TRANSCRIPT

David Hoffman:

[0:04] Bankless nation it is the fourth week of september and we've got a bull market on our hands it's a bull market but, whose bull market is it that is the question the majors are up a little bit this week while the middle of the market is up 30 40 50 in just seven days

David Hoffman:

[0:23] so what's going on even crypto guru, Ben Cowan, has said that the bull market is on. We're going to talk about, we're going to dissect the current state of the bull market.

Ryan Sean Adams:

[0:33] Yeah, I think once Ben says it's on, he's been bearish lately. Once he says it's on, that's confirmation enough for me. We also got to discuss Zcash. A near 10-year high. I think that's a fundamental change in the market, and I want to get your take on it. Also, David, tell me about Kalshi. They got cooked this week. There was a bunch of wash trading, a million identical $5,500 trades. The Wall Street Journal is talking about this. Some guy on Twitter is talking about this. And also, I saw Vitalik has blessed a prediction market called TRUO. That token was up a lot. He said this is the prediction market without any of the corpo slop. So we'll discuss what that means.

David Hoffman:

[1:19] Meanwhile, as we discussed, the 30-year treasury, the 10-year treasury are all printing their highest yields since like 2004. Not only is it a crypto bull market, but it is also a bond yield bull market, which is bad. Usually that's bad. Do we care? Does Bitcoin even care about high yields? I think that's another question that I want to ask. Let's just look at the charts. However, Bitcoin made its first leg up from like $63,000 up to $78,000. And people weren't totally sure if that was a head fake or not. But we have since made a second leg up from about $77,000 up to $85,000. And now people think it's on. I also think it's on. The second leg up off the 200-week moving average, I think, is a pretty big deal. That marks an eight-month high on Bitcoin, the highest prices since January of this year. And so the people who have previously been saying there is going to be a fourth-quarter dump, you know, we're not done through the bear market, we're going to once again touch the 200-week moving average once again in fourth quarter, maybe even go below it, those people are starting to change their tune.

Ryan Sean Adams:

[2:30] Yeah, I think there's starting to be growing consensus, even among the crypto cycle investor experts, people like Michael Nadeau from the four-year cyclers. The four-year cyclers.

Ryan Sean Adams:

[2:42] Michael Nadeau from TDR, I would say, is one of them. Ben Cohen, also from Into the Cryptoverse, is another one of them. And both of them are aligning and saying that the weight of probability is exactly where they'd want to see it for calling an early bull market. In fact, we'll get to Ben in a second because he's kind of flipped on this. He was holding out. He thought we were still in the bear market, that there would be another leg down, that we wouldn't see a light at the end of the tunnel until sometime in October. And he's on this week. He's apparently changed his mind on this. But Michael Nadeau, I talked to him on Wednesday for the TDR podcast and he said, I'm ready to say it now. He was previous weeks, he was cautious that this was an early bull market. And he's saying he wasn't sure yet, but now he's at 85% probability. I think there was a number of metrics that really nailed that to him. One is the golden cross was confirmed. Okay, so for people who don't know what a golden cross is, that's when the 200-day

Ryan Sean Adams:

[3:43] Moving average, the 50-day moving average crosses the 200-day moving average. And if that finally happened in previous cycles, that has indicated that we have broken the back of the bear market and we've entered the early bull phase. He has some other reasons. That he thinks were in the early bull market. So there's a reset in the holder structure. You know, he follows these on-chain metrics of the cohorts, the cost base of the cohorts and which cost bases are holding what coins,

Ryan Sean Adams:

[4:14] Where you see this process of coin cycling from weak hands back to strong hands and the strong hands form the base for the next market. Anyway, that reset has completed. Now we've got a bunch of strong hands in the 56K to 92K range of Bitcoin. 37% of all supply now sits there.

Ryan Sean Adams:

[4:33] So we've gone through that cycle. We have a reset in leverage. Michael Saylor Strategies, STRC, that's back trading at almost 100. And that is a belt weather for leverage. A lot of the leverage got flushed out during this bear cycle. We have a bunch of the KPIs that were hit. So realized losses as a percentage of change in realized cap, those types of things, supply and profit. All of the KPIs, I'd say, would be bear market bottom indicators. The majority of those were hit. We just hit the golden cross. And then this, we reclaimed the 50 week moving average. We did that two to three months from the cycle low. That's exactly what we've you would expect to see. And the 50-week moving average right now is 78.8K. So we've locked in at least one of those, a monthly close above 78.8K. We lock in another and another after that, then we're kind of like that solidifies it.

Ryan Sean Adams:

[5:33] That would be, according to all previous times we've seen it, the end of the bear market and definitely final confirmation that we are in the early bull phase of the market. And I haven't kept up with Ben's work, Ben Cohen's work. I know you are having him on the Bankless podcast tomorrow, but I think he's been a four-year cycle believer, sort of held out, and has said, no, we're still in the bear market, right? The bull market is coming. It's coming sometime this year, but not until a little bit later. And he changed his mind on that this week.

David Hoffman:

[6:09] Yeah, both Mike and Ben, I categorize as these guys who move slowly and require a lot of evidence. But when they change their mind, it's firm, as in they're not going to change their mind again in one or two or three weeks. And so it's kind of a big deal because it takes a lot of evidence for them to change their mind. The last time I was talking to Mike on the TDR, we really talked about comparing the last bear market to this one. And the last bear market was, you know, we had the Terra Luna collapse, followed by the Three O's Capital Contagion, followed by FTX, like one, two, three sucker punches that created just so much pain and pressure, downwards pressure on the market, followed by the Gary Gensler era of, Operation Chokepoint 2.0. Pretty bad time.

