Bankless - ROLLUP: Crypto Crash | Celsius Insolvent? | 3AC Su Zhu | Interest Rate Hike | Jack Dorsey Web5

Starting point is 00:00:00 This is what I did, the last bear market, and I came out with more conviction, stronger than ever, incredibly excited about the future. Hey, Bankless Nation, happy third week of June. It is a bear market, officially a bear market. David, you feeling bearish this week? Well, I feel now that I am capitulated to the bear market, I'm like, well, do I continue to be bearish or are we done here? What's the point of being bearish? Yeah, what's the point of being bearish now?

Starting point is 00:00:29 It's all the bearishness that's already happened, right? Well, that could be wrong. It could be wrong. Yeah, we'll have to get into that. And you're in your new setup in New York, the first roll-up I think we've done in New York. And you've got like a bear market vibes with the big brick wall behind you. Is this a new place? Are we always going to have this brick? Bear market jail is like, yeah, I'm in the bear-market jail time.

Starting point is 00:00:48 Yeah, I was overly bullish. I got punished for being a permanent perma bear. Now I'm in the bear market perma-bore. So now I'm in a bear market jail. Yeah, exactly. That's exactly right. Sorry, man. Well, we get a lot to talk about this week.

Starting point is 00:01:00 So I hope bankless listeners have their. morning coffee. It's Friday morning. Bankless ain't stopping in the bear market. Every Friday, this is going to come at you. Actually, I won't be. I'll be out next week. But Dave's got it covered. All right. Every Friday, bankless will ship a weekly roll-up, and this is yours this morning. We're going to talk about a few things. The first, David, crypto is crashing. Why? We look at the historical precedence of that. What else we got? We also got, of course, the Fed raising interest rates, which is definitely a part of the whole crypto crashing story. But also there's a, you know, everything's crashing. So this is actually a first for crypto. Cryptosummer crashed with,

Starting point is 00:01:34 while also everything else crashing too. And so we're going into the details around with that. The tide is out, part three of the topics of the week. The tide is out and many, many people are caught swimming without swim trunks. So we're going to talk about who got caught swimming naked. And then last but last, not least, Ryan, take us home. Yeah, Celsius is one of the people who got caught without swim trunks. So is one of the largest hedge funds. Three Arrow's Capital. We're and talk about that story. It just came up in the last week from our last roll-up. And then C-Fi is breaking all around us, but D-Fi didn't. We got some hot takes at the end. So stay tuned and make sure you like and subscribe if you enjoy these episodes, of course, on YouTube

Starting point is 00:02:14 and rate and review. If you're listening to this on the podcast, go ahead and do that. You know what, David, we're going to get to Celsius in our show in a little bit, but actually our friends at Notional. They are a DeFi. borrowing and lending platform. And the topic of C-Fi breaking, but D-Fi didn't. Guess what didn't break, David? Defy and Notional. Notional still spitting out the yield, the fixed APY yield. So, Notional is giving you 3.08% on your ether right now, on your ether. And you can, of course, also get USDA-D-D-C-Lending as well. So Notional, part of the whole, part of the crypto industry that's working just fine right now, giving you your yield, when you,

Starting point is 00:02:58 you want it, where you want it. So you can check that out. There's a link in the show notes, bankless.c.c. slash notional if you want to get some of that dependable yield. What I love about this is this is a fixed rate. So you can sign up for a fixed rate yield for a year. Also, there's no counterparty here. That's the problem. That's the thing that got Celsius in trouble is went into a black box. There were all sorts of counter parties. Who knows what they were doing with it? This is all on chain. This is how Defi solve some of the problems that are lingering in C-Fi. Anyway, go check that out. The that David just mentioned. But David, we got to get into the markets, man. You ready for some

Starting point is 00:03:32 Bitcoin talk? It's been a bloody week. Give it to us straight. Don't hold any punches. Don't hold back. Well, Bitcoin lost basically $10,000 in the last week, which, I mean, if it was at the highs of like $70,000, that would be one thing, but it was at $30,000 last week. And it went down basically $10,000. It's come up from the low. So we were at $21,000 right now. But overall Bitcoin is down. You ready for this, Ryan? 30%. 30.5% in a single week.

Starting point is 00:04:03 Wow. This is a bloody week. It's got to be historic in some ways. But tell us about ETH as well. Yeah, Ether. Another oof week, of course. I think that to state the obvious, started the week at $1,800.

Starting point is 00:04:16 We are currently at $1,100. So lost $700, down 38%. oof. Can we talk about the lows here? So how low did Ether get? Did it get into triple digits? Not yet, right? But close. In DeFi markets, it actually did wick down on Uniswap below $1,000. So in Defi, it very, very briefly got whiffed down, but it got right back up. So I don't really count it. It's more of an anomaly. So, yeah, I would call the official low at about $1,020. Of note, though, that is lower, much lower than the all-time high of the last. bull markets. So the all-time high of the last bull market was 14,000 something, 1420, 1430, 1440, something like that. And we are below the last all-time high. So this is uncharted. Yeah. Unprecedented. Of course, Ethereum's only had one cycle. So like one big bearish cycle.

Starting point is 00:05:13 Well, it's got two now. This is the second. Bitcoin, did it drop below its last high? Like just about. I mean, yeah, it's basically there. Basically there. So, its low is 20,166 on this chart. Well, this is the wick you were just mentioning on Uniswap where we dropped into triple digits, but we're still hanging above into the quadruple digit territory for ETH. But what is the ETH Bitcoin chart telling us? Yeah, we went down from 0.059 to 0.052, down 12%. So, oof.

Starting point is 00:05:49 And I'm going to chalk this up to a number of different reasons, mainly ETH being collateral and defy, an overall collateral across crypto. So that collateral, when we have liquidation events, that collateral gets sold off heavily. And so like three hours capital was liquidating ETH. Celsius was liquidating Staked ETH, creating that incredible discount between Staked ETH and ETH right now. And so just like the ETH BTC ratio, just getting absolutely hammered. I'm going to add another reason to the list is you called the bottom on that ratio last week. Wait, wait, wait, wait. Let's not bring that up. Let's keep on going. Moving on. the reason we knew we were headed down. I'll call the bottom every single week. The bottom's happening

Starting point is 00:06:28 right now. This is the absolute bottom of the EFTC ratio. You know what that means, guys. I'm calling the bottom again next week. All right. How about total crypto market cap? We got to be, are we below one trillion yet? Oh, yes, sir, we are. We started last week at 1.3 trillion. We are down to 0.94 trillion. We lost $306 trillion, oh, excuse me, trillion, a billion dollars. And, and, total crypto market cap last week. I fell out of the quadruple comic club. Look at that. I remember when we first surpass that $1 trillion

Starting point is 00:07:01 in milestone and now we are back under it, so we were retracing a lot of the gains of the past year or two. How about this? How unprecedented is this drop? Can you compare this to 2018 and look at the history here? Because this felt very fast and very steep.

Starting point is 00:07:18 Yeah, so look at this chart. This is the 2018 bubble to the total crypto market cap. This is an index of all crypto assets. So it peaked out at something like $80 billion, I think excluding stable coins, although stable coins weren't that big back then. So it peaked out at basically $800 billion, fell down to below $100 billion, like $91 billion. And it took 350 days to do that, Ryan.

Starting point is 00:07:44 It basically took a whole year, from peak to trough, top to bottom. It took a whole year of time. And inside that time, there were multiple, like, plus. 40% run-ups, like bear traps. And so, or excuse me, bull traps because, like, it would go up and then people get really bullish. Like, look at that run. I remember, like, ether fell down from 1,400 down to 300, and then rose up to 900,

Starting point is 00:08:09 and then fell back down to 300 again. And, like, Bitcoin did something very similar. And so, like, even in what was ultimately a one-year-long downtrend, there were periods of plus 20, plus 30, plus 40% price rises. We did not see that at all in this particular bear market. And in comparing this to the 22 bear, we go down 70% in 217 days rather than 350 days. That is 40% faster. If we are calling the bottom right now, if this is the bottom, which it could be, it could also not be.

Starting point is 00:08:43 But if it's where we are right now is at 217 days versus 350 days. And right now we are down 70%, 70.6%. in total crypto market cap versus where we were last time, which was what was that percentage, 87%. So we have 17% less red than in 2018, but also 20, like, we're only 40% the time or 60% of the time. So, like, if you are comparing cross cycles, that could lean into, like, we still got a little bit more to go. Like, if we went down 50%, what would that put us down to? If we went down 50% right now, that would it be at 85%. And so that would start to be comparable.

Starting point is 00:09:25 So, like, there's plenty of evidence to suggest that the bottom is not in yet, although there's also evidence to suggest that the bottom is in yet. So we'll talk about that further on in the show. I think we might, who knows, what'll happen again? This is prognostication. We're not traders. But, like, I think we'll see some relief rallies. But I don't think this bear market is over.

Starting point is 00:09:42 We definitely have the ways to go from my perspective. And then if you look at 2018, there was this recovery phase. So even though we bottomed in December 2018, it didn't feel like the bottom at that point. time because then we just kind of, you know, crabbed out and just hung at a price point. You weren't sure whether we're going to dip or not. Anyway, this could be a long one and there could be some more pain ahead is what we're saying. But how did the gas market hold up in Ethereum? Because this is interesting. You'd think this would be a big stress test. What are we looking at here? Yeah, so the average gas price over the last week was about 38 gway. You can see that if you scroll

Starting point is 00:10:18 down a little bit, Ryan, which is kind of crazy. The gas prices by week peaked out at that. Scroll down a little bit more, a little bit more. A little bit more, a little bit more. There we go. Total gas distribution, that green curve on the right side. Yeah, 38 Gway, which is crazy. I remember during the COVID crash where ether prices, crypto prices on Ethereum crashed like 40, 50, 60% inside of 24 hours.

Starting point is 00:10:44 Gas spiked up to 300 Gway, which was unprecedented at that time. We had never seen gas prices above like 10 or something, and it went up to like 300. and we had just irregularity in the defy markets. We had MakerValtz being liquidated for $0 collaterals, which was bad. But the defy liquidations right now were totally regular, and the gas markets were totally balanced, and nothing really got out of hand.

Starting point is 00:11:08 And so this is a big story that is really being discussed right now is how efficient and regular the defy markets were doing one of the fastest drawdowns in crypto history. It's actually pretty crazy. It's actually incredible. I think that's a theme of this episode, how well Defi held up, how resilient it has been, and the kind of the more centralized aspects of crypto's financial market have been the things that have been stress tested. And those are the things that have been, as the tide rips out, not wearing any pants. But David, let's get to kind of like, how are people feeling?

Starting point is 00:11:41 Because there's a lot of pain in the market right now. And especially for first, like, cyclers, maybe come in the last year or, you know, 18 months or so, They're not used to this level of pain. I mean, they've been born into a world that's been basically up only. And I've seen a lot of, I guess, pain-type tweets on Twitter. I mean, people very worried about the future of crypto, wondering if it's all over. I know we talked about this in our Bear Market, Special Edition, Bear Market episode that we did on Tuesday. But how do you feel like the community's hanging in there?

Starting point is 00:12:17 And, like, how are you doing with things? I'm generally a pretty Zen, Stoic individual. also if I really need to like, I really need to kind of like dive deep to figure out like my emotional state. I do have, I do have fear for, and this is very related to the Federal Reserve, the United States economy, and just the Fiat ecosystems at large. And so while like crypto seems like the prices and fundamentals are always incongruent, fundamentals of the crypto industry are better than ever and they only continue to get better. And especially, and that's proven out in the regularity of the defy markets while we had liquidations in C-Fi. C-Fi broke, D-Fi didn't, and that's

Starting point is 00:12:58 proving its use case, proving its legitimacy. But it's going to take a while for that to settle in. And meanwhile, like, the job of the Fed is to control inflation and not send us into a recession. And I feel like we are already committed to a recession, which is one thing. Like, we've been through recessions before. Many of us lived through the 2008 crisis, even though I was just a kid. I still felt it. I am actually, I do have fear of an actual, like, D. Depression. Wow.

