What the SEC *just* said about the Future of Crypto [NEW]

hey everyone kevin here so there's been

a lot of talk about regulating

cryptocurrencies is it going to be bad

is it going to be good

what is the sec chairperson going to do

the sec chairperson has like

29 hour courses over at mit on

cryptocurrency so a lot of folks are

like yay we're going to have a friend

in the cryptocurrency space well

unfortunately he's come out recently and

said

i might like cryptocurrencies but i'm

not going to be

simpatico to a hands-off approach so

let's go through some of the things that

gary gensler mentioned and then talk

a little bit about how this might affect

cryptocurrencies going forward

so first things first the uh sec

and gary gensler have made it very clear

that they will quote

go as far as they can go in terms of

regulating cryptocurrency

gensler wants a very clear rules

established for cryptocurrency

right now we just have sort of an

assortment of speeches and guidelines

and court cases and hearings

and so it's really hard for regulators

to kind of figure out like how do we

regulate cryptocurrency

and so i think gary gensler is looking

for something very clear like a very

rigid framework

that is going to regulate all seven

areas of cryptocurrencies that they're

interested in regulating

which include icos coin offerings

trading venues like block fi which

remember you can go to metkevin.com

bf deposit money and get up to two

hundred fifty dollars for free with

block fi

met kevin.com bf lending platforms defy

stable value coins which i've had my

concerns about

custody and etf and coin funds those

seven areas they want to have

very rigid frameworks uh or a rigid

framework to regulate

all of these things in uh now we do also

have

that gary gensler is potentially even

calling for more regulation from

congress

to give them more power to regulate

cryptocurrencies

although he does say it's very possible

that they already have all the power

that they need

uh and right now believes that uh

cryptocurrencies are kind of like

the wild west market still and gary

gensler believes that

ultimately if they need extra power

congress should give the sec more power

to

regulate cryptocurrency so it's very

clear that gary gensler even though

he's somebody who's done courses on

cryptocurrencies and and is very

interesting cryptocurrencies

it's very clear that he's a big fan of

more regulation

and and this sets up some potential

concerns over okay well what is that

potentially going to do the future of

uh coin values and what about d5 or

whatever right

uh and and so we can get a little bit

more insight into exactly what gary

gensler's

uh sort of perspective is by

understanding

really the role of the sec so here's a

quote from him he says

if someone wants to speculate that's

their choice but we have a role

as a nation to protect those investors

against fraud

and so this is really interesting

because really what gary gensler is

saying is look

we're not going to tell you something is

a good investment or a bad investment

but we are going to tell you if or or we

are going to enforce or try to

limit fraud and people breaking the law

so for example let's say you invested in

lordstown motors

and the company went bankrupt because

their product sucked well

that's unfortunate for you but that's

not necessarily fraudulent

now what if the company was deemed to be

a complete

fraud well now it would be open to

enforcement by the sec right

so the point of the sec is not to help

you determine whether you are making a

good or bad investment

it's to try to prevent fraud whenever

possible to try to make sure that your

investment

is fair and that it's not just going to

get robbed away from you

this makes sense too because even when

they talk about custody with crypto

coins

like what if you buy on robinhood versus

coinbase and

you know you don't have your keys now

somebody else has custody for your coins

who's responsible

if if they lose those keys right and to

what extent

should the sec regulate to make sure

that your investment is protected

kind of like with stocks we have the

sipc uh

and and these are sort of opportunities

for us to reclaim money in the event

let's say one of our brokerages goes

bankrupt

we don't really have that kind of

protection for uh crypto

uh and we also have a lot of concerns

regarding the stablecoin space right

there's

a very real reality that look with

stable coins

if uh stable coins end up breaking the

buck hey what happens if they're now

multi-leveraged

and people say hey i want my coins back

oh but wait a minute you staked your

coin or you said that you

you wanted high yield interest on your

usdc or whatever

we've let that out 10 20 30 40 different

times

could that lead to potential collapses

when folks

run on coins and take their money out

right now this gets argued a lot and

this video is specifically not about

stable coins but stable coins are

obviously coming up

in this discussion for example yesterday

we had raul paul on twitter

mention that hey look you know don't

complain about stable coins going down

a lot of tokens were just down 80

percent bitcoin was down over 50 percent

but nothing happened and that may be

true paul

but here's the thing bitcoin ran up to

over sixty four thousand dollars and

then fell to twenty nine 000. yeah

that's that's about a 50

decline but most institutions and people

who bought bitcoin within the last year

bought bitcoin between 34 000 and 37 000

that means people weren't actually

really that substantially upside down

which is important to consider when it

comes to the stablecoin market

because if let's say bitcoins people's

average price on bitcoin is i don't know

the later buyers their average price is

same

35 000 well being down 6 000

not that big of a deal probably not even

going to lead to margin calls

but what happens now if in worst case in

a worse case scenario

crypto bitcoin specifically fell to

let's say ten thousand dollars or five

thousand dollars

how many margin calls does that

potentially lead to and does that

potentially

lead to the liquidation of stable coins

where everybody feels like oh well i got

all this money in stable coins i have

all this extra savings money

let me use that to pay for my margin

calls on crypto oh but wait a minute i

signed up for lending on that i actually

don't really have that money

somebody 10 20 30 times down the road

has that money

because that money has been

rehypothecated over and over and over

again well now it's like ah crap

now you don't have money for this and

that potentially enhances crypto

liquidations right

so you could see really bad scenarios

coming

and we haven't really tested a a real

deep

draw down really since like 2017

you know the fall that we had at the

