Unchained - 2024 Was Full of Fascinating Crypto News. Here Are Its Top Moments - Ep. 757

Starting point is 00:00:00 Hey, all, happy new year. Before we begin, I just want to note that I'm not on camera because you may recall that I fell and hit my head. And so finished off the year with a black eye and very nasty looking marks on my forehead. And I'm actually recording this the same day that I recorded this one episode. So I don't look any different from that day, which is another day when I refused to memorialize my beaten up face. Now, on to the year and review episode. I'm your host Laura Shin, and this is the December 31st, 2024 episode of Unchained. Pocodot is the original and leading layer zero blockchain with over 2,000 plus developers, and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem, making it faster, more secure, and adaptable. Perfect for GameFi and DFi to build, grow, and scale. Join the community at Pocodot.network slash ecosystem. system slash community. Robin Hood wallet, Robin Hood's Defy mobile app, takes no fees on same

Starting point is 00:01:08 chain and cross-chain swaps. Use Arbitrum's layer two to swap with low network fees in just a few taps. Other fees may apply. Download on iOS or Android today. 2024 was a year of huge developments in the world of crypto. After an arbitrarily and capriciously long wait, spot Bitcoin ETFs finally launched in the U.S. Ethereum upgrades slashed fees and open new possibilities, and meme coins went, shall we say, bonkers. Traditional finance made bold moves with BlackRock dipping its toes in a defy and combined crypto ETFs got approved. Meanwhile, regulatory battles heated up.

Starting point is 00:01:50 The SEC sued Uniswap. Ethereum faced scrutiny over its proof-of-stakes system, and the industry watched as San Benkman-Fried was sentenced to 25 years in prison. The political stage played a big role as well. Donald Trump won the presidency after declaring himself the first crypto candidate and after selecting the first bitcoiner vice president. Cryptopolitical packs fueled a crypto-friendly sweep of Congress and everyone breathlessly watched every vicissitude on polling market.

Starting point is 00:02:21 Discussions about a U.S. Bitcoin Reserve and new laws to support blockchain technology gained momentum, all while the post-election markets surged. In this episode, we're taking you on a journey through the defining moments of 2024 as they happened. You'll hear the voices of industry leaders, analysts, and insiders through clips from Unchained and Bits and Bips. Together, we'll explore the highs, the lows, and everything in between, putting this year's most important stories into context. So let's start at the beginning. Back in January, when the Crypto World experienced a long-awaited breakthrough. The year kicked off with what was the arguably most important news of the year for the asset class.

Starting point is 00:03:04 On January 15th, spot Bitcoin ETFs began trading in the U.S. after more than a decade of waiting. After the first week of trading, Matt Hogan of Bitwise said this. This has been a historic week for Bitcoin. I think any way you look at this week, it has to be a huge success. If you look at it from the perspective of investors, between last week and this week, they've been able to reduce the fees they pay for accessing crypto in a fund structure by 80 to 90%. That's a massive win. If you look at it from people who haven't yet invested, it's now gotten so much easier for mainstream Americans to access Bitcoin in a wrapper that they're familiar with.

Starting point is 00:03:46 And if you look at it from Bitcoin's perspective, from my point of view, this is a necessary milestone on the path on which, to where Bitcoin is going. This opens up the market, gives us more regulatory certainty, brings in new investors, and will introduce a huge swath of people to Bitcoin for the first time. So I think it's been a fantastic week. Then in March, Ethereum underwent a major upgrade called Den Koon, which was specifically designed to cut fees on layer twos, and the results were immediate. Fees dropped dramatically and usage skyrocketed. Jesse Pollock, the creator of base, which became one of the most successful layer twos

Starting point is 00:04:25 this year, shared his insights on how this upgrade reshaped the ecosystem. So we didn't really know what to expect going in. We'd been pretty conservative, you know, saying that we expected, you know, two to five X reductions in fees, but we didn't want to give an exact number. Since we went live, we've seen a fair amount of variation. We saw some times where we've seen thousand X reductions in fees or 500 to 1,000 X reductions in fees, subset transactions. We've also seen actually more demand. start to pick up on base. So the average amount of transactions per second right now,

Starting point is 00:05:00 I just looked at it, is about 5x where we were before the fork, because more people are able to transact at these lows fees. That's again, kind of driven up the price a little bit. And so I think right now we're seeing average fees in the like one to three cent range, which is still like a 10 to 20x reduction. But I think what we're going to see over the next couple weeks is that it's going to stabilize at kind of this demand point. And then we're going to see more and more people start to come on chain.

Starting point is 00:05:25 We're going to see more and more transactions. By March, spot Bitcoin ETFs had already exceeded analyst's expectations, achieving milestones in just a few months that took gold ETFs years. Eric Balchunas of Bloomberg Intelligence explained how this incredible momentum showed the impact of crypto ETFs. What makes this unique is that it happened right off the bat. The only possible precedent is gold. But gold ETFs took them three years, basically,

Starting point is 00:05:54 to get where we're where we are now with the Bitcoin ETFs in seven weeks. Something like that. It's something like that. It's ballpark three to seven weeks. And that is wild. And even if you extract take out GBT's outflows, that number is accurate, by the way. If you add in GBTC, you get to 53 billion in assets. That I think gold probably took five, six years to get there. So in fact, the Bitcoin. Bitcoin ETFs are already, I think, like 55% as much as gold. Right? So they're on a pace to pass gold like by July.