David Hoffman:

[6:58] And during that time, you had Bitcoin not at the 200-week moving average, but below the 200-week moving average for, almost two-thirds of a year, and then again for another third of a year later, and so a meaningful amount of time below the 200-week moving average, which was unique, idiosyncratic in Bitcoin's trading history. And then so when I was on the TDR with Mike last, we talked about how we are at the Bitcoin is at the 200 week moving average. But also we had no three hours capital. We had no SBF. We have not Gary Gensler, but the two most positive crypto regulators at the SEC and CFTC. This bear market is different. Granted, we were saying that when Bitcoin was at the 200-week moving average, Bitcoin could have potentially broken down below the 200-week moving average. But I think now if you are accepting that we are indeed in a bull market, we're not going back down to the 200-week moving average for a while. You can take this bear market, which was a pretty short time at the 200-week moving average, never got below it.

David Hoffman:

[8:05] Compare that to the actual fundamentals of we don't we don't have to pay for our sins because we didn't have very many sins. Michael Saylor paid for his sins by selling Bitcoin under his purchase price, and we didn't spend too much time there. And so to me, those two things are congruent and like very big, painful bear market for very valid reasons in the past. This bear market much shorter because we have a lot less debt and we get to move on quicker. I think those two things check out.

Ryan Sean Adams:

[8:34] Yeah, the 200-week moving average is 65.5K right now. And you're right, we did spend some time below that, but not very much time this bear cycle below the 200-week.

David Hoffman:

[8:44] The furthest we ever got below was about 5% to 8%. Last bear market, we got 35% below the 200-week moving average and stayed there for a while.

Ryan Sean Adams:

[8:54] Yeah, if we do, now here's an if type of scenario. If we do hit that $65K or go below that for some period of time, say we get a few monthly closes below that $65K amount, you're saying you don't think we will. Michael Nato agrees. So does Ben Cowan now. They all agree. But if we did, I think that would break the back of this early bull thesis. So that's a number to watch out for.

David Hoffman:

[9:22] Oh, certainly. But that's any evidence of we went down there. It's already broken.

Ryan Sean Adams:

[9:28] See, this is like all of the people saying it's not going to happen. And this consensus that we are in early bull does raise an eyebrow for me a little bit. Because if everyone's saying it, then it's like, well, maybe.

David Hoffman:

[9:41] Well, previously, everyone was saying that we were going to break down in October in Q4. And so that also raises an eyebrow. As of being in the market, you should always have an eyebrow raised.

Ryan Sean Adams:

[9:50] Yeah, that's right. Okay. But I do agree that it looks like we are in the early bull phase. So, you know, I think that's probably true. Ben Cowan talked about, he actually released a video, why I was wrong. Maybe we're going to have to ask him why

David Hoffman:

[10:05] He was wrong. Not why you, Ryan, was wrong. Why I, Ben, was wrong.

Ryan Sean Adams:

[10:08] Yeah, exactly. Why Ben was wrong. He's bullish now, of course. What he got wrong in his words, he said, I assume the interest rate hike, he's talking about the Fed hike that just happened with Warsh last week, would immediately bring Bitcoin down and it didn't. So where he got it wrong is, he said, my thesis was that rising energy prices, It would cause the long end to go up. Then they would raise rates in September. Then the dollar would go up and Bitcoin would reprice because of the rate hike. That's why essentially he thought there would be one more leg down. Also, previous bear cycles have lasted nine to 12 months. It was getting towards about nine months, but you could see it last 12. That's why he was calling for kind of a bottom October toward the end of this year. But what he got right or wrong, I would say, if you could sum it up, is probably macro. It's just over indexing on macro. And Bitcoin crypto just plowed through all of those macro concerns. And that I think is a lesson for all of us. It's just like I enjoy some good old fashioned macro commentary. I really do. But

Ryan Sean Adams:

[11:15] I have to treat that, and I think any savvy investor who's been here for a while, including Ben, Ben knows this, you have to treat that macro analysis with a grain of salt because it's a very complex engine. There's so many other factors. The thing that won out here, I think, was coin holder rotation and seller exhaustion, and it was just time to go up after nine months of crypto winter. And so you don't want to be out of the market when the market decides it's just time to go up.

David Hoffman:

[11:45] Yeah, yeah, I do. I do take that perspective. I was trying to not be a four cycler on the way down. But for some reason, I see myself being a four cycler on the way up. Coindesk had a pretty interesting article. I just thought it was pretty interesting. It says, the data proves that Bitcoin doesn't care about rising bond yields over the long term. And they had a bunch of analysis. And they basically say that the correlation between the 10-year yields and Bitcoin is at 0.18 inverse. And so if yields go up, Bitcoin goes down with a 0.18 correlation, which is very low. That's just not, that's insignificant. And one of the reasons why I think it's insignificant is because so much of crypto cycles are herd mentality. And when it's time to go up, it's time to go up. People like the last bears sell, then they're not in control of the market. And the only people left are those left to bid. And people who have cash see, the herd, get the contagion of like, well, somebody's making money over there. Let me allocate, let me allocate. And all of a sudden everyone's allocating and we get momentum on our side. So my rationale for why Bitcoin is up at the 200-week moving average and why it's up season right now when things have been going up for like five weeks straight is because Bitcoin, It's time. People are bullish, people are allocating, and that is spreading, like a contagion across the investor field.

