Bankless - Live: Did This Crypto Cycle Just Come To An End?

Episode Date: August 5, 2024

What on earth is going on with markets around the world?! We break it all down live on stream. What just happened, what does it mean, and where we go from here. ------ 🍵MATCHA | NEW PRICING ENGINE https://go.0x.org/matcha-v2-pod   ------ 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2    ⁠ 🦄UNISWAP | BROWSER EXTENSION https://bankless.cc/uniswap  ⚡️ CARTESI | LINUX-POWERED ROLLUPS https://bankless.cc/CartesiGovernance  🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle    🌐 OBOL | STAKE ON DVs, SCALE ETHEREUM https://bankless.cc/obol  🗣️TOKU | CRYPTO EMPLOYMENT  https://bankless.cc/toku ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/44?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E  ------ TIMESTAMPS 00:00:00 What Just Happened? 00:07:57 Explaining The Yen Carry Trade 00:12:08 Crypto Charts 00:24:13 What About ETFs? 00:29:02 How Did DeFi Hold Up? 00:35:35 LRT Ecosystem 00:38:23 Price Guesses 00:49:00 Monetary Policy Updates 00:55:00 Buffett Is Dumping 00:55:46 Bullish Setup? 01:00:17 Positioning Yourself ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠ 

Bankist Nation, we've got an emergency live stream. So we only do this when either something really bad has happened or something really good has happened. We've had too many good things recently. Yeah, so I went on vacation last week. I come back to these charts, David. What, they're calling this, they're calling this Black Monday vibes. All right. So can you get me up to speed? Because I haven't paid attention to this. I just started looking at it this morning. Can you start get me up to speed on what the heck happened? I haven't seen one of these in a long time. So the markets have really been ruling over for like two weeks now. The equities market, the techs market, it started off with just like Nvidia, just selling. A lot of tech stocks selling, people rotating out of the AI

stocks that had pumped. When was this? Like last Friday? The end of the last week? It's been the last like two weeks of traditional trad equities market discussions of just like, oh, like we're having a pullback. We're having a tech stock market AI pullback. But that pullback kept on pulling back. And it hit an inflection point over this weekend and now has kind of impacted just broad markets, global markets. So all global markets, this is not just a crypto thing. This is if you are in the money, in the world of money and finance, if you're in the world of just like equities, traditional markets, whatever you want to, however you want to say it. Like, you're paying attention to this. The SPY, the American equities market is down at 4%. Taiwan, down 8.5%.

South Korea halted the entire market. The Turkish stock market, if you pay attention to that, is down 7%. Almost $2 trillion is gone from the United States equity market. And it's being called one of the worst single-day drops since the COVID dump in March of 2020. And so just ricocheting, shattering, echoing throughout all global markets everywhere. And it all starts with the Japanese NICA, apparently. And so what happened not terribly long ago, last week really, was that a suffering, slowing Japanese economy has created just instability in the stock market and the Japanese NK.

NKK is their S&P, right? It's their stock market. And as a result of this thing called a basis trade, which is something I was learning about this morning between the United States market and the Japanese economy, since the central bank of Japan was offering 0% interest rates, they have still been in a ZERP policy. There's been a basis trade because the interest rates inside of America are at 5.5%. So capital is free in Japan, but it was expensive in the United States.

And so people would borrow money at very low cost from Japan, and then they would buy American equities, bonds, just invest in the American economy. But last week, the Japanese. Central Bank raise interest rates by 0.25%, which is not that much. But when people have leveraged up a basis trade, in order to maximize, squeeze the maximum amount of juice out of that trade, that 0.25% increase in Japanese interest rates has unwound a bunch of trades. So we're watching leverage in the traditional stock market unwind, which impacts our equities markets, which then

cascades all the way down into what we feel in the crypto markets, which is just like an absolute hurricane because in the grand scheme of things were kind of tiny. That's how I would explain it in a very short synopsis. I'll explain it a little bit better in a second. But it's the single biggest move ever in the VIX term. So VIX is the volatility index. When VIX goes up, that's bad. The last big spike was, of course, COVID.

So it rises above 50, and it's like kind of a 50 is just like a self-referential number. It rises about 50 for the first time since the COVID dump. And whenever, VIX is kind of like an indicator of a black swan. Like, if you want to determine what is or is not a black swan, you would look at the VIX. VIX spiking is like something happened that no one was accounting for. There's kind of this mean that there's always hidden leverage in the system. And we are now very rapidly discovering that it was in this basis trade between the Japanese economy and the American economy. Okay, so I have a few questions.

I'm not exactly sure where to start. But like this is my impression of where I left things on vacation. I was barely looking at things. But like on Friday, there was like a week jobs report. like there was the word recession back in the air. It felt like the market was giving back some gains. I was like, okay, normal course of events, normal course of the market. And monitored things on Saturday.

But then Sunday hit, okay? This was Sunday the fourth. And looking at crypto. Last night. Yeah, last night. 12 hours ago, yeah. Ethereum down like 25%. Ethereum dipped like close to 2000?

Uh-huh. Like I don't even know, like on finance, my understanding. Is it dipped to 2000? I'm like, what is going on? Like what on earth is actually going on? And like seeing this play out, I guess in the VIX, you could sort of see this from a VIX indicator. This is similar to 2008. This is similar to the COVID March.

And this is what I was feeling, David. I was feeling, oh my God, this feels a lot like March 2020, at least in terms of crypto. And of course, Tratify markets don't trade 24-7. So crypto is a leading indicator on the weekend. During banker hours, during the weekends that those guys take off, crypto continues. And so you see Bitcoin off, Ethereum, like, particularly hit. But brutalized. Yeah.

Brutalized. Absolutely brutalized. And I was trying to make sense of what was actually going on. Of course, crypto Twitter is panicking, you know, like complete, complete turmoil from that perspective. But and then the Niki, which was trading on Sunday because, you know, Japanese time zone hours. That was off 12%.

So like something is rotten. Something is like not working in the existing system. and you're saying it all comes down to this basis trade, or is that the main indicator? It depends on who you are in the market. I think if you're in the crypto market, we also have to go look at Jump Capital and ask why the hell they were just offloading tens of millions of dollars of Eath into a very illiquid market on a Sunday. Okay, that's also going on. But that's just for us crypto people.

We do have to ask that question. I think everyone is trying to look into all of these different inputs into the market. and this is a meme that I think is the most viral meme of the last like day, the last 24 hours. And it's the, I don't know, thank you meme. It's like the be honest meme. And this person is trying to get signal from like what the F is going on in this market. Like it's the jobs report. It's a weakening economy.

