Stocks Hit ATHs… But Wen Crypto?

28:09And it's fine to be happy to speculate and just say, you know, it's everyone for themselves. And if you lose money, that's on you. But if celebrities who are famous people have coins associated with them and lots of people start losing money on them, that's pretty bad press on a mainstream scale for crypto. And that's my fear for it. And people say, you know, what's the difference between a celebrity rugging versus like an anonymous shitcoin dev rugging? well, the difference is one of them is going to hit mainstream headlines and one of them isn't. One of them is materially worse for our industry from an optical and reputational standpoint.

28:47The other one isn't. So for me, it's like, you know, I do want my long-term positions to go higher. I do want crypto adoption to rise and increase. But if you have headlines of celebrities rugging, that won't happen. And that's kind of like the counterpoint to everyone saying this is mainstream adoption. it's not if these guys end up rugging and it makes headlines So I think the press aspect is correct my point is that I just don't even know if it's rugging anymore. I think people are just trading attention. You know people might trade a phrase of Elon Musk says you know and they're really just playing like oh maybe this will be relevant for like a month and maybe oh maybe it's relevant for a year they'll be playing like TikTok memes that come up and they'll be like okay maybe this meme is going to be gone in the next week, but I'm okay trading that attention.

29:35It's just... Yeah, I get that. I understand that. Transient with how quickly these... We've had 500 ,000 tokens last month. You know, they are... Tons of these tokens are literally just relevant for like a day. Obviously, that's not the point of them from the start, but like people understand that the timeline of many crypto assets is no longer forever is basically what I'm getting at. I do think that this is really bullish for the L1. particularly Solana, because it's seen the majority of this interest. But I think people that perhaps turned off and they see meme coins and go, it's terrible. You can still think that.

30:16I'm just trying to give an understanding of what's going on this cycle maybe worse than what went on last cycle. There's far fewer coins. They're often related to a dog. And they just have different variations of Doge or Shib. this cycle is just like people are just betting on the attention of a topic and they're doing it every single day um and you can do that with pretty much anything like i said the euros is a really good example people people will be they'll probably do it with players even like you're just betting on attention here which i think is yeah it's something to uh to note but yeah that's been what people are doing every single day the other the other big winner this week, one of the only L1s that's higher is the TonCoin, the open network, which is obviously linked to Telegram.

31:02Flipped ETH active addresses this week. You've seen a huge rise in Ton gaming, these clickable games. They've seen some big investment from top VCs in this space. They've got an active gaming ecosystem being built out there. People are saying this is the Solana of last cycle. This is where we're starting to see real adoption of users at a scale that we only really saw on Solana last cycle. Have you played around with any of these Telegram games? I haven't played around with any of them and it continues to surprise me how little of the timeline has been talking about Tom giving everyone user Telegram.

31:45I think it's starting to make some more sounds now, more noise now. Obviously we've seen the token outperform many other tokens well most other alts actually in the last few weeks and months but I'm starting to see more and more people talk about it I mean think about how many users does Telegram have like what's the total number of users 800 million users and this is a coin which is now at 40 billion FDB you know this its current market cap is lower and this is part of the FUD around it is kind of why it's Tim and Solana last cycle a lot of the unlocks haven't happened so it's current market cap is at 20 billion But it's, you know, Flute Dilute is at 40.

32:26But it feels as though Telegram is really pivoting towards crypto. There is some light fudge, you know, and I think we've even spoken about it, the fact that, you know, the Telegram founder is based in Dubai and is Russian. There's been a lot of talk in the US, but they may be under the crosshairs of a band similar to TikTok at some stage, just because the US doesn't really control the privacy algorithm there. but at the same time it's really embracing crypto I would say 99 % of my chats of people in crypto are on Telegram and with that many users it feels as though they could build a pretty persuasive blockchain here where they can onboard a lot of different people yeah I think it's bigger in Asia it's bigger in Asia and obviously in the Middle East because that's where they're based but it does feel as though that is going to be a big winner.

