Institutional Stablecoins Surge, Hyperliquid Drama, & Crypto's New Frontier

bankless Nation welcome to the weekly rollup each week I'm bringing on a different co-host to help me go through the news and this week I have the pleasure of being joined by dear friend and crypto media colleague Mike EPO Mike happy Friday glad to have you here happy Friday buddy how we doing really good really uh really good week interesting week there is a lot to talk about uh Michael Taylor bought more Bitcoin which is the most boring thing of the week it only gets more exciting from there uh stable coins had a big week we're above 200 billion ion Dollar in Supply with four new stablecoin and/ tokenized money

markets being entered into the market or at least announced uh black rocks build fund triples in size in just the last three weeks hyper liquid had a rocky week this week a market manipulation attack leads to an industrywide discussion about rule what rules do and do not apply to hyper liquid uh the US Treasury finally removes tornado cash from the ofac list and then Robin Hood announces Robin Hood banking something I want to keep an eye on uh that's the news of the week that I got for you uh to talk about this week Mike but also we're coming after just Das week out of the blockworks ecosystem and broadly

that was for for the um industry as a whole so maybe before we get into the specific news of the week I can just kind of get your broad Strokes about how you feeling about the industry about the fundamentals about whatever comes to mind first and foremost also congratulations on Das you got through a killer conference thanks buddy I appreciate it um yeah I mean we've been doing Das now for six years and it's funny we have a little bit of we have insights into both a very Crypton native part of the e ecosystem and obviously we collaborate on permission list which is you know kind of like our t-shirts conference and then we've been doing Das

actually for longer and that's for the suits and so we've kind of had this this view of what's going ont I was wondering what you meant by that the t-shirts and the suits right so we've got a view into what's going on on the institutional side of the space and more of the developer Builder VC side of the space and typically I mean over the course of at least the last six years it's been very consistent that in the kind of the Builder trenches The Vibes are almost always better um this was kind of a market uh shift or Divergence in sentiment where actually you've got you know people in the gutter a little bit

in more of our corner of the industry that you and I spend more time in and the suits are kind of running around like a kid the kids in a candy store and everyone's very very excited and they're excited I think because a lot of the things that people have been talking about over in that corner of the world for a long time rwa stable coins uh you know a real regulatory Embrace by the US Administration that's all finally happening so you know the tldrs there's an enormous amount of capital and um you know large new finex and more traditional uh you know Financial folks building in that side of the space I think they're actually waiting for hag's

genius stable coin act um which hopefully should get passed in the next I don't know 90 days or so uh and then the upcoming fit Market structure bill they actually have to wait until that stuff comes into effect but once they do I think there's going to be a massive inflow especially in the uh stable coin part of the ecosystem yeah the the chant of crypto from Genesis is the institutions are coming the herd is coming and obviously it makes sense that they are not actually coming until we get crypto regulation pushed through

Congress which is currently happening with the pro crypto Administration so finally that that Meme that we have been chanting for over a decade now is finally here and it's just interesting timing that that is happening with like the flipping of morale like you said from institutions or very high morale and the retail crypto Twitter Crypton natives have had some of the lowest morale that I've seen in crypto since my time in crypto that I would say yeah same but I think that's I think that's I you and I have talked about this a little bit before I think this is a

moment in time where it's kind of the end of the beginning right so the first 15 years or so of crypto have been very exciting it's been marked by Visionary Founders kind of tinkerers people that are interested in building very wonky crazy things and now we're at a point where this industry has been accepted and embraced by at least this Administration in the United States and this is where rubber hits the road and we have have the opportunity to build things that scale that inevitably means that there are going to be compromises it means that you know we need new types of Founders and VCS and investors of VCS

that know how to grow and scale companies uh Founders that are interested in doing that they're not necessarily just tinkerers but they're uh scalers and they're innovators and so there's going to be a little bit of change and churn and I expect some of the incumbents actually IND dribbly roughly upset about it but I think the uh the light at the end of the tunnel is we actually have globally scalable Financial products which is what we all wanted from d one so I remain super super excited actually about this the next couple of decades and yeah I think we're in for a really interesting ride yeah I think the crypto native side of

