ROLLUP: ETFs Flop? | BTC on U.S. Balance Sheet? | Polymarket Booming | Japan Tanking Markets

Bankless Nation, it is the last week of July. It's time for the Bankless weekly rollup. This was the first week. The first weekly rollup, I should say, where we have an Ethereum ETF. I got a

promises made, promises kept. Bankless always delivers every time, except the weeks we don't.

So after two days of trading of the Ethereum ETFs went live on Tuesday this week, what do the numbers say? How did the ETFs perform? Is it all the buzz in Wall Street or was it a flop? Also, in addition to all of this, speculative rumors about Trump putting Bitcoin on the Fed balance sheet continue to heat up. Bitcoin as a reserve asset, not just in theory. What's going on with all this?

Speaking of politics, Kamala Harris is now the de facto Democratic presidential nominee after Joe Biden stepped down. So the big question on everyone's mind, at least in crypto, on our minds, David, is what's her policy on crypto? She's an opportunity to maybe pivot? Is she going to? What if we had both presidential nominees that were actually pro crypto?

What if? What if? And I think we might be able to actually get that answer from Poly Market, which continues to just penetrate into the world of mainstream references. Polymarket has some incredible trading volumes, even more incredible than the ones that we talked about last week. So we're gonna talk about them again. And also some survey reveal results that Ryan wants to talk to me about. And I don't know what's going on, but he's informed me about something.

That's great. Great a great survey. Actually, this was really interesting. So it turns out, David, that Bitcoin owners might not be as hardcore right libertarian as uh it seems. This is really interesting. Some uh I want to get your take on it, some of the analysis here. Where do they sit politically, the Bitcoin holders?

Before we get into why the hell the markets dumped uh like late last night into this morning, a moment to talk about our friends and sponsors. Okay, so Ryan, yesterday, second day of the Ethereum ETFs, uh starting to get some numbers in, but towards the end of the day, the whole market nuked. Yeah, crypto markets, but also the mostly actually mostly the tech stocks and just the trad markets. Uh, what the hell is going on?

Yeah, look at this. This is uh the the QQQ, David. That's the the the NASDAQ, and you can see just like the steep drop off. Oh my god, those are happening.

Those are some large red candles.

Deep deep red candles. I mean reminiscent of just a typical day in crypto, I would say. But like very very deep of red candles for crypto. So David, there's some speculation if you want to assign blame for this. Some people are just you know you want to you want to find someone to blame. Well, you could blame Japan. This is zero hedge. Someone big in Japan is blowing up. That's a speculation. Uh taking down gold, crypto, uh the the Nike, all of these indices, and and the Nasdaq with them. So that is the speculation here. And this is a Chris Berninski tweet. He says the market is making a fool of everyone, myself included. Uh, somebody, an analyst, just updated me on how much risk is nuking in Japan. It's bleeding into crypto. So the current action, his current action is he's not buying, he's not selling, he's just riding. You think Chris is maybe scared that of something going on in Japan?

Well, every once in a while, markets will, you know, throw a sucker punch at you for some reason or another. Uh I don't pay attention to what's going on in Japan, and I'm guessing I'm speaking for the average crypto investor. So if somebody in Japan is all of a sudden fearful and that's reflecting through the markets, you know, markets are a global phenomenon. This is the first two percent drawdown in QQQ since we've had in since early 2023. So it's been over a year since we've had this kind of drawdown in the traditional equities market.

And so I at some point also just like it these things happen. This isn't an exceptional drawdown. This is a normal normal sized large drawdown.

N normal size.

Normal sized large drawdown.

There's no oxymor on there.

Not at all.

Yeah, I mean markets are gonna do what they're going to do. So another answer to this is you can't don't blame Japan. It was just time. It was trying to time for a pullback. David wants to blame Japan on the weekend. If you want to, you can. It's totally allowed.

