The Breakdown - Bitcoin Bull Howard Lutnick for Commerce Secretary

Episode Date: November 21, 2024

NLW covers the latest in pro-crypto appointments. Cantor Fitzgerald CEO Howard Lutnick isn't heading to Treasury, and will instead be Secretary of Commerce. Plus the latest rumors on the Treasury Role and the SEC. 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 Wednesday, November 20th, and today we are talking about an extremely consequential presidential appointment. 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, something we have been watching very closely is, of course, the race to become Treasury Secretary. And for at least one big crypto advocate, they're going to have to be content with something

a little bit different. President-elect Donald Trump has appointed Howard Lutnik as Secretary of Commerce. That, of course, takes the transition team co-chair out of the running to become Treasury Secretary. Lutnik is also the CEO of Cantor Fitzgerald, who is Tethers Wall Street banker and says he owns a small fortune in Bitcoin. The cabinet position will keep Lutnik within the inner circle during the Trump administration, but also keeps him away from the levers of power at the Treasury. Announcing the appointment on truth social, Trump said,

Lutnik will, quote, lead our tariff and trade agenda with additional direct responsibility for the Office of the United States Trade Representative. On tariffs, Lutnik has been a supporter of Trump's agenda, but has called for a more nuanced application. He views tariffs as a tool for negotiating trade agreements rather than as a way of extracting tribute to the U.S. empire. Still, he has in the past promoted tariffs as a way to do without income tax and could push for major tax reductions. More broadly, the Commerce Department has grown in stature over the past few years with the return of industrial policy. Under Biden, the department took the lead on the Chips Act and managed the troubled rollout of regional broadband. Lutnik could be tasked with pushing

manufacturing, reshoring industries, or a host of other initiatives that fall under the Trump economic agenda. Of course, he'll also have a keen focus on reshaping domestic crypto policy coming out of the two-year crackdown. Letnik has previously said that his focus is largely on Bitcoin and Tether, stating, quote, these other coins, they're just not a thing. This doesn't mean he will be hostile to the rest of crypto, just don't expect him to pay much attention to defy in other sectors. When it comes to Bitcoin, he has said, my view as Bitcoin like gold should be free to trade

everywhere in the world. As the largest wholesaler in the world, here referring to Cantor Fitzgerald, we are going to do everything in our power to make it so. Speaking of Cantor Fitzgerald, securing a position in the cabinet leaves an open question of what happens to that company. Over the summer, Lutnik announced the firm had plans to establish a Bitcoin financing business with $2 billion in lending capacity. We don't know whether Trump will force cabinet members to walk away from their private sector positions to avoid conflicts of interest or take a more lazai-faire

approach. Either way, Lutnik's influence could place Bitcoin capital markets policy on the list of priorities. Certainly, Bitcoin Twitter is taking a flavorable view of this. Marty Party posted, It's over Bitcoin to $1 million. Lutnik is in. Flowhorst tweeted, Lett is about to get picked as Secretary of Commerce. Cryptop payments and use about to get major approval. This space is going much higher. Outside of the industry, this is being viewed, however, is Trump shunting Lutnik to one side. Investor Lauren Baalick wrote, Secretary of Commerce is the ultimate Equities in Dallas position for Howard Lutnik. Equities in Dallas refers to a particularly undesirable role in a financial firm, kind of the opposite of tech

stocks in New York. When it comes to that question of Treasury Secretary, the administration still has a massive question mark. Former Fed Governor Kevin Warsh is viewed as gaining momentum. Warsh would be a stark choice of an old-school Republican in the unorthodox Trump cabinet. Warsh was appointed to the Fed by the George W. Bush White House as the youngest ever governor. His public views promote free trade, political independence of the Fed, and a strong dollar, all of which clash with Trump's agenda. One former Trump official told Politico, bringing people like Kevin in would demonstrate that the broad coalition of support Trump has assembled across the country is equally broad among those in the business world. In the crypto world, Warsh is viewed as having some dangerous views on

CBDCs. In an essay published by American Renewal, he wrote, I am concerned that bank-like regulation of private stablecoins might not prove a sufficiently strong foundation from which a reformed American-led financial architecture should be established. His view was that stablecoin should never be allowed to be covered by an implicit government guarantee. Instead, Warsh said, there is only one true stable coin and it's the silver dollar in its paper equivalent. I'd prefer a more robust response to the Chinese challenge than a multitude of privately issued stable coins. To give Warsh's due, the rest of the essay discusses the danger of a retail facing CBDC in that it would undermine American values and risk destabilizing private sector banking.

