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Joe Consorti

lines on the record: 62
first: 2022-08-10
most recent: 2022-08-10
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Absolutely. Thank you for having me on Preston. You could find me on Twitter at Joe Consorti. And I'd also redirect listeners to My Bitcoin and macro substack publication. I do it with Nick Batia, author of Layered Money. It is at the BitcoinLayer.substack.com. It's a premium Bitcoin and macro newsletter. And we also have a free post that go up quite frequently in terms of high signal that's basically where everything's going. So point people to the Bitcoinlayer.substack.com.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The year over year change for liquidity, global liquidity, it's the lowest it's ever been. It's the lowest it's ever been in the last three or four decades. You take a look at the rate of chains for the policy rate. It's the highest it's been in several decades. And so you have to wonder how much longer can the Fed keep up with draining liquidity from the economy? And the answer, in my purview, is not very long before bankrupting not just corporations, but emerging markets, other very fragile entities. And when they eventually reverse course, right? That's when Bitcoin stands to benefit because of Bitcoin's extremely low liquidity profile, really any major player stepping in, which would undoubtedly happen if the Fed were to pivot, would send Bitcoin flying. So as of right now, cautious, you know, until the Fed sort of changes its tone. But that's where we stand.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Continue channeling around this level for a pretty sustained period of time unless we see a pause in rate hikes, which very likely there's a scenario in which that could happen, then Bitcoin could begin an uptrend. But as of right now, I wouldn't expect Bitcoin to massively break up or massively break down. We saw that there was a huge buying cohort around the 20,000 level. So really anything can happen. You know, the Fed has, again, they're hawkish in that, you know, they're not ending their liquidity draining from the economy anytime soon. And Bitcoin actually trades basically one-to-one with global money supply. I didn't include the chart here, but two weeks ago, Bloomberg has a very, very nice indicator that basically compiles every single report it countries them through money stock. And just like other risk assets, Bitcoin rises and falls and rises and falls. And so as of right now,”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Several new institutions in order to do so. And chances are they will in the next one. But as of right now, the Fed is being extremely hawkish with sucking liquidity out of the economy and their tenor, apart from a couple of minute things, it hasn't changed much. And so the question has to be asked, like, how is Bitcoin going to perform in what might be like its first sustained recession or major economic contraction, however they decide to change up the definitions? And I would say that the best thing you could do there in order to try and figure out how Bitcoin is going to perform is taking a look at these historical levels, you know, sort of combining that with the adoption trend of Bitcoin, how many new people are coming onto the network, and more so than anything else, understanding that Bitcoin sort of leads other risk assets in this regard. I think Bitcoin stands to”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Right, absolutely. So you really have to look at all of it through what we try to do at the Bitcoin layer is look at Bitcoin through a macro lens, look at it through the lens of what rates are telling us and sort of the geopolitical landscape and how things are playing out. Because if you take a look at this chart, it doesn't paint the full picture. You have to consider what credit conditions are like, what rates are telling us about how expensive money is at a certain point in time, what the Fed is telling us about how it's going to guide monetary policy. So looking at any one chart, especially a chart like that, doesn't paint a full picture. In 2020, I would say we definitely didn't see a sustained recession. As you said, you tend to discount when the curve inverted in 2020. I do as well. It wasn't a sustained recession, as you said. The Fed backstopped with liquidity almost immediately. They created”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We include because I think really anybody who takes a look at this can understand, okay, what does this mean in the top left corner? It says exactly the inputs, the value of all of those inputs. And then at the bottom, I put expensive and cheap underneath that line to show when the spot price of Bitcoin falls below the floor. And it's a really simple, I feel high signal way of determining whether or not Bitcoin is over undervalued.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Oh, yeah, it does. Not to tutor our horns at all. I mean, people have, so many people have come before in terms of this, in terms of doing similar charts to this. I know I'm certainly not the first person who has used the word confluence to create a chart that describes a floor. But again, you know, the fair value framework, taking that idea of simplifying it even further, we literally just a simple average at all three up divided by three and it provides a whole lot of signal as to why the Bitcoin is over undervalued. One of the cool things is that we also put an oscillator underneath so you could see whether Bitcoin was expensive or cheap. And we published this every week on our substack for free every Saturday. We do sort of a weekly update. And this is one of our top of the line charts. We have a whole monitor that we go through. We talk about sort of Bitcoin's correlations, its prices. And this is one of the charts.