Starting point is 00:06:32 This is crazy. I thought it would take three, four, five years. So everything, it's interesting. The fee war that happened in the two days before they launched, I always said that was like two years of fee war in two days. I feel like this has been like a year or two of flows and volume smashed into like two months. And it's interesting because I do find that time is different in crypto. And I almost feel like ETFs are getting sucked into the crypto time thing, like that planet on interstellar where like

Starting point is 00:07:06 one minute is like two years on Earth or whatever. I honestly feel like, so I'm, what is happening here is almost more consistent with the way crypto moves than the way a typical ETF moves. So I think it's interesting. And that's another reason it's fascinating is because these are these are two It's colliding. It's tradfying crypto. And they're each having an effect on each other. Also in March, I interviewed Kyle Davies, co-founder of the now infamous Three Arrow's Capital. The interview turned out to be one of the most talked about of the year. Despite the hedge fund's catastrophic $3 billion collapse, Kyle offered no apologies, instead referring to himself as the Lloyd Blank Fine of Crypto and offering up some explanations for three Csys collapse that

Starting point is 00:07:51 had some people's jaws dropping. At the beginning of the show, I referenced how there's largely negative sentiment against you from the crypto community. And what, you know, I feel like I've seen a lot is this notion that you haven't really expressed remorse for what happened. Would you agree with that? I mean, am I sorry for a company going bankrupt? No. Like companies go bankrupt all that, every company goes bankrupt, right? It's how, it's what you do about it and how you like build and what you do about it, right? And we're definitely trying our best. But yeah, like, I mean, I soon spoken about this as well. Like, we're still young. We still think we can add value in various ways. Maybe we, maybe at a middle one we can just even tell the next three arrows how to do

Starting point is 00:08:39 things better when they go bankrupt, because they will. And then we need to, you know, find the right way to do things. But, but, but yeah, like, and by the way, I have to say, like, like, Like, the people that are negative are largely people that are not affected, like Mike Duttonus, for example. Or, you know, or Nick Carter, for example. Like, this guy, how many times have I invited him to an open, frank conversation? And he keeps starting it down. He's, like, scared to talk to me or something. But, like, he, we, our biggest critics are either in jail, SBF, in massive litigation, DCG, with the New York Attorney General.

Starting point is 00:09:18 That's serious. or unaffected, like Nick Carter. I think he was just pissed off that I called him out for Block 5. But yeah, like, I just find it absurd. Like, if you want to bring on Nick on here or find a neutral place, like, I'll talk to the guy. I've offered many times to just like to beat him, but he's scared. On March 20th, Black Rock, the world's leading asset management firm,

Starting point is 00:09:46 announced the launch of a tokenized investment fund. the Black Rock USDA Institutional Digital Liquidity Biddle Fund on the Ethereum blockchain, developed in collaboration with Securitize. Biddle has grown from zero to over $500 million in AOM since its inception. Why did this giant decide to make such a move? Carlos Domingo, CEO of Securitize, weighed in on unchained. Look, the target of this is crypto companies. So we're looking at doing two things with these.

Starting point is 00:10:16 One is obviously treasury management. So crypto companies have some of them very large treasuries, some of them they keep them on their own token, some of them they keep it in stable coins, some of them do have access to Tyshal bank accounts, but obviously it's a clanky interface. So that's one use case, right, anything at all the Dow's, the foundations, etc, that they can move part of the treasury to an on-chain, money market fund, daily liquidity, and then also managed by the largest management in the world. so you don't have any counterpart to risk towards any random crypto company that you give me the money to manage, right?

Starting point is 00:10:54 Just days later, on March 28th, Sam Bingman Fried was sentenced to 25 years in prison, closing the chapter on one of the largest fraud cases in history. Crypto lawyer Sam Enzer shared insights into why the judge struck a balance between a harsh sentence and the possibility of redemption. The government sought a sentence of 40 to 50 years. in doing that, they are implicitly acknowledging that a life sentence is not appropriate. Because here, the maximum sentence was north of 100 years. The guidelines were stratospheric. And the government could have said max this guy out, put him away for as long as possible. He did not do that.

Starting point is 00:11:36 And as soon as they did that, you are now in a terrain where the defense is saying, yeah, it's got to be prison time, but it should be six and a half. the government's saying he's got to do more than that should be 40 to 50. If you look at the midpoint, 25 is roughly in the middle. And so it's almost like a reasonable balancing of these various interests. Judge Kaplan is basically saying that as bad as this was, and as important as it is, that it be a long sentence to deter others and send the right message. We also have to acknowledge as a society that prison,

Starting point is 00:12:16 is supposed to rehabilitate, except in rare cases. We're supposed to acknowledge that somebody is capable of being redeemed, and we have to give them some light at the end of the tunnel, both to incentivize them to really take that rehabilitation work seriously, and so that if they do get out, hopefully at an age when they've learned something, there is some life there at the end of the road for them to, come back into society. In April, Bitcoin's fourth halving hilariously coincided with April 20th or 420.

Starting point is 00:12:56 On Enshade, I had a fun discussion with Arthur Hayes and Wilk Lamenti about whether this cycle would be different from past ones and the insights were fascinating. There was a tweet by an infallaravicon. He said, quote, the narrative for this cycle is, quote, this will be the last cycle. So, Arthur, you were kind of laughing about that. Why don't we just discuss it seriously? Like, Will, you know, what made you say that? And I mean, I guess you kind of elaborated on what it might look like.