Ryan Sean Adams:

[13:12] Well, in the words of Michael Saylor, to all of the former bears, he says this to Ben Cowan, welcome back. So welcome back, early bull market.

David Hoffman:

[13:22] Feels good. Feels good.

Ryan Sean Adams:

[13:24] Now, that doesn't necessarily answer the question as to whose bull market this will be. So say we are in the early phases of a crypto bull cycle. The question now any investor in this space has to ask is, okay, what assets do I want to hold for this next fifth crypto bull cycle? And the answer previous to that was certainly Bitcoin. You want to have a good portion of Bitcoin outperformed last cycle by a lot. Will that continue this cycle? It's been interesting to see a bunch of other tokens, some altcoins, let's say, outperforming. Ether up a little bit on the week, about 9%, but you'd even consider ETH a blue chip. And maybe we'll talk about that in a little bit. Let's first maybe talk about some of the coins that you've seen outperforming and whether we can extract any pattern from this early bull phase into what we might see into the future. What's been doing really well?

David Hoffman:

[14:27] Yeah, you said ETH was up a little bit. It was up 9%, which is a good amount, but it's a little bit in comparison to Athena, which is up 40%. Uniswap up 30%. Ondo up 30%. Jupiter up 30%. Arbitrum up 30%. And so the benchmark, the hurdle to be above the market was something like you needed to be up 15% or 20% this week to be beating like an index of, all like legitimate crypto assets.

Ryan Sean Adams:

[14:58] What do those things have in common? What's the thing that ties them together?

David Hoffman:

[15:01] I'm so glad you asked, Ryan. They make money. They all print revenue. Athena prints revenue. Uniswap the fee burn on Robinhood chain is printing Uni fee burn. Ando, revenue, Jupiter, all of these things have revenue. Arbitrum, the only significant layer two token to receive the pump is getting revenue 10% of Robinhood chain fees, which is why Arbitrum and not any other Layer 2 tokens are up this week. It's revenue.

Ryan Sean Adams:

[15:29] Yeah, so Arbitrum is up, which is like in a world where Layer 2s are just, they've been just bleeding for the last few years. It's not like there's a secular narrative, oh, let's pump L2 tokens this time around. Only Arb is pumping, and it's pumping because of its ties to revenue from the Robinhood chain that you can clearly see. It's a different reason for, you know, it being up than we've seen in previous cycles.

David Hoffman:

[15:56] Just like we talked about keeping one eyebrow raised during the bull market. Bitcoin cash moved 50 percent.

Ryan Sean Adams:

[16:04] Don't tell me that. What do you tell me? Let me look at XRP. How did that do on the week?

David Hoffman:

[16:11] Yeah, how did XRP do?

Ryan Sean Adams:

[16:12] XRP. Um, on the, the 17%, 17%, so, okay, well, I don't, I don't know that that disproves it, David, because it is true that everything is getting a bit of a, a raise from this, but also it is true that, um, the cashflow generating tokens, the tokens with buybacks and real revenue story are outperforming disproportionately. Yeah. There are some exceptions.

David Hoffman:

[16:42] It's been that true for a while. Delphi Digital put out a tweet about like how revenue generating assets, a basket of revenue generating assets were up like 17 percent while the blue chips, ETH, Bitcoin, Solana were down 30 percent. And they put that tweet out in June. And that's been only even more true ever since.

Ryan Sean Adams:

[17:00] Well, some people have been going farther. So I actually saw a publisher, David Feld from Bankless, publish this in Bankless in the newsletter. This is not Bitcoin's cycle. And he made the case that, okay, look at all of these assets that are pumping. They're pumping. They're growing fast because of cash flows. Guess which doesn't have cash flow? That is Bitcoin. And by the way, who is the next marginal buyer of Bitcoin? Saylor has all he wants. Last cycle, we had ETFs, and you could quite clearly see institutions being the next marginal buyer. Does Bitcoin have that this cycle? Will it continue to outperform? And another way to take a look at that is like market cap Bitcoin dominance right now it's at about 59%. The usual model for what happens during the early bull cycle is we get early Bitcoin dominance. So Bitcoin dominance increases early in the cycle and then alts follow later. So it's always Bitcoin leads, then alts follow.

Ryan Sean Adams:

[17:59] Is this going to be a little bit different this time? Like maybe what David Feld is saying is maybe this will not be Bitcoin's cycle, at least not to the extent it was in previous cycles and certainly in last cycle. Do you buy that argument? Do you think that other crypto assets are going to get their time in the sun and Bitcoin just doesn't have as much potential this cycle? Also, obviously, much larger market cap. You have to take that into account, right? You can't, we're not comparing apples to apples when we compare like a multi-trillion dollar asset to something that's, you know, in the tens of billions. But that aside, do you think Bitcoin will do as well this cycle as last cycle? Or do you think other crypto assets will take center stage here?

