ROLLUP: Bearish Macro Report | Biggest Hack In History | SEC Drops Crypto Cases | Where To From Here?

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 Alex Thorne the head of research at Galaxy digital Alex happy Friday really happy to have you here today yeah great to see David I mean what a crazy exciting time I'm excited for the rollup because there's a lot of wild news happening in markets and in crypto so this should be a fun one yeah two very big things that really marked the last week are the fact that just markets are down Bad total crypto market cap is now below three trillion

Bitcoin is now below 85,000 which I mean 85,000 is still pretty high but it's h it's been above 990,000 for a long time now and so it has broken through that 90,000 uh number uh what's going on what caused this we're going to talk about that also the largest hack in crypto's history bybit a $ 1.5 billion hack exploit by North Korea so we're going to talk about how that happened and what um how everyone is responding to this um in addition to all of this though there's definitely some good news on the horizon as well a wave of lawsuits uh

dropped by the SEC four different us crypto companies got the all clear from the SEC we'll talk about all the reactions uh to those different lwuit getting dropped and then also some regulatory capture going down in DC which stable Co Coin Company is playing dirty we're going to talk about all of that and more but maybe I could just want to get Alex's take here on the markets uh Trump confirmed that 25% tariffs uh are going to be imposed upon all Canadian and Mexican Imports in addition to that consumer confidence plunged in February amid Rising economic

concerns uh which you would make it make me think that the traditional equities Market really took a beating and it wasn't green they were definitely in the red but then if you look at the crypto markets the crypto markets were down way worse so Alex how do you just analyze the markets uh the last like seven days or so yeah I mean bitcoin's down 14% ether's down down 155% over the last 7even days um obviously you can see how uh bloody the market has been right basically all cryptos were down a lot um

and and by the way stocks have been down right like all markets were down in fact on Tuesday when I was looking at it it was basically every single asset class was down except for treasuries even gold was down people somewhere were selling gold to so um it it is I would say that like look if we think about Bitcoin as example like it had touched like 91k in this range we've been in since you know November like eight different times and successfully rebounded and like so even just everything else aside if it touches

it a ninth or a tenth time it's always possible it doesn't hold and then you get a little bit of a you know a sink that pulls it down further and like so I'm not surprised but but it beyond that um you have a VAR I think the Bitcoin and crypto stories are a little bit different in the Market at the moment but still you also have something like bybit like we're going to talk about and um and then just material weakness I mean some softness truly starting to appear in the US economy which is causing risk assets generally to sell off so it's kind of a perfect storm and

you know markets trade on the margin and when you're looking here at you know looking for the next Catalyst right markets are very frenetic what's the next Catalyst that's going to drive Bitcoin higher you know we only got to only got to him laughing right we only got to 109k a like what it can't go to 150 we need something the market thinks and it's not seeing it yet so now it's like path of least resistance I think for Bitcoin was is is was lower I think I don't think it goes personally much lower but um you know 200 day moving

average is at 81k like there's there's reasons it could go at 75 or 77k people have talked about it's it's hard to know there's a big air pocket and ownership here like we rocketed up to 90 so fast that like nobody owns nobody bought Bitcoin in between 75 and 85 like there's literally if you look at the I tweeted this like the we call the UR PD the uh utxo realized price distribution which is basically just the Bitcoin Supply every unit of Supply at the price at which it was last moved really at

which the utxo was created but in in sort of simpler terms at the price at which the current Supply last moved on chain and there's literally no Supply that was that last moved when the price was that because the price has never really been that so I think it's reasonable for the market to hunt like why is there demand what is the level of demand between 75 and 85 it's almost like a CME Gap like it never really traded here and at some point the Market's going to decide now it's trading here a little bit and so that chart will look different and we'll figure out what the price Discovery is

in this range um but I do think there is like a longer term macro question and then there are two minds of this but like the the bearish one which I think is you know not like long ter but like in the sort of you the rest of this year like there are huge questions about um unemployment because if Doge does cut an enormous number of us job of of government jobs like that's unemployed people right that means they can they will have less money to spend it can hurt consumer the consume consumption sector which is an enormous part of the US economy but also if you actually take

out government jobs from the employment numbers over the last few years there hasn't been that much private sector job growth at all right it's almost all been governments um the federal government state governments so if you not only slow the hiring there but in fact roll back right then that could cause I think a lot of that that could make unemployment go up unemployment goes up people can spend less they have less appe they have less money they have less appetite for risk assets like cryptos and stocks right and I think that's partly what you're starting to see and um now

