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

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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ryan Sean Adams?

  Beg this nation, we've got an emergency livestream. So we only do this when either something really bad has happened, or something really good has happened. So

• 0:08David Hoffman?

  We've had too many good things recently.

• 0:09Ryan Sean Adams?

  Yeah, so I went on vacation last week. I come back to these charts, David. What they're calling this, they're calling this Black Monday vibes. All right. So can you get me up to speed? Because I haven't paid attention to this. I just started looking at it this morning. Can you start get me up to speed on what the heck happened? I haven't seen one of these in a long time.

• 0:28David Hoffman?

  So the markets have really been ruling over for like two weeks now. The equities market, the tech market, it started off with just like Nvidia, just selling a lot of tech stocks selling, people rotating out of the AI stocks that had pumped.

• 0:42Ryan Sean Adams?

  When was this? Like last Friday?

• 0:44David Hoffman?

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

• 1:27David Hoffman?

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

• 2:03David Hoffman?

  Has created just instability in the stock market in the Japanese Nikkei. Nikkei is their S and P, right? It's their, it's their stock market. And as a result of this thing called a basis trade, which is something I was learning about this morning, between the United States market and the Japanese economy, since the Central Bank of Japan was offering 0% interest rates, they have still been in a zerp policy. There's been a basis trade because the interest rates inside of America are at 5.5%. So capital is free in Japan, but it was expensive in the United States. And so people would borrow money at very low cost from Japan and then they would buy

• 2:46David Hoffman?

  American equities, bonds, just invest in the American economy. But last week, the Japanese central bank raised interest rates by 0.25%, which is not that much. But when people have leveraged up a basis trade in order to maximize, squeeze the maximum amount of juice out of that trade, that 0.25% increase in Japanese interest rates has unwound a bunch of trades. So we're watching leverage in the traditional stock market unwind, which impacts our equities markets, which then cascades all the way down into what we feel in the crypto markets, which is just like an absolute hurricane because in the grand scheme of things, we're kind of tiny. That's how I would explain it in a very short synopsis. I'll explain it a little bit better in a second.

• 3:28David Hoffman?

  But it's the single biggest move ever in the VIX term. So VIX is the volatility index. When VIX goes up, that's bad. The last big spike was of course COVID. So it rises above 50 and it's like kind of a, 50 is just like a self referential number. It rises above 50 for the first time since the COVID dump. And whenever, VIX is kind of like an indicator of a black swan. Like if you want to determine what is or is not a black swan, you would look at the VIX. VIX spiking is like something happened that no one was accounting for. There's kind of this meme that there's like always hidden leverage in the system and we are now very rapidly discovering that it was in this basis trade between the Japanese economy and the American economy.

• 4:11Ryan Sean Adams?

  Okay, so I have a few questions. I'm not exactly sure where to start, but like this was my impression of where I left things on vacation. I was barely looking at things, but like on Friday, there was like a weak jobs report, like there was the word recession back in the air. There was like, it felt like the market was giving back some gains. I was like, okay, normal course of events, normal course of the market. And I monitored things on Saturday, but then Sunday hit. Okay, this was Sunday, the fourth and looking at crypto.

• 4:37David Hoffman?

  Last night, last night.

• 4:38Ryan Sean Adams?

  Yeah, last night.

• 4:39David Hoffman?

  Twelve, twelve hours ago, yeah.

• 4:40Ryan Sean Adams?

  Ethereum down like 25% Ethereum dipped like close to 2,000.

• 4:45David Hoffman?

  Uh huh.

• 4:46Ryan Sean Adams?

  Like, I don't even know, like on Binance, my understanding is it dipped to 2,000. I'm like, what is going on? Like, what on earth is actually going on? And like seeing this play out, I guess in the VIX, you could sort of see this from a VIX indicator, this is similar to 2008. This is similar to the COVID March. And this is what I was feeling, David. I was feeling, oh my God, this feels a lot like March 2020, at least in terms of crypto. And of course, TradFi markets don't trade 24/7. So crypto is a leading indicator on the weekend, during banker hours, during the weekends that those guys take off, crypto continues. And so you see Bitcoin off Ethereum, like particularly.

• 5:25David Hoffman?

  Brutalized, yeah.

• 5:26Ryan Sean Adams?

  Brutalized, absolutely brutalized. And I was trying to make sense of what was actually going on. Of course, crypto Twitter is panicking, you know, like complete, complete turmoil from that perspective. But and then the Nikkei, which was trading on Sunday, because you know, Japanese time zone hours, that was off 12%. So like, something is rotten, something is like not working in the existing system. And you're saying it all comes down to this basis trade? Or is that the main indicator?

• 5:57David Hoffman?

  It depends on who you are in the market. I think if you're in the crypto market, we also have to go look at Jump Capital and ask why the hell they were just offloading tens of millions of dollars of ETH into a very illiquid market on a Sunday. Like that's also going on. That's all, but that's just for us crypto people. We do have to ask that question. I think everyone is trying to like, look into all of these different inputs into the market. And this is a meme that I think is the most viral meme of the last like day, last 24 hours. And it's the, it's the, I don't know, thank you meme. It's like the be honest meme. And this person is trying to, is trying to like. Get signal from like what the F is going on in this market like it's the jobs report. It's a weakening economy. Uh, and then they're like, be honest. Uh, and then they're like, okay,

• 6:40David Hoffman?

  no, it's the, it's the yen carry trade. And the person replies, no, be honest. And the person says, I don't know. And the person says, thank you.

• 6:46Ryan Sean Adams?

  Thank you.

• 6:47David Hoffman?

  There's like other things going on, like Kamala Harris is now, uh, encroaching on Trump's victory and Trump is being interpreted as the pro markets candidate. And so maybe the markets are actually pricing in, uh, a more like a not an assured Trump victory. And so that, that could have sent, uh, the stock market tumbling. There's levers in the system. Who knows? There's like a bunch of things.

• 7:07Ryan Sean Adams?

  Rumors of war I even saw.

• 7:09David Hoffman?

  Rumors of war, like Iran and Israel are going to war.

• 7:12Ryan Sean Adams?

  Yeah.

• 7:12David Hoffman?

  There's like a bunch of things going on all at once.

• 7:14Ryan Sean Adams?

  On Twitter, there was like a signal of, um, it was the, the dominoes located, the like pizza restaurants located close to the Pentagon where like, uh, you know, people track this apparently. And like, um, pizza delivery orders were spiking, which means like maybe the, the Pentagon is huddling. So there's like rumors of war types of things in the air as well. But, but let me understand this Japanese thing because maybe people don't really know where this is, this sell off is coming from, but I'm not sure that we can call it at this stage, a smoking gun, but it seems like there's something rotten with this, um, Japanese carry trade. You gave this to us in the intro. I just want to make sure I understand this.

• 7:53David Hoffman?

  Yeah, let's double down on this. Yeah.

• 7:54Ryan Sean Adams?

  Oh yeah. Let's double down on, uh, what they're called. Like, what are we calling this? Um,

• 7:59David Hoffman?

  The yen carry trade.

• 8:00Ryan Sean Adams?

  The yen carry trade.

• 8:02David Hoffman?

  Yeah.

• 8:02Ryan Sean Adams?

  Okay. So how does this work? What was going on? What no longer works? Like, how did this piece of the puzzle break?

• 8:08David Hoffman?

  Okay. So, uh, because of the devaluing of the yen, uh, because the economy of, uh, Japan, like, I don't know why they're the, the economy of Japan is faltering and then also they're raising interest rates, but the yen is going down. The yen is devaluing. Inflation is going up. And so as a result of the devaluation of the yen, the Japanese central bank raises interest rates in the same way that the American, the United States Federal Reserve raised interest rates post COVID, after a bunch of cash injected into the economy caused inflation. Uh, we all know that inflation has been rampant and has really put a lot of economic pressure on, uh, like the, the lower half of the American economy. Honestly, honestly, like more even larger than, than, uh, the lower half.