Starting point is 00:13:24 But yeah, I'm curious just to hear your thoughts, both of you. Yeah, to be clear, I'm not saying that like we're going to go up only and never have any drawdowns, right? Like, I just think the drawdowns will probably be more muted, like maybe, you know, 30, 40, 50 percent. But also I think the upside vol will be capped as well. But I think the Kwin will, you know, trade more with this kind of general upwards grind up into the right because of the monetary debasement over time. Arthur. Yeah, I mean, I think that maybe there's no such thing as like a permanent plateau, right? I'm not fucking Irving Fisher in 1929 thinking that stocks are never going to go down, right? That's just dumb. Stuff goes up and down we're humans. We over, we over promise the future and then it gets there and it's kind of like blah, blah, blah, right? So I think maybe the cycle is just longer and the upside is just higher. But there will be an 85, 90% drawdown in crypto. I am very confident in that. We might not adhere to this four-year cycle because, I think we're in the moment where the global investor class and the proletariat loses faith in this thing called Keynesian economics and deficit financing.

Starting point is 00:14:27 And so if we have a revolt of the bond market saying, fuck, I don't want to own JGBs, treasuries, you know, buns, all these bonds of these bankrupt governments, and here's this digital alternative, we could see a very explosive upside cycle. and then maybe if we throw all the baby boomers out of power around the world, the younger generation is like, well, why am I paying for health care for a bunch of Muppets? Let's reorganize a system and then we might seem some more responsible governance in terms of spending. And then at that point, maybe a government bond is a better bet than owning Bitcoin on a forward-looking basis. So I think things can change.

Starting point is 00:15:05 We obviously think that the same crop of idiots who run the world, they're going to continue doing so. And the same sort of deficit financing policies are going to prevail. for the foreseeable future, but that's not going to be the case in five years' time. Things are different. So I think that would be my caveat to the super cycle. And I hope the more people who say super cycle, the more I'll be ready to start dumping bags. But I don't think they're going to yet. By May, a new trend had taken it were crypto, mean coins.

Starting point is 00:15:33 Mean coins became a key driver for Salonah success in 2024 as retail traders sought high risk, high reward plays. and some explained why this trend was so explosive. I saw Pepe go from zero to $2 billion in like a month. It's like, okay, now that's possible for these other memes that start super low bals. And for people who are trading with smaller portfolios, it's like that's their whole thing. They're trying to hit 100x, like 1,000x on these coins. But you can't really do that on coins that are already at a billion, 10 billion market cap.

Starting point is 00:16:05 Whereas if you're betting on memes, they're obviously a lot riskier than everything else in crypto because they're a lot smaller and can go to zero a lot easier, but you also have that upside of being able to hit a thousand X, like, on those coins. So I just think, I'm thinking on how retail is going to trade this market. It's like, makes a ton of sense to me that that continues to be a trend. Then came in unexpected shock. Just when everyone thought that spot Ether ETS were going to be denied, the SEC ended up approving them. Here's why Bloomberg's Eric Balchunis and Bitwises Matt Hogan found this to be such a shocking reversal. I'd nearly feel out of my chair when I heard about it,

Starting point is 00:16:45 slightly before the news broke. And at first I was like, how does it make sense? Because everybody you talked to said there was no comments from the SEC. But I have to think that maybe some of this was political. Clearly, this issue is getting away from one party. And maybe they were like, look, this is going to be a huge story. If it's denied, it'll have legs. big asset managers involved and potentially they're thinking that we can't be seen as this anti-crypto.

Starting point is 00:17:15 That's my thesis. There has been a complete sea change in Washington around crypto. I think the reason for it is that traditional Wall Street wants in on the money that crypto is making. If you remember shortly after the Bitcoin ETF launch, a panoply of Wall Street lobbying organizations, the ABA and others put out a letter requesting the ability to enter the custody space. I think they saw the amount of money that could be made in custody and could be made in stable coins. And then BlackRock came in. The ETFs were a success.

Starting point is 00:17:49 Tether is making more money than Goldman Sachs. And now you have Wall Street wanting to get in on that. And it's no coincidence that Schumer is located in New York, that the financial services industry is the number one donor to his campaign. I just think there's this unusual, uneasy alliance that emerged between crypto and traditional Wall Street that is going to lift the industry higher. Also, on Bits and Bips, James Seaford had this theory. There was this alternate theory that I think has more credence now. It might not necessarily have been the Biden admin that fully pushed this. So the commission is usually two Dems, two Republicans, and then whatever president is in power gets to choose.

