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Live with Restream, April 04
Recorded: April 4, 2025 Duration: 1:41:05Space Recording
Short Summary
As the crypto community approaches tax day, discussions around compliance, legal interpretations, and innovative fundraising strategies are gaining momentum. Key insights reveal a proactive shift towards understanding IRS regulations, showcasing the industry's growth and the importance of strategic planning in navigating the evolving landscape.
Full Transcription
GMGM fam, today is Friday, April 4th, 2025, the first day of the rest of our lives. And I hope
for your sake, it's your best one yet.
We're going to have a lot of fun because it's almost tax day here in America.
So we got someone who might be arguably masquerading as your tax advisor.
Is that fair to say, Noah?
I'm more of a legal investigator.
Taxes for accounting.
And there's two considerations, accounting and law.
And to be clear, you're not a lawyer and you're not an accountant, correct?
Correct. I'm an autodidact, which means I have a capacity to teach myself.
So just getting out of the way that nothing on here is financial advice, of course.
Reasonable.
All right. Well, before we get started we're
going to uh quickly plug the winner of last week's qr code which was uh not in fact curve finance but
just a curve fan curve doesn't pay for marketing but a fan was willing to spend some squid out of
their own pocket so take a look and click that qr code to see some of the cool stuff that's been
going on with curve l Lama Land redesign.
And if you're interested in this QR code, the auction for obtaining this QR code is going to be happening and possibly even expiring while we're on stream here.
So head over to leviathannews.xyz.
We will be checking out updates as that rolls in.
But it looks like it could be, you know, sometimes you get some fierce bidding.
About half an hour from now, this one might expire for a bargain uh less than 20 bucks for an amazing qr
code all right with uh that out of the way uh we would like to bring it to you mr uh do you go by
mr sir captain how was the proper joy i enjoy the the captain. All right, captain.
Noah's fine.
But good morning.
Taxes are quite a contentious topic.
Obviously, that's a great starter.
What does that mean for a person like me?
That means over the last years, I've done things, managed investments,
considered accounting. But over the last three years in particular, I started to question what's
the relationship with accounting and law. So trying to keep things simple is the premise of anything that I'm
trying to say right now. So primarily accountants are not lawyers, and accountants are trained based
on IRS rules. Now, Treasury has the Code of Federal Regulations, which is the much-touted
50 bajillion-word set of documents that they publish, which is the much touted 50 bajillion word set of documents that they publish
which is basically the interpretation of irc code now accountants additionally follow irs memorandums
chief legal counsel memorandums which which is all interpretation, which is all reasonable because
everyone is capable, or at least persons that want to are capable of interpreting
the law as written by Congress. So some years ago, that dawned on me.
Oh, all right. What are the words? What are the laws? And it's very simple. Like, use Google, IRC, whatever you want. I mean, really, the basis of what's most interesting is like 61 gross income or 7701 is applicable specifically in the context of what we're discussing today.
what we're discussing today.
So there's a lot of definitions in the law,
but the point is words matter.
Semantics matter.
The definition of words.
Like this page right here is just one page of so many in IRC code,
which is published by Congress.
And that is such a powerful thing.
So many folks will glance over it and be like, what does it mean?
And I'm the type of guy that's like, all right, fine.
What does it mean?
What is the choice of the word?
And that's intent.
Definitions are very clear, very unambiguous and very substantive when
used as a justification or argument in argument
so to top it all off not only do we have the irc code written by congress we have common law and
common law is basically look up justia and you could that's just one of the websites. There's countless sources of case precedent.
Now, these precedents are stronger or strongest when they come from the Supreme Court.
But they're also meaningful when they come from inferior courts.
But when you draw on case precedents from the Supreme Court, that's by definition the law of the land. That's common
law. That's what has been judged and ruled historically as what is reasonable. And reasonableness
is a core of everything that we understand about just our way of life, and especially how courts
interpret law. Now, here's the takeaway, and then I'll let you set up how you want to take this.
I am much more moved by the IRC, the words as written by Congress,
and the interpretation of precedents, judges' interpretations of the law,
than that of an agency. The IRS is an agency, and by functional definition, it's a collections agency,
which is fine. That's not a derogatory statement it's an acknowledgement of reality
and they have a capacity to look at the exact same laws that i do and the exact same court
precedents that i do and they are absolutely in their right to interpret things in their favor, but equally, I am absolutely in my right
to interpret things in my favor.
And by definition, that is exactly what the judiciary branch
of the United States government is for,
to take different interpretations and produce rulings,
judgments, to create new precedents.
All right.
And I feel like we got the, oh, shoot, didn't come in just in time for that moving finale,
but we got the now, the American flag background rocking here because you're getting back to
constitutional principles.
So we're going to have a constitutional convention here via live stream.
So like before we get started, I just want to nail a few of the specifics.
So just to be clear, this is just a discussion in the Curve governance channel.
I haven't yet seen a formal vote for this.
And in fact, if there were to be a vote, there would be no code change anyway.
So it doesn't...
No, not at all.
Okay, so we're still very much still in the discussion phase.
So no one's
late to the discussion um although we probably want to get it wrapped up more or less by tax day
um because my my thinking is uh correct me if i'm wrong about this because you're you know you're
the autodidact here i could actually potentially just print off a copy of the like this nominee
agreement and include it in my taxes as justification for whatever like
basically say here's my interpretation here's the precedent and then the way that the law works is
that the IRS is a civil agency so if it disagreed with my interpretation it would have to take me to
court to prove it but because I had actually included my documentation like I would very
clearly be in that category of tax
avoidance as opposed to tax fraud. Tax fraud being a crime, tax avoidance being a patriotic duty. Is
that correct? That is absolutely correct. So Form 8275 and subversions of 8275 is for disclosing a
tax position, which basically means I read the law. This is what I understand.
So you can include statements, but I found it interesting to reference external links.
And it turns out just throw a bit.ly of a Google Doc, and that provides very easy access to a document instead of trying to like finagle how to incorporate 40 pages
into form 8275.
We're in 2025.
So explain in a couple of sentences because yada, yada, yada refer to this document.
And the more documents you have, the more argument and interpretation you have, the more substantial
your argument is, the more reasonable it is. And that's okay. So it's not just court.
They don't just take you to court. This is about a conversation, just exactly the same thing that
I wanted to have on the Curve Governance Forum. This is my interpretation. I am presenting to you my returns. Feel welcome to ask questions.
Feel welcome to pass it by legal counsel. Let's talk and identify what is reasonable,
what is the most reasonable way to proceed. All right. Now, okay, let's now unpack some of the
like nitty gritty of the proposal here um so specifically
what you're trying to do is my interpretation of this because uh well the like i'm sure you are
aware of this as a person who like is very smart and capable of generating long-form content is
when you post long-form content like 99 of people will go oh that's nice um and then about one percent
bookmark it and say okay i'll read this later um and that's fine because that's nice. And then about 1% bookmark it and say, okay, I'll read this later.
And that's fine, because that's the smart 1%.
But even of that 1%, maybe 1% actually does take the time to go and read it later.
But I'm that 1%.
I have printed this out.
I have made some notes.
But I'm not smart enough to pretend to know what's going on.
So here's my interpretation of this.
You are taking the fee distributor contract and essentially within this
presenting your reasoning that this fee distributor contract is this legal
title, which officially classifies as a nominee.
Is that correct?
Oh, broadly, that is a reasonable statement.
And nominee, could you explain what you mean by nominee?
So a nominee, we go to 1988 in the Bollinger case, which basically establishes three criteria
that is required of a nominee. So a nominee does not hold title.
It holds title for a beneficiary
if you want to compare it to another structure,
other structures.
But it holds property or money for someone else.
So technically, it never holds anything.
There's no titles in crypto.
So the concept is it already has
nominee interest because of the inherent nature of smart contracts and i go through a lot of um
documentation uh that says like a smart contract is an independent entity that has a formal charter of um of or articles of
formation and that by definition is the code of the contract so i i interpret defy the way folks
have not granularly deconstructed defy these These are discrete entities. And traditionally, maybe you could think
of them as like independent corporations or sole proprietorships, but they have literally in
articles of formation. There is nothing inherent. This is a great argument. There is nothing
inherent to a blockchain that couples contracts together. If anything, they're at worst case subsidiaries
interacting with one another,
but they're not related whatsoever.