• 8:52David Hoffman?

  And so as a result, like the Japanese central banks, like we don't, we don't want to have our people subjected to inflation. Inflation is bad, so we're going to raise interest rates.

• 9:01Ryan Sean Adams?

  Wait, so the rates in Japan, the central bank of Japan, the BOJ, right?

• 9:07David Hoffman?

  No.

• 9:07Ryan Sean Adams?

  Was it at zero or is it something very low? Is that zero? And it went up by 0.25%.

• 9:13David Hoffman?

  0.25%, yes.

• 9:14Ryan Sean Adams?

  Okay, and that caused a 20% red candle for Ethereum on Sunday.

• 9:20David Hoffman?

  That's correct.

• 9:20Ryan Sean Adams?

  Okay, and the rationale for this?

• 9:22David Hoffman?

  The Japanese, the entire Japanese stock market to go down by 12%.

• 9:26Ryan Sean Adams?

  Okay, and because what was going on or the carry trade is at 0% rates from BOJ, people are able to borrow the yen for nothing.

• 9:33David Hoffman?

  Basically.

• 9:33Ryan Sean Adams?

  And then they're able to buy an asset outside of Japan, whatever that is.

• 9:37David Hoffman?

  United States 10-year treasuries, like Apple stock, Bitcoin.

• 9:42Ryan Sean Adams?

  Yeah, crypto. And then something else happens. And then they profit from this trade because they're borrowing, assets go up, they're borrowing at 0%.

• 9:50David Hoffman?

  They're borrowing free money and they're investing long.

• 9:52Ryan Sean Adams?

  So a 0.25% increase starts to wreck that trade?

• 9:57David Hoffman?

  Yes.

• 9:58Ryan Sean Adams?

  I guess. I mean, it's just such a slight increase.

• 10:00David Hoffman?

  It's a slight increase, but it wrecks it in more ways than one. So like, A, your costs of borrowing are going up. And so now your loans that you have, you're paying a highest interest rate on. And you might think that that 0.25% interest rate is like, okay, it's not that much higher. And you're kind of right. But also because they're trying to strengthen the Japanese yen, that is the denominator that all these loans are marked in. So all these loans, they're trying to make the Japanese yen go up in value, which is what the loans are denominated in. And so not only are the costs of borrowing going up, but the actual value of the thing that you have to pay back is getting more expensive too. So it's a double whammy. And then you can also add on the fact that they, they might expect

• 10:44David Hoffman?

  that the interest rate of the Japanese yen is also going to go up higher than 0.25%, like they're not stopping there. And so like, imagine if you, imagine if you're a very sizable trading firm, or you're just pulling out a ton of loans. We all know that prices are determined on the margins. And so they are, people are maxing out this leveraged trade. It's called an unwind for a reason. And so they, people, the marginal rational economic actor will take this risk up to the maximum.

• 11:13David Hoffman?

  To the point that a very small change in interest rates will actually impact the market. And we always, like I said, hidden leverage in the system everywhere. And so 0.25%, it increases the value of the Nikkei. A lot of people feel that, even if it's a little bit, it increases the borrowing power. It decreases borrowing power. It increases like the cost of capital. And then it's also indicative of further, of all of this getting even worse further.

• 11:38Ryan Sean Adams?

  I get it. So there is this point of leverage in the system. It's been in the system for a very long time. It's just, you know, like this is why they

• 11:44David Hoffman?

  It's compounded. People are taking more and more leverage the longer that there is a zero interest rate policy in Japan.

• 11:50Ryan Sean Adams?

  And this is why markets take the staircase up and elevator down. It's like at a certain point, there's some tipping point that that's reached. And then suddenly a 0.25% raise causes a cascade of liquidation. This is like bad leverage in the system and it's all withdrawn sort of at the same time. So there's mass panic. Nikkei is down 12%. Crypto is down like 20 plus percent. Can we look at the crypto charts? So we've seen some of the TradFi gore charts. So let's recap what actually happened with crypto here.

• 12:17David Hoffman?

  Yeah, so Bitcoin, Daddy Bitcoin is set to close its worst week since FTX. So that's our biggest red candle since the FTX event. So congratulations to everyone who has experienced both.

• 12:30Ryan Sean Adams?

  And so that's Monday.

• 12:32David Hoffman?

  It's only Monday, yeah. In the world of liquidations, I'm going to skip over this tweet. We'll come back to jump in a second. But in the world of liquidations, over $1.1 billion has been liquidated from the crypto markets in the last 24 hours. 275,000 individual addresses have gotten liquidated. Just because prices went down so far, so fast yesterday. I remember tweeting out when ETH went from like 2,800 down to like 2,600. And I was like, you know, I'm just going to send out a funny tweet. Wake me, and I said, wake me up when ETH hits 1,900. Like a devastatingly low number that we are never going to reach.

• 13:11Ryan Sean Adams?

  Of course.

• 13:12David Hoffman?

  And 45 minutes later. We were down to 2,200. I was like, yo, no, I'm just kidding.

• 13:19Ryan Sean Adams?

  It's because you tweeted it. That's the reason.

• 13:21David Hoffman?

  Uh huh. And so this is what happens in crypto. We like, if you have been, if you've seen at least one cycle, you kind of know that this can always happen. The bottom can fall out of the crypto markets very, very fast. We can get very illiquid, very, very fast. So here's a tweet from Wu Blockchain. According to Binance, Binance, the price indicator, ETH suddenly plummeted to $2,100 and then rebounded. The amounts of liquidations in one hour reached 370 million US dollars. So 370, 3,000, 3,770 million US dollars got changed, changed hands inside of one hour. Wow.

• 14:00Ryan Sean Adams?

  Okay. Well, this goes back to a question I have for you, which is, it did seem like on Sunday, when all of this chaos was like, when the market was like realizing what was happening, that Ether in particular was more affected, right? I saw, I saw Ether versus Bitcoin. It was like, the difference was like 25% versus 15% down or something like that in 24 hour, or even like layer twos and Ethereum related ecosystem. It appears to have hit Ether particularly hard. And is that where this jump capital, like trading comes into the story here?

• 14:32David Hoffman?

  For some reason, at the same time that we are having this unwinding basis trade between traders, arbitragers, arbiting the interest rates between Japan and United States, completely unrelated to crypto markets, Jump has been dumping like clips of $10 million of Ether into the market like, like hour over hour over hour, just like pummeling the ETH price everywhere. And I don't know how much in total that they have sold, but it's in the hundreds of millions of dollars.

• 15:01Ryan Sean Adams?

  Well, this is a tweet here. I said, Jump has been unstaking, likely dumping 500 million ETH for the past two weeks. And there's some on-chain evidence, like detailed in this cheat, in this tweet. So 500 million? Is this like all of their ETH? Like, how much do they have left?

• 15:18David Hoffman?

  It is generally assumed that everyone I've asked is like, they are basically have fumes of their ether left. Maybe they have like 5% of their total ether left, but Jump has exited their ether position.

• 15:29Ryan Sean Adams?

  And it's ether in particular? It's not like all crypto assets?

• 15:33David Hoffman?

  It could be Bitcoin, it could also be their Solana positions. Uh, but you just don't have as much transparency uh as we have in Ethereum. When people go and they they dump ETH into the market on Ethereum, like addresses are tagged. Like, there's just so much transparency in the Ethereum ecosystem. There's a similar amount of transparency in Solana, but um it's not, it's not as much, it's just not as mature. And there's, and then there's also a lot less um sole liquidity on chain on Solana than there is on Ethereum in ETH.

• 16:03Ryan Sean Adams?

  So you dump it in OTC markets behind the scenes.

• 16:06David Hoffman?

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

• 16:40Ryan Sean Adams?

