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A

What really causes the four year boom bust cycles in crypto? Is it the bitcoin happening like everyone says it is, or is it something else?

B

Bankless station is the first week of February, and it is time for the weekly roll up. David, you know, we've never done a roll up on a leap month. February has 29 days this month. You know, that's a fact.

A

It's our first bankless leap month. And is that something to celebrate?

B

I don't know. I don't know what it means. Maybe.

A

I don't think it is.

B

No. Did you celebrate the 29 February?

A

It was below my line, unless it's their birthday.

B

All right, well, let's talk about what is above your line this week. Farcaster frames they are the hot new thing on the app called Farcaster. All right, but the question is, is this the killer app that crypto social media actually needs to take off? We haven't had our iPhone moment yet, but could this be it?

A

And surprise, people with money in FTX are being paid back pretty damn soon here. But how much is the question? And also, where is that money coming from? Speaking of money, Jupiter on Solana has launched its Jup token at an earth shattering $7 billion valuation. I think one of the largest airdrops, maybe top three airdrops of all time. How did the Solana network hold up? Was it able to keep itself upright? We'll talk about that.

B

And speaking of valuations, we got to talk about the Fed. It's getting a little hawkish. All right. That might impact our crypto, all of that and more.

A

But first, we're going to talk about DYDX.

B

All right, let's get to the markets this week. David, what is bitcoin showing us on the week?

A

We got some pretty round number price movements this week. 40,000 is where we started the week. 43,000 is where we are ending the week up about 7.5%. Pretty good. 7.5%. We like that. I mean, it was pretty red week last week, so now we're kind of starting to fill in that gap eth price. Also, some round number movements starting the week at 2200, ending the week at 2300, up 5% on the week.

B

How about the ratio, David?

A

Ratio down slightly on the week. We are below 0.054, but not news.

B

Thanks to Kraken for these charts. Like to see them going up. And that's what happened this week.

A

Make them go up, David, how about.

B

Total crypto market cap? What are we looking at?

A

1.71 trillion. Call it flat. Flat on the week, flat. It's been flatty.

B

And layer two beat.

A

Layer two beat also flat. Slightly up in TVL. We're at 21 billion locked in TVL on layer twos with a 5.5 x scaling factor arbitrum coming in at $10.5 billion in TVL, followed by optimism at five, followed by Manta Network, a brand new ZK layer two, which I think is the subject of a big old airdrop farm at $1.6 billion.

B

Manta base number four, Metis, number five. Six is ZK sync era, and number seven, mantle. And then DYDX. Interesting.

A

Immutable DYDX.

B

And ZK fair. So this is.

A

Never heard of ZK fair.

B

This is the horse race to watch, though. And yeah, it's one of the most interesting that's going on right now. David, let's flip, though, to the fed. What is going on in the broader macro markets this week? I think Jerome Powell had something to say. What did he say?

A

Yeah, I heard, I heard it was a hawkish FOMC meeting this week. The TLDR that I've gotten the vibe of is the last FOMC meeting, everyone was like, we just got the pivot. And then this FOMC meeting, everyone's like, oh, maybe we didn't have. Maybe we didn't get the pivot. That's kind of my TLDR. Do you have any more Colorado?

B

Yeah, I mean, so Jerome Powell said inflation is still too high. And recall, the rates right now are 5.25% to 5.5% in kind of that range. And he said inflation is too high. There's ongoing progress to bring it down. It's not assured. He wants to get inflation back down towards 2%, which is the central bank target. And he said rate cuts would not be appropriate. Yeah, and I think you're right, David. Some investors were surprised by this because there was talk of this, maybe the pivot, that is the decreasing of rates happening as early as March of this year. And it looks like that's not going to happen. Powell is not giving us a full pivot yet, though. That could happen later in the year, David. I think that's still on the table. And the FOMC indicated as much expecting rate cuts later in the year. We just have to wait on those.

A

I guess my understanding is that the pivot is inevitable because high interest rates means that the United States government has to pay a ton of money on its debts, which are massive. And so just as a matter of incentive, we have to have the pivot but that's like, if I keep on saying that, it'll be the bajillionth time that I said that in the last, like 18 months. So I'm kind of like starting to feel like I'm beating a dead horse or I'm broken record or something. That's still true, right?

B

Yeah, it's still true. All you got to do is wait. So just wait.

A

How long?