that Spectrum just kind of needs to learn how to get comfortable in this new world like we on Bank list we have this theme of we're going west this is the frontier and what that means is like you know we're going away from civilization into the wild and I've always kind of thought as like the institutional side of crypto is the East that's the New York that's the Wall Street that's Washington DC and then the crypto ethos is well we're going west we are leaving that part of the world and we're going into this like Lawless Frontier and then when the East finally arrives and like

also moves its way west with us then our like the Crypton native like way of life is like under threat uh a little bit I think that's like may maybe that's kind of me reading into it a little bit too much but that's kind of like how I kind of think about it no I think you're analogy is exactly right like imagine you were a Pioneer and you moved from the East Coast oh out you know out to the wild west right like the what type of personalities were attracted to that you had kind of people that were uh very courageous people that really like risk reward right it's a totally new wide open Zone and you got there and there

were things that were really nice you had a lot of freedom you had a lot of opportunity you also might get shot in the middle of the night and uh you didn't have an enormous amount of recourse So eventually Society catches up to you for some people that were out there maybe for uh you know maybe that were optimized towards that a little bit too much it was kind of there was a little bit of of melancholy or sadness but you know there were an enormous amount of benefits that came along with that as well I kind of think that's the phase that we're in in crypto too yeah yes speaking of uh Society catching up to you it's tax season uh so if you were

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calculator make sure your taxes are easy this year all right starting this week off with news that we hear almost every single week but it has been a while Michael sailor has acquired almost 7,000 more Bitcoins for $584 Million last week average price $84,000 per Bitcoin that means they now own over 500,000 Bitcoin 2.4% of the total Supply uh Mike you have heard this news before we have talked about this news before uh this is nothing new it's nice to see Michael sailor buying again there was a temporary Hiatus of maybe like three weeks maybe even four weeks

um anything to say or is this just like part for the course I think that Michael sailor is a very Savvy player um and has played this game extremely well I don't know I met him at digital asset Summit um last week and you know what I can say about the guy is that he is a True Believer in the cause and really wants to onboard you know a bunch of people and companies into buying Bitcoin I get the sense that in private he's very similar uh to how he represents himself in public and you know what I would say is oftentimes

people get worried about you know sailor I think people have a little bit of uh PTSD from last cycle where you had a bunch of centralized lenders and large holders of Bitcoin blow up characters main characters characters yeah and so I think people are very worried about sailor being an you know at some point an existential risk to bitcoin and you know he keeps issuing you know he just did a an issuance of preferred stock uh Strife where you get a 10% um essentially dividend there and people are worried hey is he going to be able

to pay these and what I would say is it's not like the operating company micro strategy is spitting off a lot of cash but what I will say is that he he has structured these these offerings in a way that he's not at risk of being you know quote margin called right he suspend that 10% dividend and investors cannot be happy that means that micro strategy the stock can go down quite a bit but what it does mean is that at least from my vantage point I'm not an expert at this you know but you know he's not at massive risk of liquidation or Margin Call so I think he's a pretty Savvy player and I think you know what I

would actually like in this too is that the advant the Insight that he's taken advantage of here is that Wall Street wants to buy his stock even though there's not a fundamental reason to so you know how you and I sometimes look at something in crypto and you're like this is so stupid but it's going to go up but I'm buying it yeah but I'm buying it he basically did the Wall Street equivalent of that so he he made micro strategy into a wall Street meme coin right because that that's the the brand value I think part of the micro strategy strategy it's actually not just call strategy today um is that Michael sailor

is himself this very grandiose figure it would not like the strategy strategy would not work with a humble Michael sailor he has to be like this Larger than Life figure in order to like add the meme power into the micro strategy stock which is where he's getting this like you know margin to be able to lend out uh and just like you know sell Equity do these Financial Alchemy in order to to buy a bunch of Bitcoin that's kind of my take on him so what do you think I don't know if you saw but GameStop uh filed to sell I think $1.3 billion of equity uh to purchase Bitcoin