  Yeah, why now? So, so we, we know it's certainly uh ether that they're selling. We don't know whether it's just ether or they're selling their other crypto assets. We can't necessarily see that on chain. But so, let's assume they're just like selling a lot of their crypto positions rather than just focusing on Ethereum. That would be more consistent with, I think, the, the evidence, right? I don't, I don't think they're saying F Ethereum in particular necessarily. I don't know why they do this on one particular Sunday unless they had word that like Ethereum was, you know, had some sort of catastrophic um bug or something like this, right? So like, are we just assuming Jump, Jump is liquidating their position because they are starting to see how, I mean, they're traders, right?

• 17:19David Hoffman?

  They're traders, yeah.

• 17:19Ryan Sean Adams?

  They're starting to see how bad things are getting on the macro and they're just trying to front run that.

• 17:25David Hoffman?

  I think there's one valid theory about it. There are other people drawing attention to the fact that Jump is actually getting probed by the CFTC. And so Jump is in some sort of like legal trouble with the CFTC. Maybe this is a fallout of that. Maybe like main Jump, so there's Jump and then there's Jump Crypto. And maybe Jump is taking a position in the market as a result of the decay, as you said, and as a result, they're like informing, hey, Jump Crypto, like, like liquidate your crypto, like, let's go risk off. And so they're like dumping their ETH. And so as a result of all of this, Ether just gets absolutely pummeled above and beyond like all the other assets inside of the crypto markets.

• 18:07Ryan Sean Adams?

  So my reaction on Sunday, David, was, at first I was like, oh, this feels like 2022 again, right? And we said some big sell-off events in like May, and do you remember Three Hours Capital that kind of hit?

• 18:18David Hoffman?

  Right.

• 18:19Ryan Sean Adams?

  And then obviously FTX, like that was-

• 18:20David Hoffman?

  Terluna FTX, yeah.

• 18:21Ryan Sean Adams?

  The most pain in recent memory, so it felt sort of like that pain. And yet, it actually felt like more like a date that was further back than that. It felt, in my mind, a bit more like March of 2020. Do you remember March of 2020? This was-

• 18:35David Hoffman?

  It felt like March of-

• 18:36Ryan Sean Adams?

  -Banker's Podcast was getting started.

• 18:37David Hoffman?

  During March of the 2020, during the March Dump, the COVID Black Tuesday?

• 18:43David Hoffman?

  It was Tuesday, yeah. And Ether was down 60% in the 24-hour candle. Ryan and I were recording the second-ever Banker's-

• 18:51Ryan Sean Adams?

  Yeah, and that felt really bad. And the reason it felt bad, like, the reason I considered what Sunday, you like, felt like, and it kind of made this Black Monday bleed over, and 2020 rather than 2022, is because it felt very, like 2020, it felt very exogenous to crypto.

• 19:08David Hoffman?

  Yeah.

• 19:09Ryan Sean Adams?

  So it wasn't SBF, Do Quan shenanigans, it was some adjacent macro black swan that's happening that is just like completely outside of the control or apparatus of crypto. So it was that. And also the ferocity of the dump. Right, like a boom candle 20% correlated with the other like, you know, macro assets, of course. So it reminded me of 2020. How did it strike you? Like, what are the other dates of this level of dumpage that come to mind for you?

• 19:41David Hoffman?

  2020 was definitely because of the exogenous factor. I think 2020 comes to mind. But I was just inside of the bankless discord this morning. Everyone's in like, one of the indicators of like, how you know it's kind of like close to the bottom is that everyone is on Twitter. Everyone's in Discord. Everyone's unhappy. And so as somebody who has experienced these dumps numerous times and gotten liquidated in at least a handful of them, I have like vibes to share, you know, like it's all gonna be okay. I think the first ever big dump that I remember, if I want to go over to this chart, like I haven't pointed out in that screenshot that you have shown there, but it was it was this one in Bitcoin. And when is this? November of 2018?

• 20:24David Hoffman?

  So after Bitcoin has fallen 67%, and it hits, the Bitcoin price after 2018, it hits $20,000 for the first time. And then it falls down to 6,000 and it hits 6,000 in February, 2018, it goes 20,000 to 6,000 in February. Then it hits 6,000 again in April, bounces back up to 10,000. It hits 6,000 again in June. It bounces up to 8,000. It hits 6,000 again in August, bounces up to 7,000. And then it stays at 6 to 7,000 between September and November. And I'm like, I'm like, phew, like 6,000 is holding up so well. Like, that's the bottom. Like, it's just like, I'm just gonna buy all, I'm gonna use all my remaining powder,

• 21:09David Hoffman?

  of which I had none because I was like, how are you positioned anyways? But I was like, de-saying into these crypto markets for my first ever bear market. And I'm like, oh, you know what? 6,000, not so bad. And then in November of 2018, in a very short window of time, it goes from Bitcoin goes from 6,000 down to 3,000. It loses another 50%. And that was my first, that was like my first like, oh my God, what have I done?

• 21:34Ryan Sean Adams?

  Is this you getting liquidated somewhere on this chart?

• 21:36David Hoffman?

  Uh, I don't think so.

• 21:38Ryan Sean Adams?

  Do you have any leverage that got washed away?

• 21:40David Hoffman?

  I think I'm just learning to use Maker Dow in this time. Yeah. And so I didn't have, maybe I had like, maybe I was on a D Y D X position, but you don't hold D Y D X positions for very long.

• 21:49Ryan Sean Adams?

  I almost got wrecked during this whole, like 2018. No, I think it was more like 2019. I almost got wrecked with some leverage I had. I did not, I guess that was.

• 21:59David Hoffman?

  Number two.

• 22:01Ryan Sean Adams?

  Yeah, that was probably more like during COVID. I can't remember. I was like.

• 22:05David Hoffman?

  That was a COVID dump.

• 22:06Ryan Sean Adams?

  Yeah. You like, man, you remember these because they're impressive on your soul. How painful they are.

• 22:11David Hoffman?

  Looking, because you, I remember the first time I got liquidated. Maybe, maybe it was, I can't remember. The first time I got liquidated, because there was two times, and that much that implies.

• 22:22David Hoffman?

  It's just like, you realize this very powerful thing about leverage, that like, you can wait until the very end, but if you unwind at the very end, you have to unwind the whole thing to make any meaningful amount of difference on your position. Yeah. Like, you have to sell, like, in order to protect your CDP, your loan, your position, you have to sell so much of your actual principal to protect yourself at all. So it's so painful. So you're at the very end and you're like, well, what's the point in even defending this position? I'm just gonna like clench my teeth and hope that this is the bottom. Yeah. And I remember that. I think that a lot of people felt that feeling in the crypto markets. Oh, man. They just learned about leverage for the very first time.

• 23:03Ryan Sean Adams?

  It is the worst feeling imaginable. When you're looking at, you got like a liquidation price, you're like, oh, I'm gonna get liquidated at ETH at 400. And then it like drops down, it's the middle of the night, and it like drops down into the 400s. You're like, oh shit, like, what do I do? Oh, I have to put more like ETH on the line in order to back that loan. And how far do you push it? Is, is a very bad position to be in when you have like margin in these types of black swan liquidation events. Is that why you tweeted, if you didn't get liquidated today, congrats.

• 23:31David Hoffman?

  You passed the test. Yeah. Uh huh. There's, there's like a, just a come to God moment, I think, where everyone kind of experiences, just like, it's just you and God. Yeah. It's just you two.

• 23:42Ryan Sean Adams?

  Jesus, take the wheel. You know, I got nothing.

• 23:46David Hoffman?

  Yeah, but congratulations to everyone who is A, not on leverage. I think you guys are just chilling. Sorry about your spot positions, but you're like, they're whole. People who are on leverage and did not get liquidated, congrats, you passed the test. People who are on leverage and then did get liquidated, I'm sorry, it hurts. We will rebuild.

