In this episode of “Speak Up,” guest host Andrew Brill joins Wall Street veteran Caitlin Long, Founder & CEO of Custodia Bank, as they discuss the world of Bitcoin. The two also explore the ongoing battle between the crypto industry and Elizabeth Warren’s views on the potential for cryptocurrency to be used for spying and money laundering. Did you like this episode? Hit the like button and let us know in the comments!
Caitlin Long 0:00 Bitcoin is an asset that does not, it's a different paradigm. It does not pay interest because it doesn't need to. It's a disinflationary asset. And what I mean by that is, you can either have an inflationary asset like the dollar that deflates with inflation, you can have a disinflationary asset with a very low inflation rate that holds its value over time where you can have a deflation deflationary asset that actually shrinks in quantity. Bitcoin does not shrink in quantity, it it does grow in in quantity, I think just a little bit under 80 basis points point 8% per year right now, gold grows at about 1.6% per year. So bitcoins inflation rate is half that of gold right now. And the inflation rate gets cut in half every four years, but it never goes to negative so I don't call it a deflationary asset. Andrew Brill 0:58 Welcome to speak up with Anthony Scaramucci on the wealthion network. I'm Andrew brill. Anthony is off this week taking care of some personal business. He'll be back in the saddle next week. Some say we look like we were separated birth he but he's a lot older than I am. I'll do my best fulfill his big shoes. cryptocurrencies they've been back on the rise the past few weeks. So I'd like to welcome in one of the experts and advocates for crypto Caitlin Long. And the accolades for Caitlin are long. She's a Wall Street veteran, first at Salomon Brothers, then a senior role at Credit Suisse, Managing Director of pension solutions at Morgan Stanley. But now Caitlin is the founder and CEO of custodian bank. Caitlin, I'm sure I missed a few things along the way that but in that brief introduction, but welcome to Speak up, I apologize that you get me instead of your good friend Anthony. Caitlin Long 1:46 Oh, thank you. It's great to be with you this morning. I wish Anthony well. Andrew Brill 1:50 So Anthony always starts out by asking people the current state of the economy. And how do you think it's going and where is it going? Caitlin Long 1:59 Well, it certainly looks like the consumer is slowing down. And there is we're recording this on Tuesday morning, have an FOMC meeting. And there are some folks who think there will be a rate cut coming in this meeting more. And certainly the market consensus is that it's coming in September, I'm not so sure. Because inflation is also running hot. And so that's the dreaded stagflation, and we're seeing of a tug of war between Janet Yellen and Jay Powell. She is executing stealth QE through the issuance of tea bills and the drawdown of treasury general account, which pushes fiscal stimulus into the economy. And Jay Powell, his job is to try to offset that offset the inflationary effects of that. And so you actually have the the Treasury and the Fed, not in agreement. And that is an unusual situation. Andrew Brill 3:01 So talk to me a little bit about this. And, and we'll get into custodial custodia bank and crypto. But there seems to be a glut of money supply because of COVID. We pumped all kinds of money into the economy. And Janet Yellen is trying to do that again. But Jay Powell saying, Whoa, wait a minute, slow this down. How do we combat this? You know, where do we go from here? The obviously FOMC is meeting there's a consensus maybe rate cut in September, not right now. But once that happens, things are going to start to tick up again. And inflation could rear its ugly head. Caitlin Long 3:39 Well, the old saying goes it Milton Friedman saying it's inflation is always in everywhere, a monetary phenomenon. And a lot of folks will debate whether that's true, you certainly have things like like real shortages, that can cause inflation. But if markets are allowed to clear that those shortages will very quickly take care of themselves and clear. And and so the honest truth is that all that spending that you pointed out, we didn't produce anything to back up that demand. And it's really simple. We did not have a supply of goods. I'm of course being I'm overstating it, but a lot of folks were literally locked in during the COVID lock downs not producing and everyone who works is part of producing GDP. And if we have a lot of folks literally not working, are we obviously we're not producing GDP and yet all that stimulus came in to replace folks income. So the supply demand got way out of balance and that created inflation. Have we not done that? And had folks actually ventured out to work We would not have had as much inflation as we're dealing with now, this is absolutely the after effect of that huge both fiscal and stimulus, monetary stimulus that took place during COVID. Andrew Brill 5:12 Are you a fan of a rate cut right now? Or do you think you know what, just pump the brakes? And I think we'll be okay. Caitlin Long 5:17 Well, I actually don't make forecasts for a living but but at a high level, I'll say this, the most important, the single most important price in the economy is the interest rate. That is the traffic signal that allows entrepreneurs to allocate capital across time and across industries. And that is the one price that should not be manipulated, it should be set by the free market. That is, when I say the one price, it is the most important price. And yet it is the price that is not allowed to be set by the market in the United States and in the Western world. And as a result, we get a lot of bad signals. I really, this hit home for me during the 2008 financial crisis when I was working on a trading floor at Morgan Stanley, and understanding, why is it that the entire home builder industry made the same investment mistake in the same direction at the same time? The answer is they all took the wrong signal from interest rates, which were too low going into the