Crypto is currently doing exactly what crypto does best, becoming more legitimate and ridiculous at the same time. We have Charles Schwab fully entering the crypto arena. We have the government of Pakistan making very pro crypto moves. But on the other side, we have another massive Defi hack that shows that sometimes crypto is just not ready for primetime. We're going to unpack all of that right now and more. Let's go.
What is up everybody? Welcome to the Daily Wolf on Yahoo Finance. I am your host Scott Melker, also known as the Wolf of all streets. And we're going to spend the next 15 minutes here together looking through all of the news stories deciding what's likely signal and what's likely noise. So first of all, before we get started, I want to wish a happy 420 to all of you who celebrate.
I see that guy right there. Talking to you. But really, we're going to go ahead and get started with the Yahoo Crypto hub right here.
As you can see, there it is. Watch now, The Daily Wolf with Scott Melker. The first story there though, if you scroll down, is this one about Michael Saylor. Strategy has acquired 34,164 Bitcoin for 2.5 billion at 74,395 per Bitcoin and has achieved Bitcoin yield of 9.5% year to date, yada yada yada, 815,061 Bitcoin. Now, the story here is not that Michael Saylor has announced a Bitcoin purchase on a Monday. We can literally just call that Monday in the Bitcoin space because he does it every single week.
The story is how he's doing it and the machine that he's created to do so. Many are calling it the infinite money glitch, which is not, not a term that I'm a huge fan of. That sound sounds like something you would hear at a euphoric peak. But let's just zoom back to last week. So, last Monday, Michael Saylor announced a $1 billion dollar Bitcoin purchase, about 14,000 coins. But the real headline there was that all of it had been funded through STRC or stretch, which is his uh perpetual preferred stock equity instrument that he's created.
That started to gain traction at the beginning of last week and on Monday and Tuesday, we were actually watching it live on my other shows as money poured into STRC and you could watch how much Bitcoin Michael Saylor was buying in real time. STRC is meant to be pegged at $100. Anytime it's trading above par, they're able to sell securities into the market. They immediately take that money and buy Bitcoin, rinse and repeat that exact same process. But what happens after that FOMO cycle? Well, then it starts trading below par, goes back closer to $99. They wait for it to float back up to par, unable to buy Bitcoin during that time, and once again, it goes back above. Now, there's a few opportunities there. You have people who are arbitraging the price, right? You can just go ahead and buy it at 99, sell at 101, rinse and repeat every month when the dividend is paid. Obviously, this instrument is also paying an 11.5% dividend.
And since it's considered a return of capital and not a capital gain or income, there's also a tax benefit because it's not taxed the same. So the effective yield on STRC is more like 17 or 18%. You have a huge wall of money seeking yield in markets that can't find it elsewhere, doesn't want to buy treasury bonds for 4 or 5%, that's willing to take on this small additional risk to earn an effective 17 or 18% yield. And that wall of money is not going anywhere as this thing gains more steam. And then we have another piece of news associated with this, which is that STRC is proposing to pay dividends semi monthly.
This means that if approved and adopted, this will lead to reduced reinvestment lag, enhanced liquidity, market efficiency and increased price stability. So think about the flywheel that I just described to you that happens basically once a month. and if you're holding STRC during that month, you're gonna get the dividend at 11.5%. Well, now they're proposing that they do it effectively every two weeks or twice a month so that that flywheel happens faster, liquidity is more smooth, the Bitcoin purchasing is more smooth and you'll very reliably be able to see what the demand for Bitcoin coming from strategy will be on a week-to-week basis. This guy has created an incredible machine. He's iterated over the years on different ways to financially engineer the stock and create products to do it and it seems that he's finally found the best way to consistently buy Bitcoin. You can think of this for for my 80s, 90s guys out there, you remember the movie Space Balls?
At the end of Space Balls, there's a huge spaceship and it turns into a giant maid, it's got a vacuum cleaner, it sucks all the air out of Druidia. That's Michael Saylor. He's Mega Maid. The problem is at the end of that movie, uh Mega Maid goes from suck to blow and we're hoping obviously that that doesn't happen with strategy. Pretty confident that it won't. But he's not the only buyer in the market right now. I want to give an honorable mention to my friend Tom Lee over at Funstrat and Bitmine. Bitmine makes biggest Ethereum purchase of the year.