They're just completely decoupled,
this androgynous type of entity unto itself.
Right.
Now, okay.
So one of the interesting things I've noticed lately is that of course the regulation
uh the regular the whole regulatory environment has been moving in favor of crypto in a lot of
ways right like you've seen like the all these like um enforcement actions being tossed out but
one that notably doesn't seem to have been tossed out is the entirety of the Tornado cash case, right?
And the reason I bring this up is because there was a lot of concern when essentially
a smart contract address got added to, and I'm not a lawyer, of course, so I might be
getting the exact term wrong, but it was like the smart contract address itself was subject
to sanctions, which was arguably also like a novel legal interpretation
of a smart contract, similar to how you're doing it. And it seems like they're still proceeding in
some form with the case against Roman Storm, which leads me to believe that they might actually want
to try and like establish or push this precedent that a smart contract is, you know, maybe not
like, like, like to try and like expand the classification of what could be applied to a smart contract.
But if so, would that like go in violation of the way that you're trying to interpret a smart contract here?
As of currently, no.
They have to define it.
And the only place for it to be defined is by Congress.
And with regard to tax treatment, that goes in IRC code. Just like we
looked at 7708 as a definitions page, they could define it. And as of current, the definition of
a partnership, 7701, is applicable. It's pretty obvious. A2. I can't read it. It's a little blurry, but basically
a syndicate, group, or pool. It's kind of unambiguously applicable, which is fascinating
because this is Congress. This has nothing to do with the IRS. So by definition, by Congress,
This is Congress. This has nothing to do with the IRS. So by definition, by Congress, so many folks in crypto are engaged in partnerships. Now, that's a separate conversation, tax treatment or collections from an IRS perspective. And that would lead into a separate conversation. But from a congressional standpoint, folks are engaging in partnership activity.
From a congressional standpoint, folks are engaging in partnership activity.
Right, which is, you know, I think you could probably even like get constitutional because
we've got our constitution background and point out that like assemblage is, freedom
of assemblage is right there in the First Amendment.
So you actually have a pretty strong constitutional case.
So this brings us to this larger document, which is the voter escrow partnership.
And this is almost more like a manifesto perhaps than anything else.
But this one's meaty.
This is a lot going on in there.
But essentially, it's the presentation of everything you've talked about so far.
Is that fair to say? like the basis and justification for what this concept of like this fee,
why you can establish this fee distributor contract as a nominee?
Yes. And that is, so there's three steps or three core things that the memorandum is intent to prove
random is intent to prove more towards the top of the document. So the nominees, the third of the,
more towards the top of the document.
it's kind of like the conclusion of, all right, let's establish what the hell is going on here.
There's the structure and the relationship of partners versus a partnership. And let's prove,
well, let's read it. Prove that the voter escrow partnership achieves the qualifications of a partnership independent
of formal compliance with IRS reporting expectations, which we literally just did.
IRS 7701, according to Congress, this is a partnership that has nothing to do with tax
reporting obligations.
It's just a definition.
So a good part of the memorandum proves that.
Prove there's no partnership dominion over property or money.
And dominion is Glenshaw Glass, which is basically the foundation of tax compliance by the IRS, gross income.
And dominion is the key word and clearly realized is, quote unquote,
one of the most important phrases in that case.
And we granularly deconstruct what the heck's going on in DeFi with regard to Dominion. And that's a powerful thing
because people see these claim buttons and they see property flowing back and forth between
contracts. But what is Dominion and how is that foundational component of tax law applied
to what the hell is going on here. So that's point number two.
And we can break this all down and go through the document and whatnot.
But point number three is where the nominee interest comes in.
We want to prove that escrow distributions
from basically in curve terms,
the fee distributor contract to partners,
which is basically press claim,
no matter how acquired, property in the fee distributor contract,
because the IRS clearly states that all virtual currency, they use the term virtual currency,
all crypto is property. And barring a definition page 7701 by Congress, that is the status quo.
page 7701 by Congress, that is the status quo. This is property. So there's considerations if
it was money, but in other case, it's not money. So no matter how the fee distributor contract
acquires property with its inherent nominee interest characteristics,
the treatment of that property is governed by Commissioner versus Bollinger in 1988.
That's exactly what the case discusses. Okay. So then so much of this focuses on Dominion.
And just to be clear, as a U.S. taxpayer who voluntarily pays his taxes every year
and full compliance with the law,
which is, you know, see, see, patriotic, we got that.
And, you know, if you're just joining now,
none of us are offering financial or tax advice.
We're just interested in the subject
because we're about to get blasted
in about 11 days on taxes.
The dominion refers to essentially
when you have provable control over the crypto.
And thus, the net effect of this is if your manifesto is adopted, this means that when I claim rewards, that's when I assume a tax burden.
Is that correct?
You skip step two to go to step three.
Okay.
I know, I know.
But I got to file my taxes.
The deadline's looming.
Well, first we have to prove a couple of things.
It's pretty easy to prove it's a partnership.
That's just by definition.
So the vote does nothing.
It doesn't declare it's a partnership and declare that, all right, we're going to comply with IRS rules regarding
partnership filing requirements.
What we're stating or what the memorandum states is it is reasonable that partnership
laws as written by Congress are applicable to what is going on here with these parties involved in a syndicate or a group
now if partnership laws are applicable and this is really where the memorandum started in my mind
i'm like oh shit so what are the laws now a partnership is not taxed it is a pass-through entity so partners are individually
taxed based on distributions from the partnership basically their prorata share or whatever
the agreement is and in the instance of curve it's based on relative governance power so
that's what the partnership distribution is now here, here's the kicker. What is the income of the partnership?
What is the dominion of the partnership?
Clearly, nothing's realized because there's no money involved to a degree.
So that's like Eisner v. Macomber and that type of conversation.
But the dominion is what's critical from an IRC-61 standpoint. The partnership, these group of partners that deposit CRV into these CRV, have technologically verifiable no dominion over any of the property in any of the contracts, nor the escrow contract.
But the dominion is what's critical from an IRC-61 standpoint.
nor the escrow contract. Clearly, these are peer-to-peer interactions where it is
technologically provable that a third party is engaging with another third party or basically
an NPC, a non-playable character, a contract. So there's no person involved. There's no entity to represent the partnership. There's no product or service
offered by the partnership because there's no products, meaning you're not acquiring natural
resources and doing manufacturing and selling a product and doing accounts receivables.
So that doesn't exist. So is is it a service that's an interesting conversation
but then we come back to these discrete entities the nature of a smart contract and the concept
that the code of the contract is probably reasonable to be argued to be articles of
inception as a discrete entity because nothing ties contracts
together from a blockchain technological standpoint so um refocusing um does the
partnership produce income if there's no product or service considering those that breakdown of
everything i just said so if there's no income to the partnership
and partnerships are passed through,
there's no income to partners.
That does not invalidate what we prove in the first step,
that it is a partnership.
What we're now doing is proving that the partnership
does not produce any income from any products or services offered by the partnership.
So that brings in like IRC 701, 702, and 703.
So there's no taxable income.
But there's still distributions. So we want to talk about the fee distributor contract,
which has inherent nominee interest.
And I mean, technically, you know, 731 can be talked about,
IRC 731, but the fee distributor contract
is not really a distribution of property
owned by the partnership
or contributed by partners
to the partnership and that's what 731 would be discussing so in the memorandum I break all this
down 731 is not applicable also because it has nominee interest or we're arguing and frankly
proving that the fee distributed contract inherently has nominee interest.
It doesn't report to anybody.
It's an independent entity that follows its rules no matter what anyone else wants.
It has immutable code.
It may read information from outside of its entity but it nothing outside of it can affect it
or invade it or take dominion of the property contained within it none of the partners can say
all right let's do a vote and take some of that money and do something discretionally so there's there's no capacity
to invade and take dominion so that sets up basically uh the conversation for proving that a
nom that that leads into the conversation of how distributions are made from a escrow
that has nominee interest.