33:23So I would say Sala Meme Coins and Tongcoin have been the big winners this week. The big losers, we had the Curve founder. So there's been another bit of drama in DeFi, which is the Curve founder, which is perhaps one of the most popular DeFi protocols, kind of OG, this is DeFi 1.0, had taken out around$100 million of loans against his Curve position. So he had a bunch of the CRV native token, and he took out loans on the platform against it and bought two mansions in Australia for him and his wife, seemingly. And then as the price of Curve has gone lower, he's now been liquidated on that. In a world where Uniswap just delayed its fee switch and DeFi governance tokens are under the crosshairs.

34:17This has not been another big win for DeFi this week. What did you make of this?

34:27When I first read it, I was like, wow, this is a pretty smart way to get out of his Curb tokens. But I think lots of people kind of caught him out on it and he refuted that. So we'll see. Did that headline say that he repaid 93 % of the... He paid 93 % of the final 10 million. Remember, this was a story that actually came out last year where he kind of got bailed out of this position before. He bought his... I mean, he bought these two mansions last year in Australia. And that's when I was like, hold on. This guy's literally just borrowed against his curved tokens and bought a couple of mansions in Australia, which was just kind of a wild move.

35:10and then he kind of got bailed out of it by a bunch of different industry people actually there was some OTC sales that allowed him to raise liquidity to kind of help pay back some of the loans but then he got liquidated in tens of millions this week I think he just paid off the last little bits of it so I don't know like DeFi's just had a tough cycle and they didn't need this I don't think Is what he did that bad though like in real life if you're a C-suite executive and you have a ton of stock, you are able to borrow against it with a private bank. And then I guess you can just default on it.

35:46I don't know if those guys ever do or not. But isn't that the same thing, but it's just decentralized? And it's public? Is it not better? People do margin loans all the time. That's how the rich take out liquidity, right? This is not unheard of. I think it's just not great when the founder if one of the top DeFi pros has this happen. And it's so public the way it happens. But yeah, I agree. It's probably not crazy. I don't know what the LTV is. I don't know what a normal margin loan LTV would be for stock, but I imagine it's low. And I think he probably got a pretty high LTV on this. So either way, not a great story.

36:29The other big story this week that came out was that Terraform Labs, which is the company behind TerraLuna, which was basically the epicenter of the explosion in crypto, which then subsequently took out 3AC and then subsequently also took out Genesis and finally SBF and FTX. They agreed to pay a$4.5 billion fine to the SEC. Do Kwan himself is$200 million of that. And they've admitted guilt. My main takeaway from this is that everyone else lost 40 billion in this lunar terror destruction. How come the SEC is walking away with 4.5 billion? Surely this should have been given back to everyone. It seems wild to me that the SEC has got 4.5 billion out of this.

37:27They didn't protect anyone, but they've got 4.5 billion. Yeah, that's confusing, isn't it? how is that not being redistributed to victims? That's just wild to me. Surely if you're the SEC, you want it to be repaid to use this. I mean, obviously this is a South Korean-based company and a lot of the people who got hurt on this were global. This really did take out a lot of different people. But surely the estate of... I don't know if Terraform Labs actually went into bankruptcy, but you would assume that they would be redistributing billions of dollars if they have it and surely this isn't the whole treasury as well like they're probably they're probably going to continue the Do Kwon is personally liable or personally paying 205 million dollars as well it's all right 204 million dollars right but is that I mean how much just to the SEC yeah how much did CZ pay pay the other day four was it four CZ fine to SEC he paid a decent amount like he paid wow so he's part of a 3 billion dollar settlement but I think he was a much larger bit of that himself I just don't know how they're basically walking away with this amount of money but if you got hurt in that maybe pull up the SEC and try and get try and get your money back Gary Gensler's just walking away with 4.5 billion here which I just thought was crazy given he did basically nothing to try and help that even though everyone was screaming that it was a fraud before it happened.