financial crisis. And the thing that got me really curious that ultimately led me to Bitcoin got me down a very deep dive of alternative schools of economic thought was that I heard then Treasury Secretary Tim Geithner admit on a Charlie Rose show that interest rates had been too low going into the 2008 financial crisis, which caused all this over investment in housing. And then two weeks later, he was arguing that the Fed should be cutting interest rates further still, that disconnect is what got me to really realize that the mainstream explanation for what caused the financial crisis wasn't what was actually the truth. And and all these years later, thank goodness, I went on that deep dive because I was able to find Bitcoin in 2012. Andrew Brill 7:12 So you started with Bitcoin? That was gonna be one of my questions is How did you get into Bitcoin? So you answered that question? Because Estonia bank told me the story of bank and how that differs, because I know it is a bank, but it's geared towards cryptocurrencies. Caitlin Long 7:28 We are a bank charter to serve the digital asset industry. Why do we need a special bank chartered for the industry, because the bank regulators all along have been throwing sand in the wheels of banks who want to service this industry. And in the state of Wyoming, my native state, I was in New York for 30 years, moved back to my native state. And and we were trying to solve a problem that entrepreneurs were coming to Wyoming to testify about, which is that suddenly banks were closing their bank accounts. And in the United States, if you don't have a bank account, you're not a business. Because you have to remit your withholding taxes to the IRS through a bank electronically. Therefore, a lot of law abiding startups lost their businesses, when a big D banking wave actually the second D banking wave, were in the third one. Now, the second deep banking wave hit the industry and 2017. And so we knew that the bad actor there that was causing the D banking was the FDIC. And so the it was actually the Ven, banking commissioner in Wyoming who said, you know, there are these things called uninsured banks, they can't lend, because they're not on it, they're not insured. And I said, well, a bank serving this industry should not be lending anyway. Because what makes bank fit banks fail, what causes bank runs, that the two that there are three that happened actually four happened in 2023 was the classic banks were borrowing short term and lending long term, it's called a duration mismatch. And the last thing in a hot money industry where money's moving around at the speed of light, the last thing a bank serving that industry should do is engage in a maturity mismatch. Because when the bank run happens, they've got long term assets that they might have to sell at a loss. And the bank might not survive that that's exactly what happened to Silicon Valley Bank to silvergate Bank and to Signature Bank last last spring 2023. So we knew that lending should not be part of the business model of a bank anyway. So long story short, we're here to serve the industry. And we got ourselves caught up in quite a nasty fight because the the Bolsheviks in Washington DC, would rather have ALL OF US banking directly at the fed through a central bank digital currency, or through a very small number of very large banks. That's the European or Canadian model that that they control. They don't like the fact that banking is so decentralized, spread out across 4400 banks and 5000 to non credit unions in the United States, and and so they want to try to force consolidation and that's been happening for years, but it's been on steroids in in the last few years and anyone who's doing anything new and different, most especially a woman owned bank in Wyoming, who spent that specialising in cryptocurrency was not welcome in the club. Andrew Brill 10:22 So how does cryptocurrency solve that problem? And I know, and we'll get into Elizabeth Warren and the dukes that you've put up against Elizabeth Warren. But how does cryptocurrency solve that problem? The you know, exactly that? Caitlin Long 10:38 Well, ultimately, we don't need banks. So a lot of folks are probably scratching their head saying, wait a minute, isn't one of the mottos of crypto be your own bank. Ultimately, that's true. But what happens between now and then is money's got to be able to go back and forth between the two systems, mostly, if I believe it will be coming out of the traditional system and into the new bitcoin system. But you've got to have a bridge to be able to go between the two in order for capital to be allocated into the two otherwise, it's exclusively a peer to peer market. And to be honest, if bitcoin was doing just fine as a peer to peer market, I remember peer to peer meetups where people would transact with each other. I got my first Bitcoin that way back in 2013, up in New Hampshire at a meetup, so it exists. And it's a lot easier with the internet for us to have virtual meetups now with anyone in the world. But ultimately, let's face it, the vast majority of the wealth is in the traditional financial system. And so there has to be a bridge between the two. I like the way Jesse Powell, the founder of Kraken says though, sometimes you build bridges, knowing that you won't need them forever, and you might blow up one end of it. And that's kind of how I think about starting a bank. This is something this is the really actually very, very heavy lifting. We knew it was going to be brutal. from a regulatory perspective, it's been a lot worse than anticipated, because we got targeted by, by by folks, we got caught up in something illegal and far bigger than ourselves and overreaction to FTX by federal bank regulators, and a lot of illegal activity and unethical activity aimed at us. But we're here for the fight. And we've been at it for a while and there's light at the end of the tunnel. Andrew Brill 12:25 So explain to me, you know, lending with Bitcoin, now a bank and someone goes out wants to buy a house, I don't have the $600,000 worth of bitcoin to buy that house. Can you still lend