ROLLUP: Crazy Markets Week | Prediction Markets Bad? | Zora Release | More Gensler Ls | Trump’s DeFi Sons

This week in crypto we saw markets…stumble? Then recover? Is the 2024 bull run over? Elizabeth Warren is targeting prediction markets and the crypto community is pushing back, obviously. Meanwhile, SEC Chair Gary Gensler also faces setbacks…more L’s? Zora’s latest release promises to shake up the NFT world. And in a surprising twist, Trump's children have reportedly taken a keen interest in…DeFi…? ------ 🍵MATCHA | NEW PRICING ENGINE https://go.0x.org/matcha-v2-pod ------ BANKLESS SPONSOR TOOLS: 🐙 KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🛞 MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🦄 UNISWAP | BROWSER EXTENSION https://bankless.cc/uniswap 🌐 OBOL | STAKE ON DVs, SCALE ETHEREUM https://bankless.cc/obol ⚡️ CARTESI | LINUX-POWERED ROLLUPS https://bankless.cc/CartesiGovernance 🗣️ TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/46 ------ TIMESTAMPS & RESOURCES 0:00 Intro 2:50 What happened to markets? https://x.com/dougboneparth/status/1820448580290724222 https://www.cnbc.com/2024/08/05/carry-trades-a-major-unwinding-is-underway-amid-a-stock-sell-off.html https://x.com/KobeissiLetter/status/1819753746202546478 https://x.com/radarhits/status/1820091232770572794 https://www.coindesk.com/markets/2024/08/08/kamala-harris-donald-trump-tied-on-polymarket-on-who-will-be-the-next-us-president/ https://x.com/WatcherGuru/status/1820554001450258522 https://x.com/KobeissiLetter/status/1820897733143585209 11:27 What happened since Monday https://www.reuters.com/markets/asia/boj-wont-raise-rates-when-markets-unstable-deputy-governor-says-2024-08-07/ https://x.com/peruvian_bull/status/1820999796334981126 https://x.com/NickTimiraos/status/1821532870529396989 https://x.com/Polymarket/status/1820869310119662035 https://x.com/KobeissiLetter/status/1820870572093448299 14:31 Bankless Episodes - Livestream & Tom Lee https://www.youtube.com/live/CIbt2xlBJ5A?si=_60rGAl_9zzv-H0C https://youtu.be/lD9774SuP3E?si=-a3Zmt-1r6aS22xq 22:24 Jump Capital is selling its crypto positions https://x.com/lookonchain/status/1820321011730116636 25:17 Highest ETH ETF inflows since their launch https://x.com/zerohedge/status/1821143966462484640 https://x.com/TommyWorldPower/status/1821091488132165719 https://www.cnbc.com/2024/08/02/morgan-stanley-wealth-advisors-bitcoin-etfs.html 27:10 Why is ETH so weak? https://x.com/RyanSAdams/status/1821534234382627195 https://imgur.com/TsIvCPi https://x.com/ceterispar1bus/status/1820842327901954453 33:38 Strong earnings for key crypto companies in Q2…what we can learn? https://s27.q4cdn.com/397450999/files/doc_financials/2024/q2/Q2-24-Shareholder-Letter.pdf https://www.theblock.co/post/310136/robinhoods-q2-crypto-revenues-up-161-as-trading-volume-hits-21-5-billion https://x.com/wazzcrypto/status/1786139849197551637 36:56 Are Prediction Markets bad? Sen. Warren thinks so https://www.merkley.senate.gov/wp-content/uploads/CFTC-Letter-FINAL.pdf https://x.com/mansourtarek_/status/1820486209031766204 https://x.com/matthew_d_green/status/1821146583955583068 https://x.com/iamDCinvestor/status/1821361435449962562 https://x.com/hasufl/status/1820818054621622673 https://x.com/LWarho/status/1820888617469771813 https://x.com/Domahhhh/status/1821208004529942713 https://x.com/TrustlessState/status/1821178136282726643 48:02 Zora protocol now creates pools on Uniswap! https://x.com/js_horne/status/1821215028457967757 https://x.com/haydenzadams/status/1821229811689517401 https://x.com/tbtstl/status/1821217611935273368 50:11 Ripple Labs settled with SEC & More Ls https://x.com/EleanorTerrett/status/1821276946921345341 https://x.com/lex_node/status/1821282897921503742 https://x.com/bgarlinghouse/status/1821289051191963861 https://storage.courtlistener.com/recap/gov.uscourts.nysd.599908/gov.uscourts.nysd.599908.150.0.pdf https://x.com/RyanSAdams/status/1821169925769044250 https://x.com/EleanorTerrett/status/1820540465609130052 53:25 Were Eric and Donald Trump Jr DeFi-pilled? https://x.com/EricTrump/status/1820906993802211751 https://x.com/DonaldJTrumpJr/status/1821164331020517596 55:04 Where did Brian Armstrong’s co-founder go? https://x.com/fehrsam/status/1820859394361610338 57:10 MEME of the Week https://media.discordapp.net/attachments/1257324353301905579/1270790505357115674/image0.jpg?ex=66b5a422&is=66b452a2&hm=33fc015ff27ad80a11172c464d2edb054bd418d5234be0088788f6946593404f&=&format=webp&width=1620&height=1843 https://media.discordapp.net/attachments/1257324353301905579/1270790505357115674/image0.jpg?ex=66b5a422&is=66b452a2&hm=33fc015ff27ad80a11172c464d2edb054bd418d5234be0088788f6946593404f&=&format=webp&width=1620&height=1843 58:28 Closing & Disclosures ------ 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.

• 0:04Ryan Sean Adams?

  Bankless Nation has been quite the week. Crypto sentiment is pivoting very bearish this week. Price drops, liquidations. You're not bearish, David?

• 0:12David Hoffman?

  I'm not bearish.

• 0:13Ryan Sean Adams?

  But this is some pretty dark days, it felt like, on Sunday and Monday earlier this week. We haven't seen this kind of activity since 2022. What do we got on the weekly rollup today?

• 0:23David Hoffman?

  We're gonna cover what the hell happened in the markets over the weekend, and also what's happened since then. Are we out of the woods, or are we just getting started? Is the bull market over? And is there more to be fearful of? Or what the hell's going on? There's a lot of different takes out there. Both good indicators and bad indicators, we'll talk about them both. But then we're also gonna talk about prediction markets, because we've talked about prediction markets every single week in the weekly rollup for a long time now. And now, it has been too good in the prediction markets land, so some of the bears are coming out to raise their heads, including Elizabeth Warren is one of them. And so we'll talk about that as well.

• 0:55Ryan Sean Adams?

  Got some good news on the week, not just bad news in markets. Gary Gensler's taken some more L's on the week. His budget is getting slashed.

• 1:03David Hoffman?

  That's the worst L you can take.

• 1:05Ryan Sean Adams?

  Yeah, also, we got some big releases on Zora to talk about. And Trump's kids, including Donald Trump Jr. and Eric, are discovering their true passions, actually for DeFi. They called it their true love this week. What is going on with that?

• 1:17David Hoffman?

  Yeah, they're discovering a brand-new hashtag. Did you see their hashtag that they created?

• 1:21Ryan Sean Adams?

  I did not, actually. It was something like #Defiant.

• 1:25David Hoffman?

  #BeDefiant.

• 1:30Ryan Sean Adams?

  Be defiant, okay.

• 1:31David Hoffman?

  Be defiant. That's the hashtag that they're creating for DeFi.

• 1:35Ryan Sean Adams?

  Thanks for the meme, Trump boys.

• 1:37David Hoffman?

  Thanks, guys. Nailed it. All right, as we get into the markets, we first want to talk about our friends and sponsors over at Matcha. If you were emergency trading on Sunday night because you needed to backstop your loans, I hope that you went to Matcha, because they were the ones who were gonna give you the most ether or the most collateral, whatever you're buying, because that's what they do. They are an optimizer of all the many different routes of liquidity and liquidity pools that could possibly happen on Ethereum. There's bajillions of permutations. Matcha scans and optimizes through all of them to make sure that you get the most profit on your trades, even when times are dire and gas is at 700, of which it did spike too. And so, Matcha combines a user-friendly app with a very serious, powerful on-chain engine to make sure that you get the best price on your trade. There is a link in the show notes.

• 2:22David Hoffman?

  Hopefully, you don't need to make emergency trades. But whenever I do make emergency trades, I do it with Matcha.

• 2:29Ryan Sean Adams?

  Nice to know in crypto, nice to know in DeFi, like the exchange doesn't go down. You know the, the South Korean exchange on, was this Monday morning or Sunday? Just like stopped, just trigger the breaker, it stopped.