Starting point is 00:13:31 Yeah. And I don't know if this is just because I read a lot of, like, Ray Dalio, and we've seen what happens to other Fiat economies when they lose their legitimacy. like the Fed is losing trust. They're whiplashing the world around. Like I don't, like, we also have the war in Ukraine. So like gas prices are up and they're not going to respond to interest rates because that's a different part of the world's economic system.

Starting point is 00:14:00 Food prices are up and they're only going to get worse. As far as I can tell, I'm not an expert. I only see what I, information that I see on like Twitter. And like, well, I do think that I know where to look. doesn't mean that I actually, that things can change. I don't know. But like, I think there's, I'm worried that food prices continue to go up and that continues to do harm to the American economy and to the global economy.

Starting point is 00:14:25 Inflation can't really get under control because it's like 50% of inflation is energy and energy you can't control with inflation rates. And so, like, I'm conflicted in that, like, wow, there's so many cool things in DFI. But, like, it doesn't really matter if, like, the world. burns down. And so I do have that fear. Yeah, I get that fear. And I think that's a fear a lot of people are thinking about right now. One bit of one thought I have for listeners is if you want a take from somebody who's in macro and also studies crypto, go listen to our episode earlier this week from Jim Bianco. Jim shares some of the concern that you just stated, but he doesn't think we're headed

Starting point is 00:15:03 for a depression. He thinks we're already in a recession, but he talks about kind of the way out. We're going to be talking about a little bit more of the way out as we get into the Fed section. You know, one thing that's helped me through these times because, you know, been through bare markets before, as have you, David. And I'm wondering if this could help some of the bankless listeners is all of you guys are probably going through like the five stages of grief here, right? Like you got the denial phase. You've got the anger phase.

Starting point is 00:15:32 Bargaining, depression, acceptance is the last phase. And you probably oscillate between some of these early phases like back and forth. in a given day. Like sometimes you're denying it. Sometimes you're angry. Sometimes you're like, well, it's not so bad. And then sometimes you're just straight out depressed. One thing I think we can help you with is getting to that end stage, which is the acceptance stage. And that's the stage you want to be in if you're going to get productive again. To get to that stage, you have to accept some hard truths. And I think one of those hard truths is, you mentioned earlier, David, you're fully ready to capitulate and we're in a fully, like, full on bear market right now.

Starting point is 00:16:10 now, that's getting to the acceptance phase. And I just want to say this out loud for people. We are in a bare market right now. Things will get worse before they get better. This will take a while. Here is when we're saying this. We are in a bare market. Things will get worse for a while, and it could take a while. Now, once you've accepted that, then you can get to a phase where you can be productive again. And one of the decisions you have to make if you accept that truth and that reality is what do I do? What do I do with my crypto portfolio? And you have kind of three options ahead of you. Number one, you just sell it and leave crypto. My conviction's gone. You know, if we're entering, you know, kind of sort of a very sad global state, I'm better off with like food

Starting point is 00:16:57 and supplies and like, you know, shelter and like, I don't know, gold. I don't know what you're going to do with your money, but maybe something else. Maybe that's an option for you, right? The second thing you do, people could do, is trade the pumps and the dips, right? So they see these and they're like, oh, you know, it's dipping. Now's the time to buy. And then they sell. It goes up another 200 and 300. They sell.

Starting point is 00:17:17 I think a lot of people choose to do that. The third thing you can do is just hold through the pain, all right? Of course, do the first one if you're not convicted on crypto, right? It's like, and again, I think holding through a bear market requires conviction. You can't get conviction through listing to someone like David or myself. have to develop that on your own. So if you don't have conviction, maybe number one is the right option. It's not an option for me. I do have a tremendous amount of conviction in this asset class. So that's not the one I choose. But a lot of people who have conviction in the asset class,

Starting point is 00:17:50 they default to two, where David, they start trying to trade the dips and the pumps, and they try to think they can make money on that. So many people in these bare market scenarios get wrecked by that, David. If you do not know that you are a trade. then you're not a trader. Don't do it. That's what I'm saying. So like I'm kind of encouraging the bankless audience to be very careful before they start trying to trade these dips and the pumps and that sort of thing.

Starting point is 00:18:16 If you're good at that game, maybe you could do it, but most people, 95% of people should not be playing that game. And so you come to acceptance in the third option, which is just hold through the pain. It's hold through the pain. You have conviction. And if you decide to hold through the pain, there's some things you can do for your mental health right now. Okay?

Starting point is 00:18:34 One of the things you can do is delete your price apps for a bit. All right? Stop checking daily, hourly, every 10 minutes, every five minutes. Stop doing that. That is not good for your dopamine levels. It's like not good for your psychological health. It's not going to help you if what you're deciding to do is holding through the pain anyway. You're not going to trade any of these moves.

Starting point is 00:18:59 So why check it? Number two, I think you can start working on your side. a bit more. And maybe this means hitting the gym. Maybe this means reading some books that you have on economics, on philosophy, on history. Maybe this means learning to code. There's so many disparate skills that crypto requires to be really good. And, you know, you can draw these out and you start learning them during the bear market. The third thing is you can go build something. David, you mentioned, like you and I started a podcast in a newsletter, the last bear market. Maybe art. And if TC is going to come back, it's going to boom again.

Starting point is 00:19:34 maybe learn to code, maybe get into a community. We talked about layer two's being incredible opportunities for the future. Maybe you decide to join governance in one of these layer two ecosystems. That opportunity is in front of you. It's way less crowded. There's way more signal. Go do that. Number four, you can level up, all right?

Starting point is 00:19:51 Forget price. Just learn about the new DFI protocols. David, you put out a great alpha leak episode on Voltz Protocol. How much do you know about interest rate swaps, guys? Because I don't know a ton, but I can level up through bankless content and start to use some of these DFI protocols. And then number five, I think you get to a place in acceptance. You start doing these things where you're like, ah, okay, it's not over.

Starting point is 00:20:15 It's not actually over. Everyone in crypto went through this before. This is how you earn the crypto appreciation. People think you get lucky with prices of crypto going high in a bolt run. You do, but you also don't. this is very much about your ability to hold through these deep dark crypto winters. And that to me is how you get out of this. This is what I did, the last bear market.

Starting point is 00:20:41 And I came out with more conviction, stronger than ever, incredibly excited about the future. No, I think those are some fantastic bits of advice, Ryan, and just to add on more clarity and color to that. my mental health is actually bad in bull markets. Like it's... Like Van Spencer. Yeah, things are noisy. They're hard to reason about.

Starting point is 00:21:05 I'm confused. Like, I can't look away from crypto Twitter. Like, there's, like, my attention is being pulled in every single direction. And, like, what a bear market is, is a return to fundamentals. And you can apply that same lesson to your own psychology and your own personal well-being. Like, take this opportunity to take a step back. go touch some grass. Go exercise.

Starting point is 00:21:27 Because if you are exercising, it's hard to have bad mental health. There's a connection between these two things. And then just like zoom out and think about not like the forced one to four week time frame perspectives of the bull market, but the one to four year perspectives of the bear market. And that is how you like maintain your sanity. And so just to reiterate what Ryan said, what do you want to get done in the next one to four years. Do you want to like get fit and get out there and see the sunlight and get away from

Starting point is 00:21:59 crypto Twitter? Get away from screens. And like if you need help gaining conviction about like what we're here to do in this space, get educated. Like understand why we're going through a bear market. Understand federal reserve and like monetary policy and the choices that they're doing. Understand the history of fiat currencies and the choices that nations have made to to manage those things to get a long-term perspective and to prepare yourself and your family and your loved ones and your bags for the future. And just so like again, zoom out, get rational, get sober, the bull market's over. We got the time. The hangover's here. And so as soon as we can skip forward, like you said, into that acceptance phase, we can start to actually plan for the future

Starting point is 00:22:46 and rebuild ourselves, our portfolios, and like our industry. There you go, guys. I hope that was helpful to some of you listening who are feeling the pain right now. That's how David and I get through it and cope and how many crypto investors do as well, many of the OGs that you hear about in crypto. People that stick around do these things. Yeah, absolutely. Let's get to the Fed. All right. What are they doing this week? We're still on markets. That segue was important for our mental health, David, but let's talk about the traditional economy numbers. What's up first? Yeah, so this is the Dixie, the DXY, which is a dollar index, which is, comparing the value of the dollar compared to a basket of currencies. It's at all-time highs.

Starting point is 00:23:28 Well, not all-time highs. It's at a high since 2002, basically. And so all-time highs for as long as I've been paying attention to money. And so what this means is that people are really demanding the dollar. And this is what happens when interest rates go up for the World Reserve currency. They are making the dollar more scarce. They're making people with outstanding loans from the Federal Reserve pay back those loans at faster rates. Therefore, people need to get their hands on more dollars. So they're selling more assets. the Dixie at all-time highs. So these are just correlated. Since the world's debt is denominated in U.S. dollars, demand for dollars is going to go up as the Fed

Starting point is 00:24:03 increases interest rates. Therefore, things sell off to access dollars. And that includes the bond market. Something that's unique that happened in the last few weeks, Ryan, is that both the equities market and the bond market have gotten hammered, which usually those things go in inverse correlation to each other. But in this week, the last couple of weeks, they are, correlated with each other, both going down, both getting hammered, because both markets are trying to get their hands on dollars. Everyone's trying to get their hands on dollars. It's funny that with inflation so high, the dollar goes up, but that's exactly what happens when people are panicking and uncertain. Also, we could take a look at the gas, the gas markets.

Starting point is 00:24:42 I'm not talking about Ethereum gas. I'm talking about traditional gas that used to fill your tank with, and we are at highs as well. So above $5 is the U.S. national average per person. gallon. Part of this, of course, is COVID, right? Lack of oil refineries in processing the U.S. A big part of this, of course, is the war in Ukraine. There's lots of issues, and this is one of the issues the Fed can't really fix. It can't print more gasoline, can't print more barrels of oil, and it looks in the future like it's going to continue to rise. As long as we're looking at numbers, David, what is the third number that we have here? Yeah, this is, of course, the CPI, the metric that really kicked off the last 40 percent downwards.

Starting point is 00:25:23 price action, consumer price prices up 8.6% year over year on ending May 2022. And so while people, and this is why crypto prices went down so violently and equities too, people were hoping, praying that inflation had peaked in April. And so we were going to see the CPI numbers in May be lower, hopefully in the seven, ideally in the six range. Eight, like the low eights would have been just like, meh, okay, fine, but it was 8.6, which was a decent amount of inflation above what expectations were. And so this goes from the last holdouts who thought that inflation was transitory, capitulated. And so the entire market reorganized itself to go from transitory inflation to long-term inflation plans. And so assuming that the Fed is going to raise interest

Starting point is 00:26:17 rates faster than expected, that faster than the market had accounted for, and so that's why crypto prices and all prices are down bad. I do think at 8.6% is actually a lower limit of that, too. There's an interesting website that rolled out recently called Truflation, which tries to predict a better non-government inflation rate. And that was tracking the website. It's not loading right now, but you know it's bad when the private market comes up with its own inflation numbers because you can't trust the government. This is classic end-of-stage Fiat cycle things when the government says, oh, inflation, it's only this percent. And then meanwhile, the market understands it to be way higher. Yeah, I found true inflation really interesting. So they're saying annual inflation is about

Starting point is 00:26:59 10.8 percent. So already double digits. And if you look at things like housing, for instance, like housing is 12.3 percent and go to energy. Do you see that anywhere? Health, transport, transportation is more like 18 percent. So that's reflecting it by category as well. And this is interesting. Nearly one in four homeowners would have to sell if interest rates rise even more. So there are some breaking points in this economy. And as we're talking with Jim Bianco, you only see those breaking points and those fracture lines when the market is in stress and in turmoil. So we're not sure where the next shoe it's going to drop in traditional economy, but we have some glimpses of things. David, all of this, of course, the Fed has to respond in some way. And you were talking about

Starting point is 00:27:44 what the Fed response is going to be. They just announced yesterday that they were going to raise interest rates by 0.75%, and this is the biggest increase since 1994. They've not done this. High of a raise since 1994. People are projecting interest rates of 3.4% by the end of the year. The next time the Fed meets likely in May, it's projected that they'll increase by another 0.75%, maybe 1%, that seems to be what they're indicating at this point in time. But there's a problem here in that, like, the Fed, their plan to fix inflation, they only have one tool in their tool belt, and that is to raise rates or do quantitative tightening.