And then they're like, be honest. And then they're like, okay, no, it's the yen carry trade. And the person replies, no, be honest. And the person says, I don't know. And the person says, thank you. Thank you. There's like other things going on. Like, Kamala Harris is now encroaching on Trump's victory, and Trump is being interpreted as the pro-markets candidate.

And so maybe the markets are actually pricing in a more, like a not-an assured Trump victory. And so that could have sent the stock market tumbling. There's leverage in the system, who knows. There's like a bunch of things. Rumors of war, I even saw. Rumors of war, like Iran and Israel are going to war. There's like a bunch of things going on all at once. On Twitter, there was like a signal of the domino's location.

like pizza restaurants located close to the Pentagon where like you know people track this apparently and like pizza delivery orders were spiking which means like maybe the Pentagon is huddling so there's like rumors of war types of things in the air as well but but let me understand this Japanese thing because maybe people don't really know where this is the sell-off is coming from but I'm not sure that we can call it this stage a smoking gun but it seems like there's something rotten with this Japanese carry trade. You gave this to us in the intro. I just want to make sure I understand this. Yeah, let's double down on this. Oh yeah. Let's double down on what they're called. Like, what are we calling this? The yen carry trade. The yen carry trade. Yeah. Okay. So how does

this work? What was going on? What no longer works? Like how did this piece of the puzzle break? Okay. So because of the devaluing of the yen, because the economy of Japan, uh, because the economy of Japan, like, I don't know why they're the economy of Japan is faltering and then also they're raising interest rates, but the yen is going down. The yen is devaluing. Inflation is going up. And so as a result of

the devaluation of the yen, the Japanese Central Bank raises interest rates in the same way that the American, the United States, Federal Reserve, raised interest rates post-COVID after a bunch of cash injected into the economy caused inflation. We all know that inflation has been rampant and has really

put a lot of economic pressure on like the lower half of the American economy. Honestly, honestly, like even larger than the lower half. And so as a result, like the Japanese central banks, like, we don't want to have our people subjected to inflation. Inflation is bad. So we're going to raise interest rates. Wait, so the rates in Japan, the central bank of Japan, the B-O-J, right? Went up.

Was it at zero? Or is it something very low? Is that zero? And it went up by 0.25%. Yeah. Okay. And that caused a 20% red candle for Ethereum on Sunday. That's correct. That's correct. And the rationale for this. The entire Japanese stock market to go down by 12%.

Okay. And because what was going on or the carry trade is at 0% rates from B.OJ, people are able to borrow the yen for nothing. And then they're able to buy an asset outside of Japan, whatever that is. The United States 10-year treasuries, like Apple stock, Bitcoin. Yeah, crypto. So, and then something else happens. And then they profit from this trade because they're borrowing, assets go up, they're borrowing at zero percent. They're borrowing free money and they're investing long.

So a 0.25% increase starts to wreck that trade, I guess. I mean, it's just such a slight increase, though. It's a slight increase, but it wrecks it in more ways than one. So like, A, your cost of borrowing are going up. And so now your loans that you have are paying a highest interest rate on. And you might think that that 0.25% interest rate is like, okay, it's not that much higher, and you're kind of right. But also, because they're trying to strengthen the Japanese yen, that is the denominator that all these

loans are marked in. So all these loans, they're trying to make the Japanese yen go up in value, which is what the loans are denominated in. And so not only are the costs of borrowing going up, but the actual value of the thing that you have to pay back is getting more expensive, too. So it's a double whammy. And then you can also add on the fact that they, might expect that the interest rate of the Japanese stand is also going to go up higher than 0.25%. Like, they're not stopping there. And so, like, imagine if you're a very sizable trading firm or you're just pulling out a ton of loans. We all know that prices are determined on the margins.

And so people are maxing out this leverage trade. It's called an unwind for a reason. And so people, the marginal, rational economic actor, will take this risk up to the maximum. to the point that a very small change in interest rates will actually impact the market. And we always, like I said, hidden leverage in the system everywhere. And so 0.25%, it increases the value of the NECA. A lot of people feel that, even if it's a little bit, it increases the borrowing power. It decreases borrowing power.

It increases like the cost of capital. And then there's also indicative of all of this getting even worse further. I get it. So there is this point of leverage in the system. It's been in the system for a very long time. You know, like, this is why they call it. It's compound. People are taking more and more leverage the longer that there is a zero interest rate policy

in Japan. And this is why markets take the staircase up and the elevator down. It's like at a certain point, there's some tipping point that's reached. And then suddenly a 0.25% raise causes a cascade of liquidation. This is like bad leverage in the system. And it's all withdrawn sort of at the same time. So there's mass panic. Niki's down 12%.

Cryptos down like 20 plus percent. Can we look at the crypto charts? So we've seen some of the Tradfi. Gore charts. So let's recap what actually happened with crypto here. Yeah, so Bitcoin, daddy Bitcoin, is set to close its worst week since FTX. So that's our biggest red candle since the FTX event. So congratulations to everyone who has the experience both. It's only Monday. It's only Monday, yeah. In the world of liquidations, I'm going to skip over this tweet. We'll come back to jump in a second. But in the world of liquidations, over $1.1 billion,

has been liquidated from the crypto markets in the last 24 hours. 275,000 individual addresses have gotten liquidated. Just because prices went down so far, so fast yesterday. I remember tweeting out when ETH went from like $2,800 down to like $2,600. And I was like, you know, I'm just going to set out on a funny tweet. And I said, wake me up when Eith hits 1900. Like a devastatingly low number that we are never going to reach. Of course.

And 45 minutes later, we were down to 2,200. I was like, yo, no, I'm just kidding. It's because you tweeted that, David. It's because I tweeted it. Uh-huh. And so this is what happens in crypto. Like, if you have been, if you've seen at least one cycle, you kind of know that this can always happen. The bottom can fall out of the crypto markets very, very fast.

