Datasets:

MasaFoundation

/

bankless_ROLLUP_Curve_Exploit__BASE_Memecoins__Richard_Heart_vs_SEC

like 0

Follow

Masa Foundation 7

A

Binance could face fraud charges from the Department of Justice. But what is the Department of Justice waiting for?

B

Bankless nation. Happy first Friday of August, David. What time is it?

A

Oh, Ryan. It's 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 this bullish frontier. I'm claiming it's bullish this week. It's a very bullish week to me. I think it's a bullish.

B

David came down from the mountains bullish. Okay, so what was the elevation of Matterhorn and how did that go?

A

The elevation of Matterhorn was 14,690ft.

B

Okay, mark that number.

A

You can't necessarily judge a mountain by its elevation. Matterhorn's very steep. Yeah, it was.

B

Elevation is high, though, right? That elevation is high as far as mountains go.

A

I mean, high is relative. I wouldn't call it super high like Everest is 26,000ft or something like that. Okay. Yeah, yeah. I mean, is. That was definitely like feeling the altitude, that's for sure.

B

Did. Do you see my comment? That's going to be. The elevation of Matterhorn is going to be the top price of ether during the next bull cycle. So give us that number again. 14,000. What?

A

14,690.

B

There it is. It has been prophesied.

A

I'm looking forward to, like, as ether pumps through this nice bull market. It's like, oh, it passed my summit at Baker. Oh, it passed my summit at Pollux. Oh, it passed my summit at Rainier.

B

You need to tweet that every single time. It does, yeah. That's great. Well, it's great to have you back, danklist.

A

It's really good to be back.

B

I'm on you, dankless. David. And dankless is dankless. It's great to have you back, David.

A

It's not the first time the word dankless has been uttered. I'm very excited to be back. It's a very good time to be back. It's a very good week to be in crypto. I was a very entertaining week. Good things happened. Some bad things happened. More good things than bad things, I would say. And like I said, I'm feeling pretty bullish. I don't know about you.

B

All right? No, I'm feeling bullish too. Although there were some bad things that happened this week, starting with the curve exploit, which we got to talk about, that led to a cascade of events across all of Defi. Everyone's talking about the CRV token right now. We did an entire episode on that. I think we got to get the recap in today's roll up. David, what else we covering?

A

What else we got? The base launch date is announced, we're about to drop the base, and a meme coin frenzy has already happened on base. So it's already had its meme coin frenzy cycle, or at least the first of perhaps future cycles. Richard Heart is sued by the SEC for fraud and issuing unregistered securities. Man, like, I never thought I'd see the day. But here we are. So we're going to talk about all of that and why some people are thinking that the Department of Justice is not far behind. And then also binance is in the hot seat. Speaking of the Department of Justice investigation for fraud, are they too big to fail? Does that matter for binance? What else we got, Ryan? We got some birthdays, don't we?

B

We got a birthday to celebrate in the episode. I'm not going to tell you what birthday we're about to celebrate, but it's a big one. It's an important one. So stay tuned in the show, guys, for that. David, while we're here, we got to shout out our friends and sponsors over at stator. All right. Let's go see what's cracking. Oh, thanks, Kraken, for these fantastic charts. What's bitcoin price on the week?

A

When did you think of that one?

B

Not gonna lie, it was a while ago. You know, I've been waiting for that. Waiting for you to come down the mountains.

A

Oh, my God. I'm glad you did. Bitcoin started the week at 29,400, down .3% to 29,330. Bitcoin lost a whopping $70. So that is flatter than flat, I would say.

B

That's pancake flat right there. How about Eth Price?

A

Eth price? A little bit. A little bit. Actually. Down 18,075. Down one and a half percent to 1840. I didn't say 18,000. We're not there yet. That's later. 1875 down to 1840, 18,000.

B

Be past your matterhorn peak there. You got to climb a higher mountain.

A

For that to happen. That's exactly right. That's a great excuse to go climb another mountain.

B

Don't. Don't, man. I was. I'm not going to lie. A little bit worried for you on this one. You know, you're posting about, like, snow conditions and you know whether you should do it or not and. Yeah. So I think we're good for now. How about the ratio eth bitcoin ratio.

A

Yeah, down about 1.5%. So 0.062. It stayed in the low zero sixes for a while now.

B

Can I zoom out here for a second? It's been kind of flat summer, hasn't it?

A

Yeah, it's been flat since the start of the last bull market. It's been flat for a very long time. It's been like two years now.

B

I'm looking back in June.

A

This is what ether does. It is a stable coin, and then it goes vertical.

