ASH BENNINGTON: Hello, and welcome to Real Vision's Crypto Unwrapped where we cut through the noise and the hype and take a look at the stories that underlie the crypto markets. I'm Ash Benington, Real Vision's senior crypto editor. With me today are Tascha Che, founder of Tascha Labs, and Katie Talati, director of research at Arca, the crypto asset management firm. Please send us your questions. You can do it on our Pro Crypto Discord server, the Real Vision Exchange, our website, YouTube or Twitter, we want to hear from you.

First, let's talk a little bit about price action here at the top of the show, Bitcoin dipping above and below the $20,000 mark again. Obviously, breaking news here to talk about today, court in the British Virgin Islands has ordered Three Arrows Capital into liquidation. This comes at a moment, obviously when we're seeing some challenges across the macro space with the Fed withdrawing liquidity, tightening rates, beginning to unwind the balance sheet, and otherwise depressing risk asset prices, especially crypto, which many investors view to be very far out on the risk asset curve.

Class Note has been calling this the worst crypto bear market in history. And that's based on several technical analysis, metrics such as the 200-day moving average. I wanted to bring in our guests Katie and Tascha to talk about all of this lots happening in crypto markets right now, a series of challenges facing the space. First, we had the LUNA collapse, Celsius gating client funds, Voyager Digital cutting withdrawal limits, 3AC's insolvency now and now additional challenges over at CoinFLEX.

Guys, jump in. Talk a little bit about your overall impressions of what's happening in the space, your general sense of what's happening right now. First to you, Katie.

KATIE TALATI: Thanks for having me, Ash. Look, ever since LUNA, I feel like it's just been like one domino effect after another. It's the knock-on effects of what would be considered like a leveraged unwind. There were so many lenders that they were loaning out money to each other, they were reliant on each other for either liquidity, for growth, and one small, or I guess, one project collapsing, like I said, it's had all these impacts on first on Celsius, on defi, on 3AC, on BlockFi and then it's just led to this contagion effect.

We've heard of a ton of different insolvencies just outside of these big few, including within Bitcoin miners. Now, the last few days, CoinFLEX has come out of the woodwork. Obviously, we'll talk about it later. But there's rumored to be even more insolvencies and announcements to come. So, this is just, I would say, leverage being wiped out of the system, which could be a good thing long term.

ASH BENNINGTON: Tascha, over to you, general impressions, overall sense of what's happening in crypto and digital asset markets right now.

TASCHA CHE: Yeah, so like you said earlier, Ash, this is largely triggered by the macro landscape drastically changing, and Fed tightening. That is pushing down on the risk assets. And a while ago, I posted on Twitter that if you look at the impact of LUNA, the size of LUNA relative to the cryptosystem, LUNA going bust is like equivalent to a five or six top US banks going bust, that impact would have to the US banking system.

So, my point at the time is like this, LUNA going bust is going to trigger a bunch of domino effects. And we've been still seeing that over the past a month or so, including Celsius and 3AC or the latest ones. And the fiat funding into the crypto market has been consistently going down, which you can, one way to measure it is to look at US stablecoin growth that are actually the stablecoin that are actually backed by US assets, US dollar assets, which are USDC and USDT.

So, the growth rate right now is pretty much flat compared to last year, which it's been going down a lot relatively speaking over the past few months. And in line with it is the defi TVL growth is now going into the negative territory. And I think right now, like Katie said, the market is on edge in terms of how many more skeletons are in the closet still in regard to these liquidations and insolvencies that we have a few larger ones already come out, but how many are still in hiding?

And people don't know about that. And that I think make the market very hesitant in terms of whenever you hear a bit of bad news comes out is going to trigger some price actions to the downside.

