The Breakdown - Arizona Drives Ahead with Bitcoin Reserve Bill

Episode Date: April 30, 2025

Both houses of Arizona legislature have passed a Bitcoin Reserve Bill. The question now is whether the Governor will actually sign it. Meanwhile, bullish sentiment is coming back as BTC floats around $95,000. Sponsored by: ⁠⁠⁠⁠Crypto Tax Calculator⁠⁠⁠⁠ Accurate Crypto Taxes. No Guesswork. Say goodbye to tax season headaches with Crypto Tax Calculator: Generate accurate, CPA-endorsed tax reports fully compliant with IRS rules. Seamlessly integrate with 3000+ wallets, exchanges, and on-chain platforms. Import reports directly into TurboTax or H&R Block, or securely share them with your accountant. Exclusive Offer: Use the code BW2025 to enjoy 30% off all paid plans. Don’t miss out - offer expires 15 April 2025! Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today. Buy now on ⁠⁠⁠⁠Ledger.com⁠⁠⁠⁠. 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 Tuesday, April 29th, and today we are talking about Arizona's Bitcoin Reserve Bill. Before we get into that, however, if you're 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, exciting one to kick us off today, Arizona has become the first state to pass a Bitcoin Reserve bill. Now, the question is, will it make it off the governor's desk? The state legislature passed the Arizona Strategic Bitcoin Reserve Act on Monday.

State Representative Jeff Weninger, one of the bill's sponsors, said, this bill basically takes the approach that probably 15 other states are considering the same legislation nationwide that allows the treasurer to invest up to 10% into probably mainly Bitcoin but other things as well. I think this probably would start as a May for the foreseeable future, but as things continue to pivot towards Bitcoin and these things, we would have that already in place in the future. However, the bill still faces its toughest challenges lawmakers seek the signature of Governor Katie Hobbs to turn it into a law. Republicans control a double majority in the legislature, but their views on Bitcoin clash with the Democratic governor.

Hobbs had previously said that she would veto all bills until the state legislature passes, quote, serious bipartisan funding solutions that protects health care for Arizonans with disabilities. The Republican legislature actually passed a bill dealing with the issue last week, so hopefully the governor can now give the Bitcoin bill her stamp of approval. This is the first bill to pass as part of a widespread push to establish small Bitcoin reserves at a state level. According to Bitcoinreservemonitor.com, there are 19 states with bills proposed and five states who have already rejected legislative changes to allow Bitcoin reserves.

Arizona is one of two with bills actively moving through the legislative process alongside Utah. The Utah bill passed through the Financial Services Committee with a superman majority vote in January, however, a House vote in February passed by a narrow margin, with many in the Republican majority crossing the Florida vote against the bill. Utah has a deeply red majority in both houses, but for whatever reason, it seems like the bill could be a heavy lift in the Senate. Still, bringing it back to Arizona, Dennis Porter of the Satoshi Action Fund, who has been traveling the country evangelizing state Bitcoin reserves tweeted, Arizona just became the first state in the nation past strategic Bitcoin Reserve legislation in the House and the Senate.

On to the governor's desk. Thomas Ferrer of Apollo Stats noted that the maximum minimum investment would be $8 billion source from state general and retirement funds, saying we just need one signature from Governor Hobbs. Continuing the bull train for the moment, standard chartered is saying that it's a great time to buy Bitcoin. Notoriously bullish investment bank analyst Jeff Kendrick expects Bitcoin to hit a new all-time high of around $120,000 this quarter, adding, buy now. In a Monday research note, Kendrick wrote, a number of indicators support our view that Bitcoin is headed for the next leg higher. U.S. Treasury term premium, which has a close correlation to Bitcoin is at a 12-year high, time-of-day analysis suggests that U.S.-based investors may be

seeking non-U.S. assets. Meanwhile, Bitcoin accumulation by Wales has been strong. ETF flows in the past weeks suggest safe haven reallocation from gold into Bitcoin. The central point of Kendrick's thesis is that both Asian and U.S. investors have been looking for a safe haven away from struggling U.S. assets. He notes the broken correlation between U.S. tech stocks and Bitcoin as evidence that investors are turning to digital gold for protection. While gold has stood the test of time, Kendrick argues that, quote, Bitcoin is more effective in this regard because of its decentralized nature. Elaborating in an email, Kendrick explained that timing breakouts in Bitcoin is not easy, but his feeling is that an upswing is imminent. That's why he emphasized that now is the time

to buy in order to prepare for the next leg up. Kendrick is not concerned about a long, frustrating summer this year. Not only has Bitcoin already had a major drawdown to reset positioning, but the analyst notes that 13F disclosures for ETF filings are due in mid-May, potentially revealing buying by pension funds and sovereign wealth funds. He also believes that the passage of stablecoin legislation sometime over the coming months will bolster the narrative and further legitimize crypto as an asset class. Finally, as is the tradition for Kendrick's notes, the analyst is sticking with his $200,000 Bitcoin call for the end of the year.

