The Breakdown - 5 Questions Shaping the Near Future of Crypto and Macro

Episode Date: May 15, 2025

Blockworks announced that we're bringing together their daily newsletter together with The Breakdown brand to build the best daily content package in crypto. In celebration of that, NLW is joined by Byron Gilliam to discuss some of the big explorations of the moment. Find Byron on X: https://x.com/bgilliam1982 Subscribe to the Newsletter: https://blockworks.co/newsletter/daily Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on Macro, Bitcoin, and the Big Picture Power Shifts remaking our world. What's going on, guys? It is Wednesday, May 14th, and today we are asking five big questions shaping the future of crypto and macro. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, well, we have something fun today and a little bit different. Now, you all know that last year, Blockworks acquired the breakdown. And part of the reason that I was really excited about that is that I wanted the breakdown

to land in a place where there was going to be new energy and new vibrancy and new blood and new plans and just new excitement to be brought to the show. And obviously to this point, not all that much has changed. The format has been the same. we've had a lot more to talk about, thanks to this crazy political cycle. But today, Blockworks announced a really cool update and shift that shows, I think, how we're trying to bring some of these different outlets together. The TLDR is that Blockworks is rebranding their daily newsletter to the breakdown as well, and we're going to be looking for ways to connect

the dots between some of the analysis and explorations going on there with what we're doing over here on the podcast. Now, this doesn't mean any big, huge changes in the immediate term for either audience. The podcast format remains the same. I will still be hosting. but I am also simultaneously going to be looking for new voices and to bring people into the show in a way that brings some fresh perspectives. One of those, of course, will be Byron Gilliam, who is the lead writer on The Blockworks Daily Newsletter, now also called The Breakdown. I've spoken about Byron's writing here before.

I think it's some of the most consistently interesting and thoughtful writing in the space, and I'm very proud to have the brands connected. Now, as a fun way for you guys to get to know Byron a little bit better, we had a conversation about five big questions, the answers to which could have a pretty dramatic impact on the shape of crypto in the year to come, as well as on macro. And so now we're going to jump over to a conversation with me and Byron talking about everything from, is Bitcoin becoming a risk-off asset, to what if we don't have recessions anymore? All right, Byron, welcome to the breakdown, the new, improved, integrated, exciting breakdown. We're going to have some fun.

And I thought that this would be a really fun way to make sure that this audience, those who aren't already reading you, which I think many are, gets to know you. Great. Yeah, thanks for having me on. So when we were talking about this, we were kind of thinking through, you know, A, what we wanted to do to sort of get you acquainted with the audience, but B, also, just sort of start to experiment the type of fun things that we want to do with the show. And so, honestly, the thing that seemed most interesting was just kind of riffing on some of the things that you've been writing about recently. So we've got a list of kind of five

questions. I think that you've pondered at various points that are continuing to think about. and in no particular order, we're just going to talk through them. Sure, great. Let's do it. Let's start with Bitcoin. We've got a lot of Bitcoiners in this crowd. Is Bitcoin becoming a risk-off asset? Yeah, I always feel like I'm out of step with Bitcoin price movements because I personally view it as insurance against hyperinflation, sort of like a credit default swap in case the U.S. government ever chooses to default on the U.S.

dollar, which I don't think they do, so I don't hold like a lot of Bitcoin. I think that's kind of a small risk, so I hold a little bit of it. But it's a weird kind of insurance. If it is insurance, it's a weird kind of insurance. It gets cheaper when you're more likely to need it, and it gets more expensive when you're less likely to need it. At least that's what it's seemed like recently. With all the tariff tantrum, it looked like people might finally be losing faith in the dollar

for real. You know, Bitcoiners have been talking about this for a decade and a half, and it's never happened, but with the tariffs, it seemed like it might actually happen for real. You know, the very thing that Bitcoin is meant to hedge against seemed to be happening, and it went down. And then when it seemed like it wasn't going to happen, and everything was going to be fine, it went back up. So that's kind of weird if your starting point like me is that Bitcoin is a hedge against the dollar. But I guess it makes sense because, you know, Bitcoin is still new. And I think probably it's just a process. And it

does kind of anecdotally feel like it's directionally going in the direction of being a risk off asset, but it's not there yet. Yeah, it's interesting. I mean, this is a thing that, oh, God, the entire life cycle of this show just, you know, have asked some version of this question. And, you know, where I always land with it is just the weird and ever-changing composition of the Bitcoin audience itself, the buying base, creates some really kind of strange dynamics, because you have a lot of folks who kind of fall in some version of the camp that you just articulated for yourself. But then you have others who completely don't, who are basically betting on us betting on that, right? And who are, you know, it's really sort of the farthest risk,

you know, profile in their portfolio. And, you know, any given day, it kind of, you know, can exhibit both properties. So, you know, this is, I feel like this is a perpetual question, and we're going to be asking it forever until it becomes really, really, really important. and then I guess we'll know for sure. Yeah, I think the thing that might in the end change it is when there are other things to trade on weekends and weeknights. You know, like when investors are feeling scared on a Saturday night, there's nothing else to sell other than Bitcoin,

even though that's probably the thing you should be buying. So maybe if other stuff goes on chain and you can sell equities on Saturday night or something, that's when Bitcoin will finally for real be a risk-off asset. Yeah, I actually think that the market timing dynamics are radically underappreciated as sort of a force with these things, especially as there's been more integration with Bitcoin and crypto in general and traditional markets for exactly that type of reason.