Okay, so there's definitely a lot going on there.
And I wanna just take a second to recognize
the question from the chat because we're live streaming.
So while the 600 of you who are watching this
are like listening, you can pop your questions
onto X or YouTube and we'll go ahead and answer them for you.
So it's a great time to, it would be a great time to like ping us with questions.
Arrow is asking two questions.
One, where would one start when it comes to basically like trying to like understand this
material?
And two would be like, where would one start
when relaying this to our tax guy
to implement for this past year?
So two considerations, there's law and accounting.
All right, so every accountant
is rightfully worried about liability.
So this is a novel interpretation.
And they're like, okay, this is a partnership
that's not filing
a 1065 and issuing k-1s all right what the hell do i do with it and unfortunately um
i've seen accountants that say that breaks the irs system all right what does that have to do
with me we're talking about congress the ir IRS is just an agency, and they are responsible for executing the law as written by Congress.
So what's really needed is an accountant that has either an independent autodidact in them that wants to understand the laws written by Congress
and execute accordingly, which is probably going to be far and few between.
There's not going to be many of them.
But from a law perspective, I think any lawyer should be interested in this kind of document. This is a very granular
breakdown of the law as written with full semantic evaluation. The definition of words
are all considered this is an extremely granular document. I don't have recommendations for how people could or could or may want to proceed.
Obviously, from my perspective, I understand this document.
Therefore, I have a capacity to represent or express what the hell is going on.
So it's just like we're having with this conversation.
So in some regards, from a legal perspective, all right, you guys want to talk about this?
You want me, hey, IRS, let's have a legal conversation or in a court?
I'm not familiar with the quorum.
I probably rightfully outsourced that responsibility to a third-party attorney, but I surely have
a capacity to explain this document's content
and what it means
and the implications of it.
I can't, in good faith,
offer any recommendations for anyone.
Everyone has to proceed
on what serves their best interest.
But for myself, yeah.
If we submit this with our taxes
and we get audited,
will you commit to doing a live stream
with the auditors,
like prosecutors that come after us
to like have the debate
on a podcast like this?
Well, I could talk
on behalf of this memorandum.
I know what you're saying is tongue in cheek.
I just, this is not something that could help everyone.
What this document is, is a legal analysis that's pretty robust, that cites precedents that go back to the early 1900s and draws on established law from Congress
to draw conclusions and interpret the law as written.
That's what it is.
All right.
Another good question coming in in the chat.
This is pretty relevant.
Since the entire rest of the world has basically been walled off from America thanks to tariffs, does this matter to any of our listeners outside
the United States? Yes. This document is an expression that everyone in every country
has their individual capacity to look up the laws as written by their respective government and understand them and apply them and interpret them.
That's really what it means for outside the U.S.
And that's what I would like to do.
As you brought up the First Amendment, people have their individual rights under the Constitution of the United States to express themselves and speak
freely and produce argument and interpret laws. And I guess, you know, a good takeaway from a lot
of the conversation is a lot of behavior is based on fear. Not really one to be afraid of a conversation, especially after doing research and exercising due diligence,
because then you have your tools.
You have an understanding about what the hell you're talking about.
Well, I think the fear comes in the fact that if the IRS is having a conversation with you,
it could end up in court.
And the U.S. government does pretty good at winning their uh
court cases in federal court well that's a fear what's pertinent is whether it's in court
you don't end up in court right away first off you're having a conversation with inspectors
you're having a conversation with or they're the inspectors are dropping off documentation
and justification to their attorneys and they're doing a full legal analysis because from an irs perspective they're doing a cost benefit analysis
you know how much potential tax revenue we can make versus how much we have to spend on lawyers
to actually bring this to court that's exactly what happened with the jared case in my opinion
that's just uh implicit not explicit they remember jared and tezos and he got a tax
refund for his staking so okay i thought you were talking about jared from subway and i was like
that's a completely different legal case this was last year jared um was staking tezos and he paid
taxes on it and then he filed for a tax refund and the IRS issued him a refund.
So he received Tezos from staking that wasn't taxed.
Now, obviously, it's all implicit.
There was no judgment in the case because the IRS refunded the money.
One of two things really happened.
The IRS said, I don't want to make precedent because this is a contentious
topic we're dealing with property we're dealing with staking but this isn't like uh chopping down
wood in a forest this is digital so they didn't want to make precedent that's one potential
takeaway or the other one was they were dealing with a four thousand dollar tax refund and like
this is going to take us 200 grand to try this case cost benefit analysis given the refund in any case that should express um a decent reality it's not so simple as how
people think there's the cost benefit analysis consideration that they certainly make and
there's the precedent consideration they certainly make and in the press in consideration of the precedent
angle it's exactly why i wrote this document they there's some serious precedent that's applicable
to defy of course based on my knowledge i've never seen anything like this i've never seen
someone look at the irc code, find relevant court cases
relative to DeFi, and do thorough, robust, granular interpretation of what the hell is going on.
Yeah, it makes sense. It makes sense. Now, just the funny thing about the tax code,
though, is it's so complicated that if the pro want to build that case, like they can mine through thousands of pages of tax code and I'm sure construct an equally elegant like counter case.
So you did address that in the document.
You do address some like your thoughts as to like how people might counter this.
But first, I just like because I haven't followed as close.
Maybe you can help me.
Is this the most recent guidance the IRS has issued?
This was from April 2024.
And in it, they mention specifically this clause that I wanted to ask you about.
And this is just for when you're supposed to just check yes as to like, did I receive payment or property?
Like, did I hold crypto during the year?
But they specifically, let me zoom in a bit here.
They specifically mentioned that you received new digital assets resulting from mining,
staking, or similar activities, which I think is similar to that Jared case you're mentioning.
And this should mean, like, receiving income from the fee distributor, right?
Like, this is what they're talking about here?
Oh, yeah.
So, in in law you have
to be very specific when to check yes check yes period that's it there's no scope there's no other
consideration involved you are correct but there you can't draw anything else from it. So a distribution from the fee distributor contract
aligns with that particular bullet.
Therefore, check yes.
Nope, muted.
And that's the only guidance they've issued on this subject.
There's there other things that there's more.
Okay.
Oh yeah.
I have in my other documents.
This is, this is a relatively short document.
Yeah, this one I understood.
And I, I click yes.
I click yes.
I got this answer right.
I think I got this answer right.
Oh yeah. But this, I was think I got this answer right. I think I got this answer right. Oh, yeah.
But I was referring to the memorandum.
That 39-page memorandum is relatively short compared to other stuff.
Oh, yes.
Oh, I believe it.
I've done it.
Let's get back into your memorandum here specifically.
So you frequently throughout this memorandum, you mentioned the Loper-Bright
decision. And I'm curious about this because my understanding is that the elimination of
Chevron deference might affect that. Okay. So part of why I started doing this years ago,
Okay. So part of why I started doing this years ago, when I heard of the Loper-Bride case, I was like, oh my God, this is exactly why I started doing what I started doing.
And Loper, when I heard of Loper-Bride, I was like, wow.
So interpretation. We're talking about literally all the IRS memorandums, including the document you were just looking at, including every document that the Trump administration basically told the IRS to, all right, let's stop and redo it.
It's all interpretation. So for instance, my memorandum is from a court perspective,
a judicial perspective, not from an accounting perspective, nor the IRS perspective,
which means in a court setting the irs could argue yeah but
we've done this or this is the history of the way people have reported or x y and z and from a
defense defense perspective you're like all right pearl opa bright reference statute reference the
irc code where are you acquiring this authority to do this? And that elimination of agency deference means the court
has to ground itself in the law as written. And that's called de novo, the words of the law as
written, which basically puts us all on the same footing. And that's remarkable from an autodidact's perspective. They're
looking at words. I'm looking at words. We're the same. And what do we do? We construct
sentences. We construct arguments. We draw on the laws as written, and we draw on the laws as written and we draw on case precedence called common
law and we build strength to argument.
Okay.