David Hoffman:

[18:46] I do go back to the era of like DeFi summer where Bitcoin and Ether were unresponsive while there was like, money flying hands, euphoria, insane amount of wealth generated in like the lower market cap assets or the brand new assets. And then what happened, you know, Bitcoin went from $6,000 to $60,000, you know, Ether went from $300 to $4,000 plus. And so like, maybe like the attention always starts inside of the cryptosphere and then it, you know, then it overflows and attracts attention. And that's what moves the blue chips. And so that pattern could still play out but nonetheless I am also concerned like the average typical, commentator on crypto Twitter I would say is just like our blue chips are really big and they're hard to move and who is the marginal buyer of Bitcoin when gold is still doing its job as gold and who's the marginal buyer of Ether after like Tom Lee I don't know who's buying the blue chips because it's not me I'm done they're too big.

Ryan Sean Adams:

[19:52] Right. It's not going to come from crypto natives. It has to come from some new set of buyers and the markets may be still establishing that. I still think there are net new buyers, right? Even Michael Howell is certainly not a crypto native, someone I do follow. I enjoy his macro takes. I enjoy his global liquidity takes. He still talks about Bitcoin as a 5x kind of levered gold type position in that if you believe in debasement, you could buy gold or you can buy Bitcoin and it has a 5x multiple to gold. When global liquidity goes back up, right? So there is a set of institutional believers out there who aren't sort of the crypto natives that you interact with that I do think will continue to be the marginal buyers of Bitcoin. And they are going to believe even more this cycle as Bitcoin recovers, as new time, all time highs are breached.

David Hoffman:

[20:45] Yeah, I do think on the longest of timeframes, like if you believe that thesis and therefore you are looking to have exposure to debasement and you weigh Bitcoin or gold and you have a 10 plus year time horizon, then I bet you that that plays out. I think the very large, wide, random walk that Bitcoin walks to like around the debasement exposure line is very frustrating for investors because like you can be correct about debasement on a five to eight year timeframe, but Bitcoin just randomly walked down at negative 30% while gold was more steady around the debasement line. But then Bitcoin does the thing where in two years it makes it all back and then some. So it's a very frustrating random walk.

Ryan Sean Adams:

[21:31] Let's talk about an asset that's at all-time highs and that is a bit of an outlier from what we just said, which is we said assets that were pumping are assets that have some sort of cashflow or revenue attached to them. And yet here we have Zcash, which just made a 10-year all-time high on the price. Now, I'm not sure if that's market cap all-time high. It's probably still

David Hoffman:

[21:51] Ahead of market cap. Market cap all-time high is by far... Massively because zcash oh yeah of course.

Ryan Sean Adams:

[21:59] Okay yeah it's the opposite of what i think of course

David Hoffman:

[22:01] This is why the zcash chart is kind of fucked especially in the first like third of its life but also most importantly in the first like, one month of its life because people like somebody i tweeted out zcash all-time high and then i think austin came into my replies and was like technically it's a recent era all-time high, and if you go and you look at the zcash all-time high chart it starts at like ten thousand dollars.

Ryan Sean Adams:

[22:26] But are you talking about in price or in market

David Hoffman:

[22:28] Cap in price in price in price like the the the first zcash tokens were trading at ten thousand dollars for like a day you're talking about this yeah that that thing does not count yeah.

Ryan Sean Adams:

[22:40] That doesn't count that's

David Hoffman:

[22:41] Stupid thing that the line the vertical line that is like reminiscent of hunter biden's laptop token does not count.

Ryan Sean Adams:

[22:49] Yeah it doesn't i mean market cap i think is the true expression of how is this doing as a store of value asset? So Zcash quite clearly is in the store of value asset category. It's a crypto monetary asset. It's like early bankless thesis stuff where we were like, okay, there are crypto assets that are emerging that will have monetary properties. It's sort of the Bitcoin play, but private. And now we are at a market cap of, we exceeded $26 billion dollars last week. And this has been an insane over-performer even during the bear market and certainly in the early bull market. Like, what are we up here, Zcash? We went from about eight billion now. We went from just even during the bear market up to now, it's like $7 billion right now.

David Hoffman:

[23:38] And $7 billion was after it pumped for the first time. And I think that was not even a year ago. Like when Zcash went from a $300 million market cap up to like $2 billion, when was that? That first vertical lineup.

Ryan Sean Adams:

[23:53] What? What's that? The first vertical right here?

David Hoffman:

[23:55] Yeah, that one.

Ryan Sean Adams:

[23:56] $10 billion?

David Hoffman:

[23:57] $10 billion at the top. What date? You're talking about 2025.

Ryan Sean Adams:

[24:00] November 2025.

David Hoffman:

[24:02] Yeah, so it's September 2026. This whole Zcash thing is less than a year old. It's put on $26 billion in less than a year.

Ryan Sean Adams:

[24:09] In the bear market and into the early bull market, put that much on. And when you start getting to $26 billion and you don't have cash flows, you are a store of value crypto asset. Part of your explainer for this was just like, this is Bitcoiners rotating in. It's like it's catching the Bitcoin bid trophy.

David Hoffman:

[24:30] It's not ETH money. It's not Solana money because those assets aren't big enough. It's Bitcoiners shaving off like 1% of their market cap. Yeah. And when that goes into a $200 million market cap, it goes to $26 billion.