Starting point is 00:18:32 the chairman of the SEC. In this case, it's Gensler, Democrat. So theoretically, he was a swing vote in Bitcoin ETFs. It's not necessarily true 100% that he was a swing vote here. So theoretically, Crenshaw was never going to vote again. She wrote a dissent letter. But Liz Zaraga, who is another, the other Democratic commissioner, did not join her in her dissent of those Bitcoin ETF. She voted, he voted against it, but he didn't join her in her dissent letter. What's interesting, what I had heard from other people was that the theory was that this wasn't necessarily from the Biden admin. The Biden admin may have rolled over a little bit, but this could have come from Liz Zaraga, who spent, I don't even know, a very long time working. She used to be Nancy Pelosi's

Starting point is 00:19:10 right-hand man. And a lot of what I was hearing, even leading up to the East stuff, was that Dems in the Senate and the House, we're getting really concerned with how the crypto polling was showing up and how many people own it. So there's this other theory now. It could have been just like the House and the Senate being like, we're going to lose elections if we keep allowing it to go down this. Fast forward to June, and the SEC quietly closed its investigation into Ethereum 2.0. Many saw this as an acknowledgement of Ether's status as a non-security. The investigation had only started back in April this year. So why did it end so quickly? Laura Brookover from Consensus shared her thoughts on why the SEC may have been forced to back down. The biggest token in a proof-of-stake protocol

Starting point is 00:19:55 out there is ether, I think it was, I think it was and will be very difficult for the SEC to argue that, you know, some of these other tokens are securities while ETH isn't. So I almost wonder if they were kind of forced a bit by their own positions elsewhere to initiate this investigation and to see if they could put an argument together. But then I think, you know, we made the investigation public and there was such a big outcry that they were sort of forced to back down. And so I'm going to be very interested to see how parties in these enforcement actions, you know, like the Coinbase case, Cracken, where the SEC is alleging, you know, that a dozen, you know, tokens or securities, I'm going to be very interested to see how the parties

Starting point is 00:20:40 use the closing of the Ethereum 2.0 investigation to make arguments about the tokens in those cases. Meanwhile, the airdrops were continuing galore, but not having the effect many projects had been hoping for. To combat this, Layer Zero attempted to out-compete the Sybil's, finding some industrial-sized farmers in the process. Brian Pelagrino, co-founder and CEO of Layer Zero Labs, explains the scope of the problem. We found clusters of like 50,000 plus accounts controlled by one person. And so if you look at a lot of the distributions recently, a lot of them just go to these people. You don't get any of the users that you want. They get the supermajority of rewards. They dump the rewards and then, you know, the people who we were supposed to be rewarding end up

Starting point is 00:21:27 end up getting nothing. So we decided to take sort of this pretty contrarian stance that this is, this is a bad thing in the industry overall in that we, you know, you want to have real users, you want to have durable users, you back into that. And then it became a question of like, how do you actually solve for that? Pocod is the original and largest layer zero blockchain with over 2,000 plus developers. and the anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem, upgrading the infrastructure with 8 times higher transaction throughput and twice as fast block times, perfectly tailored core time for the needs of every protocol,

Starting point is 00:22:06 trustless bridges internally and into Ethereum, Cosmos, Near, Binance smart chain, and revised tokenomics and the implementation of a token burn to reduce inflation. Perfect for GameFi and DeFi to build, grow, and scale with one of the most active crypto communities in the, this space. Pocodot recently announced a partnership with mythical games, bringing top games like NFT rivals with over 650,000 players and 43 million transactions to pave the way for GameFi and the Pocod ecosystem. Get your Web3 ideas to market fast with economics that work for you. Think big, bills bigger with Pocod. Join the community at Pocodot.network slash ecosystem slash community. Big news for Dify traders. Robin Hood Wallet, Robin Hood's not.

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Starting point is 00:23:30 In July, we had a surprise guest, Popstar Iggy Azalia, who this year launched a meme coin called Mother. On Unchained, she shared her fascination with meme coins and the cultural power of memes. The thing that I think is so interesting about meme coins is just memes in general have always interested me. I read a lot of books about them actually because, as a celebrity, I feel like celebrities partake in attention economy. And meme coins are based a lot on attention economy too, obviously. So there are two things that I feel already culturally have like a cross parallel that interests me. And memes, particularly, like I said, I've read books about what they are in terms of a unit of culture or how they transfer or what makes a meme. And this

Starting point is 00:24:13 is always something that I've been very interested in. That same month, Cryptos' attention turned to the U.S. elections. After an assassination, attempt on Donald Trump, the political landscape shifted dramatically. On bits and bips, James Safer and Joe McCann explained why this event essentially sealed Trump's victory. Do you think that all the images and what we're seeing out coming out of this situation, does this settle the election, Joe? Yes. It's over. It's a wrap. Listen, look, I mean, irrespective of your political leanings, what happened on Saturday, there's no place for that kind of political violence in the United States, period. I would say anywhere, but certainly not in the U.S.

Starting point is 00:24:54 And it's abhorrent that it happened, period. Even if you despise someone like Trump, right, shouldn't happen. I think that the perception of Trump now has gone up dramatically. Now, you could see some sympathy in the polls, et cetera, you know, surviving an assassination attack in the in like the Rocky Balboa kind of way that he did. I mean, it was truly unbelievable. I think I'd probably speak for everyone when they saw that. They just could not believe their eyes. Amidst these political changes, President Biden announced he was stepping aside in his campaign,

Starting point is 00:25:32 leaving Kamala Harris to become the Democratic nominee. While the crypto community hoped for a crypto reset, those hopes largely went unfulfilled. During the campaign, Representative Roe-Connor reflected on the Democratic Party's shortcomings and embracing crypto. I admit that the Democratic Party has not been as good on crypto, but people like me and a young generation are pro-crypto. You can do have people understand it. And ultimately, I hope this can be an issue that transcends partisanship and that we have people supportive of it on both sides. I mean, who would be against semiconductors or against AI in a blanket way that crypto and Block and Bitcoin are just technologies? And let's have sensible