beginning of march in 2018

was was really not that substantial at

all in fact let's go ahead and look at

the chart

uh and it certainly wasn't even that

long now it's a good fall it's a good

test

but let's go ahead and go to march over

here let's zoom in obviously prices were

substantially lower right but take a

look at this

over here we had uh bitcoin trading for

mostly around the uh well actually i

mean we've bounced around quite a bit

right in 2019

we went from anywhere around five

thousand dollars a coin to up to

thirteen thousand dollars a coin

to six thousand dollars a coin to ten

thousand dollars a coin to four thousand

dollars a coin

so really yeah we had a fall but this

four thousand dollars a coin was not

much

lower than the 6400 where we were or the

uh

3000 where we were not much before that

right we haven't seen a very very

substantial drawdown

uh in quite a while uh here in 2017 was

probably the last time when we went from

19800 all the way down to about 6 000

that's that's losing somewhere around

two-thirds these are some big drawdowns

right

and now maybe and hopefully one of these

bigger drawdowns will never come we

don't really want to see like a

90 sell-off again in the crypto space

and

i think the biggest concern now though

is how many

more times are our stable coins sort of

getting hypothecated and are

are we creating a potential environment

where we have

way more leverage in the crypto space

than we do in regular securities that

are

more regulated or at least somewhat

regulated by the sec for example

now i know a usual response from folks

is oh well kevin remember

like there's so much debt in a normal

financial system how could you

complain about rehypothecation or debt

in cryptos

well folks keep this in mind i wrote

this down here 90

of the money invested in bitcoin is

spent on derivatives

90 and a lot of that is traded on

unregulated exchanges like ftx

or bitfinance where people then borrow

more money against

what they already are trading their

derivatives which derivatives are like

options right

so when we put all the pieces of the

puzzle together it's kind of like yeah

it's probably actually not a horrible

thing to have more regulation than

crypto

because it's so dark and murky right now

i personally have kept my crypto

holdings to less than four percent of my

portfolio

because i'm just nervous about the lack

of transparency

now again i know that the regular

financial system is very arcane as well

trust me you got scumbags like over at

citadel you got a lot of shade

happening okay i agree with that i just

worry that

what if those same players are going

into sort of the wild west of crypto

and doing what they're doing in the

regular financial space even more and

even worse right

so that's something to keep in mind but

here's another thing to keep in mind and

i think this analogy is really really

good

gary gensler came up with this analogy

and he says that

automobiles didn't take off until

governments laid out the rules

automobiles didn't become popular until

we had traffic lights and speed limits

because public safety actually helped

make cars go mainstream

and by bringing cars into the sort of

the inside of government

you can create broader adoption by

giving people more comfort and safety

and see this is really interesting

because

now we look at the potential benefits of

regulation

so now rather than looking at regulation

as oh no this is crappy this is bad this

is going to be horrible for crypto the

last thing we want is regulation

we can actually potentially look and go

no you know some transparency and

oversight

like guarantees that i won't lose my

money if i have it sitting at coinbase

some form of guarantees that if i have a

stable coin

and i i have it lent out it's very clear

to me that

i am lending something rather than

having it there as savings

or i know who it's lent to uh or rather

whom it's led to

how many times is it then lent out is it

re-lent out again like how can i track

where my stable

coin is right how much risk am i really

exposed to

i think additional regulation could help

foster some of those

changes or benefits that does

unfortunately go kind of

as a slap in the face to the purpose of

crypto which is don't regulate me bro

right

but the reality is this is where we're

likely heading so

we don't want to stick our heads in the

sand we want to be real that gary

gensler

plans more regulation we don't know when

he's got a lot of things going on you

know you are kagos disaster earlier this

year

the gamestop disaster uh people were

clamoring for crypto etfs and that

but personally even though there's no

timeline i'm optimistic

to see some kind of regulatory framework

i do think some regulatory framework

could create some temporary downward

pressure

on uh on cryptocurrencies in general

but those could be buying opportunities

because i i'm actually

bullish on more regulation coming for

the reasons that we've really outlined

here i also don't believe that

cryptocurrencies will just

vanish i mean at this point we have so

many crypto exchanges we have so many

uh institutions invested in

cryptocurrencies we have universities in

cryptocurrencies we have

paypal square and these massive visa

massive companies with a vested interest

in cryptocurrencies

nvidia with their ethereum you know the

graphic cards they make are great for

mining ethereum with so many vested

interests in cryptocurrency surviving

i'm actually bullish i think it's all

great

and so what i've been doing lately is

buying the dip

and and i plan to keep buying the dip

now i've been nibbling i've been pretty

soft

buying the dip i haven't bought in the

last few days because obviously bitcoin

ran back up to 38 000

but any time it's been around like 29 to

32 000

i've been buying uh and uh and i'm

curious

i'm very curious about how much more of

a dip we could see if we get some

sec regulation personally i

kind of would love for bitcoin to

briefly fall to like 15k just to kind of

like really

shake things up a little bit and like

test the market really well and

and that would probably make me feel a

little bit more comfortable because i do

think a fall to 29 000 is not

really a test when most people who

bought last year averaged in somewhere

between 35 and 37.

so anyway which is kind of where we sit

right now at 38 000 but anyway

just some thoughts open dialogue here

nibbling

bullish on on uh potentially regulation

creating by the dip opportunity but then

also regulation leading to broader

adoption more safety and security

for coins overall and more transparency

on how much lending is going on so

my thoughts want to share all this

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much bye

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