Ryan Sean Adams:

[24:42] It's Winklevoss twins. It's Barry Silbert. It's Grayscale. You know, there's an ETF here. You can kind of, it's Naval. You could see that rotation into this. But the reason it's meaningful, I think, is because this is a true... Competitor maybe to Bitcoin. I mean, $26 billion is still slight in terms of Bitcoin's total market cap, but the category it's pursuing is store of value. And the only other asset to even try to claim at this type of market cap level that it was pursuing a store of value type strategy has been Ether, Ether the asset. And not even the full Ethereum community has kind of claimed that, You know, and Vitalik has, you know, been a little wishy-washy even about that. And so we have another crypto money that seems to be emerging in the game. And you wonder if that's going to persist for this entire market cycle. And if it does, what are we going to get to? Hundreds of billions of dollars for Zcash?

David Hoffman:

[25:44] Yeah. It's hard to say that Zcash is a Bitcoin competitor when you have a $1.7 trillion asset shoulder to shoulder with a $26 billion asset. Like that's a 65X difference. But I think the point we want to make is that it is a competitor for the marginal flow of dollars in 2026 buying assets. And so are they going to buy Bitcoin or are they going to buy Zcash? And if that flow split is 50-50 from the marginal buyer of Zcash, like that does make it a competitor.

Ryan Sean Adams:

[26:13] The other, go for it. Yeah. Well, don't you think it's the first viable competitor that we've sort of seen?

David Hoffman:

[26:19] It's like after after ether had its like very valid attempt who's pursuing.

Ryan Sean Adams:

[26:23] The store value race right now still still left in crypto

David Hoffman:

[26:27] Do you think Ether is in the race?

Ryan Sean Adams:

[26:29] I do. Absolutely. I think Ether is in the race. I think it's Bitcoin. I think it's ETH. And I think now when you get over $25 billion, Zcash is in the race too. And I don't see anything else.

David Hoffman:

[26:41] Yeah. There's one more to keep an eye on that I know that the team is interested, has their eye on the ball here, which is like the Nier team. And I do think that there is an interesting pairing between Zcash and Nier and Bitcoin and Ether. So, so... Ether won the blessing of like the Bitcoin bid, like the trophy of Bitcoiners are going to buy this thing because there's going to be like.

David Hoffman:

[27:08] An agreement that like, okay, maybe hedging my Bitcoin exposure of my multi-trillion dollar asset with a little bit of ETH is a good idea. And so that's why ETH just did so well in 2021. And I think that same thing is happening to Zcash today.

David Hoffman:

[27:24] Then there's like why also because of the privacy the technical superiority the more the more modern uh asset the one with less tech debt and i think near is also kind of fulfilling that same thing it's also on the privacy meta so you have zcash the private money and then what is near doing it's doing private intents and so cross-chain like it just privatizes your asset transfers across chain. And the volume around near intense is up like 85% on the two week. The near is the biggest mover of the week this week is up 54% in seven days. And I think if like there's in addition to the Bitcoin bid, there's always been this like second place trophy, which is like the smart contract bid that Ether, Ethereum has won. Solana then won it later. Like Solana won the dominant smart contract big flows beyond 2021. And I think one of the reason why NEAR is up so much in the last seven days is because it's winning the smart contract bid. And that is the marginal flows. And so kind of going back to this problem statement that, hey, I put in my article, but we were talking about earlier is like.

David Hoffman:

[28:30] The assets that are more attractive than our blue chips are these much smaller cap assets, the $26 billion, market cap asset instead of the $1.7 trillion one, Or in Nier's case, it's like the, what is it, $8 billion asset instead of the $500 billion one. So the blue chips are not getting the bids and it's going down to these more modern, more new assets that are capturing the marginal flow.

Ryan Sean Adams:

[28:57] I think that could be the case. It could also be the case that just Near is the recipient of kind of this revenue meta pump as well. I mean, Intense are generating cash flow on Near as well. And you can kind of see that. You could see it has product market fit in a set of applications, right? It's like the Intense application around privacy, also doing things in AI. So maybe it's coming for some of the smart contract bid, but I'm not sure. It certainly doesn't seem like it's coming for the store of value bid, though, which is like what ETH Bulls in sort of the, you know, the glory years would claim. And it does seem to be trying to actually create a business that is generating cash flow with apps and revenue and sort of more central kind of control over the product roadmap.

David Hoffman:

[29:45] Yeah, it is. It's doing kind of like the ultrasound money thing where it's using the revenues from confidential intents to like buy and burn near. And they have like, they're averaging, I think like 60% of NIR issuance is getting bought and burnt. And they're doing the ultrasound money thing. I still think the ultrasound money narrative for Ethereum was the best narrative that we had. And then ETH price went from down from like 4,000 down to like 800. And we all threw out ultrasound money into the garbage. I still think it's the best narrative. It's still worth that being the narrative. And I think like that's kind of why NIR is stealing the week, won the week this week is because of something like downstream to that.

Ryan Sean Adams:

[30:27] What remains to be seen whether this momentum can hold and what's going to do well during the early bull, but we're going to be talking about it on a week-to-week basis. Coming up next, there was a Howard Marks memo. I was waiting for this to drop. Talking about yields and why treasury market, bond market is going crazy. What assets to buy in order to hedge against them. I want to talk about that. Also, does he mention cryptocurrencies in the memo? We'll discuss all that and more. But before we do, we want to thank the sponsors that made this possible.

David Hoffman:

[31:01] Ryan, we got some more all-time highs to discuss. The U.S. 10-year is at an all-time high of 5.15% yields. The third year is at 5.44%. These are highs not seen for over 20 years.

