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

This is what I did, the last uh bear market, and I came out with more conviction, stronger than ever, incredibly excited about the future.

Hey Bankless Nation, happy third week of June. It is a bear market, officially a bear market. David, you feel embarrassed this week?

Uh well I feel now that I am uh comp capitulated to the bear market, I'm like, well, do I continue to be bearish or are we done here? What's the f

yeah, what's the point of being bearish now? It's uh all the bearishness has already happened, right? Well happy that could be wrong. It could be wrong.

Yeah, we'll have to get into that. And uh you're in your new setup in New York, the first roll-up I think we've done in New York, and you've got like a bear market vibes with the big brick wall behind you. Is this your new place?

I feel like

Gonna have this brick?

bear market jail is like, yeah, I'm bear market jail time. Yeah, I was overly bullish.

Prison.

Yeah, exactly. That's exactly right.

Alright, man. Well, we got a lot to talk about this week. So I hope bankless listeners have their morning copy coffee. It's Friday morning. Bankless ain't stopping in the bear market. Every Friday, this is gonna come at you. Actually, I won't be. I'll be out next week. But Dave's got it covered. All right. Every Friday, Bankless will ship a weekly roll up, and this is yours this morning. We're gonna talk about a few things. The first, David, crypto is crashing. Why? We look at the historical precedence of that. What else we got?

Uh we also got of course the Fed raising interest rates, which is definitely a part of the whole crypto crashing story. But also there's a you know the everything's crashing. Uh so this is actually a first for crypto. Crypto summer crashed with well, also everything else crashing too. Uh and so we're going into the details around with that. The tide is out, part three of the topics of the week. The tide is out, and many, many people are caught swimming without swim trunks. So we're gonna talk about who got caught swimming naked. Uh, and then last but last not least, Ryan take us home.

Yeah, Celsius is one of the people who got caught without swim trunks. So is one of the largest hedge funds, Three Arrows Capital. We're gonna talk about that story. It just uh came up in the last week from our last roll-up. Uh and then C Fi is breaking all around us, but DeFi didn't. We got some hot takes at the end. So stay tuned and make sure you like and subscribe if you enjoy these episodes, of course, on YouTube and rate and review. If you're listening to this on the podcast, go ahead and do that. You know what, David? We're gonna get to uh Celsius in our show in a little bit. But actually, our friends at Notional, they are a DeFi borrowing and lending platform. And on the topic of C Fi breaking, but DeFi didn't. Guess what didn't break, David?

DeFi and Notional. Notional still spitting out the yield, the fixed APY yield. So uh Notional is giving you 3.08% on your ETH right now, on your ether. Uh, and you can of course also get USDC DI or WBCC lending as well. So Notional, part of the whole part of the crypto industry that's working just fine right now, uh, giving you your yield when you want it, where you want it. So you can check that out. There's a link in the show notes bankless.cc slash notional if you want to get some of that dependable yield.

What I love about this is this is a fixed rate. So you can sign up for a fixed rate yield for a year. Also, there's no counterparty here. That's the problem. That's the thing that got Celsius in trouble. Is it went into a black box? There were all sorts of counterparties. Who knows what they were doing with it? This is all on chain. This is uh how DeFi solves some of the problems that are lingering in C Fi. Anyway, go check that out. The link that David just mentioned. But David, we got to get into the markets, man. You ready for some Bitcoin talk? It's been a bloody week. Give it to us straight. Don't

Yeah, okay.

Don't hold back. Well, Bitcoin lost basically $10,000 in the last week, which I mean, if it was at the highs of like $70,000, that would be one thing, but it w it was at $30,000 last week and it went down basically $10,000. It's come up from the low, so we're at $21,000 right now. But overall, Bitcoin is down. You ready for this, Ryan? 30%. 30 in a week.