because it's a peer to peer thing? Is there still lending that's going on? Or do is the lender the peer to peer and I'm actually paying them interest back in Bitcoin. Caitlin Long 12:47 So two points. One is lending in a disinflationary asset like Bitcoin, is it should only happen for reasons that are related to liquidity or tax planning. It shouldn't be for speculation. And the reason I say that is the moment you go above one to one leverage, if you take out more than one to one exposure, there will never be more than 21 million Bitcoins. And so you're insolvent the lender is insolvent, the moment that they do that, and we experienced that with block phi and Celsius among others, that got themselves massively leveraged. And then the then the proverbial bank run hit, and they didn't have enough Bitcoin to pay off the customers who were withdrawing. And they went into bankruptcy. And I do fear that the big Wall Street firms are going to have to learn that lesson the hard way, we can come back and talk about that a little bit later, because so many of the Wall Street firms are in the old paradigm, the old Trad fie paradigm, which is, debt based money in fiat money is all debt based. If you want to have a mind bender, if all if the US were ever to pay off all of its debt, there would be no money. Why? Because the dollar is an IOU. And so it's a debt instrument. In and of itself, there's nothing backing it other than the full faith and credit of the US government. But It's turtles all the way down, so to speak that in that regard. So it's purely a confidence game, there isn't anything backing it there used to be gold, which was a valuable asset that tethered the amount of credit created in the US dollar. And that's no longer the case, obviously, to the first question you asked with Ben on into gigantic money printing spree that will not be able to go on forever. But But back to the Bitcoin point. Bitcoin is an asset that does not it's a different paradigm. It does not pay interest because it doesn't need to it's a disinflationary asset. And what I mean by that is, you can either have an inflationary asset why At the dollar that deflates with inflation, you can have a disinflationary asset with a very low inflation rate that holds its value over time where you can have a deflationary deflationary asset that actually shrinks in quantity. Bitcoin does not shrink in quantity, it it does grow in quantity, I think just a little bit under 80 basis points point 8% per year, right now, gold grows at about 1.6% per year. So bitcoins inflation rate is half that of gold right now. And the inflation rate gets cut in half every four years. But it never goes to negative. So I don't call it a deflationary asset. But back to your question, if that's the asset that you own, an asset that that that is growing in supply at a rate far slower than the rate at which fiat currency is growing in supply every year, then that asset is going to hold its value, it doesn't need to help to have a yield in order for it to hold its value. So if you're if you're investing in any bitcoin product that has yield, because Bitcoin itself does not have yield, ask yourself, where's that yield coming from? And if it's coming from someone going more than one to one leverage, you should expect that Counterparty to be insolvent. It's just a question of time before the market reveals that and if you happen to get out before the run happens, and the market reveals the insolvency of your counterparty, then you are lucky. But what is happening right now, just as a fair warning is folks that got out of Celsius in the last couple of months of Celsius operations are now being sued personally by the bankruptcy trustee. So you again, do your counterparty credit risk homework, really understand if you're investing in Bitcoin, that gives you a yield. Watch out. Andrew Brill 16:52 So how do we lend how do we borrow? I guess if I if I wanted to buy a house, and I'm doing it with Bitcoin, let's say Bitcoin becomes the currency. How do I do that? Caitlin Long 17:02 Well, again, it's a new paradigm that's not a debt based paradigm. Bitcoin is money. That's no one's IOU. The dollar is money. That is the US government's IOU. Bitcoin is money that is not debt, the dollar is money, that is entirely debt. So it's a completely different paradigm. So now the question becomes in a Bitcoin world, would we actually have much in the way of Debt Capital Markets? So let's, let's pack unpack that in a couple of different ways. Some folks won't want to sell their Bitcoin for liquidity reasons and might just want to borrow against the collateral kind of the same way as you would take a home equity loan out against the collateral of your home. And some, for tax planning reasons don't want to sell it, a lot of people there are there it's very easy in the Bitcoin network to determine who's in the money. In other words, who has unrealized gains. And, you know, anyone who bought Bitcoin, obviously, at prices below where the prices today have an unrealized gain, and in a lot of cases, it's if they're American, it's an it's a long term unrealized capital gain. And so they don't want to have to sell it and pay the taxes. They'd rather borrow against the appreciated value. Those are two strategies that I know a lot of folks are using and there are places including Bitcoin, but you know, Bitcoin native companies that will lend against Bitcoin they have, they have US dollar and Bitcoin based loans. So that folks who don't want to trigger that capital gain can can temporarily borrow against the value of their Bitcoin and I do know a lot of folks who are engaging in that. I will say though, one of the phrases that I'm somewhat famous for is a fool and his leveraged Bitcoin are soon parted. At the Bitcoin Conference three years ago, I'm on stage with Sam Beckman fried I coined that phrase, and it kind of went viral when FTX failed because he was a fool. And his his leverage Bitcoin he and his leverage Bitcoin were soon parted for sure. But he, the the point is well taken that just don't go above one to one. If you're going up to one to one, you're fine. But