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Bitcoin is cheap. Bitcoin is closer to its fair value. And when the spread between these widens, you could say, okay, Bitcoin is overvalued, right? And the reason we capped it at only three metrics was because, again, we feel that you could derive the most signal if you eliminate all of the unnecessary things.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We went through traditional technical analysis, and then we went through energy. And the three metrics we derived in order to create this floor are realized price 200-week moving average and actually proprietary metric that I created called the electricity hash value. This was based on Charles Edwards' Bitcoin production cost. And basically the way that that gets derived is multiplying terahashes per Bitcoin by it's I'm losing it. But essentially it's the production cost of one Bitcoin. And basically the idea is that if you zoom out, even I have this chart up to 2019 because I think it's helpful to just take a look at the most recent cycle or couple of years. But if you zoom out, you can see every single one of these floors moving in a stepwise function underneath the Bitcoin price. And this is very helpful because when Bitcoin approaches or falls beneath these floors, you can identify, okay.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Course, so the first chart here is our fair valuation framework. And basically this is something Nick and I worked up a month or two ago where we were trying to figure out the clearest and highest signal way in order to value Bitcoin. Oftentimes people will get way too muddled when it comes to whatever indicator they're using. They lean to heavily into on-chain or they lean too heavily into technical analysis. And ultimately, it ends up, you know, your chart ends up looking like a five-year-old's finger painting more than an actual financial analysis chart that you can derive signal from. And so basically the idea behind this was that simplicity, $30,000 view will give us the highest signal. And really the way we went about this was going across three completely separate financial disciplines in order to find the floor in every single one of them. And what I mean by that is we went through on-chain, right, on-chain analysis.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Started to invert, right? You know, when 5s begins to invert, or even tens 30s, like nobody takes a look at 10s 30s, nobody takes a look at 10s 20s, especially not the Fed. But if they did, maybe they'd be able to adjust monetary policy ahead of some of these major cataclysmic events happening. Instead, what they monitor is the three-month tenure, which is perhaps the shortest inversion and the most severe inversion you could possibly measure. I don't know why we pay these people. I really don't.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“But how forward growth expectations are looking? As of right now, things are channeling relatively steadily. We know that the Fed actually looks at the five year, five-year inflation swap first in perspective as to whether or not inflation expectations. And this means inflation expectations six to 10 years from now are coming down. They're increasing. And that's sort of what they use to dictate their policy rate. It did start moving down steadily, but it's continuously channeling around that to five level. So we'll see. And then the other thing that we tend to look at is the three month 10-year treasury spread. And that, as opposed to twos, tens, because the Fed likes to wait until the very, very, very last minute, they like to look at the three-month 10-year spread for when, oops, we've gone too far time to reverse course. You know, ultimately the Fed, they could be a lot more ahead of the curve if they looked out further on the yield curve and addressed issues with monetary policy when the longer tenors on the curve.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There are, yeah. The 10 year, two year, just to provide some context as well, I mentioned how twos trade with policy rate expectations trade with forward growth and inflation expectations. And so the way, because this chart's been thrown around a whole lot, the way that this can be interpreted from 30,000 feet is below the red line when these curves invert is when growth expectations for growth expectations, annual inflation the Fed targets at 2% are below the policy rate expectations, right? So in other words, the price of money, right, policy rate is higher than expected growth, which is very bad, which is why sort of this 2's 10 spread is such a good indicator. But looking at the rate of change there, that's not good. A couple of other things I tend to look at, Nick tends to look at are the five-year, five-year inflation swap. Not necessarily as a recession.