Wow. This is a bloody week. Uh it's gotta be historic in some ways, but tell us about ETH as well. Um

Yeah, Ether, uh another uh oof week, of course. I think that to state the obvious start of the week at $1,800. We are currently at $1,100. So last lost $700, down 38%. Oof.

we talk about the lows here, so how low did did Ether get? This is yeah, did did it get into triple digits? Not yet, right? But close.

In DeFi markets, it actually did wick down uh on Uniswap below uh one uh $1,000. So in in DeFi it very, very briefly got wicked down, but it got bought right back up. So I don't really count it. It's more of an anomaly. Uh so yeah, the the uh I will call the official low at about $1,020.

Of note though, that is lower, much lower than the all-time high of the last bull markets. So the all-time high of the last bull market was 14,000 something, 1420, 1430, 1440, something like that. And we are below the last all-time high. Uh so this is

Unpri

uncharted. Yeah. Of course, uh uh Ethereum's only had one cycle, so like one big bearish.

to now.

This is the second. Uh Bitcoin, did it drop below its last high? Like just about. I mean.

Yeah, it's basically there.

Basically there. So its low is uh 20,166 on this chart. Um well uh this is the the wick you were just mentioning on Uniswap where we dropped into triple digits, but we're still hanging above uh into the um du uh quadruple digit territory for ETH. But what is the ETH Bitcoin chart telling us?

Yeah, we went down from 0.059 to 0.052, uh down 12%. So oof. Uh and I'm gonna chalk this up to a number of different reasons. Mainly ETH being collateral in DeFi, uh, and overall collateral across crypto. So that collateral, when we have liquidation events, that collateral gets sold off heavily. Uh and so like three hours capital is liquidate liquidating ETH, Celsius was liquidating staked ETH, uh, creating that incredible discount between staked ETH and ETH right now. Uh, and so just like the ETH BTC ratio just getting absolutely hammered.

I'm gonna add another reason to the list is uh you called the bottom on that rate.

No, I wait, wait, wait, wait. I don't let's not bring that up. Let's keep on going. Moving on.

The reason we knew we were headed down.

I was I'll call the bottom every single week. The bottom's happening right now. This is the absolute bottom of the KPTC race.

That means guys.

All right. Uh how about uh total crypto market cap? Uh we gotta be are we below one trillion yet?

Yo, yes, sir, we are. We uh started last week at 1.3 trillion. We are down to 0.94 trillion. We lost 306 trillion, or excuse me, trillion, billion dollars in total crypto market cap last week.

Ah, fell out of the quadruple comic club. Look at that. Um, I remember when we first surpassed that $1 trillion milestone, and now we are back under it. So we were retracing a lot of the gains over the past uh year or two. Um, how about this? Like, how unprecedented is this drop? Can you compare this to 2018 and look at the history here? Because this felt very fast and very steep.

Yeah, so look at this chart. This is the 2018 bubble of to the total crypto market cap. This is an index of all crypto assets. So it peaked out at something like $80 billion. I don't I think excluding stable coins, although stable coins weren't that very that weren't that big that back then. So it peaked out at uh basically $800 billion, fell down to below $100 billion, like $91 billion. And it took 350 days to do that, Ryan. That's it basically took a whole year from peak to trough, top to bottom. It took a whole year of time. And inside that time, there were multiple like plus 40% like run-ups, like bear traps. Um and so, or excuse me, bull traps, because like it would go up and then people get really bullish. Like, look at that run. I remember uh like Ether fell down from uh 1400 down to 300 and then rose up to 900 and then fell back down to 300 again. And like Bitcoin did something very similar. Uh, and so like even in what was ultimately a one-year-long downtrend, there were periods of plus 20, plus 30, plus 40% price rises. Uh, we did not see that at all in this particular uh bear market. And in comparing this to the 2022 bear, uh, we go down 70% in 217 days rather than 350 days. That is 40% faster if we are calling the bottom right now. If this is the bottom.

