Episodes

Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research.

Corey McLaughlin: I'm Corey McLaughlin, editor of the Stansberry Daily Digest. Today, we're going to talk with Crypto Capital editor, Eric Wade.

Dan Ferris: For our opening rant, we'll talk about SBF, FTX, and more about crypto.

Corey McLaughlin: Remember, you can e-mail your feedback at [email protected] and tell us what's on your mind.

Dan Ferris: That and more right now on the Stansberry Investor Hour. Well, crypto has sort of taken over the headlines, hasn't it? It's an all crypto all the time now because of Sam Bankman-Fried and the blowing up of FTX, and then, of course, we have the bankruptcy of BlockFi, too, this week, so it's all happening, man, as they said in the '60s. It's all happening.

Corey McLaughlin: Yeah, we've been talking about this for three weeks now, I think, right?

Dan Ferris: Yeah.

Corey McLaughlin: Yeah, and I'm glad we're kind of talking about it again today, now that we've heard a bit more from Sam Bankman-Fried, himself, who seems to be going out and talking for some reason... I'm not entirely sure why, but he is.

Dan Ferris: Yes, that's the great mystery, isn't it? That is what I don't get, and he even said in his New York Times DealBook Summit interview with Andrew Ross Sorkin recently, he said, "Yeah, my lawyers don't want me to do this." I'm like, "No kidding. No kidding they don't want you to do it." He spent the entire time, I feel like, the amount of time he spent saying, "I don't know," "I believe so," "I don't have that information, I'm still looking into this, but for now I think ... " and everything begins with his level of ignorance about his own business, it seems to me, anyway.

Corey McLaughlin: Yeah, I spent an hour last night watching that entire interview because, once I started, I couldn't really stop because, like we said, I wanted to know more about him, or at least how he's portraying himself. Yeah, it came off as – I think I sent you a note like, "If this is the same guy as he was before, why would you trust this guy?" He doesn't seem to know anything about his business, allegedly. I don't particularly buy that, but who knows. There is a lot that a lot of people don't know, including me, which I guess is the point.

Dan Ferris: Yeah, it is the point, but it seems to me like one of the really big, hairy sticking points here is his own lack of kind of up-to-the-minute knowledge about the amount of leverage. Never mind custody issues, and money coming into FTX through Alameda and all that other stuff, but just at any given moment, it seems like he was surprised, he continued to be surprised by the amount of leverage, even though he saw the collateral tanking really hard. He said he was surprised by the amount of leverage.

Corey McLaughlin: Yeah. A lot of times, it sounded like somebody who got caught doing something and is just pretending they don't know what actually happened, like a kid or something that got caught.

Dan Ferris: Right, and Andrew Ross Sorkin asked him, he said at the end of the interview, "Have you been truthful with us?" and he said something like, "Well, I'm as truthful as my knowledge allows," or something like that. I'm like, "Ooh, that doesn't land as well as you think it does, buddy." Anyway, it's been a week, and it's been a month, and I think –

Corey McLaughlin: Yeah, that's what he said, "It's been a month. It's been a bad month for me."

Dan Ferris: Yeah, that's right. Yeah, "I've had a really bad month." He was asked about his future. I think it was when Sorkin was asking about his future, and he said, "I've had a really bad month." No kidding.

Corey McLaughlin: Yeah. Part of me, usually, if there is a fraud or a scam or something like this, like Bernie Madoff wasn't out talking a week later, so part of me wants to believe what he's saying, and the other part of me just can't believe what he's saying, I suppose. It's definitely a fascinating situation, obviously, within the crypto world, but a lot of it has to do with the leverage, as you were saying, and could happen in other places, I think, maybe not a bank, but maybe. I don't know. It's a fascinating situation.

Dan Ferris: It is, but to your point earlier, you said, "If the guy we see in this interview is the same guy that people gave money to before, why did they ever give him a penny?" I don't think it was. I think what we're seeing is him trying to be contrite and sincere and everything, but I think before, he was probably much more hyperconfident about what they were doing, and filled with hubris, I'm sure, I would bet money on it, and the bubble of the last several years is that kind of a thing. It was a typical run-up and a typical apparent success, with a typical, really disastrous conclusion.

Corey McLaughlin: Yeah, it's got all those signatures, for sure.