And then let's get to the reaction from the community here. here so you know you you give the good dtl dr um the steps that you would be uh like
mandated by this and mostly like uh you got like a comment from one good dude thinks it's good
llama risk to to their credit like uh they are like super good with legal stuff and they've
written a bunch of like really in-depth legal documents. They had some questions about this
and you did reply to them.
So you could of course direct people to your reply here.
But like the basic like questions they have is like,
first of all, how do you envisage formalizing the agreement
in a manner that ensures is both validly executed
and legally enforceable?
They also wanted an explanation
about how the voter escrow arrangement
is being treated as a partnership for U.S. tax purposes. You already addressed that in pretty
substantial detail. But basically, yeah, Lama Risk raised a bunch of questions, and you answered
them in text. But why don't you also go ahead and summarize that response for people who are listening here. So the fee distributor contract, the Estro contract that distributes what is quote unquote
fees, there's an interesting section of the memorandum discussing that, inherently possesses
the characteristics of nominee interest or that it was inherently assigned or inherently has nominee interest
it is a discrete entity unable to be affected by any third party is unable to be affected by the
partnership it cannot be invaded it does not there's no potential for anyone to claim dominion
over the property contained within other than as defined by the articles of inception, the contract's code.
And that is tamper-proof.
So let's go back.
Let me ground my thought process
in the first part of Lombarism.
Oh, yeah.
Let me get that back up there.
I don't know if you could see that well enough on the formalization yes so how do you so technically this is why did i propose this because i wanted other folks to be
constructive i wanted folks to talk about this there is absolutely no need whatsoever for this
governance vote to pass in my opinion based on my reading of the laws as written.
It inherently possesses nominee interest.
But, for instance, if there's a governance vote which has its assigned vote, that is a point of reference.
It doesn't add to the strength of argument or any argument that's presented in the memorandum.
It's just in addition to basically stating that, all right, everyone's like, we've read this.
This is quite interesting.
And we agree or we understand that this memorandum describes the fee distributed contract has characteristics of nominee interest
so it's an acknowledgement vote uh it doesn't signify anything other than a memorialization
maybe um so that's how it's already enforced it says so in the meat space you would need partners to all agree and then they would need to create
a third-party entity incorporation or whatever however they want to structure it and they would
need all this documentation for enforcement and compliance and how to prove that it has nominee
interest but that is literally what the contract's code
of the fee distributor contract does and prove.
It's already there.
Got it.
Okay.
Good answer.
Good answer.
Let's get to the counter-argument section
in which you will try to steal man the opponent's case against the voter escrow partnership, just because I think it's, you know, it adds to the credibility, the document to actually like to to try and formalize the case against it and argue against it, uh, shows that you have been thinking through things.
Go ahead.
These are nice counter arguments and rebuttals.
I attack this from many angles and I think there's four counter arguments and
rebuttals that are literally like 15 pages in length, more or less.
So how do you attack it?
Okay, IRS is like, it's not a partnership.
All right, look up IRC 7701.
That's in brief, but there's obviously from a documentation standpoint, a whole entire argument that could be presented and thus the rebuttals to the counter arguments. Now, then they could also argue like,
all right, it's a partnership. So why aren't you filing a 1065? Well, because it's software,
but we prove that it's a partnership. So we have no capacity to file a 1065.
And then the framing of that standpoint is,
all right, what are we supposed to do? And that's from like,
a consumer of the IRS's perspective. Hey, IRS, this is a partnership. You want a 1065,
it can't be filed. What's the answer? What do you do? It's not, and that's what
what's the answer?
What do you do?
It's not, and that's what
Loper Bright
discusses, it's not for them to define
what to do, it's for Congress
to define what to do.
It's not the mandate of IRS
to write the law,
it's the mandate of Congress
to write the law.
And I find that an interesting angle.
They may, so part of the last counter argument is
they may want you to pay taxes, but that's not something for them to decide. That's for Congress
to decide. And all their job is to interpret the words and the law as written de novo by Congress.
Their want is not part of the equation.
And frankly, since Lover Bright, their interpretation is not up to them.
Their interpretation is up to a judge.
Or the interpretation is up to a judge.
Now, a potential other counter-argument that I don't think you addressed in here is that
you still are saying that when you receive the rewards, that is what Count says.
When I, as a taxpayer, get dominion over the funds and thus would assume a tax burden.
But a counter argument might be like,
if I really hate paying taxes, I would prefer to have a interpretation of this where even when I claim the rewards, I don't get dominion of it. And that's like, you're giving me more of a tax
burden than if I had a more creative legal argument that would say, like, maybe I don't
get custody of the funds until they're in a centralized exchange.
Anything in blockchain land, it's kind of like metaverse.
It's not real.
This is the whole point of nominee interest.
And this is why the Bollinger case is so exciting.
And this is why it's so hard to understand the goddamn Code of Federal Regulations and
how Treasury interprets the word of Congress.
The Bollinger case has a very simple outcome and a very simple constraint, basis. property enters an escrow contract with nominee interest
and all that is set up
in the memorandum
what is the
basis and there is
a counter argument and there's also
sections that discuss what is the
basis
the basis in the Bollinger case is preserved between escrow and the partner.
So we've already identified and clarified why partnership does not produce income, because there's absolutely no capacity for the partnership to exercise dominion.
absolutely no capacity for the partnership to exercise dominion. These are third party
peer to peer interactions that result in the escrow of property. In DeFi, they use, so
there's a good section at the end of the escrow contract section. And where is it?
escrow contract section and where is it yeah escrow contract though this escrow property
might superficially resemble fees it is not a fee generated by the partnership because it's so simple
what is a fee a fee is a manifestation of a product or a service it's a payment so it can't
be a fee because the partnership is incapable of offering a product
or a service. So basically, you have what results is the escrowing of property, that's
a manifestation of third party persons engaging peer to peer with one another, which isn't
a fee of the partnership. People are doing stuff with each other in discrete immutable entities that
have their own articles of inception unto themselves this really brings up the nature
of what the hell is going on here it's what no one has done before so it it's not a fee
so what it's the escrowing of property by two people.
We have no idea who they are and they're doing some shit and property gets escrowed by the rules of the contracts that they're engaging with that the partnership has no dominion over.
no dominion over so the basis of the property that enters those contracts is arguably the
fair market value at the time of contribution now that presents a complexity because we have
no way to track that as partners we don't know when i mean obviously if there was defy tools
created we could track fair market value on escrow contract deposit.
I think technically it's possible, but I have an entire counter argument and an entire section that discusses that.
case precedence that discusses why and how it is most reasonable that the fair market value upon
distribution from the escrow contract is basically all you're going to get about basis it's the only
way to track a factual actual value with accuracy.
So basically, to summarize then, because the properties of how the smart contract operates, there's no basis and thus no capital gains tax triggered, even when you're claiming rewards
from the fee distributor.
Is that fair?
If $1,000 of Bitcoin is escrowed, the basis is $1,000 fair market value bond contribution.
So let's say there's zero volatility and the escrow contract distributes $1,000 worth of Bitcoin.
The basis carries over.
The partner receives $1, dollars in bitcoin at one thousand dollars
of basis that's not that and that is what i kind of jumped to conclusion with or it jumped the
that's why i was trying to focus on nominee interest rules with the um with the proposal
because that that's the craziest takeaway that I could possibly have based on
the Bollinger case. Basis preservation involves a distribution from an escrow contract with
nominee interest preserving basis. So there's IRC 1001. If you receive $1,000 worth of Bitcoin at a basis of $1,000, all right, fine.
It goes up to $2,000.
You owe capital gains tax on the Delta, $1,000.
But that's after the fact.
What happens if you take that $1,000 in Bitcoin from a claim button and you immediately convert
it to stablecoins?
There's no change in basis.
You received $1,000 worth of Bitcoin at $1,000 basis.
You convert it to $995 worth of stablecoins.
So technically it's a $5 capital loss.
There's no capital gains on receiving that property.
And then we can talk about constructive receipts.
So there's an entire section about constructive receipts and how that's clarified.