Uh which it could be, it could also not be. Um but if the if this where we are right now is at 217 days versus 350 days, and right now we are down 70%, 70.6% in total crypto market cap versus where we were uh last last time, which was what was that percentage? 87%. So uh not we have 17% less uh red than in 2018. Um uh and also but also 20 like we're only 40% the time or 60% of the time. So like if you are comparing cross cycles, that could lean into like we still got a little bit more to go. Like if we went down 50%, what would that break put us down to? If we went down 50% right now, that would be at 85%. Um, and so that would start to be comparable. Uh so like there's plenty of evidence to suggest that the the bottom is not in yet. Although there's also evidence to suggest that the bottom is in yet. So we'll talk about that further on in the show.

I think we might what who knows what'll happen again. This is pre prognostication. We're not traders, but like I think we'll see some relief rallies. But uh I don't think this bear market is over. We definitely have a ways to go uh from my perspective. And then if you look at uh 2018, there was this recovery phase. So even though we bottomed in December 2018, it didn't feel like the bottom at that point in time. Because then we just kind of you know crabbed out and just hung at a price point. You weren't sure whether we're gonna dip or not. Uh anyway, this this could be a long one and there could be some more pain ahead, is what we're saying. But how did the gas market hold up in Ethereum? Because this is interesting. You'd think this would be a big stress test. What are we looking at here?

Yeah, so the average gas price over the last uh week was about 38 GUE. You can see that if you scroll down a little bit, Ryan. Uh the which is kind of crazy. Uh the gas prices by week peaked out at 32. Scroll down a little bit more, a little bit more. Uh a little bit more, a little bit more. There we go. Total gas distribution, that green curve on on the right side. Uh yeah, 38 GUE, which is crazy. Uh I remember in during the COVID crash, uh, where uh ether prices, crypto prices on Ethereum crashed like 40, 50, 60% inside of 24 hours. Gas spiked up to 300 GUE, which was unprecedented at that time. We had never seen gas prices above like 10 or something, and it went up to like 300. Uh, and we had in uh we had just irregularity in the DeFi markets. We had maker vaults uh being uh liquidated for $0 collaterals, which was bad. But like the DeFi liquidations right now were totally regular and the gas markets were totally balanced, and nothing really got out of hand. And so this is a big story that is really being discussed right now is how efficient and regular the DeFi markets were doing one of the fastest drawdowns in crypto history. It's actually pretty crazy.

It's uh actually incredible. I think that's a theme of this episode. How well DeFi held up, how resilient it has been, and and the kind of the more centralized aspects of crypto's financial market have been the things that have been stress tested. And those are the things that have been uh as the tide rips out, not wearing any pants. Um, but David, let's let's get to kind of like how are people feeling? Because um there's a lot of pain in the market right now, and especially for for first like cyclers who've maybe come in the last year or you know, 18 months or so, they're not used to this level of pain. I mean, they've been born into a world that's been basically up only. And I've seen a lot of um

I guess um p pain type tweets on on Twitter. I mean people very worried about the future of crypto, wondering if it's all over. Um I know we talked about this in our bear market special edition bear market episode that we did on Tuesday, but um how do you feel like the community's hanging in there and like how are you doing with things?

I'm generally a pretty zen stoic individual, so if I really need to like I really need to kind of like dive deep to figure out like my emotional state, um I do have I do have fear uh for and this is very related to uh the the Federal Reserve, the United States economy, uh, and just the fiat ecosystems at large. And so while like crypto seems like the fundamental like the prices and fundamentals are always incongruent, fundamentals of the crypto industry are better than ever, and they only continue to get better, and especially and that's proven out in the regularity of the DeFi markets while we had liquidations in C Fi. C Fi broke, DeFi didn't, and that's proving its use case, proving its legitimacy. But it's going to take a while for that to settle in, and meanwhile, like