Dan Ferris: Yeah. All right, maybe we should bring in the person who actually knows about these things instead of you and me trying to figure it out.

Corey McLaughlin: I agree, yeah.

Dan Ferris: It seems like a good idea. That person is Stansberry's in-house crypto guy. He knows more about crypto than any two people I know, probably more than two, and he is Eric Wade. He is the editor of Crypto Capital and some other publications for Stansberry Research. Eric, welcome back to the show. We're really glad to have you back.

Eric Wade: I am glad to be back. I appreciate the opportunity. Hopefully, we'll find some more interesting things to talk about than just collapse and terrible interviews, but that is obviously the context, that's the platter that the entire meal is being carried in with, right, is the backdrop of that. I was led to believe that there would be a little bit more rant going on, so maybe I'll have to pick up the slack a little bit with that.

Dan Ferris: Sure.

Eric Wade: I have some rant. Well, first off, if I can wind this back 90 seconds and maybe call out Corey a little bit on your statement of maybe not a bank –

Corey McLaughlin: Please, yeah.

Eric Wade: – maybe this wouldn't happen in a bank, I don't know what you know that I don't know, but I think our laws right now in America at least say that the banks only have to hold 0% of their assets in reserve. Now, they're all outperforming that. I think the average is they're holding 10% to 14% in reserves right now, so I guess by that standard, you could say they're being fiscally conservative. But it also means that if everyone within the sound of our voice now went into their bank and asked for their assets out of the bank, then somewhere between one in six and one in 10 of us would get our money out of the bank. At some point, and this is assuming that the assets that they're holding on their books are fairly valued, and now we're getting to the problem that FTX and Alameda had that Sam Bankman-Fried and everyone else involved was allowed to ignore for so long because they did believe they had plenty of assets on the books.

What it turned out they had, my phrase that I've been calling it, is a smoke balloon, that it was a smoke bubble. Yeah, it was a bubble, but it was bubble filled with the smoke that they had been blowing up everybody's pantleg all this time, that he had a big, beautiful asset on his books and then it popped. That's where the trouble started. That's where you start to find out that this League of Legends character that plays videogames and sleeps under his desk and whatnot during the VC meetings, that really was who he was. I think a lot of people are trying to find, "Hey, this character Sam is playing now, do we believe this character that Sam is pretending to be with the 'I don't know' and the 'what-ifs' and the 'boy, I should know more about that?'" It's the same character. I think in the beginning of his rise, that played really well. It was the person they wanted to put in the game.

I almost think of it like a comedy or something, or I don't know if any of you have ever been around children, toddlers, they tell a joke, they get a bunch of laughs, and they won't stop telling that same joke. "Well, everybody laughed the first time I pratfell such-and-such," and, after a while, you realize, "That's a pratfall. You've got one joke." That's where we're at, is I think this is the same person, I think the same characteristics, the same, as Dan said, maybe it sold better, of bravery or having some sort of self-assuredness. Maybe, but it was self-assuredness based on not knowing the dangers or overlooking the dangers. Once that bubble popped, let's go full circle back to the banks, no bank in America could withstand the rapid withdrawal of assets that FTX withstood.

Pick a bank, any bank, and do that to them, and then throw their CEO into a decent interview and ask him, "Well, what were your ratios? How much of it was in property of this, and how much was that?" She, he, they would probably wear a suit and probably say, "I don't know," a lot less because they would have been schooled. What we're seeing with Sam was no suit and not schooled in the "don't answer that," or "here is how you answer that." But, I don't think any CEO would have better answers for, "Well, everybody took their money out and my bank collapsed." "How? Why? Aren't you regulated?" "Yes, but everybody took their money out." OK, mild rant. That was me trying to catch up.

Dan Ferris: No, that's –

Eric Wade: – to your opening.

Dan Ferris: The point is extremely well taken. I think tier 1 capital, like the best capital, I think Basel III is like 6%, you know? I mean, that's nothing, right? You're right, it's like 10% to 14% in American banks for the capital requirements, and that's considered a very well-capitalized bank. If you're at 14%, like you said, you're exceeding all expectations, which is insane, right?

Eric Wade: Yeah.

