EMERGENCY BEAR MARKET LIVESTREAM

Hey Bankless Nation! This is uh an emergency session of the Bankless Nation. We are we are uh recording here, we're doing a live stream because we feel like we've been through something over the past week or so. I don't think I've been hit this hard uh in the mouth by a bear market since like maybe forever, but this is starting to feel reminiscent of 2018. So we wanted to give you guys the bear market survival guide. You know, haters will call this copium, David, uh, but uh I think we've got some things to say. We want to go through what happened to prices recently in crypto, why it's happening, at least at a high level, what's gonna happen next, and how you should play it, how David and I are playing it. Uh, David, um, what do we want to cover here, man?

Yeah, yeah, that's we definitely want to talk about, of course, because even when people are down bad, sometimes that means the opportunities are the highest. Uh but also at the same time, to some degree, I think other people are just not there there's one part of the the uh conversation which is what opportunities are there, and then these the the the other part of the conversation is like some people just need s uh like a shoulder to lean on. Some people just need to cope. Uh and so this is

Is that what you need, David?

I mean

How are you feeling, man?

I I always kind of appreciate the fact that markets are aggregates of human emotions. A lot of humans calculate things with their gut, with their emotions. And so when the markets are down bad, that means the people are down bad. And so there's a lot of that out there. And so we're gonna try and balance out just like some people just need uh to like go through the process of pain to get through to the other side. So we're gonna we're gonna talk about all of those things. Uh thankfully I'm the uh the the son of what I think is a very talented uh psychologist, and so hopefully I can uh I can bring some mom energy into this into this live stream. Um but there's also the conversation that I want to get to of comparing this market cycle to last market cycle because you know, same, same, but different. Uh why different? Because it's that different that is that difference that is people I think are getting uh, you know, it's the difference of between this cycle and last cycle that really causes um a lot of people a lot of like uh just like emotions, right? It's like why did this happen? Uh and of course, there's also just a macro conversation. Ryan and I are not macro experts, but I do think that we do know where to look. Uh yeah. So over the next like weeks and months, we're I think we're gonna talk to a lot of macro experts and get their perspective because this no one knows anything, like no one knows everything. Uh, but if you talk to a lot of macro experts, we can start to paint a picture. And so I think that's

And this is

this isn't just crypto, right? This is inflation, this is war, this is pandemic, this is you know, y monetary, this is central bank stuff. And so I think uh the the analysis of this bear market requires a bit more than maybe the previous bear markets have.

Mm-hmm.

Um ultimately though, we want to get to a place where we're talking about how to how to rebuild, uh, how to pick yourself up and keep moving forward, how to keep journeying west. Uh, you know, people forget, David, but Bankless was born in a bear market. I know we've said this before, but it kind of feels like home, uh, at least for us. Not that we're excited or giddy about it, but at some level, this is a time to uh to reflect and develop uh conviction and to rebuild for the next leg up. But uh just uh just a vibe check on you, man. Like, how are you feeling, this bear market? So um I think that you you knew it was a bear market. I don't know. You tell me though, David, do you think we'd come down this far and this fast? Like, and how are you feeling about this?

Oh, I I wouldn't say that I knew it it was a bear market. I think that my mind has uh accepted that it's a bear market in the last like three days. Like

Really?

Oh yeah, yeah, yeah, yeah. Uh like I

You knew it was a bear market, but you didn't know it was a bear market capital B like.

Yes.

Correct.

Okay.