The job of the Fed is to cut to control inflation and not send us into a recession. And I feel like we are already committed to a recession, which is one thing. Like we've been through recessions before. Many of us lived through the 2008 crisis. Even though I was just a kid, I still still felt it. I am actually, I do have fear of an actual like D depression. Wow. Yeah. And I don't know if this is just because I read a lot of like Ray Dalio, uh, and we've seen what happens to other fiat economies when they lose their legitimacy. Like the Fed is the Fed is losing trust. Uh they're whiplashing the the world around. Uh like I don't like that we also have the war in Ukraine, so like gas prices are are up and they're not going to respond to interest rates because that's a different part of the world's economic system. Food prices are up and they're only going to get worse. As far as I can tell, I'm not an expert. I only see what I see the information that I see on like Twitter, and and like while I do think that I know where to look, doesn't mean that I actually that things can change. I don't I don't know. But like I think there's I'm worried that food prices continue to go up and that continues to do harm to the American economy and to the global economy. Inflation can't really get under control because it's like 50% of inflation is energy, and energy you can't control with inflation rates. And so like I'm conflicted in that, like, wow, there's so many cool things in DeFi, but like it doesn't really matter if like the world burns down. And so I do have that fear.

Yeah, I I get that fear. And I think that's a fear a lot of people are um are thinking about right now. One bit of uh one thought I have for listeners is um if you want a take from somebody who's in macro and also studies crypto, go listen to our episode earlier this week from Jim Bianco. Um Jim shares some of the concern that you just stated, but he doesn't think we're headed for a depression. He thinks we're already in a recession, but um he talks about kind of the the way out. We're gonna be talking about a little bit more of the way out as we get into the Fed section. I um, you know, one thing that's helped me through these times, because you know, been through bear markets before, as have you, David. And I'm I'm wondering if this could help some of the bankless listeners is all of you guys are probably going through like the five stages of of grief here, right? Like you got the denial phase, you've got the anger phase, bargaining, depression, acceptance is the last phase. And you probably oscillate between some of these early phases, like back and forth in a given day. Like sometimes you're denying it, sometimes you're angry, sometimes you're you're like, well, it's not so bad. And then sometimes you're just straight out depressed. Um, one thing I think we can help you with is getting to that end stage, which is the acceptance stage. And that's the stage you want to be in if you're gonna get productive again. Uh, to get to that stage, you have to accept some hard truths. And I think one of those hard truths is you you mentioned earlier, David, you're fully ready to capitulate, and then we're in a fully like full on bear market right now. That's getting to the acceptance phase. And I just want to say this out loud for people. We are in a bear market right now. Things will get worse before they get better. This will take a while. Okay. Hear us when we're saying this we are in a bear market, things will get worse for a while.

And it could take a while.

Now, once you've accepted that, then you can get to a phase where you can be productive again. And one of the decisions you have to make if you accept that truth and that reality.

Is what do I do? What do I do with my crypto portfolio? And you have kind of three options ahead of you. Number one, you just sell it and leave crypto. My conviction's gone. You know, if we're entering a, you know, kind of uh sort of a very sad global state, I'm better off with like food and supplies and like, you know, shelter and like, I don't know, gold. I don't know what you're gonna do with your money, but maybe something else. Maybe that's an option for you, right? Uh the second thing you do.

people could do is trade the pumps and the dips, right? So they see these and they're like, oh, you know, it's it's dipping. Now's the time to buy. And then they they sell it goes up another 200, 300, they sell. Um I think a lot of people choose to do that. The third thing you can do is just hold through the pain. All right. Um

Of course, if do the first one if you're not convicted on crypto, right? It's like, and again, uh I think holding through a bear market requires conviction. You can't get conviction through listening to someone like David or myself. You have to develop that on your own. Um, so if you don't have conviction, maybe number one is the right option. Uh, it's not an option for me. I do have a tremendous amount of conviction in this asset class. So that's not the one I choose. But a lot of people who have conviction in the asset class, they default to two, where David, they start like trying to trade the dips and the pumps, and they try to think they can make money on that. So many people in these bear market scenarios get wrecked by that, David.