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Of a free market, a market where there aren't a tremendous amount of regulations in terms of leverage on the balance sheet, but also leverage with these various exotic financial products that people can take on. And as a result of that, when leverage gets purged, the price tanks pretty expeditiously compared to other risk assets. But that said, you know, while Bitcoin can sometimes be unreliable, it led the 2017 S&P 500 top by something like two months. It led the 2018 top by something like six months. And then in 2021, the one that we just showed, it led it by eight full weeks. So obviously as Bitcoin monetizes and its market capitalization comes closer to that of the SP 500, it'll be a less effective fire alarm. But as of right now, it's a moderately reliable indicator for when things are going south in traditional markets.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Profile compared to the SP 500. Bitcoin, that's reason number one. So Bitcoin's market cap is $450 billion roughly, and the SP 500 is right around $35 trillion. And so, you know, Bitcoin being a fraction of a fraction of the S&P 500, but also trading with very high beta to other risk assets, it means that as Luke Groman puts it, Bitcoin can be sort of a fire alarm. When you're looking for something that could be a leading indicator on the direction of risk, Bitcoin, in this case, it led the S&P 500 by eight weeks. The other thing is sort of this extreme excess of leverage. So obviously we had this massive leverage online, sparked by the collapse of Terra Luna, and then all these insolvencies that we talked about $50 some odd billion dollars, or excuse me, $5 billion some odd dollars of cell pressure. And I guess it's just a symptom of.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So Bitcoin leads other traditional risk assets for a couple of reasons. But I'll also preface it with Bitcoin is, it also acts as a false alarm sometimes. Bitcoin has these extremely volatile swings. And sometimes, and in this case, when Bitcoin started to decline eight weeks before the three-month started, it increasing, in this case, it wasn't a false alarm. But if you look back, even just on this chart back to last May, if you looked at that and then thought that broader risk was going to puke too, you were wrong. If you looked at that and thought, oh, rates must be increasing relatively soon. You were wrong. But by that same token, Bitcoin does get it right sometimes. And the reason I feel, and we're going to publish a longer form piece on this, we're going to do a longer form SPY versus SP 500 versus Bitcoin study is because of Bitcoin's very, very tiny liquidity.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Would be the most responsive. And it's pretty remarkable. The moment you saw the three month take up, I think the wake didn't even go as high as 50 basis points. You saw the S&P begin a pretty substantial move down. And that just goes to show how dependent on cheap, cheap, cheap debt we are. We talked about zombie companies earlier, and I think this is the easiest visualization for anybody to see how overlevered everybody is on this cheap debt. We've been able to binge on it for the last 14 years since the great financial crisis, but also during COVID, when the Fed decided to backstop literally everything and inject the economy with all of this liquidity. And now you're seeing, okay, once the music is up, the S&P has been brought down a pretty substantial amount and has only started a rally once. Rates have begun to level off in reverse.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“If anything, I think that the broad strokes for anybody watching is that rates lead the Fed and rates guide risk. Risk is forward-looking six to 12 months, and they see essentially, the reason I chose the three month was because of all the different maturities, of all the different tenors across United States Treasuries, the one that gets borrowed against the most, I'd say, or considered the proverbial risk-free rate would be the three month. Obviously, the further you go out along the yield curve, the more duration, the more interest rate rescuing curve. And so the reason I use a three-month was because, you know, again, corporates borrow at a spread to this. And for that reason, I felt, and actually Nick published this initially. So I'm taking a little bit of his thunder. Essentially, this is what corporations borrow at. So, you know, naturally you could extend that out and say that's what things like the S&P.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's unbelievable. I mean, I'm sure Jerome Powell can afford a Bloomberg terminal. Just take a look at all the jobs data that's coming out, all these other really important economic releases that are coming out. Things are getting more dismal. The labor market's extremely tight. As you said, the last, we actually didn't get below 3.6% the last percent unemployment, the last hike cycle in 2019 before that started to rise too. And then obviously COVID happened. Yeah, not looking ideal.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Most definitely. Yeah, a lot of people, you mentioned unemployment. A lot of people have been, and even the Fed does this, they take a look at things that are still looking good, but they're lagging indicators like unemployment. And then the Fed will use that, oh, well, we're still at 3.6% unemployment. And they'll use that to jump on the market as if it's a good thing. But that thing's lagging”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And so the SP would have room to fall to 1,100. If that was the case. So there are a number of different scenarios more taking a stance of absolute doom and gloom versus, okay, this is a relief rally spurred on by lower rates. And as of right now, basically we're just myself and Nick and what we do at the Bitcoin layer. We're just trying to weigh things probabilistically, right? So whatever the charts are telling us, we try to relay that information and sort of give all the probabilities. But those are sort of your scenarios, I'm guessing.