39:11He's managed to walk away with a$4.5 billion fine ex-post. I don't really know. This doesn't really seem to make any sense for me. And then the final thing was just gaming tokens. Gaming has been one of the hottest narratives. Although Ton is doing relatively well, it's definitely been a sector which is people thought this was the cycle for gaming, and it hasn't really happened, at least on ETH. You've seen these clicky games are the only thing that's happened. All these other big AAA games, their tokens are down a lot. 30 % to 40 % for the majority of them this week. Prime, Parallel TCG was one of the most popular ones, and that token had to actually change its economics on the back of recent performance.

39:59What do you think? Is this still bullish on crypto gaming? Do you think it can come back? Do you think it's just going to be these sort of mobile games like Telegram's doing? Or do you think we can actually have these full economies, GTA style, that can work with crypto? Crypto gaming is just one of those things that I think makes sense to everyone. But for whatever reason, it hasn't been executed to a level where they've managed to mass on board a ton of users and have a game that's become hugely viral or popular. I think that's been the biggest problem. There's that and then it's just the tokenomics of them as well and the way that they've raised capital and the VCs that are in them and the ongoing selling of tokens over the next two, three, four, five years.

40:53I think it makes those tokens hard to rally. It's the thing with Axie, the game, I think, was not a game itself that people loved playing, but because the token did so well for a time period in time, there was a ton of attention and a ton of focus. But once all these tokens are vesting and they're just designed, almost by design, just trend lower and lower and lower over time, it's really hard to onboard new users because who's going to be like, oh, I want to play this sub-tier game to earn this token that goes lower. It's not really a strong pitch to anyone, right? So until all that stuff changes, I think it's going to be hard.

41:34And I think you'll get moments, you'll have moments in time where you had this throughout 2020 and 2021. You had this at the end of last year and beginning of this year. You'll have moments in time where everyone's like, oh yeah, crypto gaming is going to be massive. And now is the time. Now it's finally going to take off. And people run these narratives. And the first two or three or four new coins and new games that come out when they haven't started, unlocking yet and they're brand new and shiny. And, you know, people invested in them at very low valuations because it was kind of like that transition period between the bear market and the bull market.

42:10So you hear about people making 50x and 100x from these trades and then everyone suddenly jumps into gaming. You kind of have those periods and then eventually after a period of time, everyone just gets burned and it dies a bit again. So I just think for gaming to work, you need to have a genuine AAA game that goes viral and has a ton of users with an in-game token that's interoperable that actually has value and its tokenomics aren't designed such that a bunch of VCs who are up 50 to 100 X are perpetually selling it over the next three years. That's the biggest problem. And that's just not...

42:47I feel like I talk about this every show now, but it's not just gaming. It's true for many altcoins now and even more so now than in the past because there's been so much investment in this space. But until that's fixed, it's just designed to fail, I think. And those are the two biggest issues. And the problem is, if you're someone like Activision or Rockstar Games or these people who are making real AAA games, they're making a killing out of all these games and stuff. They have no need or desire to move into crypto. They're already making a shit ton of money. They already have a captive audience.

43:23Why would they risk that to switch? What's the... I mean, what's the bull case for one of these guys to switch? So you need someone crypto native to make a really good game. And those things take years and years and years to achieve. I'm just not even sure if it's a good game that's the thing. Like, I think that when you add such intrinsic financialization to something, suddenly the gameplay can kind of be ruined. and you basically invite bot users and you invite users that aren't really playing the game. They're just farming. Even with a really good game, you'd end up with guilds of players who are there just to ruin the economics of it.

44:08I think it's going to be interesting to see how crypto can... I do think it can be useful for tokenization of assets. I do think NFTs work quite well with gaming, that you could have marketplaces for that sort of stuff. But actual in-game tokens, I think they run into a lot of issues. This cycle, you've seen kind of an acceptance of that. And a lot of the top things that came this cycle were more infrastructure plays. But even then, they've had a real tough time this cycle because you just haven't seen the adoption in the games and the infrastructure hasn't really gone to scale. So gaming feels like it may not even be a this cycle thing now.