We can get very illiquid, very fast. So here's a tweet from Wu blockchain. According to Binance, Binance, the price indicator, ETH suddenly plummeted to $2,100 and then rebounded. The amounts of liquidations in one hour reached $370 million U.S. dollars. So $3,700,000, $3,070 million U.S. dollars got changed hands inside of one hour. Wow. Okay, well, this goes back to a question I have for you, which is it did seem like on Sunday

when all of this chaos was like when the market was like realizing what was happening, that Ether in particular was. more affected, right? I saw, I saw ether versus Bitcoin. It was like, the difference was like 25% versus like 15% down or something like that in 24 hour or even like layer two's and big Ethereum related ecosystem. It appears to have hit ether particularly hard. And is that where this jump capital like trading comes into the story here? For some reason, at the same time that we are having this unwinding basis trade between traders, arbitrages, arbing the interest rates between Japan and United States, completely unrelated to crypto markets, Jump has been dumping, like,

clips of $10 million of ether into the market, like, like, hour over hour, over hour, just like pummeling the eth price everywhere. And I don't know how much in total that they have sold, but it's in the hundreds of millions of dollars. Well, this is a tweet here. As a jump has been unstaking, likely dumping 500 million eth for the past two weeks. And there's some on-chain evidence like, um, like, um, detailed in this tweet. So 500 million? Is this like all of their eth? Like how much do they have

left? It is generally assumed to everyone that I've asked that like they are basically have fumes of their ether left. Maybe they have like 5% of their total ethel left. But jump has exited their ether position. And it's ether in particular? It's not like all crypto assets. Well, it could be Bitcoin. It could also be their Salon positions. But you just don't have as much transparency as we have in Ethereum. When people go and they dump ETH into the market on Ethereum, like addresses are tagged. There's just so much transparency in the Ethereum ecosystem. There's a similar amount of transparency in Solana, but it's not as much. It's just not as mature. And there's also a lot less sole liquidity on chain on Solana than there is on Ethereum in ETH.

So you dump it in OTC markets behind the scenes. Yeah, you dump it elsewhere. Yeah, you dump it on Binance, you dump it on OTC. But like if you want to get, but ETH is like meaningfully liquid on chain. And so we can all watch, we're all watching like like just jump, just nuke the price of Eth as they sell like clips and clip. They're also sending it to Binance as well. Maybe that actually is where they've, they've dumped most of their ETH. But they're sending it like to Binance on the hour every single hour. And so you like they're going and then they're like liquidating and then saying it to finance and they're liquidating. And, uh, and we'll, The big question is like, why now?

Yeah, why now? Why? So we know it's certainly ether that they're selling. We don't know whether it's just ether or they're selling their other crypto assets. We can't necessarily see that on chain. But so let's assume they're just like selling a lot of their crypto positions rather than just focusing on Ethereum. That would be more consistent with, I think, the evidence, right? I don't think they're saying F Ethereum in particular necessarily.

I don't know why they do this on one particular Sunday unless they had word that like Ethereum was, you know, had some sort of catastrophic bug or something like this, right? So, like, are we just assuming Jump jump is liquidating their position because they are starting to see how, I mean, they're traders, right? They're starting to see how bad things are getting on the macro. They're just trying to front on that. I think there's one valid theory about it. There are other people drawing attention to the fact that Jump is actually getting probed

by the CFTC. And so Jump is in some sort of like legal trouble with the CFTC. Maybe this is a fallout of that. Maybe like main jump. So there's Jump and then there's Trump crypto. And maybe Jump is taking a position in the market as a result of the decay, as you said. And as a result, they're like informing, hey, jump crypto, like liquidate your crypto. Like let's go risk off.

And so they're like dumping their eth. And so as a result of all of this, like Ether just gets absolutely pummeled above and beyond like all the other assets. inside of the crypto markets. So my reaction on Sunday, David, was at first I was like, oh, this feels like 2022 again, right? And we said some big sell-off events in like May. Do you remember three hours capital that kind of hit? And then obviously FTX.

Like that was the most-T-X, yeah. The most pain in recent memories that felt sort of like that pain. And yet it actually felt like more like a date that was further back than that. It felt in my mind a bit more like March of 2020. Do you remember March of 2020? This was right when the bank was podcast was getting started. During March of the 2020, during the March dump, the COVID Black Tuesday? It was Tuesday, yeah.

Thursday, Tuesday. Ether was down 60% in the 24-hour candle. Ryan and I were recording the second ever bankers podcast. Yeah, and that felt really bad. And the reason it felt bad, like the reason I consider what Sunday you like felt like in the kind of made this Black Monday bleed over. and at 2020 rather than 2022 is because it felt very,

like 2020, it felt very exogenous to crypto. Yes. So it wasn't SBF, Doquan, shenanigans. It was some adjacent macro black swan that's happening that is just like completely

outside of the control or apparatus of crypto. So it was that. And also the ferocity of the dump, right? Like a boom, candle, 20% it moved.

Yeah. Correlated with the other, like macro assets of course. So it reminded me of 2020. How did it strike you? What are the other dates of this level of dumpage that come to mind for you? 2020 was definitely,

because of the exogenous factor, I think 2020 comes to mind. But I was just inside of the bank list, Discord this morning. Everyone's in, like, one of the indicators of like how you know is kind of like close to the bottom is that everyone is on Twitter,

everyone's in Discord, everyone's unhappy. And so as somebody who has experienced, these dumps numerous times and gotten liquidated in at least a handful of them. I have like vibes to share, you know? Like, it's all going to be okay. I think the first ever big dump that I remember

if I, we don't want to go over to this chart. Like I haven't pointed out in that screenshot that you have shown there. But it was this one in Bitcoin and when is this? November of 2018. So after Bitcoin has fallen 67% and it hits

the Bitcoin price after 2018. It hits $20,000 for the first time. And then it falls down to $6,000 and it hits $6,000 in February of 2018. It goes $20,000 to $6,000 in February. Then it hits $6,000 again in April, bounces back up to $10,000. It hits $6,000 again in June. It bounces up to $8,000. It hits $6,000 again in August.

It bounces up to $7,000. And then it stays at $6,000 to $7,000 between September and November. And I'm like, I'm like, I'm like, few, like, six thousand is holding up so well. Like, that's the, that's, that's the bottom. Like, it's just like, I'm just going to buy all, I'm going to use all my remaining powder, of which I had none because I was like already positioned anyways. But I was like, like, decaying into these crypto markets for my first ever bear market.

And I'm like, oh, you know what? 6,000 not so bad. And then in November of 2018, in a very short window of time, it goes from, Bitcoin goes from 6,000 down to 3,000. It loses another 50%. And that was my first. That was like my first like, oh my God, what have I died? Is this you getting liquidated somewhere on this chart?

Did that happen? I don't think so. Do you have leverage that got washed away? I think I'm just learning to use MakerDoubt in this time. Yeah. And so I didn't have, maybe I had like, maybe I was on a DYDX position, but you don't hold DYDX positions for very long. I almost got wrecked.

During this whole, right here? 2018. No, I think it was more like 2019. I just got wrecked with some leverage I had. During COVID, right? I did not. I guess that was... Here's my number two.

Yeah, that was probably more like during COVID. I can't remember. Yeah, that was a COVID dump. That was a COVID dump. Yeah. Like, man, you remember these because they're impressive on your soul. How painful they are. You are looking, because you...

