The Breakdown - Bears Fuming as Elon Opens Tesla Purchases With Bitcoin

Episode Date: March 25, 2021

Today on the Brief: Robinhood IPO incoming Competing bitcoin price predictions  Yellen and Powell’s latest testimony on economic growth Our main discussion: Elon Musk announced this morning Tesla’s program for buying its cars with bitcoin:  Says the company is running Bitcoin network nodes Says Tesla won’t convert back to fiat but will hold bitcoin Expanding the program internationally coming soon NLW breaks down the hater response from the Tesla and Bitcoin sides and argues that much more significant are the other CEOs – like that of buzzy bed startup Eight Sleep – who are following suit.  -- 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

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, Casper, and Exodus, and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, March 24th, and today we are talking about the bears absolutely frothing at the mouth and fuming, as Elon Musk allows that people can now buy their Tesla's with Bitcoin. First up, however, let's do the brief. First on the brief today, big IPO news. Robin Hood has confidentially filed with the SEC for an initial public offering. This, according to insiders, reported to Bloomberg. Robin Hood could be going public as soon as late Q2 of this year, and it sounds like they've selected NASDAQ but haven't set the terms as of yet. So let's talk the good

and the bad. The good, Robin Hood did start democratizing trading last year as, per their mission. This is a trend I'm a fan of. More people having agency to participate in markets is a good thing, full stop. What's more, Robin Hood has provided an on-ramp to a ton of new Bitcoin and crypto users. Robin Hood added over 6 million new users in the first two months of this year, who traded crypto for the first time. Piling onto that, last week, Robin Hood's CEO, Vlad Teniv, said that they planned to hire, quote, tons of people to their crypto operations in the coming months. Now the bad, well, first, on the crypto front, they've only just started to reverse their policy to allow people to actually withdraw their crypto, which is obviously not full participation

in this industry. Certainly worse for me is that I am not super keen on how Robin Hood handled just about anything about the GameStop fiasco. Go back and listen to any of the half dozen shows I did on that to see my sense of it. And it's not just me. At Robin Hood Investors on Twitter is clearly still upset, tweeting, Robin Hood halted our trading. Let's halt their IP. Now, there is more than just the good and the bad to this, there's also the crazy. If they IPO around the same time as Coinbase, it is going to be such a massive battle to see what the biggest FinTech or crypto IPO of the year really is. Speaking of which, one other follow-up on the Coinbase IPO, CFO Alessia Haas did a Reddit

AMA and was asked about whether Coinbase had ever considered some sort of security token offering, right, a crypto-native version of an IPO. And basically she said that the infrastructure wasn't there. Quote, then we looked really creatively. Could we do something on the blockchain? Could we do a security token? And as we evaluated those options, what we came up with was the security token infrastructure is not quite there, that we didn't have the opportunity for all investors.

Many institutional investors can't participate in security tokens, and we didn't have enough broker-dealers that could trade it to provide liquidity to the market. And we, Coinbase, didn't have the right licenses or the right foundations to be able to offer that. It was really important that we were able to offer a security token that was native to crypto and could be treated like an ERC20, could be used in defy, and have all the features of crypto that we have all come to love. And until we can offer something that we feel like meets the customer or an investor in this case experience that we want to have, we found that we couldn't pursue it at this time. Pretty interesting stuff, but for now we'll just have to be

content with that traditional IPO public market exposure. Next up on the brief, let's talk about some competing price predictions for Bitcoin. We're in an interesting sideways period. 17 days closing over 50,000. Funny place to be bored given how long we spent not even near 50,000, but here we are. And there are a couple explanations I've seen for why things have been a little bit listing right now. The first is an optimistic take that the institutions who started engaging in the Bitcoin treasury process a few months ago are in their final stages before making their purchases. effectively, the idea here is that the first wave of price pressure earlier this year was caused by institutions piling into this space. There is, in fact, another wave of institutions that are