and I'm I'm curious if someone else is going to be able to run back the Michael sailor Playbook and you know one pattern that we've seen time and time again in crypto is that there is a uh there is a new sexy thing um it goes up quite a bit and then it gets replicated to death and suddenly you have a bunch of different you know a large supply of different assets to express the same trade and ends up getting compressed I I think that it probably won't end up being the same here I sort of doubt that GameStop sees the same success that Michael sailor has and strategy but you know

it's interesting to see that someone else is trying to run this Playbook back I think that's right uh Michael Michael sailor and strategy is the Bitcoin of the strategy strategy uh this is getting very meta in the commentary yeah getting very very meta but but GameStop is itself also a meme ston like it created this meme ston category and so I think it is a pretty viable like second candidate for the Wall Street bets crowd to like add more meme power into the gamest ston to do the strategy strategy

I agree okay so the other thing to I'm reading this uh so it also there's these are convertible senior notes so it's not an equity offering but still they're converts but right yeah it's a same yeah we'll have to see what well what what do you think do you have any predictions for do you think this goes uh how do you think the market responds to this David um I think it's all dependent on bitcoin if Bitcoin starts to go up it will add more weight to the mimetic idea that you can just issue Equity to buy Bitcoin um

and if Bitcoin goes down in the near term then this like GameStop adding fuel to the fire is actually not working and there's no fire to add a fuel to so I think it it really depends on like the mimetic value of Bitcoin which is all mimetic value it's funny it's I don't know there are a lot of times in crypto where you look at um something that's happening and you think maybe it's working for some fundamental reason and there's some kind of regime shift or there's some sliding uh sliding doors moment and then the real reason ends up being much stupider than you'd

ultimately hoped and you remember there was there's been a push for the last couple of years to put Bitcoin on company treasuries and you know to defend against the devaluation of the dollar right that feels very you know headyy and real as a use case and then you realize that actually it's just uh what why public companies are actually buying Bitcoin is to turn their stock into a meme stunk it's like a much sillier reason than you would have ultimately hoped but yeah maybe it's a yeah yeah the light comes on in the club moment but um uh so long as bitcoin's

going up from 85,000 to go higher then the music will keep on playing all right let's get into something that's completely different than Bitcoin which is stable coins uh so not this week but maybe in the last like two weeks uh stable coin supply has broken above 230 billion it's somewhere around 210 to 230 billion total Supply uh ethereum stable coin dominance at 58% followed by Tron at 31% uh but also we have four new either stable coins or tokenized money markets that were announced this week we got USD one from Liberty Financial we

got avit from custodia bank we got Ys wst from the state of Wyoming and then FY hxx which is a money market tokenized money market fund from Fidelity these are all announced these are not launched so these are not alive tokens um but uh each one each one is a little bit different like World Liberty Financial 100% backed by short-term US Government treasury USD deposits and other cash equivalents uh minted on ethereum and binance smart chain initially uh custody

by bitco custodia ADV Vantage Bank are introducing the First Bank issued stable coins that is a bank and they are issuing a stable coin and that is a first pre-existing Bank establishing a stable coin that's pretty cool uh the state of Wyoming we will issue a Fiat back stable coin the first issu by a us entity I guess that means like a public entity like a state uh fully backed by treasuries cash repurchase agreements capitalization requirement of 102% uh currently being tested on salana ethereum arbitrum polygon and then base

as well working with layer zero to facilitate token deployments across all these networks uh and then testing phase will continue for until uh around a potential launch date of July and then of course Fidelity uh just onchain tokenized money market um looking to uh uh go live in in May and then here's your co-founder uh Jason yanowitz tweeting out maybe it's was just a good summary of this is f fideli stable coin is just the beginning every Bank brokerage fintech is thinking about doing the same stable coin legislation passing in the next few months we'll accelerate this the biggest winners will

we cryptos brand and circle and tether okay so I think the one of the themes of the last two weeks is that people are very aware of that that there is this institutional stable coin gold rush that is happening um so that's all the new that's all that news like stable coin Supply breaking all alltime highs for new entrance into the market what's your take on all that news yeah I think it's very difficult to reason about what is going to happen when uh there's a bunch of new issuers coming to Market with different stable coin offerings and you know I think you can