Ryan Sean Adams:

[31:16] Yeah, all-time highs during the decade period, not all-time highs.

David Hoffman:

[31:22] All-time highs during the conscious years of us and our audience.

Ryan Sean Adams:

[31:26] All-time highs for the show. All-time highs for the crypto industry. And honestly, show no signs of stopping. I mean, they can just keep going up, growing at quite a pace. So, David, did you read the Howard Marks memo?

David Hoffman:

[31:41] No, because I knew you would tell me all about it.

Ryan Sean Adams:

[31:44] You know who Howard Marks is, though, right? It's just like

David Hoffman:

[31:47] A legendary investor. But for the benefit of our listeners, why don't you go ahead and tell us?

Ryan Sean Adams:

[31:52] I don't know. For me, he's kind of in the Hall of Fame. He's a bond investor, but he has just like these memos that he writes, almost like Warren Buffett-like, that kind of makes sense of the current environment of the market. He's very seasoned, very reasonable, very rational, and often right. And so I read every one of his memos that come out. It's just like every couple months or so, he'll publish something on what's going on. This memo was about yields. And he knows a ton about them because he is, of course, a bond investor. So it's called, Shall We Repeal the Law of Economics? And he gives reasons, three reasons for why yields are rising. And it's reasons that our audience is probably familiar with. We've talked about this. And Howard Marks is really reinforcing some of these ideas. So number one, yields are rising because inflation is high, stubbornly high, he calls it. So we have inflation, PCE at about 3.7%. And recall the target. There is a target out there. And the Fed has still said the target is 2%. Well, we've been above 2% for a long time. Since COVID.

David Hoffman:

[33:03] COVID really popped our ability to hold to 2%.

Ryan Sean Adams:

[33:06] Yeah, and 2% is just like we've never gotten back there. In fact, we're in 3% range and the high 3% and rising. So we have the war in Iran, we have oil prices, lenders are demanding some protection from inflation. So they demand that in the form of higher yields. That's the first reason. The second reason, which has been a bankless theme, of course, and the theme of all of crypto is there is zero fiscal discipline. In the U.S. and not just the U.S., all countries around the world, you know, fiscal situation blowing out of control. Sovereign debt is, you know, exploding. There's no signs of reining it in. He said that the U.S. has a golden credit card. There's no credit limit. The bill never comes. And this is, of course, the U.S. flexing its ability as the sovereign

Ryan Sean Adams:

[33:54] Reserve asset and the global reserve currency is kind of flexing that golden credit card capability, $40 trillion in debt, $1 trillion a year in interest payments, now exceeding the amount that we spend on our military in the U.S. We're just spending that amount in interest. So we know about that, zero fiscal discipline. The third is a capital demand squeeze. So he talks about you've got $5 trillion in AI buildout that need to be funded by debt instruments. So this is AI data center buildout needing funds, needing capital in the form of debt, and they're willing to pay for that capital in the form of yields. At the same time, you have Treasury, and it's trying to issue its debt too. So you got $2 trillion in Treasury that needs to be issued. This is U.S. bonds. Whereas you have $5 trillion in AI debt. You know the AI people are good for it because they have the cash flows to support it.

David Hoffman:

[34:53] Do we know that?

Ryan Sean Adams:

[34:54] I mean, they have the profit right now. And also, if NVIDIA chips, if that's kind of the new oil, if that is a commodity as Jensen, people like Jensen are saying, then it's also collateral backed as well. So it's a competitive debt instrument and that's just raising the cost of capital up. So he says about Besant, he says, You know, Besson has been going around saying, I don't think yields reflect the underlying fundamentals of this strong U.S. Economy. And he says, on the contrary, I think U.S. long-term bond yields are reflecting the actual fundamentals that we have. If you just look at those three things, inflation, no fiscal discipline, and the AI capital squeeze, it's sucking all the capital. So he reiterates those points. That's the reason, according to Howard Marks, yields are rising. The question is, how do you protect yourself as an investor from what he's essentially calling kind of the debasement type trade? And he said you could do a few things. One, you can have assets denominated in currencies other than the dollar. But the problem with that is the other currencies have a similar type of effect. They are debasing as well.

Ryan Sean Adams:

[36:08] Two, you could go to non-financial assets like gold or non-US real estate. You could try that. Or three, you could do non-U.S. companies. The problem is there's not a lot of great companies out there. The U.S. companies are overperforming. Or he says, cryptocurrencies. He actually mentioned cryptocurrencies in the memo. So that's something.

Ryan Sean Adams:

[36:32] A friend asked him, okay, Howard, should I sell my stocks? And his answer was this. The problem we face isn't a problem with the U.S. Stock market or with U.S. companies. The problem is with the U.S. fiscal management. And ultimately, it's a problem with the U.S. dollar. He's basically saying American companies are good. In fact, maybe they're great. It's the American government that's bad. And so don't sell your stocks. That's actually a way to protect from some of this debasement as well. So I thought it was a well-reasoned, well-rationed, insightful memo. And kind of connected a lot of dots on what's going on in the current environment for me at least.

David Hoffman:

[37:18] This connects to a bit of discourse that I've been seeing around the timeline that I'm picking up on. And I'll pause and give a disclaimer that this is bullfuel, what I'm about to say. And I'm trying to not be too drunk in this bull market.

Ryan Sean Adams:

[37:35] Okay, Tom Lee.

