Crypto JUST made me lose EVERYTHING.

holy crap i literally just got wiped out

this is despite wearing dragon chain

armor

boy there are lessons in this loss that

i really hope that you take with you

forever

this is a loss that is really a 99 loss

that should have been avoidable after

all warren buffett tells us the number

one rule of investing is don't lose

money and the number two rule of

investing is don't forget rule number

one

well

i failed on number one and on number two

now i was fortunate to sell all of my

cryptocurrency and my profit less

technology companies or smaller cap

companies in january to avoid an

additional 70 to 80 losses that would

have exceeded the white about that we're

about to talk about but

the reasons that i got wiped out in this

particular investment completely wiped

out

are big lessons

now first for you to understand this you

need a bit of background do you remember

the tara luna stablecoin meltdown it was

a stable coin with a value at one point

of almost 60 billion dollars 60 billion

dollars is four times the amount of

money that kathy wood manages it is half

the size of amd amd is a 120 billion

dollar company tara luna a stable coin

got to

60 billion dollars that's a lot of money

and all of it disappeared

and when that disappeared and that

stable coin melted down crypto

brokerages lost massive amounts of money

lending their money to uncertain

entities like three arrows capital that

just vanished with that 1.18 billion

dollars under management and led these

crypto brokerages to near collapse or as

some might say no collapse

now

you know what's really sad about this

is watch this watch this three-minute

clip from march of 2021 15 months ago

when i described what could happen to

stable coins and companies that i

nicknamed like voyager digital and

crypto phi nicknames i gave voyager

digital and block fi who are making

waves of their own today listen to the

clip uninterrupted we think hey it's

pegged to the dollar it's pegged to the

dollar one uh one to one and if it's

pegged to the dollar one to one it's

kind of like having cash except it's

kind of like a high yield savings

account but that's the problem it's not

it's a loan if they made you sign a

document saying you agreed to lend this

and you could lose all of it people

probably would be less inclined to do

this but that's all in the fine print

they just say hey sign up and earn

interest on your cryptocurrency it

sounds so wonderful they don't make it

clear that this is actually a loan now

that doesn't become a problem because

right now your gusd doesn't fluctuate in

value because it's pegged to the dollar

and the markets are working normally

prices are going up you've got nothing

to worry about because as prices go up

there there usually isn't stress in the

markets right so when does this become a

problem well let's say sally says you

know what i'm going to get some margin

i'm going to buy bitcoin for 100

i'm going to get 25 of margin from

voyager here and i'm going to have 125

invested in bitcoin now let's say

bitcoin goes from 55k to 5k that's a big

drop it's about 91 right well this is

going to go down 90 to about 12.50 what

happens now well now sally gets wiped

out sally got destroyed and this could

be a flash crash this could be a day

sally instantly gets destroyed because

you have smart contracts that instantly

take your money away give it to voyager

the problem is voyager is left with an

asset that's worth a whole lot less than

what they thought it would ever be worth

so now they only have 12.50 they just

lost money when a company or an

institutional investor loses money and

this happens at scale amongst hundreds

or thousands of different client

accounts because we have no idea how

many people are margin we don't get that

kind of transparency

from the system we don't know we don't

know how often this gusd is lent out

over and over again we have no idea

let's say voyager goes bankrupt okay

voyager goes bankrupt because they're

like wow we just tell all these margin

losses well cryptofy is probably going

to have some issues as well but i'll

tell you the first thing that's going to

happen kevin and michael are going to be

like

oh crap please let me have my gusd back

and all of a sudden we're gonna see a

lot of people instantly demand

redemptions they're gonna want yo give

me turn my gusd into dollars right now

the market's crashing i'm freaking out

okay now and i know some of you are

gonna think kevin come on the same stuff

happens in fractional reserve banking

hold that thought okay i'm going to put

a little note down here fractional

reserve banking we're going to talk

about fractional reserve banking

hold that thought because there's a

massive difference quite a few actual

massive differences here so what happens

now now you've got two people who think

they have 100 of gusd in the bank

they're like i want to redeem okay well

what happens gemini and crypto if i say

hey look we're in a crisis right now no

redemptions literally no redemptions

they could do that it's happened before

look at bitfinex bitfinex a chinese

company uses tether as their stablecoin

and in october of 2018 they stopped

allowing deposits and so nobody was able

to convert uh us dollars or chinese

dollars or whatever euros into tether

and the one-to-one peg of the tether

collapsed it went down as low as 85

cents to one dollar and there was no

market crash bitcoin was stable around

six thousand dollars when that happened

no credit no crash no collapse and

tether loses 15 percent

boom like that but wait a minute it's

pegged to the dollar okay you think

kevin and michael are gonna be able to

go to the fed and go yo i demand my usd

no fed's gonna laugh you they're gonna

laugh you out of the bank like get out

of here we we did not bestow our trust

on the gusd you tried to inherit trust