there's that can be solved quote unquote I mean one they might not fire as many people from the federal government as it may seem they would if inflation which is mostly under control it's not quite at Target but I mean it's not really like a fear and by the way on you know a bad economy is typically deflationary people have less money to spend so they don't spend as much you know what's inflationary is giving people free money and then they go out and spend it right so INF if we assume that inflation stays you know relatively under control or even fully like gone as an issue the FED

has a dual mandate and it's control inflation and maximize employment in the economy so if if unemployment goes up and inflation is relatively low then our old friend is coming back David rate cuts are coming so and and I think we think there'll be three or four rate Cuts this year um which helps make things cheaper and can put liquidity into the system and so where that Bal I mean the fed's tools are very blunt in response you know they can't make people get hired like literally but they can make the cost to borrow money cheaper

and and thus stimulate a bit so I think you're and there is a whole other view that's more of like what Howard lutnick and president Trump are arguing will happen and what they want to happen which is you know new skilled labor bring American jobs back home have a domestic manufacturing boom helps us grow simultaneously cut a trillion dollars out of the deficit while adding a trillion dollars in Surplus through new tax revenues from business explosion in the US um which could offset it we just don't really we don't know yet but in general like there's significant

uncertainty about the US economy's path forward not not that it's like we're on the brink of some disaster but just like right I mean you're pricing in future cash flows when you buy stocks right the question of the future is is one that's a little bit less certain now you combine that with everything in crypto you know the fact that David sax didn't you know buy five billion dollars of Bitcoin for a strategic Bitcoin Reserve with his checkbook right like the markets are are a little like frenetic there was I think room for this so that's sort of My overall view as to why I mean I think there's intra crypto stuff we could talk about eth weakness

Soul weakness like I mean mcoin Market ending I'm not sure or coming down like that sort of also play a factor but I I would say broadly this is a this is a risk-off market for traditional assets and for crypto at this moment Alex I think that was a really good just lay of the land of everything and I think maybe one thing I'm taking away from all of this is there just seems to be a Confluence of a variety of different factors that the market still needs to process uh we are still on the back of the the Libra debacle following the Milani

um just extraction out of the salon memec coin ecosystem which was the hot ball of money and I think crypto investors are looking at that hot ball of money leaving the arena and thinking that is a selloff event like let's just let's just wait for this dust to settle we'll see where it settles maybe Bitcoin when that settles ends at 75,000 maybe it ends at 85,000 we don't really know let's just see what happens uh and I do really take uh I really like your analysis of the Bitcoin current price if you look at the Bitcoin chart over the year it was completely flat from March

until November it just it just bounced around like 58 to 70,000 until the election came and then like you said it just teleported from 60,000 up to 990,000 uh and what we're seeing is just we're seeing like maybe just the random walk go back down to the election prices that's where we currently are we have not seen Bitcoin at 85,000 or lower since the election and so we're just randomly walking back there along with some internal to crypto negative events like the Libra thing now this byit hack

um and then in the macro world I kind of been just personally having a hard time really seeing what is in the driver seat like what's really wag what's the Tail Wag and the dog of the markets my my broad strr analysis is that I think people are realizing that last Trump um uh um presidency U not this one but the one before uh he was you wanted to align yourself with the stock market you if you wanted exposure to Trump's policies you bought spy you bought stocks he wanted the stock market to go up this

Trump Administration has different priorities uh they are aligning themselves this is from some of the analysis that I've heard around crypto Twitter and around trafi commentators is that the Trump if you want to align yourself with the Trump Administration this cycle it's actually long-term treasury yields uh we want not short-term treasury yields but long-term treasury yields to to do well uh and that is materially different from buying equities or risk assets uh and I think maybe over the last week or maybe two weeks or even in the last like three or four days the market has really started

to process that and digest that and price that into the market um this is just kind of my my Loosely informed takes how do you how do you accept that yeah I mean and I'm not an expert in fixed income but I sometimes am forced to play one and I we've got smart people like my friend Bim Neta BB who helps me with this question as well but um look they we the Janet Yellen created a situation where the treasure was issuing enormous amounts of short-term paper and like in general they need to term that