Starting point is 00:26:15 regulation to use the technology for good while protecting consumers. But it makes no sense to say we're the anti-crypto party when you're talking about just a technology. Meanwhile, at the Bitcoin conference in Nashville, Senator Cynthia Lemis unveiled a proposal for a U.S. Bitcoin strategic reserve. However, George Selgin from the Kato Institute criticized the idea, which had also been proposed by Robert F. Kennedy Jr., with Selgin arguing that this one against Bitcoin's core values. Kennedy's proposal is not specifically one aimed at using Bitcoin for reducing the government debt. He is treating Bitcoin as if it were a strategic asset in the way that oil and certain minerals and pharmaceutical supplies can be. That is, it's something that the United States needs to have a stock.

Starting point is 00:27:15 pile of just in case. I find these arguments very, very vague. I don't understand the sense in which the U.S. government can use Bitcoin other than as an investment asset. So I have to admit that I can't see much logic in Kennedy's proposal quite apart from the fact that the sheer number of Bitcoin involved in it doesn't really make much sense. And I would say it especially doesn't make sense. because even if the government could get hold of 4 million Bitcoin, it would defeat the original purpose of Bitcoin, which is to serve as a private exchange medium that people, individuals, can have

Starting point is 00:28:02 as a way of getting around repressive government activities, including sanctions and other barriers to moving wealth around, and also a way to get around government snooping. And at the same time, all of the selection activity was heating up, the prediction market-Polymarket was generating a lot of attention. Nick Tomeino of one confirmation, which invested in polymarket, gave a bit on the history of event contracts, plus explained why his main interest in this type of market isn't even financial.

Starting point is 00:28:35 But my excitement about prediction markets is not at all the gambling side of it, but it's the ability that they have to bring more truth to the world. And you have a lot of narratives right now out there, right? And it's hard for people to know what is true. You have kind of corporate media narratives. You also have social media narratives. And, you know, the X algorithm doesn't do people any favors. And it often kind of, you know, it showcases what's popular rather than what's true.

Starting point is 00:29:06 Right. So, you know, will Joe Biden drop out in 2024 again, I think is a great example? Because if you look back then what the media was saying, what most people were saying and what the odds were, like, you know, the average person would look at that, you know, 25% and say, ah, that's that's stupid. The market is irrational, doesn't know, you know, people, it's just crypto bros. But that actually was closer to the truth than what the mainstream was writing. Around this time, we also saw the Tonn blockchain taking off in a big way, even with simple tap-to-earn games.

Starting point is 00:29:44 How did on-chain activity search so quickly on Tun? Jack Booth of the Tun Foundation explains. The reasons it very simply took off, viral mechanics, so they had referral system from the very start and incentives. These two concepts, if you can master these as an application, in Telegram. You will find millions of users and you'll find them quick. It's been proven multiple times now. I've no doubt in saying this. It's all due to the referral mechanics in telegram in the not coin. It was this simple to refer. I would go into the app. I would go to my friends tab. I would click share with friends and then I could highlight my entire contact list.

Starting point is 00:30:31 they would then be pinged a referral link which would then earn me not coins at the time. It's something that every single one of the projects tapped to own projects has now copied that referral mechanic. And it's incredibly powerful because that friend that receives that link

Starting point is 00:30:50 just taps once and just straight into the gameplay. No need to mess around with a wallet, no need to set up anything, no need to download a new app. It's there, open straight away. So viral mechanics is the first thing. And then incentives, obviously with not coin, it's not coins with another one who's, which has grown even bigger than not coin, which is called hamster combat. It's hamster token where you're acting as a CEO of your own

Starting point is 00:31:18 crypto exchange and different to not coin instead of just tapping to earn. Now they include tap to earn, but then you can use those coins to buy things that make you profit. per hour. And so the actual airdrop of the hamster token is going to be based on the profit per hour, which is interesting because it's like, it's more of an engagement thing. How engaged are you in the game?

Starting point is 00:31:43 In August, Jump Trading sold $600 million with ETH during a low liquidity period, briefly tanking prices and sending ETH to $2,200. But Jeff Dorman was quick to call this a buying opportunity, saying the sell-off made no sense fundamentally. There's three things I'm looking for right now,

Starting point is 00:32:00 to confirm my bullishness. And make no mistake about it, we are bullish, we are buying the dip, we are continuing to buy the dip. We think this is one of the dumbest sell-offs, certainly in terms of magnitude that we've seen in years. And we have no problem buying this dip and continuing to buy. Around that time, we had Caitlin Long of Custodia Bank and her lawyer, Michelle Callan, on the show to talk about how the Fed's rejection of Custodia Bank seems politically motivated and why they finally felt compelled to sue their own regulator. This was all politically motivated. The 86-page order was the longest order in Fed history, denying any applicant by a long shot. The longest one in the entire 115-year history of the Fed,

Starting point is 00:32:45 prior to that was three pages, and ours was 86. That tells you something right there. But what I found out was that it was entirely about crypto. And they were backpapering the file by saying all those things. And Laura, there were a lot of inaccurate things in that order that the Fed refused to correct. We actually filed a complaint with the Fed's Inspector General, which of course went nowhere. And they refused to correct the factual inaccuracies in that order. So it's nuts. What happened, that was at the beginning, it was very confusing to us because we didn't know Operation Choke Point 2.0 was in full swing in retrospect. Clearly, that's what it was. Even though the markets later recovered, led by Bitcoin and Solana with huge gains,

Starting point is 00:33:32 Eve had a bad year in comparison. While Bitcoin and Solana rallied later in the year, Ethereum struggled. This sparked a debate about whether Layer 2 solutions are parasitic to Ethereum's Layer 1, with Ryan Berkman's and Justin Bond's offering opposing views. Here's what Justin, who contends that L2s are indeed parasitic, said. The Layer 2 critique is very extensive. So one, it's economically extractive, right? Because instead of having, say, all of the usage happening on a layer one, right, you're basically outsourcing it to these private enterprises that are able to skim fees off the top, right?