coming, perhaps inspired by things like the Michael Saylor Bitcoin for Corporations Conference at the beginning of the year, but there's a lag time between when the decision is made to get in this space and how long it takes to actually execute. We've seen some evidence of institutional buying at these prices. About $806 million worth of Bitcoin was transferred off of Coinbase Pro yesterday morning, 14,666 Bitcoin. This tends to reflect a big institution moving from where they bought the Bitcoin to cold storage. Now, the second take for why we've been in this modality for a week now or so has to do with the $6 billion in options expiry happening at the end of this week. A number of traders on Twitter have pointed back to a similar point at the end of January

where Bitcoin was trading in tighter and tighter bands right up until a big options expiry. Either way, when price isn't moving in the short term, people speculate about price in the long term. So what are the competing price predictions? First, let's look at a set of investors who are surveyed by Deutsche Bank and who clearly hate fun. 52% think the price of Bitcoin will be under $60,000 12 months from now. Boom. 69% think Bitcoin is more likely to fall by half in 12 months. This is up from 65% who thought that same thing in February.

The big caveat here is that only 23% of these surveyed have actually bought Bitcoin. 40% of those under 35 have Bitcoin versus those over 55, only 13% of which actually have Bitcoin exposure. So depending on your take, this might make the survey more or less legitimate. Next, we have the CEO of BTC.top, which is one of the biggest crypto miners in China. He's predicting $150,000 to $300,000 Bitcoin as this cycle's top, and he sees it happening between September of this year and June of next year. emphasizing that we have room to run, he said the current price level is definitely not reaching a peak. The attention and popularity around Bitcoin has not reached the level we saw in the

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Take control of your crypto and download Exodus today. Visit the App Store or Google Play to download or visit Exodus.com for more information. Then we have Peter Brandt. Peter Brandt is a trading veteran who is hugely followed in both the crypto and traditional trading worlds. He's betting on Bitcoin to reach between 180,000 and 200,000 this cycle in Q3 or Q4. And for him, it's just following the patterns. Quote, I keep my eye on the broader picture. Bitcoin over the past 10 to 11 years, you get these big rallies that accelerate two to three years,

and then you get a big correction. And then, of course, there is Scaramucci. He had previously made a year-end prediction of 100,000, and doubled down on that in interviews around the announcement of his firm's Bitcoin ETF application late last week. He said that he's keeping his price prediction consistent to avoid making clients think he's crazy, saying, I think they've grown to think that I am nuts. And finally, a new convert in Jordan Belfort, the wolf of Wall Street himself.

Last we heard from him on Bitcoin was in September 2017 saying he didn't think it was a good model, agreeing with Jamie Diamond that it was a fraud and saying that some central bank version of a digital currency would win. Now, he says that he sees advantages over stocks because of the limited supply and could see it hitting $100,000 per Bitcoin. Who will get it right? Only time we'll tell. Third and finally on the brief today, Janet Yellen and Jerome Powell make their second day of appearances before Congress and the Senate. It was the second day of joint testimony today about government efforts to restore economic health. This testimony was mandated as part of the CARES Act passed last year. The TLDR of basically everything they said is that the economy is poised for a strong recovery,

but the labor market is going to take longer. Powell reaffirmed that he doesn't see raising rates until the economy reaches full employment. He also argued that the spending package is unlikely to raise inflation much or for long. In addition to talking about some of these sort of more monetary policy questions, there was also a lot of debate around the upcoming infrastructure package and the taxes that are supposed to pay for it. Republican lawmakers are saying that it would stunt economic growth, while Janet Yellen countered that the forthcoming infrastructure package would actually improve productivity and growth and, in fact, spur employment. Finally, Powell also defended the central bank's muted projections for lowered unemployment this year, saying that part of the reason that their numbers weren't as dramatic. as maybe some expected, is that they factored in a growth in participation of the labor rate, i.e. more people deciding to seek jobs. Remember, the unemployment rate doesn't count people who

have given up. So when some meaningful number of people who have given up come back in, even if they're unemployed for a while, that means that they're participating again. That means that they're hopeful again. So net net, it is a good thing, even if there is a short-term damper on the exact unemployment rate. So net, net, when all is said and done, very little new, but perhaps some indications of the battles to come around the infrastructure stimulus and around more broadly this administration's interest in thinking about climate change as it relates to business, particularly around the infrastructure stimulus. With that, let's shift to our main discussion. When Tesla announced $1.5 billion in Bitcoin Treasury holdings, their filings also said that they

