The Breakdown - Bitcoin's Record Breaking Week: The Five Biggest Stories in Crypto

Episode Date: March 9, 2024

NLW and Scott Melker count down the most important stories in crypto this week. Today's Show Brought To You By Ledger - 5% to Bitcoin Developers When You Buy https://shop.ledger.com/pages/bitcoin-hardware-wallet 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 Saturday, March 9th, and that means it's time for the weekly recap. Normally, I would tell you to go subscribe, rate, and review. But as it turns out, I ran out the door to a little man's third birthday party without recording this intro. So you're getting AI me. The good news is that Scott and I have tons to talk about in a week, where we flirted with all-time highs, had some interesting court cases and more. Happy Saturday all.

It has been an absolutely massive week. I got a message from NLW last week that said, dude, you took quite a great time to go on a vacation. Like last week we had Bitcoin going from like the high 40s up to almost a new all-time high and I was in Japan and it was one o'clock in the morning. We can still talk about it all today, right? Our first topic is literally the price action. Yeah. I mean, it's all part of the same story, right? Yeah.

So maybe it was just, I was delaying a week so that we could actually talk about the new all-time high. Take you a look at the market right here. Bitcoin, we saw it. We've talked about it endlessly on Tuesday, up to 69, down to 59. Now just chilling at 68, like it never happened on that leverage flush. But Ethereum really seeming to want to catch up here up 4% in the last 24 hours and 24 bucks short of $4,000.

I mean, do you think that that's the rotation? narrative is still alive and well? Yeah. I think that Ethereum's an interesting spot in the sense that Bitcoin obviously is sucking a ton of oxygen out of the room with the ETF, but then Solana and meme coins are also, you know, pretty dramatically loud narrative right now. And I think there's a lot of folks who are still sort of in the, you know, excitement about Ethereum camp. And maybe to some extent we're seeing people positioning for what, what seems like an inevitable, you know, rotation in catch up, return to focus. But right now, I think the most notable thing about all this is like, think about how different this is than where we were two weeks ago the last time we talked.

I mean, it was just a dramatically different situation. And now somehow inside of a week, we've gotten completely used to Bitcoin at levels that it had previously only spent a couple days on ever. I feel like if we went down to 60,000 now, people would be crying in the streets. So it just shows you how fast we get used to new normals here. It's the great memes. It's like Bitcoin on the way up and it's Wolf of Wall Street or Great Gatsby, Leo. And then you get him in like, you know, dying in the frozen tundra on the way down at the exact same price.

It makes a lot of sense that that's sort of how it is. We also have here, Ether could run to $10,000 or higher this year on numerous catalysts. We're already talking about huge topics for Ethereum. And of course, this one, Ethereum's Dengoon upgrade could mean near zero fees for layer two blockchains, fidelity, digital assets. This is happening next week. Yeah. I mean, you know what's interesting is if you look at all the research houses, you would think that the place that their sort of narrative making would go is speculation around ETHF approvals. And there's a little bit of that, but there's actually a lot more that we're seeing around some of these

technical upgrades as being, you know, meaningful catalyst. So it's interesting to me that you've got non-crypto actors paying attention to stuff that was previously fairly inside baseball. Yeah, like when the mainstream is talking about the having or the merge, you know that things have slightly changed and for the better. It's funny because we always get this social metric. How many people are searching Bitcoin? How many people are searching Ethereum? And people say, we're so early. It hasn't happened yet.

The searches are low. I take the other side of that, which is that everybody just knows about these things now. So now I think that you have the average person doesn't need to Google search Bitcoin anymore, but they may need to Google search the having. So we're moving into the actual narrative surrounding. rounding it rather than just the asset. Yeah, I think that's a good observation. I think that there are probably other of our kind of traditional retail signals that are stronger. I think that probably Coinbase's position in the App Store is a slightly stronger indicator

than sort of the Google search thing. You know, I mean, on this note of whether we're early or not and where we are in terms of retail awareness, again, going back two weeks, we were still speculating on when retail would start paying attention again. I think that it's certainly the case that the sort of approach of all-time highs did, in fact, capture some amount of attention. We started to get those text messages. I'm sure everyone who's listening now got at least one of them, you know, with a friend or a family member asking about things. I don't think that that means we're fully back to people, you know, kind of going crazy for some, you know, the average person and your uncle and Topeka is not buying Joe Bowden coin yet.

