ROLLUP: SBF Arrested | Trump NFTs | Binance Bank Run | Fed Inflation | Proof of Reserves | Bored Ape Lawsuit

SBF got arrested. It's such a great day. Turns out his 4D chess was just him playing checkers. Ladies and gentlemen, we got him.

Bangless Nation, happy third Friday of December. David, what time is it?

Ryan is the Bankless Friday weekly roll up where we cover the entire weekly news in crypto, which is always an ambitious endeavor. Yet we persevere into the frontier, into the end of the year, nonetheless. How are you doing?

Yeah. I'm doing great, man. It's gonna be good to close this one out. This year, that is. Uh, but we got a lot to talk about in this roll-up. And David, I I think you're you're are you wearing your SpongeBob uh sweater? I haven't seen you in that for a while.

Hi Fashion Friday.

All right. That feels like a good kind of like holiday sweater. It looks comfy, looks uh pretty relaxing. How are you feeling, man? You feeling okay? You feeling relaxed?

Dude, I think I'm pretty I'm I'm feeling good. I'm feeling really good. Uh I mean we all know how bad this year was, but uh I think that we are uh on the precipice of good stuff because of what happened this week. SBF got arrested this week, Brian. I started I started December saying that December is the best month. SBF got arrested. Uh the the redemption arc of three arrows capital is coming to a close. People are having none of that. Uh and so we're gonna cover all of this news and more. In addition to that, Binance is seeing all time high outflows. Is a run on the bank happening with Binance? Are we about to do this all over again? Or is this just happening in an abundance of caution? People going bankless. We'll talk about that. What else we got, Ryan?

We also have um one of the best investigative journalists, or so we thought, called the Block. It turns out that was secretly owned by SBF.

Yeah.

Like what a Mastercraft villain uh we're dealing with. So we we talk about that. That hit me pretty hard on Friday. We'll talk about that a little bit. And also, David, I'm hearing some rumblings. I'm hearing some things about the world's greatest NFT drop in history. Who is who is dropping an NFT?

Oh, we're we can't tease that. We can't tease that now. But let me just tell you, Ryan, it's a big, big deal. The world has never seen an NFT drop this fantastic. We're going to make NFTs great again. Folks, let me tell you, NFTs are the future of digital ownership based on the most advanced technology out there, blockchain. And we're going to drop the biggest any NFTs anyone has ever seen. More later in the show.

David, did you get any comments about your uh Trump impression from last roll up?

You know, I uh

Positive or negative?

the scammy YouTube comments, absolutely like the bot farms that are also on YouTube kind of drowned out all the YouTube comments last week. I didn't I didn't get any comments, but I'm coming from

Maybe this is

round two.

He's fishing for it, all right? Because uh I bet if you can guess who that was, who David was in person, you probably have a clue on who's dropping an NFT as fresh as of today. All right, well let's uh get in. Let's talk about markets today. Bitcoin, what are we looking at on the week? Give us the price data.

We got a flat week, Ryan. Bitcoin uh it ended up up 0.7%, start of the week at 17260, ending the week at 17380, so 0.7% up.

All right. Um, neither higher nor lower very much, just kind of flat-ish. Uh ETH as well, same, same.

Uh down a little bit, down 1.1%, start of the week at 1285, ending the week at 1270. Got up to 1330 on the uh positive CPI print, um, but then fell back down. Uh down 1.8%. Part of 1.1%.

I'm feeling um uh I guess rejuvenated coming into this episode uh versus some of the others in like November. Is uh we had that ETH Bowls episode that we did. This is an episode that's coming at you on December 26th, all about Ether. It's an ETH bowl panel that we do about every six months and six months, and this one was especially good.

So good.

Uh but I remember something that the DC investor made the point, look, we are still below twenty eighteen all-time highs for ETH, right? And what's interesting is like he he put out this tweet a few uh weeks ago, which said like

I didn't buy at 80, but I bought at 120. This is during, you know, uh 2020, I guess, but you know, bear market. And he's like, there is no difference. There's literally no difference. Don't remember the difference, right? It's it's it's crazy, is like that's kind of what the numbers look like now. Only it's 10x different. Like our low for ether was about 800 or so. It's eight high 800s, really. And then now we're at like 12, uh, 1200s, 1300s, right? The delta is the same. So, and we're below 2018. We're below the last all time high. So I'm not saying ETH is looking juicy at these prices, but uh the ETH bulls certainly are, and they will be on the two on the 26th when that episode releases. And uh yeah, it just seems like a good time to keep dollar cost averaging in.

Yeah, and the point of that tweet was that like when Ether hit $80, like it didn't stay there. It bounced right back up. And so he was just reminding people like, hey, you don't have to time the pico bottom. Buying at $120 ETH just kind of blurred together with buying the $80 ETH.