out better they got to get that under control because when it's short and rates change and those Bonds mature and and then like they're subject to Shorter term rates and you want you also want long-term uh people to hold your your your your treasuries and there I think there's been some talk I'm not sure if this is actually the thing I know Jim biano has talked about this idea of the mara Lago Accords which among other Big Ideas could include as part of negotiations on trade and commerce such as on tariffs could include forcing or getting foreign uh countries to buy more

of our long data debt right so I I agree it's part of the question we we have to figure out a way to uh they got to get the debt under control in general which they're trying to through the deficit reduction stuff with Doge and and other ideas that I've heard them say like I said about like you know bringing in high skilled labor that's been on this apparently there's 250,000 incredibly high-skilled people that have been waiting in and some immigration queue that we have that we could let in that could start businesses and generate revenue and whatever so I I think it's all part of it and yeah I mean what do

you want do you want a a innate object like gold or Bitcoin for that matter that yeah Bitcoin has like real appreciation potential it certainly has um but if you're uncertain why not buy something that's backed by the government it pays a good yield I mean that's that's the especially as uh you know rates come down like there's going to be um I don't know it's it's going to be tricky though think about this like it's like the scales right I mean if if if rates come down a lot that's that can be stimulative right and

that's good if I mean if we were to chart the Bitcoin price against the fed's you know policy rate it's you can see a pretty decent correlation um that Bitcoin tends to do better when the FED prints more money you know or eases its monetary policy however if the FED does have to cut a lot that typically also might mean that the economy is not doing great which is also bearish right so um I don't know it's like what Hester Pur said like there must be some way out of

here like I think the market if you looked at nvidia's like stock performance over just during their earnings call yesterday it was just totally fenetic like I mean it was like the after hours trading I saw was like people just trying to figure like people don't know how to position right now I think that's really fair and that causes uncertainty like yeah like literally like this this yesterday and I mean it was up a lot to begin on the day anyway but I just mean like people are unsure about how to position because there's a lot of uncertainty like there's uncertainty in the data like the macro

data there's uncertainty about the president and their plans which are very disruptive maybe good but all certainly not you know sort of simple stay the course do what we've been doing right so who knows how those play out right all of that stuff is contributing to uncertainty and markets hate uncertainty and I think that's just what we're dealing with here and again like you know Bitcoin crashed to 82k I saw 84k crashed all the way down to 82k yeah so I mean it's kind of like look I think if you're longterm in

investing and you're looking at something like Bitcoin think we can get a little more tenuous when we talk about eth or Soul or others because they have inter different Dynamics but I think pretty confident that dips are meant to be bought on for if you're a long-term holder of Bitcoin but you know if you're an investor a fund manager a hedge fund like sometimes the market tells you hey man we should probably raise cash right now right in which case people also like to sell their winners and not their losers right and so like bitcoin's been on a huge tear it's reasonable if you

are up a lot and and you say well you know 91 like I said if you look at the chart 91 like just held for so long I mean really not so long three months or so it basically you could do you could have done well short-term trading if you bought 91 and sold like first 108 then sold 102 then sold sold 98 then even sold 95 like over and over again that worked for like eight different times and then this time it didn't work and at some point it's just like something's got to give like markets want to go a direction bitcoin's not a stable coin it's it wants to go up or down usually

um and so when everything is flashing not necessarily red but uncertain um you know people want to raise cash for that so I think it is the long bond is part of the is part of it um and but there's also just like data and like weird multi-polar world seems pretty obvious right now and like there's it's just a it's just a weird time something I'm noticing in the market uh obviously this was a red week and there are some very red numbers I think uh mantle the MNT token which is

associated with bybit took the worst of it in the top 100 crypto assets so down uh 27% the Trump meme coin down 24% and it's supp been going down forever uh bit tenser down uh salana down 20% salana is taking a huge beating uh um hyper liquid but then even Dogecoin and xrp and then of course Bitcoin are really up there and some of the biggest losers of the week at the same time Alex there are some very strong winners uh story protocol is on this huge pump it's a brand new token uh so its chart is very recent but maker Dow has gone from $900

to $1,700 uh the Celestia token in the midst of the Bitcoin dump actually went up in price uh Athena is actually doing okay so while there's definitely big weakness in some of the Blue Chips there's also pockets of strength uh and my interpretation of that is that we don't think I don't think this is over I think there's a lot of Vitality found in pockets of the crypto market so while some people are of course just a complete Weather Vein about sentiment saying like oh it's so over like bull market is over I'm actually seeing pockets of optimism in select down