The piece was also written in 2022 when the Chinese CBDC was viewed as a more credible threat to the dollar. On the other hand, Warsh has served as an advisor to Electric Capital. He garnered a glowing report from partner Avichal Garg who tweeted, Warsh is an excellent pro-crypto pick for Treasury. He's been one of our most helpful hands-on advisors at Electric Capital. He's an investor in crypto, fintech, and AI companies. He gets macro from his time at the Fed. Few people has qualified as Kevin for this job. The other name at the top of the list is Mark Rowan, the CEO of private equity giant Apollo Global Management. His views on crypto are basically non-existent, at least as we know so far.

During an interview earlier this year, he was asked how crypto will play a role in the future of the U.S. financial sector, to which he responded, honestly, very truthfully, out of my depth, absolutely no idea. Polymarket odds between Rowan and Warsh have been fluctuating with each headline over the past few days, but both are currently around 40% to secure the job. Hedge fund manager Scott Bessent remains a stocking horse candidate. reports over the past week suggested that Trump had become infuriated with the fight between Besson and Lutnik, leading him to look elsewhere. With Lutnik out of the picture, however, Besson could get a second look. Trader Necroveris thinks that's exactly how this will play out, tweeting,

my gut, Trump picks Besson in the end. This was his original intended pick, then he got co-opted by Lutnik. Lutnik cut a deal in the end when he saw the ship sinking. Trump does not want Warsh's Treasury Secretary. He was pitched on him to be a shadow-fed chairman in waiting, and that makes most sense. In my opinion, the longer this drags on, the more likely Besson gets the Treasury job. This is the more experienced in deliberative Trump, having served one term as POTUS, but acknowledging the mistakes he made staffing his first administration. Ryan Selkis co-signed that opinion, adding, Besson at Treasury and an empowered Lutnik at Commerce and Tariffs are would be an extremely formidable economic duo for 47.

Generally, Besson, you'll remember, is viewed as a financial genius who is positive enough on Bitcoin to run the first pro-crypto Treasury. Turning to the SEC, some new names are being floated as the head of the agency. The first is Wilkie Far partner, Robert Stebbins. Stebbins doesn't have any particular ties to crypto focusing on transactions and corporate governance in his private practice. He was last in government as SEC General Counsel during the previous Trump administration. The ripple corner of CT is concerned, with CEO Brad Garlinghouse writing, in a group of strong candidates for SEC chair, it's unconscionable to consider someone directly involved in Bill Hinman's unethical and likely illegal push to pick winners and losers in crypto.

Choosing Stebbins would be akin to bringing us back to the start of the regulation by enforcement era. Ryan Selkiss surfaced an alarming Stevin's quote, I will KYC and sanitize defy. Now, it's unclear exactly where that quote came from, but if it's real, it's certainly provocative. The other major new contender is Crypto-Loyer Teresa Goody Gehan. She is currently the co-lead of the blockchain team at Baker Hostetler and previously worked as an SEC lawyer during the first Obama term.