Starting point is 00:28:32 And the Fed has made it clear that they have no impact on demand. Sorry, they have no impact on supply, but they only have impact on demand. So they're basically beating us all down, making us feel like we're in a recession and actually trigger a recession in order to decrease demand for products. And the hope is that that will tamp down inflation. So if you're an asset owner, your assets go down. If you have no assets, you're kind of living paycheck to paycheck, you might lose your job. That's what a recession is. And the sign of reversal, like when will all of this reverse? I don't think it will reverse, and this is what we talked about with Jim Bianco, until we see the first signs of inflation

Starting point is 00:29:16 actually reversing. So the beatings will continue until we see inflation maybe drop from that 8% to something closer to 6, 5, 4%. Who knows what the measure will be? Either that will happen, David, or something will break to require them to reverse course. What do you think about this? The way that this bear market ends, the way that we get out of this thing, the way that we all feel better is that the Fed has, well, might decide that it has gone too fast, too far, too quickly, and it reverses course. And there are some grumblings about this, some murmurings about this possibility that by the end of the year, the Fed will actually stop raising interest rates because of, out of fear of the recession it's triggering being too strong. Because if you kill demand,

Starting point is 00:30:03 if you kill demand too fast, you kill people's jobs. And then that turned, and that can spiral out of control, and that can be even harder to get out of. And so, like, the Fed is trying to weave this needle, to thread this needle by reducing inflation, but not triggering a recession. And Ryan, like, again, the window might not be open. And so the Fed just has to pick. Does it send asset prices through the roof? Because that's what would happen if we all heard that the Fed is going to stop interest rates, or do we send asset prices to zero because of a depression that we triggered? And there seems it seems to be like the likelihood that it's actually one of these things, like, and there's no middle ground. It's like pretty most, the most likely outcome. It's one of these two things,

Starting point is 00:30:47 up big or down big. And so there's some murmurings that the Fed is going to just be fearful of just having gone way too far, and it's going to reverse course. And then when we see that, we're going to see markets just like pump off the floor. It's like, yes, it's over, like back to the easy money era. They crashed the markets. We're all broke, but at least the markets can go up again. So, like, there are some conversations about, like, this, predictions about this happening. So how do we interpret all of this? This is what people want to know. This is a Vance Spencer's interpretation. You know, some people are saying, hey, this is the end of easy money is era. Fed interest rates are going to rise. The last 30 years of low interest rates, we'll never see that

Starting point is 00:31:28 again. But Vance has a contrary take. What is his take here? Vance says, have seen a common take from VC investors that the era of low interest rates is over. Maybe for a few, few months, maybe a year, that's probably right. But long term, it doesn't seem like we can put the genie back in the bottle and reverse a 40-year decline in interest rates. And Ryan, as the Fed raises interest rates, if the Fed raises interest rates by like 1%, it puts costs on the U.S. government, because the U.S. government is in massive debt. The U.S. government has more debt than any of us by a long shot. And so like 1% of interest rates turns into like hundreds of billions of dollars of monthly fees, payments that the government has to make.

Starting point is 00:32:06 And it does, the Federal Reserve is just as insolvent as a three-year-os capital is. Like, we'll get to that part of the story. But, like, they have debts to pay. And so, like, this is going to the conversation of just, like, at some point, they cannot raise interest rates. And it's lower than 5% probably. And so, like, the era of easy money is on the horizon, whether it's in one month, one year, a few years. it ultimately will return back to an easy money situation just because we're in debt. And that's just what we, that's the paradigm that we live inside of.

Starting point is 00:32:39 And we can't break stuff without triggering a depression. And so this is like the light at the end of the tunnel. Eventually, everything breaks so far that we have to go back to 0% interest rates. It's just a matter of when. Yeah, I think that's probably true because the Fed, it's not in the Fed's interest or the U.S. government's interest to actually break things and send the world or the economy into another recession. So depression. And so if that's the case, then you got to imagine this will stop at some point in time. When will it stop? Not sure. But there could be tremendous buying

Starting point is 00:33:11 opportunities here. One thing that's interesting is, do you know Wells Fargo and Ethereum are the exact same market cap? Like, real close right now. Both of them are worth $146 billion. So as an investor, if you were like, you know, deciding to invest is like, where do I put this dollar? And I have the world, assets choice. I could put it in bonds. I could put it in stock. You could put it in Wells Fargo, or you could put it at ETH, and you're buying those things at the same price right now. I think it's a total gift to be able to buy the future, things like Ethereum, at a low price point right now, at like lower than the price of Wells Fargo, the same price of Wells Fargo stock. And some people don't like these comparisons of like, because Wells Fargo is a bank and

Starting point is 00:33:55 Ethereum is a whole monetary system. Look, they're both assets. I know. apples and oranges, but both are fruit. I think you can compare them. And the question is, coming out of this, where will people want to put their money? Will they put it in the old traditional banking system, or will they put it in this new economy, this new financial system in Ethereum? And I know which bet I'm going to take personally. But again, you've got to develop your own conviction for this. David, we got some other things to explore. That's coming in the next section. But Spencer Nune kind of teases that for us. What's he saying here? Yeah, Spencer says it's becoming increasingly clear that,

Starting point is 00:34:30 The ETH move from $1,000 to $1,000 was the result of large forced sellers. And two, the majority of forced selling is behind us. Cautiously optimistic that we found a local bottom. I heard a cool take interestingly, Ryan, that if 2017, the ICO mania was crypto's dot-com bubble, 2022 was the 2008 housing crisis. And what that means is that the dot-com bubble was a bunch of like internet promises, which is what the ICO mania was. And the 2018 crisis, the 2008 housing crisis happened because of an over-leveraged, low money, easy money, monetary policy.

Starting point is 00:35:08 And people just kept on cascading because they were leveraged on leverage on leverage, which I think we're about to see, Ryan, is exactly the case on many, many other crypto participants in the market. So that is the topics that are coming up next. C-Fi insolvency, the three-euros capital caught swimming with no shorts, and also layoff season as well. So some bear market topics coming up next right after we get through some of these fantastic sponsors that make the show possible.

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Starting point is 00:37:10 Hey, guys, we are back with our main event news items. The first is about Celsius. So Celsius is a centralized lending and borrowing platform. And they announced this week in a shock to the moment. market, that they were pausing all withdrawals. And so users could deposit funds into Celsius and receive interest as a result of that. They could also borrow from Celsius, accomplished what many of the defy protocols do, only in a black box centralized model where you're not really sure how Celsius is generating that interest. You just know you're getting some interest back.

Starting point is 00:37:46 It's kind of a black box for you. Well, they just notified the entire world that they were pausing withdrawals. And so this is an indication of insolvency that they can't actually honor all the depositors' commitment. And this, of course, sent the crypto world in a tizzy. One tweet from Bankless HQ that I think is right on is if they can freeze withdrawals, it's a bank. If they can freeze withdrawals, it's a bank. And so Celsius looking a lot like a bank right now. And of course, you know, the bankless position has been as to any central. lending and borrowing platform is actually a lot like a bank. But David, could you break down actually what happened here? What are some of the details of what Celsius is doing with the money and why

Starting point is 00:38:34 can't they honor the withdrawals right now? So some details out of coin metrics, which has put out a great metrics on-chain database newsletter. They say as of May 17th, Celsius controls over $11 billion of crypto with at least $150,000,000,000, sorry, I'm not used to that large number of Bitcoins inside of their, inside of their, like, AUM, inside of the assets that they hold. They also have outstanding defy positions. So Celsius is an active depositor of users' funds into defy protocols. And they've also suffered some losses from hacks, right? So last December, Celsius submitted to losses of a hack of the Badger Dow, a DeFi protocol when BadgerDow was hacked. So they have losses that they used customer funds for, which they have to make up.

Starting point is 00:39:20 And so users don't even know if their funds were lost. It's because it's an aggregated pool of all users' funds. And so whatever funds was in Badger was lost. And so stuff like that starts to chip away at the solvency of Celsius. Celsius also controls the largest vault of wrapped Bitcoin inside of Maker Dow. So as of June 13th, Celsius's Maker Vault held 24,000 wrapped Bitcoin worth about $500 million. as Bitcoin price fell below $25,000, Celsius Maker's Vault quickly approached its liquidation price of $22.5,000. And so, Bitcoin price, $25,000. If it went down $2,500 more, the vault's collateralization ratio

Starting point is 00:40:03 would reach the low ratio of 155%. For those that don't know, MakerDAO vaults get liquidated at 150%. So with just a few percentage more moves to the downside, all of Celsius is, not all of it, but a very large trunk of their Bitcoin would have been liquidated. On Monday morning, June 13th, the vault was topped up with an additional 4,000 wrapped Bitcoin, sending the new implied liquidation price down to $18,000 Bitcoin and a new collateralization ratio up to $185,000. As Bitcoin fell to $21,000, Monday night, Celsius added an additional 2K-wrapped Bitcoin to the vault, lowering the liquidation price to $17,000, and this is where we are today.

Starting point is 00:40:42 The situation remains precarious because if Bitcoin, like, they can't keep. keep on generating collateral out of thin air. And so as the Bitcoin price gets lower and lower and lower, they aren't paying down their loans, Ryan. They're putting more collateral in there, which is like saying, okay, we took the loss, but I'll just double my bet and put it on black, which is already crazy. But that is only one half of the story. The other half of the story is staked eath. Celsius is also a large holder of Lido's staked Eith. June 13th, Celsius held $445,000 staked ETH, $500 million, but there is less liquidity for staked ETH than there is on ETH for Decentralized Exchanges. So there's only so much Staked ETH that you can swap for

Starting point is 00:41:23 ether to allow for users to withdraw their assets. And so since the Staked ETH slash ETH peg has started to slip, Staked Eth has started to trade at a discount. Many people are facing insolvency issues and so they are liquidating their stake to get ether back to pay down their debts, Celsius being one of them. And so there isn't sufficient transparency to make authoritative claims about the solvency of Celsius, and an unwind of this proportion would, if Celsius had to unwind further, would certainly impact all of crypto markets. And so like we've seen before, if there was indeed Celsius allowed users to withdraw, there would likely be a run on the bank because users want to get their funds out before others.

Starting point is 00:42:09 And so that's why Celsius had to halt withdrawals. Basically, they are on the brink, Ryan. And if prices go down too much more, they would face just a trigger a significant liquidation event, which might trigger further liquidation events, which is pretty damn scary. The scariest thing about this, Ryan, is that basically Celsius is a, like a yield farming,

Starting point is 00:42:31 a centralized yield farming app. So you deposit your money into Celsius, and then they go and farm defyfy. with it, which is the same thing as a bank. You put your dollars in Wells Fargo, and Wells Fargo gets yield out in CFI with it, and then they pocket that yield and give you a little bit of difference. What Celsius is doing is they are leveraged yield farming,

Starting point is 00:42:50 so they are juicing up the yields in order to attract deposits, and then they are going and engaging in very risky yield farming behavior in Defi, which works great on the way up, and it's why Celsius has tracked billions of dollars of users' deposits, but it doesn't work so great on the way down, especially as yields come down, but also as they lock up users' deposits inside of things like MakerDAO, and also staked each, which is a one-way deposit right now.

Starting point is 00:43:19 So, like, and so they're going, they leverage up, they get a ton of yield, and then they lock their positions, and in a down, when prices go down too fast, they just can't unlock their positions to, to give funds back to their users. So, like, if you have money in Celsius, users that currently have money in Celsius, because of the whole Staked Eth thing, because they can't withdraw Staked Eath until post-merge and then about six months after that when withdrawals are enabled on the Ethereum chain, they need to wait to get that money back. So there is money there, but, like, you can't access it. And so they are kind of in a rock and a hard place. And so they have to pause users' withdrawals to maintain their solvency, which is kind of crazy. crazy. Yeah, in fact, they're probably, they're probably insolvent right now, right, is the case.

