The Breakdown - Ark Invest Ramps Up BTC 2030 Prediction to $2.4M

Starting point is 00:00:00 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 Monday, April 28th, and today we are talking about Arc raising its Bitcoin 2030 price target. 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, we have a bit of a grab bag episode. Sometimes this happens over the weekend. We've got some updates around Stripe's stable coin product, some recent record high exchange

Starting point is 00:00:48 outflows, this arc price target. But we'll start just for completeness with a quick update in the tariff and macro world. This week marks the first 100 days of the Trump administration with frankly pretty mixed results for the crypto industry. Not like I need to tell you that. Obviously, we have seen significant progress on the regulatory front and the appointment of numerous pro-cryptopersonnel. Now, optimistically, I think that when all of the dust settles, those will be the most

Starting point is 00:01:12 important things to this industry as opposed to the short-term volatility. However, of course, there has been much short-term volatility, an instability set off by tariff policy that has completely disrupted Bitcoin's bull run and absolutely crushed all coins. This weekend featured very little further movement on tariffs. A truth social post from Trump articulated the next stage of the plan, with the president stating, when the tariffs cut in, many people's income taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year. Also, massive

Starting point is 00:01:42 numbers of jobs are already being created, with new plants and factories currently being built or planned. It will be a bonanza for America. Passing a package of tax cuts is firmly on the Republican agenda in Congress, which is back in session this week. In the China negotiation, there has been a little softening. Beijing quietly rolled back tariffs on semiconductors, while administration officials said that the government will keep expanding imports. These comments came as part of a broader speech about supporting exporters and the consumer, so may not contain much signal. Meanwhile, on a Sunday show appearance, Treasury Secretary Scott Besson expressed his belief that there is a path to a trade agreement. At the same time, he warned that a full deal could still take months. The first ships to sail under tariffs

Starting point is 00:02:20 are scheduled to arrive this week, so we'll start to see the full impact on store shelves. The de minimis exemption that allowed Chinese e-commerce companies to avoid tariffs is set to end this Friday, with the platform's hiking prices as much as 300%. In his 100 days interview with Time Magazine, the president claimed that he had made 200 deals. When asked to elaborate on these deals, Trump said, because the deal is a deal that I choose. View it differently. We are a department store and we set the price. In markets, gold and Bitcoin both moderated over the weekend on the relative lack of news. Long bond yields continued to be an issue with the 10-year trading at 4.26% overnight. yield are no longer rising rapidly, but we're also not seeing the reduction the administration

Starting point is 00:02:55 wants to see in order to roll over the national debt. Perhaps the most telling comments from the weekend came from AI and Cryptozar David Sachs in his appearance on the All In podcast. After griping that the president didn't receive praise for the stock market recovery, he turned to discussing the shift in the Overton window. Sacks pointed out that, quote, before Liberation Day on April 2nd, just three weeks ago, no one was talking about the unfair trade practices. No one was talking about the dependencies on rare earths, no one was talking about the race to the bottom, and Trump has shifted that conversation. After receiving pushback from guest host Andrew Ross Sorkin, Sacks added, by planting this flag in the ground, Trump was creating leverage to then have these negotiations and he completely shifted the

Starting point is 00:03:31 conversation. The fact that you're saying that you don't disagree with where Trump is trying to get to, but it's mostly just tactical, is a huge shift in the conversation. And so I think it's a fair interpretation between that and the post on truth social, that it appears that we're heading into the next phase of the Trump plan, such as it is. Can the administration actually start to combine the tariffs with positive policies for Americans? It seems like that's going to be the next big challenge. Let's move over into the crypto world. Where optimism has not left entirely, ARC Invest has raised their bullcase to $2.4 million per Bitcoin by 2030. Now, Kathy Wood's investment company is no stranger to sky high Bitcoin calls. Back in 2021, Wood was one of the first and

Starting point is 00:04:10 loudest to call for Bitcoin to begin its March to a million dollars as that cycle ramped up. The firm has updated their price modeling with an experimental new model. Their bare case is for to hit 500,000 by 2030, up significantly from their previous call of 300,000. The base case is now 1.2 million up from 710,000, and the Bull case has the form forecasting Bitcoin to reach 2.4 million, up from 1.5 in the 2025 edition of their Big Ideas report released in February. The optimistic case implies a 72% average growth rate for the remainder of the decade. Each of these forecasts has essentially moved up a band, meaning that their previous bull case is now the baseline expectation. So how do they come to these numbers? Well, ARC invests price targets are done by estimate

Starting point is 00:04:48 making a combination of Bitcoin adoption and restriction of liquid supply. Each of these factors, by their logic, has meaningfully shifted over recent months. The massive adoption of Bitcoin UTFs was already baked into the forecast made in February. Almost the entire forecast is premised on Bitcoin being added to traditional portfolios and the growth of the digital gold narrative. This factor is by far the largest differentiating factor on whether the bear or bull case is achieved. Accumulation in sovereign wealth funds and corporate treasuries was also considered and viewed as seeing tremendous growth for the next five years. However, this factor was a much smaller contributor to the price target. The big change in the assumptions that led to the massive

