Bitcoin Crypto Fund, Massive Liquidation, and Coinbase Hell

we gotta now hit silver Gates bankruptcy

or should I say their liquidation the

Bitcoin ETF and updates regarding that

I'm going to talk a little bit about

Peter schiff's son yeah and we're going

to talk about coinbase what just

happened with someone over at coinbase

and what did it have to do with some

potential theft going on at coinbase a

little bit of a warning sign for those

of you if you use coinbase so first

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Patty's coupon linked below a few days

ago we actually covered silvergate

Capital we pulled up the balance sheet

for silvergate and one of the things we

complained about with silvergate was the

massive pain on their balance sheet I

mean we showed that their total assets

fell from about 15.4 billion dollars to

11.3 not only that but they totally

removed any valuation of their

intangibles which was basically a sign

that they were writing their brand down

to nothing their total liabilities

dropped as a well but then again the

spread between their total liabilities

and assets fell to less than 600 million

dollars whereas previously it sat at

around double that and a lot of this was

due to the write down of really bad

investments in fact a lot of people are

saying hey this is see here the losses

for example this is what happens when

you end up borrowing short but lending

long you end up taking the L when

interest rates change and you end up

going bankrupt loss on Securities loss

on derivatives impairment of intangibles

I mean massive write Downs here at

silvergate well silvergate has now

announced that they plan to wind down

operations and liquidate the entire Bank

remember silvergate was a Community Bank

in California that was uh that basically

hopped on the crypto bandwagon and the

idea was that hey this was going to be a

bank that would create on and off ramps

24 7 for individuals drum Powell

somewhat kind of responded to this a

disaster slightly by talking about how

the feds fed now system expected to be

released later this year which is sort

of a replacement for ACH and Zell uh

basically more instantaneous uh

transacting there is still an

intermediary the FED but more

instantaneous payment between two

different banks uh this was really what

what silvergate was trying to do for

crypto by being an on and off ramp in an

intermediary for crypto to get from

dollars to crypto unfortunately because

of the lending they exposed themselves

down to they're now liquidating their

Bank

their shares fell another 50 percent

they do say they're going to be able to

repay all of their deposits and this was

a stock that was actually trading for up

to 220 dollars in November of 2021. it's

now trading for somewhere around two

dollars which uh quick math is down over

99

uh this also does put more pressure on

regulation for crypto and it's not the

good kind of Regulation I mean I suppose

regulation in general was always deemed

to be something that was a hard pill to

swallow but something eventually crypto

would have to go through uh but uh this

does put more scrutiny from the SEC and

certainly companies like FDIC on anybody

who touches crypto because ultimately

who ends up having to bail out Banks who

will uh can't fulfill their deposit

requirements well the FDIC and and

potentially the government so

silvergate's demise here is I think a

little bit of an L for the crypto

industry following of course the

disaster that we've been uh seeing over

the last year I still have I still have

nervousness regarding binance I am very

hopeful though that once we get through

this sort of flushing out of the excess

uh there's a high likelihood that we end

up getting to cleaner regulation and uh

and and less of this this nonsense uh

and that's exactly where I am actually

paying attention to what's going on with

the grayscale Bitcoin trust the

grayscale Bitcoin trust is basically

kind of it's It's a fund you have to be

an accredited investor and you suffer

dare I say suffer it's not that long you

have to sign up for at least a six month

lockup if you want to invest in the

grayscale Bitcoin trust and the goal is

that the assets under management in the

grayscale Bitcoin trust will eventually

be turned into an ETF which is an

exchange traded fund now the difference

between that is uh ETFs generally don't

trade for discount or premium it's

possible that they they slightly do but

that's more of a rounding error in my

opinion than it is an actual discount or

premium

ETFs generally trade at what's known as

net asset value so let me give you an

example I'm an active ETF manager which

is true I'm a licensed financial advisor

but let's say that my ETF I'll just say

has uh I don't know let's make it up

okay let's say it has exactly 20 million

dollars in assets under management well

then we have and and then let's say it

it has I don't know uh shares worth one

million dollars a share well if we have

20 million dollars in assets under

management then there are 20 shares ETFs

work very differently from the way

stocks work because the number of shares

that exist just aligns with how many

people put money in so if somebody comes

along and says here's 20 million dollars