All right, getting into more familiar territory, despite somebody going risk off in Japan, Bitcoin, uh at least according to these beautiful green Kraken charts, up two percent on the week. Uh so starting the week at sixty three thousand six hundred, currently at the price of sixty four thousand nine hundred. So uh even though Bitcoin did take a little bit of a dip in the last two days, um, nonetheless, still up two percent on that surprises me. That's I mean that yeah,

I

I thought it would,

I thought it was a like pretty bloody

I guess, two days for everyone, but I guess not in Bitcoin if you look at it on seven days. This is this could have something to do with it, which is the Bitcoin ETF flows, of course. So this is an interesting stat. BlackRock, that's just one of the many Bitcoin ETFs. BlackRock's Bitcoin ETF has surpassed the NASDAQ tracking ETF, QQQ, in year to date flows. Isn't that crazy?

that is insane.

Yeah.

Isn't isn't QQQ just the granddaddy ETF?

Yeah, it really for the Nasdaq, right? I mean there's SP that are a little larger. So Bitcoin is the iShares Bitcoin Trust is now number four. But the if you if you're going for the year to date in terms of top ETFs, there's uh a few S P there's Vanguard, there's the BlackRock S P, and there's a total stock market uh indice of just everything that's you know tech stocks and SP and QQQ. And then number four.

It's Bitcoin.

Is the Bitcoin trust above QQQ?

We have two SP ETFs in one and two. Then we have the total stock market number three. And then Bitcoin is number four. And then QQQ is number five.

Yeah.

Wow. Wow. That's great.

Yeah.

Pretty impressive in terms of volume. And this was a take Matt Hogan actually gave earlier in the week when he came into the podcast is uh tech investors who are very excited about QQQ are looking for an opportunity to diversify into the broader tech market. You can only get that with the Bitcoin and Ethereum ETFs. That's kind of the crypto tech market. That's an adjacent tech market you can't capture in an indice like QQQ. So I guess if you subscribe to Matt's thesis, not all that surprising that this is going on.

Right.

In other words, in the Bitcoin world, uh Kraken has finished their distribution of the Mount Gox Bitcoin coins. And so now we actually get to see what's going on with the Bitcoin price as a result of the Gox distributions. It looks like nothing. They are not selling. No additional trading volumes have been picked up on Kraken or any of the other venues that have had the Gox distribution. It actually might just be Kraken. So while there have been some Bitcoin outflows, as in like people have sent the Bitcoin around, no one is sending it to the market. And so this is kind of what we were speculating on last week, and now it's come to fruition and we're proven right that the Mt. Gox FUD is indeed just FUD.

I guess to summarize the Bitcoin story right now, Germany's done selling. Gox doesn't seem like it's a big deal, and spot Bitcoin ETFs continue to go up. This is uh this is your tweet, and you're just posting the spot Bitcoin ETF flows over the summer. I mean, really good June and July for Bitcoin

Then July Bitcoin ETF inflows. In flows.

inflows, net inflows. Because all of this red in the the back part of the chart, that that's all the

Grayscale kind of bleeding outflows. It's gone now. So it's just everything that flows flows up. Well, I guess it can go down too. Yeah.

On net, like the ETF, the crypto ETF flows will flow inwards for a very long amount of time. And by very long, I mean like decades.

Okay, wait, wait, wait a second. Now I'm looking at the Ethereum price on the week, and I I'm skipping ahead because I'm gonna get you to tell me this. But like we just looked at Bitcoin and it was up two percent. And this is Ethereum ETF week, and we look to be down. I mean, this is why I was feeling the pain in the earlier segment.

These Kraken Charts don't look as good as the Bitcoin crack.

Okay,

give it give us the bad news. What's Ethereum on the week?

Uh down 7%. Starting the week at $3,400, currently at $3,150, $60. And so yeah, Ether took a wallop. Why did this happen? Well, okay, so we're we got the ETF. Flows on day one, surprisingly strong. Uh flows on day two, also decently strong as well, but we have are watching a faster outflowing of the grayscale ETH e trust than what we saw when Bitcoin, uh the ET when the Bitcoin ETFs uh started. Uh and so things are really shaking up quicker, quickly for the Ethereum ETFs. This is how I summarize it. We're gonna go through all of this and more. Um, but what what we are noticing is that the ETH Ethereum ETF volumes are surprisingly strong, and so are the ETH e outflows out of grayscale.

It's a bit of a mixed bag. I mean, we'll do an entire uh segment on the Ethereum ETF, but I mean the TLDR is from from an issuer perspective and from the inflows and volume perspective, the letter grade is A. Like it was a really solid launch. Uh the second largest in history. Uh net inflows and volume around 20% of Bitcoin. But the market, at least right now, still seems disappointed by that if we're down seven percent on the week.