• 24:04Ryan Sean Adams?

  Yeah, this is how you learn. Your job right now is to survive, just survive right now and live to fight another day, if at all you can. But you got a section on ETFs. So what about ETFs is relevant here, David?

• 24:15David Hoffman?

  Uh, let's see, ETFs. Okay, so we are watching the Bitcoin ETFs have all time highs in volume. Not maybe not all time highs, 20 minutes into the trading session of today's stock market trading, $1.3 billion in Bitcoin ETF volumes. So that's, that's quite a lot. Eric Balchunas put out a tweet saying that like, well, high ETF volume volumes is actually just like everyone being scared. But like, the whole stock market scared. So I feel like that was like, well, yeah, have you seen the blood in the streets, sir? And like, high volumes is kind of what you want, because you want high liquidity on both directions, inside and out. We don't have any data today, because with the stock market trading day is all over, but it will be interesting to see flows.

• 24:59David Hoffman?

  Who are the ETFs net buyers or net sellers of these crypto assets? We'll see.

• 25:04Ryan Sean Adams?

  Oh, yeah. How, how strongly do they like, how diamond hands are they is kind of a question. Like, you know, those bitwise commercials about Ethereum being like open 24/7 aren't going to hit quite the same way. When you're down on your 401k about 25% right now. It's just like unfortunate timing, I would say for Ethereum of like, was it two weeks ago, got the Ethereum ETF. And so you're like, hey, dad, you can now buy Ethereum in your 401k. Two weeks later, he's down like 25%.

• 25:34David Hoffman?

  It's so classic, dude. Just like ETH gives its ETF and the whole entire industry loses 25%. Like, it's the most classic asset of all time and being perfectly cursed. Okay, so there's a few other things that I want to talk about. You got to ask the question, how did DeFi do? We got Ave to look at, we got Maker Dow to look at. Gearbox is a newer lending protocol that's on leverage. How did Gearbox do? I'm going to take over the charts and we're going to look at ETH BTC. We're going to look at coin, we're going to look at Solana. And then we're going to talk about the calls for a Fed pivot. Because now that something quote unquote broke. We get our pivot now, right? That's what everyone is asking for. So there's a bunch of other conversations. We're going to get to all of them and more. But first, a moment to talk about some of these fantastic sponsors that make the show possible.

• 26:18David Hoffman?

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• 27:46David Hoffman?

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• 28:59Ryan Sean Adams?

  All right, David, so we haven't seen blood in the crypto markets like this since 2022. And maybe it felt like March of 2020. The question, I'm looking for a silver lining on here. And my question is like, but how did DeFi hold up? Was DeFi okay? Did we liquidate in a fair and efficient way? Did everything work according to plan or were there some troubles?

• 29:23David Hoffman?

  So if you remember, Ryan, the last time, the first and I think last time that DeFi meaningfully broke was during the COVID dump of Black Tuesday of March of 2020.

• 29:34Ryan Sean Adams?

  Yeah, this was like die de-pegging.

• 29:36David Hoffman?

  Die de-pegged, yeah. Maker DAO loans, CDP loans, the things that are backing and renting and producing die in the first place. Were getting paid back with zero collateral. Because as an ecosystem, as a blockchain, Ethereum had never experienced high transaction fees before at that level. Like, we had just come off of the one Gwei paradigm. For those that don't know, Ethereum, gas fees on Ethereum were one Gwei until 2019. Where in 2019, they hit two Gwei for the first time. And then it hit three Gwei, and then it hit five Gwei. And then things started to like never actually go back down. And we were somewhere between like five, sometimes 20 Gwei, astonishingly, for months.

• 30:21David Hoffman?

  But that was a new paradigm and like Ether was like $100. So you're still talking about like one to five cent transaction fees. But we had established the paradigm of gas fees and congestion on Ethereum. Then the COVID dump happened and gas jumped up to 700,

• 30:40Ryan Sean Adams?

  Wow.

• 30:40David Hoffman?

  Applications were not ready for that. People didn't know how to think about that. That was just like unheard of. A level of demand for Ethereum block space. And as a result of that, Maker Dow had CDPs that were paid back with zero collateral, as in they were needed to be liquidated, but because the liquidation transactions to pay back the CDP is the ones that were supposed to go through. They didn't have, they weren't accounting for very high gas fees and some people like arbitrators figured it out. And so they could send a very high gas transaction, like a 1,000 gas transaction. And they would pay back a Maker Dow loan for zero collateral and Maker Dow would just assume that that's what it was worth because it doesn't know. And so DeFi broke during COVID of 2020.

• 31:22Ryan Sean Adams?

  Yeah. And I would say, when you say broke, it was not a catastrophic failure.

• 31:25David Hoffman?

  It wasn't catastrophic, yeah.

• 31:26Ryan Sean Adams?

  Like MKR didn't like completely go bankrupt.

• 31:30David Hoffman?

  Twenty million dollars of bad debt that they had to backstop with the MKR token.

• 31:34Ryan Sean Adams?

  Yeah. So it wasn't Lehman Brothers, but we are talking about like a

• 31:38David Hoffman?

  It didn't function. You couldn't say it was like a thumbs up.

• 31:41Ryan Sean Adams?

  And it was worrisome, right? We were like, okay, it's starting to wobble, starting to shake here. Like, could things get worse? And what would happen? Could this cause a catastrophic failure? So that was 2020, the last time we saw this. How about now?

• 31:52David Hoffman?

  How about now? Totally fine. Not, it's an absolute breeze, dude. Aave has 14 active markets on various layer ones and layer twos. So 14 different implementations of Aave, not a single penny of bad debts. Twenty one billion dollars deposited in Aave across all of these different protocols. Not a single penny of bad debt. Aave, the protocol was rewarded with $6 million of revenue from all of these liquidations, because that's how Aave works. So Aave actually pocketed $6 million for providing the service as a provider to the market. Stani tweets this out. Aave was rewarded with $16 million in revenue overnight from decentralized liquidations.

• 32:30Ryan Sean Adams?

  Six million, yeah.

• 32:31David Hoffman?

  Six million, yeah. And this is why building DeFi is going to work. Monet Supply, who is out of the Maker Dow ecosystem, says $28 million liquidated on spark.fi, which is a Maker Dow front end. Everything looking healthy so far. Maker Core Vault only had $300,000 liquidated so far, although there's another $400,000 loan at risk. Not much. So like, not only is this thing working, but also the people, the layer zero that is actually minting DAI is actually being like risked off, which I actually thought was pretty interesting. Here was the thing that I was gonna have my eye on, because this is something, so we have a supply of stables at Bankless, and we put stables to work

• 33:12David Hoffman?

  inside of DeFi, but it's our working capital. So if ever we need to like tap into these stables in order to pay our employees, we might need to use those stables. And so where we

• 33:21Ryan Sean Adams?

  And you've been in charge of that, David.

• 33:22David Hoffman?

  I've been in charge of that. And so I have put them inside of Maker Dow's S-DAI, which is like one of the most conservative versions of yield for stables in the industry. I have considered going for the much higher yield of Gearbox. Gearbox a little bit more aggressive with their farming. You can also do leverage farming then. And this was a protocol that has not seen a full cycle. And so as a rule of thumb, hasn't seen a full cycle. Let's just wait until something bad happens. Gearbox did just fine. Operational across three networks, no bad debt incurred whatsoever. Even the newer protocols that are doing more aggressive yield farming are

• 34:05David Hoffman?

  operating just fine. Ignis, DeFi Ignis put out a thread, kind of just like looking at everything, that talked about everything about DeFi. No significant DeFi liquidations that caused anything to bad happen whatsoever. So DeFi just gets another, after all of the gold stars that DeFi got in the 2022 liquidations, DeFi gets another gold star.

• 34:27Ryan Sean Adams?