don't go above one to one because the moment you do, you're in trouble. Andrew Brill 19:20 Caitlin, I know that. You're not a big fan of Elizabeth Warren. I know that. She she's dead set against crypto, and she's in charge right now. But she says that crypto can be used to spy on the United States to undermine Homeland Security and to launder money. You're now in an elevator with her. What are you seeing Elizabeth Warren to change her mind? Caitlin Long 19:45 Well, I think she has a very different paradigm than I do. She has a paradigm where she wants total control. She wants total visibility into everything everyone does. She wants the ability to block people from speaking freely, and she wants the ability to block people from transacting with their own money freely. And she has said that she wants a central bank digital currency. So to be honest, I'm not sure it's worth even having that elevator conversation with her, because her philosophy is so different. It's not a Philosophy Of Freedom. It's not a philosophy of respecting the individual. It's a philosophy of total government control. And a lot of folks question, whether she's actually said that please google it. Just Google her her interview with Chuck Todd, where she talked about how she is in favor of a central bank digital currency, she wants the government to be able to block any of us from spending money on things that she deems we should not be spending money on. And so just I wouldn't even have that conversation with some folks that are just in that very different philosophical paradigm. It's not not not even worth trying to orange pill, the people who are curious or who are willing to learn I'm very happy to orange pill. Andrew Brill 21:04 Do you see that as a problem? Do you see how Bitcoin can be used or cryptocurrency can be used to launder money or spy on people? Look, there's a there's a the blockchain, there's a ledger of every transaction that goes through look, and there's no doubt bad actors are going to try and manipulate the system. But there's a ledger is it possible for someone or hurt concerns valid? Speaker 1 21:30 So let's unpack them Bitcoin can be used to spy. The funny thing is I'm about two miles away from the Bitcoin mine that Cepheus blocked because Chinese miners took control of that and that is the basis upon which she says bitcoin is used to spy on the United States. If anybody really dug in and understood what an ASIC is an application specific integrated circuit, it is not capable, it is application specific. It is not a GPU is there's nothing general about it. It is application specific. The chips are designed expressly to mine Bitcoin, they are specifically designed to find the the number the prime number that that allows you to mine a Bitcoin block. That's it. So those chips are not capable of some of spying on the United States. So that is laughable. And it underscores just how little she understands about what Bitcoin and Bitcoin mining really is. In terms of money laundering, yes, any money is going to be used in crime, any money is going to be used in illicit finance. Here's the funny thing. The national security apparatus has changed a lot. In the 12 years that I've been in Bitcoin, it was initially extremely opposed to Bitcoin, because it saw only criminals using it by the way, in the beginning of the internet, it was criminals and porn and, you know, drug dealing, and, and gaming and the like. And the same thing is true of of Bitcoin in the early years, but then the Silk Road bust happened. And here's the point. Can you use the Bitcoin Blockchain to spy on people? Absolutely. Yes, you can. I just this morning, saw a lot of discussion about the US government's wallets. Because you have a private you have a public address, people are watching the US government's wallets. And if you can understand who's who's connected to what wallet, then of course, you can spy on their financial transactions. But the key is, if you know how to keep yourself and not a tsunami suit anonymous, you can, however, they were able to bust the Silk Road online drug marketplace that was using Bitcoin, because ultimately, every private every public key can be traced to an IP address. And they ultimately traced the public key to the IP address of Ross Albrecht and busted him for running the Silk Road and confiscated his Bitcoins. So can you spy absolutely you can spy anyone can spy. The really important point though, is if you control your own private key of Bitcoin, no one can stop you from transacting with it. Because it's just code. Code knows no borders, code knows no laws. It's just code. And so the this is where we're on. I also laugh at her attempts to try to kill the industry thinking that they might succeed. She certainly has the ability and has thrown sand in the wheels, no question. She succeeded in really making a lot of very wealthy people mad and donating to Republicans who were not Republicans previously, because of what she did to this industry. She and her to use Trump's phrase she didn't her goons. Not my phrase, but, but she certainly has a lot of people who are loyal to her that she has put in these agencies who have done illegal things to try to kill this industry. And I laugh, because do you think they succeeded in killing the industry? No, they only made it stronger. What every attack on Bitcoin only makes it stronger. And it forced people to, to build these peer to peer networks, we now have decentralized exchanges, frankly, that the invention of tether itself was a reaction to the attempt to de bank, the industry in that was the first attempt to de bank the industry 10 years ago or so. So long story short, she didn't succeed, all she did was succeed in in throwing sand in the wheels and raising a lot of money for crypto packs who are trying to get her and her and her crew unelected. Andrew Brill 25:57 So crypto is a digital currency. And you're talking about the government digital currency is their concern, taxes and getting their peace. Look, we live in a country where we do get services. Yeah. Which is a peer to peer thing. How does the government a government