The Breakdown - Bitcoin Smashes Through $70k

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 Tuesday, October 29th, and you better believe we are talking about Bitcoin reclaiming 70,000, and frankly, continuing to go up. 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 of the show notes or go to bit.L.L.Y slash breakdown pod. All right, friends, well, you know this is where we had to start after five long months of downwards chop. Bitcoin is back at 70K. Bitcoin rose above the $70,000 mark on Monday evening for the first time since June. And the market has only seen a daily close above this level on 12 occasions,

Starting point is 00:00:59 meaning that many are expecting resistance to be extremely strong. Still, this is the best chance for a blue sky breakout we've seen since before the summer and traders are out. absolutely chomping at the bit. Bob Lucas wrote, It's like you can feel the pressure rising rapidly. Jake Gujastic tweeted, Bitcoin give us the God candle. Others are taking a different strategy, more like crossing their fingers and shutting their mouths. Haley Lenin of Brown Rutnik tweeted, no one tweet about the Bitcoin price, just don't do it. And Raul Paul is waiting for more confirmation before declaring that we're in the banana zone tweeting,

Starting point is 00:01:29 sh, don't scare our little yellow friend until Solana breaks 185 with Bitcoin over 70K. Then it's Fruit City. This breakout does seem to have a bit of a momentum behind it, reminiscent of the strong rallies in 2020. A trader called Bingler noted, Bitcoin just ate through a 700 BTC limit sell order on Binance. Time for the Bulls to take control if this holds up here. Checking in on the price action overnight, Bitcoin held firmly above 70,000 for the entire stretch, and at the time of recording was actually above 71,000. So what does this all mean? Well, earlier this month, we mentioned that Bitcoin typically sees most of its gains in the back half of October, but this is definitely cutting it close. With just three

Starting point is 00:02:06 days left, Bitcoin is up around 12% for the month. That would make this the fifth worst October since 2014. It's certainly no longer looking like the miserable Uptobers that came in the middle of crypto winter, but perhaps closer to the one in 2016 which notched a healthy 15% gain. Still, we're a long way away from the octobers during raging bull markets where 30, 40, or even 60% gains were made. Then again, are we not Bitcoiners if we cannot adapt our narratives quickly? Perhaps a relatively subdued October is setting the stage for a wildly positive 2025. Remember, this would still be the strongest month since March, which is nothing to get frustrated about. Staying on the market side of things for a little bit, Bitcoin ETF saw another massive week of inflows.

Starting point is 00:02:48 Total net inflows for the U.S.-based products were just shy of a billion dollars. BlackRock by itself had five extremely positive days, adding 1.15 billion. That total was weighed down by the large net outflows from the Ark Fund and minor outflows from Bitwise and Greyscale. And while last week was a downtick from the week prior, recent inflows are starting to pile up. Over 3.3 billion have come into crypto products globally in October, adding 12% to net asset value. Overall, it appears that this will be the fourth largest month on record. U.S.-based funds are closing in on 1 billion Bitcoin under management, or around 5% of all the Bitcoin that will ever exist.

Starting point is 00:03:22 Nate Garassi, the president of the ETF store, commented on how absurd the numbers still are nine months after launch, tweeting, Over the past 12 trading days, spot Bitcoin ETFs have taken in nearly $4 billion. For context, less than 10% of the 3,800-plus ETFs in existence even have $4 billion in total assets. Ibit alone has taken in $2.6 billion. Ridiculous numbers. Still perhaps more notable is that ETF traders completely ignored all of the tether and

Starting point is 00:03:46 warfud that knocked the market off course heading into the weekend. Friday inflows were over $400 million the largest for the week. Monday was even better with over $470 million in net inflows. At their current pace, the Bitcoin ETFs are buying almost five times the daily supply. Sean Edminson, who tracks the ETF's Bitcoin holdings, thinks we're about to hit an inflection point, tweeting, BlackRock's purchasing has gone up a gear in the last two weeks, and it is now starting to leave the others in its wake. Corporate adoption is accelerating, and your time to get some and get yours at reasonable prices is rapidly diminishing.

