ROLLUP: Stripe's Billion Dollar Stablecoin Bet | Noteworthy Investor Longs BTC | Kraken's New L2 | Self Custody Is For Losers?

Bankless Nation is the fourth week of October. It's time for the Bankless Weekly Roll-Up. Okay, where do we start? We got a record breaking billion dollar crypto acquisition. It's catching mainstream attention, and uh it could be a really big deal for stable coins.

We also got multiple layer twos adding to the Ethereum Settlement Network this week. Kraken adding its layer two to the Super Chain. What's its plan? What's it called? And then also World Chain from WorldCoin is online. Uh and in addition to all of that, scroll, another Ethereum Layer 2 dropped their airdrop this week. Was everyone happy or was everyone upset?

It's an airdrop. So what do you think, David, at this point?

Was it like all the other ones, or did it break the trend?

Also, uh Paul Tudor Jones, notable investor, is uh buying crypto, and we'll talk about why. And then uh Michael Saylor, another notable crypto investor, he's on the hot seat for basically saying self custody is for losers.

Yow. Yow. Hot take. Not very hot take. We're gonna get to all of this stuff and more, but first a moment to talk about our friends and sponsors over at

Getting into the markets this week, let's uh take a look at our friend Bitcoin. Where are we at on the week?

Up 1.3% on the week. Start of the week $67,000. Ending the week at $67,700. So okay. Okay week. How about so kind of flat, but okay.

Yeah, how about Ether?

Uh not great. Down 2.8% on the week. Start of the week at $2,600. Uh fell pretty low. Fell below $25,000, $2,500 for a little bit. Um currently at $2,525.

Almost 3% down on the week. This explains my timeline. ETH holders in shambles. Uh ETH is dead, uh, et cetera, et cetera. This is the sentiment going on on crypto. And but but what are we seeing in the in the ETF flows? Maybe we should start with Bitcoin because it had a banger week. Did it probably

They start and end with Bitcoin.

Bitcoin ETF flows coming in hot. I'm just gonna start start reading out some numbers. October 11th, 250 million. October 14th, 550 million. October 15th, 370 million. The next day, 450 million. The next day, 470 million. The next day, 273 million. The next day, 294 million. The next day, out 80 million. And then yesterday, the most recent day, in 192 million. Just racking in the numbers. For there's a total inflows of 21 billion and like 3 billion, 2 billion came in in the last like 10 days.

all right? Uh so Bitcoin at the big week. How about Ether?

Uh, I mean, just not not too much action. Uh we're we're at negative 475 million. It's like marginally inflowing, but not not anything comparison to what Bitcoin ETFs are doing.

Yeah, it's like probably not even a tenth of the inflows, net inflows in that same uh time period. So just basically take take the numbers that you heard and like you know take ten percent of that. And that was basically what Bitcoin did. Uh let me show you a chart that's gonna make you even sadder, David. You ready?

Yeah. I mean, like we're looking at the we're about to look at the ETH BTC ratio, and the ETH BTC ratio reflects the uh inflows that we were just talking about. It is down to 0.0372, which is a three year low.

Down. Wait, a three year low? You say a three year low?

Three year low, yep.

Okay, so the lowest level since April 2021.

Mm-hmm.

According to our sources here. You know, trader Ben Cowan, he has predicted this ratio for actually some time. Remember, he came on the bank list and he he basically told us this. He he thought he was kind of crazy back in, you know, 2022 and 2023. But his range for the last three years has been 0.03. So still some ways to go to.04. But he says that we are being the bottoming process right now. He says that's kind of the home range. And over the next few months, into maybe the first two weeks of January, that's when we're gonna bottom. We might be at the bottom right now, according to him.

Bottom ish, yeah.

Or we could go a little bit lower before we resume some ascent here. And his base case is just reversion to mean because he reads kind of the TA lines and the logarithmic charts and that kind of thing.

So this could be the worst of it, David, but uh it's definitely uh feeling kind of bad in sentiment land.

Yeah. Uh we've uh we've been here before. I've seen that point zero three handle, uh, but it was all the way back in like 2018, 2019.

Most people don't remember that.

Uh

no, most people were not here for that. But that's where that's that's where the crucible was. That's where a lot of ships got uh sharpened.