broadly group Stables into two different groups today there's usdt and usdc and these are the market leaders but they're also unique in the sense that people just hold them they don't need to pass their users yield back although usdc has a bunch of Revenue shares with coinbase um other market makers Etc so there is some amount of essentially yield getting passed back and tether historically hasn't really done that but from the user perspective they're still holding that without the expectation of yield and then there's a bunch of other uh stable coins so like the usds type thing

which is they're sort of positioning themselves in the market as more of a savings vehicle um and so the advantage there is that you know they have this value proposition to users which is hey you can hold this and get some amount of yield although every St these stable coins are a net interest margin business right so you're directly eroding your profits by having to pass a lot of the the yield back to users then you have all of these different new entrance here so you've got you know fidelity you've got um you know custodia you've got World Liberty fi issuing on binance

Smart chain which is that's C I mean that headline just in and of itself is absolutely Bonkers and then the state of Wyoming itself and so I'm not 100% sure here um it it really depends on what are the distribution rails for these stable coins and I think if you look at today why have certain staes taken off it mostly has to do with becoming a liquid trading pair so if you look at like why why is tether done so unbelievably well is because most of the trading activity

for crypto has happen on offshore centralized exchanges they could not hold dollars so they needed another dollar likee instrument that's what their users wanted and they found tether right so tether is this very very sticky product where most of the trading activity happens that's kind of the that's the distribution that comes from these centralized exchanges there's a similar story with usdc as well which is U obviously they have a huge distribution partner in the form of coinbase but also the reason that I

think usdc is very sticky and usdc has come under a lot of fire and feels like it's coming under a lot of pressure lately but they're also very dominant as a uh as a trading pair within defi especially on ethereum and so the question is who can replicate that use case I I think maybe you know there are certain fintechs like Robin Hood here is a very interesting Contender if they were to ever do this right like they also have a large uh you know retail trading audience that that could be quite interesting but there's another form of distribution here which is uh just payments in general and it's

interesting to see you know some entrance that have tried to move into this market like PayPal uh stumble and kind of fail here and I wonder if that's just because the use case of trading today is still much much higher than the sort of remittance and payments use case than that we'd all maybe like to see going into the future but I do think that people are probably sleeping on that as a use case because if someone was able to dominate this from the payment standpoint I think you know you would end up having uh that that would be that would be a really great way to grow stable coin distribution very fast

we just haven't necessarily seen it yet so I think Fidel I'm you know I'm looking at each of these names here and I think the differentiating factor for something like Fidelity is you know they have an enormous money market fund business that exists offchain they I'm I'm I'm sure that some of these large um money market fund guys looked at tether and the insane amount of profit that they're putting up and thinking huh I'd like some of that profit that is not a small number right even for someone of fidelity size right and so ironically actually it's it kind

of puts a Target on your back if you're tether the the question is do they swim in similar markets and can Fidelity erode that market share I'm actually not sure um I think something like custodia Bank maybe is a little bit interesting more from the standpoint of it probably is slightly more secure right like there's probably a security differentiator here from the custodia standpoint like um most of these stable coins you know on the on the absolute safest side you're just C you're you are um collateralized with short-term

treasuries uh but also Bank deposits right custodia is actually tokenizing a essentially tokenizing a dollar deposit which is backed by the Federal Reserve so there's probably a security element here it gets a little bit wonkish I'm not sure if the Market's ultimately going to care about that but yeah it's just very interesting to see what this new stable of issuers is going to do and I I would imagine maybe I know that some people feel very very strongly about this but I think it will be probably hard for tether to hold on to the the

lead that it has in terms of market share I'm sure tether from an absolute standpoint will continue to do well but it feels unlikely to me that they're going to continue to have you know 90% or 80% market share or whatever they have just from the sheer raw amount of issuers alone yeah the the tether dominance you can just look at this chart this is a tether tether in green tether dominance is just really really strong 142 billion tether issued second place is 49 billion from usdc and then third is eight billion from um maker Dow Sky uh when you were speaking just now I