I remember the first time I got liquidated, maybe it was. I can't remember. The first time I got liquidated, because there was two times. That much that implies. It's just like, you realize this very powerful thing about leverage that, like, you can wait until the very end, but if you unwind at the very end, you have to unwind the whole thing to make any meaningful amount of difference on your position. Like you have to sell, like, in order to protect your CDP, your loan, your position, you have to sell so much of your actual

principle to protect yourself at all. So it's so painful. So you're at the very end and you're like, well, what's the point in even defending this position? I'm just going to like clench my teeth and hope that this is the bottom. Yeah. And I remember that. I think that a lot of people felt that feeling in the crypto markets. Oh, man. They just learned about leverage for the very first time. It is the worst feeling imaginable when you're looking at you got like a liquidation price. You're like, oh, I'm going to liquidated at Eith at 400.

And then it like drops down. It's the middle of the night and it like drops down into the 400s. And you're like, oh, shit. Like, what do I do? Oh, I have to put more like Eith on the line in order to back that loan. And how far do you push it is a very bad position to be in when you have like margin in these types of black swan, Is that why you tweeted? If you didn't get liquidated today,

congrats, you passed the test. Yeah. Uh-huh. There's like a just a come-to-God moment. I think everyone kind of experiences just like, it's just you and God. Yeah. It's just you too. Jesus take the wheel.

You know, I got nothing. Yeah, but congratulations to everyone who is A, not on leverage. I think you guys are just chilling. Sorry about your spot positions, but they're like their whole. People who are on leverage and not liquidated, Congrats. You passed the test. People who are on leverage and then did get liquidated. I'm sorry, it hurts. We will rebuild.

Yeah, this is how you learn. Your job right now is to survive, just survive right now and live to fight another day, if at all you can. But you got a section on ETFs. So what about ETFs is relevant here, David? Let's see, ETFs. Okay, so we are watching the Bitcoin ETFs have all-time highs and volume. Maybe not all-time highs. 20 minutes into the trading session of today. stock market trading, $1.3 billion in Bitcoin ETF volumes. So that's quite a lot. Eric Belchunis put out a tweet saying that, like, well, high ETF volumes is actually just like everyone being scared. But like the whole stock market scared. So I feel like that was like, well, yeah, have you seen the blood in the streets, sir? And like high volumes is kind of what you want, because you want high liquidity on both directions inside and out. We don't have any data today

because the stock market trading day is all over, but it will be interesting to see flows who are the ETS, net buyers or net sellers of these crypto assets. We'll see. Oh, yeah. How strongly do they, like how diamond hands are they? It's kind of a question.

Right. You know, those Bitwise commercials about Ethereum being like open 24-7 aren't going to hit quite the same way when you're down on your 401K about 25% right now. It's just like unfortunate timing, I would say, for Ethereum of like, was it two weeks ago? got the Ethereum ETF. And so you're like, hey, dad, you can now buy a Ethereum, 401K.

Two weeks later, he's down like 25%. It's so classic, dude. Just like, ETH gets its ETF and the whole entire industry loses 25%. Yeah. It's the most classic asset of all time. Yeah. Perfectly cursed.

Okay, so there's a few other things that I want to talk about. You got to ask the question, how did defy do? We got Avey to look at, we got Maker Dow to look at, Gearbox is a newer lending protocol that's on level. How did Gearbox do? I'm going to take over the charts, and we're going to look at ETHBTC, we're going to look at Coin,

we're going to look at Solana, and then we're going to talk about the calls for a Fed pivot, because now that something, quote-unquote, broke, we get our pivot now, right? That's what everyone is asking for. So there's a bunch of other conversations. We're going to get to all of them and more.

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So go and download the Uniswap extension today by clicking the link in the show notes. Just another way Uniswap is helping you swap. All right, David, so we haven't seen blood in the crypto markets like this since, you know, 2022 and maybe it felt like, you know, March of 2020. The question, I'm looking for a silver lining on here. Sure. And my question is like, but how did Defi hold up? Was Defi okay?

Did we liquidate in a fair, an efficient way? did everything work according to a plan or were there some troubles? So if you remember, Ryan, the last time, the first and I think last time that Defy meaningfully broke was during the COVID dump of Black Tuesday of March of 2020. Yeah. This was like dye depegging. You're referring to that. Yeah.

MakerDAO loans, CDP loans, the things that are backing and renting and producing dye in the first place, we're getting paid back with zero collateral. because as an ecosystem, as a blockchain, Ethereum had never experienced high transaction fees before at that level. Like, we had just come off of the one-gway paradigm. For those I don't know, Ethereum, gas fees on Ethereum were one Gway until 2019. Where in 2019, they hit two Gway for the first time. And then it hit three-gway.

And then it hit five-gway. And then things started to never actually go back down. And we were somewhere between like five, sometimes, Quinti Guay, astonishingly, for months. But that was a new paradigm, and Ether was like $100, so you're still talking about, like, one to five cent transaction fees. But we had established the paradigm of gas fees

and congestion on Ethereum. Then the COVID dump happened, and gas jumped up to 700, which applications were not ready for that. People didn't know how to think about that. That was just, like, unheard of a level of demand for Ethereum block space. And as a result of that, MakerDAO had CDPs

that were paid back with zero collateral. As in, they needed to be liquidated, but because the liquidation transactions to pay back the CDPs, the ones that were supposed to go through, they weren't accounting for very high gas fees, and some people, like arbitrators, figured it out. And so they could send a very high gas transaction,

like a 1,000 gas transaction, and they would pay back a MakerDAO loan for zero collateral. And MakerDAO would just assume that that's what it was worth because it doesn't know. And so Defi broke during COVID of 2020. Yeah, and I would say when you say broke, it was not a catastrophic failure.

It wasn't catastrophic. Like MKR didn't like completely go bankrupt. It was something like $20 million of bad debt that they had to backstop with the MKR token. So it wasn't Lehman Brothers, but we are talking about like a die. You couldn't say it was like a thumbs up. And it was worrisome, right?

We were like, okay, it's starting to wobble, starting to shake here, Could things get worse and what would happen? Could this cause a catastrophic failure? So that was 2020, the last time we saw this. How about now? How about now? Totally fine. Nice. It's just an absolute breeze, dude. AVE has 14 active markets on various layer ones and layer twos. So 14 different implementations of AVE. Not a single penny of bad debt.

$21 billion deposited in Avey across all these different protocols. Not a single penny of bad debt. Avey, the protocol was rewarded with $6 million of revenue. from all of these liquidations because that's how AVEA works. So Avey actually pocketed $6 million for providing the service that it provides to the market. Sonny tweets this out.