Starting point is 00:44:08 They're probably underwater on the depositor's assets. And so basically that's what they're doing. They're generating yield and you just, you know, park your ETH here, park, park your USDC here will generate yield. But they were taking those funds and doing all of these speculative, risky things with it in order to generate that yield. Now, I'll note that that is actually the opposite of what DFI does. Now, DFI does generate yield, but it's fully transparent. It's fully on train. You can see an audit log of everything that backs an individual position or an asset. You can right-click view source. Celsius, it was kind of just like, here, put it in the black box.

Starting point is 00:44:44 We'll generate interest. Trust us, please. Trust us. And we all know what trust us, how that ends up going. There are some takes here as well about the way Celsius positioned itself in the market. So bad. And where should I start this, David? Yeah, tweet number eight.

Starting point is 00:45:02 It goes, but even worse than the pseudo-crypto vibe that is Celsius, dangerous is use of meaningless platitudes and strident anti-bank rhetoric. This is a tweet from John Wu out of Aztec that I'm reading. So here's some of the marketing terms that John took from their white paper and website. Banking is broken. Unbank yourself. Replace Wall Street with Bitcoin, 99% versus 1%. First off, those first three things, is a complete farce because they're just a bank.

Starting point is 00:45:28 they are using defy terminology, defy memes, but for their C-Fi app. And so, like, it's disingenuous versus what is actually going on. Like, these are the things that we chant about D-Fi. Meanwhile, defy, again,

Starting point is 00:45:43 highly efficient and highly orderly while all the C-Fi is breaking. And then the whole, like, 99% versus 1% thing is just the populist tactics that we've seen so many times. These are the populist tactics that Doe Kwan used to advertise Tara. It's the populist tactics

Starting point is 00:45:57 that Danny Sessa used. to advertise Wonderland. It's just a consistent red flag across so many things that all ultimately come to break. John from Asset continues saying, worst of all, is this in-your-face focus on safety, security, and transparency,

Starting point is 00:46:10 and most of all, trust. Military-grade security, withdraw your crypto at any time, keep your crypto safe, next-level transparency. These are defy words, and it's completely the opposite of what is true of Celsius.

Starting point is 00:46:24 So they're using defy talking points for their C-Fi app, which is, malicious disingenuous. And so again, people that do these things, like, this is called icrissing, Ryan, where you fly too close to the sun. It's just a little ridiculous. And again, for this is the lesson to take away, for those that are just unfamiliar with all these tactics that are going around in defying crypto all the time. And even in centralized, this is a truth about the centralized world. John continues, therein lies the problem,

Starting point is 00:46:53 the promise of sky high yields combined with a veneer of Lidimonyer, legitimacy with regulated on ramps, premium access for creditor investors, and regulator logos. This cleared the way for Celsius to pursue truly degenerate trading strategies with investor funds. And again, something that we've seen before, just a few days before pausing withdrawals on Twitter, the CEO, Alex Mashinsky, is attacking Mike, Mike Dudus, formerly a CEO of the block. And Mike says, I hope retail can get out of Celsius. I am hearing about accounts being locked. similar to Luna, we shall see.

Starting point is 00:47:29 And Alex goes, Mike, do you even know one person who has a problem withdrawing from Celsius? Why spread fudden misinformation? If you are paid for this, then let everyone know you are picking sides. Otherwise, our job is to fight trad-fi together. And then, ironically, two days later, everyone had a problem withdrawing from Celsius because it was actually Trad-Fi in Defi's clothing. This is the crazy thing, too, is Alex's tweet got like three times as much likes as Mike tweet it's because you always in these cases have kind of an army of defenders they're saying don't

Starting point is 00:48:02 pick on Celsius right and like uh it just it's it's it's very it's very sad for all of kind of the people who deposited into Celsius without actually knowing the risks of of doing that um i do think you know a fun fact ryan if we got i've been attacked by the celsius trolls it hasn't happened in a while yeah it was like back in 2019 2020 uh maybe early 2021 but like they were like oh have Alex Machinsky he's like he's like super into defy and I would go and look at Celsius like this isn't defy and so like Celsius had Celsius armies yeah it's crazy yes I agree and that that's always a red flagged like in the future I mean it's we it's kind of feel like we've called it every time every time there's a red flag community it's just like it turns out like this and it's just all

Starting point is 00:48:48 happening all at once um these days the thing of it is I'm not against a centralized um lending and borrowing companies either, right? Like, I'm not. I'm not also, like, I know this show is called bank lists. I'm also not against banks. I do think defy is better. But if you are depositing into a bank, into a Celsius or a blockfi or a nexo or anything else, you have to be aware of the risks. And just so happened, like, I don't think that this is going to happen to the block fies and the nexos of the world. We don't really know, to be honest. It just, it's, it's, it's, it's, it's, It just depends on how they manage the assets that you've deposited with them. And clearly, like, Celsius and the Alex and his team were taking, like, he was more D-Gen

Starting point is 00:49:36 with his depositors money than I am with my D-Gen portfolio that I have, my little side pocket where I'm playing around, like, just taking extreme crazy risks that I don't understand why anyone would take with depositors funds to generate interest. I don't think the blockfires of the world in the nexus are doing this, but the point is we don't really know. That's the point. With Defi, you know it's transparent, it's on chain, you can see what the risks are. That's why we're advocates of defy. Also, like, you know, centralized lending has a place, certainly, but I think we deserve more transparency and probably, and this might be unpopular with some, more regulation on the central, because if there is

Starting point is 00:50:15 centralized trusted third parties, we need some transparency. And if they won't provide it on their own as part of the free market, right? We need the regulators to step in, right? This is a place for right. But what I'm worried about, of course, is as always, is, you know, this all gets swept under. I saw some forms on, on Reddit and such when people are saying, oh, all the defy advocates, look what just happened to Celsius. I'm like, that wasn't defy. Stop. Don't get me wrong. We get hacked. There are bridge attacks. They're like multi-sig problems, but like, not this one, though. Not this one, all right? And transparency is not a problem with defy constructed decentralized finance.

Starting point is 00:50:53 All right? We've got that one locked down. So anyway, how does this resolve? It's a sad story right now. I don't think it's the end for, if you are deposited in Celsius, you have your funds in, just stay tuned, all right?

Starting point is 00:51:06 I don't think this is a terrorist situation where, you know, everything's gone to zero and you lose everything. I'm sure they are underwater, probably at some degree, with their collateral, but some of these assets are like staked and just being held. You can't withdraw it,

Starting point is 00:51:21 because it's staked inside of Ethan, withdrawals aren't enabled on the beacon chain yet. I do expect depositors to get at least some of their money back. Maybe the vast majority of it, maybe 80 to 90%. This is a hope that I have, but the proceedings are going to, like it's probably going to go to bankruptcy court

Starting point is 00:51:36 or somebody could step in. And it appears like NXO is another centralized lending company that's actually stepped in and offered to buy Celsius. So that might come about to you. Anyway, hope is not lost. Not by Celsius, but by Celsius's distressed assets. So take their illiquid assets off their hands and give them liquid assets so they can resume deposits, which, again, like some people, like yield farming is scary. Some people don't have enough money to pay for gas prices. There's a place for CFi lending. And there are good CFi lenders and there are bad CFi lenders. And after crypto has an 80% drawdown and NXO has the capital to buy out Celsius distress assets, I think you can tell which one is the responsible centralized defy app here that has the funds to backup their users deposits. So pretty Chad moved by NXO. It would be interesting if Celsius basically does like bent the knee and it's like, okay, competitor, here is our assets at a steep distount

Starting point is 00:52:37 because you are responsible with your funds. Do you know another fun fact, David? Yeah, I'm ready for it. I have a little bit of funds in Celsius. No way. Yeah. So as part of that, like just a very little, right so as part of you know bankless journey and going like talking about centralized protocols and all of these things reviewing blockfi and nexo I have a little bit of funds in all of them where I've just kind of parked it to test it

Starting point is 00:53:00 and like you gotta try see which one fails for things I guess so I don't know if I'm getting my eat back Alex and Celsius nexto well done nextos the winner yeah it's a little bit I'm not worried at all about it but

Starting point is 00:53:13 but you know I'm right there with you guys if you're if you're in Celsius. I can't wait for the breaking co-founder of bankless. I also have some funds in BlockFi full disclosure, right? It's like I, you know, it's definitely far more in D-Fi, but I'd like to use everything. Some place that you don't have your funds, Ryan, is with three-eros capital. Also caught, because they don't do that. Oh, I know that one. Okay. You know, I have nothing in three-hours capital. What happened to them? Yeah. So, prominent crypto fund three-erros Capital is facing possible insolvency after occurring at least $400 million in liquidations,

Starting point is 00:53:50 Coin desk reports. So a very useful thread got put together by Danny 8 BTC. So we're going to go through that thread because, Ryan, I did not have Three Arrow's Capital insolvency on my bear market bingo card. I thought they were extremely capitalized. For people who don't know who Three Ars Capital is, okay, these are like the legend, like these are like the Chad's. Like Chad Legends, yeah. The bull market, right? The biggest fun. held in the highest esteem, like the biggest whales on the planet. Not necessarily like high respect

Starting point is 00:54:20 by everyone. It depends who you talk to. Not in our, like not in kind of the settler, builder, holder class, but definitely among the traders. Yeah, they're big traders. Traders think they're chads and the long term people kind of

Starting point is 00:54:34 are frustrated by their constant rotations. Exactly. So that's the context. These guys are a big deal. A lot of money. So, Dave, TTC, he puts a thread together and he goes, here's what happened between Three Ro's Capital and what we know so far. From November 2020,

Starting point is 00:54:48 we entered, and so this is an individual that has a relationship with Three Ro's Capital. From November 2020, we entered an agreement with Free Aros Capital in which we would pay them a fee to use, yeah, to use their trading accounts. As a Delta neutral market maker in the crypto markets, we are very sensitive to trading fees when you're trading at nine figures U.S.E per day, even a one BIP on $100 million is $10,000. If you're doing that every single day, it adds up very quickly. So our agreement with them was, we withdraw whenever we want. A hundred percent of the P&L belongs to us. They are to never move our funds out without permission because it increases the risk of our positions getting liquidated. And in return, we pay them fees for

Starting point is 00:55:25 their service. This was a mutually beneficial relationship over a year and a half. We have known them since 2018, thought they were competent and didn't think that they would be degen enough to lose billions and not employ basic risk management. Wow. You hear that? Oof. On June 12th, with a market dropping and needing some funds from the account for our positions on other exchanges, we asked for a withdrawal from the ops team, which was honored, the operations team, which was honored. On June 13th, with the continuation of the drop, we asked for a bigger withdrawal. There was no reply, but we didn't think much of it at the time. After a while, the market stabilized, so we just no longer needed the funds. We thought maybe they were just busy. Turns out they were just busy.