really just got this like idea of like that there's this taxonomy out there of all these different properties that stable coins are filling one of them is payments right and tether has really dominated payments especially in developing countries and I think that's something that we frequently Miss on crypto Twitter the US Centric like developed country uh first world is that like tether I was listening to Paulo Arduino on um with Nic Carter on their podcast and he was talking about how uh in these developing countries where tether has a ton of payments volume it's tether and then a bunch of like Chinese

supported like physical infrastructure and the only and his point that he's making is that tether is the only us presence that's actually in these developing countries as the dominant form of payment in these countries uh and so this he was kind of just flagging like yeah we are we are the uh arm of the United States for a lot of these developing countries where only China is actually uh having any sort of presence and so that's like the payments arm the developing country payments and then also tether has liquidity in things like binance and basically all non us uh

centralized exchanges so that's like it's kind of perks that it's got and then you labeled uscc has liquidity and coinbase onshore and then also defi uh defi liquidity and defi leverage um and it's interesting that I I talked to a lot of um arent argentines uh and they say uh that they like to use tether because it's not usdc and then inside of the United States you ask people like what stable coin do you use and they answer United States people usually answer I use USC because it's not tether

and it's really just a frame of reference as to like your proximity and Trust in the government um and then there's like like you said with maker Dow is a savings vehicle which is exactly how I'm holding I'm holding s die and so there's these different niches that different stable coin products or tokenized money market funds are finding and I'm wondering how many total niches that there are and that that there are left to be discovered CU maybe there's a lot more that I'm giving uh credit for but I don't think there are that many niches left that are uncovered by like the current offerings

by current products uh what's your take yeah I I agree with that I think actually one other there was a really interesting interview done with treasury secretary Scott bessent and we've gotten little Snippets and clips of this Administration talking about crypto over the course of the of the last couple weeks there was actually a White House hosted digital asset Summit the Lesser known digital asset Summit David and uh and the secretary treasury Scott Besson talked about I mean he talked for

maybe 30 seconds or 45 seconds but what he did seem to focus on with stable coins and he brought that up again during this long re form interview on Allin as a key as a key lever that treasury was looking at to this is what guys like Nick Carter have been saying forever as a purchaser of US debt because this Administration has to refinance something like8 trillion of debt uh this year and they're looking for buyers of that debt and stable coins are a big part of that story the other thing as well that you know people have talked about um there there's a whole

this is a little bit wonkish right but there's a whole there's a very large uh offshore market for dollars which people refer to as the euro dollar market so there's kind of dollars which are issued on the usl1 right within our you know domestic banking system that the FED has a lot of oversight into but then the rest of the world also wants to transact in dollars right when you know different banks between you know Russia and China you know want to finance joint projects they actually want to do it in dollars but they can't interface this directly with the US banking system and so what ends up happening is there are a bunch

of dollars that over the years have been uh doled in offshore you know banking centers and then those there are uh USD loans that get issued based on that dollar collateral and so this actually this large kind of unregulated world of Euro dollars is actually larger um it's kind of a secondary market for dollars which is much larger than the actual domestic US dollar market and so stable coins are they look a little bit like Euro dollars in that sense they're crypto dollars yeah crypto dollars but

the us if the issuers are actually us-based and regulated by the us then they might actually have a lot more insight into and control over this overseas market and that's when you were just describing Paulo's interview uh that's kind of what I had in mind it's like actually not only are these large buyers of US debt but actually this is probably a way for the US to get slightly more insight into and potentially control over you know what large um you know uh what what's going exactly exactly what's going on yeah

yeah yeah one of my favorite takes from my first podcast co-host CK uh is that uh United States dollar stable coins are actually the cbdc if you understand that like the tech arm and also the fintech arms are just extensions of the government well then you can look at USC and be like that is the Central Bank digital currency it just has this like private entity that was totally beholden to the government as like this intermediary between the government and and circle or and and the actual dollars

um in related subjects we can talk about bidle as well Biddle the tokenized treasury fund from Black Rock uh it was at hovering around $600 million $500 million for the last like half of half a year stopped really growing uh but in the just the last three weeks that has since grown to almost $ 1.9 billion dollar just in three weeks so adding something like 1.2 billion dollars in the market cap in just the last uh two weeks uh Carlos Domingo who uh works at securitize who is the like software

