The Breakdown - A $1.5T Asset Manager Is Getting Into Bitcoin

Episode Date: September 3, 2021

Today on the Brief: Binance dinged by Singapore authorities while discussing Binance.us going public  Former CFTC Chair Giancarlo leaves BlockFi board of directors after only four months  SEC takes action against … Bitconnect? Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW Our main discussion: Franklin Templeton has posted a job listing for a crypto trader, while Vast bank now offers bitcoin buying and selling directly from FDIC banking. NLW explores what’s next in the bitcoin market cycle.

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. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Thursday, September 2nd. And today we are talking about a $1.5 trillion asset manager getting into Bitcoin and crypto, and also just an outlook on Bitcoin in general. But first, let's start with the brief. And the theme of the day is definitely institutionalization and integration.

Let's start the brief with the latest in the saga of Binance. And first, the rough. The Monetary Authority of Singapore has issued an investor alert for Binance. This comes as a follow-up to their statement in July that said that they were reviewing Binance's Singapore entity, which at the time had a licensing application under review. Late last month, Binance also hired Richard Tang, who is the former CEO of Abu Dhabi's financial watchdog to run their Singapore efforts. So clearly they have some attention and import placed in that city. Singapore, unlike many places, actually has a relatively clear licensing regime thanks to their

2019 Payment Services Act, which has made them a pretty desirable location. Unfortunately for Binance, the MAS is now saying that Binance may have breached Singapore's Payment Services Act and thus ordered them to stop providing payment services too, as well as soliciting business from Singapore residents. This is basically the story with Binance everywhere right now. Regulators saying, you probably broke some of our laws. You've got to stop that. Binance, for their part, is not shirking away and is trying to aggressively signal a shift to a more above-board business. Along those lines, there's also a report making news today that in an interview with the information, CZ said that Binance.us is just going to do what Coinbase did, aka go public. What's the timeline?

This is a quote from CZ. So if the business can grow consistently over the next three years, then three years should be sufficient for an IPO. If there's a prolonged fair market for, I don't know, maybe three to five years, then it may be a little bit longer. For now, Binance U.S.'s main focus is writing the ship after former U.S. Comptroller of the currency, Brian Brooks left his role as CEO after only a few months. Brooks left in the midst of a nine-figure funding round that was designed in part to reduce CZ's control. So when it comes to to Binance, the story continues. Let's shift now to another embattled player.

Chris Giancarlo, the former head of the Commodity Futures Trading Commission, has resigned from BlockFi's board of directors after just four months, which is just about the same amount of time as Brooks had in his stint as CEO at Binance.us. Giancarlo did not comment on the news, but after the news broke, BlockFi quickly released a press release, saying that he had been replaced by Ellen Blair Chube, a managing director and client services officer at William Blair. They said that Giancarlo will, quote,

continue to provide strategic counsel to the firm in an advisory role. This can't but feel like more bad news, or perhaps it is just reflective of a tough string of bad news for BlockFi. Multiple U.S. states are accusing BlockFi's flagship products, which is their interest accounts of being unregistered securities. These legal battles are all at various stages of progress, with the first state to come after them, New Jersey's, now multiple times delayed cease and desist order going into effect on September 30th. Those legal troubles, or perhaps the bad press, also caused chaos for an intended financing round that would value the company at $5 billion. According to venture capital-focused reporter Eric Newcomer,

leave investor third point pulled out of that blockfire round. If you're interested in more on that, I did a whole show about it. Matthew Semedini, a professor at Arizona State University that studies corporate governance, put Giancarlo's departure this way. It's like somebody putting an offer on a home, doing the inspection, taking a look at the inspection, and saying, yeah, I'll pass on the house. Ouch. Finally on the brief today, such a random one.

Remember BitConnect, that scheme and scam from more than four years ago? The scam that literally is synonymous with scams in the crypto-memory? Well, the SEC has filed a new complaint against BitConnect, claiming that the people behind it conducted a fraudulent and unregistered securities offering to the tune of $2 billion. The $325,000 Bitcoin that it took in were worth $2 billion then and around $15 billion today. This is the second complaint against BitConnect this year. The SEC also filed one against five promoters earlier in the year and won a $12 million judgment against two of them in August.

The Associate Regional Director of the SEC's New York Regional Office said, We allege that these defendants stole billions of dollars from retail investors around the world by exploiting their interest in digital assets. We will aggressively pursue and hold accountable those who engage in misconduct in the digital asset space. So here's the thing about this. I'm completely fine with the long arm of the law being long. It's more like, though, if they really want to protect investors,

enforcement actions four years later, without ever actually articulating a framework, other than continuing to insist that the Howie test is fine, seems pretty moribund to me. Of course, something like BitConnect was a scheme. That's obvious. The question is all the projects that rightly or wrongly are engaging in good faith. Meanwhile, SEC Chief Gary Gensler spoke in front of the European Parliament yesterday, and it was a pretty clear replay of his recent greatest hits. He acknowledged the significance of the crypto industry, saying, I think the transformation we're living through right now could be every bit as big as the Internet in the 1990s. He said that it needs to be integrated with the current systems. I'd like to note that financial innovations throughout history don't thrive outside of public policy frameworks. Finally, he pointed at stable coins in unregulated exchanges as the key issue. So again, nothing new, but clearly crypto is still meaningful enough on the SEC's priorities to keep talking about. This podcast is sponsored by NIDIG, an institutional Bitcoin firm that sees Bitcoin as a gateway to financial security for people around the world.