Starting point is 00:56:04 Fast forward to, well, not just busy. They were busy, very, very busy. Fast forward to 24 hours ago, this came out a couple days ago, or yesterday actually. Our fund monitoring script noticed that $1 million was missing from our accounts with them. We reached out to Kyle Davies, one of the two co-founders of Capital, and the operations team on Telegram about the missing funds, no replies. We tried calling them. They were online because you can see the little green dot in Telegram, but they did not pick up. Then our traders noticed that there were a few rumors circulating on Twitter

Starting point is 00:56:34 about speculating on Three Ars Capital Insolvency. Since we were directly involved, we felt the need. to tell the world about what had occurred and gauge the extent of the three arrows capital contagion. A lot of people have reached out about what they know, many of whom have direct relationships with three errors capital as well. What we learned is that they were leveraged long everywhere and were getting margin called. Instead of answering the margin calls, they ghosted everyone. The platforms had no choice but to liquidate their positions, causing the markets to dump further. However, they still have assets on a number of platforms. You know who you are in

Starting point is 00:57:08 parentheses, we call for you to freeze their assets so that three arrows capital, to those that three arrows capital owes money can be paid back in the future after legal proceedings for what it's worth, for the most part. They aren't speculating with clients' money like Celsius was, maybe a threat another day about our dealings with them in 2019. However, they did use our funds a million dollars to answer their margin calls. So three hours capital use this trading from funds to answer their margin calls. Losing a bet is one thing, but at least being honorable and not dragging others into your bets who have nothing to do with it is another. Certainly don't ghost on everyone since potentially they could have helped you. Oof. Oof. And then of course, Suu

Starting point is 00:57:49 from Three O's Capital put out a single tweet. After people notice their complete silence on Twitter, which is generally silence on Twitter is the sign of somebody's got their tail between their legs. Suu tweets out, we are in the process of communication, communicating with relevant parties and are fully committed to working this out. No context about like that. So assuming that other people the context, the people who are working with three rows capital totally knows the context. And so, yeah, confirmed three errors capital down probably the baddest out of anyone at the point. At the peak of the market, Ryan, no one really knows this number for verified fact, but the highest number I've heard is that at the peak of the market, when three errors capital was up the

Starting point is 00:58:28 most, they had $18 billion. Wow. So they are closer to like maybe below half a billion dollars at this point in time. So imagine losing like almost $18 billion. Really? Like some of these numbers are speculation. We're not entirely sure. But like these definitely the order of magnitude for sure.

Starting point is 00:58:47 What's crazy about the story here, David, is so we've seen an algos stable coin, a Dgen Algo stable coin kind of backed by nothing, just, you know, meme potential, die. We saw Celsius, which is basically gambling client deposits on DGN defy yield activities. We saw that die. And we see three arrows capital. likely insolvent due to leverage, due to margin, right? It just seems like this bare market, and back to Spencer Noon's tweet,

Starting point is 00:59:15 and this cascade of liquidations that we've seen and this very harsh dip has been caused by, like, things that are preventable? Like, you don't have to go build a $15 billion algo stable coin that's backed by nothing, just memes and promises. You don't have to take out margin the way Three Arrow's Capital did.

Starting point is 00:59:34 You don't have to go DGEN on, depositors funds in order to juice your yields. That's called being greedy. That's called being irresponsible. That's called being like diving into the risk pool all the way to the bottom. It's not like what's happening is some of these companies, these firms are just living with the consequences of this. Now I think like Celsius and Terra are probably the most egregious because retail gets

Starting point is 01:00:00 caught left holding the bag. I'm talking about people who should like didn't know better and they should. have and they learned a very harsh lesson through this exercise. The people that regulators protect. Right, right. This is a take from Robert Leshner. I'll read this out. I became a defy founder of compound, of course, a defy protocol.

Starting point is 01:00:19 I became a defy founder in order to create a more transparent, autonomous, and safer financial system. Watching the implosion of U.S. T. Celsius, three hours capital, and more, all of which are opaque and trust-based reaffirms the need for decentralized finance. than ever. Bolded that. Decentralized finance more than ever. And this is back to the theme of the episode, David, is like,

Starting point is 01:00:43 C-Fi down bad, defy holding up. Just fine. The protocols, I mean, sure the tokens are down bad too, but the protocols are healthy and fine and collecting a ton of fees. So, again, C-Fi liquidated. Defy, orderly and efficient. This was a great meme. I'm pretty sure you put this one together, Ryan.

Starting point is 01:01:02 This is the Reaper coming to knock on the door meme, where it's got three doors. already opened up and there's just blood flowing out. The first one was Luna. The second one was Celsius. The third is three hours capital. The next, the door that the Reaper's knocking on right now is Tron. And the caption is, don't answer the door, Justin, Justin's son of Tron. And the reason why I'm pretty sure you put Tron here on the door ride is because Tron is copying the Algo stable coin model of Luna. Yes. Which is ridiculous because it went to zero. Just like a couple weeks before Luna imploded and Justin's son and Tron

Starting point is 01:01:38 decide to duplicate it to pump the price of Tron, right? Some people were mad at this meme from Bankless, but we decided not to take it down because they were mad. They said it was... It's a great tweet. They said it was insensitive, okay? You know what's insensitive, though? When people like Luna, like Doe Kwan, like Celsius,

Starting point is 01:01:54 like Three Hours Capital, took ludicrous risks with investors' money because they were short-term and greedy. That's ludicrous. Not this meme. We're just trying to like warn people. about this, the risks of centralization, the tradeoffs that you're making when you deposit into black boxes that you don't fully understand, I think it's a good lesson for the crypto space,

Starting point is 01:02:15 but there might be some other shoes to drop before we're done. And this is my final tweet on this subject, I guess, or final thought on it is a bunch of people got dumb and greedy during the bear market, the bull market and are being liquidated now. This isn't the end of crypto. This is how crypto gets healthy, okay? That's exactly right. This is what interest rates do. They burned the brush so that we can rebuild. So, like, Terra was never going to be long-term sustainable. It collapses the first moment that interest rates go up. Three hours capital, levered to the absolute tits, was never going to work.

Starting point is 01:02:49 Sorry for the word. It was never going to work with high interest rates. All the people that are getting liquidated because of high interest rates, we are returning to fundamentals. This is what bear markets do. We go back to the fundamentals. We go back down to the basement, and we rebuild the foundation stronger and stronger and stronger every single time. There we go. There we go. Guys, we're going to burn through this too.

Starting point is 01:03:09 There have been some layoffs in crypto. That's our third story. Let's talk about a few Coinbase. They laid off 18%. That's a fifth of their staff. Crypto.com, 5% of their workforce, another centralized exchange. BlockFi cutting 20%. That's another big move. And then in the midst of this, here's CZ from Binance, another crypto bank, let me remind you, but one that is in a pretty cash strong position, I say. CZ tweets this out. It was not easy saying no to the Super Bowl ad, stadium naming rights, large sponsored deals a few months ago, but we did flexing on the other centralized exchanges. And he's saying, today we are hiring 2,000 open positions for Binance. So, you know the funny story about this tweet, Ryan? What? Is it this image? Good job. Good job,

Starting point is 01:03:57 C.C. I'll give you your praise for being responsible and an opening position. Wait, responsible. We don't know that. But like, we don't know. We don't know. We've got some money. We know that. We know that. Yeah. Uh-huh. And so, like, for the podcast listeners, there's this photo of CZ in a blue button up shirt reaching out his hand to shake your hand with a tag we're hiring. I want to work there.

Starting point is 01:04:14 It looks very much like a stock photo. You got a blurry background, very corporate. Like, you definitely know this. This is in Binance's offices. And so, like, people are like, what's up with this photo, dude? I remember, I think Mooney commented, like, what happens if I shake that hand just because it's like, do you really want to shake that hand? And then Kobe, on.

Starting point is 01:04:33 Twitter, he finds the stock photo of this other guy who is not CZ, who is actually a stock photo. And so what they did is they just took a picture of CZ's face and photoshopped it onto a stock photo. This is absolutely nuts. Oh my God. I love crypto. Was this intentional? I don't know, man. It's just had to be intentional. It's good Photoshop work. Yeah, it's fantastic. So yeah, big layoffs in the crypto space, but I will remind people that these are the old institutions, not old, old crypto institutions, Coinbase has been around for a while, CoinCripto.com has been around for a while, BlockFi has been around for a while. They have already scaled up bigly. They've already hit their point of saturation of growth. And so when the market turns over, because they were already

Starting point is 01:05:21 saturated with growth, that actually does impact their ability to pay employees. That is, so really the playoffs are only coming from the big institutions that have been around for a while. There are newer startups that have a ton of cash, like we've been saying every single week, and those people are doing just fine. Interesting dichotomy in the crypto space right now. And of course, brings us to job time because like I said, there are people hiring jobs. And so this is coming at you every single week. If you have a job, if you're hiring in crypto, go to banklist.pallet.com slash drops and post your job because we're really good at getting people hired. And if you are looking to get hired in crypto and you don't believe me about how many

Starting point is 01:05:57 jobs there are, also go to banklist.pallet.com slash drops and look at all the jobs available to you. or go to the talent collective and post your resume so jobs can come hunting for you. The job, the labor market in crypto is hot. And so, yes, some parts of crypto are laying people off. Other parts of crypto are hiring big. Ryan, who's hiring this week? Let me know.

Starting point is 01:06:18 There's a lot from Alliance Dow this week, which is a really cool company. I've learned much more about recently. They're hiring a CTO at Alliance Dow. Also a software engineer, full stack, senior software engineer, full stack Alliance Dow, two of them. Executive assistant lines down. That's non-technical. A solidity engineer

Starting point is 01:06:36 that's very technical, otter space, and a front-end engineer at abstract ventures. We've got a founder and CEO. You can hire a founder at Boolean Labs. We've got a Twitter specialist at Bankless. Come make memes for us. Research engineer at blockchain capital, a tech lead at Swell Network,

Starting point is 01:06:52 solidity developer unlocked, senior product designer streams, a whole lot more. Go to bankless.com slash jobs. and also sign up so you get these via email. You don't just have to hear it from David and I, yelling at you to get a job in crypto every week. And just for the record, those are only like the first like 25 to 33% of jobs

Starting point is 01:07:13 that we read out on the jobs board. So there's so many more that you do not hear because you don't read them much. Just the tip of the iceberg. That's great. And so like I say, fundamentals are stronger than ever, and you can be a part of building that fundamental base so we can kick off the next bull mania so we can all get liquidated then too.

Starting point is 01:07:27 Coming up next and the second half of the show, second half, Jesus, so it's already a hour long. Optimism, Wintermute Hacker Update. There's an update there, some drama, good drama, good news this time. Jack Dorsey releases Web 5, skipping right over Web 4, okay, and also Coin Center suing the IRS. So interesting turn of events in many and many different parts of the crypto industry. We're going to get all to those stories and more right after we talk about some of these fantastic sponsors that make the show possible. There is a brand new staking feature in the Ledger Live app today.

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Starting point is 01:09:24 between Ethereum, Optimism, Arbitrum, or Boba networks. And Bankless Nation, we are back. Optimism Exploiter returns 90% of stolen tokens. And here's a quote from this article out of The Defiant. Over the past few hours, the address opened a line of communication with Wintermute on chain. That's pretty cool. And 17 million of the 20 million OP tokens have now been returned, said Optimism. The attacker has kept 2 million OP tokens as a bounty.

Starting point is 01:09:52 And the 1 million OPs by the Exploder were sent to Vitalik Buterin. So I'm assuming Vitalik just sent it to him. Oh, and when the Wintermute Optimism token hacker sent the tokens to Vitalik, he also included a message inside of the transaction. Fun fact, you can actually do that, by the way. Hello, Vitalik, I believe in you. Just want you just want to know your opinion on this. By the way, help to verify the return address, and I will return the remaining after you.

Starting point is 01:10:20 I don't know what that means. After you do that. After you, oh, okay. And hello, Wintermute. Sorry, I only have 18 million. and this is what I can return. Stay optimistic. Interesting hacker, I guess. So that was like a forced bounty. It's not like the optimism team gave him. He just kept two million as a bounty. Is that the case? I guess so. I guess the optimism's like, hey, we will not pursue charges if you just give us most of the stuff back.

Starting point is 01:10:45 I don't know. One million or two million tokens of reward is pretty damn good. Yeah, it's you keep 10%. That's the hacker fee. The white hat hacker fee? Black hat to white hat? I don't know what that is. I think that's gray. Yeah, that's a gray hat. That's pretty black, actually. That's pretty black. They sold the money. They just didn't steal all of it. They definitely stole the money.

Starting point is 01:11:05 That's crazy. All right, update with the Ethereum, a difficulty bomb. The difficulty bomb is being delayed for two months, and the difficulty bomb is coming at the end of August. What the difficulty bomb is, is it slows down Ethereum block times. It's been in Ethereum. Since day one, it's been the pressure, the fire under the butts of Ethereum developers

Starting point is 01:11:23 to make sure that proof of sake ultimately gets shipped. It's a part of a ritual to kick this thing back over and over and over again. They are kicking it back one last time for two months because we cannot ship the merge fast enough before the difficulty bomb came. So that means the overall a longer wait for the merge. So from August. It doesn't really matter because we're in a bear market anyways. August to when?