• 2:39David Hoffman?

  Oh, yeah, they intentionally stopped it.

• 2:41Ryan Sean Adams?

  Yeah, that's what they do. Not Latcha, you know, 24/7, never stops.

• 2:47David Hoffman?

  I guess, I guess that means the liquidations also get stopped though, too.

• 2:49Ryan Sean Adams?

  Yeah, that's true. All right, David, let's, let's talk about this bloody Sunday and into Monday. We're going to do this in two parts, I think. So first, let's talk about what happened on Sunday and Monday. And we're going to look at some chart gore. And then let's talk about what happened since that time up until the time of recording. So David, I got some charts for you. Ready? Hide your eyes, avert your eyes.

• 3:09David Hoffman?

  Oh, wait, no, it's going up, it's going up.

• 3:10Ryan Sean Adams?

  Yeah, okay. So this first chart, we don't typically look at on the biggest weekly roll up. Because you only, you only look at it when like really bad things are happening. Okay, so the, the, the chart is going up and that's because the market is panicked. This is the VIX chart. And the spikes are basically panic volatility in the market, extreme kind of like fear type scenarios. And you see the spike, this happened on Sunday and into Monday. This is as large as the spikes on 2020, COVID, right? March 2020, and then back to 2008, financial recession. So it was on that level, that order of magnitude with respect to how fearful the market was earlier this week. And we could look at the crypto charts too here, David. Look at these spikes down.

• 3:54Ryan Sean Adams?

  This is Bitcoin, thanks to Kraken charts, this is Bitcoin spiked down. We haven't seen one of these red candles in a very long time. This is Ether, look at this.

• 4:04David Hoffman?

  Yeah, that's bad. I can't like. Ether on Saturday, Sunday was just going down all weekend as people were, we'll talk about this. As people were unwinding the carry trade that we'll talk about. And then Ether goes from like 3,400 down to 3,000, down to 2,800. And I'm like, oh, it's one of those times where just like, you know, bearish, really bearish pullback. Prices are dipping, red candles are everywhere. But I've seen this before, like I'm a veteran, I know what this looks like. And so I just like tweet out.

• 4:30Ryan Sean Adams?

  It's a pullback.

• 4:30David Hoffman?

  I'll see you like, wake me up at 1900. Like I'm not going to bother until I see 1900. And I shit you not, 45 minutes later, it had. Half 1900. I'm like, whoa, that got there really fast.

• 4:42Ryan Sean Adams?

  Were you excited about this?

• 4:44David Hoffman?

  Or were you just like watching the charts? It was just like, oh, man, somebody is getting carded out. Somebody, like, people are getting liquidated left and right.

• 4:51Ryan Sean Adams?

  When, I mean, I don't, I don't remember the last spike like this. I mean, probably 2022.

• 4:57David Hoffman?

  FTX.

• 4:58Ryan Sean Adams?

  But we kind of, that was so insular to crypto. We sort of knew what was going on. This was like some unseen enemy.

• 5:05David Hoffman?

  The last time there was an exogenous market event that caused the liquidations in crypto was COVID, was the COVID crash.

• 5:11Ryan Sean Adams?

  Okay, so we were all trying to unpack this on Monday to figure out what actually happened on Monday and into Tuesday. So what are the reasons? Why did we get this spike down? Why did the VIX spike in the way that we just talked about?

• 5:24David Hoffman?

  There is definitely a confluence of factors and we'll talk about all of them. The number one that is being ascribed to is the unwinding of the Japanese yen carry trade. And so the Central Bank of Japan has been holding a 0% interest rate for quite a long time. Meanwhile, over the last two years, the United States Federal Reserve has increased interest rates up to 5.5%, which means if you have any money inside of the American economy, you can get a risk-free 5.5% in United States Treasuries. If you can borrow money from Japan at 0%, where their interest rates have been for the last forever, you can borrow free money from Japan and then you can get 5.5% in the American stock market for free, for free. And so 5.5% is the base when people are buying bonds.

• 6:10David Hoffman?

  Somebody comes into the bond market and then that pushes the marginal person out of the bond market who wants a little bit more risk. So it goes into the equities market. It goes into Nvidia stock. It goes into crypto. And so a lot of this, a lot of the market was holding up this leverage, this winding up of leverage as people were juicing this carry trade between Japan and the American economy. The Japanese Central Bank decides to raise interest rates by 0.25% because of the weakening yen. And they do not want to have the yen inflate because we have seen the pressures that has been put on the American individuals and on global individuals from inflation. Inflation, bad. For consumers, so the Japanese central bank doesn't want that. And so they are experiencing inflation in the yen, so they decide to raise interest rates,

• 6:55David Hoffman?

  which squeezes the ability to run this carry trade. So when it goes up by 0.25%, like the yen actually appreciates, and that's the denominator that everyone has been borrowing from in Japan. And so all of a sudden, when the yen goes up in price, everyone's been borrowing and then shorting the yen, basically. And so not only is your cost of capital going up, but like now you have to repay at a higher loan. And then it's also indicative of like, well, if they keep on raising, like this is going to get squeezed even farther. So people just unwind the trade, which causes mass selling in the American stock market, which hits risk assets specifically the hardest. That's like the number one reason why people are saying that this happened.

• 7:34Ryan Sean Adams?

  Yeah, it's crazy that just like a 0.25% raise causes this cascade of factors.

• 7:39David Hoffman?

  Prices set on the margins.

• 7:41Ryan Sean Adams?

  Yeah, it's so levered up. So right now, the Bank of Japan balance sheet is larger than any country's GDP at 127.5% of GDP, right? And so like, as you're saying, when you unwind this trade, basically you have to go buy yen in order to pay off your loans. And in order to buy that yen-

• 8:00David Hoffman?

  It's almost a short squeeze on the yen.

• 8:01Ryan Sean Adams?

  Yeah, you have to, and you have to sell your other assets. You have to sell your treasuries and like mostly it's not treasuries. It's like risk on assets because we've been in risk on season. So you sell your crypto, you sell your Nvidia stock. So we saw that unwind happen quite rapidly on Sunday and Monday, and the market kind of waking up to this. But that's not the only reason. What else we got?

• 8:21David Hoffman?

  The only reason. The US economy has also got hit with this like not great jobs report. So 71,000 fewer jobs than what was estimated came in in this jobs report. And also unemployment has been trending upwards. It's at 4.3%. And when unemployment trends, it trends hard. It's like a hard thing to reverse. And so when we notice an upward trend in the jobs report, investors are like rut row. We've been saying this R word, this recession word for like three years now. And so like people are real sensitive to it. And we are now starting to finally rear its head potentially with this jobs report. You get you get that paired with like some other market signals like Warren Buffett selling

• 9:03David Hoffman?

  half of his Apple stock like just dumping all of his Bank of America stock sitting on almost $300 billion in cash.

• 9:10Ryan Sean Adams?

  Cash.

• 9:10David Hoffman?

  Everyone watches Warren Buffett like we need to see what he's up to and when Warren Buffett is on cash like everyone knows it and so it just adds even more jitters, I would say.

• 9:20Ryan Sean Adams?

  Yeah.

• 9:21David Hoffman?

  It's not just that, there's also just like escalation in the Middle East. There was this Hamas leader that was assassinated inside of Iran, inside of Iran's territory, which is, you know, an affront to Iran. No one knows who actually did this assassination, but like Iran is like, we're, is obviously Israel. And so like they have been posturing with some very big language towards Israel. That actually didn't come to pass this week, but like nonetheless, that's what like markets don't like this level of uncertainty.

• 9:49Ryan Sean Adams?

  Just jittery, jittery.

• 9:50David Hoffman?

  Just jittery, jittery left and right.

• 9:52Ryan Sean Adams?

  And like, it's just like a little spark can like cause all of this volatility. So it's 0.25 raise or it's like an assassination of a political leader. And it's like, it's not like this hasn't happened historically, right? So like the assassination from like Franz Ferdinand in Serbia started World War I.

• 10:07David Hoffman?

  Small little spark, you know?

• 10:07Ryan Sean Adams?

  Do you know what I mean?

• 10:08David Hoffman?

  Decimated the stock market.

• 10:09Ryan Sean Adams?

  So it's not irrational necessarily for the market to behave this way, but go on. What else we got?

• 10:16David Hoffman?