ASH BENNINGTON: Boy, Tascha, I'm struck by several things that you said there. First, this notion that LUNA is the equivalent of multiple banks collapsing in the TradFi system. Those are sobering remarks. But also, the chart that you showed I thought was quite interesting. This idea that stablecoins are now a greater percentage of the market in defi in terms of TVL other than coins, rather than coins, I should say, that actually are generating yield. That's a pretty striking environment.

TASCHA CHE: Yeah, that chart was more measuring how much funding, like fiat funding is flowing into crypto markets as measured by stablecoin market caps that are backed by US dollar assets. So, you can see a close correlation between that and the defy TVL and also, the total crypto market caps.

KATIE TALATI: Could you not argue, Tascha, though, that, and I'm just curious, I don't look at this metric quite as often, but as asset prices have trended lower that their USD value is lower and therefore, that's why the stablecoin supply has contracted? Or is it simply because you think people are actually redeeming their stablecoins?

TASCHA CHE: Yeah, so for the stablecoin market cap to go down, you will have to have people redeeming. So, right now, we are-- USDT has been down over 10 billion or so compared to a couple months ago. And there will also a period of market cap going down for USDC as well, though, recently, it's been more stabilized in both. So, you can see the clear redemption just from the market cap.

KATIE TALATI: Yeah. I would also say I feel like a lot of people have been trying to take a bank run, Tether, especially. There's been a lot of again, like, we talked about contagion risks. And obviously, everybody always comes back to the, is Tether fully backed, age old question. So, I do think that there's always constantly whenever there's like market instability dealing with the potential scenario, it's odd, I guess, though, to see USDC, which is considered a safer equivalent, although they basically have the exact same function.

TASCHA CHE: Yeah, even USDC market cap is no longer going up over there. Yeah, over the past couple months.

ASH BENNINGTON: Yeah, this is the age-old question about the backing up of Tether assets. Every time that there is a downturn in the market, the Tether bears come out and make the case. We've never seen it materially break the buck. So, that of course, is something that remains to be seen.

TASCHA CHE: Yeah, I do not have any insider information on this. So, I do not have an opinion about USDT. I think everybody's judgment call. If you don't feel comfortable with USDC, then don't hold it.

ASH BENNINGTON: Yeah, I wanted to just go through a couple of the other stories that are happening here. Obviously, there are a lot of moving parts in this market, many stories unfolding. So, one of the stories that came out yesterday was an interview that Sam Backman-Fried, the CEO of FTX, did with Forbes in which he said some third-tier exchanges are "secretly insolvent". Sam Backman-Fried is one of the richest men in crypto. In addition to being the CEO of FTX, he also manages Alameda Research.

Further on the Sam Bankman-Fried point, we should say that he's offered revolving lines of credit, I think $250 million to BlockFi, $500 million to Voyager Digital, which is also another shop I mentioned at the top of the show that's been in the mix for some time after limiting their withdrawals. Voyager, in this interconnected ecosystem that we're talking about, has issued a notice of default to 3AC, that's Three Arrows Capital, on assets worth $670 million.

Obviously, a lot of things happening in this space. How do you guys think about this? How do you process all this information? How do you contextualize it and try and get a sense of what's happening in the crypto ecosystem overall?

KATIE TALATI: I was going to say, I think one thing to frame this as is a lot of people love to paint SPF as the savior of crypto which indeed, he is being here, but I would not say that his intentions are 100% altruistic. At the end of the day, SPF runs an exchange, and the entire exchange business right now is based off of the participation of retail, and that group in the market and if that group doesn't have confidence in basic products on the lending and the exchange side, they're not going to want to return to the market after prices recover.

And so, in a sense, he is offering these lifelines to projects or to companies where he does see the value in supporting them, for his own business. And his own value and the equity of his own company. And I think that's really important to keep in mind is that somebody's had to step in within our system and bail people out, in a sense, or risk further contagion, and just retail walking away forever.

I also think it'll probably help in the long term on a potential regulatory side, that these businesses didn't go completely out of business, or weren't completely insolvent, as it would force regulators to step in to protect consumers, especially since BlockFi and Voyager are very retail focused businesses.