It's not income to the partner because they're following partnership law. the income allocated to the partner is a manifestation of the income that the partnership
generates. And we have proven that the partnership cannot generate income. So if the partner is
receiving $1,000 in Bitcoin that has a basis of $1,000, there's no capital gains, and there's no
income attributable to the partner because the partnership is technologically provable incapable of realizing realizing
glenshaw glass and taking dominion over fees or producing any fees and there's no income either
so basically that that is the takeaway of the framing or the net result of the memorandum.
That claim button isn't what people think it is.
And there's 40 pages that break down what no one has looked into.
Okay.
And just so there's some people joining just now,
like the TLDR of all this is that if you like want
to like advance this interpretation that essentially
when you hit the claim button, it's not quite as, you know,
it's not quite as cut and dry as,
there's many possible interpretations.
What has proceeded for the past 50 minutes or so
is a very detailed explanation
of the basis of this argument.
So again, we're not lawyers, we're not accountants,
but you could present this to your lawyers,
to your accountants, and for example,
try and cobble together a case
for how you could do your taxes.
That's part of the conclusion. I mean, this is really just an exercise. I get excited because
for me, it's a learning experience. I'm like, holy shit, this is what it says? This is how it works?
This is the law? It's provable. And really at the end, after writing
this entire document, you come back to the three things you want to prove. And maybe at the end of
our conversation, we say, we have proven that it's a partnership really damn clearly. And that
has nothing to do with a declaration of a partnership at all. There's
nothing to do with filing 1065s or issuing K-1s at all, according to Congress. And there's no
capacity to offer a product or service, therefore there's no capacity for the partnership to
generate income. And we have proven that escrow distributions, no matter how required, which is a
very key takeaway from the Bollinger case, the Bollinger case never, ever, ever talks about how property got into the nominee interest account.
They only discuss the relationship between the nominee interest account and the recipient.
And the whole case concludes preservation of basis. So it doesn't matter
who put property into the escrow account. So we proved the three things. You press claim,
you receive property, it retained basis. What else is there to argue?
Very cool.
Now, the other argument that some people have advanced
is that the IRS is itself going to be in disarray
because of budget cuts and because of tariffs and everything.
So they might not...
Who knows if they'll even have time to deal with anything.
Plus, it's a friendlier administration.
So they might be looking to, at some point, even issue counter guidance on this,
right? And they're welcome to. Half of my conclusion is, all right, I'm going to file 8275. I'm happy to talk about this. I'm more than happy for Congress to write some laws. And then
Congress to write some laws, and then you adapt, you adjust, you read the law as written, and you're
you adapt, you adjust. You read the law as written, and you're like, all right, great.
like, all right, great. If you have to change something, you change something. So instead of
approaching this type of topic with fear, I'm more like, let's have a conversation. What is actually
going on? And I'm sure a lot of people feel that way. They're like, all right, nobody's looking
into this. Who's looking into this? Where are the accountants that are on my side where are the lawyers that are on my side and i couldn't find
anyone i guarantee even if i spent hundreds of thousands of dollars they wouldn't be able to
see what i saw when reading these words to construct a memorandum
like this.
So we come back to the old parable.
If you want something done right, do it yourself.
Yeah, very, very good point.
I tried to get our legal squid, Alex, on the show to discuss, and maybe we'll be able
to get him back in the week or two or something like that.
He's on vacation, so he wasn't ducking out of like fear
um of not like of not having like a good case or whatever um but i would be curious to know like
if you have like shop this around because i'm not a lawyer right like um have you shopped it around
to lawyers have you shopped around to accountants what do they say i've tried to my i have an
accountant and he's like,
holy crap, I can't believe what you do with your documents.
My accountant's jaw is constantly on the floor.
I have 120 pages worth of documents for different things.
And he's like, I don't know what's going on in your brain.
Are you paying him per hour?
Oh, he's expensive. He must be happy when he gets one of these like all right
i'll read through this but it's gonna cost uh it's gonna cost a dollar or like whatever like
an hour per page i was i don't know i spent like 30 40 000 on uh on lawyers and accountants probably
in the last two years anyway um here's an interesting statement um
so i presented this argument in memorandum form totaling about 40 pages
that does not warrant a knee-jerk reaction saying i don't like this i don't agree with this
I don't agree with this. I don't understand it. This warrants, okay, you're saying this.
What about this IRC code? What about this clause? What about this language? What about this court
case? That's the only reasonable way to respond to this document.
And it is certainly not the case,
oh, it breaks what the IRS does.
No, this has nothing to do with what the IRS does.
This is a document that is for a court
using court precedents
and the words of the law as written by Congress.
So accountants are very quick to say, I don't know what to do, or I can't file this because
they have a liability.
They have risk.
They have their own risk.
They don't want to take responsibility for someone doing this because then someone who's
not prepared to defend themselves is like all right you got me into trouble
so they can't they can't proceed with something like this so that's why it comes back to what
era said there's no practical way for me to say anything about what to do with accountants here
it's an individual relationship between you and another person and nobody wants to take
responsibility for someone else so the
only reason I'm have written a document like this is because I take responsibility for myself
I do what others don't and and I learn and I'm not I have no inhibition in some regard no fear
I mean obviously at some point I'll have fear, all humans do. But I certainly don't fear words.
And I don't fear a conversation using words.
All right.
As for other people who gave feedback, so first of all, almost half the people out there said they read it, which is pretty good.
So maybe they're lying because like I know
my teacher often asked if I read the book and I'd said, oh, of course, of course I read the book.
Then the feedback, though, on Twitter or X now was like rather like, I guess, tepid, let's say.
So like you got accused of being an AI, which might be a good accusation. Like it means you
think like you think like an AI.
Martin said that he wasn't sure why it's needed.
He just tells his government,
I got this amount of Curve USD as dividend and they're okay with that.
No, I think he's not US.
I think he's Switzerland.
So it's different.
Lex Snowde hasn't read it.
Hopefully we can get Lex Snowde to read it.
That'd be really cool and have him on the show to discuss.
But what was your uh response in you know
you rewrote it out but like go ahead and verbally like uh respond to some of the feedback here
fiddy said it was ai but i just had a conversation an hour-long conversation about it
so that brings up philosophical questions what is is language? What is, yeah.
Well, I think what's neat is,
I think we need to take your writing
and feed it into and train an LLM based on you.
Because I think you would be a great candidate
to have your own AI built.
It would be way better than 99% of the AI agents out there.
It would be completely deficient of me
to not utilize AI for what it is capable of. But clearly,
in my capacity to articulate in the way I speak, these words in this document are a manifestation
of everything that I am. Whether explicitly each individual word is written by me or an argument
is presented as constructed from an llm and then
i modify the language to express myself or i modify and correct it to best express the argument
these are all my words well llms are good but um you know how working out with llms like it could
not come up with something like this like this this is clearly like, clearly like there's a stage of creative reasoning that LLMs do not yet possess. So I reading
through it is pretty clear to me that this is not the byproduct of an LLM. Although of
course, yeah, I'm sure you're able to supplement some sections and probably you, I would guess
you used it for the counter argument section.
No, I use LLMs significantly, but there is, so the first days, so this is obviously two
weeks in the making, but I have years that I've been writing legal documents. And I'm quite,
I'm quite proud of where this document is, the flow of the sections, how you introduce a,
so like, for instance, the first section talking about traditional partnerships,
that didn't exist. And I'm like, all right, so I have this flow of sections and now I should add more content,
introduce context, and I add additional sections. So this is a constructive process
where this is certainly not the original form of the document and it's certainly not the original progression of sections
and there's no answer to how to build documents in their perfect form when you start it's an
iteration process just like with software but the flow of these sections are quite interesting
because it builds from context into what is blockchain. And frankly, I start with the three things I want to
prove. And the only way I didn't know those three things at the beginning, I've only realized those
three things probably in the last couple of days after writing the entire document. But that belongs
in a section very early in this document. You go through what a smart contract is, you go through downstream contracts, you go through the relationship between contracts document you go through what a smart contract is you go through downstream contracts
you go through the relationship between contracts you go through the notion of an escrow contract
then you introduce inherent nominee interest then you go through irc 701 to 703 731 and you talk
about all right great basis basis preservation you bring in the court cases you bring in the court cases, you bring in the most important, Glenshaw Glass.