  Also, just Kamala Harris and Donald Trump are now like neck and neck in prediction markets. So polymarket, which has generally always leaned towards Trump ahead of other prediction markets is now putting Donald Trump and Kamala Harris at a 50 50 split. Predict it, I think even has Kamala in the lead and Trump has been known to be the pro markets candidate. And so the market, especially the crypto market, might have started to unprice in a Trump victory. So I was like, okay, like maybe we got a little bit of unwrinding that too. Let's unwind, yeah, exactly. Let's unwind that from well. All in all, like it's probably the end carry trade that's impacting the markets the most, but overall, just like add fear, uncertainty and doubt into into the into the market. Not to mention like

• 10:58David Hoffman?

  the very high highs that we had been at just 15 days earlier. Like the stock market climbs a wall of worry and like Nvidia has been just taking this entire economy, this entire stock market on a Walk upwards.

• 11:09Ryan Sean Adams?

  Yeah.

• 11:09David Hoffman?

  Yeah. Microsoft too. And overall, what do we get when we get all, when we add all of these things up is like, we get a loss of 1.8 trillion dollars of market cap.

• 11:18Ryan Sean Adams?

  That's like one crypto.

• 11:19David Hoffman?

  It's gone. It's gone.

• 11:20Ryan Sean Adams?

  Wiped away in like one day. This happened on Monday. All this red that you see is all from the, uh, the equities markets on Monday. Okay. So that was Sunday and Monday. And then it felt like on Tuesday, we just kind of like took a deep breath, got some breathing.

• 11:34David Hoffman?

  Okay. New normal. All right.

• 11:36Ryan Sean Adams?

  All right. And then on Wednesday, we sort of let things settle. Like where are we now in the markets? What's gone on since then? How are people feeling and reacting? What are some of the new data points coming out?

• 11:46David Hoffman?

  I would say we have erased some of the fears as in like some of the fundamentals have kind of been like walked back. So the Bank of Japan announced that it won't hike rates when markets are unstable. So the Bank of Japan was like, oh, whoa, we didn't mean that. Like, yikes, sorry.

• 12:02Ryan Sean Adams?

  Sorry, everybody.

• 12:03David Hoffman?

  And so, uh, so like the, the comment here is after an amazing 25 total basis points of hikes, the Bank of Japan is done with their hiking cycle. So like totally folding. And honestly, this is what, this is what happens when you're a minority central bank. Like Japan, Japan actually needs to go be looking across the pond at America and make sure that they didn't just cause a recession in America. If they didn't cause a recession in America, they actually do have the tolerance to go back and hike rates, but they first need to make sure that they are not causing a recession in America.

• 12:34Ryan Sean Adams?

  Oh yeah. There were some phone calls made. Let's just say that.

• 12:37David Hoffman?

  Certainly, certainly. Also, there's this indication and some other stats and analysis and metrics that the US jobs report actually is not that crazy. There is a seasonal adjustment of jobs. And so when you adjust it seasonally, uh, this, uh, this Twitter account, who knows more than me, Nick Timmaros, uh, says that this has arrested fears that the United States labor market is imminently weakening when you adjust it seasonally. Claims continue to run to their year earlier and to their 2018 to 2019 levels. So jobless claims that we've seen before. So, you know, maybe not, not so crazy. If you believe polymarket, the odds of recession are down to 15% from 25% where it was over the weekend. And then as well, uh, the, it's just the federal, the, our Federal Reserve, our central

• 13:21David Hoffman?

  bank, uh, is being predicted to not change rates because they're not going to just like allow the market to whip them into changing rates. So it's being, even though we don't know. There's a, the next September federal meeting is in September. We actually just had one and we had just had one just before this happened, which was one of the many causes of this fear was like, oh, the Fed just decided to like not change rates and that happened two days ago, which means they're not going to meet for another long while.

• 13:50Ryan Sean Adams?

  Yeah. And are they waiting too long? Are they causing recession that was in the background?

• 13:54David Hoffman?

  Right. So, I mean, like, and also like prices didn't go down anymore on Tuesday. They actually bounced back up.

• 14:02Ryan Sean Adams?

  Yeah.

• 14:02David Hoffman?

  And so like, if you pull up in like the S and P chart, we fell like a solid nine percent from the all time highs down to the bottom was a drop of nine percent from July 15th to Monday was a drop of nine percent. And then we have since regained 3.5% just this week. So lost nine percent over the last three weeks, gained back three with 3.5% in the last three days. To me, it looks like a very normal pullback off of just a bunch of market chitters.

• 14:31Ryan Sean Adams?

  It's kind of up to like, it's choose your own adventure time, man. It's up to interpretation at this point. It's, it's, there's almost a crossroad. You can go with the bull case and the bull case, I think Tom Lee earlier in the week kind of put it well. He called this a growth scare. This is not a collapse. He says this is, this is a pullback. Investors are afraid of a recession. He said, he doesn't think we're actually in a recession. Some data points coming in September and later will sort of confirm some of that, that the US economy is actually not that bad and that this was a pullback as part of the cycle, similar to what you're saying. There's still bears out there, David, that are saying-

• 15:07David Hoffman?

  There's always a bear somewhere.

• 15:08Ryan Sean Adams?

  Oh yeah. But like the bears, the magnitude of like the conversation just increases when you have events like this. And the bears are basically like, hey, look, we've been in an everything bubble for a very long time. Look at earnings for AI companies, right? It's just like they, they haven't really performed based on the lofty expectations of investors. So you have like whiffs of dot com, like bubbles, and also the global economy is on kind of shaky ground and the US is already in a recession. We're starting to see that with unemployment numbers and that kind of thing. So I think for the investor, the crypto investor, it's sort of a choose your own adventure, right? I'll say for myself personally, I'm skewed bullish,

• 15:52Ryan Sean Adams?

  but like that's my general, that's my general disposition. Want to be ready for a bear market, but I'm definitely skewing bullish at this point.

• 16:02David Hoffman?

  Yeah, you did an episode with Tom Lee that I am halfway through and it's been, it's been very, very good. Guy's really smart. And so if you bankless nation have not listened to that, there's a link in the show notes. So you can go listen to Ryan and Tom Lee. We also did an emergency livestream, more deeply unpacking just the events that unfolded over the weekend. Both of these things are in your podcast player if you so choose. All right. Coming up next in the weekly roll up, we're going to dive into the crypto market specifically and their reaction. We are not done with our market section. Also, why the hell is ETH so weak relative to Bitcoin and Sol? I demand answers. And are prediction markets good for society? Or are they a front to democracy? Ponder that question because we will answer it very clearly as we get back from some of these sponsors that make

• 16:46David Hoffman?

  this show possible, especially Kraken, the place where I was watching all the market turmoil this weekend. Got to get your charts somewhere. I get mine at Kraken. Let's go hear from them right now. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive, and fair financial system, making it simple and secure for everyone, everywhere to trade crypto. Kraken's intuitive trading tools are designed to grow with you, empowering you to make your first or your hundredth trade in just a few clicks. And there's an award-winning client support team available 24/7 to help you along the way, along with a whole range of educational guides, articles, and videos. With products and features like Kraken Pro and Kraken NFT Marketplace and a seamless app to bring it all together,

• 17:30David Hoffman?

  it's really the perfect place to get your complete crypto experience. So check out the simple, secure, and powerful way for everyone to trade crypto, whether you're a complete beginner or a seasoned pro. Go to kraken.com/banklist to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. The Obol Collective is up and running and is maybe one of the most important collectives that you've never heard of. Obol is bringing distributed validators, or DVs, to the Ethereum staking stack. Distributed validators allow multiple parties of people running multiple nodes to create a single virtual Ethereum validator. Together, this makes participating in Ethereum consensus more accessible, more affordable, and more inclusive. It is a strict improvement to the Ethereum staking tech stack with collaboration from Lido, EtherFi, and 50 other entities and thousands of individuals.

• 18:15David Hoffman?

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• 19:00David Hoffman?

  The Toku team understands the crypto space inside and out and will ensure your token launch is fully compliant while maximizing tax efficiency. Toku can connect you with the best attorneys if you need them to make sure that you have the best advice. And Toku can help optimize your taxes so you pay the least possible amount of taxes while still maintaining legal compliance. With Toku's guidance, you can concentrate on building your company while Toku handles the logistics. Token launches don't have to be complicated. Talk to Toku today to get a free initial token valuation. And we're back and we're going to start with the total crypto market cap today because it fell basically down to $2 trillion. Almost touched $2 trillion. We are up to $2.18 trillion. I believe last week it was $2.4 trillion.

• 19:39Ryan Sean Adams?

  Okay, so what does that mean? So we lost about 300 million, 500, 400 million, something like that?

• 19:44David Hoffman?

  Billion, billion.

• 19:45Ryan Sean Adams?

  Billion, oh.

• 19:46David Hoffman?

  Add three more zeros, but yes.