Dan Ferris: Yeah, point very well taken, and then of course the next point is that, like you said, the catalyst for all this, really, you can go backwards in time, but financially the catalyst is that enormous collapse in the collateral value, right? I mean, we don't expect to get that but, hey, let's face it, that's exactly what happened to Bear Stearns, and it was the same thing. On Friday or Monday or whatever day, "Hey, everything is fine. Everything is fine. I don't know what the world is talking about," and then, a week later, they're bankrupt and it's the exact same thing, so I think Eric is spot on there.

Eric Wade: I was looking at 2008, the subprimes, and what doesn't get talked about a lot with the subprimes was that – this is my recollection – it's almost like the Star Wars trilogy or something, "Let's go back and redo the same heroic journey storyline failure," or something. But a lot of the problem with what happened in that crisis was John Smith takes out a loan from his credit union, they sell that loan, that gets packaged, that package gets sold, that sold package gets bundled, that bundle gets "investment banked," and then that investment bank puts it into ... etc., right? It's unwound to the point where, or wound up so much to the point where if the credit union of John Smith thought to themselves, "Hey, wouldn't it be great if my loan was still here in the community, a liability to Party A and an asset to Party B? Wouldn't it be great if this loan was in the community?" That's impossible, or it became impossible.

That was the first wave of the problem, and then someone else realized, "If we can take four parts of a decent loan, and one part, an 80/20 mix of just god-awful loans that nobody would ever have underwritten this," and then say, "As a whole, these are pretty safe. We've got a lot of decent loans, and some crapola in there. But overall ... " and that's where we got into trouble. You couldn't unwind it, you couldn't track that back to who holds what, and they were mixing crap in with good stuff, and then values started dropping and you couldn't unwind it fast enough, so we got TARP out of that, right? We got TARP because of the fact that there were so many toxic assets, and they ended up settling on the name "troubled assets" but they realized, the government, "We need to just start buying our way out of this because we can't unwind it fast enough."

Then, the concept of blockchain and decentralized ledger technology came out of that with the "what if there was something that we could track all the way back down to where it is right now? No matter how many times you wrap and sell and move something, what if we could track it all the way back to who owns it presently?" That's the promise of blockchain, is that you can't hide the assets entirely, right? It's on a ledger that is, in most cases, a public ledger, and then you've got your FTXs, where they're doing the same sort of thing where people mistake it, "Well, I thought blockchain was supposed to prevent that." OK, it is, but it can't prevent bad business practices, and it can't prevent if I have an asset, you know, if I have an Apple and I promise apple jelly to one party and applesauce to another party and they both take me up on it, then I only had one apple.

That's what, I think, got us in trouble a lot with this, is the idea that, "Crypto is better. Crypto was built to survive this." Yes, it was, if you self-custody, if you don't overleverage, if you have your own keys, etc., so a solution to that is, "What if we bank-run crypto? What if we all pulled our crypto out of an establishment, or at least hold ourselves to the standard of, 'I'm going to try.'" You'll find out pretty quickly, "Well, is my bitcoin, is my Ethereum, is my crypto, etc., in a position that I can or cannot pull it out?" If FTX had held themselves to that standard of "what-ifs" and "where is everything?" because, well, what we're due to find out is was this all a very confusing shell game and Russian dolls intentionally, or because you could have done anything in that bull market and it would have worked?"

But the idea of, "Pull it all out," if Sam had said that to his lieutenants at some point, "Hey, let's straighten all this out," maybe he had a moment of self-awareness of, "How much leverage do we have?" because he's good at that, right? He was a market maker. He was good at these financial manipulations. Manipulations is not the right word – these financial calculations. He was good at that, and at any point did he say, "Wait, we're talking about crypto. We're talking about decentralized ledger technology. Sort this out and somebody send me a spreadsheet on where everything is." Who didn't ask for that, or did they know what they were doing, because it's binary, right? Either nobody asked because they didn't think of it, or nobody asked because they didn't want to because they didn't want to have to straighten that out.

Corey McLaughlin: Yeah, that is one of the questions I had about all this, was will all of this come out in the legal proceedings that are inevitably going to happen, like will all of these decisions be able to be traced on blockchain and through technology, unlike, like you said, the bank. That's the reason why the peer-to-peer, Satoshi Nakamoto did his whitepaper way back in the day, like in this case, are we going to be able to find out what happened through the actual technology that ultimately led to this whole story.