gets their piece of everything, sales tax, no real estate tax everything? How does the government get their piece when it's a peer to peer thing? Caitlin Long 26:20 Here's, you know, what's interesting, is it from a pure peer to peer perspective, there are transactions that I'm sure are not being reported to the tax authorities. I do not advise that. As I was one of the back in 2014, there was a Wall Street Journal article that said something like only 680 People had reported Bitcoin on their tax returns, and I was one of them. Okay. So I laugh at that, because I know a lot of people were not reporting it. And and the tax reporting obviously has gone way up because the penalties are have gone way up as well. But here's, here's what the US government should do if it wants maximum compliance with both tax laws. And with anti money anti money laundering and counterterrorism financing laws, it should create regulated pathways and bridges to the traditional financial system. Why? Because all the banks and broker dealers have to do KYC. They are monitoring, monitoring transactions for illicit finance and terrorism financing, they will close and freeze assets and accounts, according to the law. That is what custodia does. We're a bank, we have to comply with those laws. And so instead of trying to force all this activity into the shadows, which is what Elizabeth Warren has done, that's the practical effect of the policy of trying to kill the industry, it just all went into the shadows. What it should be doing is what the telecom industry did when Voice over Internet Protocol came along. They said, Alright, if the US government wants the phone calls to be made in lit, regulated markets, as opposed to dark markets, then we're going to encourage people to use the telcos Verizon AT and T T, mobile, etc. You can make a phone call using the command line interpret interface using VoiceOver and an Internet Protocol, if you want to. Even the most talented software developers don't do that. Why? Because the user experience is better. The security is better. The technology, you've got to be an expert at voice over internet protocol to do that. But the point is that you can do that. So a lot of people are still using Bitcoin peer to peer using Tor trying to use privacy tools, whether they're doing it for illicit finance, or they just don't want the government snooping, I don't know, probably a lot of both. But here's the point. If the government's goal is to maximize tax compliance and compliance with those anti money laundering laws, it should be welcoming the industry into regulated institutions instead of what it's actually doing, which is trying to kill us. Anthony Scaramucci 28:52 This show is sponsored by better help. In these crazy times we live in the last thing on your mind is you and taking care of yourself. We all deal with it work kids obligations bills, about 11 days in the White House, you name it. Everything takes priority except for you. If you've ever been an athlete, you've heard the saying never skip leg day. But how about skipping a day of therapy? That's right. I'm talking about putting yourself first talking to someone who will help you ease your load so that you can focus on self fulfillment and your goals. Maybe you're going through something and you really can't pinpoint what it is it's bothering you. If you need to talk to a professional or thinking about giving therapy a try. Give BetterHelp a try. It's easy, entirely online convenient and flexible to fit your schedule. Just fill out the questionnaire get matched to a licensed therapists anytime. Never skipped therapy day with better help. Visit betterhelp.com/wealthion to get a 10% discount on your first one. off. That's BetterHelp, help dot com slash wealthion. Andrew Brill 30:05 So let's get rid of Elizabeth Warren, let's talk about the happy stuff. Just a couple of weeks ago and cryptocurrencies have been on the rise just a couple of weeks ago, Solana was down under 130. I wanted to buy some, I couldn't figure out how, how does someone go about? And I know there's ETFs out there. But if I wanted to just go and buy some bitcoin, or Solana it just or Aetherium, just to have it for myself, how do I go about doing that? Caitlin Long 30:33 Well, just the fact that you're asking that question, back to our previous conversation illustrates to me that the sand in the wheels that has been thrown by Warren and her crew has worked, right? Because we don't have these regulated on ramps that everyone knows about and recognizes, but the answer is you'd go to an exchange, there are exchanges, they're, they're quasi quasi regulated. They're all trying to become banks and broker dealers, and we're all being blocked from various aspects of being fully a bank or broker dealer. And, and so you'd go and open up an account there, or alternatively, you create, you join a decentralized exchange and you can transact on a decentralized exchange, those are the two places that you can go, you can't do it right now, through a bank. You cannot buy bitcoin directly through a broker dealer, you have to have you have to go through the ETF, which is a wrapper around Bitcoin, it is not Bitcoin, right? Andrew Brill 31:40 So I would go to custodia bank or I can go to Coinbase, open up an account and buy it directly from there. Speaker 1 31:47 Well, custodian is not an exchange, we're just a bank. We can't we do not hold Bitcoin on our balance sheet. We provide Bitcoin custody services and US dollar services to the industry. But we're not an exchange. So you'd have to Yes, you'd have to go to exchange in the Bitcoin markets, which are largely retail, by the way, there are over the counter transaction marketplaces that you can transact in as well. Once you dive in, you very quickly figure out, you know, who are the players in the ecosystem? Where is their liquidity in the ecosystem, and because of the fact that there's been so many there's been so much sand thrown in the wheels, the spreads between these various venues have have widened out, it used to be back when, you know, before the banks that silvergate and signature failed