And over time, these documents, or my process, the documents iterate and strengthen and are better organized to clearly express the economic reality of what is going on. These are very key words.
Reasonableness.
Economic reality.
What is property versus what is money is like one of the most important things to discuss
when talking about IRC code from Congress.
They are not the same.
Eisner v. McComber, you have to realize property for it to become money.
Property isn't inherently money.
It's property.
And this comes back to constitutional property rights type stuff.
And by the way, we were joined by our co-host, Sam.
Sam, welcome.
You have missed a very interesting hour because I don't know if you have.
Are you among the 50% or so of people who have read the voter escrow
partnership manifesto?
I, this is my like first time glancing through,
but it looks really interesting. I'm, I'm like tearing it apart at the moment,
but I think that just a off like the top level stuff that I'm looking at.
And like, it seems that this is
something that would like drastically change the understanding of
how these VE partnerships work and how they're characterized under the law.
It looks pretty cool. You know, I didn't know.
I didn't know where this memorandum was going to head.
I had something, an idea in my mind and
and i had no idea that like under corporate law there's there's three types of laws that are very
important to understand you got personal law you got corporate law and you got trust law they have
they're completely distinct in many regards now i understand a lot of trust law i don't know
nothing about corporate law so a lot of what i understand from trust law is kind of how I started thinking about this from an individual law perspective.
And I had no idea how this was going to turn out.
Now, interestingly, in Discord, some initial conclusions from other folks in the relevant channels said it's not going to work.
It's not going to produce the conclusion you want.
And that was actually before I read the court's case, Bollinger case, regarding nominee interest.
And then I'm like, what is this nominee interest?
Oh, my God, that's exactly what's going on here.
And we could technologically prove that it possesses this property this legal
property inherently and i was like all of a sudden what was a roadblock is no longer blocked and this
is probably about like two weeks ago at this point and um and that allowed significant progress to be made on the coherence of argument in the document.
Cool.
So since Sam hasn't read it,
I'll give him a chance to skim through
and see if he has any questions.
But if you have any kind of final thoughts
you want to give on this document,
before, if you have time,
it'd be interesting to get your perspective
on some of the other aspects of the markets, because we live in interesting times,
which is a curse. I do have a question about it. Now that it's written, how do you build
political support for it? What's the plan to go out and lobby this into reality?
That's what's exciting, that you don't need political support. You don't even need the
governance vote on curve to pass. This is an interpretation of what currently exists,
independent of any action that anyone else can take. This is reading the words written by congress in law and interpreting common law the history of judicial judgments
and describing the economic reality of what is commonly referred to as defi
people have been engaging in defi and taking the guidance of accountants that are trained to do X, Y, and Z based on X, Y, and Z rules.
The accountants haven't read the IRC in entirety.
The accountants are not lawyers.
And why would a lawyer look into this? I guess my two senses, at minimum, nobody has looked into the law as written. And this document is an expression of that fundamental reality.
That's awesome. I'd love to see if you could build some political support around this. This seems like one of the kind of reactions to the broker law that they're trying to pass or some of the other minutia that the IRS has levied against crypto tokens and protocols and partnerships.
and protocols and partnerships.
Well, the irony is that this is partnership law,
and none of the IRS memorandums talk about partnership law
regarding crypto.
So this supersedes all IRS memorandums
because this is established law.
This isn't new interpretations,
or rather, frankly, it is a new interpretation, but it's an interpretation of already existing law. That was what I wanted to do. I wanted to apply the law to DeFi, not wait for guidance by the IRS, because the IRS surely has issued no guidance regarding partnerships. And clearly, that's something in the back of our minds.
We've been engaging in voter escrow and this concept of governance.
All right, fine, great.
What laws are applicable?
And that's somewhat how this type of piece emerged.
Oh, shit.
That's a partnership. You know, and it's really telling because I was reading this post by, let's see, Paradigm came out and kind of like put out their general perspective on what the market structure for
crypto should be coming into 2025.
I saw this put out by the VP of regulatory affairs, Justin Slaughter
over at Paradigm. And I thought it was really interesting. So maybe I can just bring that up
real fast. We can like roll through that. And then you can talk about that in the context of
this. Let me just find that as I'm scrolling down. Essentially, we're going to get a stable coin bill this year, right? And then we're
probably going to get a market structure bill at some point. And once we have those two things,
it's going to like, drastically clean up everything.
So I'm really excited that we're going to get these things.
Oh, yeah. Here we go. I found it. So I'm really excited that we're going to get these things.
Oh yeah.
And here we go.
I found it.
Okay.
So let me just run through this because I thought it was a really interesting doc because, you know, paradigm does carry a lot of weight.
Credibility.
Comes to this and credibility.
And we'll just run through their term sheet, right?
So we can go through this one by one.
So crypto assets are native digital assets
that are imbued with property rights, right?
Number two is-
Yeah.
Property rights.
Property rights.
Distributed ledger technology means a ledger shared
across distributed nodes within a network
syncretized between the nodes that is publicly
accessible and is appended to via some kind of cryptographic consensus. It's pretty straightforward.
Here's a good one. Smart contracts are computer code deployed to distributed DLT
that execute instructions based on occurrence or non-occurrence condition.
You realize that's a key of this memorandum. These are discrete entities that have articles of inception,
which are literally their code.
Yeah.
And I think the next one is interesting
because crypto assets are commodities,
except for those that have forms or aspects of security,
which are also in decentralized ledger.
And this commodity part, I think, is the most interesting
because we did not see a lot of any CTFC action in the previous four years.
We had the UKIDAO case, we had the open case.
And those two things were heavily partisan, arguably,
extremely draconian as coming down on both open and uh and also ukidao especially open oh yeah
ukidao got a got a short end of the stick but uh one thing that i remember from the ukidao case that
i wanted to bring up because you are talking about partnerships is that they like they were able to
get a summary judgment against ukidao because nobody showed up in court uh they claimed that
they were a um what's it called unincorporated partnership and that anybody who had ever voted
with the token uh in governance was like legally liable at that point for anything that the uki
dal had ever done yep um yeah and uh so, how does that fit into your
partnership? Because I know that's one of the things that
we talked to, like, I've talked about at length with Alex
Golubitsky, our, our former like former squid legal, legal
person in residence or squid in residence. Like, how would this
type of partnership protect the members of the partnership
from outside litigation?
Well, this is where immutability changes the equation.
They probably took the position
that persons not only in the DAO,
but they were looking at it
from the perspective of centralized people
in an office, making choices and decisions, calling themselves a DAO. In the realm,
especially, this is why I only posted the Curb Finance, and I haven't really thought about
application to other voter escrow systems. Curb Finance contracts are immutable. It's a past tense.
These are established, deployed entities post-fact.
There's no person that is even capable
of changing the code of these contracts.
So that is very personal in the UKDAO consideration.
Ongoing development of separate contracts.
They are a partner themselves, maybe a recipient from the feed distributed contract.
That is completely new work.
And there's nothing that ties these contracts together to form an entity.
Yeah.
I wonder if there's something that Open, like specifically Open can go back and appeal in their case. Maybe I think they already accepted the enforcement action. So maybe there's not. But now that we have like rulings on the Uniswap contracts plus tornado cash and essentially saying that immutable smart contracts are like excluded from the law. They're just code. You cannot put them under ownership
of anyone. And that's what number six gets into here, which is a decentralized crypto
asset exchange, which in this case would be Curve, is public and permissionless, right?
And has no person or group of persons that can control, block, or approve the transactions
on the exchange. And then that last one, non-custodial in nature and like all
of this and i think your go yours goes in line with this as well too is that this is going to
push everything into the ctfc um at some point like the the dexes just kind of get like pushed
off into their own like they exist they're these partnerships if you want to call it i think it's
probably like a really nice way of um describing them as its own entity like crypto general crypto
partnership or something um but uh you listen there's laws for commodities and there's laws
for securities there's laws for property there's laws for money most pertinent is the letter of the
law and it's not the case you know what I described in the memorandum as
a partnership. Probably the most accurate takeaway is that the economic reality of what's going on
means partnership laws are applicable. So there's a difference in statements there.
