The Peter McCormack Show

Latest Episodes:

Trapped Inside The Collapse of FTX with Travis Kling - WBD608 Jan 20, 2023

Show notes

Travis Kling is the Chief Investment Officer at Ikigai. In this interview, we discuss being on the frontline of the FTX collapse: Ikigai had a large majority of its investment funds in FTX when it stopped withdrawals; Travis had a majority of his liquid net worth also stuck in the bankrupt company.

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2022 will be a defining moment for crypto. In November 2021, the total market valuation was approaching $3 trillion. By the middle of 2022 the market valuation was down to $800 million. UST had depegged in May and caused contagion to ripple through the market: in short order Celsius, 3AC and Voyager all filed for bankruptcy. And yet, the biggest shoe was yet to drop.

In January 2022 FTX was valued at $32 billion. The August/September issue of Fortune magazine compared FTX's founder and CEO Sam Bankman-Fried (SBF) to Warren Buffet. Commentators, investors and media outlets likened SBF to JP Morgan as he bailed out struggling competitors. He'd been hosted by congressional committees in DC to help shape legislation multiple times. SBF was seemingly untouchable.

That all changed in November with a rapid fall. On November 2nd CoinDesk reported on concerning balance sheet issues at FTX's sister company Alameda Research. On November 6th, Binance announced it would liquidate its entire holding of FTX's FTT token. On November 7th a run on FTX began. On November 8th FTX halted withdrawals. Days later it filed for bankruptcy.

SBF was orchestrating a years-long fraud of epic proportions. Some in the industry had raised concerns, but many believed the hype. What Bitcoin Did did not have a relationship with FTX, but there are scenarios where that could have been different. Others did have relationships with FTX. For example Travis Kling, who had a large majority of his investment funds and personal liquid net worth stuck in FTX.

On November 14th Travis posted a Tweet thread: "I have some pretty bad news to share… I lost my investors' money after they put faith in me to manage risk and I am truly sorry for that. I have publicly endorsed FTX many times and I am truly sorry for that. I was wrong." This show goes through what happened and reflections on where we go from here. As this show goes live shortly after Genesis filed for bankruptcy, it's obvious we're still in the midst of this mess.

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How Bitcoin Can Expand the Grid in Africa with Erik Hersman - WBD607 Jan 18, 2023

Show notes

Erik Hersman is an entrepreneur and the co-founder of Gridless. In this interview, we discuss how half of all Africans are without access to electricity, the affordability issue affecting the rest who do have access, and how Gridless aims to alleviate this situation by helping to build out cheap sources of stranded renewable energy.

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Africa has an energy problem. It has been estimated that the continent has the potential to produce approximately 2.5 million terawatt hours of energy per year from solar and wind energy. To put that into context, the US uses around 4,000 terawatt hours of energy per year. And yet, approximately half of all Africans lack access to electricity. Furthermore, a large number of those with access struggle with the relatively high costs.

There are a multitude of reasons why this situation has been allowed to develop. But, despite the focus of major NGOs and developed nations, the issue is getting worse: whilst access to electricity is increasing around the world, it is declining in sub-Saharan Africa. And, without access to energy, any plans to improve Africa's economic future will always be constrained.

While some have seen this as a tremendous challenge, others have recognised it as a tremendous opportunity. Whilst the issue of stranded renewable energy was being mitigated by Bitcoin mining, the costs for the associated equipment were prohibitively high. That was until last year when the problems that beset the mining industry in the US, opened the doors for those looking to harness the power of Bitcoin mining in Africa when the price of ASICs dropped sharply.

The thesis is simple: Bitcoin miners help subsidise the build-out of mini-grids, providing electricity to dispersed and remote communities. As supply and demand find an economic equilibrium, the Bitcoin miners can be redeployed and the process starts in a new location. It is a market-driven solution that provides a return to all stakeholders. The aim is to catalyse the electrification of Africa. It may result in Africa becoming a new home to Bitcoin miners.

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What Do Economists Get Wrong About Bitcoin with Josh Hendrickson - WBD606 Jan 16, 2023

Show notes

Dr. Josh Hendrickson is an associate professor of economics and chair of the Economics Department at the University of Mississippi. In this interview, we discuss how Bitcoin has influenced his economic teaching, the importance of Bitcoin in the current unprecedented global debt bubble, and why people continue to dismiss Bitcoin.

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"Bitcoin and the entire process that led up to it was motivated by the desire to make the world a better place and internet commerce more private. It was a true technological innovation. The market will decide what that innovation is worth." We're used to hearing such statements from ardent Bitcoiners. But this statement was made by Dr Josh Hendrickson, an economics professor who chairs a University Economics Department at one of the US's top public universities.