well then we just create 20 more shares

there's no like dilution the shares just

represent how much money is in it it's

very different from a mutual fund or

something like the grayscale Bitcoin

trust and very different from from

actually stocks

ETFs are are much uh dare I say uh

I I would I would call them preferred

this I'm gonna I want to be very clear

this is my opinion I think ETFs are much

more preferred because there is none of

this sort of dilution or discount or

premium or all of the Ridiculousness

dilution of course affecting stocks uh

specifically uh companies uh and then of

course these massive discounts or

premiums affecting mutual funds uh or

things like the grayscale Bitcoin trust

grayscale Bitcoin trust right now A

trades at about a 50 discount to the

assets it actually has under management

so what that means is if you have a

hundred dollars of Bitcoin in the

grayscale Bitcoin trust the the fund is

actually trading for fifty dollars and

the reason it's trading for that sort of

discount is one regulatory risk and

number two illiquidity and and it's

basically the grayscale Bitcoin trust

trying to price in the market the free

market is trying to price in well what

if Bitcoin Falls more right uh and so uh

grayscale is actually suing the SEC over

the rejection of the opportunity to turn

the grayscale Bitcoin trust into an

exchange traded fund I actually think a

Bitcoin ETF which companies like

arconfest have also filed for would be

very brilliant I think it would be a

smart way and a safer much much safer

way for people to be exposed to crypto

uh the regulation over the storage of of

crypto assets

would be a substantially uh more

scrutiny based or in my opinion safer

for individual investors than individual

investors having to worry about you know

Cold Storage versus uh exchanges then

you have exchange risk then you have

cold storage risk like losing your your

coins you know there's actually a joke

on Reddit that the guy who lost like 400

million dollars of uh crypto on a hard

wallet because he threw away his laptop

uh there was a joke it's a joke but it

was it's funny well maybe not but anyway

it was circulating that he spent two

million dollars to basically dig up the

dump where he threw away his laptop or

where he thinks he threw away his laptop

and he finally found his hard wallet was

able to recover his coins only to

realize that what he thought was 400

million dollars of Bitcoin was actually

just Bitcoin cash and uh he only had 400

000 of value after having gone into debt

by two million dollars to actually

recover this hard drive and now he's

upside down 1.6 million dollars and

anyway the point of that is that's a sad

story there's some humor in it but it's

to argue that it's not easy if you have

your money on Exchange it's convenient

but uh you know now you have exchange

risk if you have your money on Cold

Storage what if you lose it you know and

I know a lot of people are like well

that's your problem you should put it

next to your gold bars and your guns but

again you know it's it's there's risk

whereas if you have an ETF I personally

think it's the easiest way to have

exposure to crypto but but you can't

have that right now because the SEC

doesn't want it anyway the grayscale

Bitcoin trust is suing uh there's the

potential that uh the court right now is

leaning towards actually vacating the

rejection which would be fantastic for

the grayscale Bitcoin trust because then

it would go back to the SEC and the SEC

would either have to approve the

grayscale Bitcoin trust to turn into an

ETF or uh reject them again with with uh

of potentially a different reason that

they pull out of their butt but

personally for crypto investors I think

one of the best things that could happen

would be Us ending up getting a crypto

based ETF I think it would be phenomenal

for crypto it would be a very very

bullish moment

I did uh end up having dinner with Peter

Schiff and his family yesterday I'll say

a Peter schiff's son is uh super into

Bitcoin brilliant guy realized obviously

I mean anybody could have known this but

both of them were very libertarian but

government is nearly always bad a

smaller government is much better or

potentially no government I mean our

conversation ended up turning into the

potential for the privatization of fire

departments and blockchain-based

arbitration of disputes which is

something that's been theorized for a

very long time the blockchain

arbitration of disputes uh one of the

issues we ended up running into was what

if somebody loses a dispute and doesn't

pay and what if the assets that are now

arbitrated through blockchain are

actually real assets and and can't be

traded like for example a house or a car

even though the title can be traded

through blockchain you you the physical

possession of it can't uh and so then we

kind of the conversation briefly

devolved into the idea of well then who

has the militia and they were joking

like oh is is the militia going to gonna

start Department are they going to start

wearing uniforms should we call it a

police department so uh anyway really

really fascinating discussions so uh

anyway it's very interesting to see