But that's actually one of the other questions that we have on here. Will stocks trade on chain? A little bit different, but sort of directionally in the same area. Yeah, you know, I've never taken that seriously because it just seems like there's so many impediments like there's still going to be KYC, right? And there's still, you're still going to need a brokerage account. And I don't know. It just has always seemed impossible.

But lately, and very lately, the last couple weeks, just last week Hester Pierce said in the speech that the SEC is considering an exemption, a kind of sandbox that would allow securities to trade on chain. Another SEC commissioner said just yesterday that he thought tokenization could dramatically change how financial markets operate. Robin Hood said a couple of weeks ago, I think, that they're going to let European customers trade securities on chain. So it feels like it's happening. I think also just today, J.P. Morgan said they did their first ever trade on a public blockchain settling with J.P. Morgan

coin, which is, I think, is really interesting. So yeah, it kind of feels like it's happening. And I haven't thought enough about it. I'm kind of like just kind of getting my head around it now because I've always kind of thought that the interesting thing in crypto was the native of crypto assets that it produces and that if a real world asset was put on chain, that's just kind of better bookkeeping, right, which is not that exciting. But now that I think about it a little more, like if everything is going to be on chain, there's going to be some weird overlap between TradFi and Defi that will get really interesting.

And I think that there's also been probably more crypto influence on TradFi than you would think like meme stocks are, you know, the meme stock craze probably would never have happened if Bitcoin wasn't a thing. Micro Strategy is so wildly popular on stock exchanges that, you know, Bitcoin held by micro strategy is worth twice as much as a Bitcoin that's not held by micro strategy. And there was a comment I saw the other day by Mike Bird of the economist. He said that, well, he was speculating that retail investors were such big buyers of this tariff dip, he thought, maybe because the huddle culture from crypto had infected the way that

people think about stocks. So yeah, I think it's all going to get very interesting. And if everything moves on chain, there's probably going to be a lot more of that sort of cryptophication of traditional finance. Yeah, I mean, I think it's interesting. Probably an odds on bet around which of these would sort of have more influence on the other as they started to get, started to get closer. And I think that you're right that there are a lot of aspects, if nothing else of crypto culture that have found their way into kind of stock culture, not necessarily for the better, just for better or worse. You know, the other piece of this is that it could also be just a byproduct of the same larger environment, you know, shaping the kind of the financial nihilism

of a generation to the extent that that's a part of it. But when it comes to tokenization, It is, I think that the signal that was most interesting to me over the last couple of years that I think is being picked up now in a bunch of different ways is when BlackRock announced that they were going to do the Bitcoin Spot ETF and Larry Fink started just really hard shilling for it. Various media outlets kept trying to put him into the blockchain not Bitcoin box or, you know, bring up that kind of narrative. And he was just so firmly unwilling to not have it be a both and where he would speak eloquence. about the virtues of Bitcoin as an asset, but also speak as though tokenization of real world assets and stocks was completely 100% inevitable. And I think that you're starting to see some of that sort of token, the presume tokenization start to find its way into other areas. Now, I agree that I'm not sure, and this has always been my question when it comes to thinking about like RWA as a

crypto market theme, how that if it all impacts crypto prices or, you know, know, how that sort of drives people into the crypto space, but that's a whole separate conversation. Yeah, I'm not sure whether it's for better for worse, but it'll definitely be for more interesting, I think. Next question, does valuation matter in crypto now? I think it's starting to. That might be because I read a lot of Blockworks research notes, which didn't used to be a thing that was available to me or anybody, really. But I think there's definitely a change from when I first started writing the newsletter about four years ago. Before that, I had not paid too much attention to crypto. So yeah, when I started writing about four years ago, protocols seem like

software and token seems like something new and different. And now protocols look a lot more like companies than they ever did, I think. They have revenue. They pay the revenue out to token holders, which makes tokens look much more like stocks than they used to. And it seems like there's going to be more of that. So the question is whether that kind of thing is going to be predictive of token prices, which, you know, it hasn't been traditionally. But I think this time might be different. Largely, I think because in this last cycle or whatever it's been, the old playbook of outperforming Bitcoin by just being long alt coins, you know, by just. by taking more risk. That hasn't worked this time around. And I think that makes crypto trading more

of an alpha game instead of just a beta one, which is good news because beta, you know, beta is more productive than alpha. And I think, you know, if beta is more of the focus, which is to say, you know, individual tokens creating real value, then that would give us new things to trade other than just meme coins, which would be nice. Although on the other hand, meme coins have come totally back from the dead this week, so maybe not. Well, you know, I actually want to bring in question four because I think it's sort of related, which is will crypto capital markets produce productive assets? I think that there's sort of a through line here between these two questions.