Now, it is not new for Kendrick to be extremely bullish. He's been one of the most consistent analysts on that front all year. However, Kendrick is rarely pounding the table with such a clear buy rating. I don't have a particularly clear sense on how respected his opinion is among institutional investors, but he's one of the few bank analysts putting out Bitcoin-focused research, and last week's move was enough to make even veteran traders sit up and pay attention. On a podcast appearance following the Bitcoin breakout, Tony Greer said, I feel like what's leading the charge on this re-risking that has obviously just begun is Bitcoin.

I'm blown away by Bitcoin right now. I'm so bullish I can't see straight. Bernstein's Monday research note also had a clear directional bias with the investment bank writing that it's hard to be bearish. Their highlight of the last week was 21 Capital, the new joint venture between SoftBank, Tether, and Cantor Fitzgerald, that seeks to accumulate as much Bitcoin as possible. Analysts wrote that, quote, 21 aims to replicate strategies Bitcoin Playbook, albeit from a lower capital base. Still, they noted that what the new firm lacks in capital they make up for in deep-pocketed backers. Tether alone earned 13 billion in profit last year, rivaling Goldman Sachs. The note commented, regardless, the Bitcoin accumulation game is

becoming competitive. They pointed out that 80 companies now hold a combined 700,000 Bitcoin, around 3.4% of total supply. The other big narrative on Bernstein's radar is the return of strong ETF flows. Last week saw over $3 billion come into the Bitcoin funds, the strongest week since November, and the second highest inflows of all time. Bitcoin ETFs now hold around 5.5% of total supply. Analyst commented that around 33% of ETF shares are held by institutional investors up from around 20% in September. Of that amount, around half is held by investment advisors, likely representing longer-term allocations for clients. Less than a third of the institutional portion is held by hedge funds, which includes the extremely risk-sensitive basis trade.

Bernstein was making the point that the vast majority of Bitcoin held by ETFs looks like long-term positions that are unlikely to return to market anytime soon. Analysts noted that Bitcoin held by corporate treasuries and the ETFs now account for 9% of supply, up sevenfold since the ETFs went live in January of last year. They wrote, in our view, the current momentum driven by corporations and institutions is strong enough to push Bitcoin to new highs in 2025. However, a significant Bitcoin purchased by the U.S. government is definitely not priced in, and it would trigger a global shift in competitive Bitcoin accumulation among sovereign nation states.

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It's trusted by 7 million users and secures 20% of the world's digital assets. What's more, ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem of products and services, all of which are designed to make digital ownership more secure and accessible. You can buy your Bitcoin with Ledger and Ledger Live and so much more. Basically, not only did they want to keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks and Ledger Flex introduced the world's first secure touchscreens, making it easier and safer to manage your transactions and assets. alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app,

offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks, once again, to Ledger for sponsoring the show. There was also a breakdown of recent outflows from crypto exchanges, which we covered extensively on yesterday's show. Brinstein's overall conclusion was that, long term, we believe Bitcoin fundamentals are being driven by its own demand trajectory and its mathematically proven immutable supply of 21 million coins. Bitcoin mine today stands at 19.9 million and of the remaining 1.1 million to be mined, almost 95% will be mined over the next 10 years. Hard to be bearish in our view on this asset with the current

demand supply dynamics. Now, if you take a step back, what makes these interesting is not just that they are a breath of bullish fresh air. It's that it appears that people are looking for reasons to be bullish at the moment. Bitcoin is changing hands at 95,000 and everyone is looking for a catalyst to drive it higher. Sometimes that's a counter signal, but it's a heck of a lot more enjoyable than the doom and gloom that was going on earlier this month. And really, that's going to be the theme for the rest of these stories today. None of them are huge on their own, but altogether they show the changes that are happening. Speaking of new players coming to the market, MasterCard is enabling stablecoins in their network. In a press release, the company said,

To allow consumers and businesses to use stablecoins as easily as the money in their bank accounts, MasterCard is providing an integrated 360-degree approach. They said that customers will be able to earn rewards, pay and spend the stablecoins in their crypto wallets via traditional cards at the over 150 million merchant locations accepting MasterCard globally, as well as withdraw stablecoins into their bank accounts. Unlike previous partnerships, this sounds as though MasterCard will start supporting various stablecoin on an offramps natively and offer customers and merchants' stablecoin transactions as an option. However, the company is also signing new partnerships at a rapid clip.