B

All right, well, it's great. We found our stable coin. Finally. The decentralized stable coin we've been waiting for. How about the crypto market cap, David?

A

1.2 trillion. Over 1.2 trillion.

B

All right.

A

Hey, man, we've been up the total crypto market cap. I mean, it goes up, it goes down, but it's been on an upward trend for seven months in a row now.

B

Yeah.

A

Ever since FTX.

B

Yeah, I mean, not too bad to be above a trillion, as we always say. David, let's talk about all of that ETH, what it's doing. What is it doing? It's getting staked. This is crazy to me. Look at these numbers. Can you read them out?

A

I mean, this isn't new news. It's just the news is that there's more of it happening. 25 million ether staked is the threshold that we have recently passed. 22 and a half million is actively staking with. 2.5 million. Over 10% is actively queued up to speak.

B

Waiting to get in.

A

Waiting to get in. Wow.

B

Yeah. And I think there's, like, a 30 to 40 day wait time now. Like, if you're in the queue, you gotta. In order to get in the staking club, you gotta wait 40 days, which is pretty incredible, man. A lot of interest there. But what happens when more eth is staked? That means yield goes down.

A

Yields go down. Yield go down. Yeah.

B

Okay. Is that okay? Are we happy with that? Don't care. Do we? Goes down?

A

Yeah.

B

I don't know.

A

It's part of the game.

B

Part of the game.

A

I mean, y'all can all please unstake, and I will gladly take. Take your issuance.

B

Take the issuance. Stamen will take all the mev. Let's talk about another type of yield, and that is, uh, interest payments. Um, interest payments. Fastest growing us federal expense. Did you know what is this chart that we're looking on? Uh, they're about to pass $1 trillion. I'm. I'm, of course, talking about how much the us government has to pay in interest on its debt because. Yup, the us government is in a lot of debt. Look at this chart right now. What are we looking at?

A

We are looking at the chart of government debt. Um. It. It looks like a shitcoin parabola. That's how I would describe this. So in 1991, we were looking at maybe $4 trillion of government debt. It had already started to increase pretty fast at that point. For the decades prior. Moving up to, like, 2005, we're at a doubling of 8 trillion in debt. Moving into 2012, we're at 16 trillion. So another doubling 2019, 22 trillion of debt to where we are now at $32 trillion in debt. And that makes, according to this tweet, about $1 trillion in interest payments that the government has to make this year. That's a lot of money.

B

This is more than the US spends on defense.

A

Yes.

B

And, you know, the US spends a lot on military.

A

That sounds like spiraling debt. That sounds like spiraling debt.

B

Well, related to this, Fitch. Fitch is a ratings agency. So they rate various debts of different kind. Fitch downgraded the us debt rating, basically their credit worthiness, to aa plus from aaa. And that apparently one, one rating lower.

A

Than aaa is double a plus. These ratings, I think could do it with a redo, but whatever, crypto can't fix that yet.

B

David, their statement was, why? So why did they downgrade the US? A few reasons. Three, primarily fiscal deterioration over the next three years. Okay. That means they expect the legislators and Congress and the president to continue spending. Number two, a growing general debt burden. We just saw it. $32 trillion. Number three, erosion of governance related to its peers. So the US having an inability to actually govern itself.

A

Some of the comments that they gave are pretty funny. The us government lacks a medium term fiscal framework. I think that's related to the governance issue. Like, they just, you know, we can't govern our own spending. The budgeting process is extremely complicated. They cited us politicians, don't really know what's going on with their own budget. Quote, you're too confusing to even be a proper government.

B

Wait, who said that?

A

Okay, I'm quoting Kyla Scamlon. Who's quoting? So we're hearing this through the grapevine. A little bit of. But then also they cited the rising costs of Social Security and Medicare. We got an old population just like, shout out to Kyla in her humor. Boomers are booming.

B

Very true. Luke Raman has a take here. The US cannot mathematically sustain their debt and deficits without sustained negative real rates. That's a problem when you raise rates. So don't tell me the downgrade doesn't make sense. Tell me which suckers at the card table collectively have a big enough balance sheet to hold 32 trillion in debt at negative real rates. Yeah, there's a question. I don't know who's buying bonds, David, do you? Who's buying bonds? You buying any bonds?

A

Not me.

B

I'm buying the Internet bond.

A

Yeah. The bonds that are both giving you real yields and also capital appreciation. Yeah, I remember talking last week, we were talking about like, the Fed, because the Fed raised interest rates last week, a quarter and quarter, 25 bps, if you will.

B

I like the cut of your jib, David, finance terms.