Total crypto market cap 2.44 trillion. That's been flat for a while. Getting into some layer two updates. Layer two is brought to you by Mantle, the layer two ecosystem with the LST and LRT tokens on it as well. So some things we're gonna bring up here. This is uh Michael Nato's tweets, one of the analysts that Ryan and I definitely appreciate who put in um some layer two focused tweets that I want to highlight. Uh layer twos now have six times the active users that layer one has, the Ethereum layer one. Arbitrome coming in at over half a million of daily active addresses, followed by Base at 350,000, followed by ZK Sync at just over 300,000, followed by Linnea Linnea at

This is all for the quarter, right? For a Q

This is for the Cortex Q2 2024, followed by Linea, followed by uh Optimism Mainnet, followed by Immutable, Z-K E V M. Immutable, the the first uh like app specific, gaming specific ecosystem to get a bunch of users. Actually makes sense. There's a bunch of users in the world of gaming. Uh, and then there's some uh economics that will pull out as well. Uh and so as a result of 4844, the fees being charged to layer twos drops $680 million thanks to blob space. Uh and so I of course activity on layer twos commensally increased with the drop of fees. And this is this is what we wanted out of blob space. You do you take down the breaks out of layer twos, and all of a sudden you get more activity on the layer twos. And then the last one, you can also see which of these layer twos are are pulling in the strongest margins so of their usage on their block space, and then and then subtracting the revenue, the um fees that they have to pay to the Ethereum layer one to settle. Base is coming in at almost $35 million on the quarter. So base pocketed $35 million, followed by a scroll as number two, just shy of $15 million, followed by uh Optimism, just above $10 million, followed by Linnea and Blast, right around $9 million apiece. Uh profitable business models.

what's your takeaway from all this? If you could just like sum this up. What do you what do you think?

Two e ecosystem on Ethereum is like one of the most healthy things that I've we that I think see in this industry. Like active addresses are up only, TV L is up only, ETH denominated TV L is also up. It's been like stagnating for a little bit, but it's still like marginally up on on the quarter. Uh the layer two ecosystem is like a shining spot of like adoption.

Yeah, i I guess it's not um hockey sticking at this hockey sticking

Ticking.

It's kind of just steady, incremental, up. And so I guess maybe doing what it's supposed to. I guess zooming out to where we are in the cycle is sort of a question. There was a take I read in Pantera Capital that that summarizes that they think we are entering into phase two. And so we have been in phase one. We are entering phase two. Maybe we've just started to enter phase two. So when I explain this to you, you'll be like, oh, okay. I use different words, but this is what always happens. Basically, phase one is the Bitcoin. Every bull market, I should say, has a phase one and a phase two. At least it has historically. If you look at the you know 2016 bull market, you know, the 2019-2020 bull market, uh, the current bull market that we're in, which maybe started in you know 2023 or so, there's a phase one that is dominated by Bitcoin, you know, ticks the bottom and then shoots up. All right. And that's the entirety of phase one. And then there's a marked difference where phase two gets activated. And that's really kind of the non Bitcoin market, the altcoin market. So here's how they sum it up phase one is the early stage of a rally when Bitcoin has tended to outperform the rest of the market. Phase two is the later stage when altcoins, everything non Bitcoin,

uh have tended to outperform the market. And so we believe we are entering phase two. This is sort of like if you look at the chart here. Uh

Is there is there a phase three or is it just one and two?

one and two. We get two phases in this type of analysis. And

By the way, phase three is when everything goes down.

Yeah, we don't talk about phase three, right? Because then that that's the bear cycle. But Bitcoin dominance in the first phases has historically increased uh 15 to 20 percentage points in the first portion of every cycle. And at this point in the cycle, evidence that we're in like phase one, it has increased by 17 percentage points. So that's what they think. So basically, what this means is Bitcoin has had the majority of its run, at least relative to other crypto assets. And they're anticipating the second phase being the non Bitcoin assets. If it plays out the way it has played out in previous cycles, what's your take on this?

Um this is good hopium. I hope. I hope this is the case. I would love phase two.