  That's actually bullish. That's actually great. By the way, I'm glad you brought up the point of AVE making, like generating revenue. It's not just true for AVE, it's also true, you know, increased volatility, like future transaction fees for Uniswap. Also, do you know the ETH supply was on an upward trajectory, right? Supply was growing. We're not like burning enough ETH to compensate and make Ether ultrasound money. Well, this reversed things in the other direction. So Ethereum is, I guess, a protocol from a burn perspective, making profit. So high volatility days of high usage, generally good for DeFi protocols. And what we want to see is that they do an efficient Orderly unwind of these

• 35:10David Hoffman?

  Efficient and orderly markets, yeah.

• 35:12Ryan Sean Adams?

  Yeah, in fact, that's part of the SEC charter. They're supposed to be doing that. But DeFi is is doing it. And like a 20 to 25% drawdown on Ether, that is not small.

• 35:22David Hoffman?

  That's not small.

• 35:23Ryan Sean Adams?

  That is like black swan territory. Like, imagine if S&P took a 25% down day.

• 35:28David Hoffman?

  Oh, my God. We're here. There would be plenty of I would lock my door.

• 35:33David Hoffman?

  I also want to kind of shout out the LRT ecosystem. This is another ecosystem that has not seen a full cycle and actually had its first meaningful stress test. And so these are all the LRTs that are LSTs that are also wrapped inside of Eigenlayer that also have to very much do like protective risk management to not have a meaningful de-pegging event from all of their collateral that's backing their LRT. And so out of all of them, they all did pretty well. We're looking at, you can see kind of the de-pegging, the they all have a discount to actual fair value because there's a illiquidity discount that's applied to all of them. So you have like Renzo, EtherFi, Kelp, Swell, and Puffer.

• 36:13David Hoffman?

  Renzo's coming in at number one as it's worst off the peg of 0.68, worse as in like, that's as far as it went. It's number one as in it didn't de-peg very much at all. The worst that it got was 0.68%. Next best after Renzo was EtherFi at negative 1%, followed by Kelp at negative 1.25%, followed by Swell and negative 1.5%, and then followed by Puffer at negative 4%. These are all just like the spikes of the worst. These are now all, all of them are returning back to parity. So even the LRT ecosystem, which is brand new, is also like pretty robust. I don't know of any, I haven't seen any sort of liquidations as a result of LRT de-pegging. So you got to kind of give a pat on the back to the LRT ecosystem, too.

• 36:56Ryan Sean Adams?

  Yeah, speaking of that, speaking of trading and volatility, we should shout out our friends and sponsors over at MACHA here. They've got a new trading experience. What's this?

• 37:04David Hoffman?

  Since DeFi doesn't break, you are considering, we haven't even talked about how the, all the other Charles Schwab, Fidelity, all these platforms are down and offline, but MACHA

• 37:16Ryan Sean Adams?

  Oh, yeah.

• 37:17David Hoffman?

  Is online and operational, getting you the best price for all of your on-chain trades. And so if you were trying to save your CDP, backstop your CDP, like put more collateral inside of your loan, or you needed to pay back anything, I hope you use Matcha, because that is where you get the best price, even in extreme market environments, because Matcha is a highly optimized order routing engine, to make sure that you always get the best price. If you are stressed out and needing to source some collateral, I would do it on Matcha. I have done this before.

• 37:46Ryan Sean Adams?

  And can you believe, by the way, that that's TradFi's response to all of this? Like Circuit Breaker, they stopped trading?

• 37:51David Hoffman?

  Yeah.

• 37:52Ryan Sean Adams?

  Just like

• 37:53David Hoffman?

  No, not only are they trading, but like so many people were swarming Charles Schwab that like the website broke.

• 37:58Ryan Sean Adams?

  Wait, so Charles Schwab, like I saw, I think, um, exchange in South Korea, Circuit Breaker stopped trading.

• 38:06David Hoffman?

  South Korea did stop the entire Sarc market. That is what happened.

• 38:09Ryan Sean Adams?

  For like multiple hours, right?

• 38:11David Hoffman?

  Yeah.

• 38:12Ryan Sean Adams?

  You can't get it online. Uh, yeah, it's crazy. You got some charts here, David. So,

• 38:16David Hoffman?

  Okay.

• 38:16Ryan Sean Adams?

  What do the charts tell us at this point in time? Um, are you like, you're zooming out a little bit, right? And seeing

• 38:22David Hoffman?

  Yeah, we're zooming out. We're zooming out. Let me load up my charts again. So we're going to start with other, somebody else's charts that I follow to follow quite frequently.

• 38:31Ryan Sean Adams?

  Yeah.

• 38:31David Hoffman?

  Who's much better at charting than me.

• 38:33Ryan Sean Adams?

  Well, because I think

• 38:33David Hoffman?

  These are not my drawings.

• 38:34Ryan Sean Adams?

  I set up the question. I hope you're going to help answer this with with your chart section, David. Like, set up the question as, okay, is the bull market over? Is that it? We dead now? Do we just kind of like reset? Wait for another four, four years? And like, see you next cycle?

• 38:50David Hoffman?

  I would kind of like to pose the possibility that the bull market never started.

• 38:55Ryan Sean Adams?

  What?

• 38:56David Hoffman?

  Yeah.

• 38:56Ryan Sean Adams?

  I feel like I have you on thumbnails, celebrating the bull, the bull market somewhere in the bankless archives, David. How can you say this?

• 39:02David Hoffman?

  Oh, I'm pulling it back. I'm pulling it back. Uh, okay. So just looking at these charts. Uh, so we have two channels, which are like, you'll call it the bull market channels, which is like, if these things like meaningfully continue, then certainly we're on a bull market as judged by like upwards appreciating price. Uh, ETH, you can see how badly ETH got pummeled versus Bitcoin. Can I zoom in anymore on these things? Kind of. Um, uh, and but ETH has like tapped the bottom of this channel when it got down to all the way down to like 2,260. Bitcoin actually did not do nearly as bad as ETH. So either you think that ETH is oversold, or Bitcoin has more to go, one of these two things. It could go either way. Again, I'm not a charter. But like putting these things into this channel is kind of interesting.

• 39:44David Hoffman?

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

• 40:14Ryan Sean Adams?

  That's tough.

• 40:15David Hoffman?

  That is tough.

• 40:15Ryan Sean Adams?

  Tough for ETH holders.

• 40:17David Hoffman?

  Yeah. Yeah, bigly. How many years is that? Is that two years?

• 40:20Ryan Sean Adams?

  I mean, it's been a fantastic.

• 40:21David Hoffman?

  We're coming up on two years now.

• 40:22Ryan Sean Adams?

  Fantastic narrative for Bitcoin as well. So this might also be like just the strength of Bitcoin this cycle.

• 40:28David Hoffman?

  Bitcoin dominance is at like 55% right now, which is like meaningfully high.

• 40:33Ryan Sean Adams?

  This is not what has happened in the previous two cycles, right? What you'd expect to see in a bull market scenario is that non-Bitcoin assets, particularly assets like Ethereum and others, would appreciate relative to Bitcoin price. So I don't know if this says like Ether is super weak this cycle, or if this says Ether is super strong, or if it says the bull market hasn't really started yet because we haven't seen the non-Bitcoin alt trades, so called.

• 40:57David Hoffman?

  Yeah, I think, I think both of those are interesting perspectives. Typically, the ETH BTC ratio has been like the bull market indicator ratio. As in like, if ETH goes up versus Bitcoin, it's because we're in a bull market. Like Ethereum has more things to do on it than Bitcoin does. And so it's like a measure of exuberance, it's a measure of euphoria, it's a measure of people doing things on-chain. And that has been going down since FTX, since the FTX crash. And so like, that's, that's one perspective. We can also open up, however, the Solana ETH ratio.

• 41:33Ryan Sean Adams?

  So I'm going to open up that on my screen and I'm going to zoom all the way out to, let's do one day candles.