Market uh parts of the crypto industry which gives me some some optimism uh that many different sectors of crypto are very much still alive yeah I think they are alive to be clear think there's a lot of like I mean look Soul went to 290 something 295 on trumpcoin launch like well trumpcoin is was denominated in Soul right so like that makes sense if you bring in a bunch of new people that want to buy something and they have to buy soul to buy it just like the icos for eth in 2017 or even nfts for eth in 2021 right a lot of what drove I think

ether and in 17 and 21 and soul in 24 was that there were assets net new people wanted to buy that required they buy the underlying token right so um that doesn't mean the platforms aren't vibrant and and the rest of the stuff isn't happening it definitely is it's just that like you got to wonder why people were buying to understand why they may be selling right and so yeah there are a bunch of other things I think that's all I I actually think that nothing is really materially changed

here it's really just like a bunch of money came in and some of that money is looking to come out at the moment and and I think it will come back in across a range of assets right it's not won't just be I mean I do think Bitcoin has shown like a just a an incredible amount of outperformance versus the others you can see it in dominance you can see it ebtc and um but um you know there's going to be generalized blockchain that have apps on them like we they already are obviously and they're going to continue to be I don't think this changes that it's pretty interesting to

look at the salana chart which on March 1st was $130 March 3rst um last year so one year salon is actually starting to become flat it's at $137 right now uh and so while salana has been like the absolute outperformer that started a little over a year ago and then it hit its new all-time high at $262 actually I think I think it's actually even higher I think coin GE yeah I think that's like a daily close or something I think it got to like 295 or something two almost 300 basically but yeah flat on the year is pretty

interesting for salana it's still up it's still up on the year uh but it has erased a lot of its gains because I think just a lot the energy is coming out of the mem coin Market um but like you said uh this is a very strong dip I think if you are sitting in cash this is Mr Market is coming to you with some interesting offers at this present moment in time uh and you can do with that information uh what you will Alex we're going to talk about the bybit Hat next as well as all the SEC drop Vos and there's definitely some politics to talk about as well but before we get into all

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eth staked eth me eth and other erc20 tokens makes the biggest hack ever uh 133% of all exploited funds ever were the recent Bic hack it's twice the size of the second largest hack which was the $600 million hack of the Ronin bridge in March of 2022 uh both the Ronin bridge and the bit were exploited by the Lazarus group of course North Korea so this is North Korean uh money now is in the hands of North Korea um one of the big takeaways I think is the byit crisis

response uh from bybit leadership was heralded as the best that we have ever seen in the industry uh Ben from bit immediately went on a live stream pretty calm and collected uh and just talked about exactly what happened took ownership over it talked about the crisis response and really calmed fears uh and some people were trying to uh correlate this to spf's tweet that FTX is totally fine uh but I I don't really think those takes really age very well at all it turns out bit was totally fine even with a $1.5 billion loss I think

they had something like $8 to19 billion in reserves and so while $1.5 billion there nothing to scoff at they could actually handle it um and so it bybit was praised for some of the best crisis response ever in the industry which to me it sounds like a a sign of growth for the industry at large okay so let's talk about actually how byit was hacked uh it was a fishing campaign that targeted by bits cold wallet signers using the nosis safe front end so hackers gained access

to the bybit front end specifically on nosis safe so everyone else who used nosis safe was totally unaffected uh by bit's use of Nosa safe was somehow fished or um uh just was given a malicious version uh the hackers intercepted a rout routine transfer from bbits ethereum's cold wallet which rerouted 41,000 ether to the Lazarus group addresses forensic reviews from a few independent Auditors found that safes wall credentials were compromised uh the attackers injected malicious

JavaScript uh into safe's AWS infrastructure deceiving the signers into approving malicious transactions so bit's infrastructure itself was not compromised but its security controls failed to detect the attack um Stefan George which which is one of safe's co-founders says that the safe wallet was targeted but the team has secured and reinstated the infrastructure and also stressed the need for verifiability of transactions to prevent BL blind signing risks and I think everyone maybe not everyone knows what blind signing is but everyone does it which is you just

get your transaction approved like the the on your Ledger or on your metamask you don't really know the text that is being shown to you you don't know what that means it's very complicated if you're a developer you could parse it out with skills and time uh but I don't I don't know what the hell all that stuff means then that's kind of more or less what blind signing is uh hzu criticized bit by bit for failing to verify the message Integrity on an air gap machine despite handling over billion dollars in fund uh and then warned that assuming front ends are secure is a critical mistake in crypto