Starting point is 00:04:17 U.S. debt is out of control. Bitcoin is your hope. Sticking with the ETFs, the first university endowment has bought Bitcoin. Atlanta-based Emory University now owns more than 15 million in shares of the grayscale Bitcoin mini-trust. The university also disclosed around a million dollar investment in Coinbase stock. Bloomberg Senior ETF analyst Eric Belcunis wrote, Emory University reported 15.8 million worth of Bitcoin, the first endowment to report a Bitcoin ETF position. With that, every institution type is now represented in the Bitcoin ETF 13Fs, endowment, bank, hedge fund, insurance company, advisor, pension, private equity, holding company,

Starting point is 00:04:52 VC, trust, family office, and brokerage. absolutely insane feat for a category less than a year old, akin to winning all four tennis grand slams before their 16th birthday. To the extent that people were skeptical, many pointed out that Emory has an $11 billion endowment, and so the argument was that this was basically pocket change. Still, right now, we're still in the normalization phase, where it's all about first movers breaking the ice. Emery's endowment isn't as large as some of the Ivy League funds, but it's also no slouch. The fund ranks is around the 13th largest in the U.S., similar in size to Cornell, Johns Hopkins, and Duke. institutions still have two more weeks to file their 13F disclosure, so we could still have a few more

Starting point is 00:05:27 surprises in store. It'll be interesting to see if some of the first movers add to their positions now that they've had a little time to get more comfortable. The other thing to watch will be the sheer number of institutional investors increase. Hunter Horsley, the CEO of Bitwise, thinks there's a big shift underway, tweeting, family office last week, I guess it's time we get off zero. Sign of the Times. This episode of The Breakdown is brought to you by XAT Network. As regular listeners know, one of the things that I think is really exciting right now is all of the new builder energy around Bitcoin, and XAT Network is a great example of that. XAT Network utilizes a combined consensus mechanism of POW and POS, enabling miners to earn revenue and stakers

Starting point is 00:06:06 to earn Bitcoin yield. Their state data index mirrors Bitcoin UTXO data, creating a venue for BTCFi to flourish and a platform to trade Bitcoin assets. ExSAT network partners with Matrix Port committing 5,000 to 10,000 NBTC to the network, assisting with DAP development and enhancing security. Ultimately, the goal is for X-SAT network's decentralized asset custody to enable you to earn Bitcoin yield without sacrificing security or transparency. The X-Sat Network aims to unlock and scale the Bitcoin ecosystem without compromising Bitcoin ideology. Check out X-Sat.net or follow X-Sat on Twitter at X-Sat Network, that's E-X-S-A-N-E-T-W-O-R-K, and unlock Bitcoin Defi with X-Sat. At this stage, analysis of price action is becoming a cliche.

Starting point is 00:06:51 There's near total consensus that a combination of rate cuts and anticipation of a Trump victory are driving Bitcoin higher. As one example, Van Eck, head of digital assets research Matthew Sigel told CNBC yesterday, our bet is that this is a very bullish setup for Bitcoin going into the election. We saw the same pattern in 2020. Bitcoin was quiet before rallying with high volatility once a winner was announced. He added that the latest run-up was correlated with Trump's odds rising in betting markets. To the extent there's a different analysis, it's that a breakout is programmed into the Bitcoin

Starting point is 00:07:18 cycle. It's now been 192 days since the halving. While price action has underperformed previous cycle so far, we can see demand building from a number of places. Mapping onto the last cycle, we're roughly in mid-November 2020. That would mean that we're just entering the part of the cycle where things get crazy. There's even some looking way back to 2016 and noticing we're sitting right in the long-term trend line. For technical analysts, there isn't much space for Bitcoin to sit at at these levels for long. On the other side of the analysis, some are warning that the election will be a sell-the-news event, at least in the short term. To your capital CIO, Edward Hinde's