Starting point is 00:05:22 re-rating was a new experimental model being trialed by researcher David Puell. In this model, he estimated that 40% of Bitcoin is stashed away in long-term holdings or lost through mismanagement of private keys. The analysis then runs their metrics against this much smaller float of active Bitcoin only leading to the inflated price targets. Now, Poole acknowledged that this methodology is aggressive. However, he argued that this more experimental exercise highlights that Bitcoin's scarcity and lost supply are not reflected in most valuation models today. The report also underscored the change in use case for emerging markets. With Poole writing,

Starting point is 00:05:53 In our view, this Bitcoin use case has the greatest potential for capital accrual. In addition to its store value characteristics, Bitcoin's low barriers to entry provide individuals with internet connections in emerging markets access to an investment alternative that may provide capital appreciation over time, as opposed to defensive allocations like the U.S. dollar, to preserve purchasing power and avoid the devaluations of their own national currencies. And honestly, with recent disruptions in the global economy, it's reasonable to think that this use case will see even more penetration over the coming years.

Starting point is 00:06:20 Now, for many people, arc's price targets are sort of seen as moon math, the upper bound of what the most aggressive optimists think is possible. However, there's always a ton in these analysis, even if you don't come to the same conclusion, that's worth digging into. I think that this idea that we're not taking account of the lost Bitcoin and that most valuation models assume 21 million is really interesting. And even if you don't think the number that they chose of 40% of Bitcoin never hitting the market is the right one, that really would mean vastly different supply mechanics. Seth Michael Steele believes the report is food for thought, writing, I'll admit, I had expected the idea of diminishing returns to be disproven by now, and with

Starting point is 00:06:56 ARC's new projections, there's still a real possibility that the narrative collapses. The invalidation of diminishing returns doesn't require everyone on Earth to become a Bitcoin maximalist. It could just as well be catalyzed by the rapid deterioration of fiat currencies. That scenario is arguably more plausible and certainly more painful, but it leads us, indirectly, to the same outcome. Bitcoin becoming the clear monetary alternative. Bitcoin's scarcity isn't static. It compounds. Through its program supply schedule and the inevitable loss of coins due to human error, available supply will continue to dwindle. Price and divisibility will naturally fill the gap. Today's episode is brought to you by Crypto Tax Calculator. If you're looking for accurate

Starting point is 00:07:34 crypto taxes with no guesswork, check out Crypto Tax Calculator. Get accurate CPA-endorsed tax reports with full support for IRS rules. those who have fallen down the on-chain rabbit hole, CTC has you covered with more than 3,000 integrations. They have full support for defy staking in NFTs. Import directly to TurboTax or H&R block or share securely with your accountant. Create an account, import your sources, and review. It's that easy. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with the breakdown. Many of you know, but for those of you who don't, Ledger is the most secure hardware wallet for your crypto and logins. It's trusted by 7,000.

Starting point is 00:08:12 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 do 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,

Starting point is 00:08:47 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. Now, when it comes to more current crypto trends and behavior, outlets are reporting a two-year high-in outflows from crypto exchanges. According to CryptoQuant, the last time outflows where this fierce was in February 2023 as Bitcoin started to recovery from the lows.

Starting point is 00:09:16 Now, usually, people view exchange outflows as bullish. It means that people are not planning on selling their Bitcoin and locking them away in cold storage. However, March of 2023 saw a 20% retracement as the first rally out of the bear market failed. What is clear is that the metric implies that whales are accumulating. Glass node wrote, Bitcoin whales are back in full force. Large players have been buying into this rally.

Starting point is 00:09:38 Their data shows a gradual transition from strong distribution in February to accumulation at the end of this month. And while whale wallets are basically back in full accumulation mode, pretty much all cohorts are shifting towards accumulation. Part of the story was some big exchange withdrawals. 38,800 Bitcoin worth around $3.7 billion was withdrawn from Binance last week, while Coinbase Pro saw 8,500 leave their reserves. Binance saw one of its largest withdrawal days in history on Tuesday as Bitcoin recovered. The only days that were larger in terms of Bitcoin and withdrawals came at moments of acute stress and uncertainty during 2022. Al-Fractal founder Drowo-Wedzen noted how noisy the signal can be, writing, while large outflows don't automatically

Starting point is 00:10:15 signal a price rally, they do indicate strong institutional activity, which often precedes major volatility. In 2021, massive outflows didn't prevent the dump triggered by China's crypto ban. On the other hand, continuous outflows over several days, like during the FTX collapse, signal the bottom and recovery. Some aren't tempering their enthusiasm. Dennis Porter of the Satoshi Action Fund tweeted the chart of exchange balance. is adding, we've never seen this before. We've never had a global Bitcoin supply crunch. Bullish. On-chain analyst checkmady is skeptical of the data and pushing back on the supply squeeze narrative. He noted that once you add an ETF flows, the numbers are basically flat for the year, saying

Starting point is 00:10:49 Coinbase is moving Bitcoin from their left pocket to their right pocket since they custody everything, and folks think exchange balances have declined and that's bullish. The ticker just changed from BTC USDA to iBITUSD, that plus some questionable data full of nuances and poof, chart magic. James Van Stratton, the senior analyst at CoinDesk agreed, Tweeting this data is so wrong, please stop. One may be more directly positive signal. Last week's Bitcoin rebound brought a tidal wave of ETF inflows. Products saw over 3 billion in net positive inflows their best performance since November. Friday was the sixth straight inflow day in a row, a stark break from consistent outflows earlier in the month.

