ROLLUP: M2 Money Supply Flipped Bullish | Robinhood Wells Notice | Trump Supports Crypto | Friend.tech Token

Bankless Station is the second week of May. David, it is weekly roll-up time. You ready for this?

I'm absolutely ready for this. And we're gonna go super fast this week because that's kind of the week that it is. First up, Gary sends his fifth Wells notice this week. Who got the nasty gram this week? It's not a crypto company, so the crypto army is growing by one. Biden, Joe Biden, says he will veto extremely important crypto legislation right before election season. And Trump has uh a thought on that. Bold strategy coming out of the Biden administration. And also, we got a number of signals to say that the bull market is not over. We have some tides that are turning in the bullish favor. So we'll talk about that. And also, FriendTech launched their token, Mode Network launched their token, a roll up spans between Bitcoin and Ethereum. Got a bunch of new network launches this week. Uh, and we're gonna get to all of these details and more. But first, before we get into prices, we've got to talk about our friends and sponsors over at

Alright, let's get to the prices. Thanks to Kraken for providing these uh glorious charts, the beautiful charts, but uh the direction is unfortunately a bit Wait, are we up or down?

Bitcoin Bitcoin's up on the week. Bitcoin is up

Really?

five point three percent on the week. Uh start of the week.

I feel happier this week, David. I it doesn't feel like it.

Hang on, we we haven't got to ETH yet. We haven't got to ETH yet. Okay.

Uh Bitcoin started the week at $59,000. It is currently at $61.5,000, up 5.3% at the week. ETH price basically flat. Uh start of the week $2,950. We are ending the week right below 3,000, uh up half a percent. Counts as flat. Uh, and then of course the total crypto market cap $2.39 trillion under $2.4 trillion.

Are you are would you say this is uh still feeling doldrums y? Like it feels like it's kind of, you know,

Yeah.

so far we've got like six

Right now. Six weeks of just like not exciting down flat ish.

So while this general malaise is going on, the layer two projects continue to build. And thanks to Mantle for this layer two update today, David, you know there's now 95 projects on L2 Beat?

And that's just the ones that we know about.

95 different layer twos. And you're absolutely right. That's just the ones that we know about. Um, this is Chow saying, in other words, there are probably at least several hundreds, possibly thousands of layer twos right now. And I think there's a big question for crypto is is this just like an infrastructure boom? Like how sustainable are all of these layer twos? I know you and I have always taken the vantage point that like uh they answer the question of uh how many layer twos uh will there be? Is it's sort of similar to trying to answer the question how many websites will there be? It's like

Many blogs with our beam. Yeah.

Yeah, exactly. A as many as the market finds like useful and deems fit. Uh w what's your take on these numbers here? Do you think this is sustainable?

Uh well, in the short term, no. In the long term, yes. Uh and I think there's gonna be a theme, especially when we get to the announcement section of this roll up, is like, well, we we have are getting more roll ups this week, but we're also getting more specialized roll ups. Uh and so one of the reasons why there will be like N number of roll ups is because they are learning to become extremely niche and extremely specific and finding different corners of the internet in which like a roll up is actually useful and justified. Uh so yeah, we'll talk about that.

Let's talk more about the markets again and see how long these doldrums will last. Because there's actually, David, some bullish signs on the horizon. You called it in the intro. The tide is beginning to change. So a few things that are different that we should emphasize this week. Number one, I don't know if you saw this chart. This is Thomas. I love it. M2 money supply has flipped positive. Here it is. What are we looking at? And can you describe this for um like bankless listeners and uh and viewers on YouTube? What we're looking at and what M2 is actually measuring.

If so we are looking at a chart from 2019 up until this very moment right now of the uh percentage growth of M2 money supply. So when there is a tiny sl uh blue bar that's above the line, that means we are growing by a percentage. Uh and then if it's below below the line, it actually means that M2 supply is decreasing. M2 money to supply is called broad money supply. So like if you uh pull out your wallet and you have like a $1 bill, that is M zero. M2 is after all of the you know 10 to 1 fractional reserve of the commercial banking sector. It's after all of like private private money has been created. And so it's a very broad measure of circulating money. Uh and it's generally why it's important. It's generally the underlying um d common denominator that uh frequently prices capital assets. Uh

It's like you know that meme where you see Jerome Powell and the money printer?