I made so many mistakes when I was a noob, just like watching the charts and trying to time the the pico bottom when I should have just been like dollar cost averaging in during the bear market.

Yeah.

Uh all right, let's talk about the ratio. What's that looking like, David?

Uh ratio down 1.8%, down from 0.0745 to 0.073, uh, down 1.8%.

Holding up though. Holding up. And Bitcoin and ETH down from all time highs, they're about neck and neck, aren't they?

Yeah, yeah, they're about the same. Mm-hmm.

Like 76, 77%, something like that. Um crypto market cap total, are we above or below a trillion dollars, David?

Still below a trillion dollars, uh eight hundred and eighty five billion dollars about flat on the week.

Good question that we asked Vitalik by the way in our episode we recorded. That's coming at you Monday was basically like Will crypto ever be a you know multi trillion dollar asset class again or will it forever be a niche? You had a really fascinating answer to that question.

Oh yeah, you do. At least

In a few hours, yeah.

go check your premium RSS feed for that. It's a fantastic podcast. All right, should we talk about uh do our Fed watch, talk about macro for a bit?

Gotta watch the Fed.

Two things happened this week, David. Um, the first is we got some CPI numbers. And that is inflation, of course, consumer price index. They came in lower than was expected. So that is good news. Good news. We are excited about that. And you can kind of see this over time. This is the chart from uh

Of CPI changes from 2015 all the way to 2021. You see the peak? That peak was around like June-ish or so. And uh we're down off the peak. So I think the official numbers are something like this, David. Um, June was 9.1%. That was the high for the year. Now November, 7.1%. The numbers fall off. And previous month, October was 7.7%. Uh core inflation, obviously also down. Core inflation is like a subset of the main CPI number. That's another uh number to track independently. So that happened. And the question is, is inflation over? Maybe we'll talk about that in a minute. The other thing that happened, David, is the Fed raised rates. So the federal fund rates, that's the interest rate, is now in a range of 4.25% to 4.5%. So the Fed Powell raised it by another half a percent. That was basically as expected. The market anticipated that. And so this is lower than the previous increases. The last couple of raises have been by 0.75%, and this was half a percent instead. Uh, and if you look at kind of the the predic, like the markets, the prediction markets, the the target rate right now is people are thinking the market's thinking the rate's going to be about 5% in 2023. Uh so we might get one or two more hikes that are expected in that range. And by 2024, the market is saying the rates will drop down to 4.1%. So that is what the average person thinks. And so I think there's like two questions here. Um, the first question is has inflation peaked? All right, has inflation peaked? What's your take on that? Do you think we've inflation's peaked? Do you think CPI is kind of over? And um, you know, the intervention by the Fed and a combination of relaxation of the supply chain issues that that we are facing uh over the past two years are kind of over, and so we've hit the peak and it we're we're going to be fine from here. What do you think?

So if you want to go back to that chart that you were just showing that shows the inflation chart, uh the inflation peaked in June, 9.1%, September 8.2%, October 7.7%, November this month, 7.1%. So clearly we are in a downtrend. And while it's totally possible that it just reverses and keeps on going up in a way that we don't like, that is on the menu. But uh it is worth noting that the more that we progress forward in time, the more the interest rates that the Fed has increased in recent uh in the 2022 starts to take effect. When you raise interest rates as the Fed, that takes time to ripple out. Uh it takes time for the effects of having to pay back money at a faster rate reaches the margins as a and reaches the all of the economy. So the CI

Exactly. Exactly. And so the Fed has been raising rates all throughout the year. And so there are the last one, two, three times instances that the Fed has raised interest rates. That has not shown up in the CPI print yet. And so there are many instances of the Fed's raising rates that has not shown up that will continue to have an increase effect on inflation. So I think it it's one of those questions. Are we are we peaked? Have we peaked the longer that it goes on where we are not going up? Obvious, I mean, this is a really, really simple way to put this.

Exactly. The more that it's not going up, the more likely it is that it has peaked. And we are in almost like I mean, June. We're in December now. So we have the November print. Like we almost have six months in a row of decreasing inflation. So I mean it's looking better. It's looking pretty good. Yeah. Well, and then also just like there's been a longer time before when there's been any news about uh the Russian invasion. There's been I haven't seen much about supply chains. So like the global macro news cycle at least seems to be like quelling uh for like six ish months in a row now. So like we're trending uh in an acceptable direction.