Yes, like we were at like three, four, five months of drawdown. And this is all always about like where's what where's your reference point, right? And so from somebody that came out of the 2018 to 2020 bear, when you show me like $2,000 to $1,700 ETH price, I'm like, well, it's not that bad. Um and then but then you take you throw it down to below all-time highs for the previous bear market, for the previous previous bull market. I'm like, okay, that's a bear market, that's what a bear market looks like. So uh now I have firmly capitulated in the fact that this is definitely a bear market. This is what a bear market looks like. I tweeted out um a couple days ago uh when Ether was going from 1700 down to like 1400 and even before it hit two uh 1200, where um like the we've we've talked about like with uh when we ever had our our bull case for Ethere podcast with Anthony Susano and Eric Connor and Cyrus and DC Investor, like we always talk about like the bear market, the bear market of all. The last time, the last time like prices went down, we always talked about like how it felt. And like that, this is the first time when Ether went from 1700 down to like 1200. This was the first time I was I was like, okay, this is how it felt. This was this was how 2018 felt. Uh like you thought you had a glimmer of hope, things like crypto prices would go down, they'd stabilize, and you're like, okay, was that it? You had this glimmer of hope, and then it went down like another 20%. And then that was on repeat. Uh and so the this last Sunday or like Saturday and Sunday after the CPI inflation numbers came in and crypto prices just got absolutely walloped after getting walloped, after getting walloped, I was like, oh okay, this for the first time, this feels like uh like the bear market that I'm familiar with. Um and so like for like how how am I emotionally doing? Uh I'm a little frustrated, I would say. I'm a little frustrated. Uh

What are you frustrated about?

Um it's just because like in hindsight it makes a lot of sense. But uh I remember in the 2018 to 2020 bear thinking uh like everyone was talking about oh, the next crypto cycle, the next crypto cycle, the next crypto cycle is totally gonna happen when the next cycle comes, when the next cycle comes. I'm like, well, if everyone's talking about the next cycle, then like doesn't that mean that like if like market is there's consensus on the next cycle, therefore it's not gonna manifest the same way, but it totally did. Like Ether went from 400 to like 4,000 inside of 12 months. It was super fast. And then like I should have taken that into account and been like, uh, okay, well, if it's if we are indeed in again the next cycle, it's going to be a cycle, as in the cycle comes to an end. And so I didn't account for the end of this cycle, Ryan. Um, but also at the same time, I'm like not in the game of selling ETH. So like, even though like I didn't account for it, I also wouldn't have like changed what I've done, anyways. Like I've always said, like, I'll go up, I'll I'll rise with ETH, and I'll go down with ETH. Uh so at the end of the day, I'm going down with ETH, my man.

Recalibrating, adjusting. Everyone has conviction as Mike Tyson says until they get punched in the mouth. And this definitely feels like uh we've been punched in the mouth and are bleeding a little bit here.

Mm. Yeah. How are you doing, my man?

Uh you know what, David? I g I gotta be honest. I'm I'm feeling pretty zen about things. Yeah. Like I'm feeling pretty stoic about things. And I gotta say, this is not the way I felt in 2018. But I don't think it's because the circumstances have changed and because it's that much different than 2018, though it is different than 2018. Um, it's just because um I've seen this play before. Like I feel like everything that's happened, including the reply guys uh telling us that crypto is never going to um go up again and this time it's different, uh, including all of the FUD around um ETH and crypto and NFTs and everything else, uh including all of the like the fear, it's the exact same comments on on repeat. And this like in 2018, I was actually unsure of my my thesis and the underlying crypto in investment. So I spent 2018 and 2019 and part of 2020 trying to figure that out. Like, oh shit, like was I wrong? Did I really mess this up? Um, and then I came out of that market with uh with conviction. And in 2021 and 2022, that conviction has just built up even more. And so I am at the stage where I feel unfazed by crypto prices at all because I have such a high level of conviction. So this is kind of like it's annoying a little bit. It's kind of like a you know, a fly buzzing around my head. I have to just kind of swat it. But at the same time, it's also refreshing. And I sort of feel a little bit like do you know uh Eric Voorhees? When you whenever you talk to Eric Voorhees, Bitcoin OG got in like you know, 2012 or 2013. Whenever you talk to that guy about bear markets, he's just always so zen. Right. And it's you know why? It's because he's been through this. He's seen it, he's been through Mt. Gox, he's been like nothing can face him at this point. And this time around, I feel a bit more like that. Like I have the conviction and I am not concerned at all. And now, uh hopefully, what we can do in this episode a little bit is um.