Starting point is 00:07:49 said, profit-taking could weigh on the price of Bitcoin in the days following the result announcement, yet dip buyers should maintain strong support below 60,000. He was confident that Bitcoin will keep marching towards all-time highs in December, regardless of the result. However, the election turns out, it's clear that this will be one of the largest Bitcoin trading events in its history. The volatility could make the average macro data release or Fed days seem quaint. Traders are loading up on Red Bull in preparation to trade all night next Tuesday, although for the hoddlers, it's just another Tuesday for stacking sats. One more market story. Bitcoin mining stocks are surging, but it's not entirely to do with Bitcoin. Before Monday's opening

Starting point is 00:08:24 Bell, Jeffreys issued a buy rating for Core Scientific based on their activity in the AI data center space. Benchmark analyst Mark Palmer said, we're seeing two big drivers of Bitcoin miner stock appreciation working at the same time, with the price of Bitcoin rising at the same time that enthusiasm for Bitcoin mining stocks, as plays on the growth of AI have returned. Core Scientific closed the day up 6.2% and is now quadrupled year-to-date. Palmer added, while all the minor stocks are getting a lift from the Bitcoin price rally, it is a subset of the miners such as Iran, Hut 8, Bit Deer, and Terawolf, those that have more of a focus on powering AI projects that are outperforming as they are perceived as beneficiaries of both drivers.

Starting point is 00:09:01 Core Scientific has been something of a rags-to-riches story this cycle. The Bitcoin miner was hit hard by the industry collapse, largely due to defaulted contracts with Celsius. The firm went through the bankruptcy process at the end of last year and emerged with a new plan to service demand for AI infrastructure. The company signed a long-term deal with Corweave, which put them back on track. In his Monday morning note, Jeffrey's analyst Jonathan Peterson wrote, Jeffries expects many big tech companies to watch the core weave developments closely, and successful execution will convince decision makers to sign future development leases. He added that this was a, quote, impressive post-bankruptcy comeback story

Starting point is 00:09:32 as the company leverages its significant access to power, previously earmarked for Bitcoin mining, to build AI-focused data centers. While there was certainly a level of luck involved in this transition, we believe Core deserves credit for an experienced development team that is capable and prepared for this pivot. Earlier in the month, Core Scientific CEO said the firm can grow exponentially over the next few years, commenting, signing up another 500 megawatts or one gigawatt of deals over the course of the next few years puts us in a position where we're not a $2.5 billion company. We are potentially a 25 to $30 billion company. Now, this pivot to AI isn't a new narrative for Bitcoin miners, but the investment thesis is starting to get a lot more powerful.

Starting point is 00:10:08 Over recent months, it's become apparent that there isn't close to enough supply of top-end AI data centers. At the same time, private investors have become increasingly leery of playing the trend through venture bets and mega-cap tech stocks. There's been a surge in private equity and private credit investments into data center construction as a way to access the picks and shovels of the AI boom. We've also seen Bitcoin mining firms emerge as some of the leading experts in building large-scale high-performance data centers in a hurry. Crusoe Energy, for example, was recently tapped to lead design and construction on a 200-magawatt facility, OpenAI, and Oracle are building in Texas. If this project is completed quickly, which seems like the goal, we can see Bitcoin mining

Starting point is 00:10:41 firms earn a reputation as the most efficient data center builders in the U.S. This all leads to the conclusion that Bitcoin mining firms could be one of the only ways for public equity investors to access AI infrastructure investment. The trend is still extremely early, but there's the potential to see AI and Bitcoin investment converge in the sector. However, the commentary around the trend isn't waiting for confirmation. Makesy writes, Bitcoin miners literally pivoted to AI. These are some of the only sites with plug-and-play power and data center infrastructure for running GPU clusters at scale. So friends, that is the market story. It is an exciting one. Vives are good, vibes are back. Where will October end? Just a couple more days to find out. Appreciate you guys listening.

Starting point is 00:11:19 As always, and until next time, be safe and take care of each other. Peace.

The Breakdown - Bitcoin Smashes Through $70k

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