A

But the comment I made is like, man, I haven't thought about macro or interest rates. We haven't talked about the Fed pivoting in forever. Now. It's like the markets a kind of have is like written off how big of a deal these interest rates are anymore because they are also slowing down and getting smaller. But also inflation is coming down. But also all of the points that people have originally made is like, sure, we can jack up interest rates to combat inflation, but the Fed has a date with destiny, and that destiny is to print money at some point in time. And so I think there's a decent possibility that the markets have written off the pivot. We've forgotten about it. But at some point in time, the money printer must resume. And whether that's one year, three years, five years, ten years, I don't know. But, like, I think the market has written that off.

B

David, you're starting to sound a little bit like radio to me. Yeah, I guess you're bullish crypto, you're bearish government debt. Do you remember, I think it was a couple of roll ups ago where I asked this question about all this Fed tightening interest rates raised from basically close to 0% all the way to above 5%. Right. And I remember being told at that time, and a lot of the prognosticators were saying that will absolutely devastate everything like that will be a catastrophe, widespread job loss, stock market will go down, all of these bad things. It would happen. And so, I mean, I was told the Fed tightening would nuke everything. And the question is, why didn't it? Guess what? I think Ray Dalio is a listener to the bankless podcast, because he heard that question maybe, and wrote his entire post about that this week. And he answered the question, and I think he did a good job answering it. Here's the, here is the take from Ray Dalio on why there was a big government engineering shift in wealth from, one, the public sector, the central government, and central bank, and, number two, the holders of government bonds to the private sector, which are households and businesses. This made the private sector relatively insensitive to the Fed's very rapid tightening to a more normal monetary policy. And as a result of this coordinated government maneuver, the household sector's balance sheets and income statements are in good shape while the governments are in bad shape. So that's why unemployment is low. Feels like the private sector is doing okay. The stock market is almost all time high, because you know who took all the bullets for us? The government. The US balance sheet, that $32 trillion that we were looking at over there. And bondholders. That was the take. He simplifies it a little bit more. Simply, central banks took on a lot more debt, so their balance sheets deteriorated, and the central banks printed a lot more money, which caused inflation to rise and bought a lot of the debt to get money into the hands of the private sector, which now, as a result, is in relatively good shape financially. So, yeah, bondholders took a haircut. The government's balance sheet took all the bullets. The private sector's doing okay. Wealth inequality increased even more. And that begs the question of, what's the next phase of all of this? And I think the answer, according to Ray Dalio, is more money printing, as you're saying, but a different type of money printing. We already did the qa qe thing. We already did the buying bonds thing. The next step, according to Ray Dalio's long term cycles and his planning, is basically helicopter money directly to the people to decrease wealth inequality, all sorts of government programs, fiscal and central bank programs, kind of become the same, and we're just printing money and giving it to the people. That's kind of the next step.

A

Why do the people get the money? That's what's motivation there.

B

Well, because look at things like, the stock market's at an all time high, right? But also, wealth inequality has increased in the US.

A

But don't the people need to, like, you know, grab their pitchforks in order to induce the motivation in order to get the helicopter money?

B

Ah, yes, David, right?

A

They're not gonna be like, hey, we've decided to give a distribution to the people.

B

Like, no, I mean, look out there. Are you seeing pitchforks? Cause I see pitchforks. They might be a little bit in.

A

The distance where I'm not seeing pitchforks.

B

There's so much anger. Like, politically. I mean, look at our political climate. I think so much of.

A

Yeah, I see there's a number of step, a gap in that happening. And then also helicopter money. I don't see those things, like having a smooth direction.

B

I don't think it'll be smooth. But I think that there is increasing anger. You know, we blame social media for some of these things, blame the Internet for some of these things. I think a lot of the anger just in general, like the question answered, the question, why is everyone angry all of the time? Is due to wealth inequality, due to like, shrinking pie, due to lack of economic opportunities. There's again, the, you know, the top 10%, the top 1% are doing fairly well in this type of environment, but a lot of people are left behind. The whole rural versus urban thing, that's another lens on this. I mean, we're deal not to get into politics, but 2024 in the us.

A

Political scene is going to be real.

B

Rocky for many reasons. For lots of reasons. But one of them, I think is part of the wealth inequality story.

A

Yeah, yeah. And I think one of the big things that people were looking for is a depreciation of house prices, housing prices, and that has not happened. Like, if you. But if you bought at the real estate at the top of the market in 2021, you're doing just fine. Like, you're doing great.

B

Student debt is another example that, you know, whole large conversation. I mean, there's. There's many areas where this is spilling over into political. But let's move on. Let's talk about tether for a second. Did you know, David, that tether now holds more ust bills than Australia? It's pretty crazy.