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Maybe by some miracle, these companies were able to roll their debt in such a way that these massive rate increases haven't impacted them. There are a lot of different scenarios. But I think the most doomsday scenario, I think it was Alessio on Twitter, Alessio Urban, great macro guy. He put the fractal of when Lehman went under in late.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So, there's two schools of thought. There's a school of thought that this is a bear market rally spurred on by the fact that, oh my gosh, in a month, we saw 15%, 20% losses to the NASDAQ, to the S&P, and people are buying euphorically thinking that pivot or a pause is coming. And there's the school of thought. There are a couple of different schools of thought. So I'll stop saying schools of thought. There's also the idea that, okay, two years are trending down 10 year fell pretty precipitously at its highest wake, it was three, five, and now it actually waked down to 2.5. And so the risk is forward looking. And so there's an idea that, okay, because risk is forward looking, they're seeing all these key rates begin falling. Okay, now it's time to, you know, now it's time to rally once again, potentially balance sheet conditions moving into the next year are going to be more optimal because”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Since the last hike cycle, it's insane. You know, the Fed, in order to bring down this inflation, which obviously is their mandate, right? Because they're also facing a pretty big credibility problem. You know, Jerome Powell, as Jeff Snyder says, he's channeling his Paul Volcker. He's trying to do his best impression of somebody who's willing to fight inflation at all costs. And they stand the risk of bankrupting all these fragile sovereign nations that hold this dollar-denominated debt. It's a crazy situation. I think in the fall Southern European nations, other emerging markets, we see defaults ensue over there among the more fragile ones in terms of their credit risk. It's not a pretty look for the fall, in my opinion.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Oh, absolutely. If rates continue their precipitous fall and they fall below Fed funds, then we could see a pause sooner than we think. The upper bound of the terminal rate that we're at right now is, you know, if we actually go beyond this, if in September, which by all accounts they are going to, Jerome Powell is going to speak late August about probably give some forecastance about what they're actually going to do. you know, when they hike another 50 basis points or 75 and we'll get a better understanding of what consensus is as we move forward, then that would be the first time, since I'm pretty sure the very early 80s, Volker hiked to 17, 18%, that the policy rate will be hot. That the terminal rate for this hike cycle will be higher than the terminal rate for the last hike cycle, which would be pretty remarkable, especially considering debt to GDP has what doubled, tripled in the timeframe.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“By any means, unless something extreme were to blow up, credit spreads blew out, and then the Fed was forced to jump in. We don't view that as likely. We don't view as if that's coming soon. But taking a look at the two-year versus Fed funds and then also this overnight index swap policy rate expectation, we're taking a look at the Fed is they're walking a pretty tight rope here”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You can use to gauge whether or not a pause or a pivot would be coming. And as of right now, the two year, it bounced this week, but it's channeling sideways in that range of right now. And at the Bitcoin layer, we're not saying a pivot is coming. We're just reading the charts. We try to play things probabilistically as opposed to being extremely granular and trying to make all these minute predictions. But looking at this and then taking a look at Fed funds futures, which is something that is derived with overnight index swap data, which also shows that a policy rate pivot, or at least pause is coming early Q1 next year. For those reasons, we sort of presuppose that September could be the last type we see before a pause, not the terminal.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“If you want to pull up the chart, what I've done here is I've mapped the United States two-year treasury yield against the federal funds rate upper bound. So Fed funds is obviously the policy rate that gets set by the central bank, the Federal Reserve. And as you can see here, every single time that the two-year yield falls below the federal funds rate, the Fed pauses their hike cycle. And then ultimately when it becomes a precipitous fall below the federal funds rate, then they're forced to pivot their hiking cycle in the other direction. This is a historical precedent. For those wondering, the reason the two-year yield was chosen is because the two-year yield trades with forward policy rate expectations. So the two-year yield can sort of be thought of as where the market believes the policy rate is going to be. And so that's essentially one of the charts.