Sources say that Trump is looking for a non-bureaucrat to lead the agency. Goody Gean fits that bill spending the last decade in private practice, including as the CEO of her own firm. Crypto firms are reportedly lobbying for her behind the scenes. Brendan Playford, co-founder of Massa, a blockchain infrastructure firm said, She's the best candidate of all the people that are currently being opined on. She has a clear understanding of the laws, has a clear understanding of the way the SEC works, we would just have an instant changemaker that would dramatically transform the industry

with someone that's very pro-crypto. Charlie Cooper, senior advisor at Digital Assets Solution Provider R3 and former COO of the CFTC said, she is understated, but she's tough as hell. She would govern based on substantive understanding of securities laws as they apply to the traditional markets as well as to crypto, and she will dramatically roll back the prior administration's default to regulation through enforcement and arbitrarily reading into statutes written 90 years ago. Nicole Trudeau, General Counsel for Investment Firm waived digital assets, has worked with Guillen on a number of crypto-related bankruptcies and said,

Teresa is a true trailblazer in the crypto space, bringing the expertise in vision needed to lead the SEC and drive the growth of U.S. crypto and capital markets. She embodies everything President Trump envisioned for the sector. Obviously, we will keep posted as we're following these appointments like sports trades at the moment. Following up on some stories from earlier this week, Bitcoin hit a new all-time high as ETF options commenced trading. $94,000 is the new high watermark, as Bitcoin's all-time high inches up week by week.

The range also seems to be compressing, staying above $88,000 since the weekend. The big news, however, is the first day of trading for Bitcoin ETF options. The products went live for Ibit yesterday with the other funds expected to join in from today. Galaxy Digital head of research, Alex Thorne, went on Bloomberg to discuss the launch, stating, Over time, as it's more widely held, volatility will decrease, options will help dampen volatility, and as volatility comes down, people can take larger position sizes. Something of a mixed bag, then. Losing the eye-popping volatility of Bitcoin's early days means we're unlikely to see the 20%

or more monthly gains from the past. However, it also means that larger institutions can hedge their bets appropriately, making the asset much easier to carry. Analyst Joe Korsi has a similar view, stating, the launch of spot Bitcoin ETF options specifically for the Ibit vehicle marks the beginning of a new era for price dynamics, volatility, and institutional adoption. He notes that derivatives on U.S. equities are 10 to 20 times the size of the underlying market cap. For Bitcoin, derivatives are still less than 2% of the spot market cap, meaning, of course, that the market is still

vastly underdeveloped. Restricting options to offshore and professional venues also means that U.S. retail is no easy access to Bitcoin options. Retail, meanwhile, makes up 44% of options volume for U.S. equity options. Listing options on the largest stock exchanges should help integrate Bitcoin into U.S. financial markets, boosting liquidity and market depth. Consorty said, a robust derivative ecosystem reduces volatility, improves price discovery, and allows institutional capital to engage with Bitcoin at scale. The introduction of Bitcoin ETF options isn't just about one new product. It's about transforming the market. All in all, things are very forward looking right now. Bitcoin featured heavily, for example, in BlackRock's 2025 Thematic Outlook

report. Alongside AI, geopolitics was the major theme for next year. BlackRock referred to Bitcoin as an emerging asset with the properties of a, quote, alternative monetary asset that is digitally native, global, and detached from governments in their existing economic and monetary systems. The world's largest asset manager believes the asset will prove to be uncorrelated to traditional risk assets like equities. They wrote, Bitcoin remains a volatile asset in general, but we believe Bitcoin's long-term fundamentals are largely distinct from the traditional macroeconomic indicators that drive equities and other risk assets. The firm also thinks that adoption rather than macro conditions are the major story for the decade, adding, in the more immediate term, changes in real interest rates

do tend to impact non-interest-paying assets like Bitcoin and gold, as they change the opportunity cost of these assets compared to income-paying investments like bonds. Now, amid rate cuts, real interest rates could fall. This could cause investors to view Bitcoin as increasingly attractive relative to other assets. In addition to the macro environment, there is a renewed sense of optimism that regulatory clarity for Bitcoin and digital assets more broadly may emerge following the U.S. election. The macro environment combined with supportive policies could combine to accelerate and broaden Bitcoin's adoption. So that is the story from here, lots and lots of imaginations over in the political world. Like I said, we're kind of all just trying to figure out now what

happens next given that this election has come through. What is the real shape of the officials who are going to lead policy in crypto and Bitcoin going to be? That's the big question for now and also where we will close today. Appreciate you listening, as always. Until next time, be safe and take care of each other. Peace.