A

All righty then. Okay. I mean, I don't know how many t bells. Australia holds less than tether.

B

So tether, David, has $72 billion worth of t bills. And apparently this is larger than the nation state, Australia. So there's a comment from Collins Belton about this. Wow. If true, tether is apparently holding more t bills than Australia and also the UAE and many other countries at this point, regardless of whether you believe on their history, I think it's hard to see the us government railroading these guys easily anymore.

A

What does that mean?

B

Think about that.

A

Who's the USG and what's railroading?

B

USG's government. He's saying the us government.

A

Oh, yes, government. What's railroading?

B

I think what he's saying is basically like, the us government is not going to shut tether down, is not going to completely, like, is it too big to fail? Yeah, I think that's what he's saying. Basically, when something like this gets too big, the government doesn't kill it because that would be kind of painful for everyone involved. Instead of killing it, they just legitimize it in some way. And so Collins is making the point that this seems to be what could be happening with tether. I mean, they got a lot more t bills than most countries.

A

I'm not sure how I feel about. That's probably bullish for crypto assets because it reduces the systemic risk of tether. But then crypto just made another bank that's too big to fail. I'm not sure how to feel about this.

B

I don't know. I don't know how to feel.

A

I'm going to take the bullish side. I'm bullish because of it, not it's bull week.

B

So when in doubt, you choose bullish. David, what do we have coming up next?

A

Coming up next, curve exploit and its founders, megaloan, sends defi into a hot seat base, surpasses arbitrum and daily transactions, and it's not even live yet. And a protocol has celebrated its 8th birthday. Starting to throw a little bit of breadcrumbs your way. We'll figure out who or what it is. But first, a moment to talk about some of these fantastic sponsors that make this show possible. We're going to hear what's cracking from Kraken. Let's go hear from them right now.

B

Curve finance was hacked this week, and it sent shockwaves across all of Defi and crypto. David, what happened here?

A

Yeah, so there was a vulnerability in the coding language viper, that curve used for some of its pools. So this is actually pretty damn deep in the tech stack. And so I don't think it was anything in the way that curve pools were built, but because they use Viper, and because Viper forgot. Forgot to have these reentrancy checks in their codebase. As a result, it allowed for a reentrancy attack, which is a pretty known attack. It's actually how the dao hack got drained back in 2016. And so curve had a reentrancy attack thanks to. I guess thanks to the coding language viper that forgot to have reentrancy checks in it. $70 million was drained from four curve pools. The Pindle eth pool, the metronome eth pool, alchemyx eth pool, and then the curve eth liquidity pool, about $20 million, was actually recovered by white hat hackers and Mev bots, interestingly enough, which is an interesting little side quest of this story. But the big story is that because of the curve EtH pool, $5.1 million of curve tokens, 7.2 million curve tokens was drained and then taken into the exploiter's wallethead. Now, that's one thing that's bad, because this exploiter gets $7.2 million. The reason why this goes from a bad story about curve to a bad story about DeFi is because the curve founder, Michael Igorov, had taken out about $110 million of stablecoin loans against his 460 million curve tokens, which was almost $300 million at the pre exploit price. Then once you put $7 million of curve tokens into the hands of an exploiter, people start to react to that, because that is, you know, we are just one button press away from dumping $5.1 million of curve tokens into the market. So people start to withdraw liquidity. People who are providing liquidity to curve across DeFi, either in stablecoin pairs with curve or eth pairs with curve, they start to yoink liquidity because they don't want to get dumped on. So liquidity starts to dry up around curve. And so that makes the liquidity profile around curve very precarious. And especially when Michael has $110 million of collateral of borrowed stable coins against his curve collateral, he is under duress. His positions are under duress. And if that curve exploiter decided to liquidate his curve, they would cause a cascading liquidations if Michael was not able to bolster up his positions. He has since sold about $16 million of curve to pay back some of his loans, but he still has 90 something million dollars in loans to pay back across Defi protocols. Now here's all of the Defi protocols that Michael has put curve tokens into and borrowed stable coins from. Aave V two is the biggest one coming in at 300 million curve tokens, which is 34% of the circulating supply of CRV. Abracadabra has 51 million. Frax lens had 41 million. Inverse finance at 25 million, staked out had 3 million. Silo had 2 million. This guy put curve across Defi and then borrowed stable coins. Like. Like I said, 110 million stable coins. And so all of these are in precarious positions. If curve goes down to the price of, I think, $0.34, it's currently at $0.38, last I checked. But if it ever went to $0.34, he would be liquidated, and that would cause.

B

Wait, $0.38. What did it get that low?