B

A few months. I don't know. It's going to happen this year. I still look, something crazy could happen. You never know. But it looks like we're still on track, just a little bit delayed. David, we talk about crypto and the boom bust cycle happening every four years. And of course, this is sort of our base prediction, a four year cycle. And so we are getting into the bull territory of this four year cycle. The reason that many in crypto have always pointed to for this four year cycle that I have not fully bought into is the havening, because it turns out that the bitcoin havens its supply about every four years. And of course, the magnitude of that as a percentage of bitcoin supply is decreasing over time. This is the tiniest happening yet in terms of total bitcoin supply. But still, that's one of the reasons given for four year cycles in crypto. Mike Ipolito has a different take on that. Maybe the four year cycle is not caused by the bitcoin happening. Maybe it's something else. What are we looking at here?

A

We are looking at a graph that basically looks like a sinusoid. It is a wave going up and down, up and down in the background. It's just like a model for a sinusoid. And then there's a chart in front of that sinusoid. That is the global liquidity index, as in how much liquidity is there in the global markets around the world. And that that line is a little bit more choppy, but it generally follows that four year sinusoid in a very rough fashion. But, like, the pattern is pretty clear. And then if you just look at this in the crypto context, right, we had the 2013 fork and fair launch bull market, which was at the peak of the rise, in the peak of the 2013 to 2014 sinusoid. Then we had the 2017 bull market, which also same thing. And then also we had the 2021 peak as well. And so it all just lines up with liquidity. And I think this is the biggest conclusion that people got to after bitcoin went from like 69,000 down to 20,000 as inflation set in where everyone was like, prior to that, everyone was like, bitcoin is an inflation hedge. And then inflation happened, and bitcoin went down because interest rates went up. And turns out we are now remodeling our idea about what bitcoin is. It's an index for liquidity, which is exactly what this theory would, would say.

B

Yeah, I think that's right. And I think this sort of explains crypto four year cycles even more than bitcoin. I will point out it could be both, though, right? It doesn't just have to be one thing. But I do think that worldwide global liquidity is kind of the big explainer here. And just to give a sense of what this global liquidity index is based off of, it's basically the central banks of the world. So all of the central banks, so that's the fed central banks of China, Japan, EU, all of them, and also commercial banks, they are kind of the levers or control mechanisms for how much liquidity is in the actual market. So at the end of 20, 2023, we had a global liquidity of about $170 trillion, and that is on pace to rise in this cycle. So we're at kind of the trough of global liquidity and now making our way up as more liquidity is injected by the banks into the market. That is what this trend line kind of predicts. And those are the ways that you were just saying, I want to double.

A

Down on that punchline. We are past the trough of the recent sinusoid, and we are on our way up. That's kind of the, that's where we are in this trend. Uh, and so if it as, was as violent of, of an uptrend as it was last cycle, uh, we have a long way to go in terms of more liquidity coming into the markets, which always impacts risk assets the most, which is crypto. That's us.

B

I mean, you could see this on other charts, too. This is a comment from Mike's tweet, if you know this. But Satoshi was actually a macroeconomist. Is so interesting how the bitcoin four year happening cycle is also timed with these four year, like, cycles of liquidity in and out of the market. And it goes to show, David, like, one thing that's always true of markets is it's all about inflows and outflows, isn't it? Right? And so fundamentals make their way into prices over time. But in the, in the business cycle time range, like the two to five year time range, it's all about liquidity. And so, I mean, this looks very bullish for crypto assets and then probably risk on assets in general. And the punchline here is it's actually less about interest rate. So people look at the interest rate and they're like, it's 5%. That's high. It's higher than it's been in the last, like, ten years. Right? It's not just about interest rate, guys. It's also about the liquidity that is sloshing around in these markets. And it looks like all of the banks are ready for another cycle of money printing.

A

Speaking of inflows and outflows, the GBTC outflows have slowed this week, especially in the last two days. So the 29th, 30th, and 31st have been some pretty notable changes in tune in the bitcoin ETF world. So on net, there was negative $17 million outflows on the 29th, between all of the grayscale outflows versus the other ETF inflows. On the 30th, which was Tuesday, there was $378 million inflows into all of the bitcoin ETF's. And then yesterday, at the time of recording the 31st, $240 million inflows. So over the last two days, we've had over like $600 million of inflows into the bitcoin ETF's, which have surpassed all the grayscale outflows. The grayscale outflows on the 29th, 30th and 31st. 289, 192, 170 million. So that number of grayscale flowing out, GBTC flowing out of grayscale to Coinbase being sold, turning all these candles red, is slowing. That is a lower number.