Well, I have nothing more to say to ETH Holders other than this. It's uh it's conviction time. Let me just say this.

And something that you often say, which I like, David, is you can't copy trade conviction. So you either have it for this particular asset or you don't. And if you don't, I mean better better sell.

The the the actual line is you you can copy someone's trade, but you can't copy someone's conviction.

I like it. I like that line.

Uh total crypto market cap, where are we at in the week?

Coming in at $2.42 trillion below that $2.5 trillion mark. But uh you know, I bet you we're I bet you we see three trillion by the end of the year.

Yeah, I mean I think so. Uh particularly if we start talking about well, I don't know, by the end of the year, but like stablecoin is included in this number too and

Oh yeah.

that that's destined to go higher. Um

Let's do a quick L2 update drive-by. Of course, there's some major updates on L2, some big launches happening that we'll get to for a second. I just wanted to highlight this and thanks to our sponsors and friends over at Mantle for supporting this section of the roll-up. Um, L2 fraud proofs are coming on base next week. Okay, so this will elevate base from stage zero on uh L2B to stage one, which is a big upgrade in terms of Coinbase's inability to yoink your funds. Basically, when you have fraud proofs, you as a user of the base chain have the ability to exit to L1. No one can steal permissionlessly. No one can steal uh your crypto assets on base. It's a pretty big milestone. And there are a lot of people out there who said it would never happen. Base is never going to decentralize, all the L2s are not going to decentralize. Of course, OP Mainnet did it not too long ago. And now they're rolling that out to base. I think that'll become relevant when we talk about Kraken's layer two a little bit later. This is uh Luke Youngblood saying in about a week, base will become a stage one roll up with permissionless fault proofs. While Albert Arbitrum has been ahead of base, their system only accepts uh fault proofs from a whitelist set of actors, so base will leapfrog them for a bit. I love this competitive pressures of like which L2 ecosystem can become more decentralized and like the the you know the pressure to uh to be on the frontier of that.

This is uh just about property rights. So with stage one and even more so with stage two, your property rights on layer twos are given much stronger, almost equivalent assurances to your property assets on the Ethereum layer one. So it's all about just like permissionlessly expanding Ethereum's property rights settlement network. So, you know, a very necessary part of the Ethereum roadmap. Moving into markets, some big news out of the world of Paul Tutor Jones on Squawk Box. There was an interview on Squawk Box where he says all roads lead to inflation. And the interviewer Andrew Ross Sorkin asks him what exactly he's long if he he thinks all roads lead to inflation. Let's go watch that clip right now.

Given all of the things you're saying, are you off buying gold and Bitcoin and and highlighting?

I think all roads lead to inflation. We're gonna end up if you so

Does all roads lead to inflation, therefore gold is a good investment? Is Bitcoin a good investment to you?

I I I'm long gold, I'm long bitcoin. I think commodities are so ridiculously underowned. So I'm long commodities. I think most young people find their inflation hedges via the Nasdaq. That's also been great. It's probably some combination. I probably have some basket of gold, bitcoin, commodities, and Nasdaq, something like that, and I would own zero fixed income.

I really like the framing actually that he's so long commodities or he believes that commodities are just super undervalued. Cause I kind of think if you if you go to CoinGecko, you just look at the market cap. You got Bitcoin, Ether, like all the other ones, these are all commodity monies. Every single layer one asset is a commodity money. So to me, that statement is just like secularly bullish the whole entire crypto industry.

Yeah, I agree. When he says all roads lead to inflation, some people will hear that and think he's just talking about consumer price index, inflation, like CPI, and they'll be like, well, no, Powell's got that under control. Look at all the reports. I mean, it came down from 8% to now it's like roughly 2 to 3%. And that seems to be sustainable moving forward. That's not what Jones is talking about here. He's talking about the increased supply of money. He's talking about currency debasement, essentially. He's talking about asset price inflation and ways to hedge against that when there's more and more liquidity and more and more fiat dollars in the system. That's the type of inflation he means. And that's why he's pointing out there are some hedges out there, like commodities. He says those are undervalued. And even like the Nasdaq can be a inflation hedge as well. And certainly we think our crypto monetary assets are the best of the best with respect to inflation hedges because they are completely outside of the fiat system.