of the usd you tried to inherit the

sovereign banking the uh the backing of

the full faith and credit of the united

states via a stable coin but it doesn't

work that way quick example i have let's

say a thousand of these erasers and i

say hey i will always pay you one dollar

for this eraser right here because the

value of this eraser is pegged to the

dollar cool who are you trusting the us

government or me

you're trusting me if i go bankrupt

worthless

same could happen here you get

institutional bankruptcies the value of

those underlying coins which are

corporate controlled these this is not

government control they're corporate

controlled usdc is a consortium they're

private companies that control usdc

gemini private company that controls the

gemini coin it's not a government the

government cares about

the people corporations care about

themselves so i was acutely aware of the

danger of stable coins so much so that

people in the comment sections regular

told me that i was just a fudder when it

came to stable coins that they're always

redeemable for either in the case of

tara luna juan luna or in the case of

things like usdc one dollar

well today folks are sending me a lot of

tweets saying things like it looks like

your prediction from 2021 may be playing

out and they're showing me charts

describing exactly the issue that i

explained from the video of march of

2021

unfortunately

i couldn't even protect myself

now for those of you wondering about

this chart you know with usdc on it

personally i don't believe that usdc has

massive issues until bitcoin gets closer

to sub 10 000 probably around 5 000 then

this chart from usdc could play out as

well so there's there's still more

damage to be done to cryptocurrency

valuations but

there's something propping up

cryptocurrency valuations right now that

might not last very long we'll talk

about that as well but let's go back to

me so what did i do after march of 2021

well i did exactly what i said i would

do i would stay away from stable coins

i'm like hell no no stable coins for me

that is just lending money and lending

money is stupid see i come from a real

estate background and my understanding

is that when you lend money you might

not get your money back

so i didn't want to be a lender

i wanted to be

the broker i wanted to be involved with

like hey we'll make you make the loans

but i don't want to be the lender and

this is interesting because not only am

i a licensed real estate broker but i

used to be a licensed loan originator a

licensed mlo who brokers loans

and so

this

kept me researching the issue and

looking for opportunities to invest in

this market without being in stable

coins so i interviewed people whom i

thought would know better than me here's

me with the ceo of block five you know

we're not we're not building a business

that's focused on extracting as much

value as we can today or tomorrow we're

really thinking about a relationship

with our clients over the next five 10

20 years and so that's what's important

to us

so

you know i think our our scale and

capitalization and experience in risk

management is something that really

stands apart from other

uh folks uh that operate in this market

nice so yeah i mean that's interesting

because uh when the market crashed there

in march there's no fed coming in to

bail out the crypto market right there's

no lender of last resort

it sounds like that was almost you guys

so you guys were liquid

yeah i mean look we're the we're the

largest um and and we you know we think

of ourselves as

uh certainly a company that's interested

in growing more client relationships and

offering more products to our clients

and being successful from a

uh from a capitalistic perspective but

we also view ourselves as a company

that's a

you know uh an increasingly important

part of this crypto ecosystem and that

comes with

uh certain responsibilities here's me

with the ceo of voyager digital

would you say then the vast majority of

the money that you're lending out is

going to these these larger institutions

that are doing this trading it's it's

not like you know

joe the ice cream vendor is getting my

bitcoin and if you know it's it's a cold

winter day he's going bankrupt i have

risk

yeah we don't do any of that we're not

we're straight to these big institutions

that was the it's the risk parameters

we've set as a public company and why

it's easy to see it in our disclosures

and our financials you know we just uh

put out our december financials got

posted on canadian cedar

the other day on monday as did on the

otc market so people can see all the

data and like i said it's only big

institutions because we don't want to

carry that risk for our consumers

here's me with the crypto analyst at

kathy woods arc invest

why can

blockfi or some of these other companies

voyage or whatever why can they pay me

six percent interest just for holding

bitcoin there is this is this bit

connect all over again is this a ponzi

what's going on here

yeah that's a good question

uh i i would say a few things that the

first is

there's a

there's a mis

a misperception between

offering annualized rates

and annual

rates so like what's funny is like the

six percent annualized

it's at any given time but you're going

to see massive fluctuations that might

end up converging towards two or three

percent over the year um

the second thing is that you know there

is huge custody risk

um and people are taking massive risks

by custodying it um in

um you know a in in in sort of a

counterparty and so i mean we and we've

seen we've seen like hacks and leaks um

in security leaks uh from users who end

up trying to generate yields by going to

these more esoteric products um with

block fi specifically um again i'm not i

would say i'm not the perfect person to

speak but i i've like followed zach

prince who's their ceo and and they've