B

We needed to get rid of all of those outflows in order to resume the ascent upwards, didn't we? And it might be no accident that this week we saw a 7% gain on bitcoin and these outflows have started to halt and stultify. So that's good. That's healthy market activity. That's what we need in order to go back up. David, what do we have coming up next?

A

Coming up next on the second half of the show, we're going to talk about Jupiter's $7 billion token launch. Did you get that airdrop? Bankless nation? We're also going to talk about Farcaster frames and if crypto found its social killer app, as well as record amounts of on chain user growth in 2023, which chains grew the most? Was it ethereum layer twos or was it newer layer ones? We're going to talk about all that and more but first, I wanted to talk about some of these fantastic sponsors.

B

Big airdrop. This week, Solana's biggest Dex, Jupiter, just launched its Jup token. What do people need to know?

A

10 billion Jup tokens. This airdrop was actually announced. There's going to be four phases. This is phase one. The future criteria of phases two through four are undecided. But this was actually announced all the way back at Solana breakpoint in 23 to November 15, 2023. 10 billion Jup tokens going to 955,000 Solana wallets. Almost a million wallets, definitely not a million users in Solana pre November of 2023. Of that 955,000 eligible airdrops, uh, airdrop addresses, 485,000 addresses have claimed those tokens. 646 million Jup tokens. That's, uh, bait. About two thirds of the airdrop, which I believe is 10%. I need to double check these numbers, but I believe 10% was airdropped of the $7 billion, which means $700 million was, uh, airdropped to Jupiter user.

B

Where are you getting 7 billion? Is that, is that the market cap of.

A

Yeah, that was a market cap at the drop. It is now at 6 billion, which, I mean, still plenty respectable. Yeah, still $6 billion. Yeah.

B

So almost a billion dollars in token value was dropped to 600 million.

A

At the current price is 600 million.

B

Wow.

A

Wow. Which might be number two behind arbitrage, which dropped like 2 billion to users.

B

Yeah. Because Jupiter is like the primary Dex on Solana.

A

Yes.

B

It's kind of winning.

A

So it's like a super dex. It's not just an amm, it's also a Dex aggregator with like, a bunch of just other bells. Bells and whistles. It's got, it's like a suit. Like, it's got all the, all the Dex bells and whistles hooked into one app.

B

Okay, so how did Solana, the actual network, I'm sure this was a flood of activity of people claiming their Jup tokens, getting very excited. How did the network handle that load?

A

Network stayed up and running, but a bunch of failed transactions happened. I think something like 50 or 60% failed transactions. So people were pretty frustrated about that. But it was significant improvement from what Solana would have done, like, a year ago, which was topple overdose, stayed online, didn't break a sweat in terms of block production. But now Solana as an ecosystem is like just paying attention towards its fee markets and its congestion. And so this is like the new era of development in Solana. So I would call that a success. They have work to do, but it's a success.

B

Those are the big boy problems, right? When you get so many users, your network can't handle it. Right. You gotta keep up with it, and you gotta figure out front running and Mev and all of these things. I think it's a sign of increasing maturity that that Solana is working on these problems. And, of course, if you're a bankless citizen, then you probably knew about the Jupiter airdrop, because we covered it in the airdrop hunter. And you can claim that if you don't know whether you're eligible or not, you can also claim that on the bankless website, bankless.com claimables. Type your Solana address in and see if you qualified. And, David, you've scheduled a live stream with one of the founders of Jupyter, I believe, to. To talk about this and talk about future plans.

A

Yeah. That founder's name is Meow. He is a cat. And we are having a livestream tomorrow, 08:00 a.m. eastern time, because I believe he's in Singapore hours to talk about Jupiter and the Jupiter airdrop. And so this will actually conclude my Solana app layer series that I've done over a while. I did tensor, I did Jito, and now Jupiter. And these are like the three big apps on Solana, and it's going to be round out that series.

B

Are you expecting a cat to actually show up? Is this person going to be pseudonymous?

A

No, he is a man who I'm sure if you investigated, you'd be able to find out his name. He will show up as a dude. He will also call himself Meow. I am Meow is what I'm expecting to hear.