Uh, just some stats on this, some metrics on this, just to put some numbers here. The Congressional Budget Office estimates that the federal government will clock a $1.9 trillion deficit this year by the end of 2024. And that's on track to grow to $2.8 trillion by 2034. So in a decade, we're gonna have a $2.8 trillion deficit. All of that, that's just net inflation. All of that, how how do we cover that deficit? Inflation. Inflation.

We are 11 days out from the election. So let's do a check in on polymarket. And what we're seeing on the 2024 election forecast, at least on polymarket, is Trump still up. 61% odds of winning for Donald Trump versus Kamala Harris at uh about 39%. I've actually been surprised at how Trump's lead has held for so long.

Gone gone up and then held its position.

Exactly. And so what I sort of expected to see, if this was more kind of short-term uh noise or maybe even market manipulation, was you know Trump's 60% like fading uh as the days progress. And what we're seeing is some sustained lead here. So what does that tell us? I mean

The more I mean the more volume that's coming in at these current um valuations, like percentage likelihoods, uh just the more true the number is, as according to like the market, right? Uh and but in addition to that, I think I saw this uh market, the Senate control after 2024, 84% chance Republicans, which um obviously Donald is the far more pro-crypto candidate, but I think there's a lot of consensus that it's actually really the Senate that really matters in terms of the crypto industry, because the Senate is going to be the people that does or does not pass pro crypto regulation. And when the Republicans have an 84% chance, up 10% on the week, uh 84% chance to win the Senate, that that just bodes so well for the industry getting legislation passed that we needed to.

I do think that's like think of that as like, you know, higher percentage likelihood of getting fit legislation actually through. So we understand what's a commodity and what's a security in crypto, higher percent likelihood of getting stable coin legislation through, lower percent likelihood of having like um regulators who are sort of unchecked by by laws. So uh you're like definitely the election is moving in uh crypto's favor here. Uh David, we got more to talk about. Kraken's layer two. We have all the details. Also, that monumental crypto acquisition will tell you what that is. We think it's gonna mainstream stable coins. And let's get to the Michael Saylor gossip. Did he really just turn against self custody? Is he just another banker now? We'll talk about all that and more. But before we do, we want to thank the sponsor that made this episode possible.

Introducing Inc., the brand new OP stack layer two out of Kraken. Kraken's going on chain, uh, and they're doing it with it. Their chain called Inc. That testnet is coming in 17 days uh with mainnet coming in Q1 2025.

It's cool. They're actually introducing this at DevCon. So they're going to have hackathons, that sort of thing. So really getting right into the Ethereum community. Of course, we've been waiting. There's been rumor for a very long time that Kraken was going to launch a layer two. And there was rumor of them discussing, like talking to various uh layer two solution providers. And uh it looks like they've been doing that for the past year, David. This isn't just coming out of the blue. They're coming out with an announcement, and they're like, yeah, we're like a week or two away from uh test net and we're gonna launch mainnet in Q1. So why is this a big deal? It's a big deal first because this is uh a total win for Ethereum and the Ethereum economy and kind of the layer two roadmap. What we're seeing here, David, is all of the centralized exchanges, they either have a layer two or they have a plan to launch a layer two. I mean, the one outlier is Binance, who has its own kind of like layer one chain, but you wonder what the trajectory of that is when everyone else is uh building out a layer two. So they're bootstrapping security and decentralization from the Ethereum network. So that's bullish. And this is something that we'd long hoped for and long predicted at Bankless that all of the crypto banks, we call them, the the centralized exchanges of the world, would actually start to move more and more on chain with the eventual destination of all their assets and their order books are fully on-chain as well. I mean, that's a long time out, but you could see the migration, the progression here. Base has its own layer two. Uh, crypto.com with Kronos has their own layer two. That's on the ZK Sync stack. OKX has a layer two as well, and this is Kraken joining their ranks. Uh, a few cool things about this that I think are cool anyway, it's gonna be on the Super Chain. So that's gonna be a very interesting cohort. You already have Base there, you have UnChain there, which is as just announced uh earlier this month. You have Zora there, you have an interesting amalgamation of other layer twos and uh a lot of liquidity, a lot of centralized exchange liquidity, the largest decentralized exchange with Uniswap being there as well. I think that's going to be very interesting. And it positions both Kraken and Coinbase on the same ecosystem, in the same economic.