and FTX and, and Celsius and block phi and prime trust failed. It used to be that there were very, very tight spreads, and the transaction price at which you could buy or sell Bitcoin was not that different between US, Europe, Asia, Middle East, Latin America, but now because of all the sand in the wheels, the transaction spreads are pretty wide again. Andrew Brill 33:03 Caitlin, how do we find the reputable places? I have a nephew who was swindled out of some money trying to buy some cryptocurrency so the scams are out there. How a lot how do we find a reputable place? Look, it's the hot topic, you know, and and we're on a wave right now where people are thinking about getting in and he put a chunk of money in and lost his money because it was a scam. But how do we weed those out? How do we get the reputable places? Speaker 1 33:30 Well, again, I'll just go back to the conversation we had a few minutes ago. It is sad that Elizabeth Warren is blocking those of us who are trying to become the regulated reputable places for this and allowing the the lit marketplaces you know the Verizon is at and T's and T mobile's as opposed to the tours and the dark web venues for people to transact. There is definitely a lot of crime and a lot of scammers a lot of impersonators. We hire a firm at custodia. That takes down impersonator accounts. On an average week, it's taking down about four dozen impersonators of me across different social media platforms. And it seems like every week, you know, one of my childhood friends is contacting me to say, Did you just ask me to talk to you about Bitcoin mining? Okay, that's those are scams. So be absolutely aware of scams. But the first and most important thing that I would do is educate yourself. Don't just go and open an account at one of the exchanges. Yes, you mentioned some of the reputable names in the space. But don't do that. First, educate yourself. First start reading and learning how Bitcoin works, because when you do, you'll quickly realize you really don't want to leave your Bitcoin on a centralized exchange, because of some of the issues that we just talked about. Yes, there's a lot of fraud not at the reputable players. But there's a lot of leverage. There's a lot of hidden leverage. That hidden leverage took down players that were considered reputable in the in previous markets, so so just be careful. I think the other piece is, you'll quickly realize if you start following the sector, the people who are philosophically committed to Bitcoin are not going to be the ones who are running big leveraged platforms, that big leverage platforms are going to be those who are really driven by number go up speculation, short term gains, trading, those of us who are philosophically committed to Bitcoin, we're not going to be leveraging it because we understand what we talked about earlier, a fool and his leveraged Bitcoin are soon parted, and we're not going to lose our reputations and burn our customers that way. Andrew Brill 35:50 do you anticipate big banks that JP Morgan Chase is the Wells Fargo's Bank of America? Do you anticipate them getting involved with this stuff? I have a feeling they own some cryptocurrencies now. But are they going to become a place to store your crypto? Speaker 1 36:08 Oh, well, they already are Bank of New York Mellon has been in the business for a few years. The SEC through sand in the wheels, there's something called staff accounting bulletin 121 so 121. I won't go into detail about what it is because it's kind of wonky. But the point is, it was the SEC attempt. They're sort of you know, belayers rules, Rules for Radicals ends justify the means will do anything to kill the industry. Okay, so they created a new accounting rule that was not US GAAP, very unusual. And so and by the way, it created a lot of problems at the accounting firms because it only applied to sec filers. And the accounting firms really tried to be consistent and how they applied the accounting rules across all their customers. And most of their customers are, of course, not SEC filers only their biggest companies are. So it created a real problem. But long story short, the SEC has now decided to grant exceptions to the large banks. And this leaked from a senior SEC official who should remain unnamed kind of thing to Bloomberg. And Bloomberg reported a couple of weeks ago, and I did some digging, started talking to people in Washington and from a very reputable source. At least one they said several large banks, that was what the Bloomberg story said at least one is a New York bank that was granted approval by the New York Financial Services Department of Financial Services and by the Fed that the latter is interesting, because the Feds official position is that it is not approving banks to do this. And now we know the Fed is indeed approving banks to do this. And while it's still blocking custodia, watch what they do, not what they say. And this is the most corporatist thing to try to ban the industry from an accounting rule using an accounting rule and then saying, Oh, just kidding, we'll give exemptions to the big banks. Where are the progressives yelling and screaming at the SEC, helping the big banks? I thought they were anti big bank. Watch what they do, not what they say. Andrew Brill 38:12 That whole too big to fail thing is, you know, those big banks get bigger, but custodian like yourself is struggling. Oh, you just just want a piece. Look, let me do my thing. Because I know what I'm doing. Speaker 1 38:23 And we are in good standing. We've been operating for almost two years, by the way in good standing with a regulator. And it's funny the Fed it when they denied us had an 86 Page denial order. Do you know what the longest denial order in fed history was? Before that the entire 100 plus year history of the Fed before custodians denial order, the longest denial order was three pages, and ours was at six. They were clearly using us as a to send a signal to the rest of the industry to stay the hell away. Andrew Brill 38:55 So I know you're not a speculator last week, we had Tom Lee on, and he said bitcoin is going to 