Eric Wade: What makes this, maybe not a Greek tragedy but maybe an HBO special, is if we could or did, is there something that has been planted in the way that would prevent us from getting our final answers to this. That's why I think people are so interested in the political and SEC aspects of this, is because we're in a mindset of, "OK, crypto is fairly confusing to a good number of people already." But, I think you guys can agree with me, if you take a man on the street and you ask him decent questions about the Securities Act of 1933 and 1934, or equity structures, or the difference between an LLC and a corporation, we're going to find a few percent of people could answer those questions, very few. It's not crypto's fault that most people don't understand crypto. Most people don't understand the teaser rate on a credit card, but we're a trillion dollars in debt on personal debt.

What people do understand is donations and political contributions, and they're worried about that. People are tuning in to George Stephanopoulos to find out, "Well, are the assets on the Solana chain, or were they on Ethereum, or were the assets held in a ledger or a treasury?" They're not tuning in to hear that. They're tuning in to hear, "Is buying your way out of trouble still going to work?" There is a tipping point, there is a Jenga going on here. There is a Jenga happening right in front of us of, "Are they going to get through this because of the contributions?" The contributions are a fact. The influence was a fact. The visit with people from the SEC. Those are all facts. But what we don't know is, "Is the Jenga going to collapse, or are they going to pull this off? Are they going to pull this out and say, 'Looks like no wrongdoing here.'"

We mentioned Bear Stearns, and we have talked about subprimes, we've talked about collapses and TARPS – no jail time, not enough jail time, right? Now, on the other hand, the fact that this is crypto, maybe the inoculation isn't going to be complete. Maybe the fact that this is crypto and they want more – they, the government, us, consumers, we the people – maybe this is an opportunity for someone to say, "Hey, we want more regulations on crypto because of this." The only way you get that is by saying someone did something wrong, and, to prove that, maybe somebody has to do sometime, maybe. That would be an easier chain if we're talking about a tragedy, that we want a third-act turnaround, something needs to come out of this better.

Now, I'll remind people, though, that theft is already against the law. We already have securities laws, we already have corporation laws, we have all the laws we need. This is the same argument you could use for gun control, for example. Why we need gun control was because people are getting killed. Wasn't killing already illegal? OK, fraud is illegal. I don't care if it's crypto or orange juice futures, fraud is fraud. Gold fraud is illegal, stock fraud is illegal. It doesn't matter what it is, fraud is illegal, defrauding investors.

Dan Ferris: Right. Absolutely.

Eric Wade: It's already illegal.

Dan Ferris: We're very much on the same page there in a variety of industries because the other thing is you and I both know, especially you can see it in finance like crazy, and in banking particularly like crazy, a primary function of the regulatory regime is to entrench the larger incumbents and make it harder for upstart competition. It entrenches the most powerful interests, which is why they're always involved in the regulatory process so heavily. They're OK, they can pay for it. I remember a particular banker I know, I should probably keep him anonymous, but he is a famous guy, you would recognize his name instantly, and we were talking at a conference once. At that time, the hurdles were $10 billion in assets and $50 billion, where it really ramped up the regulatory compliance costs, and he said, "Yeah, we just hit $50 billion in assets," and I was shaking his hand and he said, "Dude, I need $2 billion more to pay for it," right?

Yeah, so he says, "We'll get it, we'll get there, but once you get past that first hurdle," he was like, "Whoa," and they got much higher than that and got bought out and he's a very successful guy. But, the point was well taken, you know, the regs are not there to protect – even if they are there to protect the consumer, they're there to entrench the incumbents and see an FTX kind of go to Washington and come on pretty hard. It tells me that he was trying to be that guy, you know, he was trying to –

Eric Wade: Yeah, he was literally playing that game of, "Can I get regulations that put the fence right here, where I want the fence to be put," and our industry –

Dan Ferris: I mean, he went right after Binance in those conversations. He went right after them –

[Crosstalk]

 

Corey McLaughlin: Yeah, I mean this speaks right to the soul of crypto, like between Binance, and the whole reason, the trigger point for all of this was the Binance CEO basically playing his huge card against FTX by pulling out all these tokens based on –

Eric Wade: Yeah, absolutely, and before, you nailed there. The soul of crypto and the idea that "I don't need any of this centralized... " etc., or "one is as good as another," or "I can send my transactions, my smart contract, I can do all of this without any one of you." The regulations that FTX was pushing for, which, from what I've heard, our lawmakers still seem to favor, but those regulations were aimed towards defanging and declawing the soul of crypto, which shows just this gross incompetence or negligence of, "You can't do it." You might as well set a law that says what time of day the sun needs to rise... because you can't do it, it's impossible.

