The Breakdown - Are You Really Surprised Elizabeth Warren Doesn't Get Bitcoin?

Episode Date: March 4, 2021

Today on the Brief: PayPal acquiring Curv for $500 million? Traditional markets are very confused Portnoy launches Buzz exchange-traded fund Our main discussion: NLW looks at the emerging political landscape for crypto in the U.S. Specifically, he examines: Gary Gensler’s hearing before the Senate Banking Committee on his nomination to head the SEC Elizabeth Warren’s comments (or non-comments) about bitcoin on cable TV -- Earn up to 12% APY on Bitcoin, Ethereum, USD, EUR, GBP, Stablecoins & more. Get started at nexo.io -- 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=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   The Breakdown is produced and distributed by CoinDesk.com

So many of the supposed champions of economic reform don't actually take the time to understand true systemic alternatives. Instead, their mechanism for change is just more regulation of the existing institutions that have shown themselves time and time again to be the problem. It's like wanting a system run by criminals with better handcuffs rather than a system just not run by criminals in the first place. 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 nexo.io and Casper and produced and distributed by CoinDesk.

What's going on, guys? It is Wednesday, March 3rd, and today we're talking about Elizabeth Warren and whether you're really surprised that she doesn't get Bitcoin. First up, however, let's do the brief. First on the brief today, some big crypto M&A news. PayPal is reportedly in the process of buying Curve, which is a crypto custody technology platform. An Israeli outlet is reporting the purchase price at $200 to $300 million, while a CoinDesk source says it's closer to $500 million. The rumor is that PayPal tried to buy BitGo for $750 million in cash last year and got rebuffed. So why is this interesting?

Well, one of the things we've discussed is that as all of these mainstream financial firms, both fintechs like PayPal, as well as traditional services like banks, get into the business of actually offering crypto services, they're not going to have the time or know how to build things out themselves. What they do have is capital to throw around through acquisitions. If this deal is $500 million, it will be the biggest acquisition in crypto yet. But I also have no doubt that before 2021 is done, it will be. massively outstripped. I would be shocked if we didn't see at least one billion dollar M&A deal this year. Next up on the brief today, the traditional markets are confused as hell.

Just to sum this up, in Bloomberg and analyst for Think Markets said, the markets have been all over the place for the past few days, alternating between risk on and risk off, as investors have tried to weigh the impact of rising yields against the prospects of a strong economic rebound with the ongoing COVID vaccine rollouts. Basically, stock futures had started to rise, then faltered when data came in showing that employees at U.S. businesses rose in February by less than expected. Businesses, it turns out, are still constrained by pandemic-type protections even as the vaccine gets further distribution. Still, at the same time, we're now seeing promises that all U.S. adults could get vaccinated by the end of May, and we're seeing more and more

states and jurisdictions rolling back restrictions and limitations. Really, though, it's treasuries that are freaking people out. Last week, the gap between the bid and offer prices for 30-year bonds hit the widest point since March of 2020. Bloomberg summarized it this way. There are plenty of potential culprits in last week's bond market tumble, which has since mostly reversed, from improving economic readings to more technical drivers. Ultra-loose Fed policy and the prospect of fresh U.S. fiscal stimulus have investors betting on quicker growth and inflation. Add to that a wave of convexity hedgers and unwinding by big trend-following investors such as commodity trading advisors. If that feels like you have no idea what TF they're talking about, the takeaway is this.

Basically, no one has any idea what they're talking about. Especially when it comes to these big macro phenomenon, even people who are paid to watch this day in and day out are just grasping for interpretation. So what does this all have to do with Bitcoin? Frankly, I'm not sure anything. But I really like that Bitcoiners are debating that exact question right now, with some saying that there's a relationship

between treasury yields and Bitcoin prices, and others saying no way. If you want to learn more on this topic, I'm doing a macro 101 show soon that goes a little bit deeper into some of these themes. Last up on the brief today, let's talk BuzzETF. We've been discussing ETFs a lot on this show, ARCS innovation ETFs, the Canadian Bitcoin ETFs, but what about an ETF for the Davey day trader set, a social chatter ETF? That's exactly what Dave Portnoy announced yesterday. Let's listen in. I got approached by these guys who built an algorithm five years ago.

The algorithm was basically designed to scrape the internet, social media, and find positive sentiment on stocks. It kind of lingered. It kind of did its thing. And then what happened? DDDG happened. I happen. COVID happened. All of a sudden, the amount of chatter on the internet about stocks exploded. They reached out to be when?

When Penn National showed up in their rankings? Like, hmm, Penn. What's going on there? Oh, Dave Portnoy. Penn. DDDG. He gets it. They scrape DDG, they scrape Reddit, they scrape stock twists, everything.

They showed me their algorithm. I said, this is brilliant. Of course it'll work. If you don't adapt, you die. Twitter, social media, all of it is dictating stock prices. Nobody has seen that more than me over the past year. I wish I could own a million stocks, but you can't own them all. Well, that's the beauty of Buzz ETF.

With Buzz, when you invest in BUZZ, the money that you're putting in is then redistributed across the top 75 most favorably talked about stocks according to our algorithm. Does it work? Last year, Buzz Index beat the S&P by 40%. Now, is it some ritsy-glitzy trying to get 100% gains? No, this is just the best of the best. It measures positive sentiment for the course of a month. The top 75 big cap, $5 billion stocks go into it, constantly rotating based on the most positive sentiment.

not only from me, from everybody on the internet. This thing, again, I've won my lesson. You can't be I guarantee. He returns this, that 20 years I haven't lost. It takes a lot for me to put my reputation, my balls in the line. I am doing it this time. Buzz ETS. Thursday.