Yeah, that's another one.

M2 basically is. This is

Well, not uh when uh when drone power on their money printer prints one dollar, that turns into like ten dollars in M2. And so it's like leveraged uh just because of like the leverage of the commercial banking system. M2 is like where people get the money in their the in their accounts to go buy assets. Uh that M2 money supply flipped negative at the end of 2022 because of the Federal Reserve hiking interest rates and all the capital destruction in both like Bitcoin, crypto, stock market, all the capital assets went down, right? Houses stopped being sold.

for people who can't see, before that, it was mega.

It was big. It was extremely big. It was very, very big. So like M2 money supply was growing 25% uh like on a on a uh for a year, uh, which is large, which is very, very large. Uh and then so M2 uh money supply was gr uh getting smaller basically throughout twenty twenty three and into twenty twenty four in the last week.

Mem2 money supply flipped positive as in M2 supply of money out there is growing for the first time in like a year and a half, if 18 months. Uh and Bitcoin generally, crypto assets generally are like debasement um hedges, and m M2 the growth of M2 money supply is basically the thing that props up, especially the long tail of assets out there, which is definitely what crypto is.

So for the first time in a couple of years, M2 has flipped positive. The money printer is on. You remember that take I was I was telling you from Arthur Hayes, uh I think a couple of roll ups ago where he was just basically like April's a wash. I'm gonna sell. Like it's just like um uh we're going down in April, and he called this like the end of March and beginning of April. He has now flipped bullish. Oh, right, but it's like one month later.

It's made

And this is part of the reason why is uh he says this make no mistake, by reducing the rate of quantitative tightening from $95 billion to $60 billion per month. That's a thing that happened, by the way. They've reduced quantitative tighten, tightening. The Fed is essentially adding $35 billion per month of dollar liquidity. Okay, so quantitative tighten tightening has eased. And in other words, this is quantitative easing, money supply expansion by another word. And this is part of the reason that um Arthur has flipped bullish. He's not saying it'll happen overnight, but he's basically saying we're back to more liquidity, back to money printing, back to like how things were trending in 2020. Of course, we're probably not going to see a COVID level uh stimulus, but that for Arthur makes him uh very bullish on the crypto asset class.

If you look at the total supply of M2 money out there, not just the change in direction of its growth, M2 money supply grew just absolutely massively post-COVID. That's like really what the effect of COVID was. It was a massive growth in M2. And then we jacked up interest rates and all that money went into money market funds. But if you look, like the supply of M2 money didn't go away. There's still a ton of M2 money out there. Theirs is just not in the long tail. As um, as M2 money is growing now and people going on risk on, like all of that money that's still print, we still printed a bunch of money, it's still out there. Uh now it's giving like more and more permission to go out on the long tail. So that's like the first changing of the tides. Second, pretty unrelated to M2 money, but uh Grayscale GBTC saw its first ever inflows last Friday. Uh, and so the actual amount of bitcoins in the grayscale GBTC ETF went up, which is crazy because like there's so much already Bitcoin in there, they had the fees are super high. Why people what people are still trying to figure out why uh there's more Bitcoin in Grayscale than than typically what would be expected. People are learning like, why are why are people buying grayscale over anything else? Still haven't found that answer. The crazy thing is, it also went up on Monday as well. So Grayscale had two days in a row of inflows into the grayscale G BTC E.

So I kinda wanna ask the question though, w what about just um global Bitcoin ETF inflows, right? So like I don't know if we can really explain why Grayscale had an upweek, but are we getting an upweek on just global Bitcoin ETFs?