44:51like it feels as though what was meant to be six to 12 months ago I was like this is going to be the thing this is the time there's a big AAA game Star Atlas which is launching on Solano at the moment which looks really good looks amazing but you've got to question if that doesn't work or there's a few other AAA games I'm just mentioning them but if you start to see actually good games not working in crypto I think they're going to have a big reassessment of how it's really going to work. I just think that this financialization sometimes can ruin things. Should we do some questions? Yeah, that was what I was going to say too.

45:34Let's get into your favorite bit of the show where you become the quiz master.

45:41First question. I was going to say, we did end up breaking that. Oh, God. for breaking that support. I repeat, we've broken support. Right, we're heading to 60k. It's been nice knowing you guys. Zoran Cole was right. Zoran Cole's gone for 42k Bitcoin. I think we've got quite a big movement before a 5 % move. All right, first question. This is from Crypto Compliant on Discord. What due diligence have you done around the last L2? I see you've been very active over there. As a community, a bunch of us have been enjoying the fruits of Blast 2, but worry about how centralized it is and the potential it might rug.

46:30So he's super interested to hear about our thoughts on how we've gotten comfortable with the third-party risk. It feels like more of a question to you. I think some of the questions originally around Blast were the fact that it wasn't an L2. It was literally just, you gave your money to a multi-sig who put them on Delido and there wasn't really a blockchain behind it or an L2 behind it. Since then, the testnet went live and they're obviously... Sorry, testnet went live and then obviously are on mainnet now and they're going to launch the token. All L2s, you dig into the biggest L2s in this space, arbitrage, optimism, the centralization in many different aspects.

47:16Optimism made some changes even this week. that made it slightly more decentralized, but there's huge, huge centralization around different bits of L2s and bits of their security. So don't think that it's just Blast that has this issue. I think it's an L2-wide issue. Do I think it's perhaps more centralized than others? Yes. But I also think maybe that's by design. I don't know. What do you think, Osif? I think it's by design. And I just don't think, you know, if you look at the DApps and Blast, they're very like degen, risk-taking focused. You know, there's a lot of like casino-style elements to it.

48:01So I think it's not, you know, it doesn't feel like to me it's a chain that was like built to be this great solution to decentralization and all that. You know, like it's a yield, a platform that bears, a chain that bears native yield, which I think has a lot of value to apps that are able to attract a large amount of TVL because you're able to earn 4 % on that if it's in ETH or 10 % on that if it's in USDB.

48:31and if you're worried about the centralization you have to think about who's running it. It's being run by Pac-Man who has raised capital from the likes of Paradigm one of the larger crypto VCs out there and they've successfully he successfully founded and created Blur which is fully functional and hasn't rugged or anything like that today and now they're doing the same thing with Blast too, and he's basically a doxxed founder. So if it's one of those things that's created by a completely anonymous team and there's no information who they are and it hasn't attracted investment from top-tier VC companies, then yeah, I would be worried about that kind of risk.

49:18But otherwise, I don't see the risk of it. Those risks that this person specifies is no more or less than any other L2 out there to Mando's point. So all these things inherently always have a risk. And where the risk is higher, the reward can be higher. And that's just for all of us to judge when we get involved in these ecosystems. But I personally have invested in Blur, we've invested in Blast2, and I just have some comfort around, a lot of comfort for me around Pac-Man as a founder. I hope I don't ever have to regret that statement. But for me, I think it's someone who's quite talented, who's earned his stripes and has started to build a very proven track record, in my opinion.

50:06All right, next question. This is from Pericles on the Real Vision website. I think the election season in Europe is delaying investments. I guess that question means given the upcoming UK and various European elections, is it delaying people from deploying capital? You tell me. I don't know about the sentiment in the UK. It might be slightly different because I think there's questions about taxation there. No one said that to me. so maybe I felt in the UK maybe more of an issue just because of it's maybe quite a big change but I haven't heard that sort of sort of sentiment at least where I'm in Europe I think times of election generally are times of uncertainty especially in the world we're in now so if someone is risk averse they're probably more likely to hold cash than they are to actually invest it into anything, let alone crypto.