Yesterday saw OkX and Metamask joined with their own bank card partnerships, adding to Binance, Crypto.com, Crackin, Gemini, and many more. The MetaMask partnership is particularly interesting, as one of the first times that self-custodied funds have been able to be used in the credit card network. Customers will be able to pay directly from their crypto wallets without pre-funding accounts or converting into Fiat. The entire process is facilitated by smart contracts, which the press release claims allow for five-second transaction times. The only real catch is that funds need to be held on the Linnea network, a little used Ethereum layer two. Now, MasterCard and Visa have been in the mix for several years and clearly

recognize the need to adopt crypto during the last cycle. After a few small pilots, though, of crypto-funded bank cards kind of died off or at least tapered off significantly. But with the current stablecoin trend, it's very clear that large payments companies are looking to keep up with a competition. And another blast from the past, crypto lender NXO is returning to the U.S. NXO was one of the big lenders during the last cycle competing with firms like Voyager, BlockFi, and SELC, to deliver retail yield on crypto holdings. Most of their competitors blew up during the crypto winter due to some combination of mismanagement, counterparty risk, and in the case of Celsius, outright fraud. Nexo managed to escape the cycle without going bankrupt or losing their customers' money,

but still led to deal with a lengthy regulatory battle in the U.S. Around two years ago, they halted service to U.S. customers and returned funds due to the scrutiny they received from regulators. The company ended up settling with the Consumer Financial Protection Bureau and the SEC on accusations of failure to register the yield product. Nexo paid out a $45 million settlement without admitting wrongdoing. Now, with a more friendly regulatory environment, Nexo is returning. At a closed-door event this week, the company announced that they would be re-entering the U.S. market with their crypto savings accounts, asset-backed loans, and other core offerings for retail and institutional customers.

Even if you're not looking for any of those services, the return of Nexo is still big news. Credit in the crypto industry has been somewhere between lacking and completely non-existent over the past few years. The return of lenders will absolutely make conditions easier for the crypto funds, finally restarting the credit cycle for the industry. And with all of this momentum, many crypto actors are trying to push things even farther. For example, the DeFi Education Fund is calling on the Trump administration to end the prosecution of crypto developers. Their letter comes as Tornado Cash founder, Roman Storm, is set to begin his trial in July. The group argued that Trump's, quote, stated goal to make America the crypto capital of the planet cannot be realized if developers

are prosecuted for building the very tools that enable this innovation. We ask President Trump to protect American software developers, restore legal clarity, and end this unlawful DOJ overreach. Storm is charged with conspiracy to commit money laundering, sanctions violations, and operating an unregistered money transmissions business in relation to his part in developing Tornado cash. He is not alleged to have communicated in any way with crypto or terrorist groups that use the platform. The only allegation is that he was aware of the activity and didn't do enough to prevent it from occurring. The prosecution continues despite a federal court ruling that sanctions against tornado cash were not legally valid. For certain segments of the crypto community, the prosecution

of developers is the last big holdover from the Biden era. The DOJ recently put out a memo declaring that it was not a digital assets regulator and would be pulling back from pursuing crypto cases that don't involve fraud. The Defy Education Fund wrote, while the DOJ recently released a helpful memo explaining that it will no longer regulate crypto by criminal prosecution and express principles that reflect longstanding FinCEN guidance on money transmission laws, it seems like the Southern District of New York has not received the message. Alongside the letter, the group is hosting a petition to put additional pressure on the administration. Jake Trevinsky, the chief legal officer of Variant Fund, tweeted,

the DOJ's case against Roman Storm is an outdated remnant of the Biden administration's war on crypto. There is no justification in law or policy for prosecuting software developers for launching non-custodial smart contract protocols. Sign the Defy Education Fund's petition and help today. So again, it is not clear from where I'm sitting that things are all hunky-dory, or even necessarily going to get better, without another detour into worse. But this week really does seem to be continuing to trend towards optimism, and after the last few weeks, I will take it. For now, though, 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.