• 19:47Ryan Sean Adams?

  Yeah, add some zeros on that. I mean, that doesn't feel that bad.

• 19:51David Hoffman?

  Yeah, getting worse. I mean, we bounced back very healthily.

• 19:54Ryan Sean Adams?

  Look at the seven day here. So Bitcoin on the seven day down 5.6%.

• 19:58David Hoffman?

  Yep.

• 19:59Ryan Sean Adams?

  That's not bad.

• 19:59David Hoffman?

  5.6% on the seven day.

• 20:00Ryan Sean Adams?

  Solana down 1.6%.

• 20:02David Hoffman?

  Wow, Solana's flat.

• 20:04Ryan Sean Adams?

  One of these is not like the other. Ethereum down 17.4%.

• 20:09David Hoffman?

  17% on the seven day, yikes.

• 20:12Ryan Sean Adams?

  We gotta talk about that. Is there anything more to unpack with the Bitcoin chart here? I mean, like, what's, I guess the week has been down 5.6%. Anything more?

• 20:21David Hoffman?

  Yeah, we touched below $50,000. So that's kind of cool. If you, uh, bankless listener, were a buyer below $50,000 on Bitcoin, pat yourself on the back. That is a legendary buy. Congratulations.

• 20:33Ryan Sean Adams?

  At least on the week it is.

• 20:34David Hoffman?

  Yes, on the week. Oh, I mean, like, when's the last time Bitcoin was it was below $50,000? It's been a while.

• 20:40Ryan Sean Adams?

  It's been a while. Not no time this year? Is that correct?

• 20:43David Hoffman?

  Yeah, it was March. March. Not since March. Yeah, that's the best price that you've been able to buy in Bitcoin since March. So if you bought sub $50,000 Bitcoin, go ahead and pat yourself on the back.

• 20:52Ryan Sean Adams?

  All right.

• 20:53David Hoffman?

  Ether started the week $3,100, $200, uh, down 18%, touched below $2,100. On some exchanges, it got below 2,000. If you managed to buy sub $2,000 Ether, pat yourself on the back. Wow, well done. That is a bottom tick.

• 21:10Ryan Sean Adams?

  Really?

• 21:10David Hoffman?

  If ever I've seen one.

• 21:11Ryan Sean Adams?

  Are you sure that was a good buy? We'll talk about that in a little bit more.

• 21:14David Hoffman?

  Well, I mean, we're at 2,600 right now. So like, yeah, unequivocally, that's a good buy at current prices.

• 21:19Ryan Sean Adams?

  This is what actually happened on Sunday. So 155,000, this is the magnitude, 155,000 traders were liquidated.

• 21:27David Hoffman?

  Yeah, addresses traders, yeah.

• 21:28Ryan Sean Adams?

  Uh, 573 million liquidated across all traders, 300 billion wiped from total crypto market cap.

• 21:35David Hoffman?

  And this is just Monday. This is just Monday.

• 21:37Ryan Sean Adams?

  This is Monday. Yeah, Bitcoin went from 59 to 49K. Ether went from 2,900 to 2,100. The Nikkei down 12%. This buy down 3%. If you've made it past all this, the tweet says, congratulations, you survived. Be careful with leverage.

• 21:51David Hoffman?

  If you did not take get liquidated on leverage, uh, congratulations.

• 21:55Ryan Sean Adams?

  You're doing great.

• 21:56David Hoffman?

  You passed the test. You passed the test.

• 21:58Ryan Sean Adams?

  Fearful is what I would characterize the markets are.

• 22:01David Hoffman?

  On Monday, yeah, I think we're moving back towards greed.

• 22:04Ryan Sean Adams?

  Are we?

• 22:04David Hoffman?

  We, I, I think so. I mean, look at the prices, like, like Solana is almost up on the week. I bet you Solana is up. Since we've started recording, prices have gone up. Ether was past 6 to $2,600.

• 22:15Ryan Sean Adams?

  Okay, that, I mean, I guess this points to this is just a flesh wound and like, we're gonna like regain our territory and resume the bull market.

• 22:23David Hoffman?

  Yeah, doesn't answer the question, why the hell is ETH so much worse than the rest of the market? Part of the answer comes from none other than Jump Capital, our favorite market makers in the world of crypto. Jump sold over 100,000 Ether, units of Ether, coming up to somewhere between like 300 to maybe, maybe up to 500 billion. It depends on what price you measure it at. Like 400 ish million dollars of Ether was sold by Jump Capital over the last, over the 48 hours into the weekend. Specifically on Sunday, where Jump Capital was selling their Ether into the most illiquid moment of the week, in the most illiquid part of the market, which is as it is dumping.

• 23:06David Hoffman?

  And so people were all watching Jump Capital un-stake their Ether, send it to Binance, and then just like nuke the order bid on Binance. And so everyone was all wondering like, why the hell are they doing this now?

• 23:17Ryan Sean Adams?

  Yeah.

• 23:17David Hoffman?

  It's the worst possible time to sell. It's an illiquid weekend. All weekends are illiquid in the crypto markets. Why are they choosing to just throw bombs into the ETH/USD price?

• 23:26Ryan Sean Adams?

  Seems panicky, doesn't it?

• 23:28David Hoffman?

  It seems panicky, right? Like, so I've seen people defend their leveraged positions. I've been one of these people before.

• 23:34Ryan Sean Adams?

  That's what I look like.

• 23:35David Hoffman?

  I've looked like this before. I've tried my moments with God. And that's, that's what it looks like. Like walks like a duck, quacks like a duck. Other people are speculating that as a result of their CFTC probe, the CFTC is trying to kick them out of crypto. I think that's extreme speculation, but you can see like the moment that the CFTC did probe them, like all of Jump's stablecoin volumes on Solana just went to zero. And so like a lot of the stablecoin volumes on the, on the network just went out there.

• 24:03Ryan Sean Adams?

  Do you think it's, it's fair to say at this point in time, we don't know the full story of what's going on with Jump, but there's something going on, right?

• 24:10David Hoffman?

  I mean, like, maybe they were in the, the carry trade. And they needed to unwind their positions.

• 24:17Ryan Sean Adams?

  There's a few, like, in the history of Jump, right? They were in the kind of the lunaterra thing. Obviously, they were like wrapped up with FTX. Now they got this CFTC probe. They also, their CEO has recently left. But they're also involved in places, too. They're still proceeding on this, building out the Solana FireDancer client. I know some of this is Jump Capital versus you Jump Crypto. And these are separate entities and all of this. And I'm kind of like grouping them in this segment. But I guess I would say, if you, Bankless listener, know anything about what is going on with Jump, I would love to hear it. Because this is one of the biggest mysteries over the past week, at least to me.

• 24:50David Hoffman?

  I mean, I think Occam's razor points to they, they had a leveraged position that they were, needed to defend.

• 24:56Ryan Sean Adams?

  All right.

• 24:56David Hoffman?

  Occam's razor suggests that.

• 24:57Ryan Sean Adams?

  Okay.

• 24:58David Hoffman?

  Also, they weren't the only large-scale ETH holder to like sell ETH. Like, I think Paradigm sold like $130 million of ETH. Not this last week, but the week before.

• 25:06Ryan Sean Adams?

  Oh, really? People didn't even notice that because I guess, you know, Jump took, or maybe I just didn't notice that.

• 25:10David Hoffman?

  It went from a Paradigm wallet to an Anchorage wallet, which is a custodian. So you would assume that the buyer is using Anchorage as their custodian.

• 25:17Ryan Sean Adams?

  I'm sick of talking about the crypto sellers. Let's talk about some of the buyers. Let's look at our ETF flows. And it's actually looking healthy on the week, ETF flows?

• 25:26David Hoffman?

  Depends on which ETF that you're looking at.

• 25:28Ryan Sean Adams?

  Okay, let's look at both.

• 25:29David Hoffman?

  Bitcoin ETFs have outflows. So during the first three days of the week, the Bitcoin ETFs had a quarter, over a quarter billion dollars of outflows, $272 million of outflows.

• 25:41Ryan Sean Adams?

  Okay.

• 25:41David Hoffman?

  In that same period, the ETH ETFs had $130 million of inflows.

• 25:46Ryan Sean Adams?

  Wow.

• 25:47David Hoffman?

  A lot, a lot going into the BlackRock ETH A, 157 million. And the last two days in a row have been the largest inflows since launch. The grayscale outflows have very quickly dried up on the Ether ETFs. And outflows have turned into inflows.

• 26:05Ryan Sean Adams?