Yeah.
Yeah.
I think the general consensus that we're
going to get to in this cycle is that DEXs or these VE
partnerships, if they are non-custodial in nature,
they should have their own exclusions that
prevent them from having to be registered
or excluded from certain types of
litigation or enforcement actions as well, too. They're going to have to reconcile, okay, great.
It's pretty ambiguous that this is a partnership that cannot file forms. So reconcile that. That's
not for the IRS to reconcile, it's for Congress to. To reconcile is like, what do you do? We need a definition of behavior.
Right, right.
I'm excited.
We're going to get so much, like, so many rules and laws coming out this year.
It's just going to juice it all up.
And especially for a protocol like Curve or Uniswap or, like, any of the major DEX major decks is going to have like extreme uh clarity to operate
uh under us law that's growth and and that's just certainly exciting from a technology standpoint
and certainly from an investing standpoint and clearly we could talk about the market collapsing
today but that's yeah can i ask a question about one of your uh you know you're you're you got a
lot of bangers and i'm surprised this one didn't take off.
Everyone else is either like taking a wait-and-see attitude or panicking, and you're euphoric.
Oh, completely euphoric right now.
I've been waiting years for this.
To explain, there's three steps that lead to us experiencing what we know is inevitable.
First is dollar down.
Second is the bond market getting bid
with the treasury market, long end duration.
The third is the volatility of those treasuries collapsing.
DXY down, 10 year plus yields down, move down.
You get those three conditions, it's game on.
That's what Arthur Hayes argued as well, right?
We all argue the same thing.
We all use different words, and everyone argues that everyone's saying something different.
I say that literally, I say the same thing as Raul.
I say the same thing as Arthur. i say the same thing as arthur i say we're all
saying the same exact thing even mike howell liquidity okay so how do you get liquidity
bond market volatility collapse move collapses and there you go the global ave health factor goes
through the roof that's a decent analogy the global ave health factor which basically means
you want your collateral to appreciate and so here two seconds
so let's say you got 10 grand worth of ethereum on ave and it has um you know infinite health factor
but then you're 10 grand and you don't want to take any um uh debt because ethereum's going
between 4 000 and 1800 five times a week That's basically your move indicator through the roof.
The volatility is through the roof, and you don't trust it.
So what happens if your $10,000 becomes $30,000
and the volatility just basically sits there week over week after week
for like two months straight?
You're going to borrow some capital.
So when you apply that to the global financial system,
you're talking trillions of dollars.
Of new credit?
Credit, which is the dollar.
The dollar is credit.
It plays into basically what is the actual structure of a dollar,
which is a conversation unto itself.
Yeah.
What is the 10 you're at today probably close to four in chain yesterday was getting close to four uh well holy shit wow it broke four yeah three
nine that's a three eight wow well look at the dollar accomplished partially because look at the
dollar the volatility on the dxy is absolutely insane I mean it is historic volatility um okay this is uh it's constructive yet precarious territory
from a DXY perspective we did not breach the 50 SMA in the monthly and we are not we're not holding
the 200 SMA in the weekly we this is the first breach yesterday was the first breach of the 200 sma in the weekly
in any meaningful way since june of 2020.
oh yeah i mean that's already done the candle's already there it's wicked but that is the last
time we were in a dollar position comparable to what we experienced yesterday.
So there's your time.
Yeah, I got MAs up and whatnot, but it's the story of moving averages.
A lot of folks don't like them.
Levels they look at, and I agree.
But a moving average is quite significant. It's because that's consensus.
So what's your like bellwether chart that you're going to be watching the 10 year or.
It's the trifecta.
So obviously the dollar is a cross currency pair.
But how do you look at all charts at once?
I don't have time.
I got shit.
I got to do.
So DXY. DXY 10 year move. um but how do you look at all charts at once i don't have time i go i gotta do so dxy dxy 10-year
move those are the three charts and i don't even have to look at bitcoin i could tell you what
bitcoin's doing based on those three charts so i've i actually haven't been looking at the charts
at all um so i'm kind of curious to hear your guys uh thoughts i have seen some people mentioning that they've seen that crypto has been holding up
relatively well compared to all the other assets is that true like is okay is this like so i mean
like like i can't help but like be like vaguely like optimistic about everything that's happening
because like you know i'm i'm so tuned out to market volatility at this point.
But whenever I see massive market volatility,
I just assume there's a massive wealth transfer from someone to someone.
And it actually seems like if crypto is shaking out on top,
then I'm on potentially the receiving end of that,
the beneficial end of that, right?
It seems like there's a massive wealth transfer going on to us in crypto, which is kind of
cool.
As you're well aware, it's a very complicated story, which I handle on my stream.
What the hell's going on?
But frankly, NASDAQ down 1,000 points and the DXY back up at 102.8 is quite extraordinary
to see.
Right now, the dollar has got everyone shaken.
The story is in tariffs.
The story is what tariffs do to cross-currency flows,
the flow of capital between countries.
And this plays into policy because of GDP requirements
to service outstanding liabilities,
debt servicing requirements.
Frankly, the fact that the dollar is doing this
and the move is back at 112,
I'm surprised that Bitcoin is doing what it's doing.
And that is basically how you started the thought.
It is fantastic, astounding that it's at 83.
We were just at the ETF and it was 47
and it crashed to 40. That's crazy that it's at 83. We were just at the ETF and it was 47 and it crashed to 40.
That's crazy that it's at 83. You know, I had come into like the past couple of years,
uh, watching a couple of really interesting market analysts that I like. And one of the things that they consistently said
over and over and over was that the market valuations had never been higher. P's had never
been higher. The price that you were paying for risk assets, especially the S&P and NASDAQ and
everything had never been higher. Everything was just at like stock valuations were at like extreme extreme levels um and maybe this is the reset right where you know in order to
bring stocks and other things back into line this is the sell-off that needs to happen
part of the equation strong words reset um overvalued look nasdaq and asmp those are etfs basically 500 and whatever
particular nasdaq you're looking at maybe it's the 100 or whatever but so they're irrelevant
you want signal through noise you look at the russell 2000 or the will share 5000
so frankly as much as
we're seeing a thousand points down on
Nasdaq today following what the hell
happened yesterday and the day before,
the fact that the Russell 2000 is down
10 points, 5.25% following yesterday, we
got some signal. Right now, there's
capital outflow from the United States.
And that is further supported by the dollar's move.
Dollar goes down.
It's going to force the unwinding of the Japanese carry trade.
It's going to force capital outflows from the United States,
outside of the United States.
And that's consistent with the more traditional conversation
about emerging market cycles,
which we haven't had
in a long time. And dare we look at the six-month chart of the DXY, that presents my overarching
thesis. Yeah. I always go back to this chart, which is an inflation-adjusted S&P 500 chart.
And you see that there are periods where we have sustained growth, but then there's
also like decades where we have no growth at all. And potentially, you know, we've been in one of
those since like 2008, like arguably that like we've been in a secular bear market during that
entire time period. And maybe this is just one of the final
or continuation of sell-offs
or one of the final sell-offs
in order to clear out that bad hangover that we still have.
Because I still think that a lot of the issues
that we're going through now
are just still knock-on effects from 2008.
Of course.
And we didn't solve anything back then
and we're paying the price for it now.
Well, we have to refinance $7 trillion this year.
And right now Besson's trying to get interest rates down
so he could actually afford to refinance it.
NASDAQ is just noise.
It's overinflated.
Boomer meme coin.
It's boomer meme coins. Same with the S&P because it's over inflated boomer meme coin it's just it's boomer meme coins same with the smp because
they they it's an etf means they could finagle the balance and that's why we've talked about
the max seven for so long so seeing nasdaq down a thousand points smp down almost five percent 265
like all right whoopie do show me the russell 2000 all right there's your signal um because
that's the broad stock market or maybe at least look at what an rsp equal weight s p 500 equal weight not just the
that's gone up and they've rebalanced to the favor the stuff that's gone up so their etf goes up
these prices are all noise um which is why really the dollar,
the move, and the 10 years, the inspection
and cross-border flows.
The dollar has
dollars have flowed
into the United States over the last years.