100,000 by the end of the year. I'm going to steal a phrase from Anthony, what say you? Speaker 1 39:07 Ah, well, look if if past is prologue, and I do believe it is because of the halving cycles, which are fundamental, we will be in a rip roaring bull market this fall. I don't think we're in it yet. We're still seeing consolidation, we're still seeing the hash rate dip. As miners that were profitable before the halving are now turning off their mining rigs, because they're unprofitable after the halving. It always happens. We see a dip in the price we see a dip in the hash rate. We've got to work through that. It typically takes about six months that having occurred in April, and so if past is prologue, we'll be in a bull market again in October. I don't think it's a coincidence that that tip that that having cycle, it's 210,000 blocks, which at an average 10 minute block time, works out to be about four years and Satoshi released the white Paper in October 2008, during the height of the financial crisis, which was also a US presidential election year. So it's not a coincidence. That's where I'm going. It's not a coincidence that bull markets happened around the time of US presidential elections. And I think that will happen again, that the models certainly show that it could go above 100,000. But I don't make price predictions. And I look at all kinds of different models, models tend to be garbage in, garbage out. But they tend if you back test them to explain very well, what has happened, I do believe the stock to flow model has some use. And I do believe that the power law model also has some use. And those models are both predicting very high prices, the stock to flow model broke down in the last in the last Bull Run, we did not hit the top and I put out a big tweet thread explaining why because there was all this paper Bitcoin that was created all these claims to Bitcoin that are not actual Bitcoin. By the way. ETFs are claims to Bitcoin that are not actual Bitcoin, they should be backed one to one with Bitcoin. The SEC requires them to be backed one to one with Bitcoin but are they actually and a lot as we learned, a lot of those leveraged players were not backed one to one with Bitcoin. When when the bank run came as the Warren Buffett saying goes when the tide goes out, you see who's been swimming naked a lot of them were swimming naked, right? So again, this gets back to the point I made earlier teach yourself how to self custody Bitcoin, you're going to transact most likely with a centralized exchange if you don't want to do decentralized exchanges but take take your coins right off the exchanges because you don't know if the exchanges solvent. Andrew Brill 41:47 Before we get to some viewer questions, Anthony always likes to ask his guests what advice can you give our viewers and listeners? Where are you putting your money? Where are you telling your family and friends? What are you telling your family and friends to bet on in the near future? Well, my most recent investment was in my own company custodia but I'll say is I haven't sold Bitcoin I did trade around my position a little bit in the last time I haven't I sold Bitcoin I believe was 2017 and and I used it in 2014 When we were all bootstrapping the network back in 2013 2014. I used it to buy all my Christmas presents on overstock.com You know, think back to how expensive those Christmas presents were? It's like the Bitcoin pizza right? You know those pizza every year and Bitcoin pizza day they value those the Bitcoins that were spent to buy the buy the first pizza, it's the first transaction where Bitcoin was used as payment. But I don't look at it that way. Because all of us are really users of Bitcoin. We were bootstrapping the network. And it wouldn't be to what it is today, had we not been willing to use it. But once Bitcoin became more of a store of value for me, and less of a medium of exchange, I stopped using it and started just holding on to it. And I'm a I'm a diamond hand hogler. For now. So let's get to some viewer questions. Caitlin Long 43:09 Yeah, does does our bank handle Bitcoin? Yes. custodia handles Bitcoin for customers in I believe, 36 states. We're not licensed in every state. And we just provide Bitcoin custody services for Bitcoin. That's it. So not exchange services. And for business customers only not not individuals. To be sure I big disclaimer, our US dollar deposits are not FDIC insured. I know that's not your question. But getting that in there. Does this clash with the SEC is non financial instruments stance two answers to that one is? The answer is no for a couple of reasons. One is the SEC has deemed Bitcoin to be a commodity, not a security. And another is custodian is legally a bank. Banks can do things that non banks cannot. And one of the things banks can do is provide custody services for for commodities and securities. So even if it were a security, which it's not, we could provide custody services for it, we're licensed to do so. Andrew Brill 44:04 That was wrong from Marietta, Georgia. Let's go to the next question. Rick from Carlsbad, California has the government's debt outpaced inflation, asset Growth and Tax revenue deposits, despite money printing in the 2000s? And are there charts to back this up? Speaker 1 44:22 Well, I don't produce the charts. There definitely are charts to back it up. But what you really want to look at, I don't look at the Fed's balance sheet as a measure for inflation that has not had good correlation. What you really want to look at is total non financial sector debt. And it has grown at a remarkably steady rate of about 7% per year. And so yes, the debt growth is is outpacing inflation. How have we been able to get away with that in the United States? It's because we've been in for importing deflation from the rest of the world over the last couple of decades, in terms of of technology pushing the cost of doing business down and In terms of cheaper labor, coming from other countries where we're importing the effectively importing those lower labor costs, that that that's not sustainable forever, there is going to be a