Peter Schiff who's obviously very anti

uh Bitcoin and then his son sort of take

the opposite position of being very Pro

Bitcoin but both of them being

anti-government

uh anywho so uh you know another thing

that I thought was fascinating was that

apparently a man uh was hacked a person

named Jared Ferguson was hacked uh on uh

having his money on Exchange with

coinbase

allegedly the individual uh hat was a a

victim of being Sim swapped Sim swapped

let me say that correctly apparently

Jared Ferguson is now suing coinbase for

over ninety six thousand dollars in

losses because his phone was hacked uh

Sim swapping is basically where somebody

calls in your cell phone provider and

ends up uh requesting a new sim because

they allege that they lost their phone

they impersonate you and then they can

use that phone to uh basically they

would need then your username uh for

let's say your coinbase account

they reset the password for your

coinbase account getting a confirmation

text I would imagine they'd have to have

some kind of access as well then maybe

to your email but maybe not I mean in

theory if you have somebody's login

email and you Sim swap to get a code you

could just reset your password on the

page log in and then transfer your

crypto out Jared is now suing coinbase

alleging that a coinbase is violating

the ET uh or sorry the electronic funds

transfer act protecting customer funds

from electronic fund transfer fraud and

violating article 4A of the California

Uniform Commercial Code stating that if

a bank authorizes an unauthorized order

it will get refunded or the individual

will be refunded however coinbase is not

a bank and uh doesn't uh fall under the

same sort of Regulation as Banks do

therefore it's likely that unfortunately

Jared mate actually lose

uh that case so uh this is leading of

course to a lot of debate about uh

crypto security and of course a lot of

people make the argument again in the

crypto space hey not your keys not your

crypto uh of course that's easy to say

but it is it is not the most convenient

thing to have uh your your coins off

exchange if you're trading them right so

I do I do empathize I can't empathize I

haven't lost money to to one of these I

I sympathize with uh with people who end

up losing uh money on on exchanges

especially uh if there's there's hacking

involved because you know you might want

to be trading from uh either uh stable

coins to actual crypto assets uh like

Bitcoin or ethereum or otherwise uh so

anyway long and short of that is if you

can avoid exposure to sim swapping via

you know putting putting additional

security measures into your your phone

account by maybe calling and uh ask your

ask your phone provider to to uh set a

code word onto your account so if

anybody ever calls in they have to give

a code word or you know set up more

security whether that's uh don't use sim

authentication use uh use authenticator

apps you know and then back up your

authenticator apps onto a different

device in the event you do lose your

your phone but anyway a two-factor

identification big deal here uh I would

uh I would highly encourage looking at

that a lot of people in the crypto

Community obviously say hey you should

just never use two-factor identification

on your phone a lot of people actually

calling for just straight up Banning

two-factor identification uh through

cell phones I I kind of completely agree

with that anyway overall it's it's worth

taking also a look at just sort of

what's going on now uh Sim swap is a

tool that makes a copy of your phone

remotely yeah I mean that's that's a I

guess another way to put it I mean it's

it's really what it's doing is it's

allowing text messages to go to somebody

else's device right so I think that's

that's obviously a a problem anyway

Bitcoin right now sitting at about

twenty one thousand uh 625 dollars at

the time of this recording we have been

trending down going into these Catalyst

meetings here not only the jobs report

but also the CPI report so uh uh you

know big big problems all new phones are

now e-sim thankfully I don't know that

esim actually makes a difference because

somebody can activate an e-sim by

calling in somewhere else you don't

actually need a physical uh SIM card

anymore you could get esim so esim

actually hurts uh in my opinion more so

than uh Than Physical uh but anyway

someone here writes Cold Storage can

have multiple backups of the same one

you can get multiple uh wallets but yes

I'd rather hold half in a trust right I

mean that's a very good point it's like

you could you could it's kind of like

guns okay let's say you have 20 guns in

your house it's like you can find 20

different places to hide it but it's

still a pain in the ass right I mean you

could put guns in multi different

properties in case one of them burns

down or whatever uh but but you have to

keep track of all of them you have to

make sure they're safe and somebody else

doesn't have access to them who's

unauthorized who then has access to the

combinations where you're hiding them

all right it's you know how do you track

it it's it's a pain in the butt and

there's just things to to think about uh

anyway that's sort of a little bit of a

crypto discussion for all of us