ASH BENNINGTON: Well, I was going to say, does anyone in finance ever do anything for purely altruistic reasons? In a certain sense, this reminds me of the bankers panic of 1907, JP Morgan engineering a bailout of some of the fellow bankers to keep Wall Street solvent. Tascha, I'm curious, do you have any thoughts on this?

TASCHA CHE: Well, regardless of what the motivation is, it's good to see that the ecosystem is finding its own organizing principles. In a downtrend, in the bear market, it's a good opportunity for players that has the cash position to pick up distressed assets on cheap if you have actually an optimistic view about the space in the long term. So, I think that is part of what's happening, including also Goldman is-- I read some news that they're trying to scoop up some assets from Celsius.

So, in this market, whoever has cash, if you have the foresight to be conservative in your asset position in a bull market, then now you're in a good position to actually scoop up some assets on cheap and also on the bigger picture, you are helping to stabilize the market out of your-- even though you're acting out of your self-interest. So, I think this is playing out beautifully. And the message on the macro level is people with cash, they're still optimistic about the space in the long term. That's why they're scooping up assets. So, good thing.

KATIE TALATI: I would totally agree.

ASH BENNINGTON: Please.

KATIE TALATI: Yeah, very optimistic outlook for the space and definitely a change from what we saw in the last couple of cycles or even the last time there were insolvencies or hacks with projects like Bitfinex, or even Mt. Gox going really far back.

ASH BENNINGTON: Yeah, some important history and context on the space. I just wanted to add a couple of other stories that are happening out there, obviously, as we said at the top, lots of moving parts. FTX is also reportedly looking to buy Robinhood, the retail brokerage platform whose shares jumped on that news. The CEO, Sam Bankman-Fried has denied any interest in M&A with Robinhood, but has confirmed they want to explore a partnership with Robinhood.

Also in the news, Coinbase's stock is crashing after a downgrade by Goldman Sachs. And as you said, reports that Goldman is looking at potentially buying assets from Celsius, which has gated client funds. Katie, Tascha, obviously, these are a lot of stories, lots of things happening. Again, how do we contextualize it? Any thoughts on any of those points?

TASCHA CHE: Yeah, it makes sense for FTX. So, they're in a good position in terms of profitability. I think, Sam, I read that the FTX has been profitable over the last 18 months or so. And they are being conservative in terms of their cash spend and they are obviously running a good profitable business model and the next step seems to be getting more into the TradFi space by offering stocks, tradings and so on so forth.

So, partnering with Robinhood seems like a promising approach given that Robinhood has the distribution and access to retail investors and that has been the aspect that FTX traditionally has not been mostly focused on because they are more has been traditionally geared towards the more sophisticated semiprofessional traders. So, maybe they're now in the position or thinking of expanding to more retail and this is a distribution channel they are looking at.

KATIE TALATI: Yeah, definitely, especially with FTX US, I know has been making a big push with their derivatives exchange, their NFT marketplace. Obviously, they've been doing a lot of marketing to the US markets with the MLB and the Miami Heat stadium. So, it makes sense that they would want to get distribution from one of the largest US trading apps.

ASH BENNINGTON: So, another story that I wanted to touch on is CoinFLEX. CoinFLEX also halted customer redemptions on June 23rd, just a few days ago. I should say CMO of CoinFLEX, Leslie Lamb, is a frequent contributor on this show, Crypto Unwrapped. The CEO, Mark Lamb, who is married to Leslie Lamb, has confirmed the halt in redemptions and is due to a CoinFLEX account holder going into default.

So, the CEO revealed on Twitter, the account holder is Roger Ver, an early Bitcoin investor. Bloomberg has also reported it. So, obviously, lots happening in this story, incredibly dynamic, fluid situation. I'm curious if you guys have any thoughts about what's happening on CoinFLEX.