If you do not know that you are a trader, then you're not a trader.

Don't do it. That's what I'm saying. So, like I'm I'm I'm kind of encouraging the bankless audience to be very careful before they start trying to trade these dips and the pumps and that sort of thing. If you're good at that game, maybe you could do it. But most people, 95% of people, should not be playing that game. And so you come to acceptance in the third option, which is just hold through the pain, is hold through the pain. You have conviction. And if you decide to hold through the pain, there's some things you can do for your mental health right now. Okay. One of the things you can do is delete your price apps for a bit. All right. Stop checking

daily, hourly, every 10 minutes, every five minutes. Stop doing that.

Mm-hmm.

That is not good for your dopamine levels. All right. It's like not good for your psychological health. It's not going to help you if what you're deciding to do is holding through the pain anyway. You're not going to trade any of these moves. So why check it? Number two, I think you can start working on yourself a bit more. And maybe this means hitting the gym. Maybe this means reading some books that you have on economics, on philosophy, on history. Maybe this means learning to code. There's so many disparate skills that crypto requires to be really good. And you know, you can draw these out and you just start learning them during the bear market. The third thing is you can go build something. David, you mentioned, like you and I started a podcast in a newsletter, the last bear market. Uh, maybe art. NFTC is gonna come back. It's gonna boom again. Maybe learn to code, maybe get into a community. We talked about layer twos being incredible opportunities for the future. Maybe you decide to join governance in one of these layer two ecosystems. That opportunity is in front of you. It's way less crowded. There's way more signal. Go do that. Number four, you can level up. All right, forget price, just learn about the new DeFi protocols. David, you put out a great uh alpha leak episode on Voltz protocol. How much do you know about interest rate swaps, guys? Because I don't know a ton, but I can level up through bankless uh content and start to use some of these DeFi protocols. And then number five, I think you get to a place in acceptance, you start doing these things where you're like, ah, okay, we've it's not over. It's not actually over. Uh, everyone in crypto went through this before. This is how you earn the crypto appreciation. People think you get lucky with prices of crypto going high in a bolt run. You don't, you do, but you also don't. This is very much about your ability to hold through these deep dark crypto winters. Uh, and that to me is how you get out of this. This is what I did the last bear market, and I came out with more conviction, stronger than ever, incredibly excited about the future.

No, that I think those are some fantastic bits of advice, Ryan. And just uh to add on more clarity to and color to that, uh my mental health uh is actually bad in bull markets. Like it's it the things are

Answer.

Yeah, things are noisy. They're hard to reason about. I'm confused. Like there I can't keep look away from crypto Twitter. Like there's it, like my attention is being pulled in every single direction. And like what a bear market is, is a bear market is a return to fundamentals. And you can apply that same lesson to your own psychology and your own personal well-being. Like take this opportunity to take a step back, go touch some grass, uh, go e go exercise. Because if you are exercising, it's hard to have bad mental health. That that is a the there's a connection between these two things. And then just like zoom out and think about not like the forced one to four week time frame perspectives of the bull market, but the one to four year perspectives of the bear market. And that is how you re like maintain your sanity. And so, just to reiterate what Ryan said, what do you want to get done in the next one to four years? Do you want to like get fit and get out there and see the sunlight and get away from crypto Twitter? Do we want to see?

And like if you need help gaining conviction about like what we're here to do in this space, get educated. Like, understand why we're going through a bear market, understand federal rate interest, federal uh reserve and like monetary policy and the choices that they're doing. Understand the history of fiat currencies and the choices that nations have made to uh to manage those things, to get a long-term perspective and to prepare yourself and your family and your loved ones and your bags for the future. Uh and just just so, like again, zoom out, get rational, get get sober, the bull market's over. Uh, we got the it's time, the hangover's here. Uh, and so as soon as we can skip forward, like you said, into that acceptance phase, we can start to actually plan for the future and rebuild our ourselves, our portfolios, uh, and like our industry.