Offer some perspective, maybe offer some lessons learned because the first uh cycle was not like that at all for me, David. And uh I grew a lot in in 2017, 2018, 2019. And I think some of those lessons might be helpful for for folks here today. So, guys, we're gonna get into all of that. That's gonna be the bulk of the podcast. Uh, welcome to the bear market. Before we get in,

Hey guys, we are back with our bear market episode. We've capitulated, of course, both of us. David and I, we are officially in the bear market for some pain. It is known. David, let's um let's let's start here, maybe with some emotional regulation, because there's two types of viewers that I think are or listeners who are listening to this right now. There's people who have never been this before. It's their first time, all right, like this guy up here. Uh, and then there's people who have been here before 2018 holders, last bear market holders, even veterans previous. And I think those two classes of individuals, those two cohorts, are experiencing the bear market in very different ways. Let's let's talk about the first cohort, those that are on the first cycle. Uh, if you recall kind of your first cycle and you know how you experienced the bear market, what are these people thinking right now? What are listeners who've never been through this thinking?

Yeah, so there there's the mentality of it's all over and it's never coming back. And uh I've been in crypto for the last six to twelve months, 12 months if you're lucky, six months if you're unlucky. Uh and uh am I really ready to stick it out for an unknown amount of time? Like how much of my life do I want to get dedicated to this thing? Uh I was here to because numbers were going up, but numbers aren't going up anymore, numbers are down only, so why am I here? And also, where is the light at the end of the tunnel? I don't see it. That's probably the perspective of a lot of new holders, especially ones that like part of the conviction of older holders is they've had the time to understand fundamentals, and fundamentals is where you get your conviction from, right? And so, like fund having conviction is where you can take just beating after beating after beating because you have conviction. And so it's harder to have conviction when you came in just like six months ago. Because like, again, it's e everyone's more comfortable when they invest in what they know. Uh and so the new, the first cyclers are getting tested at the moment. Uh so they're real scared. They're real scared.

It's like an emotional ride more than anything, right? I mean, you you see the numbers kind of evaporate. And uh, do you know from your from all your your psych classes and your psych training, David, like the five stages of grief. Uh, you know, I think that's what happens to you in a crypto market. And I r I recall all the lingering questions I had in the last uh, you know, crypto bear markets, like what was I wrong? What if this never recovers? What if this time it's actually different? I know in previous cycles crypto has recovered, but what if it what if it doesn't this time? And I literally believe I went through the five stages of grief, right? Like first it was denial. Uh it's not, it's just a dip. This is just a temporary thing. I feel like last weekend kind of smashed that idea. Um, this is this happened so fast and so drastically. It's it's hard for people to say this is just a dip. And then in the stages of grief, there's anger, right? So you start to get mad at oh, it's the whales playing their whales game, their whale games and liquidating people or like F Do Quan, he's the reason for this, or now more recently, like Celsius, F Celsius. Uh and then it's like bargaining, okay? So you get through the anger stage and you're bargaining, and you're like, okay, well, what if it's not so bad? What if like, you know, w what if this is a very important thing to do?

Yeah.

Yeah, there's a relief rally. There's always some piece of hope around the corner. Maybe this new legislation is good for crypto. And then you're like, oh, this is gonna be way longer than I thought. And you get into that depression phase of things where it's like, oh my God, what have I done? I've made a huge mistake. I'll never financially recover.

Uh, and then you get into the acceptance phase. Um, and that's the stage that is actually

most beneficial for you during the bear run. If you can, if you can get through all of those other four stages and get to acceptance, like that's the stage at which you'll start to level up and start learning. Because then you go, okay,

what have I actually learned from this experiment experience? And how do I rebuild? Right. That's that's when you can start learning, writing.

Trying new things, figuring out where to allocate your portfolio for the next bull market. I tweeted this earlier today. I felt smart during the bull market because I did. You feel like a genius at first, but I became smart during the bear market. And that's really what happens. And the reason it's such an emotional roller coaster is there are a whole bunch of people who came into 2022 feeling like a genius.

Like feeling like they were on top of the world, feeling like they were a badass crypto investor. And now this market is just punching them in the mouth and showing them that uh, well, things can go down too. And when they go down, they can go down drastically.

Uh, any any other thoughts for the first time, uh, cycler here, David?