Bitcoin is still dismissed by a significant number of well-placed people within society. We hear from many people who are passionate about Bitcoin but feel unable to discuss this within their work networks for fear of ridicule that could harm their career paths. This is why having esteemed individuals from traditional academic backgrounds advocating for Bitcoin is so critical.

A professorship is a hard-won title. It takes years of graft. The history of academia is littered with stories of people being ostracised for taking left-field positions. Therefore, academics, particularly professors and department chairs, are not ones for throwing weight behind ideas that are not inherently sound or principled. So, as with the growing list of people BPI has been attracting, these academics provide the solid rationalisation of Bitcoin's thesis.

This is not to state that there is a consensus within these groups regarding Bitcoin's path over the coming years and decades. We live in tumultuous times. The world's economic and political landscape is at the mercy of an almost limitless number of changing variables. But, there is a growing consensus that Bitcoin is a unique innovation, a new form of money with the potential to protect those who need it most. All other debates to justify Bitcoin should fall by the wayside.

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Bear Market Analysis with Dylan LeClair - WBD605 Jan 13, 2023

Show notes

Dylan LeClair is a Bitcoin and macro analyst working for Bitcoin Magazine. In this interview, we discuss the carnage in crypto in 2022 that's bleeding into 2023. We talk about the clear signs of Ponzi schemes, the lost fortunes of crypto billionaires, and how Bitcoin regains its footing in the market.

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It has been 14 years since Bernie Madoff pleaded guilty to running the biggest Ponzi scheme in history. It should have been a defining moment, and yet, we're now witnessing a tsunami of similar tragedies unfolding in crypto; a period Dylan LeClair is calling "a golden age of fraud". The cruel irony is that the industry was inspired by Bitcoin, formulated in part as a technical correction to such scams. How did this happen?

Just 2 months after Bitcoin's release in January 2009, Bernie Madoff stated at his plea hearing: "When I began my Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme." This may be the fundamental psychology of those involved in Ponzi schemes: it is a short-term workaround that can be resolved, and investors will be made good.

We may never know the true intentions of anyone involved in 3AC, Luna, Celsius, FTX and other companies currently in the spotlight, but it's hard to believe that anyone sane could think they could run a perpetual Ponzi. They must all have had an exit strategy in mind. A strategy where they and investors made good. But, time and time again, Ponzi schemes, bound by the realities of the market, fail.

So, what did we miss? In an industry that was built on the mantra of "don't trust, verify", how were so many people fooled? We can all in hindsight question FTX's pitch of 15% returns with no risk. But, how many of us assumed the huge customer bases and political endorsements and A-list celebrity advertising had merit because we were not the smartest guys in the room?

Maybe it takes the cold logic of a fresh analyst, unencumbered by industry groupthink, to see the warning signs. Dylan LeClair has made a number of successful calls and trades on both sides of the market. He can sense BS, has the strength to call it out, and, as a result, he has witnessed a well-deserved meteoric rise. What's his trick? Simple: don't trust, verify.

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Bitcoin: A Year in Review with Matt Odell - WBD604 Jan 11, 2023

Show notes

Matt Odell is host of the Citadel Dispatch, co-host of Rabbit Hole Recap, venture partner at Ten31 and co-founder of Bitcoin Park. In this interview, we review 2022: the attacks on privacy, the reaffirmation of self-custody, how people who were treated like gods rekted the market, and the responsibility of Bitcoin podcasters in doing right by the audience.

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2022 has been brutal. First, tough lessons were learnt in trying to use Bitcoin for warranted privacy needs within North America. Then, we had our industry's very own global financial crisis when the tide went out and we saw how many of the supposed titans were swimming naked. So many people have been damaged, so many have been rekt.

The collateral damage to Bitcoin is unknown, but material. So much of that damage has come from malign and selfish actions by people who knew better. They have exploited a new form of money, which was meant to circumvent systemic centralized greed and corruption, to put into practice new more brutal forms of extraction than anything we witnessed in TradFi.

But, there are also those, whose actions have been made in good faith, who need to reflect on the events of the past year. We know where blame is centred, but how far does blame extend? Explicitly, what responsibilities do Bitcoin podcasters in general, and this Bitcoin podcaster in particular, have in regard to protecting and educating their audience?

2022 has been personally brutal for a whole range of reasons. But, it is now time for reflection. It is right therefore that, as a show that assesses and comments on the industry, the tables are turned and a light is shone on this show's decision-making. There is nobody better than Odell to shine that light.