They've flown them in hand over fist
digitally, obviously.
At some point,
cycles will cycle.
It's a fundamental characteristic of nature. At some point, the dollars need to It's a fundamental characteristic of nature.
At some point, the dollars need to flow out of the US.
Dollar comes down as the foremost leading indicator of dollars flowing outside the US.
Now, what's fascinating is how does the dollar go down?
It can't.
It can't go down by itself.
So what I'm curious, what I think about, and i don't draw a conclusion on it's all speculative how are they making the dollar go down
can't go down by itself there's too much debt out there
china owes india india is china india is russia russia is india india is south america india India owes China. India owes Russia. Russia owes India. India owes South America.
India owes South Africa.
India owes Australia.
Australia owes India.
But take that spider's web and make it the most complicated spider's web you could possibly imagine.
And all of them owe each other dollars as interest on that debt.
And there's this Brent Johnson territory. How do they get the dollars to pay the interest on that debt. And there's this Brent Johnson territory.
How do they get the dollars to pay the interest on their debt? And what happens when the dollar comes down? Then the whole equation changes, and that's why it becomes cheaper to get dollars.
So all of a sudden, their economies boom, and you get the emerging market cycle.
Because capital flows from underperformance
to outperformance as foreign currency gets stronger or purchasing power prices go up they get inflation
and equities go up so if Nasdaq is down a thousand points and some you know some index in India is up
two thousand percent you get your FOMO and you get your capital outflow. Because when you apply that
type of story to the entire system and that things don't happen quickly, they take periods of time.
Capital flew into the United States, it'll flow back out over years, two, three, four, five years.
So if you look at the six month on the DXY,
it screams 10, 15 years of lower high, lower low are really due for the dollar
in order to bring the entire global system into equilibrium.
That's a fun one on the six month.
No psychopath looks at the six months on the DXY.
Yep, I do.
You're talking about like the uh this one yeah
that's what i'm talking about 1970s okay
over the night this is my broad thesis over the next 15 years we hit that lower trend line.
We are over, this is like Yellowstone.
We are overdue for an eruption. We are overdue for a downward leg in the dollar.
It has been a dollar bull market since 2008.
All of the crypto bull markets that people refer to
occurred in a dollar bull market.
Dare we talk about what happens in a dollar bear market, which we've never experienced?
Yeah, I've never experienced it. What should I, as a casual crypto user, expect?
Well, generally speaking, to use hyperbole, that's by definition the super cycle, where the entire market produces higher lows and higher highs over the next 10 to 15 years.
Albeit, the scary or crazy thing is, we've already been producing higher lows and higher highs, so we're talking about even higher lows and higher highs.
Dollar down makes foreign currency more valuable there's
infinitely more foreign currency than dollars because they can print their foreign currency
so as the dollar gets weaker they have more purchasing power and by they i mean the rest of
the world which means their number goes up and then I remind folks that crypto is not a United States market.
Crypto is an emerging market, as I define it,
accessible to all markets of no market.
It's not like New York Stock Exchange.
It's in New York.
You don't need an intermediary or a broker to engage with crypto,
but you do, and you need dollars to engage with the New York Stock Market.
You can engage directly with crypto from any denomination.
You just need counterparties.
And that's exactly what DeFi offers, the capacity for third parties to engage with one another
vis-a-vis the contracts that we've talked about and that we know all too well.
All right.
One last thing and then we'll get out of here,
unless you have something else, Garrett.
No, I'm good.
It's been a fantastic conversation.
What about, I'm going to bring up the most hated chart in crypto.
This one doesn't actually go on the six months.
We'll do this one on the one year.
Or the five year for this one.
But hated chart, just down only at this point. Well, my two senses from my personal investing perspective,
which I offer on my stream,
it's irrelevant.
It's noise.
I don't treat Ethereum as an investment,
nor do I treat a Bitcoin as an investment.
So if you have a portfolio,
I bifurcate my portfolio between cash and investments.
Consistent with Vanguard,
my investments must produce cash flow.
So cash isn't cash flow,
cash is cash, which means it's suitable for payment purposes. All right, fine. Bitcoin's more volatile than dollars, but folks forget that dollars are volatile. So stablecoins might
be fixed at the unit of one. But as we look at the DXY, that value of one varies significantly
over time.
So the cash position of the portfolio is stable coins and Bitcoin for myself.
Everything else is investments that must have rule number three.
Fuck you, pay me.
That's the core criteria for an investment in Captain's book.
So I don't look at Ethereum as an investment.
So what's the use of Ethereum?
I need Ethereum to engage in transactions.
I need it to pay for transactions.
So my two cents is, what's the future of Ethereum?
Fat protocol thesis.
At some point, I expect these entities, quote unquote, on ethereum to be more valuable than ethereum uh one last thing um and uh that's um maybe you can talk about being a a top 10 squid
holder before we get out of here um it's not an investment. It's a holding position for the
future of news and content distribution and everything else that Garrett has packed up in
his big brain of his. Oh, it's an honor. It's stunning. I love what you guys do. I have been
with you guys since the first days and it has been such an incredible journey.
So I wouldn't put it in the cash position.
So there's obviously an additional position
that's collectibles.
And that's a very popular position
that people take part in,
clearly not in NFT.
But the point is,
there's substance and meaning
and sentiment associated with it.
And that means something.
It's not something I really entertain much from an NFT perspective, but it certainly is there.
I know other folks talk about it all the time.
Like Raul talks about his NFTs and art and folks like that.
Other folks, a DC investor, he loves his NFTs.
So that is just something I don't think about a lot but it's
it is important sentiment what is meaningful so squid is meaningful in that regard
amazing yeah it's been really a blast having you around and yeah we've been at this, it's hard to believe over two years
now. And it's almost three, almost three. And it's entirely like because of like part time efforts.
And we feel like, you know, we've never even really given it our full steam ahead go. But
once we do, like we think that they could get some pretty powerful stuff because we got amazing
stuff. Just kind of like getting this loose confederation of random people who like
are news junkies and follow crypto 24 seven together. So I'm excited to see where Squid
goes this year. It's already, we got some, we got some big plans. Let me just say.
My general expectation is the market, everyone, everyone is under appreciating where the markets
are heading and history. So like lendiness, the longer technology exists, the longer it's likely to exist.
The longer a news source or an organization is in existence, the stronger it gets over time.
Here's some of the original guys that have discussed these topics.
That is going to be extraordinarily interesting as this market heads to its destination.
So does that mean that I should buy stock in MSNBC and CNN?
They've been around a lot longer than us.
Those are meme coins.
In conclusion, Chase stock is a meme coin.
You're not getting cash flow from mortgages.
You're not getting cash flow from mortgages. You're not getting cash flow from international investments.
You're getting a dividend, which is a bunch of people sitting in a boardroom saying,
here, peasants, shut up.
Here's a couple of pennies on your stock.
That's not an investment.
That's a meme coin.
All right, fine. Maybe REITs and other stuff are more aligned, but there's nothing like immutable smart contracts that are just programmatically designed to exist and distribute everything.
All right, fine.
Maybe REITs and other stuff are more aligned.
It changes the equation.
With nominee interest, of course.
Excellent. Yeah, everyone, if you're in that half that has not gotten a
chance to read through the voter escrow partnership, highly recommended. It's, you know,
it's, it's a good long read, so it's perfect for a weekend. So given that we're coming up on the
weekend, last full weekend, no, two weekends before tax day. So perfectly timely. All right,
perfectly timely.
All right, Sam, any final
parting thoughts?
I just have
one last tweet.
This is my final tweet before we get out of here.
Actually, this is
hilarious.
Absolutely.
Here we have
Palo Andrino standing in front
of the Wall Street Bull.
I love this tweet.
He's right.
Public.
It's already public.
It already exists.
This whole notion of I got to fit in.
I got to fit myself into the mold of established frameworks and established systems.
I love this tweet.
All right.
I'll let you take it out, Garrett.
Just got nothing to say, but Squids, thanks for joining us.
It's been fantastic getting to chat with you as always.
It has been a live stream for Friday, April 4th,
and we will see you all next time.
Peace.