Starting point is 00:34:09 VCs and investors and private companies are literally skimming fees off of these layer twos. That's literally impossible to do on a layer one, right? That's the part where it becomes extractive and it's not a net good anymore. And at the same point, fragmentation, right, is destroying the UX. Fragmentation is destroying composability, liquidity. You know, all of these things are just going down a terrible direction. And as I also mentioned before, it's all centralized. And I don't believe it will actually decentralize on mass.

Starting point is 00:34:42 We have no good reason to think that. We actually have a good reason to think the opposite because of the incentives. So for most of these altus to quote unquote decentralize, they'll have to sacrifice millions of dollars of revenue. I think that's completely unrealistic. In October, CoinDesk published a bombshell report about how North Korean hackers are infiltrating the industry as workers to hack crypto projects. Crypto security expert Taylor Monaghan had some mind-blowing stories.

Starting point is 00:35:10 What about how companies discover that they have North Koreans working for them? It's completely unwitting. Like, they have no idea that these are like North Koreans. Some companies, there's sort of like two reactions. One is if the person's been there for a bit and is maybe underperforming or the company has already noticed some odd things, maybe like their location has changed or like, yeah, just little weird things that they picked up on when we approach them and tell them like, hey, we think that this is, you know, in North Korean, IT worker, sometimes they're like, oh, yeah, okay. Yeah, that makes sense. And you're like, what? But it's like that final like thing clicks into place and it explains all this past

Starting point is 00:36:02 behavior that they've been observing quietly. The other one is that they're just like, yeah, it's just, it's out of left field. And they're just like, they have no idea what that is or how. And we usually will sit down and go through all of their, all of the people that they've hired in like a similar manner or other employees that, the first employee referred because it's quite common that a single company will have two or three or four or even five people on payroll by the time we talked to them. Another one of our crazy stories was about a North Korean who flubbed his job interview at a

Starting point is 00:36:40 crypto company in a hilarious way. So it used to be that they would just like not go on camera. And that was like a big red flag. And so we told all the companies like, yeah, so make sure you, you know, have. have your air viewies cam up. And that was like good advice for like maybe a month. And then when they stopped getting jobs. And so then all of a sudden they started camming up.

Starting point is 00:37:05 So they're usually in literally like in call centers. You can hear like background noise like they're in call centers. But then they'll always have these quaint, fake like Zoom backgrounds on their camera. So they'll have like the Golden Gate Bridge behind them or like these little like snowy cafes or the fake room. The other thing is that if you ask them questions that are not, that they're not prepared for, that they're not trained for, right? Like they'll, they have tactics and, you know, some of them are smarter and more experience

Starting point is 00:37:37 than others so they can actually, like, answer technical questions. Others are, like, quickly Googling or using AI. But if you ask them, like, normal human questions, like, they don't practice those. So if you ask them what the weather is, if you ask them, like, where they grew up, like, oh, what street? Our favorite one, we asked them, he said that he was in Amsterdam, right? He said that he'd grown up in Amsterdam. And then we asked him to, like, say like, hi, my name is so-and-so.

Starting point is 00:38:07 Like, I'm a blockchain developer or whatever. And he was like, oh, oh, oh, you speak Dutch. And then the person interviewing was like, yeah, of course. Like, and you're an answer to them. Like, let's go. He just literally dropped off the call, just like left instantly. But then he came back in email, like maybe an hour or two later. And I was like, why did you ask me these questions?

Starting point is 00:38:34 And it was like very upset on us. And then got back on the phone call. But this time refused to cam up and was clearly a different person. And was like now prepared to speak Dutch or whatever. Then we saw one of the biggest trends of the year take off, AI agents. The first one to catch the public's attention in a major way was Truth Terminal, which was associated with a meme coin goat, and which was originally given $50,000 with the Bitcoin by Mark Andresen. Brian Armstrong, the CEO of Coinbase, also offered to set Truth Terminal up

Starting point is 00:39:06 with a crypto wallet. Tang Yan of Chain of Thought gave his perspective on why Truth Terminal captured people's imaginations. If Truth Terminal was just purely a shit poster and it would just be like tweeting on Twitter. I think it could be a very funny thing for some people, but it would just kind of an end is just that, right? A funny joke and all of that. But I think that's the idea.