Fundamentally, it is the audience who will decide. I look forward to reading any comments listeners may have following one of the toughest podcasts I have hosted.

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GBTC Leverage Death Rattle? With Steven McClurg - WBD603 Jan 09, 2023

Show notes

Steven McClurg is a Co-Founder of Valkyrie Investments. In this interview, we discuss the causes of the crypto crash of 2022 and the effects seeping into 2023. We talk about Genesis, GBTC and Valkyrie's proposal; how over-leverage and debt are leading to a breaking point; the positives of political chaos, and how Bitcoin could have bottomed out.

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"In a risk-off environment, Bitcoin definitely goes down, there's no doubt about it." That was Steve McClurg being interviewed on What Bitcoin Did in October 2021. Since then we've witnessed the biggest players in the market going bankrupt one after another in the biggest domino toppling event the ecosystem has ever seen.

It is therefore more than timely to unpick what happened with one of those who foresaw problems and who manages one of the investment vehicles not having to charter chapter 11 proceedings. Steve himself admits to being surprised at the scale of the events that have occurred in 2022. The extent of recklessness, greed and criminality has shocked us all. But, there were warning signs.

The amount of yield on offer was eye-watering, particularly in the context of a fiat monetary system when lending returns were negligible. This was the canary in the coal mine. The fact that there was no meaningful borrowing market on the other side of these trades seems obvious in hindsight. However, the scale of over-leverage and rehypothecation was able to hide problems until the moment systemic collapse had become all but inevitable.

The question is, therefore, what now? Are some of the large funds still locked into active investment vehicles, such as GBTC, still safe? What can we do to protect the industry from such malign actions in the future, or, are crashes like these inevitable? And what about Bitcoin? Has its price bottomed out? Can it yet return as an investment vehicle for the masses? It's time to ask someone at the coal face.

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China & America's Economic War with Matthew Pines - WBD602 Jan 07, 2023

Show notes

Matthew Pines is a Managing Consultant at the Krebs Stamos Group and a Fellow at the Bitcoin Policy Institute specializing in national security. In this interview, we discuss the rapidly changing geopolitical order as China competes with the US for dominance, and how Bitcoin may become one of a number of alternative global reserve assets to US debt.

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There are moments when the world pivots when events change the course of world affairs. The Russian invasion of Ukraine was one such event. More to the point, it was the western sanctions imposed on Russia that will come to be seen as a paradigm shift. It was when the world went from working in an open Eurodollar system to a closed system involving alternative forms of money.

In the face of increasingly fraught geopolitics and a loss of faith in the US dollar, certain countries are seeking to diversify the reserve assets they hold. This will create problems for the USD-UST system, at the same time the US is facing significant headwinds: dealing with huge structural debt, 'reshoring, restocking and rewiring', and countering China's rise.

What was once a theory is now turning into reality: China is on the cusp of being able to compete with the US, principally within the Asian geopolitical sphere. To this end, China has a strategic imperative to secure reliable commodity and energy sources, and will likely move towards a proto-petroyuan system, and coerce other countries and entities to follow.

In this context, Bitcoin is emerging as a viable alternative to fiat currencies and gold as a global reserve asset. It is a unique form of money: a digital commodity with global fungibility, limited counterparty risk, and large liquidity. But critically it is a politically neutral asset, an increasingly attractive attribute for countries seeking to hedge their exposure to increasing geopolitical risk.

In the US, the rise of Bitcoin companies, along with the Biden administration's Executive Order on Digital Assets and positive statements by officials, suggests the US could accept Bitcoin's gradual adoption and monetization. From a national security perspective, key decision-makers may realize that allowing Bitcoin to serve as a new global reserve would disproportionately benefit the US.

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Defending Bitcoin in DC with David Zell - WBD601 Jan 05, 2023

Show notes

David Zell is a co-founder of the Bitcoin Policy Institute and Director of Policy at BTC Inc. In this interview, we discuss how the Bitcoin Policy Institute engages to educate politicians in DC through combating FUD, distinguishing Bitcoin from crypto, and aligning Bitcoin with US National Security interests and American values.

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Bitcoin was developed on the shoulders of the cypherpunks building new forms of money outside of government control and oversight. Permission was not sought, as permission would not have been granted. Government actively disrupted the cypherpunk vision, seeking to destroy it. Bitcoin's emergence was therefore antithetical to the concerns and endorsement of decision-makers.