intended to let people buy Tesla's with Bitcoin. Today they lived up to that promise. At 3 a.m. Eastern time, Elon tweeted, You can now buy a Tesla with Bitcoin. Tesla is using only internal and open source software and operates Bitcoin nodes directly. Bitcoin paid to Tesla will be retained as Bitcoin not converted to fiat currency. Pay by Bitcoin capability available outside the U.S. later this year. So obviously, Bitcoiners are stoked. The timing is, in fact, ExtraSweet just a day after Fed Chair Jerome Powell said that Bitcoin isn't

useful as a currency. But moreover, people were excited about, one, the fact that Tesla are actually running Bitcoin nodes, and two, the fact that they aren't intending to convert their Bitcoin to Fiat. The first shows that they intend to be an actual participant in this network, not just an opportunist company who can grab some headlines and grab some short-term value. The second, speaking of value, shows that they believe that the long-term value of Bitcoin is going to continue to increase. We knew this already based on their treasury bet, but this strongly reinforces the other. idea. At the same time, the bears are so mad. Tesla and Bitcoin both inspire incredible hate in addition to

their incredible devotion, so let's check in on both sides. In the context of Tesla, there's TC at Tesla charts, who actually honestly has a good podcast and is worth a follow, even if you love Tesla. His tweet was something, something, something, RICO. Pretty extreme. On the Bitcoin side, you know we have to see what Peter Schiff has to say. He tweeted, the only reason Elon Musk will exchange a Tesla. for Bitcoin is that he wants the Bitcoin. The unit of account for the sale will still be dollars. None of the Bitcoin received will be used to pay expenses. Therefore, these are barter transactions. Bitcoin won't be used as money. Now, many recognize this is kind of a weak criticism, given that he's reinforcing exactly what we're excited about that Elon wants to hold the Bitcoin.

He also got trolled by his son Spencer, who responded, when Bitcoin inevitably becomes a common unit of account, will you finally concede that you were wrong all along? Now, in addition to these two specific examples, I saw a lot of tweets connecting Elon's theoretical environmentalism and Bitcoin's theoretical environmental impact as well. Like I've said before on this show, I think that Elon and Tesla getting into Bitcoin is actually going to increase rather than decrease environmental scrutiny on Bitcoin. I simply think there's too much concentrated hate in both of these communities for it not to just absolutely metastasize in the context of this particular seemingly obvious issue.

But like I said, this is about the Bears fuming, and let's talk about how all of their reactions pale in comparison to the cool stuff, particularly other companies following suit. The CEO of Buzzy Bed Startup 8Sleep tweeted, Should we let people buy 8 Sleep pods with Bitcoin? If you can buy a Tesla with Bitcoin, why not a pod? That's the sort of follow-on effect that can actually change the playing field for how Bitcoin is used or at least how people are allowed to use it. Now, of course, there are many who will say Bitcoiners don't want to.

spend their Bitcoin, and it's true. But two things. First, as Nick Carter said in a response to a snarky tweet asking why you would trade your BTC for a car if you thought Bitcoin was going to keep going up, Nick wrote, why do you redeem deferred consumption money for present consumption? Because humans aren't immortal and have temporal needs. But there's a second piece as well. Buying things with Bitcoin doesn't mean necessarily spending Bitcoin thanks to companies like this show sponsor NXO. Preston Pish suggested that even cooler than Tesla accepting Bitcoin would be to team up with one of these companies that offers loans against people's crypto collateral to offer financing directly through the interest on Bitcoin rather than having to get rid of that Bitcoin itself.

So a lot of great discussion, a lot of fun was had, like I said, regardless of all the haters, regardless of all the snark, the market liked it, Bitcoin is up, and we all had fun because watching Bears cry is the best. I appreciate you listening. I hope you're having a great week. be safe and take care of each other. Peace.