done they've done tremendous things

they're doing uh they found an

inefficiency in the market um and i

think because we're so early

and crypto first companies aren't

actually as integrated into the

traditional financial system

as what we might see

um you know in a few years there's still

some significant arbitrage opportunities

uh that users are capitalizing on and

they all told me the same thing yes

there's counterparty risk for the

stablecoin but you have to trust the

institution you have to trust how good

and protected blockfi is going to be

when we just issue margin calls blockfi

one of the you know most critical pieces

of technical infrastructure that we've

built is our risk management

infrastructure which one's 24 7. it's

connected to liquidity and when prices

are volatile in either direction it

issues warnings and margin calls and

ultimately liquidations to folks who

have borrowed from us and those

liquidations occur before

the value of the loan is higher than the

value of the collateral voyager lends to

safe people

like three arrows capital

[Music]

if there's ever a problem it's the

borrower who will get screwed because

they'll just get margin called and again

i should have reminded myself of what i

said in march of 2021

because i even said the words

let's say voyager goes bankrupt okay

voyager goes bankrupt because they're

like wow we just have all these margin

losses and now guess what's happening

voyager got an emergency bailout loan

and it's limiting withdrawals from its

customers like i said redemptions would

get stopped

they're like i want to redeem okay well

what happens gemini and crypto phi say

hey look we're in a crisis right now no

redemptions literally no redemptions

they could do that it's happened before

blockfi got an emergency bailout loan

from sam bankman freed the founder of

ftx and tara luna is at zero now usdc is

still fine but the path to destruction

is written if btc keeps falling in my

opinion is

usdc breaks as well at btc 5k

until then bailouts from companies like

ftx his founder sam bankman freed or

binance can keep crypto afloat they're

basically acting like the federal

reserve

which remember when i said you're going

to wish you had a jay pal

who is referred to as the lender of last

resort well guess what cnbc is now

calling the founder of ftx

yup the lender of last resort just like

jpow but even sam bankman free doesn't

have a money printer like jaypal so that

means his support is more limited than

what jaypal can do sam bankman freed

might be able to help prop the crypto

economy up around 19 000 bitcoin as a

strong support but what happens when his

support stops what happens when true

panic spreads because there's no sam

bankman free to make sure voyager

digital can allow people to at least

remove some of their money from the

platform

tbd

but how did i get wiped out already i

couldn't even make it to the end and i

was the one ringing the bell of the

warnings so how the hell did i get

screwed well after talking to the ceo of

voyager blockfi and other crypto

analysts i thought the safest investment

was in the institutions the worst case

the people lending their stable coins

would get screwed but the brokers

transacting it would be fine you lend

the money lender gets screwed broker

still keeps the commission well that

real estate style thinking got me wiped

out because in may of 2021 i agreed to

invest in block fi as a venture capital

investment i invested four hundred

twenty thousand six hundred ninety

dollars into blockfi which is more than

other people invested when they say they

did things like starting a bank or

buying a bank you could do that with

little investments like 25 50 100 200k

no i didn't even talk about my

investment and i've still put

hundred 420

dollars into block five here's my wire

and cnbc

just released a wonderful article saying

that block fi is now in such distress

because of the three arrows capital

margin call and that margin call not

working out and that good old risk

management from blockfi not working out

so

you know uh i think our our scale and

and capitalization and experience in

risk management is is something that

really uh

stands apart from other

folks

that operate in this market blackfy is

now being sold for less than 99 of its

prior valuation potentially all to sam

bankman freed for just 25 million

dollars and all the venture capital

investments are wiped out well folks it

looks to me i can pat myself on the back

i was 100 percent right my fundamental

analysis was absolutely correct

except i still lost everything

these are these are these are laughs of

pain

see three things went wrong

this was a venture capital funding which

meant i had no liquidity

i

wanted to be liquid in crypto so i tied

myself up into venture capital which has

no liquidity

see once you're in a fund you're locked

up in fact i

regretted my decision as early as

september of 2021 when i grew concerned

more concerned about stable coins but i

was told that my money wasn't in shares

themselves that i just had ownership

interest in a fund that owned the shares

uh in block five and therefore i could

not sell my shares on equity zen a place

you can sell shares

number two i ignored the collateral

damage that would occur if my stablecoin

belief was correct this was a huge blind

spot i was correct about stablecoins

collapsing

but didn't realize that they would take

the ship down with them this was a large

blind spot and i paid the price dearly

for that number three i didn't follow up

on the red flags of the companies being

able to explain their yield strategies

numerous times in interviews i

complained that it just seemed odd that

they were able to pay people six to ten

percent on stable coins yet they somehow

weren't taking larger risks elsewhere

well by being blind to these three

issues i couldn't even save myself