David Hoffman:

[37:36] I'm taking evidence. I'm taking insight from my guru, Rancho Adams, of during a bull market, you want to be a little tipsy. You don't want to be sober. You want to be a little tipsy, but you definitely want to be drunk.

Ryan Sean Adams:

[37:46] It's pretty early. It's pretty early in the night to be drunk, David.

David Hoffman:

[37:49] I'm decently tipsy. Okay. And so I'm into bull stuff. But the bull stuff that I've been seeing on the timeline that I agree with, one came from a while ago, which came from Ansem, actually, when I was listening to his Market Bubble podcast. And he talks about the way that Zoomers and millennials escape inflation is through investing. And so inflation is a bitch. It's punishing everyone. You get out of that by investing. And that's the only good way to escape. You have to own assets.

Ryan Sean Adams:

[38:17] That's step one.

David Hoffman:

[38:18] The other bull takes, so that was a while ago, that was months ago. The other bull takes I've been seeing on the timeline is like, what if the bond market is printing in 5%, 6%, 7% because the economy is fucking cooking. And this is something I've been seeing from Felix from Forward Guidance about the economy is ripping. The economy, there's money flying around in the economy. The economy is looking good. So the bond market is printing in higher yields because it wants to allocate to the stock market. And the stock market is the place to put your capital. And the bond market, the yields on the bond market are just reflecting the cost of capital because everyone wants to invest. So what if the actual fundamentals are great of the stock market, of equities, now is the time to invest, and the bond market yields? Like, sorry, U.S. Treasury, you're shit out of luck. Everyone wants to take their money and invest in growth assets because that's the only way to escape inflation.

Ryan Sean Adams:

[39:13] Which is also somewhat ironic because a lot of these growth assets in the U.S. Capital markets are U.S.-based companies, right? And so that is still fundamentals of the United States of America at some level and future potential tax revenue.

David Hoffman:

[39:28] So maybe— But the tax revenue is just not going to be able to pay the debt. It's going to. You have to debase. You have to debase. The tax revenue is the most helpful thing. There was one time I typed into a clot or something. I was like, what if we just did away with taxes? What would be the repercussions? Like, do we need taxes? Can't we just print the money to pay? And it was like, no, dude, like tax revenue is the majority of the reason as to why there's not hyperinflation. And so if you did away with the tax revenue, like you, it would be massively catastrophic to inflation. But nonetheless, tax revenue does not cover debt. And so therefore the debt compounds.

Ryan Sean Adams:

[40:10] That's right. I think that's what's going to happen. And it's pretty sensible to hold assets. And I guess just almost any asset you can hold is certainly better than the

Ryan Sean Adams:

[40:19] dollar and certainly better than bonds. David, there's a story breaking from Kalshi this week. Did they get caught red handed doing stuff?

David Hoffman:

[40:27] I don't know if they have officially got caught red-handed. This was one of the Twitter stories for the decades. There is a Twitter persona. His name is ICOBeast. I've interacted with him a few times on Twitter before, but he got hired by Kalshi, who has like a crypto lead. And basically on Twitter, he has just been promoting Kalshi. Like our metrics look great. Like Kalshi is the best. Look how big our perps volume is. This most recent tweet was a picture of the Kalshi's like market share of like regulated onshore perps volume. And he asked, chat is 96.7% a lot because that's how much the volume dominance Calci has over polymarket perps. Then an account named Benny on Twitter responded, it's easy to have 96% like market volume dominance when three quarters of your volume is wash traded. And then ICO Beast replied like, no, you're wrong and dumb. I love this.

Ryan Sean Adams:

[41:23] Cope, seethe, rage.

David Hoffman:

[41:26] Now these words are just imprinted upon the future of crypto Twitter and all the Twitter surrounding these polymarkets. ICOB follows up with, Why the fuck would anyone try to wash trade when you have trading fees? Incredible intellect on display. Uh, Benny, then a few tweets later, self, uh, is informed. So call it themselves. Like I'm an autist on Twitter.

Ryan Sean Adams:

[41:51] Don't, don't piss me off.

David Hoffman:

[41:52] Cause I'll go deep. Don't piss me off. To prove this. ICOB says better to remain silent and, uh, then, and thoughts of fool than open your mouth and remove all doubt. I'll give you a few minutes to think through this and delete this. Uh, Benny responds saying like, no, no, no. Like reverse uno card you. And then nothing happens for a few hours. And then Benny releases a monster thread with a bunch of evidence, like hardcore evidence for wash trading on Calci. So I'll summarize his points. Point number one, there's a massive dislocation between ETH volume and open interest on the ETH market. So on the ETH volume, there's half a billion dollars traded hands on the volume on the ETH perpetual. The open interest is 3.1 million. And so that is a daily turnover of 174 times the amount of actual open interest there is. That's just like absurd. Massive dislocation, too much volume for open interest. That's the first bit of evidence. The second bit of evidence is that the position leaderboard is tiny. The number one position on the ETH market was up a whopping $17,000. When $500 million is changing hands daily, you'd expect people to be up or down more than $17,000. but all the winners or losers were in the 10-digit range or the six-digit range, so tiny. Third, there was the same trade size, about $5,500, accounts for over 50%, 5-0% of all trading volume.

Ryan Sean Adams:

[43:18] That's pretty suspicious.