Starting point is 01:11:45 November? Is that when it's going to be pushed back to? Yeah. End of November, early October, I think. Yeah. Got it. Got it. Yeah.

Starting point is 01:11:52 I guess that will have some bearing, but probably no bearing really. And what's this other thing? Maker adding R-Eath as collateral? It's a decision? Yeah, yeah. This is really, really cool. So R-Eath from Rocket Pool, Rocket Pool's liquid-staked Eth. So when you deposit your ether into Rocket Pool, you'll get R-Eth back in return.

Starting point is 01:12:09 Same thing with Staked Eth out of Lido. But the difference between Lido and Rocket Pool is that you can also add your own node to the Rocket Pool network, which is the difference from Lido. There is a vote to add R-Eth as a collateral type in Maker-Dau, allowing you to deposit are eth and to maker Dow and borrow die against it. And so I'm a big fan of competition in the staked eth arena. Lido has a ton of staked eth and people are worried about how much supply that they have. And in order to get other staked eth alternatives, we need integrations into DFI. And this poll ended literally like 30 minutes ago at the time of recording, midday Thursday. And we have an

Starting point is 01:12:48 overwhelming yes, in 40,800 MKRs voting yes, 22,000 MKR tokens voting no. And so our Eth is going to be added as collateral in MakerDAO, probably with a really low collateralization ceiling, as in not that many dye, can be minted against our Eth to start. This is normal. But the idea is that this helps incur R.E.E.th liquidity. And so as a result of this, this is a liquidity mechanism for R.Eth. puts more demand for R.Eth. Creates more dye supply for Maker Dow, and ultimately will help R.Eth become more liquid. So bullish, Ryan, on the competition between staked ETH derivative tokens, I'm glad we have alternatives, because we need alternatives, because competition is always good for the consumer.

Starting point is 01:13:32 Congratulations to Rocket Pool, Dow for getting that done. Absolutely. And speaking of competition, it feels like centralized finance, traditional finances, and a competition for talent with defy. This is Uniswop Labs announcing that they are welcoming Stacey Cunningham, who is the former president of the New York Stock Exchange as an advice. to Uniswap Labs. So taking her from TradFi to Defi, and this is Hayden talking about that higher, it's critical that Defi learns from both the successes and failures of existing financial systems, former New York Stock Exchange President Stacey Cunning's experience and excitement,

Starting point is 01:14:11 expertise and excitement in the transformative potential of AMMs, part of why I'm so thrilled to welcome her as an advisor to Uniswap Labs, poaching from the New York Stock Exchange. That's what UniSwap is doing right now. Some people will call this like very corporate, though, David. What do you think of that sentiment? They'll be like, oh, we don't need trad-fi people. Like, you know, let's leave this in the hands of kind of the geeky crypto nerds who really care about this stuff.

Starting point is 01:14:38 What do you think? No, I think there's a case where Stacey Cunningham is a frontier enthusiast. And so she's leaving the non-frontier and she's going off onto the frontier. You can actually see her Twitter account there on the right. She says in her bio, markets, And I'm a fan of that sentiment. I'm also at markets enthusiast. So Stacey Cunningham, welcome to the frontier. And thanks for joining us. Absolutely. We, uh, we're going to take more from Trad 5 before this is all over. Um, speaking of frontier enthusiasts, Jim Carrey has now

Starting point is 01:15:10 minted his first NFT called Sunshower and he has sold as well. Speaking of things I did not have on my bingo cards. Yeah, Jim Carrey into NFTs. Um, Jim Carrey, of course, the actor. Um, and, uh, I don't know, Ace Ventura. This is like some of his famous, the mask. The mask. Yeah. The classic 90 stuff. And now he's getting into the NFT world. I love Bruce Almighty. Speaking of the NFT world, David, how's the NFT world doing? Like from a market's perspective, like board apes, crypto punks. We got to be down to you. I haven't even looked at the JPEG prices because I've been consumed by other things. What's that looking like? Yeah, I saw a report from the defiant that I thought was pretty useful with that reported some numbers of common NFTs markets.

Starting point is 01:15:52 So Board Ape Yacht Club down 14% to 76th. Cryptopunks up 3% to 48th. And that is the only NFT project that's up this week. Other Deeds down 35% to 2th. Moonbirds down 30% to 15.5th. Clone X down 34% to 8.2th. Izuki down 20% to 9.40. That's just this week, right?

Starting point is 01:16:14 Yeah, that's very recently, yeah. And so this definitely lends itself to the argument that NFTs are, leveraged eth if you believe that. But also, Cryptopunks, you know, return into fundamentals, right? Right guys? Wait, do you think, do you think, do you think that that's true? NFTs are just leveraged ETH? I guess it depends on the NFT, doesn't it? I definitely think so. My jury is still out for that, but this is something that Eric Connor chants, and I'm waiting to be convicted on that more.

Starting point is 01:16:45 I think you can make that case for something like nouns that has like actual eat backing in its treasury. Maybe that makes more sense. But like I know some people, a lot of people who've mentioned to me that they're, they're waiting for some generational lows to go buy some of these OG blue chip NFTs, like a crypto punk, you know, when the time is right. But I always wonder about them. I'm going to go like check back because you say that now, but when you are in the depth of the bear market and these NFTs are trading super low, will you have the guts to make those purchases at that point in time? Because that's where I, always falter because I'm like, it's just a JPEG. What do you think? It's, it's, when Bitcoin had

Starting point is 01:17:25 its first price run up and then crash, imagine being in the first Bitcoin bull run and then the first Bitcoin crash, there is no precedent for the Bitcoin ever coming back. And so the people that bought the first Bitcoin crash down to like, I don't know what it was, $100, they had to have just brains of steel, right? Because there's no guarantees that these things come back. NFTs are the same. There's no precedent for these NFTs ever coming back in price. Are NFTs part of the future or are they just a part of 2021? Or will it be a new crap, new crap, new crop of NFTs, right? That's the thing that's that people are. Is that a ferdin slip, Mr. Non-NFT? Maybe. Look, I got an NFT right behind me,

Starting point is 01:18:06 all right? This dude kneeling. That's an NFT, David. It's not a crypto punk. You, by the way, you're going to put your crypto punk up somewhere in your new place? Yeah, totally. As soon as I get my hands back on it. Yeah. You don't have your crypto punk? No, it's with all my other stuff. Oh, the image of your crypto punk. Yeah, the image, yeah. Oh, I have my crypto punk. Of course you do.

Starting point is 01:18:24 I can't hang my ERC 721 here. All right, leaning into what's next. Jack Dorsey's Bitcoin Venture TBD unveils new proposal for decentralized web platform. This caught crypto Twitter by storm and reignited the feud between Jack Dorsey and Dresen, Mark Andresen. And so Jack Dorsey releases, along with Square, releases Web 5? Web 5? Yeah, so here's the actual literal name for it, right? Yeah, Web 5, the decentralized web platform and new evolution of the web that enables

Starting point is 01:18:56 decentralized apps and protocols. So like sounding a lot like Defi, right? So here's the pitch deck, but Web 5 came from the math behind Web 2 plus Web 3 equals Web 5. Oh, I see that math. Right. Yeah, the math does check out. Yeah. I ran those numbers myself.

Starting point is 01:19:16 But really the TLDR here is Bitcoin plus decentralized identity. And so decentralized identity is a thing that's a conversation outside of crypto. Decentralized identity was a topic of conversation and topic of research and development before crypto was a thing. And many, many companies around the world have worked on decentralized identity. There's an identity consortium, identity standards, just like the World Wide Web Standards. This is a concept outside of crypto. So it's not native to crypto. decentralized identity paired really, really well with crypto. Our defy apps, our NFT orgs, our

Starting point is 01:19:51 Dow's are definitely bolstered and enabled in just great fashion by decentralized identity. Would you say this, David, crypto gives decentralized identity a use case? A huge use case. It's not exclusive to that. Decentralized identity works. It would be great for Web 2 because you can like, the meme of owning your own data and like charging Mark Zuckerberg for access in your data, that is the meme of decentralized identity, Ryan, not crypto. And so decentralized identity is useful for Web 2 and individual sovereignty aside from crypto. But when you marry Web 3, Jack Dorsey, with decentralized identity, you get an explosion. Like the Renaissance explosion that Josh Rosenthal leans into, like that's what we're talking about. Such cool stuff.

Starting point is 01:20:36 I think this is true. I think this is true of the money use case too, right? It's like Bitcoin is cool on its own, but when you have a non-sock, when you have a self-sovereign money inside of a decentralized financial system, then you actually give a use case for that money. And that's what Ethereum's doing, is giving a use case for ether. I think that the same is true of decentralized identity. It's just like, where do you use decentralized identity in the real world? I mean, I have a passport. I have a driver's license. I have a Gmail account. I have an email, like, I have a Facebook login, whatever. What do I need DID for? Well, you need it in order to, like, do pseudonymous governance in a Dow in order to actually vote in order to like actually participate in some of

Starting point is 01:21:16 these NFT communities. That's what you really need it in the metaverse, Ryan. The metaverse requires decentralized identity. Anyway, go on. What's Jack building here? Yeah. So this is why like this is in my mind a little bit skeuomorphic. You need smart contracts. You need a variety of tokens. You need metaverse real estate, metaverse land, all the metaverse things, metaverse games. And you need a decentralized identity in there to actually make a self-sovereign metaverse. But Jack is trying to just add an identity layer on top of Bitcoin, and he somehow claims that it's making defy, like, decentralized finance apps, et cetera, et cetera, once you add an identity to Bitcoin, I'm confused about that. But with like deids, decentralized identifiers and verifiable

Starting point is 01:22:02 credentials, which are terms you might have heard from our recent show with Evan McMullen and Vitalik Buteran, if you want to go down that rub, whole. They are applying these things to Bitcoin and the Bitcoin blockchain just to create a world of self-sovereign identity on a Bitcoin standard, which is confusing to me, although it is the appropriate use of dids and VCs. Again, not venture capitalists, verifiable credentials, but then it's like it into the Bitcoin blockchain, which is where I get confused. Yeah, so I kind of like it. I like the concept of having a self-sovereign identity. Now, whether it takes off, like, do you have the use cases to actually support it or not? It's like a jury's still out.

Starting point is 01:22:39 I like that they're pursuing this. The weird thing about it is kind of the wrapping of the whole thing, which is very anti-Web3. And very, I would say, like, it's wrapped in this, like, almost Bitcoin maximalists. Like, all we need is a Bitcoin chain for everything, sort of persona, which is just, like, doesn't make sense to me. And there was this back and forth that you mentioned between Mark Andreson, who came on, Bengals podcast recently made the case for Web 3. And Jack Dorsey, he says, this is Mark Andreessen.

Starting point is 01:23:06 Wait, what happened to Web 4? We skipped right to Web 5, right? And then Jack says, same thing that happened to Web 3. I know what he means by that. He means like it's irrelevant or going to fade to existence. Oh, I get it. It wasn't a thing in the first place, right? Which is, you know, definitely a Bitcoin maxi take.

Starting point is 01:23:24 And so, and the thing is, like, people started just making fun of this. Like, the joke was not accepted by the, like, not even the inside of crypto, but outside of crypto. Melissa Chen, she's actually somebody I respect because she reports on China. She's not really a crypto person. She's like a Chinese markets and commentator critical of China. And she goes, can we just go skip straight to Web 69? Like throwing a whole like farce out of the whole like Web 5 thing.

Starting point is 01:23:47 Did you see Snoop Dog suite? No. Oh, he tweeted something about getting ready to launch Web 8. He just tweets this the same day. It's got a lot of play. So the joke did not land at Jack Dorsey. So swinging to miss on that one. But the, yeah, it's interesting, right?