• 41:40Ryan Sean Adams?

  Let's do one day candles. And that has actually been up and staying up. And you know what's interesting, Ryan? This, this vibe that the Solana Ether chart ratio looks like, having gone up 700% since the middle of 2023, it kind of looks like how Ether went up versus Bitcoin in 2020 to 2023. Yeah, I mean, that's another.

• 42:04David Hoffman?

  Doesn't that look like the same thing?

• 42:06Ryan Sean Adams?

  Yeah, there's another interpretation of this data set is like Solana's. Actually, could you show the, um, uh, the, the Solana Bitcoin ratio? Like, what does that look like?

• 42:15David Hoffman?

  Sure.

• 42:16Ryan Sean Adams?

  That'd be kind of interesting.

• 42:17David Hoffman?

  Is that, is that the new ratio chart?

• 42:19Ryan Sean Adams?

  I don't know. I mean, it feels like this cycle Solana is really taking some of the, the steam, the wind out of Ethereum sails for sure. But like, this is not, this is not the same as the ETH Bitcoin ratio, right?

• 42:32David Hoffman?

  It's kind of, it's similar. So I'm trying to actually compare it to the ETH Bitcoin ratio. Uh, and so here's the ETH Bitcoin ratio. And here's the Solana Bitcoin ratio. The Solana Bitcoin ratio looks like this part of the ETH Bitcoin ratio.

• 42:52David Hoffman?

  And I'm not, and I'm actually not implying that therefore then Solana goes down as ETH has over the last two years. I'm saying ETH has gone down because it looks like that.

• 43:01Ryan Sean Adams?

  So what does this mean, do you think, about kind of the, the broader, uh, cycle that we're in? So again, maybe I'll go back to 2020. And another reason this felt sort of like 2020 is like four year cycles. Uh, four years ago, exactly, we had sort of, you remember 2019? We had some, we had some hope and we're getting ready to do, like, we're getting ready at the end of 2019. We're on the bull run. DeFi was real. We're very excited. You know, I started this podcast. DeFi led bull run. We were starting to see crypto assets appreciate.

• 43:32David Hoffman?

  You're talking about right here.

• 43:34Ryan Sean Adams?

  Yeah. Oh, my God. That's, that's very small when you look at it like this, but it felt very large at the time and it was. So we're just gaming, gaining steam in crypto, gearing up for another bull cycle. And then COVID punched us in the face, March 2020, knocked off a lot of like gains recently and sort of delayed the bull run. It feels like four years later, it's kind of what's happening. Or that's one interpretation. Basically now we're going to go on a six month pause, maybe a nine month pause. I'm not sure. Some sort of hiatus with the bull market. But then after that, bull market will resume after kind of like macro events heal themselves.

• 44:10David Hoffman?

  Settle themselves?

• 44:11Ryan Sean Adams?

  Settle themselves.

• 44:12David Hoffman?

  I think, I think this is a valid pattern of, I don't know how much conviction I have in this one to one comparison. But I do remember this moment in the market very, very well, where Ether hadn't been above like $250 for a very long time. We all got really excited in this, what we call like this ghost bubble market in the middle of 2019, which was the plus token Ponzi scheme.

• 44:36Ryan Sean Adams?

  Oh, God. Yeah. Okay.

• 44:38David Hoffman?

  So this Chinese Bitcoin Ponzi scheme ended up raking in like billions and billions of Bitcoin and created this like ghost bull market. And we didn't really know about it after the fact. That popped. And so then Ether went down like another 60% in the middle of 2018 to 2019, down to like $120. And what you're saying is like this period of like, it was like December of 2019 to March of 2020.

• 45:02Ryan Sean Adams?

  Yep.

• 45:03David Hoffman?

  Uniswap was popping off.

• 45:04Ryan Sean Adams?

  Yep.

• 45:05David Hoffman?

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

• 45:22Ryan Sean Adams?

  Back baby.

• 45:23David Hoffman?

  Yep. We're back baby. And then with COVID strikes and we all, it was all true. We just had this like COVID hiatus. And so we had this like, what? 100% increase in ETH price. Bitcoin does the same thing. We had this 100% increase and then like later, if you had just waited, how many more months? One more year, you would be up. Oh God, I can't even scroll that high. You would be up 2,000%.

• 45:51Ryan Sean Adams?

  Exactly, right? So like, look, go back to those. Go back to those March 2020 candles for a second. I can't tell you how many people I know in crypto who got washed out.

• 46:02David Hoffman?

  Who left, who left right here?

• 46:03Ryan Sean Adams?

  They left. It was just like COVID. It's over. You know, because remember, we were like in the depths of despair, 2018, 2019. It was like bear market vibes and then suddenly some signs of life. And then COVID totally shake things upside down.

• 46:19David Hoffman?

  Right.

• 46:19Ryan Sean Adams?

  Right. And a lot of people got knocked, a lot of people were on margin. I almost got liquidated during this.

• 46:24David Hoffman?

  I did get liquidated, yeah.

• 46:25Ryan Sean Adams?

  Really? I was in this market and a lot of people just sold and just didn't get interested. Until crypto had like a, you know, or Ethereum had like a hundred percent or a thousand percent plus rise. And then they got re-interested and they wished they didn't sell. It was a huge washout event.

• 46:40David Hoffman?

  Dude, it's, it's hard, man. Like we, like I said, when Ether, when Bitcoin was at $6,000 and then it broke down to $3,000. Ether was at like 240, 200 and it broke down to $80 in the end of 2018. And we stayed in that range for two years. For 700 days.

• 47:03Ryan Sean Adams?

  Yeah.

• 47:04David Hoffman?

  Before we actually broke out of it. And like, we thought we were getting out of it a year later in that plus token Ponzi. Turns out it was just a Ponzi scheme that made that price go up. And then we, then prices started to go up again. And then COVID hit and we got walloped by another negative 60% candle. It was hard, man. I was numb by the end of this. I was so numb, but then once it was on, it was so obviously on that it wasn't even funny. Like I remember just having like, and once Ether broke between, broke upwards above 230 and it hit 465 for the first time in like three years. Everyone in the industry knew exactly how bullish we were about to be. Uh, and we were totally right. And that's the thing that I've been feeling is missing from this market is like, I've never had

• 47:47David Hoffman?

  that level of conviction that like, oh, absolutely. The bull market is back like I had when it came back in 2020.

• 47:54Ryan Sean Adams?

  Okay, so but if it was going, like if it was an out to 2020, then that would still be in the

• 48:02David Hoffman?

  Today, you mean?

• 48:02Ryan Sean Adams?

  Yeah, today, like you would feel like this is the the March 2020 COVID type macro dump, right? And then your conviction would build that we're in the bull market over the next six months. That's like if it if, you know, it worked out the same way.

• 48:16David Hoffman?

  If we're trying to draw comparisons, we have an exogenous macro event that caused liquidations, it caused like prices to reset, everything went down. And as a result of that, we are now going to get, if this is going to be a similar thing, we're now going to get much more favorable monetary policy. COVID was immaculate. We can't repeat COVID. We literally got STEMI checks mailed to us, dropped in helicopter money into our bank accounts. Like, we can't really repeat that. But we can get like just a softening macro policy. And so as a result of this, if we are carrying forward this analogy that this is bullish for crypto, it's going to be because like there's going to be an easing of global interest rates in monetary policy.

• 48:58Ryan Sean Adams?

  Let's talk about that. So so Powell will get to like the Fed pivot. So Powell has already soft indicated, I saw this last week, the possibility of a rate decrease in September. And the question now is, will he accelerate that timeline? And I guess a few kind of like maybe points of evidence in that favor. And then you tell me the tweets. But just like when I zoom out and look at it, first of all, we are 91 days from the US presidential election. Right? Do you think the White House, the powers that be, Powell, Yellen, etc. Do you think they want a market crash 91 days out from the election? Because

• 49:39Ryan Sean Adams?

  like, doesn't this basically secure the election in Trump's favor? Right? I mean,

• 49:44David Hoffman?

