The Breakdown - Bitcoin Breaks $120K as Crypto Week Kicks Off in Washington

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, July 14th, and today we are talking about Crypto Week getting underway in Washington as Bitcoin sits at all-time highs. 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.L.Y slash breakdown pod. Well, friends, Crypto Week is getting underway in Washington, but on crypto Twitter, this is Bitcoin Week. Bitcoin spent the entire weekend trading above $117,000, giving absolutely no dips to buy into. As futures markets opened on Sunday night, Bitcoin took off again. It blew past $120,000

Starting point is 00:00:55 to reach $123,000 early on Monday morning, and we're currently trading at around $121,500, and the vibes are immaculate. Callaio tweeted, clean break above 120K. The real bull market is finally here, fellas. Bitcoin Jack was amazed he's getting rewarded for buying the top, asking, how much longer do they let me get away with buying at market? The chart is now at a point of long-term resistance that traces through the tops of the last two bull markets. Bitcoin has reached the same market cap as Amazon, with Apple next in line and another 30% higher. The timeline is euphoric for good reason, but we are starting to see the first signs of broader recognition that something big is happening. Bitcoin Google search trends are moving up for the

Starting point is 00:01:32 first time all cycle, defying the assumption that signal has gone bad. Joe Wisenthal, host of odd lots, is calling out the Daily Moves writing Bitcoin going nuts again. Internet troll Ian Miles Chong has put on a malady pfp. Bitcoin fear and greed is jammed even further in the greed direction. Ultimately, no one is watching out for top signals yet, but it is the first breakout that feels like a big occasion. Thankfully, Jim Kramer is still silent, so we have that going for us at least. Still, there are plenty of reasons Bitcoin could go much higher. While the U.S. dollar value is way up, Bitcoin is still yet to make a new all-time high against the euro. That's how much value the dollar has lost this year against the euro. It's also reaching an all-time high in gold term, so nothing is getting

Starting point is 00:02:11 too insane other than dollar devaluation. For Stack Hodler, the move is just a reminder of what Bitcoin can do. He commented, as Bitcoin moves up to $123,000 per coin, it's time to switch your chart to log scale for perspective. This is a rather orderly move. Many people have simply forgotten what the king is capable of. We were due for a reminder. Zoothing out a little, that's really one of the remarkable things about the current move. Bitcoin was up 4.3% on Thursday and registered a 2.5% move across just a few hours this morning. These big daily moves were commonplace in earlier cycles, but many believed volatility had been crushed by the launch of ETFs and institutions coming into the fold. Thursday's move saw 4,700 added to the price in a single day, more than the final green

Starting point is 00:02:51 weekly candle during the December 2017 blow off top. Stephen Jang, the head of research at the block, is ready for more, writing 10K weekly candles are cool and all, but I'm ready for 10K daily candles. Now, he's looking a few days in the past, but Joe Consorti of Thea Bitcoin wrote, Bitcoin at 118K has the lowest volatility of any major all-time high in Bitcoin's history. Look at the last decade or so. Bitcoin's current vol is what you generally see in the middle of the main run. This is not a cycle top. There is so much more gas in the tank.

Starting point is 00:03:19 Now, this is the moment in the cycle that Bitcoin critics come out of the woodwork and commentary starts to flood the mainstream press. Guy Swan wrote, pretty soon the whole world is going to be talking about Bitcoin nonstop. It's going to be infuriating. Most will have no clue what they're talking about, and they'll have very strong, angry opinions. Now, although crypto-twitter is filled with people cheering the move, frankly, it's very subdued. Things could get crazy from here, but mostly the feeling is summed up