Starting point is 01:24:03 The technology's real. The technology's real. And I'm the joke is bad. I would actually love to have somebody from Web 5 or Jack Dorsey on bank list to explore this a little bit more as we're exploring like decentralized identity and verified credentials. David. Yeah, real quick here. Coin center suing the Treasury plus the IRS. Coin Center, our favorite crypto lobbying firm filed a lawsuit against the Treasury Department and the IRS claiming a crypto tax reporting requirement contained in the infamous infrastructure bill is unconstitutional.

Starting point is 01:24:32 The lawsuit claims in 2021, the Biden and Congress amended a little-known tax report. reporting mandate. If the amendment is allowed to go through, it will impose mass surveillance regime on ordinary Americans. The provision in the infrastructure bail regime last summer would require individuals and businesses receiving $10,000 or more in crypto to report that person's date of birth and social security number. So, Ryan, if I send you $10,000 of crypto, I have to report your birth date, your name, and your social security number, of which I do not know to the IRS and the Treasury. How do you feel about it if I did that? How would that make you feel? I think that would suck.

Starting point is 01:25:07 I think that is like completely needless, right? And do I have to do that if you send, if you hand me over $10,000 in cash? And this is very much surveillance state, like unnecessary. So I'm glad somebody is standing up to this. And this is why we need crypto lobbyists. Protect our liberties. $10,000 of your NFT sale? You got to report your counterparty to the IRS.

Starting point is 01:25:28 Like, like whatever. We can't AMLKYC the entire world here. We don't need to either. It's also not the point. Have it at the Fiat. Have it at the Fiat gateways, right? That's where we have it today. That's what makes sense.

Starting point is 01:25:41 Jeremy Aller just announced Eurocoin. So Jeremy Aller, of course, one of the main people behind Circle and USDC, which is a very popular centralized stable coin, now launching the Euro version of USDC. And what's cool about this is immediately, because it's Circle, they get Binance, BitStamp support, they get Defi support, they get custodian support, wallet support. kind of cool for euro to have its own stable coin. I'm also surprised it took this along. It feels like, you know, I should have already been there, but I guess U.S. dollars is still the World Reserve currency, so most people are holding it there.

Starting point is 01:26:17 David, we got some releases this week, too. What do we want to cover? Yeah, we got a vampire attack on Twitter. Lens. If you integrate your Lens protocol with your Twitter, you can automatically post your tweets to Lens Protocol with Lens Share. So there's a link in the show notes.

Starting point is 01:26:33 there is probably a Lens protocol token coming, Ryan. And so more footprints on Lens, the better. And so you can vampire attack Twitter by posting your tweets automatically to Lens and allowing people to consume your tweets on Lens Protocol. So there's that. Coming up next as well,

Starting point is 01:26:49 claim your hop tokens. Drop it like it's hop. You can now claim your hop tokens, ladies and gentlemen, there's a link in the show notes to get that done. And so that's an app.hop. com. Oh, Ryan, you're an Ethereum user. So you got a thousand hop tokens.

Starting point is 01:27:02 So congratulations on that. Oh, wow, that just loaded up. Cool. Yeah, you didn't even know that. And then last release of the week, OpenC has required Seaport. We covered this a couple weeks ago, and now that is finally being migrated over. So OpenC is now front end to just like the Seaport protocol. And so as a result of that, we are saving a bunch of money on gas because Seaport is just so much more gas-efficient than OpenC.

Starting point is 01:27:27 And so some of the details here, you can now make offers on items in an entire collection. or buy items with a specific attribute, which is the first of its kind for Ethereum NFT marketplaces. You can display floor prices and percent rarity by attribute now as well. Also, there are no set-up fees for Seaport accounts. When you made your first trade on OpenC,

Starting point is 01:27:46 you would have to initialize your account, which was an expensive gas-intensive endeavor. And so people are already saving money because they don't need to set up initialize their wallet on OpenC with Seaport, saving users at this current rate, $120 million a year in gas. And also, there's other features coming as well, like listing many NFTs in a single transaction

Starting point is 01:28:06 and creators also being able to define multiple payouts on OpenC. Basically, OpenC getting a lot more expressive, a lot more composable, doing a lot more cool things. There's speculation, Ryan, that OpenC will never do a token, probably, because they're probably just not the right vibe for them. But Seaport, a different entity might still do a token. I'm still kind of skeptical on that outcome, but the path is there for that. Interesting. Guys, we've got more coming up, including questions from the bankless community. We'll get to some of those.

Starting point is 01:28:35 And, of course, some hot takes from Twitter. Vitalik has his own take. We give you some takes about the bear markets. Make sure you guys like and subscribe. We'll be right back. But before we do, we want to thank the sponsors that made this episode possible. Arbitrum is an Ethereum layer two scaling solution that's going to completely change how we use Defi and NFTs. Over 300 projects have already deployed to Arbitram and a defy and NFT ecosystems are growing rapidly.

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Starting point is 01:30:15 ETH to centralized staking services or exchanges. Lido now supports Salana, Kusama, and Polygon staking. Whatever your preferred proof-of-stake asset is, Lido is here to take away the complexities of staking, while enabling you to get liquidity on your stake. If you want to stake your ETH, Soul, or Matic, and get liquidity on your stake, go to Lido.Fi to get started. That's L-I-D-O-F-I to get started. Hey, guys, we are back with a new segment

Starting point is 01:30:38 we call Questions from the Nation. Of course, to get your question in. You've got to follow us on Twitter and wait for this. Every Wednesday, sometimes Thursday, we post a question to the community, which is ask your question. Do you have a question for the weekly roll-up

Starting point is 01:30:51 and we try to answer some of the top questions? David, this was one of them. I'm going to read this out, and then why don't you take a shot at the answer here. This is from cloddy.eith, Christina Clotty won. Hi, Ryan and David. I would love to know your opinion about staking eth on merge via Lido. Do you still consider it safe or do you think that Lido

Starting point is 01:31:08 and so that STEth is in risk, thanks to the problems with Celsius? So this listener is wondering whether we think that STEath and Lido, that's the stake derivative ETH version on Lido, is in risk, Celsius and all of the turmoil. What do you think about this? The answer is very definitively, no. There's nothing wrong with Lido. This is only to do with Celsius. Staked Eth is trading at a discount to ETH right now because people like Celsius, entities like Celsius and other people that have used Steak ETH as collateral, had to sell their staked ETH on the market to get ETH

Starting point is 01:31:48 to pay back their collateral, but that has nothing to do with the actual protocol of Lido itself. it doesn't mean anything. So, like, they are completely immune from that. It's just market shenanigans that is a byproduct of the fact that ether on the beacon chain is locked for the foreseeable future. So people that needed liquidity had to sell their staked eth for a discount in order to access that liquidity. That does not mean anything about the solvency of Lido that is just completely irrelevant

Starting point is 01:32:14 and just not related to anything to do with Celsius. And so this is not only is this not a risk, this is an actual an opportunity. So some people are forced sellers of staked eath. I think the staked eath rate right now is something like 0.94 staked eath to eath when those things should be trading at one to one. And so you can actually take, if you have like 10th, for example,

Starting point is 01:32:34 and you take it to curve where you can get staked eith liquidity, you can turn 10th into something like 10.6th. And so if you have a bunch of ether and you're ready to be locked up until the withdrawals are enabled at an unknown time in the future, you can actually count,

Starting point is 01:32:50 you can actually get that arbitrage and turn your 10-Eth into like 10.6-Eth for free. You're basing that because every ST-Eth is redeemable for one Eth once withdrawals are enabled, right? So you're kind of basing it on that. You're saying like ST-Eth is depegged from the price of ETH, but if you're a long-term holder of ETH and you want steak D-Eth, you can just buy that and you make maybe like 5% more, 10% more

Starting point is 01:33:15 in terms of your ETH-holding at the end of this. The only person, the only people that are really affected by this ST-Eth-Depeg are some of the DGens, right? So if you have a collateralized loan, a synonym in STEth, because you're trying to get leverage on your stake deeth, you might want to check on that.

Starting point is 01:33:30 Like, that's not a good... But if you're just a Lido depositor, right, one STEth is still worth one Eth, and once the merge happens, once withdrawals are enabled, there should be no problem withdrawing that at this point in time. That's kind of good news, right?

Starting point is 01:33:45 Because people worry about that. If you have cash, this is an opportunity. So not only do you get like that 5, 6% premium because of the staked-to-eat-eat discount, you were also getting the staking yields on top of that as well. Yeah. So, bullish. How about this question, David? But note on that, actually, that doesn't mean you go and stake your eth in Lido.

Starting point is 01:34:04 You don't, because then you will get, if you take 10th and you go stake it in Lido, you will get 10 staked Eth in return, which are only worth 0.96. You should buy. You should buy staked Eth. You should not go stake your Eth with Lido. That's a different thing. You want to go buy it off the secondary market because that's where the discount is. Okay, there you go.

Starting point is 01:34:22 Dragondad.eath. One thing I'll say about that, though, is there might be some tax implications of doing that. Oh, yeah. I don't know. I don't know. Talk to your account as well. Thank you. Thank you.

Starting point is 01:34:30 No, no, this is financial advice. All right. Next question. Next question. What should retail investors be doing now? Hoddle, borrow dollars and buy. Sell and buy back later. So this is a hard question because it always depends on facts and circumstances.

Starting point is 01:34:47 Who you are, what your financial situation is, is. going to depend on what the answer is. And I don't know your financial situation, dragondad. But I do know, the only thing I do know is that ether at $1,100 is a better price than it was at $2,000 and $3,000 and $4,000. And so it really depends on what are your outstanding liabilities? How much you have to pay in rent? How much you have to pay for your mortgage? Do you have to pay for your kids' college? Do you have to pay for your food? What do you have to pay for? In my opinion, and it always will be, ether is the greatest asset of all time, and the world is just slow to figure that out. So if you have everything buttoned down, I am a big fan of dollar cost averaging because we are down so bad that we're probably not going to rocket up off of the ground.

Starting point is 01:35:36 I do not know the future, of course, but I would lean into you having long more time to dollar cost averaging into crypto rather than less. because when there's so much pain in the markets, things just don't recover instantly. And so, again, I don't know who you are. I don't know your financial situation. But I would say that you have time to make slow and conscious and calculated decisions. How do you feel about that answer, Ryan? Yeah, I think that's a great answer. And I'm going to be like to give the crypto dad answer that's going to work best for like 95% of people, right?

Starting point is 01:36:06 Which is like absolutely hold is the question. So hold, yes. Borrow dollars and buy. No. Do not do that. There are people that the answer of borrow dollars and buy, the answer to that question is yes. But it's not to the people that ask the question. It's people that know the already answer.

Starting point is 01:36:25 Just margin is just like, look at experienced three hours capital. The best crypto fund managers, hedge fund managers, they just got liquidated because of margin. All right? So borrow dollars and buy, no, 95% of people. If you're listening to this, you're probably one of them. sell and buy back in later. Also a no. That makes you a trader.

Starting point is 01:36:46 That makes you a trader. Are you a trader or are you just an investor? We've said this before. You got to pick your character class. And we're talking about the top of the episode, right? So like if you're in the acceptance phase, you're going to be tempted to like trade these dips, the ups and the downs. I think a lot of people will lose a lot of money doing that.

Starting point is 01:37:05 You're better off dollar cost averaging in, holding what you have at this point in time. None of this is financial advice. just our personal takes on it. This kind of thing probably works for the vast majority of bankless listeners. All right, David, let's get to some takes of the week. This is a hot identity take from none other than Vitalik. He's talking all of that identity now since he's come on the bankless podcast, you know, and this is a really interesting take.

Starting point is 01:37:29 What does he say? Yeah, he goes, please stop using real name to refer to your passport name. Your government doesn't get to define you who you really are. if you use a different name in most day-to-day interactions, that is your real name. Passport name, legal name, slave name, to be edgy, are all fine. And so basically, he's just saying, like, yeah, your government doesn't dictate what your name is. You dictate what your name is. Now, I so happen to have the same name that I have on my passport.