Yeah, the thing that I like best about crypto is that it's a permissionless capital market. I love the idea of seeing what people can come up with if anyone can offer equity for sale and anyone can buy it or, you know, tokens aren't exactly equity, but they're something that look like equity or their pseudo equity. And the results have been a little underwhelming so far. You know, the revenue that we've mentioned, there's more protocols creating revenue, generating revenue. But most of it is downstream of meme coin trading, which is, you know, not a super

productive thing. It might be an entertaining thing, but it's, you know, it's a negative sum activity that is, you know, not societally beneficial or anything. Dpin is exciting as a new business model that's only possible with crypto, but it's pretty small so far. There's like a couple of success stories, but no like big breakout ones. But I think this needs to change, really, because outside of Bitcoin, the crypto riches that have been generated so far have been, you know, collected by people who are just creating and selling tokens, as opposed to getting rich because they've created something that has real value. for users. So hopefully that will change. Hopefully crypto will produce, you know, more than just tokens. And it seems like if that's going to happen, that nowish is the time for it to start

happening. I think this is one of the things that folks who were, regardless of their feelings of sort of broader political issues, people who are optimistic about a Trump administration vis-a-vis crypto, the space to get sort of to the next generation of clarity on the equity-like properties of crypto. To be able to have safe harbors and spaces to actually do some of these experiments where it didn't just have to be sort of a race to the meme coin bottom was the hope. I think the question is whether crypto can survive its association at this point and actually get legislation done. But again, I think that's a whole separate conversation for perhaps another time. I want to actually move with our last question to the macro. This is a provocative one that you

had. What if we don't have recessions anymore? Yeah, I'll preface this by saying I'm not an economist, but I write about macro and equity markets on Fridays, partly because I need a mental break from thinking about crypto, and partly because I'm still more of an equities guy than I am a crypto guy. So the market recently, as I've been trading since 1993, or I was trading, I don't trade anymore, really, not professionally at least, but I started as a trader at 1993, which was a long time ago. And this most recent market year to date, I think, has been the most surprising one that I've seen. I thought markets were wildly underpricing the risk from tariffs until this weekend when President Trump called them all off. And it suddenly made sense that stocks are basically unchanged on the year. But still, you know, we spend all this time in macro debating when the next recession will start. And the way that the market has survived, the tariff chaos, it's making me wonder.

whether it'll ever start. You know, the last traditional recession we had in the U.S. was 1991, you know, before I even started trading. The other recessions were the pandemic, which lasted for about five minutes. And then the financial crisis, you know, which was just a, was just created by the market. So the question I'm asking myself is, like, what does it mean if the only thing that causes a recession is pandemic and financial crisis? And my initial thought is that If so, then U.S. equities start looking like a pseudo-risk-free asset and that they should probably be, you know, re-rated higher. It's just a thought. And, you know, my other thought is whether that's good or bad for Bitcoin and to bring it back to the first question, I'm not sure.

Yeah, it's interesting. I mean, so I don't have an answer to this, but I'm kind of adding more fuel to the, this is at least a curiosity fire. Watching the reaction of, you know, watching the reaction of the stock market to the rate hiking cycle in 23 and 24 was really interesting for me because I was sort of going deep on AI at the same time. And you really had this competition of stock prices want to go down because rates are going up and that's sort of the natural place for them to go. But there's this incredible enthusiasm around this particular category in AI post-chatGBT. And you had this war, this emotional and narrative. war for, you know, it was basically like Powell trying to bring inflation down with rate hikes

versus, you know, exuberance with AI. And what was fascinating to me was like, hold aside AI. It was like, the markets were so, so hungry to have a reason not to go down in the natural way that they normally would have. They just, there's this sort of like this pull ever upward, you know, to quote people who, who no longer really have a place in crypto is sort of an up only vibe. as much as it was about AI, it felt like it would have been about something else if it hadn't been for AI. There would have been some theme that was competing to sort of allow people to just stay in animal spirits filled. And I don't know what that is. I don't know if it just means that, you know, when a recession does happen or when, you know, a crisis does happen, it's going to be

the mother of all crises, the one that's so undeniable that it actually crashes everything. But it is a, it is an interesting force to observe. Yeah, I think so. But that's what makes markets fun and entertaining besides just something to invest in. Awesome. Well, Byron, so excited to have you on the show today and to be able to do more of this in the future. So thank you for the time and look forward to the next time. Great. Thanks for having me on. All right, guys. And so with that, we will close out this special guest episode of the breakdown. Like I said, while nothing big is changing in the immediate term, I'm really excited to find

new ways to incorporate voices like Byron's and others into the show to give you guys a broader perspective. For now that that is going to do it for today's breakdown, appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.