  I have already seen a Twitter account brand this as the Kamala crash.

• 49:48Ryan Sean Adams?

  Okay.

• 49:49David Hoffman?

  I don't know what she did.

• 49:51Ryan Sean Adams?

  That's what the branding is going to be. It's Biden White House shaky economy. You let inflation. Now we've got to.

• 49:56David Hoffman?

  How could they have allowed this to happen? I think I already saw a Trump truth social tweet already blaming this on how this would never or saying this would never happen.

• 50:05Ryan Sean Adams?

  So the incentives on the powers that be is just Biden or Kamala, whoever's operating the ship right now is calling Powell and saying, all right, how can you fix this? Right? So like, that's the incentive. Fix it now before the election. Do something. You have to do something. So that could move out Fed intervention dates. And I don't know what the intervention might look like, whether it's a interest rate decrease or something else more creative, but like that moves it up. And also, there's always been this idea as we've been rationing up rates over the past, you know, two, three plus years that we've been rationing up rates, that the Fed will ratchet up rates until something breaks. This is the clearest sign that something is broken since we had the false, like,

• 50:47Ryan Sean Adams?

  almost, almost something's breaking, breaking, breaking with Silicon Valley Bank. Do you remember that? That was in, was that in 2020?

• 50:54David Hoffman?

  That was 2023. 2023.

• 50:56Ryan Sean Adams?

  That was like March of 2023. And it felt like, oh, my God, is this the thing? Is this going to break the Fed interest rate policy? And they're going to have to reverse course as a result of this? Well, this is another, it feels like a breaking of some Fed policy somewhere that they're going to have to paper over and go fix. So this might accelerate things. What do you think?

• 51:16David Hoffman?

  Yeah, I don't know how. So this is an exogenous factor to like the entire United States economy. This is Japan. Like this is the Japan central bank and a Japanese economy that's reverberated all the way back towards us. What, here's a take from Cyrus Unesi, who I appreciate when it comes to like these macro these macro conditions. He says, an emergency Fed cut would strengthen the yen. So if we devalue the dollar, it would strengthen the yen, which is what is causing the unwinding of the basis trade in the first place. A strong Yang yen is what is liquidating the entire part of the economy that's doing this basis trade. And so an actual Fed cut would actually create a worse condition

• 52:01David Hoffman?

  as it results to, as it is related to these people who are creating this like leverage in the first place. So like on one side, we're like, oh, things are going like prices going down. Let's cut the interest rates. But also as a result of this particular like context, that's actually what would make it things worse.

• 52:17Ryan Sean Adams?

  So you can't just cut rates, right?

• 52:19David Hoffman?

  I don't know.

• 52:20Ryan Sean Adams?

  I say as am I and like I'm thinking that if it's not rates, it's basically sub that in for any central bank intervention of some type to quote unquote, bail out this situation, right? I don't know what that looks like.

• 52:36David Hoffman?

  Japanese bank thing. I think it's the balls in their court.

• 52:38Ryan Sean Adams?

  I think they'll be very creative, but like all of the Bank of Japan and the Fed. I mean, these, these entities work in lockstep, basically. They're all talking to one another. They're all like interdependent on one another. It's just like, it's not just a Japanese, you know, Bank of Japan problem. It's definitely a Fed problem and Powell's going to, I would imagine, do something or be under pressure to do something.

• 53:02David Hoffman?

  I, I can't imagine just on net, I can't imagine making money harder to come by as a result of this than easier. Like to put it in a very like stupid, simple terms.

• 53:14Ryan Sean Adams?

  Some are already calling for this. Uh, I guess was on Squawk Box CNBC, Warren's professor, Jeremy Siegel calls for a 0.75% emergency rate cut by the Fed. So already investors are calling for an emergency. Now I've, I've seen the counter to this, which is like, come on, S and P is still up 10% on the year. Like go cry about it, investors. Like this is not that big of a drop.

• 53:36David Hoffman?

  Right.

• 53:36Ryan Sean Adams?

  You know, you can't start triggering, like it would be a bad idea to start intervening after just like a, you know, a run of the mill market correction. So there's that take out there as well.

• 53:49David Hoffman?

  So we'll bring in another confluence of factors in addition to the ones that we all listed earlier, like in addition to the conflict that the market is wary about in the Middle East, uh, we also just have like a looming recession. Uh, and so one of the inputs into this very strong pullback in the traditional equities markets is fears of recession inside of the United States. Uh, and so, um, the jobs report inside of America has been bad, uh, which would bolster this idea of actually cutting, uh, Federal Reserve interest rates. Uh, and so like, that's also happening. And so we have also have to look at our own like domestic numbers. That's like, kind of why this, this meme at the very start that I introduced, where like no one actually really knows what's going on here.

• 54:31David Hoffman?

  It's like, there's like seven different relevant like inputs into the current state of things.

• 54:36Ryan Sean Adams?

  Yeah, I mean, a few more. We've got this in kind of the last section here, but Lockheed Martin's stock price is up 25%. Big defense contractor. Like, why did that happen?

• 54:45David Hoffman?

  Just bellwether of people like worried about World War III.

• 54:49Ryan Sean Adams?

  Yeah, war bellwether, basically. Middle East braces for a week that could determine the course of the Gaza War. So again, that's still like going on. Also Buffett is dumping.

• 54:59David Hoffman?

  Yeah, Buffett was like dumping this shit, excuse me, out of Apple and Bank of America all last week and is now sitting on like $270 billion of cash. Like when I saw that last week, I'm like, hmm, I wonder what he knows. And then like literally the next day ETH is down 20%.

• 55:19Ryan Sean Adams?

  Just follow Buffett in trade. So there's a lot going on right now. Okay, so how does this change things? I remember a recent Bankless episode, I don't know, probably within the last 30 to 60 days or so, we were talking about the bullish setup and indeed it felt like that.

• 55:33David Hoffman?

  Wait, were we bullish? I'm guessing we were bullish.

• 55:37Ryan Sean Adams?

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

• 55:58David Hoffman?

  Yeah, so let's take these one by one, because that's what we did when we first talked about this take. Trump election locked in. That was written right after the Biden stepped down and the assassination attempt. Yeah, right after the assassination attempt, Biden had just stepped down and promoted like Kamala Harris as the candidate. And to me, in my mind, my interpretation was like, oh, well, that's over. Like, Trump election likelihood at all time highs, pre apparent like a wave of surge of support for Kamala Harris, which I did not expect. And so you actually, I can't really tell if we can really say the election is locked in for Trump. There's a bunch of like-

• 56:35Ryan Sean Adams?

  It's become, it's become more profitable.

• 56:37David Hoffman?

  Much more narrow.

• 56:39Ryan Sean Adams?

  It's like, go look at the poly market, right? I don't know if you've seen this lately, but you know, it was

• 56:44David Hoffman?

  Like 45, 55 or something.

• 56:45Ryan Sean Adams?

  Something like this, yes.

• 56:46David Hoffman?

  Yeah. Uh, JD Vance is extremely pro crypto VP for Trump. I mean, still true, but Trump also has to get elected for that to be relevant. Also, like, people are saying like JD Vance is weird, so maybe he's actually holding Trump back. I don't know, TBD. Jamie Dimon bullish because of Trump, uh, bullish Bitcoin. Uh, I'm not sure how much substance that had. That might've been just a rumor that I ended up regurgitating. Sorry. Gary Gensler resignation, that's a hundred percent still happening. Uh, that happens either way. I'm pretty sure like, like I'm them, so I'm gonna bet.

• 57:17Ryan Sean Adams?

  I don't know about that. I don't know about that.

• 57:19David Hoffman?