service provider token tokenization provider to Black Rock he tweeted out tokenized treasuries passed the5 billion Doll Market Mark yesterday with securitized as a leading protocol and black rocks Biddle as the leading asset with more than 34% market share so5 billion dollar in tokenized treasuries uh and then also out of the Black Rock bidle ecosystem uh news is that they are also launching on salana so this was uh primarily an evm ecosystem um uh token uh ethereum and all of it layer 2os uh but it is now also being

deployed on uh salana I don't know if it's already deployed but it is going to be deployed uh so that's the news in Black Rock bidle any any comments or takes here yeah I I I think there was there was another interesting tweet from guy from Athena actually describing that uh the The Leverage that stable coin issuers here have uh you know where I this is unverified here but it's interesting that they both use the same time period that 95% of the incremental demand for bidd was driven by usde in the last 3 weeks so and you also saw you

know something else that happened last week around Das was uh Sky announced the results of their grand prix right where they're basically getting uh different issuers of rwas uh to to bid for um you know uh for inclusion within Sky's ecosystem so I think the winners of that were no surprise like Biddle but also superstate was a winner there's one more that I'm blanking on but I think one thing that I think will be interesting to see is if there are Advantage right the currently the structure of these centralized issuers are you have a

dollar representation offchain and or onchain and then you have a bunch of treasuries or fixed income securities or Bank deposits or whatever all of that um you know the asset side of the balance sheet is managed offchain well if you were to bring the asset side of the balance sheet on chain so you actually had the treasuries on chain as well are there advantages to that and you know immediately what comes to mind is there it's 24/7 right unlike the US banking system which actually has off hours and sleeps right so if people want

redemptions things like that um actually Paulo has mentioned this as a as a challenge so he he just did a an interview with Nick Carter on on the brink where he mentioned that the MAA framework stipulates that in Europe 60% of a stable coin issuer's balance sheet has to be held in Bank deposits and first of all that's challenging just from a risk perspective right those are un those are not secure right in the same way that a money market fund would be but also if you have to meet an enormous amount of redemptions on chain

very quickly which can happen in crypto in times of extreme stress like the Luna dpeg that can be really problematic right for for you as a large stable coin assurer so having those assets on chain um is really interesting there's also ways that you can transform for instance in the same way that you have Ste and WAP Ste where WAP Ste is more efficient from a tax perspec because it appreciates so you can just pay capital gains tax as opposed to paying tax every single time you're getting Yi you could do the same thing with treasuries right so there are interesting Transformations that you can that you can achieve moving

offchain stuff onchain but I think also um from a liquidity and 247 247 perspective I think stable coin issuers will be a driver of demand for rwas as well so that's the kind of link that I see there MH one of the big questions that we frequently see in the uh Bank list Discord just the community Discord that we we chat with listeners with um is just what does this mean for my backs and I think just the the because like you know you you're not going to get rich by holding uscc right and you know

we can't invest in circle we can't invest in tether the entities making all this money are are private you know you can invest in mkr that's that's an option U you can invest in ethena Ena governance token that's an option but really there's not that many ways to get broad exposure to this and really like those are those are tokens and those are valid tokens but we mostly as an industry have Bitcoin ether salana layer one assets as our primary primary bags that we hold and like my my quick answer here is that's like well this represents

a shifting of global Finance to being on chain and that's fundamentally good but you can also take the inverse of just like oh there there's an very OG Nick Carter article that he actually wrote on Bank list was talking about stable coins are actually parasitic to ethereum so not just layer twos are parasitic to Ether the asset but sounds like stable coins are also parasitic to Ether the asset if that's a perspective to take what's what's your take on it okay so potentially it depends on what ethereum and l1's Define as their value

prop or their reason to be held so I'm going to end this argument with something I've told you a million times but I I think there have been broadly like two theories for Value cruel for eth or l1s in general and one of those one of those theories has been an idea of moneyness or the desire to hold this as a collateral and the other has been yield and generating fees so on the on the money side of things right this is what bitcoiners like to talk about it's divisible it's portable it's fungible it has all these properties that's better