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“You're basically entirely on point. And the fantastic thing about this is that the only thing that the channels on the Lighty network need to know is that they're routing liquidity. And that's already what they do. They don't need to know what asset they're routing. All they know is they're routing Bitcoin, right? So if I wanted to send USDC to you through the channels, the first hop into the Lightning Network per se, it gets converted my Bitcoin or my USDC gets converted to Bitcoin gets sent through the Lightning Network in the most optimal way. And then on the last top to you gets converted right back into USDC, which sounds a lot like Strikes business model, right? Strike, you know, the idea that you could send dollars, somebody receives Bitcoin and vice versa. But this essentially takes that business model and embeds it, you know, creates a method for embedding it into Bitcoin and letting itself. It's pretty cool.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“What people should be looking at is that any increase in demand for transactional capacity will also come with increased network liquidity on Bitcoin in order to facilitate those transactions. And so to me, for participants who live maybe in El Salvador or other countries that are thinking about adopting this technology, a major onboarding milestone would be the ability to hold Bitcoin and dollars in the same wallet, right? Right now, that's sort of reliant on a third party, right? Like strike, they create a user interface and they're not in the same wallet, but they're in the same application. And Tarot sort of jumps directly over that and sort of allows for all these different currencies to be held within one Bitcoin wallet. It's pretty remarkable.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Ultimately, what's made possible through this is any asset you can think of primarily in my mind, whether that immediately jumps to is like all the world's currencies, we've got dozens, hundreds of fiat currencies all circulating. And those currencies can be traded between market participants. And for goods and services between participants and in and amongst one another, right? So sort of inter and intra currency all over Bitcoin denominated financial rails, right? So it's sort of, it's using these Satoshis, these 100 million units of a Bitcoin as the vehicle for sending these currencies back and forth. And so even if people aren't a fan of monkey JPEGs trading on using the Bit”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. That's definitely variable because somebody could be issuing stablecoins or somebody could be issuing a photo of a monkey. Similar to the fixed income space, it all depends on the creditworthiness of the issuer. It all depends on the reputation of the issuer. That spread is absolutely variable. But it's interesting. I mean, Tarot can issue assets on the Bitcoin main chain, but it can be sent over Lightning, which is the real innovation in my person.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The reason this trades out of spread to L on liquidity lease is because obviously that incurs all of the associated risk with anybody who issues an asset on their own. And then at the very top off-chain lending, that encourages the most risk. And so it's the most expensive. But you also have a pretty high potential for return. Obviously, when you're off chain, you incur default risk. You incur counterparty risk. Counterparty risk at a level that isn't present with all the other four risks on the curve. And really, this is just a way of illustrating every single instrument on Bitcoin's future potential capital market based on the way I see things are going.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Underneath it, you'll notice I put LNR plus 50 bips, right? Now this is not alien talk. This is mostly just to illustrate how this sort of emulates traditional fixed income instruments. So LNRR is the lightning network reference rate. And something that's a little bit more risky, something that incurs things like the risk of the marketplace going down and other associated risks, it trades at a basis point spread to Lightning Network reference rates, right? So it's a little bit more expensive than the proverbial risk-free rate of the Lightning Network. And then one step above that, I've put tarot asset lending. And we could talk about this, but tarot by Lightning Labs is essentially a protocol that's in development by them that would allow for asset issuance, any asset on Bitcoin and Lightning, right? So essentially.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“channel. This is a spread to cold storage Bitcoin because obviously it incurs all of the lightning risks inherent to the protocol that we talked about earlier. The utility of publishing a lightning network reference rate is just to show market participants that Bitcoin can be a fully fledged capital market in and of itself. The idea of having a widely reported return on your investment, the idea there is that it attracts liquidity to the ecosystem. So that's a step above cold storage Bitcoin, obviously, requires a little bit more work to manage. Then the lightning liquidity lease, this is to illustrate marketplaces like Magma, these liquidity lease marketplaces where not unlike a bank issuing a loan, somebody can put up their channel liquidity for lease. People can come purchase it for specified periods of time.