  Yeah. I think there's a pretty, even if, even if the Dems get elected, I still think they replace Gary Gensler.

• 57:25Ryan Sean Adams?

  The Elizabeth Warren, uh, chokehold on the Democratic Party.

• 57:29David Hoffman?

  Uh, is not as strong as it was a few months ago.

• 57:33Ryan Sean Adams?

  But this is pre-election. I'm, I'm worried that the grip is loosening right now. The chokehold is loosening right now because it's election season and you can't be too far left. You can't be too Warren. But then if Kamala gets elected, perhaps that grip resumes again. We'll have to see.

• 57:48David Hoffman?

  Here is, speaking of Warren's shenanigans, uh, she apparently just wrote a letter to the CFTC. I haven't actually read this full letter because it was happening while we were, um, going live. Uh, but, um, trying to basically inhibit, uh, prediction markets.

• 58:05Ryan Sean Adams?

  Poly market.

• 58:06David Hoffman?

  Specifically election prediction markets, which is basically naming poly market without actually naming poly market. I'll read this letter in a second, uh, but this is a

• 58:15Ryan Sean Adams?

  She hasn't stopped.

• 58:17David Hoffman?

  She hasn't stopped yet. She's still now, now she's going after the CFTC and for prediction markets. Uh, anyways, so yeah, still, still unfriendly to crypto. Uh, ETFs approved, that happened, um, waiting for inflows. Uh, they can't overcome an entire, uh, Japanese economy nuking, um, but we still have them. Speculation that Trump wants Bitcoin on the Fed balance sheet. That turned into real substance. Uh, he doesn't want to buy Bitcoin. He just wants to not sell the Bitcoin that we do have, that we've confiscated. And I think like not creating sell pressure and creating buy pressure is actually the same thing. So if we have $2 billion of Bitcoin and we don't sell it, that's equivalent to buying $2 billion of Bitcoin as far as I'm concerned. Uh, and, uh, the Fed, Fed rate cycle cut is looming.

• 59:02David Hoffman?

  Uh, the cut cycle is looming, uh, still out there. So some of these things have definitely gone away. Uh, but you know what has also gone away? Ryan?

• 59:09Ryan Sean Adams?

  What's that?

• 59:10David Hoffman?

  25% of crypto prices. So you should therefore be 25% more bullish at these current prices.

• 59:18Ryan Sean Adams?

  Right. Uh, so insane bullish setup. Would you rephrase that? Would you like, what, how would you express this sentiment today? Because many of these things are still true-ish. If you take a crypto in isolation, it's just everything surrounding crypto has changed. The macro environment has changed. I mean, we're looking at something significant that we just stumbled upon that gets worse from here. Um, do you have any takes on the, the bullishness of crypto at this point in time?

• 59:48David Hoffman?

  I think we're getting a lot of clarity this week as to what exactly is going on. Uh, and how much is related to Japan? How much is related to other reasons? Um, I think if you bought yesterday, congrats, especially if you felt sick to your stomach and you bought anyways. That's like awesome. And I'm, that's just like a very cool skill to have. Not many people can do that. I, it might be bold to buy, but that is what it calls. That's how you make great trades. Um, I think it's a great time.

• 1:00:16Ryan Sean Adams?

  I guess, uh, my take on this is this, this kind of shows the value of, of positioning. Like all of the work that you've done today. And it's like, I remember we were just talking about cycles where you and I were both positioned, uh, much worse than we are today. Right? Because

• 1:00:31David Hoffman?

  Yeah.

• 1:00:31Ryan Sean Adams?

  Exactly. Did not understand offsides. And I think there's like basically three states of your portfolio positioning. Like one is poorly positioned. These tend to be like first cycler's, uh, second cycler's. And you know, you are poorly positioned if you have trades on margin. So if, if you're doing the margin trading thing on a highly volatile asset like crypto and you're feeling that pain now, that's how you know. If you have other things in your life expenses, like credit card debt, and you're looking at your crypto portfolio and being like, I can't pay my credit card bills. You are poorly positioned. If your spouse or partner has not bought in on your risk tolerance level with your portfolio. How many times has that story played out? If you have no emergency cash reserve and you're looking at that, you know, your net worth go down and you're like,

• 1:01:15Ryan Sean Adams?

  this is not good. I can't pay my rent. I can't pay my bills. You are definitely poorly positioned, right?

• 1:01:22David Hoffman?

  Yeah.

• 1:01:22Ryan Sean Adams?

  Well positioned is you have no margin trades, you know, like your, your, your, your bad debt is paid off. You don't have a credit card debt. You got maybe mortgage, something like this. Uh, you're fine if your crypto portfolio just trades like 80% down, even 95% down. You're allocated to crypto assets that will revive when the, the, the macro market improves. And you are God positioned. This is the last year. If you actually have that dry powder, if you have like 20%.

• 1:01:50David Hoffman?

  Powder? Wow.

• 1:01:50Ryan Sean Adams?

  Yeah. And you can buy, you are, you're a God positioned. And like the general advice is if you're poorly positioned, that's how you learn. That's how it starts. Your objective is just to survive and continue in the space. And like try, try, try, try to meet those, uh, margin call obligations. If you are well positioned, great time to hold, just hold. I think ignore the noise. Don't trade on emotion right now. Things are being priced in at the moment. What can you do? You don't know anything, just hold. And if you're God positioned, obviously this is the start of.

• 1:02:22David Hoffman?

  You've been, you, you, if you're God positioned, you already know exactly what you're doing.

• 1:02:26Ryan Sean Adams?

  Yeah. And it just strikes me as like, all of that positioning is work that you did as an investor over the last two years. And it just like, this is the moment where you can kind of like realize the benefits of some of that long-term planning. I, for me, I'm somewhere between well positioned. I'm not quite God positioned. I would love to have like 20%.

• 1:02:47David Hoffman?

  Yeah. Wait, are you making any moves?

• 1:02:50Ryan Sean Adams?

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

• 1:03:04David Hoffman?

  Yeah.

• 1:03:05Ryan Sean Adams?

  20, 10 to 20% was kind of my aim. Uh, I was trying to sell on the way up in order to get there in dry powder. I didn't quite get it. So I have some dry powder, but not as much as I'd like to start doing the buy strategy here.

• 1:03:19David Hoffman?

  That's generally always my position is like I have a like a trickle of dry powder and it's never as much as I want to actually make meaningful moves.

• 1:03:26Ryan Sean Adams?

  Yes.

• 1:03:27David Hoffman?

  Because I'm generally always fully allocated to.

• 1:03:29Ryan Sean Adams?

  Yeah, you're more in than out, right?

• 1:03:30David Hoffman?

  I'm always more in than out and there's no way that I'm selling like $3,500 Ether just to protect myself in the event of like a downside.

• 1:03:39Ryan Sean Adams?

  Exactly.

• 1:03:40David Hoffman?

  Because I'm trying to sell like, like $15,000 Ether to protect myself from the event of a downside. Like I'm not, and we're not there yet.

• 1:03:47Ryan Sean Adams?

  Exactly, not there yet. So that's how things break down. We'll have to see how things emerge. Of course, we have a roll up. David, you got a meme to end with. So what are we looking at here?

• 1:03:55David Hoffman?

  This is Kevin Awaki. This is two guys saying the same thing, but one's looking at the window facing a rock and the other one's looking at out the window like looking at a fantastic view. And they are both saying the market is down 30%. Time to reset and rebuild.

• 1:04:10Ryan Sean Adams?

  We're back in the.

• 1:04:11David Hoffman?

  It's only up for here. It can only go up.

• 1:04:13Ryan Sean Adams?

  Back in the market. Alright guys, well, we will end with this. Of course, this disclaimer is more meaningful. You know crypto is risky. You could lose what you put in, but we are headed west. This is the frontier, not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

• 1:04:28David Hoffman?

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