B

Well, it sounds. Sounds like it's worth $7 billion. This is crypto. Sorry, Tradfi, I got to get you this weirdness. Speaking of weirdness, this came out last Friday, David, but it really made waves. A Farcaster frame. Talking about Farcaster, we're talking about the crypto social network. It's kind of a Twitter type of competitor called Farcaster, and they've rolled out a new feature called Farcaster Frames. William Pster of Bankless. William Pster, one of the analysts at bankless, described it like this. The crypto social scene just got a huge level up. That's because Farcaster just introduced frames which can turn any cast, which is Farcaster's equivalent of a tweet. A cast is a tweet into an interactive app. This new feature offers awesome new possibilities for the Farcaster ecosystem, ranging from in cast airdrop checkers to one tap gasless NFT mints. So the idea here, David, is that rather than have just a tweet, which on Twitter, it's a piece of content, it's an image, it's a video, it's some text you can actually tweet, or as Farcaster calls it, cast, an interactive application inside of the cast itself, if that makes sense. So, like some examples of this, literally one of the first apps, I don't know if you ever saw it. Like, you ever played doom on a ti 83 calculator, you ever see that?

A

No, I never. Not on a calculator. I would be like four or five years old, sitting on my dad's lap, and he would move and I would press a spacebar and I would kill the monsters. And my mom did not like that.

B

Well, like on a PC, right?

A

On a computer.

B

Yeah, yeah, yeah. Well, one of the kind of the things that is done, like, have you ever seen Doom on like a pregnancy tests? Like, people love putting doom.

A

Yeah, I know the meme of we can put doom places, but you can.

B

Put doom on every. I've seen Doom on a pregnancy test. Like not in person. All right.

A

On the Internet.

B

Seen this on the Internet. And anyway, so doom as an early application in a frame, just. Why? Because you can. But there's some really other cool apps that people have developed and once again, this functionality just dropped on Friday. All right? And there's already something like 500 different frames that have been developed. Tell us about some of the frames that are possible here, David.

A

Well, I mean, the first one that everyone should go play is the doom one, of course. But in addition to that, there's a chess trainer. So you can just play chess inside of a tweet, a far cast or cast. There's song drop, which is a music nft minting frame from sound XYZ. There's NFT mints. So gasless NFT drops on Farcaster, one of the more creative ones. Netheria, a text based game where users attempt to conquer a monster. Um, the way that I would explain this is like, uh, if Twitter is bitcoin, as in all you can do is write text, and that's how bitcoin is expressed. Then farcast or frames are like smart contracts on Ethereum, where you can put smart logic and you can put logic into your tweets, aka your casts. Uh, that's how I would explain that very, very simply. And so it's just opening up the world of just like innovation to the Farcaster community, and people are doing cool stuff with it. And this is, I'm just here for this because, you know, let's put place complexity on the margins, allow for coders and developers to have clay to work with and see what they come up with. Why didn't Twitter ever do this? I don't know.

B

Well, they didn't because their model is kind of against it. They've, they've Twitter and most of the other, all the other social media platforms are now these walled gardens. Right. Even your Facebook used to be much more innovative with kind of the Facebook API and used to get, like, games like Farmville. Now none of that exists. Right. So what's really cool about this is all of the permissionless innovation that's been unleashed. And, you know, I've been excited about Farcaster for a while. Right?

A

Yeah, you've been on there for all month.

B

Right? Like, I mean, I've been there for a while, but I started to get really active about six weeks ago when it just felt to me like Twitter was just kind of too toxic.

A

Twitter sucks.

B

It was just getting, like, too toxic. Right. And so just, you know, algorithm, it's. We've talked about this ad nauseam. Right. It very much incentivizes clout chasing, dunking, like, you know, and Farcaster seemed to me, maybe it's because it's small, a much healthier crypto community. I just loved it. But the thing about Farcaster up to this point, David, and all crypto social that I've used is it didn't feel significantly differentiated from traditional social media. So you go into Farcaster, it just looks like Twitter, and you're like, all right, so it's a healthier Twitter. Cool. It's not the ten x better thing, David, this is the first time I've actually seen cryptosocial present, potentially a ten x better use case. Right.

A

And there's actually not, we call it crypto social. It is crypto social, but this is just a social innovation on a crypto adjacent application.

B

Yeah, crypto adjacent. And also, I mean, they've designed this thing with kind of open borders, so it's completely permissionless. Sriram, whom we've had on the podcast of a 16 z, says the far Caster and frames energy is how 2005 Web 2.0 web energy felt like. And I very, I kind of remember that in the energy, like the open.

A

Source era of Web 2.0.