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“That these protocols were evolving in tandem. But at the bottom of the risk curve is cold storage Bitcoin, right? Obviously, it's non yielding, obviously, but it's non-custodial counterparty free. And unlike the United States government, obviously we've never defaulted on our debt, but physical cold storage Bitcoin could be considered completely devoid of all counterparty risk, all default risk, all custodial risk. So it sort of mirrors physical goal and its risk profile. And if you play these two risk curves back to back, you could sort of see how these instruments align with one another in terms of having similar risk profiles. And then a step above that is the Lightning Network reference rate. This was originally coined by Nick back in 2018 in order to describe basically a standardized rate of return that people could earn through parking their capital on a lightning.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Sure, yeah. So there's one aspect of the risk curve that I'll describe when we get there. But I mentioned Bitcoin's capital market and its risk profile can sort of be illustrated best with a risk curve. So we talked about the traditional finance risk curve. You've got gold at the bottom, the least risky, least, no counterparty risk if you're holding it on your own, no custodial risk, unless it gets demonetized, and then venture capital all the way at the top being the riskiest. What I've gone ahead and done, And again, this piece was very conceptual. This is sort of a future conceptual Bitcoin Lightning risk curve. The reason I wanted to do this was so people who are very adept when it comes to building instruments like these, they can take a look at this and become inspired. I took a lot of inspiration from Nick's original piece way back in 2018 to sort of adapt what he did there and bring it into the present and sort of give people an update on the way.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“No, you're right. I mean, we've had more zombie companies than ever. I mean, money has been essentially free. People have been able to borrow at a small spread to the T-bill since 2008, basically free money. You've seen the impact of that now that People can't survive when they're borrowing at a spread to that. It's quite remarkable.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The 29,000 Bitcoin, they were able to add 936 million bucks to their balance sheet, right? Their cash balance actually would have shrunk by $117 million. And it would have been their first quarter of the year where they had a negative cash balance. And so in my purview, it's just window dressing. Tesla is still the second largest corporation. In terms of the Bitcoin treasury, But I mean, in times like these, it's important to remember, right, cash flow is king. I mean, Michael Saylor's doing it right with micro strategy. They have a solid software business. They can rely on those free cash flows. Tesla, not so much, right? It was pretty bold of them to add a Bitcoin strategy when, as you said, they're really struggling with cash flows even now and they rely heavily on good regulatory environment from the United States. Government to stay”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I mean, Tesla sort of a company living off of subsidies, to put it bluntly. And we actually did a report on this over at the Bitcoin layer, Nick and I. We talked about essentially this was just window dressing, right? From Tesla, we titled it Tesla's New Drapes. On their Q2 earnings call said they sold 75% of their Bitcoin. So they still have some Bitcoin, but you're exactly right in my purview, it's just an accounting gimmick, right? Buy selling”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The majority of it, the majority of the turmoil had already gone by. As far as I know, I was seven years old at the time. But who knows, there could still be some skeletons in the closet for Bitcoin.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Based on reputation alone, and they got smoked because of it. Client funds out the door who's to say how much of it will be recovered. Players like Celsius also very heavily intertwined with this. Celsius was more so taking customer funds and putting them into these yield protocols. We just spent 20 minutes talking about a real way to earn yield. But for the listeners and viewers, the way that Celsius was parking their funds in these different protocols, they were earning essentially yield from nowhere, yield from nothing, yield from printing these worthless tokens. And essentially over two months, Bitcoin, right, as a result of all this, experienced $5 billion in sell pressure, $5 billion. And it was still able to find a cohort of buyers around the $20,000 area. So absolutely remarkable. I'm of the belief that we've seen the worst of it, but who knows? I mean, you know, Lehman occurred after.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Right, you had major players FTX, Darabit, Bitmax, Blockfi, Genesis, Voyager, Voyager went bankrupt, right? They declared, I think it was chapter 11, bankruptcy protection. And so you had all these different market participants that were very highly intertwined with three eras capital. And they were lending, a lot of them were lending to three eras capital under collateralized or with no collateral at all based on reputation alone. For example, Voyager, they lent three arrows 665 million dollars completely on collateralized, completely uncollateralized. And so, you know, when word got out, that three arrows was having solvency issues like BlockFi, they had a $1 billion collateralized loan, 80% marcher requirement, they were able to liquidate it. They were fine. But because places like Voyager, they essentially lent to 3A.