Find out more at NIDIG.com slash NLW. That's NYDIG forward slash NLW. But with that, let's shift to our main topic, and nominally it's news about an institutional giant getting into Bitcoin and crypto. Blockworks this morning tweeted a job application from Franklin Templeton, who are hiring a trader-crypto-space currency. Yes, that is how they described cryptocurrency, crypto, space, currency. Franklin Templeton is a company that was founded in 1947. It went public in 1971 and is basically just kept growing. The firm has more than 450 different mutual funds. The story here, of course, is just the continued integration of Bitcoin into large institutional

offerings and the current system. Along that front, Bitcoin magazine reported on a similar story. Customers at Vast Bank can now buy and sell Bitcoin directly from their FDIC insurance, checking accounts. Vast CEO Brad Scribner has made the argument in the past that he thinks that banks should be the best place to buy Bitcoin. Quote, we're familiar with regulation, we're going to do the right things, we're going to do things to make sure the financial system is kept safe and sound. There's lots of different customers out there that may want to control everything and have their own wallet, their own pass codes. And then there are those who are crypto-curious and may

prefer to work with a bank or an intermediary, just because they don't quite understand. Now, that's the same argument driving a lot of the partnerships that breakdown sponsor NIDIG has been doing to get Bitcoin buying, selling, and holding straight into customers' bank accounts. So what's clear is the mainstream is just plotting right along and coming to Bitcoin at its own pace. In the meantime, BTC, the asset, is back up over 50K, but still, many are wondering where Bitcoin is from a market perspective. For that, I'm going to do a mini Long Read Sunday right in today's episode by reading this excellent thread from my friend and frequent breakdown guest, Travis Kling.

He writes, Bitcoin is in an interesting spot at the moment. A couple thoughts. 44 days ago, the Bitcoin chart was in big trouble. It had broken all sorts of support levels and had many people seriously doubting whether 30,000 could hold again. In the subsequent 44 days, Bitcoin covered a tremendous amount of ground. It did that thing it does sometimes where it just runs away from people. Oh, you thought you were going to buy 30 or even lower? How about 48? A massive amount of damage has been repaired to the chart. We punched major fibs in points of control, retested and held SR flips, battled with the 200-day and then firmly reclaimed it. Impressive

stuff. Purely from a TA basis, it looks like if 50 goes, it probably will. Fifty-eight-k will be on deck in no time. Then it's a battle for new all-time highs and potentially beyond. Importantly, this price appreciation has come during a period of the lowest spot volume in the last year. Last time spot volumes were this low was mid-October and the Bitcoin price was 11.4K. We all know what happened next. This period of low volatility makes sense from a seasonality perspective. It's summer. But the market broadly has been enamored with all sorts of things lately that have nothing to do with Bitcoin. We all know that, and that's pulled Bitcoin trading volumes away too. This period of low spot volumes has also coincided with a period of low realized volatility for

Bitcoin. Bitcoin is coiling. It has a tendency to do this from time to time. So Bitcoin is probably getting ready to make a move in one direction or another, and it's probably going to have some force behind it. Given the overall setup, and with many market participants on sidelines, having sold in prior months due to negative externalities, it seems like there's a good chance volatility will come to the upside. Perhaps the most important factor at play is the potential launch of multiple 40-act BTC-C-CME future ETFs in late October. The likelihood of these getting launched appears to be misunderstood. If the market starts pricing in a higher likelihood, that should bode well for price. The biggest risk to this scenario playing out is increased

tapering fears. That was a much bigger concern pre-Jackson whole, but Powell seems content to punt on tapering until at least year-end. If we print strong jobs numbers in the coming months, there's risk that timeline moves up. The last thing I'll note here is Bitcoin dominance, which is on its ass. Sitting 42, barely off the cycle low of 40, and not far from the all-time low of 36 from January 2018. The drivers of this move down and dominance are worthy of a longer discussion than a tweet thread, but it's fair to say that Bitcoin is relatively underowned at the moment. Should Bitcoin go a heater to 58K in the coming weeks, it will be interesting to watch

whether alt's lag, keep up, or outperform. In any case, this is the last weekend of the summer. Liberty Weekend is around the corner. If you sold in May and went away, that was looking like a great plan until just to a few weeks ago. Now you're stuck contemplating whether to buy back in now, perhaps higher than where you sold. As we all know, Bitcoin reflexivity is a total monster when it gets going in both directions. After a rough couple months, reflexivity appears to be teetering on the edge of spiraling higher from here. A great thread there from Travis, I think you'll agree. And for me, it's just really about

figuring out what are all the factors that are going to shape markets this fall? Can NFTs continue their blistering, blistering growth. I mean, we're talking 10x month over month from July to August, from 300 million in volume to 3 billion in volume. Will that continue? Will that bubble pop? It's a major question. Can DeFi get heated again? Will NFTs actually impact defy? Will that suck resources away from other things? Or will values start to consolidate in core assets in those ecosystems or just in Bitcoin, the flagship asset of the space as a whole? I'm not a trader, but those seem like pretty interesting questions to ponder as we get closer to this end of summer holiday weekend in the beginning of the fall. For now, guys, I appreciate you hanging out and listening and until tomorrow, be safe and take care

of each other. Peace. Hey guys, I've got an opportunity that I'm really excited to share with you. To keep up with the breakdown's growth, we are hiring an overnight researcher. Basically, this is a person who will work with me to prep episodes of the breakdown. At the end of each day, East Coast US time, I'll share the earliest thoughts I have for the next day's show or questions I just like dug into more. The overnight researcher will then collect relevant tweets, articles, and other content on those themes, and prepare a daily dossier summarizing and linking. That will be what I use to build the next day's show. This is a three hours a night, five nights a week role, and you should be able to work between 9 p.m. and 6 a.m. East Coast time.

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