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And with that, let's shift to our main conversation. I do want to talk about Elizabeth Warren's comments on cable news regarding Bitcoin, but first, let's talk about Gary Gensler's hearing. And to be clear, this is much more significant in terms of likely impact on our industry. Gensler is a former CFTC chair and is now nominated to lead the SEC. He has also taught a course at MIT about Bitcoin and blockchain. On Tuesday, he had a confirmation hearing in front of the Senate Banking Committee. Unsurprisingly, he tried to thread the needle between talking about the opportunities of Bitcoin and other crypto technology, while also talking about the need for regulation.

Gensler called these technologies a catalyst for change and said, Bitcoin and other cryptocurrencies have brought new thinking to payments and financial inclusion, but they've also raised new issues of investor protection that we still need to attend to. If confirmed at the SEC, I'd work with fellow commissioners to both promote the new innovation, but also at the core to ensure investor protection. Genzer reinforced the distinction between an equity offering in an investment contract that would fall under the SEC's purview and things like Bitcoin that operate more commodity-esque and would fall under the CFTC. He discussed investor protections a lot and mentioned that one concern is the amount of activity that happens outside of regulatory

purview. For those who are hoping for a positive force for Bitcoin and crypto in that SEC chairman's seat, I think that you have to be cautiously optimistic about what we saw. Genzer has a lot of crypto-sceptics on that committee, and he almost for sure needed to reinforce the point that he was going to have investor protections be his overarching mandate, while still creating enough space for him to actually engage deeply with the crypto space as well. The hearing also involved Rohit Chopra, who was nominated to run the Consumer Financial Protection Bureau.

Interestingly, as part of that conversation, he discussed real-time payment settlement systems saying, we cannot be falling behind other countries. We see that China is in many ways investing in faster payments in a stable coin that will help consumers and businesses get funded faster to their benefit, and I strongly support efforts to modernize that system so that everyone can have equal access. All in all, interesting stuff from the Senate Banking Committee.

But now let's go over to Elizabeth Warren's comments in discussion with Andrew Ross Sorkin. And first, let's listen to exactly what she said. There are people like Janet Yellen who are warning that this is both speculative in nature and is going to potentially end badly. Do you have a view? I think that Janet's a really smart woman. That's all you're going to say about Bitcoin. Well, speculative in nature and going to end badly. I don't think Janet left a lot of room for ambiguity there.

Now, first, let's defend my position that she doesn't get it. Warren said almost nothing. This was the statement of someone who has spent no time to form a real opinion about a space. She started with Janet Yellen as really smart, and then she moved into repeating the line phrased exactly by the host. To me, this reads like a situation where someone is yelling at Andrew Ross Sorkin for surprising Warren with a Bitcoin question that she wasn't anticipating. But now, let's talk about what's frustrating about this exchange. First, it shows that Yellen's comments have actually been harmful. As hedged as we want to find them in the industry, and as much room as we've seen them for giving an engaged conversation, it's clear that

the banner headlights that others are picking up on are just negative. Now, I will note that I think the whole going to end badly is an overstatement of Yellen's position from Sorkin, but whatever, what do you expect? It's cable financial news. Secondly, it's frustrating that a politician who has made their entire political focus be on writing economic wrongs hasn't taken the time to engage shallowly, much less deeply, with a new economic force that so many of us see as a vehicle for exactly the sort of system remaking that purportedly someone like Warren would be interested in. Now, it's totally possible that someone could engage with it on that level and come to a different conclusion. The frustration from my end is the no engagement at all. It suggests for something

that is very frustrating to many bitcoinsers who come from a more progressive persuasion. So many of the supposed champions of economic reform don't actually take the time to understand true systemic alternatives. Instead, their mechanism for change is just more regulation of the existing institutions that have shown themselves time and time again to be the problem. It's like wanting a system run by criminals with better handcuffs rather than a system just not run by criminals in the first place. There are a lot of reasons for this and fundamentally at least in today's American politics, the dividing lines aren't just what type of change you want to see, but what your preferred mechanism for delivering that change is. The left historically is about

strengthening institutions of government as executors of markets. The Bitcoin left, however, might suggest a look at some aspects of this new crypto space as a market-based mechanism for achieving similar goals. So that's what's frustrating, but what is promising, if anything? Two things stand out to me. The first is that the question came up at all. This is an interview with a former leading presidential candidate and one of the top Democrats, and it seemed clearly pretty unplanned. To me, this reinforces the notion that Bitcoin is unignorable, that when politicians go on TV, they better be ready to discuss this.

The second positive, promising thing is that, to be honest, I'm really convinced that this is Warren genuinely not having a position she's willing to articulate. So falling back on a defensible, well, look what she said. I stated above why it's frustrating that she doesn't have a position, but it's also optimistic that she doesn't yet have a position. That means that there is opportunity to shape her position. Now, there are many in Bitcoin who, because of their right or libertarian stance,

will be fundamentally uninterested in or disbelieving of the potential of engaging with a progressive politician, and that's fine. but a tabula rosa in a position of power, even one that is perhaps on balance skewed towards skepticism, is a hell of a lot better than an enemy. I think this is something to keep in mind as we dig deeper into the Biden administration. Anyways, guys, a little quick one today. I hope that you're having a great week. I appreciate you listening. Until tomorrow, be safe and take care of each other. Peace.