  We are still net negative on total inflows into the ETF, right? And we've described like why this is, the grayscale outflows. You have to net that with the inflows as well. But this, this number is getting closer to zero and getting closer to the positive territory. So right now, the total is 387 million in net outflows at this point in time. But that should reverse. And it's looking very positive in the last few days, particularly in this like bloody market that we've seen.

• 26:34David Hoffman?

  Yeah, yeah, it's been pretty cool. I would love, after the end of this week, this week's gonna have this anomaly of this weird week pullback of like what the hell's been going on. It is interesting to see the Bitcoin outflows and ETH inflows. I always want one more week of data as things stabilize. And so next week, we'll talk about it again.

• 26:51Ryan Sean Adams?

  Tommy, Tommy World Power is saying selling from grayscale has diminished massively the two weeks. He's talking about the Ether, the ETFs. And meanwhile, BlackRock is increasing its pace of buying ETH. So there you go, David.

• 27:02David Hoffman?

  It's funny when they say BlackRock's buying Ether and they're, they're selling Bitcoin. BlackRock's not doing anything.

• 27:08Ryan Sean Adams?

  Yeah, yes, yes, their customers, of course. All right. So let's take a minute to kind of zoom out and recap the year and like where we are in this cycle. Like one thing to note is, look at this, Dave. This is Bitcoin dominance chart. And so this is Bitcoin relative to all of the other crypto assets out there. And it is more dominant. It is stronger than I've seen. It's at 57% than almost like not any time I can remember, but I don't know.

• 27:31David Hoffman?

  Last time it was at this level was 2021.

• 27:34Ryan Sean Adams?

  2021? So Bitcoin is as strong as it was in 2021 then.

• 27:39David Hoffman?

  Since, since before the, the last time it was this dominant was before the 2021 bull market.

• 27:45Ryan Sean Adams?

  Yeah. I mean, one takeaway from, from this is like Bitcoin's demise relative to other crypto assets has been greatly exaggerated, right? Like Bitcoin has been on an absolute tear this cycle.

• 27:54David Hoffman?

  And the Bitcoin dominance has been going up basically linearly since 2023. So 18 months of Bitcoin dominance increasing.

• 28:02Ryan Sean Adams?

  This is an interesting chart to, to look at too, David. Should we look at the ETH Bitcoin ratio here? Like that is going down, which means Bitcoin is far outperforming Ether this cycle.

• 28:11David Hoffman?

  Yeah. So Bitcoin has had 18 months of Bitcoin dominance increasing comparison to the whole market, which of course goes along with the decreasing ratio between Ethereum and Bitcoin. Ethereum Bitcoin, the ratio is high in the 2021 bull market, hitting like, it's been like ranging between 0.06 and 0.08 until about two years ago, which then it had, it hit 0.08 right around the merge. And since the merge, it has just been steadily decreasing downwards, hitting like a two-year low or maybe even a three-year low of 0.042. Which is very low, but that's measured right at the moment of this week. Which, uh, one of the reasons why Ether got so incredibly hammered this week is everyone uses it as collateral for their margin positions.

• 28:56David Hoffman?

  Like ETH is the asset for DeFi. What is DeFi? Margin positions. Uh, and so like ETH always gets hammered the hardest, uh, is when there's a big market pullback because that's where all the liquidations are denominated in. Like, believe it's just getting liquidated.

• 29:09Ryan Sean Adams?

  And it just hasn't, it hasn't just been this week, right? And it hasn't just been with Bitcoin. It's also, uh, Sol. So, yeah, I would say like, if you characterize the, the market this cycle so far, we've seen Bitcoin fantastic performance and a lot of strength. We've seen, uh, the Solana price with fantastic performance and a lot of, uh, strength. And we've seen Ether like weak compared to at least those two, right? Relative to those two. So let's take a look at the, uh, the Solana ETH ratio. That hit all time highs on the week. So let me, uh, zoom out here to, to Max. This is even higher than it was in the 2021.

• 29:41David Hoffman?

  Market in 2021. Yeah. Solana, the Ether Solana ratio, ratio hit a high of point zero six. Uh, and so one Solana will get you point zero six Ether and it's never been that high. And that, that high just happened now, like on the backs of like Ether getting dumped into the market by Jump Capital, everyone with a leveraged position. Overall continuation of ETH weakness over the last like two years or so. Yeah. Solana can hit, hitting a new high versus Ether.

• 30:08Ryan Sean Adams?

  Yeah. I would say, um, Bitcoin has surprised me a little bit this cycle, but like not altogether unsurprising. And Solana has, uh, very much surprised me, uh, particularly relative to ETH. And I asked this question, ETH has performed, underperformed the cycle so far. Why? On Twitter, got a lot of interesting replies. It's nothing that we haven't talked about already. You know, UX fragmentation, uh, it's outsourced, it's execution layer, you know, the burn is down, all of these, uh, types of reasons. I don't, I don't know what your take is on this. I guess like my take is, um, it's, it's probably less that ETH has been weak. Because if you look at the, the year from a relative, from an absolute basis, it's like actually up on the year and it's certainly up. It's like 4X, uh, from, um, all time highs, far outperformed other assets.

• 30:53Ryan Sean Adams?

  All time lows, rather. Yeah. It's, it's more that Bitcoin and Sol have been just like so damn strong. Like Bitcoin is crushing its narrative right now. The social layers are like a president coming out in favor and saying, right? But let's put.

• 31:05David Hoffman?

  We're putting Bitcoin. We're gonna buy the Bitcoin.

• 31:08Ryan Sean Adams?

  What?

• 31:09David Hoffman?

  We're gonna put the Bitcoin in the treasury.

• 31:10Ryan Sean Adams?

  And then Solana, I think, is absolutely crushing UX.

• 31:14David Hoffman?

  Retail flows, yeah.

• 31:15Ryan Sean Adams?

  Retail flows, you know, like casinos, like doing far better on meme coins, everything else. And Ethereum's strengths just haven't had a chance to show themselves this cycle. It's been kind of a slow build. I still think Ether's time will come, but the market is doubting this at this point. That's almost like a contrarian take.

• 31:32David Hoffman?

  Yeah. I mean, like, if you just look at the Bitcoin flows of the ETF, if you summate all of the Bitcoin flows, Bitcoin has taken in $17 billion inflows into the Bitcoin ETFs. If you look at the Ethereum flows, Ethereum has lost $400 million because Grayscale is just exiting rapidly. We are just now watching this inflection point where finally, like BlackRock, Bitwise, Fidelity inflows are now overcoming the Grayscale outflows. But we haven't had it, like Ether has taken the brunt of the pain of its own ETF. Hopefully now you will see some positive inflows, but lagging behind Bitcoin's very casual $17 billion of inflows,

• 32:15David Hoffman?

  like negative 4 to 400 million versus 17 billion. Like, that explains the Bitcoin Ether ratio. And then the Solana Ether ratio is just totally explained by the fact that people want to do fun things on chain. Like, users want to have an execution-optimized environment. And there's enough of an inflection point where all of the people who wanted to do fun things on chain went to Solana. And now it's just like, all the fun things are on Solana because that's where all the users are. Like, I think Ethereum is executing on its roll-up centric roadmap and more and more Layer 2s are spawning. But they're not Ethereum. And I think there's this debate going around, like, are Layer 2s extensions of Ethereum? And I think that's largely a semantic debate. But it also does show up in the price. It's like, it's really sick that Base is onboarding all of these users.

• 33:01David Hoffman?

  And it's sick for Base. It's not less less sick for Ethereum.

• 33:05Ryan Sean Adams?

  Right, because the users aren't buying ETH and like less, there's less value accrual. It's still my take that Ethereum figures this out, its strengths will be realized in the months and years to come. But like maybe a weakened cycle. I mean, that's certainly what we're pointing to at this point in time. Although these charts can change in a hurry and then sentiment always reflects price change.

• 33:25David Hoffman?

  There's also the idea, just like the narrative is whatever the price is.

• 33:29Ryan Sean Adams?

  Yeah, exactly, exactly. And when you zoom out, Bitcoin is up 30% on the year, ETH is up 10%, Solana is up 42%. So that's where we are in the cycle. David, there were some pretty good earnings reports that came out from some of our publicly traded crypto companies, Coinbase and Robinhood and some insights from those. So what were the reports and you have any takes on this?

• 33:51David Hoffman?

  Yeah, the Coinbase Q2 revenue report, there's like, you could spend like an hour pulling, like parsing through it. I really just think the most important thing is looking at retail investor volumes versus institutional volumes. Cause it kind of tells you what the makeup of the market is. So looking at the trading volumes of the different like user bases of Coinbase, either a consumer, call that retail or institutions. And institutional, by the way, is like all of, basically most of the Bitcoin ETFs and the Ethereum ETFs are custodied by Coinbase. And I think also traded on Coinbase. And so consumer retail trading volumes on Coinbase from Q1 to Q2 went down from 56 billion to 37 billion.