Avey was rewarded with $16 million in revenue overnight from decentralized liquidations. $6 million, yeah. $6 million, yeah. And this is why building DFI is going to work. Monet Supply, who is out of the MakerDAO ecosystem, says $28 million liquidated on Spark.5, which is a MakerDoufrontend,

everything looking healthy so far. Maker Corvaltz only had $300,000 liquidated so far, although there's another $400,000 loan at risk, not much. So like not only is this thing working, but also the people, the layer zero that is actually minting dye, is actually being like risk off,

which I actually thought was pretty interesting. Here was the thing that I was going to have my eye on because this is something, so we have a supply of stables at bankless and we put stables to work inside of defy, but it's our working capital. if ever we need to like tap into these stables in order to pay our employees, we might need to use those stables.

And so where we put the tables? If you've been in charge of that, David, so where are the stables? I've been in charge of that. And so I have put them inside of MakerDAO's S-Dai, which is like one of the most conservative versions of yield for stables in the industry. I have considered going for the much higher yield of gearbox. Gearbox a little bit more aggressive with their farming. You can also do leverage farming then.

and this was a protocol that has not seen a full cycle, and so as a rule of thumb, hasn't seen a full cycle, let's just wait until something bad happens. Gearbox did just fine. Operational across three networks, no bad debt incurred whatsoever. Even the newer protocols that are doing more aggressive yield farming are operating just fine.

IGNIS put out a thread kind of just like looking at everything that talked about everything about defy. no significant defy liquidations that cause anything to bad happen whatsoever. So, defy just gets another, after all of the gold stars that DeFi got in the 2022 liquidations, defy gets another gold star. That's actually bullish. That's actually great.

That's really cool. By the way, I'm glad you brought out the point of AVE making, like, generating revenue. It's not just true for AVE. It's also true, you know, increased volatility, like future transaction fees for Uniswap. Also, do you know the eth supply was on an upward trajectory? Supply was growing. We're not burning enough eth to compensate and make ether ultrasound money. Well, this reverse things in the other direction.

So Ethereum is, I guess, a protocol from a burn perspective making profit. So high volatility days of high usage are generally good for D5 protocols. And what we want to see is that they do an efficient, orderly unwind of these types of positions. orderly markets, yeah. Yeah, in fact, that's part of the SEC charter. They're supposed to be doing that. But DeFi is doing it. And like a 20 to 25% drawdown on ether, that is not small.

That is like Black Swan territory. Like, imagine if S&P took a 25% down day. Oh my God. We're there in the streets. I would lock my door. I also want to kind of shout out the LRT ecosystem. This is another ecosystem that has not seen a full cycle. and actually had its first meaningful stress test.

And so these are all the LRTs that are LSTs that are also wrapped inside of eigenlayer, that also have to very much do like protective risk management to not have a meaningful depegging event from all of their collateral that's backing their LRT. And so out of all of them, they all did pretty well. We're looking at, you can see kind of the depeging. They all have a discount to the actual fair value because there's an illiquidity discount that's applied to all of them. So you have like Renzo, Etherfi, Kelp, Swell, and Puffer.

Renzo's coming in at number one as it's worst off the peg of 0.68, worse as in like, that's as far as it went. It's number one as in it didn't depeg very much at all. The worst that it got was 0.68%. Next best after Renzo was Etherfi at negative 1%, followed by kelp at negative 1.25%, followed by Kelp at negative 1.25%, and then followed by Puffer at negative 4%. These are all just like the spikes of the worst. These are now all of them are returning back to parity.

So even the LRT ecosystem, which is brand new, is also like pretty robust. I don't know of any, I haven't seen any sort of liquidations as a result of LRT depacking. So you got to kind of give a pat on the back to the LRT ecosystem too. Yeah, speaking of that, speaking of trading and volatility, we should shout out our friends and sponsors over at MACHA here. They've got a new trading experience. What's this doing? Since DFI doesn't break, you are considering. We haven't even talked about how all the other Charles Schwab, Fidelity, all these platforms are down and offline.

But MACA is online and operational, getting you the best price for all of your on-chain trades. And so if you were trying to save your CDP, backstop your CDP, like put more collateral inside of your loan, or you needed to pay back anything, I hope you use MACHA because that is where you get the best price, even in extreme market environments, because Masha is a highly optimized order routing. engine to make sure that you always get the best price. If you are stressed out and needing to source some collateral, I would do it on Masha. I have done this before. Can you believe, by the way, that that's Tradfai's response to all of this? Like, Circuit Breaker, they stop trading. Yeah.

Just like disconnect. No, not only are they trading, but like so many people were swarming Charles Schwab that, like, the website broke. Wait, so Charles Schwatt. Like, I saw, I think, exchange in South Korea, circuit breaker stopped trading. South Korea did stop the entire sarcasm. Okay, that is what happened. For like multiple hours, right?

Yeah. You can't get it online. Yeah, it's crazy. You got some charts here, David. So what do the charts tell us at this point in time? Are you like, you're zooming out a little bit, right? And seeing with the trends. Yeah, we're zooming out.

We're zooming out. Let me load up my charts again. So we're going to start with somebody else's charts that I follow to follow quite frequently. Yeah, like, who's much better at charting than me. Well, because I think that... Can I set up the question? I hope you're going to help answer this with your chart section here, David. but like set up the question as, okay, is the bull market over?

Was that it? Yeah. Are we dead now? Do we just kind of like reset, wait for another four years and like, see you next cycle? I would kind of like to pose the possibility that the bull market never started. What? I feel like I have you on thumbnails celebrating the bull market somewhere in the bankless archives, David. How can you say this?

Oh, I'm pulling it back. Okay. Okay, so just looking at these charts. So we have two channels, which are like, you'll call it the bull market channels, which is like, if these things like meaningfully continue, then certainly we're on a bull market as judged by like upwards appreciating price. ETH, you can see how badly ETH got pummeled versus Bitcoin. Can I zoom in any more on these things?

Kind of. And, but Eith has like tapped the bottom of this channel when it got down to all the way down to like 2,260. Bitcoin actually did not do nearly as bad as ETH. So either you think that ETH is oversold or Bitcoin has more to go, one of these two things. It could go either way. Again, I'm not a charter. But, like, putting these things into this channel is kind of interesting.

The channel itself intact. Like, we have actually been up and to the right ever since the end of 2022. And so things are very far from exuberant. But if you appreciate this channel, which somebody might, then you would see, like, oh, actually, this kind of like checks out. We are just falling all the way back down to the bottom of the channel. This, I also think here's another channel. channel, is the ETH-BTC ratio, which has been going down, Ryan, for 700 days in a row. That's tough.

That is tough for ETH holders. Yeah. Yeah, bigly. How many years is that? Is that two years? I mean, it's been a fantastic- Yeah, we're coming up on two years now. Fantastic narrative for Bitcoin as well.

