's a it's a relationary issue. But um so, the problem though, is so Japan is creating all their own money to buy their own bonds because nobody else wants to buy them.

If nobody buys them, the right the rates of the bonds goes higher, so they're buying them to keep that down. The problem is as they do that, as I already said that their currency is crashing. So then they're buying their own currency to keep it propped up. Just like sp f t X had to start buying their own token to keep it propping up. So so so many people are trying to sell it get rid of the token of the price was going down, so they were buying it,

And so Japan is doing the same thing. They're selling whatever they can US treasuries to buy their own currency to keep it propped up, just like f t X did up. The thing is, though, to your point, is that f t X can't print their own money like um Japan. They can, But that's not that's not actually totally correct, maybe right, because they did they create the f t T token out of thin air. They did, well,

they did, but they can't print. They can't print something like dollars or fiat something that's deep and liquid, right. But but what they but what they can do is they can create their f t T token and Japan can't create dollars, right, they can just print. They can create yen. Yeah. Yeah, so f t X can create as much f t T potentially create more f t T tokens, but who wants them. Japan can create more yen,

but who wants those? That's right now, Japan is in a situation where they exactly like you said, they're now not just buying their treasuries, they're also buying the yen um and as you know, they pain yeels on the treasure on on these treasury securities from the Japanese Japanese government bonds. Then the release valve is the end. So as people see that low interest rates in Japan are extremely low, they're they're high in every other country, I'm

going to sell the end. So now Japan has been forced into a situation where they're creating all of this yen and essentially that gets passed off to the citizens. Now, the key differences f T f t X. They can create more ft T token, but there isn't necessarily a demand for that. There's not it's not like there is an economy that is operating off of f t T. There is an economy that is operating off of the end. So there's only so far that f T T that f t X can create their own token to solve

their troubles. Whereas because the entire country of Japan, anybody who holds Japanese government bonds or yen, they can absorb all that newly printed money, So the Bank of Japan has much more leeway to create money and buy its bonds and buy its currency than binance to. But the but the same, the same constraints I believe are still there. It's it's a bigger constraint, a bigger net, but the same constraint is there because back to kind of we talked about this, ft T token only had value because

the market prescribed value to it. So same with again to your point, yes, there's more people using it, the markets bigger, more people have assigned value to it. But if it continues to lose value, just like f t T token did, more and more people want to get rid of the end and go to something else, like a dollar. Just like people want to get rid of f t T token and by go back to dollars

or bitcoin or whatever it is. People also will want to get out of the again and go to the dollar or bitcoin or something like that, so they have more room. The market's bigger, it's been around longer, it's more trusted. But at the same at the end of the day, just like FTT crashing, people want to jump ship. If yen continues to crash against real assets, people who want to jump ship as well because they can't create

the dollar. That's exactly right. So what we saw with f t T and the essential complete loss and confidence and collapse of the currency, that's what we're seeing. But because the market is larger to a slower degree in kind through is like Japan. Right, So essentially the situation that we just viewed in the last forty eight hours is a small, sort of ant farm version of what we've been witnessing and will continue to witnessing in countries

like Japan. Yeah, now if we take this bigger and then let's go bigger, we only have a couple monts left if we go bigger. So Japan is having the problem. So ft T is a perfect, as you said, a version of what Japan is doing, what Bank of England's doing, what all these countries are doing, because they can create more, create more of their own currency, but not more dollars.

But at the end of the day, the US is also doing the same thing with the dollar, because again, we don't want dollars, We want goods and services, we want energy, we want food, and so the US can keep printing more dollars, but they can't create more energy or food, which is at what we ultimately want. And so if the US does the same thing, it's a

bigger than Japan. But if they do the same thing, then ultimately, and the dollar continues to fall because they're gonna be printing so much currency, people will just sell the dollar to go into oil, energy, natural gas, bitcoin, something like that. It's the same same thing, just bigger, right, that's exactly right. Ultimately, people will seek to hold reality, they will seek to hold actual energy. What we're seeing in Europe right now is a good example of this,

and this this extends the United States too. They're facing an energy crisis. They have a money printer. They can't print energy. They can print euros, devalues the euros and buy energy for a for a certain period of time. But if that is your only solution, right, Ultimately, the people who hold that currency, and the people who hold the United States Dollar and other fiat currencies, they'll be

looking for a representation of reality. They're gonna they're they're gonna go to the next best thing that they think has value, what holds value? I gotta cut you off there, because we are out of time. If you're just tuning in, you're listening to the Mark Moss Show. UM in the studio with Joe Consorti. If you like what he has to say and you want to have him finish it, follow on Twitter at Joe Consorti. We'll have it in the show notes down below. UM, we're talking about the

decentralized revolution. We're talking about how the f t T token and the FTX exchange is being taken down by finance, and how it's a small picture of what the world's going through. That's what I got. Thanks for listening today. Until next time.