• 34:36David Hoffman?

  Institutional volumes went down from Q1 to Q2, 256 billion to 189 billion. And we are just seeing institutional volume, just like completely dominate retail trading volumes, which tells you the makeup of the market as a whole. So like about 40 billion for retail, about 190 billion for institutional. If we go back to 2021, like at the height of the market, Q2 of 2021, $145 billion traded by retail, $317 billion traded by institutional. So there wasn't, there was like a two to one ratio.

• 35:08Ryan Sean Adams?

  Yeah.

• 35:09David Hoffman?

  That's not, it's not a two to one ratio. It's like a five, six to one ratio.

• 35:12Ryan Sean Adams?

  Institution is leading, like this could be the institution cycle. I actually think Was here on Twitter, Was Crypto had a really good insight here. He said, "This leads me to believe, based on some of the volume that you were talking about, this is going to be an institutional-driven cycle." And yeah, the inflows from the past year were from people that were in crypto, like the tourists. The conditions are totally different. So let's keep in mind, remember the last cycle, 2021, we were looking at numbers from 2021, and we saw all the retail volume. You had stimulus checks, there's none of that this time around. There's no retail that's stuck in home, you know, like in a quarantine, just like looking at charts and like, "Oh, what should I buy? Which I should buy some assets." You know,

• 35:52Ryan Sean Adams?

  most retail got wrecked last cycle, and dilution, you know, we got lots of unlocks happening with all sorts of tokens. So the take here is, at least so far, and maybe this continues, is that this can be an institutional cycle, institutionally led, which makes it a little bit different. I don't know if that's good or bad. Are institutions more diamond-handed than retail? It's, you know, is this a good thing? Or like, do you have a take on this?

• 36:17David Hoffman?

  I mean, eventually crypto is going to eat the world, and that is like agnostic to retail or institutions. We're getting them both in the fullness of time. We got retail last year, we're getting institutions this year, or this cycle.

• 36:29Ryan Sean Adams?

  I kind of wish retail bought more.

• 36:30David Hoffman?

  Retail is definitely more fun, because that's who you get to play with. Those are the people playing the fun games, doing the fun things.

• 36:36Ryan Sean Adams?

  Well, maybe there's some retail in their 401k accounts that are buying it through, and you see it as retail flows this time.

• 36:42David Hoffman?

  Yeah. Also, Robinhood, their crypto-based revenue was up 161% from Q2 of last year, so year-over-year growth. Crypto revenues are 161% up, so that's pretty cool. All right, so let's go ahead and get into the world of prediction markets, because Elizabeth Warren, surprise, thinks that they are bad. She is pressing the CFTC in a letter that she signed and sent to ban political contract events, political event contracts. In the letter, they say, "Election bets cheapen the sanctity of our democratic process. Political bets change the motivations behind each vote, replacing political convictions with

• 37:22David Hoffman?

  Financial calculations, allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or a party. And political insiders to bet on elections using non-public information will further degrade public trust in the electoral process. When I was reading this letter, I want to know what your reflections and interpretations of this were. But when I was reading this letter, I was like, these are a bunch of unfounded allegations as to like how prediction markets work.

• 37:49Ryan Sean Adams?

  Yeah, so, okay, so when I was reading it, it sounded so much because I've read letters from Elizabeth Warren on subject matters. I'm like much more deep on than prediction markets about crypto, you know, in particular. And it strikes me that this letter is written so the layman, like the voter who doesn't really have knowledge. They just see billionaires and they see politics and outcomes. And they say, yeah, that's bad. We should get money out of politics. And they are like defaults pro this letter, right? And this is like if you are just an inch deep inside of these subject matters. I think for someone who's a little bit deeper, they just see what you saw, which is like a bunch of pointless like allegations that just don't even make sense in this context.

• 38:31Ryan Sean Adams?

  I'll note that this letter was also signed, all Democrats on this letter, right? This is a letter, not that is anti-crypto specifically, but it is an anti-crypto use case, just prediction markets, right? It's an anti-classical liberal value. And I also see what Elizabeth Warren is doing, she's done this before, is using the administrative state. You know how she's used Gary Gensler for the past two years? I mean, this is my words, but like this is clearly what's going on. The anti-crypto army is Elizabeth Warren, a faction of like politicians seeping into the administrative state through people like Gary Gensler and trying to control things, trying to curtail things. That's why we have five lawsuits against some of the US's top crypto companies coming from the SEC.

• 39:15Ryan Sean Adams?

  She's trying to do that with the CFTC now too. Okay, so this letter was addressed to the Chair of the CFTC, who most crypto listeners haven't heard too much about. He's not like a household name like Gary Gensler, Rostin Benham, right? And he's trying to say, you've got to stop this, not through the legislative process. Not a bill in Congress. This is going to a regulator and saying, "Shut these political prediction markets down." So that was another take I had. At first, David, I thought this was about polymarket. I thought they were coming directly for polymarket.

• 39:47David Hoffman?

  Is it not?

• 39:48Ryan Sean Adams?

  It's not directly for polymarket. It's prediction markets in general. A couple of things to know is one, polymarket is already kind of like VPN blocked from the US anyway, right? So it's not actually accessible to the US. There's another prediction market, which is a web two prediction market I wasn't aware of called Kalashi. And apparently, there's some beef going on between them and the US government. They're available in the US, but they don't have political prediction markets available yet. And they're trying to get them. And so they're trying to work with regulators and legislators to get this. So it seems like it's more directed towards Kalashi. Though I will say, right? Yeah, if Elizabeth Warren is like generally against prediction markets, then you know, she's not going to.

• 40:31David Hoffman?

  Yeah, she's against prediction markets. She's against crypto. She loves writing letters to three-letter agencies.

• 40:36Ryan Sean Adams?

  Yeah, yeah, exactly. All of the things that could make this very difficult.

• 40:40David Hoffman?

  Completely irrelevant to Elizabeth Warren, which is my favorite flavor of Elizabeth Warren. Irrelevant is there are some takes in the crypto world about prediction markets. So Matthew Green, who's a cryptographer, we've actually had on the podcast before. He tweeted out, "Prediction markets seem to be really good at figuring out whatever widespread opinions are prevalent at any given moment. Not so great at actually predicting things. I don't know why people revere them so much." Hauzu, also a former podcast guest, says, "From a mechanism design perspective, I personally see the mass adoption of prediction markets as a threat to democracy and an acceleration towards plutocracy. May not warrant banning them, and you probably couldn't anyways, but they are unilaterally not a good force."

• 41:22Ryan Sean Adams?

  That's one of us. That's a crypto native.

• 41:24David Hoffman?

  That's a crypto person. That's a crypto person.

• 41:26Ryan Sean Adams?

  Interesting.

• 41:27David Hoffman?

  Yeah. So like some pushback against like the cheering of polymarkets that has come out of this industry, myself, ourselves included. What was your reaction to this?

• 41:38Ryan Sean Adams?

  I don't see it. I don't understand the threats in democracy. I think money in politics in general is a threat to democracy. But like, go back to look at Citizens United. Basically, all these super PACs are dark pools for this type of election influence. The entire lobbying industry. This is not a problem born of prediction markets. In fact, prediction markets, I don't think contribute to this problem. If anything, they kind of shine a light on this problem. I think that the main use case for prediction markets is identifying truth in reality discovery. And this is like-

• 42:12David Hoffman?

  That's my base case.

• 42:13Ryan Sean Adams?

  I mean, we've given a very bullish takes on prediction markets in the past. I kind of like stand by them. In this environment where it's very difficult to figure out what's true and what's not true, just like in general on the internet, what's happened or what hasn't happened, is a great mechanism so that people can put weight, some stake, behind actual outcomes. I love it. It's a place for a certain type of truth on a particular type of event that I go to quite often. So I don't see this, but maybe I'd have to ask Hasu a bit more what he means to really fully understand where he's going with this.

• 42:47David Hoffman?

  Right. Here's a take that is kind of aligned with this pushback. This is Dahmer, who tweets out, "The criticism that a prediction market reflects conventional wisdom is a bit daft to me for a number of reasons. Some of the markets communicate quite important information that will have large ramifications on the world, like federal interest rate changes, recession odds, next US president. And getting some sense of what the conventional wisdom is about the future is important for decision making. The goal is to be better than the alternative, a better flashlight to look ahead at a murky future." Exactly what you're saying. I also like to, I put out my own tweet in this take about this. I want to parse between the two types of markets that might be found on a prediction market. There are prediction markets for betting on something unknowable, like betting on the weather, or betting on chaotic events,

• 43:32David Hoffman?

  some things you can't inherently know ahead of time. You're kind of gambling.