Last week we definitely had net outflows, uh kind of like one of the biggest net outflows. This week we have pretty strong net inflows. Uh kind of hard hard to measure it, but um looking like maybe 50 to 100 million dollars a day of net inflows into the Bitcoin ETFs. Last week there was a very large net outflow of um 570 million. Um so you the on the average day this week has been like 100 to 200 million dollars of net inflows. So this week net inflows, last week net outflows, the week uh before that net outflows, the week before that net outflows, and then before that it was all inflows. Uh so yes, this week there has been a turning of the tide of net inflows into the Bitcoin ETFs.

The last tide turning I think we want to talk about is stable coin market supply is going up. And this is something that Jim Bianco, it's like one of his theses he turned you and I onto, which is basically we're not going to get a bullish um like crypto market until you start to see stable coin market cap and stable coin supply going up because that's a representation of how much liquidity there is flowing from the fiat system into crypto. And uh sure enough, the uh market cap of stable coins was down, down, down during the bear market. And now it is starting a trajectory and ascent up.

The in striking distance of all time highs of stablecoin supply.

Yes, uh here here's the tweet around this. This is exactly what you want to see, and it's very and very important metric to monitor. As long as we continue to see stablecoin uh inflows, our coins will go up. The stablecoin market cap has grown by 30 billion year to date and is now about 19 billion away from last cycle's peak. So this is another bullish indicator. Don't sleep on this one. This is a nice gradual kind of ascent that you'd expect to see. And as long as that number is going up, I think the crypto bull market is still on.

More changing tides here, but this was uh more specifically for Solana rather than the entire macro market. This is a tweet out of Dan Smith from Blockworks Research, uh, who's talking about uh the fees being paid to the Solana layer one. Uh and Solana MEV over the last like month or so has actually surpassed Ethereum MEV. Um, total economic value of transaction fees, Solana's still below Ethereum, but like still putting in, like you actually can see it on the chart, which is like the that's the first time for Solana. This started, of course, in uh December of 2023 with the rise of like Solana summer. Uh, but you can definitely start to see like Solana showing up on the charts with uh fee supply, uh fee structures. Uh so the the fee market in Solana, very, very strong. This is something that like we were saying like last cycles like we'll like Solana has to get to the point of having like sustainable fees. And this is this is what this looks like. Um

Yeah, I'm not gonna lie. This this number impresses me because uh something that you and I have said from the very beginning, which I think is true, and we should evaluate more layer one chains. This is blockchains, what do blockchains do? Blockchains sell blocks.

blocks.

How how do you know uh whether someone is purchasing the blocks? You have to look at the fee revenue. And the fee revenue comes from uh two sources, either transaction fee revenue, right, or the ordering of the blocks, which is MEV. And so flaw uh Solana is just not making that much with respect to like fee revenue itself, but it's making a ton with respect to ordering of the blocks. And that's actually impressive. I think if they can sustain this uh moving forward and how long they can sustain this, this is kind of like flipping into a big bullish indicator uh to me from a fundamentals perspective. A few things that I like would look for next as uh Solana continues to mature. It's like one is what's the sustainability of this, right?

to issuance ratio, right?

Uh well for first of all, s uh sustainability, not f not profitability of block space, but I'm just saying like there's going to be a lot of um high throughput blockchains that will compete against this, basically. So you've got your you know monad coming online, you've got the move ecosystem, you've got uh other layer twos that are going to like maybe try to commoditize this.

Yeah, but then I think secondly, yeah, uh fee burn, right? Because just like what you want to see is that the the fee revenue, the blockchains that you're selling, exceeds the cost, uh, which is like issuance. In our world, that's issuance. I know some people disagree with that, but um issuance is kind of like a cost if you're not staking in the network. Um, so uh ideally you have profitable block space and um they implement some sort of fee burn that delivers this MEV back to the holders of soul. It's sort of there to stakers, right? With Jito and that sort of thing. Like you can get a portion of this MEV, I believe, but it's not quite as clear how this mev flows to kind of like the average ordinary Solana staker or soul holder. Um

and then, and then lastly, I actually think MEV can become a problem for networks too, right? If it gets distributed.