Yeah, the thing the thing that I've been feeling recently is like the what is unprecedented at the moment is like these interest rates, right? And so this is one of the differences between last cycle and this cycle is la last cycle crypto went down uh regardless of like macro conditions. And this cycle is different because it is going down because of macro conditions. Maybe it was gonna go down anyways, but it was defin it's also like being accelerated with how fast it's going to go down because of interest rates, right? And so like that in my mind has caused me to have feelings of oh, maybe this never recovers. And I don't mean like never, like never, never, but like maybe this takes like an unprecedented amount of time for it to recover because how can crypto go up when there's in when interest rates are going up and up and up, right? Risk on assets don't do well in high interest rate environments. Uh oopsies.

Sorry. Uh

What's

sorry, I accidentally uh join it uh stop sharing real quick if you don't mind. Um

I was gonna say, you know what's funny about that, David, is because like as scary as that is, I feel like that's less scary than the narrative around last cycle. So last cycle in 2018, there was this narrative that crypto was useless. Ethereum didn't have any product market fit. Like it was just a big ICO token scam. And this time, no one is disputing that crypto has some product market fit. Now it's like, oh, the macro environment will continue to crush crypto, which is uh a really

big seed change here. Right. And I think less scary in some ways than the previous cycle. What's w what are your thoughts?

Yeah, out of out of 2018, I was like, oh, the ICO mania, that was it is true. What the Bitcoiners were saying about the ICOs, that was correct. Like there was nothing there. And I'm like, well, then I had to like question myself, well, why am I here then? Because there was literally nothing else on Ethereum that was really there for a very long time post-ICO Mania to really get me excited. And that's just like not true about today. Like especially like, and this is one of the things I'm feeling is that it felt it felt so close. Like victory felt so close for crypto. We had like so much progress, like DeFi had such strong fundamentals. We have things that are actually like replacing the problem of the Federal Reserve, like whiplashing the market around with like zero interest rates, like no raising rates and like all these uh people trying to tinker with the market. And we have solutions for all the broken, uh, what I feel is the broken parts of the of the world economy, and like it felt so close. But now in hindsight, I'm like, well, no, there's like still so much adoption away. So, like, there's the only way that we really get through this is time. Regardless of a bull market or a bar market, the prices don't matter. The only way that crypto wins is with time. Uh, and so you just have to like sit down in your convictions and and get to that point of just like I'm ready to wait out an infinite amount of time in order to see crypto because I know it will eventually happen, regardless.

So what you just said, David, for the first timer for the unicycler, that's the acceptance phase we're talking about. If you can cycle through the denial, the anger, the bargaining, depression, and get to acceptance where you're just like, hey, this is going to take some time, maybe take a while, take months, maybe take years. Then you can get to a place where you're much more rational and stoic about it. And then that is that is how good investors invest is they remove the emotion from the situation, they become stoic. Now, the second audience that we mentioned are those veterans, of course, who are kind of looking at this. And the one thing I would encourage uh some of the veterans who are seeing kind of the panic and the and the and the FUD and um just the fear out there in the market is hey guys, like be patient with first cyclers. Right. I mean, do you remember when this was you? It wasn't that long ago. You're feeling these same emotions. Uh and um I will say, I think you made this point. Like, even the veterans are kind of surprised by the speed of this drawdown. Uh yeah, is is this kind of unprecedented from that perspective?

Yeah, uh to to start from the beginning, like there's there's two reasons why first cyclers, the 2021-2022 cyclers, uh are uh feeling more pain than the veterans. Uh one is because they bought the assets at a higher price. So like it's obvious that they're feeling more pain. They bought Ether at $2,000 or higher. Whereas the veterans bought it at like in between $80 and $500. And so, like, well, literally, there is actually a difference in pain there because of with the the initial like cost of buying these assets. And so, like, that's a source of initial pain. And then the other reason why first cyclers also feel uh uh more pain than the veterans is because the veterans have felt it before. Uh and so like the veterans are more emotionally prepared to say we have been here before and like this is just how it goes, where the first cyclers are like the sky is crashing, like the it the world is coming down. And so, like, there's two reasons why like veterans are who they are and the noobs are are who they are. And yet at the same time, hashtag this time is it's different because of good the goddamn interest rates, Brian, is the interest rates that rugged us. Uh and so like in 2018, when when crypto, when Ether went from $1,400 down to $80,000, Bitcoin went from $20,000 down to $3,000, there were no interest rates. Like maybe there was like a little, but it went away so fast. Uh and so like even the veterans have gotten blindslided by the speed of the macro markets. And so like that actually is like if you want to blame anything, like blame the Fed. Like they printed a bunch of money, they sent us all to the moon, and then they and then they rugged us by raising interest rates, which was should be expected. In hindsight, it's obvious. But also, like, yeah, I kind of feel like the Fed should the Fed should take some blame here.