51:13So yeah, like a holistic scale, I would imagine once things are clearer and provided there aren't any materially adverse policy changes towards investing, you could think that maybe investment picks up post-election, but I don't think it's a meaningful impact that's affecting asset prices right now. Okay, next question. With unemployment, this is from Peter. with unemployment hitting 4 % do you think the Fed are about to shock us all with a rate cut ECB have cut UK is about to cut what do you think there I think I think there's now a decent star a decent chance for they have two rate cuts this year not just one um TPI and TPI coming in lower than expected I think is yeah like the interest rates that the Fed is currently paying or at least that US government is currently paying are gargantuan.

52:12They are absolutely massive. We're talking to the trillions now. I don't think they can keep long-term interest rates at this level. So yeah, I think they are going to have to cut. I think the thing that does complicate stuff there is the election. Doing a cut in September, that could be very political heading into that election. I believe there is one three days after the election. I reckon we'll see probably our first cut then. And then we'll probably see one in the December. So I think we'll probably see two late cuts this year. I think so too. I think it's only a match of time before the Fed is forced to cut.

52:57And I just think they didn't... I just think the last FOMC was pointless because I think they didn't factor in any recent data, in my opinion. and even though they say oh well everyone who's at the FOMC has the option to change their votes etc. once new information has come to light but he said most people choose not to that to me just says like it's the middle of summer these guys and some new CPI data comes in these guys aren't like suddenly leaving their holiday homes like oh I've got to actually change my view like they're not doing that now but I think in my view if data in the US for July is similar to the data we've just seen in June.

53:38I think you'll see a massive turnaround in the commentary and the tune out of the Fed at the end of July, which I think will lead the path to rate cuts in September and possibly even October as well, or November, whatever the next FOMC is. Okay, next question. This is from Melvin. Do we really need a new narrative for Bitcoin to go up? we just had the halving, ETFs are here, slowly institutions, governments and such are adding it to their balance sheets. Macro setup is favorable for risk assets to rise. I feel like only crypto Twitter seems short-term bearish. I'm 100 % with you, Melvin. Yeah, I agree with you.

54:22I think what we were saying is that the narrative is just there, but sometimes you need that extra spark. When things go sideways, like last year, I remember being super bullish. and we would have went sideways forever. We just went sideways for so long. Even after, you know, we kind of basically knew the ETS were going to come.

54:45So I've just noticed this, is that sometimes to get out of a long-term chop, you need that extra spark. You need people to firstly start to lose hope, which is what is happening right now. Like people getting frustrated. You'll probably see people on a day like today going like max short, you know? that is perfect right like you're sitting here going like why are you going max short uh there's nothing that that says we should go make sure but that sort of setup is what you need and then you need that one good piece of news that just that just sends you so i don't think we need the long-term narratives are really with bitcoin this time and with crypto this time but i just think we probably need one sort of spark which which sends us there imagine if Trump comes out and says zero tax on crypto imagine that I agree I think big tax breaks you'd see that's the sort of thing I'm kind of pointing at here why I said like a political sort of move because Trump I think probably provides the best chance for a spark just with into the election yeah I agree with that okay next question from JP what do you think about the impact on crypto from the top hedge funds doing the carry trade, delta neutral, between shorting futures and holding long spot, holding or being long spot?

56:09I believe you mentioned miners, but was wondering if these hedge fund carry trades were having a greater impact. Well, they should theoretically be delta neutral. But what they do is, and by that I mean they should have no net impact. When you buy spot and short futures, you should have generally little impact. But it does add to the gross risk out there, like the open interest. In a scenario where we actually saw negative funding, I think it would be interesting because you'd have these huge short positions. And the way that crypto works with DeFi is that you get like cascading liquidations. And there's definitely a massive increase in obviously short interest in the market right now.