• 43:35Ryan Sean Adams?

  Sure.

• 43:36David Hoffman?

  And that's going to produce materially different outcomes. Maybe that's just like the whole conventional wisdom take. But that's going to produce materially different outcomes from betting on something that is privately knowable. So if some insider knows something that the rest of the world does not know, and it's relevant towards a prediction market- That single insider can go to that prediction market and since markets are priced at the margins, they can bet all of their, as much capital as they want on the fact that they know something. And so as a result of this behavior that whistleblowers are allowed to do, call them a whistleblower, call them like a knower of facts, prediction markets can like turn into clearinghouses for disclosing private information without actually disclosing it.

• 44:17Ryan Sean Adams?

  Right.

• 44:18David Hoffman?

  And so, think in a authoritarian world where a whistleblower can't actually do the job of whistleblowing. They could still go to a prediction market and bet on something and then the truth comes out in that particular way without the truth actually coming out. Which I think is why people like you and me are, and like, this is why Vitalik talks about prediction markets as like a threat to authoritarian democracies. It is a truth telling mechanism and it allows the marginal individual who knows the truth to like, is incented to come out and bet on it.

• 44:50Ryan Sean Adams?

  Well, from that lens, it's basically the opposite of what Hasu said. It's a stabilizer of democracies.

• 44:55David Hoffman?

  That's what I thought. Yeah. That's how I've, that's how I've perceived this.

• 44:58Ryan Sean Adams?

  Anyway, interesting that there's some debate on this. Maybe it's a topic we'll dig into in future episodes.

• 45:04David Hoffman?

  All right, we got some on-chain updates to talk to you about. There's a big release out of the Zora and Uniswap universe. Those two things are now the same universe. Pretty cool. The SEC's budget getting slashed, but why? It's done such a good job. And Donald Trump's sons have now fallen in love with DeFi. What is, where did this come from? What are they up to? Let's go ahead and get onto, into all of these subjects and more, but first, a message from some of these fantastic sponsors that make this show possible. New projects are coming online to the Mantle Layer 2 every single week. Why is this happening? Maybe it's because Mantle has been on the frontier of Layer 2 design architecture since it first started building Mantle DA powered by technology from EigenDA. Maybe it's because users are coming on to the Mantle Layer 2 to capture some of the highest yields available in DeFi

• 45:47David Hoffman?

  and to automatically receive the points and tokens being accrued by the $3 billion Mantle Treasury in the Mantle Rewards Station. Maybe it's because the Mantle team is one of the most helpful teams to build with, giving you grants, liquidity support, and venture partners to help bootstrap your Mantle application. Maybe it's all All of these reasons all put together. So if you're a dev and you want to build on one of the best foundations in crypto, or you're a user looking to claim some ownership on Mantle's DeFi apps, click the link in the show notes to getting started with Mantle. Have you ever felt that the tools for developing decentralized applications are too restrictive and fail to leverage advancements from traditional software programming? There's a wide range of expressive building blocks beyond conventional smart contracts and solidity development. Don't waste your time building the basics from scratch and don't limit the potential of your vision.

• 46:30David Hoffman?

  Cartesi provides powerful and scalable solutions for developers that supercharge app development. With a Cartesi virtual machine, you can run a full Linux OS and access decades of rich code libraries and open source tooling for building in Web3. And with Cartesi's unique rollup framework, you'll get real-world scaling and computation. No more competing for block space. So if you're a developer looking to push the boundaries of what's possible in Web3, Cartesi is now offering up to $50,000 in grants. Head over to Cartesi's grant application page to apply today. And if you're not a developer, those with staked CTSI can take part in the governance process and vote on whether or not a proposal should be funded. Make sure you're vote-ready by staking your CTSI before the votes open. The Uniswap extension is here.

• 47:13David Hoffman?

  The self-custody wallet created by the most trusted team in DeFi, Uniswap Labs, designed to make swapping feel effortless. This extension lives in your browser's sidebar, letting you swap, sign transactions, and send or receive crypto without ever losing your place on the internet. Plus, with human-readable transaction messages, you'll always know exactly what you're signing. Navigate a multi-chain world effortlessly with support for 11 chains like Ethereum Mainnet, Base, Arbitrum, and Optimism. No more chain switching or token importing. All your assets are right where you need them to be. The Uniswap extension is designed to level up your swapping experience with other Uniswap Labs products as well. Easily onboard to the extension using the Uniswap Mobile Wallet to begin managing your assets across platforms and take advantage of smooth, seamless synergies with the Uniswap Web App.

• 47:56David Hoffman?

  So go and download the Uniswap extension today by clicking the link in the show notes. Just another way Uniswap is helping you swap smarter. The Zora Protocol has now created pools on Uniswap. But how does this work? Because Zora is a place to mint NFTs and Uniswap is a place to trade ERC. 20 tokens. What is going on here? So what is going on here? Glad you asked. Thank you. Is that they are wrapping the ERC 1155 standard, which is an NFT standard, it's an NFT standard, of producing many of the same NFTs is like one version of this. So like if we, everyone's minting the same thing, like that's an ERC 1155. You can wrap that into an ERC 20 contract and then you can put that into an AMM like Uniswap.

• 48:40David Hoffman?

  And so you can buy NFTs because they're fungible. Ironically, when you wrap them, you can buy them on Uniswap inside of a liquidity pool. And so through this integration as well, the trading fees of a said NFT actually goes to the creator. And so the creator gets the LP fees, which is pretty cool. And so it allows you to speculate on NFT mints using Uniswap. I think that's pretty cool.

• 49:07Ryan Sean Adams?

  Oh, I think this is super cool. Actually, I didn't understand fully how it worked. But basically, the problem right now that creators have or collectors have, when they go and they mint something, they collect an NFT of some sort, it's part of their collection, is in order to sell that NFT, they have to find another buyer on the other side, like a peer-to-peer person, like in order to sell it, I have to find someone that wants to buy it at some price. And a lot of these markets are small. A lot of these markets are kind of long-tail, particularly for creators. With this, they can just always trade against a bonding curve. And there's always liquidity for the thing that they collected. Even if it's not the price that they want, they can always sell it back whenever they want to. So this is like liquidity is oxygen, you know, liquidity is everything for markets.

• 49:51Ryan Sean Adams?

  And this gives all collections on Zora instant liquidity. So we'll see where this goes from here, but I think it's a super important ingredient. I think over in Zora, they're creating this primordial soup of just things, of organic material. And something really cool could come out of it. I feel like this is like the last piece of the puzzle potentially.

• 50:11David Hoffman?

  Ripple Labs is now settled with the SEC for a whopping fine of $125 million, which maybe you think that's a lot, but for what it was, which was $2 billion, the proposed $2 billion fine, $125 million is a huge Ripple victory. And so this is Lex Nod saying that Ripple is popping champagne right now after they have won a settlement. He says, "Probably the first sign that the SEC has litigated to a final judgment without achieving in the air just total destruction of the company question. Feels like a game changer and a major loss of pre-litigation settlement leverage for the SEC." And so Brad Goringhouse, who's one of the founders, CEOs of Ripple,

• 50:53David Hoffman?

  says, "The SEC asked for $2 billion. The court reduced their demand by 94%, recognizing that they overplayed their hands. We respect the court's decision and have clarity to continue growing our company."

• 51:03Ryan Sean Adams?

  This is a win. It's a loss for Gary. This is a win for XRP. It's certainly a win for crypto. David, I don't know if you saw this this week, but this headline absolutely cracked me up. It's the SEC claiming that a Coinbase subpoena is a waste of time. All right, so remember-

• 51:18David Hoffman?

  The SEC is telling Coinbase that the air subpoena of the SEC is a waste of time.

• 51:23Ryan Sean Adams?

  Yeah, because Coinbase has countered, tried to subpoena some of the SEC's internal documents and materials, including Gary Gensler's email. Okay, so they're asking for all of this discovery, in the same way that SEC has been asking discovery for all of these crypto companies. And that SEC is coming back to the court and saying, "They're trying to waste our time. They're asking for 240,000 documents. They're asking for, this would take 400 hours of work from the SEC to provide all of this documentation." And it's so crazy to me and ironic that the SEC is complaining that Coinbase is wasting their time, because what has the SEC been doing to crypto this entire year in their lawsuits against MetaMask and Uniswap and Kraken and Coinbase?

• 52:02David Hoffman?