David Hoffman:

[43:18] Yeah. This came from Calci's API specifically. Later, the Wall Street Journal reported on this and found nearly 1 million near-identical trades at $5,500 with more than $5 billion of volume traded in that size in that same month. Fourth bit of evidence. The original claim from ICO Beast was, why would there be wash trading when we have fees? Because if you're wash trading back and forth, you're paying the fees. The obvious answer is that Calci gives volume rebates to market makers. So that's MUTE.

David Hoffman:

[43:49] But wait, there's more. Number five, the market makers allowed to market make on Calci are selected by Calci. Bloomberg previously reported that jump trading was given an ownership stake in Calci and allowed to market make on Calci. So not only is jump trading given the fee rebate, so the fees don't matter, but they own equity in the platform and therefore are incentivized to pump volume through it. But wait, there's one more. This has spilled over to the prediction market side of the business where Benny showed that Calci has done some very manipulative metric accounting for how it accounts volume on its platform by showing the number of contracts traded, which a contract on a prediction market trades for less than a dollar. You know, you buy 30 cents to win a dollar. So a contract for here is 30 cents. But they just add this dollar sign, add this errant dollar sign to the contract amount. I don't know why they put the dollar sign there. But when 100,000 contracts are traded at 30 cents, it's reported as 100,000 contracts. But with a dollar sign, making it look like $100,000 was traded when only $30,000 was traded, which more than three X is that reported volume number. And so, as a result, a lot of eyes are on Kalshi. Kalshi has stated that the CFTC is not investigating Kalshi for watch trading or anything like that.

David Hoffman:

[45:12] I think we're all kind of, like, waiting to see how this falls out. But the TLDR moral of the story is don't piss off autistic people on Twitter.

Ryan Sean Adams:

[45:23] Has Kalshi responded to this? I see a whole response

David Hoffman:

[45:27] With the TLDR. Yeah, there's a handful of, they try, they say facts behind the Cal Street perpetual volume saying the repeated $5,500 tickets are one paid market maker quoting fixed sizes, hundreds of distinct takers. So the maker is producing $5,500 size.

Ryan Sean Adams:

[45:43] Seems like they're not denying all of it. Maybe some of it.

David Hoffman:

[45:46] Yes, it's, they are talking about it. A lot of it is unsaid. And so that's why I kind of think the story is not over.

Ryan Sean Adams:

[45:53] Okay. I did see headlines about that. Thank you for explaining it, David. In contrast to that, I saw a tweet from Vitalik this week talking about a prediction market called Truro. And he said this about it. It's actually moving from base back to the Ethereum L1. So a kind of reverse L2 back to L1 kind of direction. He said this, glad to see that Ethereum L1 will have a new strong prediction market contender that is dedicated to decentralization and being ethical and not corposlop and

Ryan Sean Adams:

[46:29] Actually trying to do interesting and meaningful things with this class of economic primitive. Earlier this year, I think I saw a comment from Metallica using a blanket criticism of some of the prediction markets. He's long been a champion of prediction markets in general. He's been all over this since 2015, 2016, the early days of Augur. But he offered some criticism in February. He said, over-converging, that prediction markets were over-converging to an unhealthy product market fit, embracing short-term cryptocurrency, price bets, the sports betting, the dopamine stuff, not the kind of long-term fulfillment or societal information value that he had hoped. So that was his criticism. And he's saying that Truro is maybe doing things right with decentralization and ethics and more of the Vitalik-style virtue that he really appreciates. The true token, it does have a token, was up about 10x after this Vitalik tweet. So it shows...

David Hoffman:

[47:33] What did it start at? What was the market cap it started at?

Ryan Sean Adams:

[47:36] It's like 10x, but right now it's an $8 million market cap. So it's like basically...

David Hoffman:

[47:41] After the pump, it's at $8 million.

Ryan Sean Adams:

[47:43] Yeah, so this is a micro market cap. So I guess the Vitalik tweet gives you something, but it doesn't give you a lot of things. And it's basically, I mean, not used. The total value locked of True is $1 to $2 million.

David Hoffman:

[47:57] The market cap was $1.3 million before the Vitalik tweet. It peaked at, $17 million is currently at $10 million.

Ryan Sean Adams:

[48:07] Yeah. So we have total value locked in Truro of about $2 million. Seven-day trading value about $3,000.

Ryan Sean Adams:

[48:16] It's just, it was interesting to me in contrast, David, because something I've been working through and struggling with is this idea of just like, what makes Truro better than something like Polymarket or even Kalshi? Like what makes a thing corporate slop or corpo slop? Does that matter? And one thing that I feel a little exhausted from is picking between virtue and traction. It's like this forced choice sometimes in crypto where it's just like you have the virtue path, but no one's ever going to use it. You'll have like one to two million in total value lock, but it'll be virtuous, right? Versus the traction path where you have to sell all your ethics and become corpo slop. And just this real, like, growing a sense of virtue without any traction is kind of meaningless. It's kind of hot air. And so just an interesting contrast point. I don't, like, Vitalik, as we've talked about before, he's very much priest class. He's very much monk class. He's sort of the conscience of crypto, if you will. And sometimes that character class ignores market sensibilities, ignores product market fit, and It's a whole, it's just like,

Ryan Sean Adams:

[49:42] What are we doing here if we're not trying to get traction for our protocols? And sometimes that requires the market telling us what works and what doesn't. And I'm like