So this might also be, like, just the strength of Bitcoin this cycle. Bitcoin dominance is at, like, 55% right now, which is, like, meaningfully high. This is not what has happened in the previous two-season. cycles, right? What you'd expect to see in a bull market scenario is that non-Bitcoin assets, particularly assets like Ethereum and others, would appreciate relative to Bitcoin price. So I don't know if this says ether is super weak this cycle, or if this says ether is super strong, or if it says the bull market hasn't really started yet because we haven't seen the non-Bitcoin alt trade, so-called. Yeah, I think both of those are interesting perspectives. Typically, the

ETH-BTC ratio has been like the bull market indicator ratio, as in like, if ETH goes up versus Bitcoin, it's because we're in a bull market. Like, Ethereum has more things to do on it than Bitcoin does. And so it's like a measure of exuberance. It's a measure of euphoria. It's a measure of people doing things on chain. And that has been going down since FTX, since the FTX crash. And so, like, that's one perspective.

We can also open up, however, the Salana ETH ratio. So I'm going to open up that on my screen, and I'm going to zoom all the way out to, let's do one-day candles. Let's do one-day candles. And that has actually been up and staying up. And you know what's interesting, Ryan? This vibe that the Solana Ether chart ratio looks like, having gone up 700% since the middle of 2023, it kind of looks like how Ether went up versus Bitcoin in 2020 to 20, 23?

Yeah. I mean, that's another interpretation of this data set. Doesn't that look like the same thing? Yeah. There's another interpretation of this data set is like Salana. Actually, could you show the, the Salana Bitcoin ratio? Like, what does that look like? Yeah, sure.

That'd be kind of interesting. Is that the new ratio chart? I don't know. I mean, it feels like this cycle, Salon has really taken some of the steam and the wind out of Ethereum sales for sure. But like, this is not the same as the ETH Bitcoin ratio, right? Definitely. It's kind of similar. So I'm trying to actually compare it to the ETH Bitcoin ratio. And so here's the ETH Bitcoin ratio. And here's the Salana Bitcoin ratio. The Salana Bitcoin ratio looks like this part of the ETH Bitcoin ratio.

And I'm not, and I'm actually not implying that therefore then Solana goes down as ETH has over the last two years. I'm saying ETH has gone down because it looks like that. So what does this mean, do you think, about kind of the broader cycle that we're in? So, again, maybe I'll go back to 2020. And another reason this felt sort of like 2020 is like four-year cycles, four years ago, exactly. We had sort of, you remember 2019? We had some hope. And we're getting ready to do, like, we were getting ready at the end of 2019. We're on the bull run.

Defi was real. We were very excited. You know, I start the best podcast. Defi led bull run. run. We were starting to see crypto assets appreciate. You're talking about right here. Yeah. Oh my God. That's that's very small when you look at it like this. But it felt very large at the time and it was. So we're just gaining steam and crypto, gearing up for another bull cycle. And then COVID punched us in the face, March 2020, knocked off a lot of like gains

recently and sort of delayed the bull run. It feels like four years later, it's kind of what's happening. That's one interpretation. Basically, now we're going to go on a six-month pause, maybe a nine-month pause, I'm not sure, some sort of hiatus with the bull market. But then after that, bull market will resume after kind of like macro events heal themselves. Settle themselves? Settle themselves? I think this is a valid pattern of I don't know how much conviction I have in this one-to-one comparison.

But I do remember this moment in the market very, very well where Ether hadn't been above like $250 for a very long time. we all got really excited in this, what we call like this ghost bubble market in the middle of 2019, which was the plus token Ponzi scheme in China. Okay. Yeah. So this Chinese Bitcoin Ponzi scheme ended up raking in like billions and billions of Bitcoin and created this like ghost bull market. And we didn't really know about it after the fact.

That popped. And so then Ether went down like another 60% in the middle of 2018 to 2019 down to like $120. And what you're saying is like this period of. of like, it was like December of 2019 to March of 2020. Uniswap was popping off. MakerDAO was popping off. Avae was popping off. Synthetics was popping off.

Chain link was popping off. A lot of these early things. If I go look up the chain link chart, that thing is just like up and to the right in the middle of this time period. And you're saying that we kind of all felt it. Like we're all getting really bullish. Like the fundamentals are really good.

Users are up. Everything is really good. We're back, baby. And then COVID strikes. And it was all true. We just had this like COVID hiatus. And so we had this like what? A hundred percent increase in ETH price.

Bitcoin does the same thing. We had this 100% increase. And then like later, if you had just waited how many more months? One more year, you would be up. Oh God, I can't even scroll that high. You would be up 2,000%. Exactly. 2,000%.

No, that's not even done yet. Go back to those March 2020 candles for a second. it. I can't tell you how many people I know in crypto who got washed out by those canals. Who left? They left. It was just like COVID. It's over. You know, because remember, we were like in the depths of despair, 2018, 2019. It was like bare market vibes and then suddenly some signs of life. And then COVID totally shake things upside down. Right. A lot of people got knocked. A lot of people were on margin. I almost got liquidated during this. I did get liquidated. Really? I was at this market. And a lot of people.

People just sold and just didn't get interested until crypto had like a, you know, or Ethereum had like a 100% or 1,000% plus rise. And then they got re-interested and they wish they didn't sell. It was a huge washout event. Dude, it's hard, man. Like we, like I said, when Bitcoin was at $6,000 and then it broke down to $3,000. Ether was at like 240, 200. And it broke down to $80 in the end of 2018.

And we stayed in that range for two years, for 700 days. Yeah. Before we actually broke out of it. And like we thought we were getting out of it a year later in that plus token Ponzi. Turns out it was just a Ponzi scheme that made that price go up. And then prices started to go up again. And then COVID hit and we got walloped by another negative 60% candle. Yeah.

It was hard, man. I was numb by the end of this. I was so numb. But then once it was on, it was so obviously on. that it wasn't even funny. Like, I remember just having like, and once Ether broke upwards above 230 and it hit 465 for the first time in like three years,

everyone in the industry knew exactly how bullish we were about to be. And we were totally right. And that's the thing that I've been feeling is missing from this market is like I've never had that level of conviction that like, oh, absolutely the bull market is back like I had when it came back in 2020. Okay. So, but if it was going,

Like if it was analogous to 2020, then that would still be in the future. Today, you mean? Yeah, today. Like, you would feel like this is the March 2020 COVID-type macro dump, right? And then your conviction would build that we're in the bull market over the next six months. That's like if, you know, it worked out the same way. If we're trying to draw comparisons, we have an exogenous macro event that caused liquidations. It caused like prices to reset.

everything went down. And as a result of that, we are now going to get, if this is going to be a similar thing, we're now going to get much more favorable monetary policy. COVID was immaculate. We can't repeat COVID. We literally got stimmy checks mailed to us, dropped in helicopter moneyed into our bank accounts. Like, we can't really repeat that. But we can get like just a softening macro policy. And so as a result of this, if we are carrying forward this analogy that this is bullish for crypto, it's going to be because like there's going to be an easing of global interest rates and monetary policy. Let's talk about that.