Corey McLaughlin: They might try to do that.

Eric Wade: Yeah, the software has been released, and people can build on it. They keep thinking what we need is more regulations and we'll get this all set up, but they don't even think about the fact that crypto was built in such a way that, sure, you can be a bad actor and you can do things wrong with it, but you don't need to go through with that. We were all trading convenience and the opportunity to leverage, etc. That's why FTX grew so fast, and the foolishness that was shown in these most recent interviews is probably what allowed it to grow so fast because SBF, if I handed him the keys to a lemonade stand at a certain point in the beginning of the summer, I would imagine he would have had 50 of them by the end of the summer, or 100, or 1,000 lemonade stands.

At some point, maybe he would have bought the wrong sugar or owed somebody money for paper cups or something, but he had an ability to grow this super fast, regardless of the regulations, and the industry is going to survive with or without him. I mean, we've spent way too much time talking about it because what we're really talking about is a minority position of the crypto industry, that 60%, 70%, 80% of crypto is held in people's own wallets, and the majority of it isn't on leveraged exchanges. It's almost like we're talking about the wedding cake when all we're really looking at is the plastic figures on the top. There is so much more to blockchain and crypto. If I can, I'm going to try –

Dan Ferris: God, I'm glad you said that.

Eric Wade: Well, I'm going to try to change –

Corey McLaughlin: I wanted to get to that at some point.

Eric Wade: – the subject for a second. This is a segue. We're not even talking about what happened in Brazil this week. Brazil, the 12th-largest economy in the world, might jump to 11 at the end of this year because it's 12 behind Russia, and we're about to find out how much this war in Ukraine is going to cost Russia. Their economy may drop, so Brazil, the 12th-largest economy in the world, their legislature just approved laws for how to handle what they call virtual assets, what we call digital assets or cryptos. What they said was they split it in half and they said, "Our central bank will handle bitcoin if you're using it as a payment. Our version of the SEC will handle it if you're using it as an investment." I think that's a pretty mature way for them to handle it. I think that's a reasonable way. Now, there are other aspects of crypto currency besides just payments and just investments. You can use it for all kinds of other things, but that's a good start from Brazil.

Their president has to sign it, but I don't see why he wouldn't, but the fact that their central bank is now in the middle of dealing with bitcoin going from Party A to Party B tells me in a year or two or three, this No. 11, No. 12 economy, at some point they're going to end up with some bitcoin on their books because there will be a customer, or there will be a user industry, other banks, something like that, that says, "I want to do business with Turkey or Lebanon or Argentina right next door, but I don't like their currency," and here's the big news, "and I don't trust the IMF's SDRs," because that's what the IMF's SDRs were built for, was I want to transact with Argentina but I don't want their currency. Brazil might say, "Well, Central Bank is actually getting pretty good at bitcoin. Why don't you pay us in bitcoin?" So, what are we going to see in 2023, when we're done talking about Sam Bankman-Fried? There are all kinds of exciting things going on in this industry besides that.

Dan Ferris: Right, and the Sam Bankman-Fried thing is a drama, so of course it's going to get the headlines. But, Eric, it's kind of my job to throw cold water on everything, so I'm going to have to do that. When countries like Brazil do things like this, my first thought continues to be, "When is bitcoin going to kind of trade like a currency, and really kind of act like one and be reliable as one? When is it not going to feel to me like it's really just dollars?" bitcoin feels like dollars to me because you put dollars into it, it's bitcoin for a while, maybe you do something with it, and then you get dollars back out of it. Mind you, I want this to work. I love this. I love bitcoin. I'm so glad that someone did this, but I can't afford to sort of fool myself about what's happening when I buy it and sell it. I mean, can you help me out here? You see where I am with this, right?