56:47So I think that's interesting. I think what it has done, unfortunately, is it's difficult to look at the ETF inflows anymore. In fact, I've started to look at stablecoin inflows or stablecoin total market cap as a better indicator of inflows into crypto, mainly just Tether, but it inflows into crypto than the Bitcoin ETF. Because the Bitcoin ETF inflows, for those who aren't aware, it's now becoming apparent that the majority or a huge number of the larger holders of the Bitcoin ETF are hedge funds. And they're not owning this outright. They're owning this by owning the spot Bitcoin ETF, and then they are shorting futures, and they're basically taking in the carry trade.

57:39It's a basis trade. You take in the yield on that short, because normally in crypto, futures longs pay futures shorts. So if you have a short position, you're being paid to hold that position. So you end up with this position, which is delta neutral, as in it doesn't matter what price Bitcoin does, but you're probably locking in like a 10 % to 30 % yield at the moment. Now that yield can vary depending on the demand. And as demand for this trade grows, that yield will go lower and can even go negative. And if it goes negative, then it could get a little bit messy for this trade, I think. What do you think, OSF?

58:20Yeah, I think the interesting thing about this trade is that for the basis to exist, it means there's still so much interest for people to go 11 long, I guess, right? And all these hedge funds are coming in and taking the other side. and that's why we just haven't seen like funding go crazy ever since the Bitcoin ETFs kind of got fully fledged. So in terms of the market impact, you know, as Michael said, it's like it's delta neutral really. Like it shouldn't really have an impact. You know, one thing I would say is, and this is just like a thought I have from the old TradFi days, but whenever you have a big basis position and everyone has this massive basis position on, because it becomes such a consensus trade, sometimes that basis can actually widen and get worse.

59:07Because banks and hedge funds and everyone, they all have capital limits, right? They have gross balance sheet limits. So they're able to put on this trade up to a certain level. So let's say, okay, we're clipping 20 % yield on this trade. We've added to it. Now we've maxed out. Now let's say the yield goes to 30%. The ARB goes to 30%. So they add to it, they add to it. Now let's say the basis goes to 40%. well some of them can add to it but now you're down your mark to market is down from where you initially put that trade on and you have all these even though you have a delta neutral trade which should be like it's free directionally for the market that basis itself can change and now suddenly you have this massive like unrealized P &L hit and as that basis continues to widen if it does continue to widen your unrealized P &L gets worse and worse and worse until you get to the point where your boss taps you on the shoulder and is like look you've got to stop out of this position.

1:00:01And then it just had this crazy thing where the basis goes crazy. So what that would mean, if this ever did happen, because it's such a big consensus trade, it would mean the basis would widen a lot. It usually happens. Yeah, the spot prices would be much lower than the futures prices. And that would just cause a massive differential between the two things. But it shouldn't have a massive directional impact for the market. But yeah, if that ever did happen, and these guys have to stop out, you will probably see people scrambling to buy back their future shorts and then dumping the Bitcoin ETFs.

1:00:37And the headline figures that retail will see is like Bitcoin ETF outflows, which then I think would probably cause the market to go lower because that headline figure looks bad. And generally speaking, when people have to unwind risk, I think that's usually a bearish indicator for the market rather than things going higher. So if that ever happens, it may not and maybe this market is way more efficient than like distressed or high yield credit was and I'm sure people have these types of basis trades on in commodities all the time and run them for very long periods of time but if it ever does happen I would be like if I saw the basis go a lot wider and wider and wider I'd be worried like I'd be I'd be selling risk there for sure I think alright I think we can I think we can call it a day there okay yeah so So over the course of the show, Bitcoin fell$1 ,000 just over.

1:01:33We're two for two and sending the market lower to Friday. Yeah, we really are, aren't we? Friday is not a good day. They say Monday is the best day to buy crypto recently. So hopefully everything reverses by Monday. Yeah. We will see you again next week, guys. Obviously, subscribe to the YouTube channel. You can find us on the Real Vision website. and we do every four weeks, we do kind of a question and answer session just for Real Vision members. So go sign up there as well. Anyway, we will see you next week, guys. Thanks for tuning in. We hope you enjoyed this episode. At Real Vision, we arm you with expert knowledge, time-efficient tools, and a powerful network to help you succeed on your financial journey.

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