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Most definitely. I mean, I think the best way to describe it is a chain of dominoes, right? So with Luna, again, in the truest sense, Terra Luna mirrored a Ponzi scheme almost one-to-one. They would burn and create new tokens amongst both of them as new participants entered and exited. And then when there was a huge dash for the exits, there wasn't enough liquidity to go around. And, you know, the token went to zero, both of them. And so that was sort of the finger that knocked over this chain of dominoes of extremely fragile market participants in terms of their balance sheet fragility, namely three R as capital, right? Three R is capital, obviously 50 billion dollar fund for those listening, for those curious, that's the same size as Bernie Madoff's fund, right? So it's absolutely major. A lot of people are calling this the Lehman moment for cryptocurrency more broadly. And I tend to agree.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Not the best person to comment on that for this piece in particular, I dove especially deep into magma. Because they have a pretty fantastic UI, very, very friendly user interface. Pool, I think, is a little bit more complex. I'm pretty sure it's closed off to node operators. For Magma, I mentioned to the listeners, you could hop right on and take a look at all the available channels for sale. Whereas with something like Pool, I'm not sure that somebody who isn't a node operator could do that.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And then, again, numerous other instruments that are available on the lightning network. And this is conceptual. Again, what we've seen in implementation is magma and a couple of other liquidity marketplaces, excuse me. But if anything, what it demonstrates is that there's a structural demand for secondary markets of liquidity. There is demand for the use of Bitcoin as a place where people can buy and sell collateral as they need to.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Income market, which is really remarkable. I mean, this is sort of the first instance in Bitcoin, one of the first instances I know that Lightning Labs had something similar with Pool, but this is one of the first major instances of participants being able to peruse and lease liquidity over Lightning. Again, not unlike a traditional fixed income market. Another graphic I sent was the Bitcoin Lightning risk curve. And it's basically the same thing as the traditional finance risk curve, the same concept. But I've gone ahead and replaced each point on the risk curve with these different Bitcoin capital market instruments. So cold storage Bitcoin, obviously doesn't have any yield, doesn't have any counterparty risk as you're customing it on your own. And then, you know, this lighting network liquidity lease is another run up the risk curve and it's trading at a basis point spread, not to get too technical, just like traditional fixed income markets.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Sure, yeah. So you can go to amboss.space magma. And basically you can log in with your node. They have a process for doing that. And you can also, you don't need a node in order to peruse all of the different information on there. So on the homepage, you could see the total amount of sats earned in interest as of right now. That's 8 million sats. So again, relatively infantile network only 10% of the Bitcoin has been earned in interest as of right now. But you can also scroll down. And again, this is a liquidity marketplace. So like you can take a look at every single channel that's up for lease, you know, the minimum and maximum APR, the history of the market participant. It's all transparent. So you can choose these nodes based on the time that you want to lock up or the time that you want to lease the liquidity for, you know, the reputation of the individual. Not unlike, you know, a traditional fixed.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The Lightning Network sort of emerges as this layer that people want to earn a return on and its liquidity profile increases in tandem with that, then ultimately like this APR and other interest rates that are drived from the Lightning Network will smooth out. But this technology is all in its infancy. Most of what I wrote about is conceptual. So it's, you know, to me, it's just pretty remarkable to see all this stuff widely reported.”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So as for the spike in June and for people who are listening, what we have up on the screen. Something called magma, which is actually a lightning channel marketplace, where market participants can go and they can lease liquidity. And essentially, this is one of the first major examples of a widely reported interest rate. And we'll talk about why that's important in just a second. As for the bump in June, it's in all likelihood due to increased demand for channel liquidity and the reason it forexes all the way up past 8% there is because as of right now on magma I'm looking here, there's only one there's only 31 Bitcoin deployed as of right now 667 channels opened so you know it has a very very small liquidity profile and so you know demand shocks in you know my estimation are probably what spiked that significantly up I think you know over time we talk about transactional capacity over time as there's more transactional capacity for things like lightning as”
2022-08-10 · We Study Billionaires · BTC090: Risk Free Rates on Bitcoin's Lightning Network w/ Joe Consorti (Bitcoin Podcast) · IDENTIFIED FROM THE TRANSCRIPT