B

Yeah, he's talking about. Or the Chris Dixon podcast when we went from Web one to web two, and it was no longer. Just read it was about write like this. Kind of feels like that. For the first time, I saw a glimpse of what could be the way we onboard the masses. Like, oh, cool. Now we have a social primitive that allows us to expose the own verb. Right. To use Chris Dixon's framing of it, we can do all sorts of crypto things on top of this. So I'm pretty excited about it. Even though it's like early days, it's still just the crypto native community. But I think this has some real potential and we'll see what's unleashed. What's built on top of far caster frames.

A

Yeah, I called Farcaster a crypto adjacent application because it just has this very small on chain footprint. Well, like one user transaction on Farcaster on optimism per account. But also these frames can be bridges into crypto use cases like we've already seen, like NFT drops and sound mints and NFT mints and all this kind of stuff inside of frames. And so it is a portal to allow for crypto expressivity to come into a web, two social app. And so it's a little bit just about. The culture of Farcaster is about enabling crypto use cases that you would never see from any of the web. Two gargantuans. As a result of frames, daily active users spiked immediately to 10,000, breaking 10,000. And then that was, I think, on Saturday of last week, and then Monday of this week, we're up above 14 and a half thousand. I think it's over 15,000 daily active users on Farcaster, which makes Farcaster by far the most popular crypto application that we have. Like, daily active users. Absolutely.

B

And David, they did it without points. They did it without big token incentives.

A

They have warps.

B

They do.

A

They do have warps, but they're not gamifying. I don't know if anyone's speculating on them. Like, people are speculating on like, eigen layer points.

B

No, I think it would be somewhat foolish to do so, actually. Like, you can buy warps inside of the app, but it's not.

A

So with money.

B

Yeah, with money.

A

With money. With credit card.

B

Yeah, with credit card or with your eth, if that's what you want to do. But it doesn't have kind of the speculative token mania side of things. They're not using that growth hack yet, which is pretty interesting.

A

Yeah. With warps turned into actual ERC 20 tokens. That would be very large. That would be a big move.

B

Yeah, for sure.

A

That's not happening. Not happening. For a while, not happening, maybe ever not happening, at least for a while.

B

Dan and the co founders of, they're taking the slow, steady route and they're getting it right. And for sure, I respect that. For sure, David. I also respect the numbers that crypto is putting out with the number of users on chain. So here's a report from flipside crypto this week that shows the total number of acquired users across all of the years that crypto has existed, starting from 2012 to 2023. And the headline here is that on chain crypto users grew by a record 62 million in 2023. Now, what do we mean by an on chain user? This is, this analytics platform. Particular is their particular definition, but basically they kind of mean an active address. Okay. So that doesn't map one to one, necessarily to a human being.

A

There were not 955,000 users of Jupiter.

B

Yes, there were not. But each of these kind of map to, let's call it like crypto bank account. Right. It's an active address and it does mean that it's active. So they had to use the chain at least once past year and then use it actively in like twice or more in the years preceding that. So it's a good proxy for not all the humans on chain, but it is a good proxy for, I guess, some of the users. I mean, bots are users too, right? Bank accounts are users too. Anyway, 65 million. And that, that's the highest it's ever been. In fact, most of these years have been up from the previous, except 2019. That was an outlier year where we had, you know, fewer than the last. Yeah, exactly. But take a look at this compilation here. What does, what does this look like to you when we compare the different chains?

A

All right, we got 15 million active wallets on Ethereum, 7 million active wallets on arbitrum, 5 million active walls on Solana, 15 million active wallets on polygon. Polygon. A really standout bar here. It's actually, it's, it's as big as ethereums and 2 million on base, three and a half million on polygon, 10 million on bitcoin. All right. That's the complex.

B

Yeah.

A

They could have organized that a little bit better, but okay.

B

I mean, it's cool to see all of this on chain usage. And this is going to hit 100 million in no time, definitely this year. David, what do we got coming up next?

A

FTX users are getting their money back. How much of it, and will we see FTX 2.0? And are we going to have to wait until 2025 for the ETH ETF? God, I hope not. But someone says so. Also, a new LRT protocol brings in $100 million in TVL in just under one day. And also, most importantly, bankless citizens are getting something new. So stay tuned after the sponsors to find out what that is. But first, I want to talk about some of these fantastic sponsors that make this show possible, especially Mantle, the layer two with staking built in. You can stake your ETH with mantle. You can use the mantle layer too. What you want to do? I don't know, try it out. There's a link in the show notes. We're going to go here for mantle right now.

B

David, you remember that FTX thing that happened last year, right?

A

I remember, yeah.

B

Actually that wasn't last year. That was two years ago.