So this isn't just happening in Bitcoin. You have Tom Lee, the Michael Saylor of Ethereum following in that playbook, effectively doing very similar things to stack Ethereum. I think we have a situation in crypto right now where there are haves and have nots. The haves are the assets that have some level of institutional adoption, they have ETFs, they have treasury companies buying them and then we have the have nots, which is the rest of crypto that we'll eventually get into. Now, talking about how Bitcoin and Ethereum are becoming more legitimate, we have this massive story that hit last week that largely went unnoticed because of all the war headlines. Charles Schwab to launch direct Bitcoin, Ether trading to compete with Robinhood. So, I'm on board with the first half of that. I think the second half of that headline is a bit nonsense. When I think of
octogenarian Charles Schwab. That guy's still alive. Chuck Schwab, he's alive. When I think about that guy buying Bitcoin or trying to appeal to Gen Z and take away Robin Hood's customers, I think about uh this exact meme right here. How do you do, fellow kids? You guys have seen this before. There's no way that Charles Schwab is going to appeal to younger digital native customers. And let me tell you why.
Charles Schwab is offering direct Bitcoin and Ethereum spot trading here. That is actually a huge signal. This is not ETFs, these are not products. This is actually Bitcoin and Ethereum. The problem is if you buy Bitcoin on Charles Schwab, you can't send it anywhere. There's no functionality for actually moving your assets and everybody knows that the digitally native and Bitcoiners believe in not your keys, not your coins. They believe in self-custody, they believe in being their own bank and holding their own assets.
So the problem that Charles Schwab right has right now is that they're seeing massive capital flight. They have roughly 39 million funded accounts on Charles Schwab. That's a lot. You know how many customers Coinbase has? 100 million plus customers on Coinbase. And right now, when a Charles Schwab customer or a Morgan Stanley customer or a JP Morgan customer wants to buy actual Bitcoin or Ethereum or any of the other crypto assets, they have to sell something on Charles Schwab,
send that money over to Brian Armstrong or Vlad Tenev or Star at OKX, buy Bitcoin or Ethereum and that money literally never comes back. Not only do those people never send it back because they go to a platform that they arguably like better or is built specifically for this, but they don't send that money back because they literally can't. There is no way to send your Bitcoin and Ethereum back to Charles Schwab right now.
This is a huge problem for these legacy systems. There is no way for this money to return once it leaves and offering Bitcoin Ethereum in a walled garden is not the solution that they're looking for. Once again, this is absolutely huge news. I think this is great for their customers, but they are not going to attract new customers by doing this. But when you line this up with the news stories of the past few weeks,
Morgan Stanley launched a Bitcoin spot ETF into an already crowded Bitcoin spot ETF space. And now they have their 16, 17,000 advisors out selling Bitcoin on the streets and they offered it at 0.14 bips, which is way below BlackRock and the competition, which means they actually do intend to compete in the Bitcoin spot race. You also had Goldman Sachs last week launching an income Bitcoin ETF or announcing that they're going to, which is yet another financial project to allow people who want access to Bitcoin to get it
in a different rapper. So the story here is that every big institution in the world now has a Bitcoin plan. And whether they want to or not, I think they're coming in kicking and screaming. I don't think that octogenarian Charles Schwab is sitting at home playing with DeFi and has decided he really like needs this Bitcoin thing. I he probably doesn't even know how to use email yet. Right? And so this is what's being asked by their customers and they're going to have to offer it to those customers.
Now, speaking of the rest of crypto, this is where things once again, unfortunately get very, very ridiculous for us. We have the 13 billion DeFi, that's decentralized finance. I don't want to take it for granted that everybody knows, wipe out in two days and it started with Kelp Dow attack. So first of all, I saw this uh news hit the tape on Saturday. I looked at it and my first reaction was what the hell is Kelp Dow?
We have these hacks on a nearly weekly basis, it seems now. There's been six or seven of them just in the past month alone. and I've literally never heard of any of the platforms where it's happening, which makes you wonder how can there be hundreds of millions, if not billions of dollars sitting on these risky platforms that nobody, even people who've been in crypto for a decade have ever even heard of. But this is actually a massive, massive deal. So this Kelp exploit itself was $292 million dollars. We had one on drift protocol on April 1st for $285 million.