  How much of our listeners' time have we wasted talking about the SEC and their shenanigans?

• 52:08Ryan Sean Adams?

  We are wasting your time now.

• 52:09David Hoffman?

  We are wasting your time now.

• 52:12Ryan Sean Adams?

  It's all so dumb and the thing that really grinds me is it's all taxpayer funded, of course.

• 52:18David Hoffman?

  Right.

• 52:19Ryan Sean Adams?

  And so, you know, our tax dollars are paying for this. Anyway, if they don't like it, they should just drop the case. And I can't believe they're complaining about this.

• 52:26David Hoffman?

  Anyways, moving on, the US Senate Appropriations Committee has proposed to reduce the SEC's budget for 2025, down from 2.6 billion to 2.23 billion. So taking $400 million out of the SEC allowance. The SEC union, which is related here, accused Gary Gensler of prioritizing other forms of expenditure over employees' benefits and ignored signs that the budget approval would not happen.

• 52:54Ryan Sean Adams?

  Ooh. No more Gary Gensler influencer videos, David. The budget's slashed.

• 52:59David Hoffman?

  Oh, the influencer videos. I would love to know the budget behind those things. So a memo read, "In effect, Chair Gensler waged your compensation," the workers of the SEC, "your compensation and benefits, knowing that his staff would suffer these consequences if he lost the bet." Man, his staff just must hate this man.

• 53:15Ryan Sean Adams?

  Yeah. I wonder what the prediction markets say about Gary Gensler's tenure at the SEC right now. I wouldn't mind taking a bet on that.

• 53:24David Hoffman?

  It's going to zero.

• 53:25Ryan Sean Adams?

  David, what, okay, this other thing, what was going on with these tweets from?

• 53:29David Hoffman?

  I would love to know.

• 53:31Ryan Sean Adams?

  Eric Trump and Donald Trump Jr. I'm just gonna read them verbatim because I think we should set the context here. This is Eric Trump tweeting out on August the 6th, "I have truly fallen in love with crypto and DeFi. Stay tuned for a big announcement." Trump's other son, Donald Trump Jr., says, "We're about to shake up the crypto world with something huge. Decentralized finance is the future. Don't get left behind. Really, really fire me up." And he's got these great hashtags here, David.

• 53:55David Hoffman?

  Hashtag crypto, hashtag DeFi, hashtag be defiant.

• 53:59Ryan Sean Adams?

  What is happening here?

• 54:00David Hoffman?

  I don't know, bro. I don't know. Can you go back to your comment below the first one?

• 54:05Ryan Sean Adams?

  What?

• 54:06David Hoffman?

  Yeah, before, this is Eric Trump saying, "I love DeFi." And then Ryan John Adams saying, "What have you used in DeFi?"

• 54:13Ryan Sean Adams?

  I'm just curious. What is he talking about? What are you talking about? Someone replied to this, and by the way, the use case is using people's exit liquidity?

• 54:21David Hoffman?

  Ooh, sure. Yikes.

• 54:24Ryan Sean Adams?

  Are they brewing something? Like, what's going on? Is there any story here?

• 54:27David Hoffman?

  I don't know. I mean, like, they already did NFTs. They haven't done the meme coin. Oh, did you see the Donald Trump meme coin went to zero? Martin's currently formally rugged.

• 54:35Ryan Sean Adams?

  Oh wow, surprise, surprise.

• 54:37David Hoffman?

  Surprise!

• 54:39Ryan Sean Adams?

  There's some speculation about what it could be. It's probably nothing for us to really talk about, right? Until something happens. But now the president's two sons are trying to do something in crypto. We'll see what it actually looks like on the other side.

• 54:51David Hoffman?

  Why didn't we think of the B-5?

• 54:55Ryan Sean Adams?

  What if they used to go bankless?

• 54:59Ryan Sean Adams?

  How'd you feel about that?

• 55:00David Hoffman?

  Oh god, I hope it's paired with something about the banking industry.

• 55:03Ryan Sean Adams?

  Yeah.

• 55:04David Hoffman?

  Okay, so last weird-ass thing of the week. This is actually weird but very cool. Pop quiz: who is the co-founder of Coinbase that's not Brian Armstrong? Who's the other one?

• 55:13Ryan Sean Adams?

  Are you asking me?

• 55:14David Hoffman?

  I know you know.

• 55:15Ryan Sean Adams?

  I know this.

• 55:16David Hoffman?

  Pop quiz for the listener.

• 55:19David Hoffman?

  This is Fred Arison, who also founded Paradigm. But about a year ago, he put out a tweet saying he's stepping down as managing director of Paradigm. He's just gonna be a general partner. And he just wanted to go do something. I think the guy just loves starting things. And also, to great effect, by the way.

• 55:36Ryan Sean Adams?

  He's done it well.

• 55:37David Hoffman?

  They also finish. Paradigm, Coinbase, doing great. He put out this tweet saying, "I founded Nudge with Quentin Frich,

• 55:48David Hoffman?

  "building an ultrasonic headset, ultrasound headset, "to enhance human experience. "Press a button to shift your brain state, go to sleep, boost focus, break habits, elevate mood, etc. "We believe this device has the potential to improve people's daily lives more than any other technology." So, just if you were curious, Ryan, about what Fred Arison was up to, he is building an ultrasound headset.

• 56:09Ryan Sean Adams?

  Ultrasound headset. From ultrasound money to ultrasound headset, huh?

• 56:12David Hoffman?

  Oh wow, I didn't even realize that. I don't know if he was ever in on the ultrasound meme.

• 56:16Ryan Sean Adams?

  That'd be really cool if you had a headset that could just help you fall asleep or improve your concentration or just like-

• 56:22David Hoffman?

  I would love that.

• 56:22Ryan Sean Adams?

  Break your crypto gambling addiction or whatever. I don't know what that-

• 56:28David Hoffman?

  I bet you it goes the other way. Like, what would happen if you gave this to a drug addict? What would they do with it?

• 56:35Ryan Sean Adams?

  Oh, oh geez, that's dark. I didn't even think about that, David. I'm sure that I'm sure he's thinking about it. This gets into like, um, medical devices and that kind of thing, which is also tightly regulated. So, I mean, Fred's gonna have to navigate all of that. But a complete departure from crypto, more in the biohacking camp, I would say.

• 56:51David Hoffman?

  Yeah, yeah. I played a game of chess with a, um, EKG headset on, uh, one time. And the guy that was like, doing this like, experiment thingy on me, he's like, he could tell like, when all the like, the important moves in the chess game were happening.

• 57:03Ryan Sean Adams?

  Really?

• 57:03David Hoffman?

  Yeah, it was kinda cool.

• 57:04Ryan Sean Adams?

  He sort of read your mind, like in a very...

• 57:07David Hoffman?

  Uh, he was, his experiment was like, he wanted to figure out if he could guess who would win or lose the chess game, just by reading the EKG readings. I don't know what the outcome of the study was.

• 57:19Ryan Sean Adams?

  Cool stuff. I guess the next frontier beyond crypto. David, we got a meme of the week. You wanted to tell me a story about Elon Musk and what he's up to. Should we start with the meme?

• 57:27David Hoffman?

  Uh, we're just gonna leave it at the meme. Uh, I'll explain some backstory. Uh, maybe about a year ago, Elon Musk was like, on stage somewhere. And somebody asked him about like, his like, hostile relations to his advertisers. And then he very like, like, pointedly said, "F you" to the advertisers, specifically this one like, Bob Iger guy. I don't know who he is, like, I don't know.

• 57:48Ryan Sean Adams?

  Disney, Disney CEO.

• 57:49David Hoffman?

  The Disney guy, yeah. Anyway, so like, he just, he just says like, "Our advertisers can like, F off. These are like, I'm gonna protect the users, blah, blah, blah, blah." Uh, this last week, he has announced that he is suing this like, group of like, advert, this advertising group, for not advertising on his platform.

• 58:07Ryan Sean Adams?

  For not buying his ads?

• 58:08David Hoffman?

  For not buying his ads. So, so a year ago, he tells them to fuck off. And now he is suing them for not advertising on his platform.

• 58:16Ryan Sean Adams?

  That's just free markets, Elon, come on.

• 58:18David Hoffman?

  I don't know, I don't know what's going on here. I am confused.

• 58:22Ryan Sean Adams?

  What's this meme?

• 58:23David Hoffman?

  But Elon does exactly what Elon wants. And so that is what this meme is. It is basically that meme.

• 58:28Ryan Sean Adams?

  Well, let's see how that works out for, for David. And risk and disclaimers, of course, as we leave this episode. You know crypto is risky after this week. You know it a little bit more. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.