Starting point is 00:39:30 Once you give it access to tools that allows it to take actions, like for example, having his own crypto wallet, having his own ability, for example, to trade tokens, to even potentially interact with other smart contracts and create its own tokens, I think that opens up and unlocks a

Starting point is 00:39:48 lot of potentially interesting things that it can do, right? It can actually start to impact the world beyond just its words. And it actually can have like financial impact in terms of like buying and selling tokens. It might decide to dump all its tokens one day and it costs a price to solve like go down. I think this kind of like leads to the other interesting like thing about like what's going on with this whole truth terminal AI agents is really like how do we know what the objectives of the AI really is. I interviewed Ryan Salem of FDX, who is in prison as we speak. He had many spicy takes, but I'll leave one of them here about his claims that prosecutors

Starting point is 00:40:27 lied to his lawyers and promised that if he pleaded guilty, they would stop their investigation into his now wife, Michelle Bond. Oh, because it was 100% was. I have substantial evidence that they made this inducement. My lawyers told me it was the strongest inducement they'd heard in their 20-plus years as prosecutors or on the defense side. I have memos from them. I have messages from them.

Starting point is 00:40:50 But I mean, I've read the prosecutors. The prosecutors say a lot of things. I mean, you were obsessed with the prosecutors being asked. But there were emails that are, you know, dated and have dates on them when I was reading the chronology of things. And it appears what they're saying is correct. What's not? But if you go down to exhibit four, five, and six, I think in that same submission, you will

Starting point is 00:41:08 see evidence that they submitted that shows my lawyers talking, mine and Michelle's lawyers, talking to the prosecutors saying, you, let us to believe or indicated there would be no charges against Michelle. Why are you emailing us and talking to us? So the government's in their own submission. So you were saying that at that time that you submitted your guilty plea, you knew that this was a point you guys did not agree on, and yet you still submitted the guilty plea? No. When I submitted the guilty plea, it was because my lawyers thought and because the DOJ had made my lawyers feel that way, or presumably I'm not a part of these conversations, remember, I'm getting relayed back from my lawyers what conversations are

Starting point is 00:41:48 between the two of them. I never got to speak to the DOJ once directly. They, and this actually will come out, I believe, in the future. So, you know, the big reason I withdrew my court nobis petition is so that it could be litigated if necessary in Michelle's court. So this will be hashed out. I think it's up to her. I don't know what direction she's going to go, but this whole point will be litigated and made far more public as her trial goes underway. But I will tell you that it was advertised to me as the strongest inducement by lawyers that basically ever heard. And these are expensive lawyers. I mean, these are very expensive lawyers. So these are lawyers that were former prosecutors. And as we all know, in November, Donald Trump, the first crypto candidate,

Starting point is 00:42:31 won the election. And since then, the crypto markets have been soaring. Alex Kueger on bits and Bips gave his perspective. Fundamentally, this is a systemic change. This is really, really fundamentally an important change for Bitcoin. They're talking about Bitcoin as reserve asset. They're talking about even just the mention of this is talking about no taxes on Bitcoin in the US. Yeah, probability that happens within the four years is like 1%. Point 1% doesn't matter. It's being discussed. It's insane. And the regulatory front, we're going to see a lot of changes coming through. It may be slow, but it's still a massive fundamental change. We have technical fundamentals, which is this is the place where, at least in my book,

Starting point is 00:43:20 you let it run. And if you're wrong and you round-trip the whole thing, well, too bad. Shit happens. You know, it's sometimes things go wrong. But that's the play right now is just keeping me. the reins. And while Bitcoin started going up a lot, defy-related coins were the ones that benefited the most. Bitwise as Jeff Park said this on Unchained. The one thing that I think was really amazing to see was Uniswap. Uniswap in a way represents as a player of crypto, the decentralized

Starting point is 00:43:54 marketplace that needs regulatory clarity, perhaps the most. It's found product market fit, and now it just needs to exist in a commercially viable way within a regulatory framework that can be supported here. And so Uniswap was by far, as I've seen, the biggest winner from the day of the election to outperform massively. The other thing that I noted was Solana actually performed very strongly as well, maybe even out inching Ethereum, which I thought was interesting to see. I don't know if I would have bet on that particular outcome, but all to say, Bitcoin dominance for the first time, I think actually trended down this week while Bitcoin, of course, was going up. So this shows you there is forever an excitement for the possibility of these all coins to have

Starting point is 00:44:35 true meaningful value capture for the next few years. One of the most significant aspects of the election was the unprecedented success of the Fair Shake Super PAC, which donated $200 million to pro-crypto candidates reshaping Congress into the most crypto-friendly in U.S. history. Farrier-Zar, Shiaz-Zad, Coinbase chief policy officer, had this to say. I don't think people in Washington had ever seen anything like it. I think we're a bit of a unicorn in the sense that you had to, you had an industry that was not partisan, was very mission oriented in the sense of focusing on who's pro-crypto and who's not, and then being willing to go into Democrat races, House races, but more strikingly go into general election races against incumbents, which for people who are in D.C. and kind of understand how Washington politics works, you typically don't challenge an incumbent just because of, you know, the risks associated and how hard it is to unseat an incumbent. So there are all sorts of rules of Washington that we've broken as an industry in the political effort that we put into place.

Starting point is 00:45:37 But I think, and Kara and I can both speak to this, I think we ultimately felt like we had no choice. You know, we found ourselves about a year and a half, two years ago, finding ourselves being relentlessly politicized and demagogue by a handful of politicians who were trying to fundraise off of attacking the industry. and they were actually becoming very close to being successful to driving critical cutting-edge industry offshore and essentially killing it in the United States. By late November, Bitcoin ETF options were launched, creating an ecosystem of liquidity that Eric Baltinas described as big fish bait for institutional investors. The more people in this ecosystem, the more it'll really do is make more liquidity for the ETFs. And liquidity, again, is big fish.