Starting point is 00:11:24 Bloomberg's Eric Baukunis wrote, ETFs are on a Bitcoin bender have consumed nearly 25,000 Bitcoin in three days. Ibit alone took in 643 million yesterday, number one among all ETFs. What's really notable here is just how fast the flows can go from first gear to fifth gear. Probably some is basis trade back in effect. That's the fast money that tends to come in and out with price. The other number to watch is the lifetime net flows, the hardest of hard numbers to grow in ETFs, which is just about $38 billion.

Starting point is 00:11:50 It peaked at $40 billion, so almost back to the high watermark. Pretty amazing given how rough a year it's been. BlackRock, meanwhile, continues to be one of Bitcoin's primary advocates on Wall Street. In a CNBC appearance last week, the firm's head of U.S. equity ETF's Jay Jacobs said, If this is the trajectory of greater uncertainty around the world, things like Golden Bitcoin should continue to go up. BlackRock's domination of the market, meanwhile, continues unabated. The firm now holds 2.77% of total Bitcoin supply with around 582,000 Bitcoin worth almost $56 billion. ETF holdings are held on behalf of customers, so it's not as though BlackRock themselves

Starting point is 00:12:22 are cornering the Bitcoin market, but the concentration risk is still notable. The firm is also surging ahead in real-world assets. BlackRock's Biddle Fund has reached $2.5 billion in assets under management, the largest tokenized Treasury fund by far. The size of the fund is up 291% since the beginning of the year. Their market cap dwarfs competitors, with the Franklin Templeton Fund reaching 707 million and superstates USTB at 661 million. According to RWA.xy, the market for tokenized treasuries is getting extremely concentrated, with the top six issuers representing 88% of assets. Tracy Jin, the COO of Crypto Exchange, MECC, is concerned about the centralization of real-world

Starting point is 00:12:58 assets, stating, most tokenized assets will be issued on permission or semi-centralized blockchains. This gives authorities the power to issue restrictions or confiscate assets. The tokenization of assets such as real estate or bonds is still tied to the national legal system. Now, while BlackRock's Biddle Fund is issued on permissionless blockchains, their smart contracts do have freeze and seize functionality. And while it's probably not realistic for large funds to operate in a truly permissionless manner, the risks are still worth paying attention to as the tokenized financial system takes shape. For newer institutions, FinTech Giant Stripe is ready to test their stablecoin product. Jen Lee, a product manager involved with the project, tweeted,

Starting point is 00:13:34 Stripe is building a new stablecoin product powered by Bridge and we're ready to start testing. Lee is looking for companies outside of the U.S., EU, or UK, who are interested in dollar access. Stripe acquired a stablecoin infrastructure firm called Bridge for a billion dollars earlier this year, which was the largest ever crypto acquisition at the time. They've steadily integrated crypto rails into their platform over the past year, offering crypto payments, on and off-ramps, as well as USDC access. Many think that Stripe is also now creating their own stable coin. Interestingly, the firm seems to recognize that dollar access in the developed world is a largely solved

Starting point is 00:14:03 problem, and so are targeting emerging markets. That would put them in direct competition with Tether, trying to bring dollars to the global south using crypto rails. Whatever the product ends up being, there is a lot of excitement at the company. CEO Patrick Collison tweeted, we've wanted to build this product for around a decade, and it's now happening. And to get some sense of why people are so excited about the numbers, in a report published last week, City Group predicts, quote, the total outstanding supply of stablecoins could grow to $1.6 trillion by 2030 and a $3.7 trillion in our bull case. Bank analysts hedged their prediction by adding a bare case of stablecoin supply only reaching

Starting point is 00:14:37 $500 billion by the end of the decade, if, quote, adoption and integration challenges persist. The research note also picked up on the narrative that stablecoins will drive demand for U.S. debt, commenting, a U.S. regulatory framework for stablecoins could drive net new demand for U.S. treasuries, making stablecoin issuers among the biggest holders by 2030. Now, of course, none of this is novel for people in the blockchain industry, including probably all you listeners, but it's noteworthy that consensus is growing in tradfai that stable coins are an obvious trend worth paying attention to. Citigroup has never expressed any particular interest in digital assets, but the opportunity is now too big to ignore. And with that, we close today's breakdown. I think we're poised for a good week.

Starting point is 00:15:14 Famous last words, but we'll see. In the meantime, appreciate your listening, as always. And until next time, be safe and take care of each other. Peace.

The Breakdown - Ark Invest Ramps Up BTC 2030 Prediction to $2.4M

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