So Powell will get to the Fed pivot. So Powell has already soft indicated. I saw this last week, the possibility of a rate decrease in September. And the question now is, will he accelerate that timeline? And I guess a few kind of like maybe points of evidence in that favor.

And then you tell me the tweets, but it's just like when I zoom out and look at it, first of all, we are 91 days from the U.S. presidential election. Okay. Right. Do you think the White House, the powers that be, Powell, Yellen, et cetera, do you think they want a market crash 91 days out from the election?

Because like, doesn't this basically secure the election in Trump's favor? Right? I mean, I have already seen a Twitter account brand this as the Kamala crash. Okay. I don't know what she did. That's what the branding is going to be. It's Biden White House, shaky economy. you let inflation.

Now we've got a stock market crash. How could they have allowed this to happen? I think I already saw a Trump truth social tweet already blaming this on how this would never, or saying this would never happen in Trump administration. So the incentives on the powers that be is just Biden or a Kamala, whoever's operating the ship right now, is calling Powell and saying, all right, how can you fix this? Right. So like that's the incentive.

Fix it now. Fix it now before the election. Do something. You have to do something. So that could move out Fed intervention dates. And I don't know what the intervention might look like, whether it's a interest rate decrease or something else more creative. But like that moves it up. And also, there's always been this idea as we've been rationing up rates over the past, you know, two, three plus years that we've been ratcheting up rates, that the Fed will ratchet up rates until something breaks.

This is the clearest sign that something is broken since we had the false, like almost, almost something's breaking with Silicon Valley Bank. Do you remember that? That was in, was that in 2020? What was that? That was 2023. That was like March of 2023. And it felt, oh my God, is this the thing? Is this going to break the Fed interest rate policy?

And they're going to have to reverse course as a result of this. Well, this is another, it feels like a breaking of some Fed policy somewhere that they're going to have to paper over and go fix. So this might accelerate things. What do you think? Yeah, I don't know how. So this is an exogenous factor to like the entire United States. This is Japan.

This is the Japan Central Bank and the Japanese economy that's reverberated all the way back towards us. Here's a take from Cyrus UNESI, who I appreciate when it comes to like these macro-common, these macro-like conditions. He says an emergency Fed cut would strengthen the yen. So if we devalue the dollar, it would strengthen the yen, which is what is causing the unwinding of the basis trade in the first place. a strong yen is what is liquidating the entire part of the economy that's doing this basis trade.

And so an actual Fed cut would actually create a worse condition as it is related to these people who are creating this like leverage in the first place. So like on one side we're like, oh, things are going like prices going down. Let's cut the interest rates. But also as a result of this particular like context, that's actually what would make things worse. So you can't just cut rates, right? I don't know. I'm at the extent of my knowledge here. As am I.

And like I'm thinking that if it's not rates, it's basically sub sub that in for any central bank intervention of some type to quote unquote bail out this situation, right? I don't know what that looks like. I think it's a Japanese bank thing. I think it's the ball's in the air cord. I think they'll be very creative. But like all of the Bank of Japan and the Fed, I mean, these these entities work in lockstep basically.

They're all talking to one another. They're all, like, interdependent on one another. It's just like, it's not just a Japanese, you know, Bank of Japan problem. It's definitely a Fed problem. And Powell's going to, I would imagine, do something or be under pressure to do something? I can't imagine, just on net, I can't imagine making money harder to come by as a result of this than easier. Like, just to put it in a very, like, stupid, simple terms. Some are already calling for it.

This, I guess, was on Squawk Box, CNBC. Wharton's professor, Jeremy Siegel, calls for a 0.75% emergency rate cut by the Fed. So already investors are calling for an emergency. Now, I've seen the counter this, which is like, come on, S&P is still up 10% on the year. Like, go cry about it, investors. Like, this is not that big of a drop. You know, you can't start triggering, like, it would be a bad idea to start intervening after just like a, you know, run-of-the-mill market correction. So there's that take out there. well. So we'll bring in another confluence of factors in addition to the ones that we all listed earlier. Like in addition to the conflict that the market is wary about in the Middle East,

we also just have like a looming recession. And so one of the inputs into this very strong pullback in the traditional equities markets is fears of recession inside of the United States. And so the jobs report inside of America has been bad, which would bolster this idea of actually cutting federal reserve interest rates. And so, like, that's also happening. And so we also have to look at our own, like, domestic numbers. That's, like, kind of why this meme at the very start that I introduced, where, like, no one actually really knows what's going on here is, like, there's, like, seven different relevant, like, inputs into the current state of things. Yeah, I mean, a few more. We've got this in kind of the last section year, but Lockheed Martin's stock price is up 25%. Big defense

contractor. Like, why did that happen? Just bellwether of people, like, were, worried about World War III. Yeah, war bell weather, basically. Middle East break braces for a week that could determine the course of the Gaza war. So, again, that's still, like, going on. Also, Buffett is dumping. I saw... Yeah, Buffett was, like, dumping this shit, excuse me, out of Apple and Bank of America all

last week and is now sitting on, like, $270 billion of cash. He knows how to play. When I saw that last week, I'm like, hmm, I wonder what he knows. And then, like, literally the next day, Eath is down 20%. I'm like, what the hell, dude? Just follow Buffett, his trade. So there's a lot going on right now. Okay, so how does this change things?

I remember a recent bankless episode. I don't know, probably within the last 30 to 60 days or so. We were talking about the bullish setup. And indeed it felt like that. Wait, were we bullish? Yes. I'm guessing we were bullish. Yes.

And bullish insular to crypto, right? It's like it's hard to predict the macro. So we just stay insular to crypto bullish. But like bullish, this is your tweet about an insane bullish setup. You mentioned the Trump election. You mentioned Gary Gensler, possibly, like a lot of political things. You mentioned the Fed rate cut cycle looming. How is this changed now, given the last week or so of events?

Yeah, so let's take these one by one, because that's what we did when we first talked about this take. Trump election locked in. That was written right after the Biden stepped down and the assassination attempt. Yeah, right after the assassination attempt, Biden had just stepped down and promoted like Kamala Harris as the candidate. Yep. And to me, in my mind, my interpretation was like, oh, well, that's over. Like Trump election likelihood at all-time highs,

pre-apparent, like, a wave of surge of support for Kamala Harris, which I did not expect. And so you actually, I can't really tell if we can really say the election is locked in for Trump. It's become more proper. It's become much more narrow. Yeah. It's like, go look at the polymarket, right? I don't know if you've seen this lately, but, you know, it was. It's like 45-55 or something like this, yes.