Starting point is 00:46:24 fish bait. The more liquid things are, the more you'll get big tuna and shark and whales. They won't bite on some, you know, BS little ETF. They need to see like giant liquidity because they don't want anyone to know they're there. They also don't want to move the market. So this is the real benefit of all this. It just creates an ecosystem that comes back to the ETF in the form of more liquidity. And like I said, optionality on how to express your view. So over the years, ETFs that have a lot of options have built a moat around them and continue to be the most liquid of their class. So, for example, GLD, there's cheaper gold ETS, but GLSD still trades the most. And a big part of that is because it has all the options tied to it.

Starting point is 00:47:07 And the options market is huge. And just weeks ago, Trump announced Paul Atkins as his nominee for SEC chair and appointed David Sachs as a crypto and AI czar. Experts like Cody Carbone and Mike Seelig highlighted how these moves could cement the U.S. as the global crypto capital. Here's Cody on Atkins. Paul is a, he is deeply, deeply steeped in the industry. Again, he's not someone who's just talked about crypto a little bit.

Starting point is 00:47:33 And it's something that he's been forced to talk about because he's been interested in this role. Paul has been one of us fighting for clarity, regulatory clarity, fighting for this technology to not only survive, but just to exist while there has been so many challenges in Washington. So I think it shows that Paul is a deep, deep expert on these issues. He cares about tokenization. He cares about how blockchain technology and digital assets can make the financial industry and the securities industry more transparent, how it can make trading easier,

Starting point is 00:48:04 what kind of new settlement times we can have, all of the different options of how this industry can make things better for the existing financial economy, how we could probably find more transparency and sunlight from using blockchain. And here's Mike Seleig on Sacks as Cryptos are. Well, I think it's a really historic decision to create a new crypto and AI czar and really put these two new technologies on the same plane and view this as something that's really strategically important for the country. And President Trump has also spoken about things like a Bitcoin Strategic Reserve, about redomesticating crypto businesses that have left the country. And this will really be in line with that mission to create a crypto capital of the world right here in the United States. And I think that's the most important piece,

Starting point is 00:48:49 the matter who the new cryptos are. And I think David Sachs is an excellent pick because of his experience as an operator, really working with technology companies, investing in technology companies, understanding what can actually drive growth of these businesses in the United States. And there's an expectation that there will be a crypto council

Starting point is 00:49:09 where there will be members of industry that are actually participating, formulating opinions and recommendations. In mid-December, French Hays and, Hill was named the chair of the House Financial Services Committee. When asked how he thought token teams should distribute or launch tokens, here's what he responded when he came on the show in July. Here's what I would propose.

Starting point is 00:49:29 If someone has an existing application out on a blockchain or has a blockchain functioning, run your characteristics against the tests that we put in Fit21. I think a lot of people will find that they are, in fact, decentralized on a functional blockchain without anyone in a position of control. And we lay all that out definitionally. And I think it's a great screen right now, even though the law has not been enacted, it's a terrific screen to test your idea against or an existing portfolio company against if you're already in the venture capital business and backing a token-based company.

Starting point is 00:50:12 And finally, one of the biggest shifts in 2024, which became apparent through 30, things like the mean coin frenzy, ended up being a major headline out of the electric capital developer report, and that is the rise of Salana. Maria Shen gives her recap of how Salana flipped Ethereum in one important metric, but how Ethereum is still maintaining dominance in other areas. Salana had the most new developers, which is something that's never since 2016 has ever happened before for Ethereum to be number two in new developers. That's that's very, very new. And Solana and Base did capture a lot of these low-fee use cases I was talking about. So, you know, Base owns 97% of NFT minting volume. Salana owns 64% of NFT mint transactions.

Starting point is 00:51:01 81% of Dex trading happens on Solana. Salana has the most unique wallets. Base is number two in trading wallet. So a lot of these signals from low-fee use cases really kind of point to the fact that people are not using Ethereum mainnet, right? They're looking to other chains to do that. That being said, I actually think what's really fascinating to see play out is how Ethereum holds on to its dominance. And it's really through the first one is network effects. And the second one is through the power of its security, right? The power of the fact that you can do high value transactions on that.

Starting point is 00:51:47 Thanks so much for joining us today. We didn't get to all the best shows of 2024. So in case you missed them, I'd also highly recommend the interview with Chris Maurice of Yellowcard, the defy one with Arthur Chung of Defiance Capital and Jordy Alexander of Mantle, the one about Ethereum's roadmap, which was sort of a debate between Justin Drake and Martin Coppulman, as well as a separate interview we did with Martin on his proposal for scaling a fearing with native roll-up. And my conversation with Robbie Mitchnik, head of digital assets of BlackRock, Guy Young of

Starting point is 00:52:20 Athena and another last interview with Vlad Tenive, CEO Robin Hood. Unchained is produced by me, Laura Shin, with all from Matt Piltered, Wanda Ranovich, Megan Gavis, Pamma Jumdar, and Margaret Curia. Thanks for listening. And happy new year, everyone. Thank you.

Unchained - 2024 Was Full of Fascinating Crypto News. Here Are Its Top Moments - Ep. 757

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