Starting point is 00:03:41 by Mandrick, who said, 120k Bitcoin. Wow. Now, if we are looking for external signs that things are starting to get a little frothy, it's hard to go past the ETF data. Reflecting on Saturday, Nate Garassi of the ETFs, another billion dollars into spot Bitcoin ETFs, 2.7 billion for the week. Since the January 2024 launch, there have been seven days of inflows over a billion dollars. Two of those are in the past two days. BlackRock's ETF is now the fastest product to reach $80 billion in assets. And it did so at five times faster than the previous record holder, which was Vanguard's S&P 500 index fund. Bloomberg's Eric Belcunis wrote, total assets for all the spot Bitcoin ETFs crossed 140 billion for the first time as well. They took in over $1 billion last night, but it was really

Starting point is 00:04:24 the big move up in price that is doing most of the heavy lifting here. Now, the goldie, ETF is at 97 billion, so Ibit still has a little more to go. But taken together, the Bitcoin ETFs have blown past already. As an interesting sign of the times, Bitcoin Treasury companies have bought more Bitcoin than the ETFs for three quarters in a row. That's not at all surprising if you watch how fast Michael Saylor is buying, but it still highlights that there is a second big force driving these price moves. And if you're wondering if Micro Strategy is content with their current holdings, well, you must be new here. Michael Saylor tweeted on Sunday night, some weeks you don't just hoddle. Now, another interesting point is that

Starting point is 00:04:57 the Ethereum ETFs are starting to see huge inflows as well, but the price moves remain smaller than Bitcoin. Last week saw 900 million worth of inflows, the best week since launch. Felix Jovan of the Forward Guidance podcast noted that short interest for ETH has skyrocketed to an all-time high. He suggested that this is the migration of the basis trade rather than people getting bearish on ETH. Traders can currently get around 9.5% annualized by holding an ETH ETF and shorting the futures, or 13% if they hold stake-death instead. That's far higher than the current return on a Bitcoin basis trade at around 5.5%, so that position is likely shifted over to ETH. All in all, the story is that Bitcoin is ripping higher and ETF buyers are knocking down the doors.

Starting point is 00:05:36 The Kobayisi letter, which is widely read among tradfai traders, wrote an entire threat on Bitcoin this morning. They posted, this is not normal. We've reached a point where Bitcoin is moving in a literal straight line higher. Rates are rising, the dollar is down 11% in six months, and crypto is up a trillion in three months. What's happening? Bitcoin has entered crisis mode. They pointed to the passage of Trump's spending bill is the latest catalyst, but also noted Bitcoin is outperforming the S&P 500 by 15% year to date. Continuing, they wrote, it appears that institutional capital is chasing this Bitcoin run. In our discussions with institutional investors, we have noticed a recurring theme. Family offices, hedge funds, and institutional capital, more broadly speaking, can no longer

Starting point is 00:06:13 ignore Bitcoin. Even the conservative funds are looking to allocate around 1% of AUM to BTC. Basically, we've seen to have reached the point in the cycle where new buyers are forced to make a decision. Are they going to keep dabbling or take a serious position? In past cycles, institutions have always had the excuse that crypto isn't regulated and easy to access. Now with the ETFs, there is no excuse. The funds that haven't allocated are deliberately sitting this one out, and that choice is starting to get very uncomfortable. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from

Starting point is 00:06:57 single asset to diversified to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of TradFi and Crypto, and one of the benefits for a lot of us is that Grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visitgrayscale.com. Go to greyscale.com to explore their full suite of crypto investment products and invest in your share of the future. As for what comes next, Grayscale is putting the pressure on the SEC to fast track their crypto index fund. Two weeks ago, the Grayscale Digital Large Cap Fund was briefly approved by SEC staff before being kicked upstairs for review of the commission.