Yeah, I I do too, although like the part of the acceptance phase I think is is coming to terms with like the only person you have to blame is yourself.

Ha.

All right. So like it is very easy in maybe the bargaining phase to just like point at other people and start blaming them. But like ultimately, a good investor sees through like the mechanisms of the sister the system and you know makes choices and could have seen some of this coming. But uh let's talk about the prices then, David. So what actually happened to uh prices? Maybe let's start with the uh the SP 500 and equities because that's uh telling a tale for us. Uh, what have equities looked like over the past year or two?

Uh yeah, so we uh the equities markets from the peak, which happened in July uh January, literally at the start of the year, are is down twenty-two and a half percent over a hundred and sixty-one days. Uh so is that over is that a half of a year? Yeah, that's ha almost half of half a year. Uh which is pretty damn pretty damn good for a a decline.

Yeah, under 20%. And it's definitely bear market territory for equities, and we've just crossed crossed it.

And and the difference here is that uh that it's down 22% over uh like half of a year versus the COVID crash, which was down something like 35%, but it recovered in half of a year. And so like the pain was sharp, but then everything bounced back, and actually people made a lot of money on that bounce back. This doesn't feel like the saying. This is like you can actually count on the market going down now. Like the trend, there's always that meme, the trend is your friend. Well, Ryan, the trend is down now. Uh and it has been that way. And so, like, and you can see the same thing in the NASDAQ. So here's the NASDAQ coming in at negative 31%, down 31%, over 217 days. And this 217 day number is gonna uh uh it's also true for Ether, it's also true for Bitcoin. Uh so it looks like we're just for some reason correlated to the Nasdaq more than we are other markets, but yeah.

What's funny is if you look at these charts, see if you can spot where uh liquidity was injected by the Fed into the market. Oh wow, here.

Right.

And then let's see if you can spot where it was taken out, right?

Mm-hmm.

Around this this uh phase. We're gonna talk about some of the macro causes, but uh before we get there, have a

But before we go too far, go back to go back to the NASDAQ. You can see like you look at that the trend from 2019 up to 2021. Like that's a decent line, and then it just like shoots up into a parabola, right? And we're like kind of like back onto that normal like line that we are. Um but also that line also had quantitative easing in it as well and 0% interest rates. Uh and so uh zooming out, it might show up a different story. All right, here is here's ether. Uh topped at the market at basically $4,900. Where and then we are when I took the screenshot, I actually don't know what prices are. Prices are super volatile right now. Uh we are at roughly $1,200, which is down 76% in 217 days. So we have 217 days of down, which is pretty damn crazy. And these are weekly candles, Ryan. So every single bar represents one week of time. That is one, two, three, four, five, six, seven, eight, nine, ten, eleven weeks of red. And that was only the second half of the downtrend. Uh, and so there was some green in the first half, but the the last 12 weeks has been all red, which is a record, a record of by setting by three weeks. I I think the most previous record of uh in a row weeks for Bitcoin at least was n uh was nine. We are up to 12 now. Uh so yeah. So here's Bitcoin 67 uh point nine percent down over again 217 days. Uh so Ether down 75%, Bitcoin down 68%. Uh oof.

How about total crypto market uh cap w what are you looking like?

Yeah, total crypto market cap is also down 68%. Uh so down from just oh uh above three trillion dollars to just below three trillion dollars. And the reason why, Ryan, why the crypto market cap is down equivalent to Bitcoin, which doesn't make any sense. It should be down way worse than Bitcoin because all the illiquid coins of the world go down way worse. It actually got buffered by stable coins. So stable coins are included in that that those numbers.

Rotating into stable coins?

Right, yeah. So uh even even the stable some stable coins have lost uh market cap, like tether has seen outflows, USDC has actually seen uh marginal inflows, um DIE has seen