security and overall I'll just say maybe the the key takeaways here is we are highlighting the importance of message verification secure signing processes and we should not treat front ends as inherently uh untrusted infrastructure you actually do have to trust that front end um Alex what was your take when you saw all of this biggest hack in in crypto's history what's your analysis yeah maybe the biggest theft in world history hist actually we work we googled a lot and did some work I think there was supposedly a billion dollars stolen from the Iraqi central bank sometime

after the American invasion of Iraq um but like this this rates in general now that's not including things like you know graft and stuff by government officials of various countries or whatever but like and if a pure like broke in stole money ran out like this is up there um very much need to agree with your assessment of bit's handling of it um there were times during the live stream when Ben had to get up and go do something and they would be like don't worry Ben will be right back and he would literally go do something and come back 10 minutes later like like I'm

he's not leaving they're not closing the stream it was very I think the level of transparency and disclosure in the actual crisis management after the hack absolutely should be praised um he got he thanked a lot of Industry participants including Galaxy for helping them with various aspects of this um of the response right and so and also I should point out by has one of the most robust proofs of Reserve they prove every day that they hold uh in excess for for every asset I think

pretty much that they offer on their exchange they hold in excess of what their client liabilities are and they did hold in excess they had all these now the security part obviously they don't so then they had he had also said that they had Bitcoin and Stables as in their own treasury like they're that's what they keep their um you know profits or whatever in um but they owe a bunch of eth to clients and I think what it looks like was happening is that the industry really stepped up and probably lent them a bunch of eth so they could honor those withdrawals and then they

have to now they owe eth back to like lenders and but they have assets so like they have I think they said their own assets they're also highly profitable that's what I'm saying it's a highly profitable business they have plenty of their own assets but they didn't have the units of eth and steth and meth and whatever the other ones were um and so look the industry came together to support them I think is a is materially different than the situation with um Sam bman freed obviously exact opposite um yeah and then you know our we have a a secure multi-party computation style custodian

Galaxy does gk8 and they did an analysis I think again they didn't know and had no way to know exactly how the hackers did got into the system fishing was the Assumption it sounds right um they actually but you can see the two trans the transactions right right so the the first transaction that was signed was extremely subtle and it looked like this is based on gk's analysis of the of the transactions themselves it looked like no funds were being moved right and it was only this one operator changed

literally from a zero to a one but what it really did was reassign the proxy contract of their safe to to the malicious hackers one and then two minutes later after that and so all the whom whatever the signing process is at byit for this type of thing yes I mean they should crypto ux needs to get better I mean basically or you get because they did sign something that effectively handed control over their eth cold storage safe to a proxy contract control by Lazarus group and then they just literally swept all the funds out of the address two

minutes later right so um there's security work I think that needs to be done in general in this industry to like make stuff like that better you're poting about blind signing you go to like openc to buy an nft and it's like you click the approval button on on your metamask when a pops up and it's got all this stuff and you're like well you know you're just making sure you're on real openc it's pretty much all you could really do and every time I hit an approval today I am thinking is this the one and I go look at the URL and it's the right URL and I know that secures me a little

bit but not completely and so anytime I approve something I'm like man is is this it is this the one I I think it says it it tells good reason uh that you should keep your assets in Cold Storage right so don't go and sign something with the wallet that also has your life savings in it right at least separate that right like at least and I think that's what's so I mean normally with these exchange hacks in the past it's typically the hot wallet that gets hacked and so exchanges have and the hot wallet typically exchanges operate with

a sort of two tiered wallet system they've got a giant amount of Cold Storage that's totally air gapped and and safe like lowercase save not Nosa save and um and then they have a a hot wallet that they do have to that's what they use to process withdrawals and deposits right like someone's got to and and so they they they take great care typically to keep much fewer Assets in the hot wallet because the hot wallet basically has to be on the internet in some form because it has to you you go to coinbase account and click deposit it produces a QR code and an address for

you that is to their hot wallet um so they they take great care to separate long-term Cold Storage from the hot wallet um and so but this isn't that this does look like they're cold wallet it their reserves of eth or client deposits um through this like I said incredibly subtle and sophisticated attack by North Korea and this is State actor like this is I think there are implications here like for national security policy I mean I can tell you this is not a great headline in policy