Address MEV, yeah. Mm-hmm.

If it gets distributed to kind of like a uh

MEV unchecked MEV is a massive centralization force.

it can be, right? And so uh that's another thing that we'll want to monitor uh long term. But um good signals, I think, for Solana.

Yeah. So if I wanted to uh move the goalposts, uh MEV to validators, very, very strong in Solana, I would like to see how um MEV per transaction or the efficient because there's an efficiency of MEV, right? Right now, like in Solana, if you just like slap market sell or market buy on a uh Solana DEX and you have like a very high slippage tolerance, like we know that this has been a problem with Solana uh MEV because people are just like dumping into a DEX with very high slippage tolerance and then MEV validators are taking a very large cut. I would like to see some sort of like um MEV efficiency because if um MEVs are taking pennies over a large number of transactions, that's good. If they're taking like hundreds of dollars over a low number of transactions, that's bad. Uh so why is that bad?

It's bad for users.

Super bad, super bad for users, and it's just not sustainable. Like that just means that's an inefficient market.

I think that's kind of like a leading indicator of what will happen if like uh users feel like they're getting jacked up over MEV costs, right? And they're being sandwich attacked, that sort of thing. Like my my theory is they just go to another chain where that doesn't happen, right? As part of the kind of the commoditization type story, which would happen.

Yeah, that's true. And and and that I think accounts for a lot of this is uh Solana has absolutely dominated the meme coin narrative this cycle, which has been super, super hot. All right, David, we got a lot more to cover. What's coming up?

Coming up next, Robinhood receives a Wells notice, but they're not giving up. They're joining the pro crypto army. Uh Biden's got a veto vote for crypto coming, but Trump uh is taking the opportunity to push back. Crypto is becoming a pretty partisan crypto issue this election cycle. And then Gary is on CNBC talking smack. So we're gonna play those videos and comment on them.

So you're gonna hear all of that and more. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Robin Hood receives a wells notice from the SEC, and they are joining the ranks of all the other crypto companies who are now also fighting the SEC. Robin Hood says they're just not going down silently. They are going to fight the SEC in the courts. Uh and so Dan Dan Gallagher, Robin Hood's uh CLO's chief legal officer, says after years of good faith attempts to work with the SEC for regulatory clarity, including our well-known attempt to come in and register, we are disappointed that the agency has decided to issue a Wells notice relating to our U.S. crypto business. Vlad, the CEO and co-founder, says we while we strive to maintain positive and production productive relationships with our regulators, if necessary, we will use our resources to contest this matter in courts, with the intent of both defending our crypto business and establishing regulatory clarity with the United States for the benefit of our customers. So Gary Gensler and the SEC coming after Robin Hood's specifically crypto side of the business. Robin Hood, of like of the most compliant and rigorous and constrained even more crypto supplier.

There's only like 20, 30 like crypto assets on Robin Hood, and they got served a wells notice. Uh, and so Robin Hood, a very like large and well-resourced company, is once again like joining the crypto army to fight the SEC in court. So LS

Interesting. So this is number five, right? Of like the kind of the big, big, big names, US-based companies, right? So we we've got uh MetaMask Consensus, of course, we've got Uniswap, we've got uh Kraken and Coinbase, and now Robinhood. What's interesting is all of the the other four companies came directly from like their crypto native companies, whereas Robinhood is FinTech and they're trying to expand into crypto and they have done so quite successfully. It's also interesting, Robinhood has a non custodial wallet, so I bet that's on the docket for uh the Wells notice as well. But how how did investors react to this, right? Because Robinhood is a publicly traded company and probably has a lot of traditional TradFi types of uh investors. I mean, it did did that spook people

Yeah, so Hood, the equity of Robin Hood, uh had a tiny little blip. I think it went down from $18 down to $17.60 and then right back up to $18. Uh and so there's market fatigue about the SEC wealth notice. Like the market actually doesn't care about the Gary Gensler and like SEC attack on crypto. Like the market.

pricing it in, basically, it's nerfed.