Eric Wade: I do, and a lot of this is on you –

Dan Ferris: OK.

Eric Wade: – and the framework, the presupposition of buy and sell it. A lot of this is on the concept of, "What can I exchange it for?" at the very least. I'm going to go out on a limb and say – because I know the answer to this already – but you're pretty good at stocks. I'm going to put that out there into the world, "Dan Ferris is pretty good at stocks –

Corey McLaughlin: Put that on a quote board somewhere.

Eric Wade: – but he also cares more about the stock than the price that it's trading for." Right? You easily admit –

Dan Ferris: Oh, I see where you're headed. Yes.

Eric Wade: You easily admit there is more to it than just $7, $25. OK, if there was a framework that we could get all the stocks to adhere to of, "You will only issue X number of shares," etc., then maybe we could get it to where the price is the only thing we care about, but we can't, right? We care about, "Well, are you profitable? Is there free cash flow?" things like that. "Are you paying a dividend? Are you using your money wisely?" etc. I think you're probably native with that level of thought on this, right? If I was to call you and say, "XYZ stock went from $30 to $35," you would say, "I would like to know more about it than the price, please." Yet, with –

Dan Ferris: Absolutely.

Eric Wade: Yeah, much of crypto, with much of what's going on with bitcoin and any of the blockchains, that is the most obvious, easiest to grasp, and, truth be told, the most exciting part of it, whether it's up or down. It's hard to not look at the price of something that the price changes so fast, and other aspects of bitcoin don't change that fast, so we do, we look at the price. I'm not a soccer fan, or futbol, but I enjoyed the heck out of the last 10 minutes of that Iran versus America game. It was breathtaking. It was exhilarating because it meant so much to everybody. If I was to be asked to talk about that, I would talk about that last 10 minutes of the game, not the 80 minutes they spent running around with one score ahead of time. OK, I'm getting off track.

bitcoin, you're right, you're absolutely right, when it hits $10 trillion in value, we'll talk about it more than that. But, hey, we've had 10,000 years to stop thinking about gold as, "How many dollars can I get for it?" and we still do. Let me throw a quick idea out at you. Here's my thought on gold. My target for gold is $3,500 an ounce, and that's because that will mark 99% collapse of the U.S. dollar versus gold since 1971. I want your thoughts on that because if gold was $35 an ounce, quick math, at $3,500 an ounce, that is a 99% collapse of the dollar versus gold, since 1971, so that's my target for gold. I think it's going to hit $3,500. It's not going to happen next year, but at some point I think the dollar has been so mismanaged that gold will be the mark that we can show the complete collapse of the dollar.

It's halfway there now, we're halfway towards a complete collapse of the dollar already, versus gold, so that's why we look at the price of it. But, yeah, I think when bitcoin crosses $1 trillion again, and when crypto currencies are at $10 trillion, maybe we'll start thinking of them as more like currency. Maybe at that point, bitcoin will be – it's got to be in more hands. I mean, I think still a minority of people own it, but we've got a 10,000-year relationship with gold, and we still talk about the price.

Dan Ferris: Right. Absolutely, point well taken, and the price target on gold, I don't do price targets, but yeah, up higher than we are now, double or more where we are now, sure. Absolutely, we're on the same page. We're on a different page with the dollar, but that is a whole other can of worms that we probably don't want to open. But, yes, I agree with you there, and the other point, though, I wanted to get to the real point, the other point, which was, yeah, you can obsess about the way it trades, which I clearly am, but I'm not at all obsessed about the way gold trades, am I? Of course not because of all the history, and I look at the fundamentals of it, etc., and I look at the long-term performance since 1971, as we were talking about, so yeah, the same thing. I think the difference between you and me is really an interesting one because you're 10 times more knowledgeable in this, so I think you probably have 10 times more confidence in those fundamentals than I do, right? At this point, it's early days, right? bitcoin began trading, what, January 2009?

Eric Wade: Yeah.

Dan Ferris: The number we cite for gold around here is usually 5,000 or 6,000 years, but those dates are a little different, right?

[Laughter]

 

I'm thinking 4,000 B.C. is different than yesterday, last year.