point at which the US government, and frankly, the entire US economy can't keep putting more debt. On the economy. We're already at the point where our debt service is greater than our defense spending. And so we're we obviously can see that it's not sustainable and at some point, there's going to be a reckoning. That's why in part, I'm holding on to my bitcoin. Andrew Brill 45:37 Robert, from Fort Lauderdale could incentivizing assumable mortgages with low rates and down payments, help boost lending and real estate. Speaker 1 45:45 Yeah, this is a hot topic. I'm not a mortgage expert or housing expert, but I've known I've been watching this, it's a hot topic assumable mortgages, make homes more affordable because the interest rate on the mortgage is is low, lower than you can get on a mortgage today. And so, yes, that is one of the ways that the housing market some of the tightness in the housing market could be relieved. I find it very sad that household formation is being delayed and and the Zoomers are really struggling and are not optimistic about their own financial prospects and their own ability to have the American dream of owning a home because homeownership is is out of reach. I was just this morning on I believe it was Fox Business saw a map of how many cities a starter home is a million dollars. And and yeah, that's, that's sad. But if we step back, what fixes all of those problems fixing them money fixes all of those problems? We have a system that incentivizes exactly what we've seen in the last 50 years, which is governments out spending their income and printing money to make up for the difference and causing inflation to be higher than it otherwise would and should have been. Andrew Brill 47:12 Go to the next question. Jill, from Portland, Maine, how might Russia's regulations of cryptocurrencies affect the war in Ukraine? Caitlin Long 47:20 Oh, boy, I don't know the answer to that. I am not an expert in Russia is regulation and obviously watching the heartbreaking war there. I do know that there have been people who've raised money for Ukraine, using crypto and especially in the early days, because the banks got cut off from the financial system, especially with the power outages. And a lot of software developers in this space are in Ukraine. So so just heart goes out to all the innocent people who are suffering. I wish I had an answer to that question, but I just don't Andrew Brill 48:01 think the next one is our last one. Alex from Greenville, South Carolina does bitcoins divisibility into tiny fraction Satoshis negate its limited supply? Caitlin Long 48:11 No, this is a question. This is a fallacy a lot of folks fall trap to fall into this trap. Think of a pizza or a pie. You can cut the pizza into four slices, you can cut the pizza into eight slices, but it's still just one pizza. And that's exactly the way to think about Bitcoin being divisible into Satoshis there will never be more than 21 million Bitcoins period. Yes, you can cut them up into small pieces. But just because you can cut into small pieces doesn't mean the pie itself has been any bigger. It's not and that's the answer on Bitcoin. There is no way at this point to change the consensus mechanism of Bitcoin that would change the quantity of Bitcoin we fought a battle in fact bitcoin is going mainstream now precisely because those of us on the side of what's called the small blocks won that battle What am I getting at people wanted to change the algorithm they wanted to have people with the mining capacity and the large companies in the industry vote for larger blocks that would have centralized Bitcoin and it wouldn't be what it is today. In fact, actually there was a competition for for exactly that bitcoin cash. And look at where bitcoin cash is today at one point when bit when when when the fork happened between Bitcoin and bitcoin cash. The two had the exact same value. I haven't even looked at bitcoin cash recently, but it's a tiny fraction of Bitcoin. So the market voted with its feet and thank God it did because we were able to keep Bitcoin decentralized. Keep it operated by regular folks like you and me. It will never be controlled by Government it will never be able to be changed to have more than 21 million Bitcoins each in each divisible into a fixed number of Satoshis. But that pie is never growing bigger. That's precisely why it has value, because it is recognized as a scarce asset that is recognized as a medium of exchange and a store of value. So, I dig in lots of discussion about this very question on the internet. Paul Vineya from it used to be at the Wall Street Journal wrote a book, The Age of cryptocurrencies in 2015 just asked this very question yesterday, look it up lots of conversation about it, and people who are answering it even better than I did, and and hopefully you can learn and educate yourself and get a lot of confidence that there isn't going to be more than 21 million Bitcoins. And if that's the case, you start to get orange pilled and go deep down that rabbit hole. Andrew Brill 50:59 Hey, look, thanks so much. This was this was awesome. Thanks so much for joining me, where can we find you when you're not stopping by speak up, whether it be social media or elsewhere? Unknown Speaker 51:09 Custodia bank.com. email us at info at custodiabank.com or at Caitlyn long underscore on Twitter and also on LinkedIn. Andrew Brill 51:18 Awesome. Thank you so much. I really really appreciate it. Unknown Speaker 51:21 Thanks. This was fun. Andrew Brill 51:22 That's a wrap on another discussion here on speak up via wealthion, thank you for joining us. If you need help being financially resilient, please head over to wealthy on.com Sign up for a free no obligation portfolio review with one of our registered investment advisors and remember to follow us on social media for the latest news and information to help you invest wisely. And if you could like and subscribe to the channel, we'd greatly appreciate it. Don't forget to hit the notification bell so you find out when we post new videos to the channel. 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