But, some believe that the initial battle has been won. Bitcoin is now 14 years old. It has spread to all corners of the globe, and radically changed the mindset of those who have interacted with it. This includes some of those in the corridors of power, who have been won over by its ideology and technical resilience. The question now is how Bitcoin development continues.

Bitcoin could continue to evolve without seeking to engage with the levers of the state. Experience suggests that this would marginalise Bitcoin and Bitcoiners within the US. In the meantime, other protocols and blockchains would continue to curry favour with lawmakers and mould the regulatory framework to their needs. Who would win in this situation?

Or, through advocacy and education and cooperation with those in DC, Bitcoin could be allowed to develop openly within the United States. Much like the internet, the risks posed by this new innovation wouldn't be allowed to throttle the huge benefits it has to offer both individuals and society.

In a grand scenario, Bitcoin could allow the United States to continue to compete for hegemonic power whilst continuing to champion individual freedom and sovereignty. This is a huge prize. Perhaps the biggest prize. This is why there are people willing to put in the hard graft to develop and nurture bodies like the Bitcoin Policy Institute. The future owes them gratitude.

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2023 Bitcoin & Macro Outlook with Lyn Alden - WBD600 Jan 03, 2023

Show notes

Lyn Alden is a macroeconomist and investment strategist. In this interview, we look forward to 2023: what's happening to Japan and China's economies, whether we are entering a recession, and how will investments, including Bitcoin, perform over the next year?

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2022 was when chickens came home to roost. Over 70 years of relative peace across Europe had lured politicians into a false sense of security allowing cold pragmatism to supplant ideology. Then Russia invaded Ukraine, and the wisdom of assimilating energy markets across the old iron curtain was brought into sharp relief. China sent equally belligerent signals to the west. In short order, retreat and resilience have replaced cooperation and efficiency.

Assumed certainties that had driven the world economy for generations dissipated in real-time. The economic impact was sudden: stressed supply chains, shortages of goods across all sectors, and dramatic changes in inflation. Excessive sovereign debt has limited governments' options. We're now in the central bankers' worst-case scenario: high inflation, high debt, and low growth. Advanced countries like Japan are now on the ropes. A global recession is looming.

So, how does one prepare for 2023? Where should we put our money? According to Lyn Alden, it's far from easy to navigate this market. When a preeminent investment strategist talks of minimising losses you know that we're in unfamiliar territory. And yet, there are still reasons not to lose hope. The world didn't collapse in 2022. China's economy should rebound.

It will take time for the world to reorder itself to the new rules of the game. Onshoring and durability are going to require significant investment. Debt levels make it harder to source the funds required. At the same time, we're in a period of stagnation with potential volatility at given moments. Governments will have to chart a steady course through choppy waters. Investors will need to keep a close eye on markets and know where the lifeboats are.

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Doomberg on Energy - WBD599 Dec 30, 2022

Show notes

Doomberg is an anonymous collective producing the world's most popular financial substack. In this interview, we discuss the roots of the 2022 energy crisis, why nuclear power needs to be the basis of our energy needs, and how pragmatic decision-making is needed if we're to best fulfil our energy needs.

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Just a few years ago energy was abundant and cheap. The oil crisis of the 1970s was a historical anomaly. The assumed understanding was that between governments, major energy companies and the markets, energy provision was becoming more reliable and cost-effective. The Russian invasion of Ukraine showed how paper-thin this impression of the energy sector was.

Systemic underinvestment in energy infrastructure, particularly nuclear, has left the industry vulnerable to shocks. And Ukraine has been a heck of a shock. Long-term political strategies for energy provision have had to be rewritten in real-time. The market, unsurprisingly, has been volatile to the upside. One in three UK families are expected to be in fuel poverty in 2023.

But, obviously, energy is not a discretionary spend. We all need a minimum material quantum just to survive. It is clear, now we're self-rationing energy, how vital it is to our way of life. Humans flourish with access to energy. The flipside is a retardation of civilisation. So, whilst limitless cheap energy is still decades away, can we supply sufficient energy for our society to prosper?

Fundamentally, are we making the right decisions to facilitate the best use of resources? Nuclear power is both reliable, efficient, safe and direct power generation that is carbon-free. Why has investment been curtailed? Material bottlenecks mean we can't produce enough batteries for EVs. So why aren't we maximising the benefits of battery tech through use of hybrids?

Ideology and nimbyism have counterproductive effects: serious harm is outsourced to the poorer areas of the world whilst leaving us with insufficient infrastructure at home. Clearly, decisions need to remove dogma and deal with the world as it is. The frustration is that we have the skills and knowledge to resolve this situation. We just need to bring pragmatism out of the dark.

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