Eric Wade: Yeah, and that's fair. I think another answer, another aspect, another answer of what's going on with your question for bitcoin is that the bitcoin that don't trade, the bitcoin that are just held for what comes next in 10, 20, 30 years out, the long term, then we don't know the price on that. The aspect of this asset that you might compare to, well, "gold 2.0," or to people who are thinking, "I'm going to own bitcoin longer than I own my next home," for example, then price is less of an object to them. You don't think about the price of it. You think about the scarcity, you think about the other aspects, "Who else is owning it? How much of it is being used? What are the number of transactions? What are the apps that are being built on it? Can I buy a cup of coffee with it?" kind of thing. Where are we at on that level of development? Those are folks that don't care as much about the price.

I've got a chart I like to pull out that shows while crypto currencies were losing $2 trillion over the last 12 months or so, the number of people holding bitcoin in their own wallets grew. The industry was getting its typical deep bear sell-off, prices plunging 50% to 70% across the board, a haircut on every crypto, and yet the number of wallets because we can track this all on chain, the number of wallets that held a positive balance grew, that more people are getting involved. That also means that the net – I mean this is very obvious, so I'm not explaining anything that should be confusing – if the number of wallets is growing, that means the buyers and holders are outweighing the sellers. I'm not saying nobody sold, obviously some people gave up, some people capitulated, some people got out and went to zero and said, "That's it. I'm done with this thing. It's too volatile for me."

I know some people did, but what I'm saying is net of all of that, of all of the sellers, net of that, there are more people holding some balance of bitcoin even though the price was plunging. That maybe flies in the face of common sense that you might think, "Well, if all the news seems to be it's done, it's dead, it's never going to recover from this. This one is different, and institutions aren't going to touch it anymore, the VCs are giving up," etc., you see all those news headlines everywhere, but you also have a lot of people that are accumulating bitcoin, that we could tell, and 60-some percent of bitcoin haven't moved in the last year. At some point, it has an aspect that feels a little bit like your primary residence like, "I don't care what my neighbor sold his house for," or her. "That doesn't immediately put me in the market to sell mine."

Dan Ferris: Right. I think this is a good place to ask you the final question.

Eric Wade: All right.

Dan Ferris: I think we're heading toward that. This feels right to me. The final question for all of our interview guests is the exact same question, even if the topic is not financial, so Eric, if you could leave our listeners with a single thought today about all this, what might it be?

Eric Wade: Look somewhere else for something positive. When we're done here, get a piece of paper, write down your own personal greatest hits of accomplishments, or things that made you happy, you're going to inventory, and then ask yourself, "What was I doing that got me there?" Pat your back, congratulate yourself. Write down what you did right. Your greatest hits, your best trades, your best buys, and I don't just mean respective to investments, either. If you accomplished an advanced degree, bought a new house, invented something, take personal inventory of yourself. Give yourself something to be happy about, and then ask yourself, "What was I doing that got me there? What did I do to accomplish that?" and have a nice little conversation with yourself about what you've done right and what you do right, and what you were doing when you got there. Maybe it will play out nicely in 2023 for you.

Dan Ferris: Oh, that's excellent. I love that.

Eric Wade: Thank you.

Dan Ferris: Thank you for that, and thanks for talking with us today. I think, obviously, this is a great time for our listeners to hear from you, and I appreciate you making time for us.

Eric Wade: Well, I appreciate the opportunity to come on here and rant a little bit.

Dan Ferris: Good. Yeah.

Eric Wade: All right.

Dan Ferris: All right.

Eric Wade: Thanks for having me, guys.

Dan Ferris: One of the most successful entrepreneurs in America over the past 50 years is going public with his fourth and final prediction about a scenario he calls America's nightmare winter. Woo. You've probably never heard of Bill Bonner, but in addition to owning an interest in businesses all over the globe, he also owns more than 100,000 acres with massive properties in South America, Central America, and the U.S., plus three large properties in Europe. And I've been to one of them. It's gorgeous... gorgeous château. And I've known Bill for many, many years. He hired me into this business, and he says we're about to enter a very strange period in America which could result in the most difficult times we've seen in many, many years. And he's made three similar predictions in his 50-plus-year career, and each time it proved to be exactly right, although he was mocked each and every time, and I remember all of them.