TASCHA CHE: I think from a macro point of view, this is one example of a space that is set in the early stage of development, an emerging financial sector that is completely unregulated, and you have these private agreements with one or two large clients that may or may not be prudent in hindsight because of completely lack of regulations in the space. Anybody can sign any contracts and also another reflection is the large use of leverage in this space.

If we had regulations similar to the banking sector regulations, we probably would have seen much less volatilities right now. So, I think this is something that regulators are going to look into pretty soon going forward. Because of these recent events.

ASH BENNINGTON: Yeah, I should also say Mark Lamb has said that Ver owns at CoinFLEX, $47 million worth of USDC. In an interview with Bloomberg, Ver said he doesn't owe CoinFLEX anything. Ver later said on Twitter, that rumors, "that rumors he defaulted on a debt to a counterparty are false" without naming CoinFLEX directly. So, important to get out Mr. Ver's statement on this.

I should add CoinFLEX's CEO is scheduled to speak to me on Real Vision tomorrow. That's Thursday, live at 12pm Eastern time. So, obviously many things happening in this space, still a flexible story still very fluid and still very early on in the process of that story.

As we talk about this space, obviously the metric that many people are looking at is price. And one of the big questions remaining is when or if Bitcoin has hit bottom. I spoke with Rekt Capital, an analyst in the crypto space, here's what he had to say.

REKT CAPITAL: So, if we look at the macro triangle of today, so to speak, we still need to see that generational bottom form after a downtrend acceleration and we also need to see that sideways period of consolidation for multiple months. And just based on the positioning of the black diagonal down trending resistance for this triangle, it could take a long time for not only both these phases to complete, of course, the bottoming phase, the acceleration in the downtrend takes not too much time at all, but that's the consolidation that lasts the longest.

So, after that bottoming out, we're going to see multiple months of sideways price action until we finally reached that diagonal resistance for a breakout into a new macro uptrend.

ASH BENNINGTON: So, Rekt Capital saying we still need to see that generational bottom. Obviously, lots of work here from a fundamental analysis perspective, from a technical analysis perspective and from a news flow perspective. Talking of the news flow perspective, I wanted to talk about stories we don't have time to talk about, but that you need to know.

Here's mine, MicroStrategy has announced another $10 million of purchase in Bitcoin, obviously not a huge amount for MicroStrategy. But still, something of a statement that they are still purchasing Bitcoin. Katie, any thoughts from you about stories we don't have time to talk about but that you need to know?

KATIE TALATI: Sure. So, Solana announced last week that they're going to be developing a smartphone to speed Web 3.0 adoption, it's going to be called the Sega phone, or Sega phon. And the phone basically will have private risky management ability to access the Solana network and supposedly should be very mobile friendly for accessing the Solana network. I think that should be really good for getting more retail users into Web 3.0 in the long run.

ASH BENNINGTON: Yeah, I find the story absolutely fascinating myself, and actually just cool technically and in terms of the implementation. Tascha, over to you, final thoughts, final story that we don't have time to talk about?

TASCHA CHE: All right, here's a fun piece from me. Binance has announced a partnership for NFT with a soccer star, Cristiano Ronaldo, to publish his song collection, will be released later this year. So, NFT market is down, but people are still active.

ASH BENNINGTON: Yes. Tascha, Katie, thank you so much, both of you to joining us in this show. Really incredible conversation. Lots going on. Lots to talk about. I hope to have you both back on this show soon. And thank you again.

TASCHA CHE: Thanks, Ash.

KATIE TALATI: Thanks for having us, Ash.

ASH BENNINGTON: That's it for this week's show. Remember, you can keep the conversation going in the comments section on The Exchange and on our Pro Discord server. If you're looking for more crypto content, Joey Krug of Pantera Capital sat down with our own Moritz Siebert. That airs on Friday on the Real Vision network, free for all Real Vision crypto subscribers. See y'all next week live on Crypto Unwrapped.