Starting point is 01:37:56 But if the government told me that my name was different, I would reject that. And that's basically what Vitalik here is saying. Yeah, I think that's a really interesting take. It just, I think it brings to light how. much we are, like we are in the water we swim and we don't even recognize there's water around us, right? Like, what is our name? Oh, that's the state issue. It's the thing on my birth certificate. It's the state issue's name. It's also the name that your parents gave you. True. Most of the time. True. But let's say, let's say the state changed my name,

Starting point is 01:38:26 but my parents didn't, right? And I didn't decide to. Then what is actually my name? A lot of us would default. Well, my real name is whatever it says on the birth certificate. Is that your real name? Wow, the nation state and our institutions have a lot of hidden force exertion on how they're controlling us. And this does bring up a new avenue for decentralized identity and who are you as a person. Well, maybe it's about who you decide to be. Maybe it's about what your consent and also the consent of your community. And maybe it doesn't have to be top-down nation-state pushed down to you.

Starting point is 01:39:04 Anyway, you know, just opening that. up as an avenue of thought. What is the source of truth of your name? Exactly. The nation state? Because right now we are in a, that is the actual source of truth. That is the paradigm.

Starting point is 01:39:15 In a decentralized identity paradigm, it's whatever you put down. Exactly right. Exactly right. Okay, so here are some related takes as well. And this is kind of the silver lining of the bear market that we've seen so far. And that's,

Starting point is 01:39:27 defy didn't break, David. This is the first take on that silver lining from you. What are you saying here? Yeah, I say, take note. Everything breaking right now is centralized. Meanwhile, defy is orderly and efficient. Defy, not C-Fi. Like I said at the beginning,

Starting point is 01:39:42 this is one of the best tests of D-Fi of all time. Billions of dollars getting liquidated. Gas fees were not that crazy. Gas fees were pretty reasonable. Everything got liquidated extremely efficiently, except for all the C-Fi companies. So if you're C-Fi, you're down bad. D-Fi is down-bad too, but at least D-Fi is orderly and efficient.

Starting point is 01:40:03 And it's the mandate of the SEC to have orderly and efficient markets. And so doing your job, SEC, we took care of it. Like, we don't need you anymore. Well, I do think this one is. That's not true. We do need you in some instances.

Starting point is 01:40:15 We need you where things are centralized, right? And I think a defy can be your best friend if you are a regulator because you get to right click, view source, what are, you know, what are the assets? What are they composed of? This is my take on the same theme. Two words Celsius and Luna had in common, trust me.

Starting point is 01:40:32 Right, right. Trust. For those that don't follow me on Twitter because they're not on Twitter, Ryan, can you tell them what my Twitter handle is? David is at trustless state. You've got to follow, okay? It's a great account. Tweet some good things sometimes here or there.

Starting point is 01:40:46 Sometimes not. Okay, trustless state, what did that come from? And I always wonder, David, I've never asked you this. I get the trustless part, right? It's obviously decentralized. It's the opposite of trust, trust me. It's, you know, trustless, no trust required. The state part.

Starting point is 01:41:01 Are you talking about the state machine? or are you talking about like nation state? Or is the answer to that question, yes. That's what you're about to tell me. Yeah, the answer is yes, brother. And did you plan that? 100% I did, yes. Well done then.

Starting point is 01:41:15 The state of being trustlessness and the nation state in the clouds is created out of a trustless paradigm. I created that Twitter handle in like 2018 when I barely understood crypto. And I'm actually like super, I'm super proud of that, like, that understanding of like very early my crypto. Here I am with my Twitter handle. It's just my slave name. My nation-state slave name, Brian S. Adams. You ought to get your Metaverse name, brother. I know, I know. I got to come up with that.

Starting point is 01:41:42 All right, what's this last take? I'm the same theme. Yeah, this last take is coming from the Twitter handle, which I'm not going to even try to pronounce, who says, On-Chane transparency is the biggest winner during the U.S. TELS. That's Terra, Celsius, three-euroz capital meltdowns. The parts we understand best are because of the blockchain data, and it gives incredibly valuable information to the market. Tradfi will never have this. Neener, Neener, Neer, Tradfi, you will never get this. You'll never get this. No, you won't, but come on over.

Starting point is 01:42:12 We'll hire you. We'll help you out a little bit. And the bare market's a good time to come over, even though you probably won't be listening to this during the bear market. David, in all of this, this entire episode has been a bear market episode. But what do you bullish on? Where's the silver lining for you? Well, Ryan, I am so glad that you asked,

Starting point is 01:42:29 because this week on bank lists, I put this article titled, eight projects that I'm bullish on in this bear market. And so I've literally listed these out, eight different projects that I think are both underreported, underrated, under-acknowledged. Some of you might know them, but many of them, I bet you don't. And these are projects that span the entire cryptosphere. So we got ETH staking technology in Oval Finance. We have bridging the infinite number of chains and infinite number of apps across the infinite

Starting point is 01:42:57 number of decks aggregators with Li-Fi. We got interest rate swap AMMs. We got Block Native. which is like predicting the future using the mempool. We got new money markets in Euler. We got Aztec, which is a privacy layer two that lets you use DFIOPs on the layer one. We got Tracer Dow, which is a derivatives meta protocol

Starting point is 01:43:14 and disco, which is decentralized identity for the data backpack for the Metaverse and the Reaverse. And I summarized all of these things into one great big article. And not only that, Ryan, I put in further resources for diving down the rabbit hole of every single one. If these have jobs, I put links to the things,

Starting point is 01:43:31 jobs that they are hiring. And I also put the win conditions for how each one of these projects can win and claim market share and mine share in the future. Is this what you wish someone did for you last bear market? A hundred percent, dude. All of the stubs like took the notes and were like, hey, go here, go here. Check this out. Right. This is literally eight different rabbit holes from across the crypto space. Defi apps, layer twos, cross-chain money markets, non-cry stuff at all. And so, yes. And the thing is like, I, okay, disclaimer. I'm going to investor in all of these. Pretty sure Ryan is too. But this is also why I know they're not going to rug me and they're not going to rug my readers or listeners who want trusted rabbit holes to go down.

Starting point is 01:44:11 And so you can go down this rabbit hole with trusting. With trusting there's not a trap at the bottom. Wait, wait, I thought you were trustless state. Who are we trusted here? Do you know what's cool about this though? All these things, when you say rabbit hole, you're not just talking about the project itself. You're talking about all of these are completely different categories. Right. Right. Bridges are going to be here. huge. So learn about Li-Fi, but then learn about hop, learn about all of the other bridging protocols. And actually, Li-Fi's an aggregator on top of that. So it's even another category. Tracer, this is on like arbitram, other layer twos, and it's a new spin on derivatives, like

Starting point is 01:44:48 permissionless derivatives. Oble, this is a shared secret validator type technology. It's going to help our protocols. Like each of these are categories of rabbit holes that you can go down that are like typified by these projects, but open up a new door for you to like new, new areas, new other projects to explore, new areas in, like the crypto space that you didn't already know. That's what's so cool about this. Yeah. And I had a ton of fun writing this piece. I actually put out a tweet saying, hey, if you think there are other rabbit holes to go down, let me know. I'll go and research that project. I think I'm going to turn this into a semi-reoccurring irregular because I can't make promises, but I'll keep on doing

Starting point is 01:45:25 stuff like this because rabbit holes are fun. And Ryan, we are in a build market. And for the crypto newbies who are trying to gain conviction. For them, we are in a research and development market. And hopefully resources like this can help those people gain the conviction that we have, Ryan. Ryan, what are you excited about? Look, man, I'm excited because we're going to make it. Notice I didn't say we're all going to make it because some people will quit. Like, the tourist leave, settlers stay. So I've never like, we're all going to make it's a nice thing to say. But the reality is like some of us will make it. Those that do are here, they have conviction. But like what I what I really mean is this feels a lot different than

Starting point is 01:46:05 2018 to me. Some people that's the number one question people ask of like those that were around in the last bear cycle is like oh is this 2018 how does this feel how does this compare to that? And here's the difference. In 2018 we didn't have product market fit in crypto or defy. Defi was actually nothing at that time. We had like maker maybe it kind of worked. We weren't sure though. We didn't have NFTs. Only on the downtrend. Yeah. Yeah, we barely had NFTs, right? No one was actually, like, using these. We had CryptoKitties and that wrecked the entire chain. Ethereum had no path to scalability or staking. There were ideas like plasma, state channels, no real path. Staking was distant. We didn't know how distant at the

Starting point is 01:46:47 time, but like there was no pending merge that was actually going to happen with a beacon chain that was live. In 2022, we have all of this. The difference here is we've been punched down by macro and self-inflicted leverage wounds. That's what you saw. I don't feel self-inflicted leverage wounds from three hours capital, by the way, just for the record. I feel like they inflicted that upon me. Well, okay, so maybe they inflicted that on themselves and like you're getting like, I don't know, the backdraft of that. The collateral damage of that. So in 2018, I was fearful. And you know why I was fearful, David? Because I wasn't actually sure we were going to make it at that time. Because we didn't have the hardest thing, which is like product market fit. We had ice

Starting point is 01:47:29 Are people going to come back after like these ICO things? And so I was a lot more fearful than I'm not now. Because now this is just a matter of macro. This is just a matter of like self-inflicted leverage. So they'll take some time to heal, but they will heal. Like we have product market fit now. And I'm not, I'm not concerned in the same way I was in 2018. In fact, I'm like, I'm like bullish going into this bear market.

Starting point is 01:47:55 So it's a totally different vibe and a totally different feel, at least for me. I don't know if you feel some of that, but... Yeah, you know, as a result of this tweet, Ryan, I think I'll stick around for the bear market. I convinced you? I think I'll stick around. Awesome, man. I'll see this again.

Starting point is 01:48:09 I'll see what happens on the other side. Let's see this again. What do we got? Memes of the week. What are we looking at? Memes of the week, this is life comes at you pretty fast, and this is the man triggering a dominoes within the dominoes get bigger and bigger and bigger and so the first domino is a bat in China.

Starting point is 01:48:24 And then the middle domino is, I'm worth $100 million dollars. And then the last domino is, I'm homeless. And, you know, good memes package up data pretty damn well. And this, what I hear is a bunch of whiplash. What I'll say back when I said, we did our bare market emergency live stream, I blame the Fed for just whiplashing this market around, like spraying money everywhere, say, hey, free money, like, don't worry about the pandemic. We're giving you free money. And then they raise interest rates, like, give that money back. And everyone was like, I spent it all. And

Starting point is 01:48:55 that's, and so, like, I blame the Fed. And so, yeah, if you are homeless, Sorry if you're homeless. Blame the Fed. This meme encapsulates the three segments here. We had COVID. We had like meme stocks. Money doesn't mean anything anymore. And now we're moving into like recession.

Starting point is 01:49:11 Hopefully not something worse. We just spread around that so fast. Look, here's another, another gift. We'll end with this one, the meme of the week. This is about transitory inflation. What are we looking at, David? Yeah. And so this is a bunch of people.

Starting point is 01:49:26 I think this must be like, I don't know, the Swips Alice or something. speaking English. Also the sound on this is really scary, which is why we're not playing it. But you can definitely tell that all these people are looking at something over the mountain. They look like they're at a ski resort. And then you see the snow coming in. And like, oh, wow, there's an avalanche happening over there on that mountain over there. And so they're all looking at this avalanche. And then they all, at the same time, realize that they are about to get blasted by this avalanche because it's coming for them.

Starting point is 01:49:49 And it took them like a really long time to realize that they were about to get blasted by this avalanche. And so the caption is, is that inflation? And then, yes. And it's just, it's just transitory. We won't even notice. And then in the last frame, they are just completely blasted by snow. Yeah. That's kind of how it felt. Like we got blasted by an entire avalanche, inflation not so transitory. Guys, we're going to get through this. This has been our bare market episode. Hopefully the worst down bad week of the year. But as always, got to end with this. None of this has been financial advice. Of course, Bitcoin and Eath are risky. As we've said before, you could lose what you put in. But we are headed west. This is the front.

Starting point is 01:50:29 We're glad it's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

Bankless - ROLLUP: Crypto Crash | Celsius Insolvent? | 3AC Su Zhu | Interest Rate Hike | Jack Dorsey Web5

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