This is why I strongly encourage you to read about Bonner's fourth and final prediction totally free today. It's all spelled out in a free report that we've put together called "America's Nightmare Winter." Get the facts yourself. Go to www.nightmarewinterscenario.com to get your free copy of this report. Even if he's only partially right, it'll dramatically affect you and your money. So again, go to www.nightmarewinterscenario for this free report.

Well, it's always a pleasure to talk with Eric. He's a friend, he's the most knowledgeable crypto guy I know, and of course he is Stansberry's in-house crypto guy. I already know what my big takeaway from talking with him today was, but I'm really curious to hear yours, Corey.

Corey McLaughlin: Yeah, obviously Eric is very knowledgeable about the space, as we said, and that's why we had him on, as always, and he does great work in Crypto Capital and Crypto Cashflow. My big takeaway was, you know, the Sam Bankman-Fried, FTX story is one thing: it's going to be a stain on the crypto story, and/or an example of another whatever you want to call it, overleveraged mess, I think. That's how I like to maybe think of these. But, beyond that, what he talked about with the Brazil government as an example of the actual use of bitcoin in the global currency scheme, in the global currency picture, and the fact that bitcoin is still not in the hands of, relatively speaking, a lot of people. As that happens over time, you still see the possibilities for bitcoin in the global picture, especially in these emerging markets that, as we've talked about, have been susceptible to U.S. dollar policy, there is actual practical use for bitcoin on that front.

I know there are tons of practical uses for these different blockchain networks and, you know, linked to Ethereum and whatnot, and so I think if you're a long-term believer in bitcoin, Ethereum, and all those different things, I mean, this time is one of those, "Oh yeah, it's a crisis moment," and you see some of the flaws involved here. But, when you look at it from a long-term view, which we like to do, if you would have told somebody a year ago bitcoin is going to be around $15,000, which I know you talked about the price, I can't get your mind off that, but if you told somebody that, I think they would probably be happy with it if they were a 10-year, 20-year, 30-year believer in it. I mean, it's not that old. That was a longwinded answer, but that was kind of my takeaway.

Dan Ferris: Yeah. My takeaway, too, is sort of similar because I'm looking at the FTX episode and BlockFi, and all these bankruptcies, basically, and thinking, "Well, Eric makes a good point." That is essentially a banking issue. It's not really, truly a crypto issue. Now, the way FTT tanked so hard, that's not good. Even if you're holding it offline in a hard wallet or whatever, you still don't want to see that, and you don't even want to see bitcoin falling 70%, or whatever it is now, from its all-time high of close to $70,000. But, he does make a good point, and I think what I came away with is his understanding, his superior understanding of the fundamentals and, therefore, his confidence in them, that's the reward for being Eric Wade and being one of the few people early on who kind of gets it.

I think it will be a reward, long term, as you point out, whereas if you're Dan Ferris and you sold out because you don't like the way it's trading, and it's not a store of value and it's not a currency, and how can this be, unless I sort of change my mind, I won't get that reward. He's right, I have all that confidence in gold. I don't care where it trades, I don't care if it goes down to $1,000 tomorrow, I'm not going to care. Because it has thousands of years of history behind it, it has worked brilliantly as a currency, brilliantly as a store of value over the long term, so that's what I come away with. FTX, all these headlines are a banking story, and understanding the fundamentals of especially bitcoin, and maybe Ethereum, and whatever else actually turns out to be useful, but those are the two with the best reputation, I guess I'll say at this point, and damn, it's good to get that feeling from Eric.

That's another really great interview, and another episode of the Stansberry Investor Hour. We hope you enjoyed it as much as we did. We do provide a transcript for every episode. Just go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy. If you liked this episode and know anybody who might like it, tell them to check it out on their podcast app, or at InvestorHour.com. And do us a favor, would you? Subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. While you're there, help us grow with a rate and a review.

Follow us on Facebook and Instagram – our handle is @investorhour. And on Twitter, our handle is @investor_hour. Have a guest you want us to interview? Drop us a note at [email protected] or call our listener feedback line at 800-381-2357. Tell us what's on your mind and you'll hear your voice on the show. Until next week, I'm Dan Ferris, with my co-host Corey McLaughlin. Thanks for listening.

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