Family.

Yeah, so what are they doing? Well, they're not quite competing against each other inside of the super chain. They're sharing liquidity because across the super chain, all of this liquidity, we were talking to Ben from Optimism yesterday, it's all going to be shared. And so what feels fragmented right now on the super chain is going to like come together and feel like one single chain. And so it's an interesting position for both base and the Coinbase's L2 and Kraken to have kind of an all boats rise uh type scenario where what's good for base is is good for ink and what's good for ink is good for base. Uh, I love that dimension of it, and I think that's going to be interesting to watch. Of course, they're bringing the Kraken devs with them. We're talking to the lead of this project. His name's Andrew. He's got over a hundred developers at Kraken working just on Kraken on-chain exercises. So this is a big deal. First, the crypto banks with L2s, then the actual banks, the actual like real world so called banks will have L2s. And our prediction is that every ledger in the world will eventually end up with some sort of crypto based, you know, layer two, layer three ledger inside of the crypto ecosystem. We're all going on chain, David.

We did an episode with Andrew from Inc., who I'd actually never met before, but very eloquent. Really interesting to see him uh come out. So, Inc. is actually this uh a subunit inside of the Kraken uh system, so independent from the Kraken organization, uh owned and operated by Kraken, but still independent, kind of in the same way that Base is. Uh, but then also Ben Jones from Optimism. So if you want to learn more about that, we did a podcast episode that's probably that's actually already out in your podcast feed, it's also on YouTube as well. Moving into crypto's largest acquisition to date, Stripe acquires a stablecoin startup called Bridge for $1.1 billion. Just blowing the water out for all previous acquisition records. Uh so what is Bridge? Bridge allows businesses to create, store, send, and accept stable coins. It was founded in 2022, which is crazy. It's a $1.1 billion acquisition for a company that started just two years ago. Well done, guys. Well done. Really good job. Uh, from two former Coinbase executives, Zach Abrams and Sean Yu. Uh, their intention was to compete with a Swift network and with credit cards. Honestly, pretty easy people to compete with, especially when you have stable coins on your side. Um, yeah. Uh, largest acquisition for Stripe as well as the crypto industry. Uh, if you're not familiar with Stripe, it's a just a payments company, kind of a Web2 fintech payments company. Definitely the most valuable.

Definitely one of the most valuable uh fintech companies in the world. It operates over 135 countries. Millions of businesses uh work with Stripe. If you guys ever use that little tap to pay on that little square thing, the square white thing, or you put your card into the square white, that's that's stripe. Uh it's kind of like um point of sale for consumer payments for businesses on the ground. Uh and now there's just like very intimate stablecoin integrations into the Stripe uh vertical.

I think this is absolutely huge. I I don't think it's hyperbole to say like Stripe is basically internet payments today. They kind of like modernized and revolutionized payments on the internet, made it super easy with kind of their set of APIs. Like everybody on the internet uses Stripe in some form or fashion. And this is a big vote of confidence for stable coins. You have to think if Stripe is doing this, they they are betting that stable coins are going to be a big deal. Maybe they even see regulatory uh tailwinds on the horizon, right? And so they're looking at, well, you know, Congress in 2025 or 2026 could come up with stablecoin legislation. And yeah, we're looking at a $150, $160 billion stable coin market now. You flip the switch on some legislation that that goes pro-stablecoin in the US and you you quickly turn into like a multi-trillion dollar market for stable coins. So all of this is uh hugely bullish. Zach Abrams, the co founder of Bridge, wrote We started Bridge because we thought stable coins could become a core global regulated payment platform and the first wave of interest of cross border companies. Today we're moving many billions in payment volume, but more importantly, we're now helping hundreds of developers all around the world.

Chris Perdisky, he tweets out the importance of Stripe wholeheartedly emblacing brought blockchains as a signal for other fintechs is not to be underestimated. So this is also kind of the conversation that is going around in the crypto VC land is that stable coin deals are about to get very hot because we just had a provable exit opportunity for any VC investing in stablecoin deals. And then also you would think that like any other Stripe competitor is looking at what Stripe is doing and be like, damn, do we need to be doing that?