Well, this professor at University of Uh Michigan over at Econ, Justin Wolfers agrees with you. He says this in his tweet core CPI rose by only 0.2% in November, which is yet another positive disinflationary surprise. Headline C CPI rose only 0.1% in the month, also below expectations. This is remarkably good news, he says, for the second month in a row. Inflation has clearly peaked. Inflation has clearly peaked. So much so that brings us to kind of the next question in the analysis when can the Fed stop raising? It's a question, right? And uh we have politicians saying that they should stop now, that they've already gone too far. Uh, this is a tweet from Elizabeth Warren saying the Federal Reserve's Chair Powell has just announced another extreme interest rate hike while forecasting higher unemployment. I've been warning that Chair Powell's Fed would throw millions of Americans out of work, and I fear he's already on the path to doing so. I'm not sure what Elizabeth Warren's response to inflation would be. Do we just let it run? But that aside, there's clearly some posturing, some pressure to not let these interest rate hikes trigger a recession. That would also be a bad thing, and politicians are increasing the pressure. So maybe that is um uh a reason, this political pressure for the Fed to uh to reverse course and change course earlier.

I'm just kind of triggered that Elizabeth Warren is trying to tweet at the Federal Reserve to influence monetary policy. Like Elizabeth Warren is a politician, not an economist. Uh our our friend Kyla, if you scroll down, Ryan, I'm pretty sure has the most liked tweet in response to this. Where she responds to uh Elizabeth Warren and says, This is an incredibly irresponsible thing to tweet, which I agree with. Like, let's not polit can we stop politicizing our monetary policy? Uh that is bad.

Uh, but I don't think we can, David, is the answer to your question. I think no. And it's interesting you said uh trying to influence the the Fed. One observation I have, we might get into this a little bit later with some other politicians' tweets is uh you said the word influence. I think all politicians are influencers now. I mean, this is like a look, uh, we know the game, we see it in crypto Twitter all the time. This is a clout chasing type tweet. You're not necessarily wanting the Fed to actually stop. It's not that you actually think it's a good idea, you're kind of trying to collect the clout.

You're just being a populist?

There's an element of that, certainly. And that is the game that they're playing. Now, Powell, the game that he's playing, is he is still saying that there is a ways to go. He's not responding to this political pressure. So uh continues to plan to increase interest rates. This is a quote from him. We still have some ways to go. He told a press conference that was on Wednesday. Uh, I wouldn't see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way. Restoring price stability will likely require maintaining a restrictive policy stance for some time. Restrictive policy stance for for some time, not gonna stop till we hit 2%. Where are we, David? 7%. There's a delta there. Um other people are saying, hey, 2%? Powell, what's so bad about 3%? We can live with that in a post COVID era. And that is the slippery slope he kind of um, I guess, finds himself in in this type of uh in this type of climate. Uh

Yeah, I think I think that I think that's right. And I think there was a big conversation around uh the S P in the stock market. And we're also seeing this in the crypto markets as well, where we got the the lower than expected inflation and markets markets rallied. That's when Ether got all the way up to the high high price of 1330. Uh and big Bitcoin jumped as well. Uh the stock market jumped, and then everything came right back down to where it was. Uh and so and then that bummed people out. It's like, yo, I thought this was good news. Like, why didn't we sustain this rally? Uh and the conversations I've heard around this are all about well, it's hard to sustain rallies when interest rates are high. And so, like, okay, maybe we're not going to dump, but like having uh going up in price sustainably requires flows of buy pressure into these assets, into these risk on assets. And like, okay, we got this good news, we got this dopamine hit, but sustaining a rally when interest rates are as high as they are at four at four and a half percent, and like that's a bigger ask. And so some people have I mean, it's you they're not turning bearish, but it's hard to be optimistic when we can't sustain a rally because of, you know.

Yeah, there's still some work to and especially when it's still uncertain. Like we don't really know. You know, okay, so here's an interesting stat. A year ago at this time, if you're trying to predict what the Fed's going to do next, the the Fed themselves predicted in December 2021 when asked what the Fed Fed funds rate would be at the end of 2022. So a year ago they were projecting the end of 2022. Uh, do you know what their projection said, David?

Tell me.

0.9%.

All right. We're at 4.5%. And they thought we would be at 0.9%. That's the FOMC projections. Do you know what their their forecast for inflation was?

The beginning of last year, the end of last year?

Two percent exactly what their target was?

2.6%.

Actually, it's been it's 7.1% to date. So look, um, I don't know, it's it's just also clear to me that uh you you can't always believe what the Fed is projecting. They're just like kind of doing that.

Yeah, they're just extrapolating the existing data of what they want to happen, uh, always. Um anyway, that's that's what's happening in macro right now. What's happening in the uh the housing market, though, David?

Yeah, well, it's it's still a macro conversation. There's an article out of Zero Hedge uh here that that caught my eye, which the headline was nine million millennials moved back at home in with their parents this year. Uh and I I think uh during COVID, a lot of innovation, a lot of uh millennials you know, got out of their parents' home and to go like do stuff. Uh and then the Fed jacks up the interest rates, and we're seeing nine million millennials moving back home. I think that about the there was a poll inside of the article that was like, All right, why did you move it? And it was all because of the economy. It was like job insecurity, wanting to save money, can't afford rent. Uh