Yeah. J.D. Vance is an extremely pro-crypto VP for Trump. I mean, still true, but Trump also has to get elected for that to be relevant. Also, like people are saying like J.D. Vance is weird. So maybe he's actually holding Trump back. I don't know, TBD. Jamie Diamond, bullish because of Trump, bullish Bitcoin. I'm not sure how much substance had that might have been just a rumor that I ended up regurgitating. Sorry. Gary Gensler resignation. That's 100% still happening. That happens either way. I'm pretty sure. Like, like, I'm, I don't know about that. I don't know about that. Really? Yeah. I think there's a pretty, even if the Dems get elected, I still think they replace Gary Gensler.

The Elizabeth Warren chokehold on the Democratic Party, I think is like. Not as strong as it was a few months ago. But this is pre-election. I'm worried that the grip is loosening right now. The chokehold is loosening right now because it's election season and you can't be too far left. You can't be too Warren.

But then if Kamala gets elected, perhaps that grip resumes again. We'll have to see. Here is, speaking of Warren's shenanigans, she apparently just wrote a letter to the CFTC. I haven't actually read this full letter because it was happening while we were going live, but trying to basically inhibit prediction markets. Polymarket. Specifically election prediction markets, which is basically naming Polymarket without actually naming Polymarket.

I'll read this letter in a second, but this is a... She hasn't stopped. She hasn't stopped yet. Now she's going after the CFTC and for prediction markets. Anyways, so yeah, still unfriendly to crypto. ETHs approved that happened waiting for inflows. They can't overcome an entire Japanese economy nuking, but we still have them. Speculation that Trump wants Bitcoin on the Fed balance sheet, that turned into real substance.

He doesn't want to buy Bitcoin. He just wants to not sell the Bitcoin that we do have, that we've confiscated. And I think, like, not creating sell pressure and creating buy pressure is actually the same thing. So if we have $2 billion of Bitcoin and we don't sell it, that's equivalent to buying $2 billion of Bitcoin as far as I'm concerned. And the Fed rate cycle cut is looming. The cut cycle's looming. Still out there. So some of these things have definitely gone away.

Yeah. But you know what? It has also gone away, Ryan? What's that? 25% of crypto prices. So you should therefore be 25% more bullish. at these current prices. Right.

So insane bullish setup. Would you rephrase that? Would you, like, how would you express this sentiment today? Because many of these things are still true-ish. If you take a crypto in isolation, it's just everything surrounding crypto has changed. The macro environment has changed. Right. We could be looking at something significant that we just stumbled upon that gets worse from here.

Do you have any takes on the bullishness of crypto at this point in time? I think we're getting a lot of clarity this week as to what exactly is going on and how much is related to Japan, how much is related to other reasons. I think if you bought yesterday, congrats, especially if you felt sick to your stomach and you bought anyways, that's like awesome. And that's just like a very cool skill to have. Not many people can do that. It might be bold to buy, but that is what it calls. That's how you make great trades. I think it's a great time. my take on this is this this kind of shows the value of positioning like all of the work that you've done today and it's like I remember we were just talking about cycles where you and I were both positioned

much worse than we are today right yeah because off sides yeah exactly did not understand off sides and I think there's like basically three states of your portfolio positioning like one is poorly positioned these tend to be like first cyclers second cyclers and you know you are poorly positioned if you have trades on margin. So if you're doing the margin trading thing on a highly volatile asset like crypto and you're feeling that pain now, that's how you know.

If you have other things in your life expenses like credit card debt and you're looking at your crypto portfolio and being like, I can't pay my credit card bills, you are poorly positioned. If your spouse or partner has not bought in on your risk tolerance level with your portfolio,

how many times has that story played out? If you have no emergency cash reserve and you're looking at your net worth go down and you're like, this is not good. I can't pay my rent. I can't pay my bills. You are definitely, poorly positioned. Poorly positioned. Well positioned is you have no margin trades. You know, like your bad debt is paid off. You don't have credit card debt. You got maybe mortgage, something like this. You're fine if your crypto portfolio just trades like 80% down, even 95% down.

You're allocated to crypto assets that will revive when the macro market improves. you are god positioned. This is the last year, if you actually have that dry powder. If you have, if you have powder, wow. And you can buy.

You're a god positioned. And like the general advice is if you're poorly positioned, that's how you learn. That's how it starts. Your objective is just to survive and continue in the space and like try to, try to meet those margin call obligations.

If you are well positioned, great time to hold. Just hold. I think ignore the noise. don't trade on emotion right now. Things are being priced in at the moment. What can you do? You don't know anything.

Just hold. And if you're God positioned, obviously, this is the start of some buying. If you're God positioned, you already know exactly what you're doing. Yeah. And it just strikes me as like, all of that positioning is work that you did

as an investor over the last two years. And it just like, this is the moment where you can kind of like realize the benefits of some of that long-term planning. For me, I'm somewhere between well-positioned. I'm not quite God-positioned. I would love to have like 20% of capital to the boy. Are you making any moves?

I haven't yet. But, you know, this is kind of the start of possibly making some moves, right? With dry powder. I wish I had closer to like 20 to 30. I mean, I wish I had 90% dry powder, but that would make me a trader, right? Yeah. Yeah. 10 to 20% was kind of my aim.

I was trying to sell on the way up in order to get there in dry powder. I didn't quite get it. So I have some dry powder, but not as much as I'd like to start doing the buy strategy here. That's generally always my position is like I have a trickle of dry powder and it's never as much as I want to actually make meaningful moves. Yes. Because I'm generally always fully allocated to crypto. Yeah, you're more in than out, right? I'm always more in than out.

And there's no way that I'm selling like $3,500 ether just to protect myself in the event of like a downside. Exactly. Because I'm trying to sell like $15,000 ether to protect myself from the event of a downside. And we're not there yet. Exactly, not there yet. So that's how things break down. We'll have to see how things emerge. Of course, we have a roll up, David.

You got a meme to end with. So what are we looking at here? It's Kevin O'Waqi. This is two guys saying the same thing, but one's looking at the window, facing a rock. And the other one's looking at the window, looking at a fantastic view. And they are both saying the market is down 30 percent. Time to reset and rebuild. We're back in the build market.

It's only up for here. You can only go up. Back in the build market. Knock on wood. All right, guys. Well, we will end with this. Of course, this disclaimer is more meaningful. You know crypto is risky.

You could lose what you put in, but we are headed west. This is the frontier. Not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot. New projects are coming online to the Mantle Layer 2 every single week. Why is this happening? Maybe it's because Mantle has been on the frontier of layer two design architecture

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