Starting point is 00:07:41 Grayscale's lawyers have now written to the SEC, noting the regulator technically missed the deadline for a decision, so the fund should be deemed approved under the law. The lawyers threatened to take the SEC to court once again to force them to follow the law. Finance lawyer Scott Johnson believes they're in the right, but that going to court isn't going to get them the result they desire. He wrote, Grayscale trying to force this issue to court doesn't buy them the time they want, so they need the commission to act. And they're getting impatient, clearly. The SEC is reportedly considering a generalized framework for crypto ETFs, but that does Grayscale no good. If the product can come

Starting point is 00:08:12 to market soon, they could get in before other products that started the application a little bit later. However, if the SEC drags its heels, then everyone is launching together and Grayscale loses the first mover advantage. Either way, crypto index funds look like the next product to come to market and could see significant new demand to keep the bull run moving. Over in the policy space, this is Crypto Week in Washington. Congress has set a goal to move three crypto bills forward. The first is the rubber stamping of the Stablecoin bill in the House moving it to the president's desk, but the more difficult battles will be around the market structure bill and a smaller anti-CbDC bill. With the Stablecoin bill almost certainly getting passed this week, foreign policymakers are starting to

Starting point is 00:08:47 sweat. In an interview with the Sunday Times, Bank of England Governor Andrew Bailey warned that Stablecoins threatened financial stability and the nature of money itself. He said he would much rather see the world central banks collaborate with commercial banks to offer tokenized deposits. He commented, I would say that the U.S. is going towards stablecoins. The European Central Bank is going toward central bank digital currency. Neither of them is going towards tokenizing deposits. Notably, Bailey appears to be backing away from the idea of a UK CBDC, which has been met with a complete lack of enthusiasm from the public. The rest of his comments were lifted directly from the Bank for International Settlements paper last month, which warned that

Starting point is 00:09:20 Stable Coins don't meet three key requirements of money, namely that they're not universally accepted and interchangeable, elastic in supply, or hardened against illicit use. The comments are really only noteworthy to highlight that Stable Coins are happening in spite of protests from the international central banking community. This is very much a policy the administration is forcing on the world rather than something with any level of acceptance. That's a big deal, given the administration views Stable Coins as a vehicle to push dollars in every corner of the globe, while also both stirring demand for U.S. debt. Basically, our stable coins, your problem. Closer to home, we got a preview of anti-crypto arguments aimed at stopping crypto week in its tracks.

Starting point is 00:09:55 Bloomberg published a lengthy hit piece on Trump's crypto projects, accusing World Liberty Financial of working with Binance to launch their stable coin. The key claim was that CZ had asked for a pardon around the same time. Now, the article was written by anti-crypto zealot, Zeke Fox, just to give you an idea of the level of bias we're working with here. World Liberty Financial's comments on the story was that your assertions are factually deficient and designed to further a political agenda. There was also an entire bunfight over whether Coinbase had planted the story, which they deny. But the takeaway is that the president's crypto issues remain the central pillar of resistance. Senior financial services Democrats put out a statement on Friday claiming,

Starting point is 00:10:29 Republicans are doubling down by fast-tracking a dangerous package of crypto legislation through Congress. Aside from lacking urgently needed consumer protections and national security guardrails, these bills would make Congress complicit in Trump's unprecedented crypto scam. Representatives for advocacy groups stand with crypto flooded the capital over the weekend, drumming up support for the bills. Community Director Mason Linau said, we're seeing some unbelievable momentum, unbelievable attention, and focus in bipartisan support for crypto as a topic. But the urgency is very real. While we have the momentum, we have to make sure we finish this mission. It's really unfortunate that people have tried to politicize crypto. When you cut through the noise and you look at the numbers, this is a broadly bipartisan topic.

Starting point is 00:11:06 Bipartisan, though it may be, this is set to be the loudest week of crypto resistance Congress has seen in some time. All bets are off on whether a market structure can get through. Although with a Republican majority in the House, that at least should be a fairly easy lift. The real challenge will be getting the bill through the Senate later this year, where around a dozen Democrat votes will be needed to push it over the line. Time is running out to get these bills moving, but assigning an entire week to the crypto agenda is a positive sign. And that is where we will close this week preview.

Starting point is 00:11:34 It's going to be an interesting one, and I'm excited to be here to cover it all with you. For now, 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.

The Breakdown - Bitcoin Breaks $120K as Crypto Week Kicks Off in Washington

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