But what's different here is the mechanics. So we've seen plenty of times where there's an exploit, somebody steals the assets, they take those assets, they go somewhere, they sell them off, done. What happened here with the Kelp exploit is very different because they took basically an esoteric asset. I don't want to get into it. It's wrapped ETH, right? And they stole that, but since that's not liquid, they sent it over to a real lending platform and they took a massive loan against it, which they were obviously able to go cash out in Ethereum and dollars.
So now everybody that was taking this asset as collateral, which is roughly 20 places, all had toxic debt, right? Because it was stolen on one place that reprices the debt, it's no longer healthy collateral, and now it's circulating everywhere in DeFi. So unfortunately, it's a very sad situation when you look at this where you have unknown unknowns. There's no smart contract breaking here. The platforms are working exactly as they're supposed to. You're on one platform that's always been safe and provable, but the debt becomes toxic because of an exploit somewhere else and you end up in a liquidity pool where there's absolutely no liquidity. Now, my friend texted me this morning, he said, you know, how does uh
how how does Bitcoin hold up when there's this big hack? And I said, dude, you're a Wall Street guy. How what do you know about this hack? He's like, it was on the lead story on Bloomberg. Crypto hack sparks 9 billion outflows from biggest DeFi lender. This is not the kind of press that we want on Bloomberg or anyone else. This is once again a massive own goal that we're having. Now, people have always described Defi in a really creative way, decentralized finance, right? They've said that this is money Legos, composable money. You can take different protocols and stacks and products and earn yield by
stacking them all on top of each other. I think I have a better analogy for what it is. I'm gonna go ahead and call it composable Jenga. And you know what happens when you play a huge game of Jenga with yourself, eventually you pull out one of the bricks and you end up with a whole lot of wood in your face like this unfortunate lovely, I'm sure lady over here, who now actually maybe will remain faceless.
But the bigger problem is not only that you might be playing Jenga and not knowing it, but now we know who's on the other side of this Jenga game. And it's probably some god tier hacker from North Korea and the Lazarus group that's playing like this. This guy has got an Elon Musk flamethrower. He's torching the entire Jenga game and it's on fire and you're over here thinking that you're owning uh, a product that's giving you a safe 10% yield. All I can say is I've always been a huge fan of Defi. I think that smart contracts work, that the tech works, but in an AI world,
there's going to become increasingly more risks and things that we don't understand that can happen that can cause contagion throughout the system. I mean, you guys remember when FTX collapsed and they were using their own token that they printed out of thin air, thin air as collateral, right? That's a real thing and we need to be very, very careful with Defi. On a positive note, we have a great story here from Pakistan. Pakistan lifts eight year crypto banking ban following Trump family Binance deals. Eight years ago, the Central Bank of Pakistan
came out and said that banks could not interact with the crypto industry in any way, shape or form. So that wasn't a crypto ban, when you cut off all the rails, it's effectively the same thing. If you're in the United States, you may have experienced something similar until we got a new administration. We had something called operation choke point 2.0. We saw that crypto exchanges had their banking rails cut off. Individuals who were trading on a coinbase or an OKX or a Gemini would magically have their JP Morgan Chase account closed because it was too risky.
So this is not just something that's happening around the world. The good news here is that because the United States is starting to lead with more favorable and sensible regulation, we're seeing the rest of the world do it as well. And Pakistan made a deal with uh the Trump family's World Liberty Financial here where they're going to utilize the stable coin and of course, a massive deal with Binance. This is the fifth largest country in the world. It's a huge deal when they open up their banking system to crypto. So once again, we have
yet again a story where Bitcoin by any metric is becoming far more financialized. It's becoming a part of the legacy financial system all around the world. We're seeing legislators and regulators take it seriously and starting to incorporate it. That's very clear with news like we've seen here from Charles Schwab, JP Morgan, Goldman Sachs and Morgan Stanley. On the other side, we still have meme coins that are pumping and dumping and people losing their money and DeFi hacks because of risks that they didn't even know existed.
I will say that crypto is maturing and things are getting better, but you still need to be very careful. That's all I got for you. See you tomorrow on the daily Wolf. Peace.