But we're certainly... That's right. And they were buying Doge. Exactly, but we're certainly seeing more of that attention being paid. I mean, if we're talking about price action, we have to talk about inflows, because even with the drop from 69,000 to 59,000 on Tuesday, BlackRock's Bitcoin ETF added a record 12.6K Bitcoin that day, right, which is over $700 million worth. So on the one hand, you have degenerates getting flushed of leverage because that's all

that could be to see a $10,000 drop. And on the other hand, fundamentally you have more buying than ever into these ETFs. Yeah, it was interesting. I think that during the day, everyone kind of assumed that despite, I mean, we watched massive volume taking place, you know, during the day. But then when the actual sort of flow reports came in, and it was a huge day up overall and especially for BlackRock, you know, it sort of told a different story, which is probably why things were covered so quickly the next day is that it clearly wasn't sort of a break in trend so much as just some market flush. And there was a bunch of

interesting stories that we didn't necessarily cover, but those 2010 vintage bitcoins moving, in sort of a huge patch right at the top. You know, that frankly could have been enough to trigger some of this. So interesting times, but it certainly doesn't feel like the trend is somehow shifted dramatically and we're headed back down all of a sudden. No, I don't think we've had mania at all, to be honest. And you kind of hinted at this. Pepe leads meme coin rally as Ether near as 4K.

Traders have been using meme tokens as a proxy bet on the growth of Ethereum or other blockchains. I mean, we always have the consistent cycle. Bitcoin goes to Eiff. The thief goes to midcaps, midcaps, and then you get meme coins going crazy and a flush, right? And we did have meme coins going crazy right. The top of meme coins are still going crazy. So maybe we have a slightly different cycle this time.

But I've made the argument, this is nobody new coming in to trade these meme coins, just like you just said. This is the classic crypto DGens, rotating, pumping. Totally. No, this is not like the doge coin days where you had three months waiting periods to sign up to Binance because you're. wanted to trade Doge and they couldn't onboard you fast enough. No one plays higher stakes musical chairs than we do, and that's what this is.

Now, I think that if you wanted to get highbrow around this, go read Travis Kling's thesis about financial nihilism and why it makes sense, perhaps, that meme coins are the choice for this cycle. You know, it's fascinating. It's such a Rorschach test for not even just individuals, but how you're feeling on any given day, whether you look at meme coins as just a great example of pure unfettered capitalist games in an environment where who cares and everyone knows the stakes and they're just doing it, or super cynically like there's nothing better that we could be spending our time on.

I feel like for most people, it's more of a day-to-day assessment, but it certainly is a factor right now. Yeah, I mean, there's like 5,000 people that are probably actively doing this, and we are pretending that it's this massive movement like GameStop or something. I was on Yahoo Finance the other day, and Cynthia Lummis was on before me, coincidentally, and they're asking her about Bitcoin, and then they asked her about meme coins. And I thought, man, this is really embarrassing. And she had to answer for the meme coin degeneracy of our market.

So at least there is some of consciousness of the media that this madness is happening. Hello, breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, it's another chance to think about your Bitcoin custody best practices, and of course, to help all the new folks do the same. ledger is the global platform for securing Bitcoin and other crypto. Ledger combines both hardware wallets and the Ledger Live app to offer the best way to buy, sell, swap, and stake without sacrificing on security or self-custody.

Ledger features cutting-edge technology in the form of a certified secure chip and a proprietary operating system, but also brings ease of use. This makes Ledger a safe and secure way to manage your digital assets without all the stress. Check out the link to the Bitcoin Ledger Nano in the show notes. 5% of all sales of the Bitcoin Ledger Nano go to support Bitcoin development. Thanks once again to Ledger for supporting the breakdown. We got to move on to the next topic, which is the SEC back at it again. SEC charges Shapeshift AG Crypto Platform with operating as an unregistered dealer.

Quickly, the take started coming in shapeshifting justice. SEC's weakest case yet, literally a $275,000 fine. Eric Forrehe, he's the founder of Shapeship, laughed this off, took it as another opportunity. to dunk all over the SEC. And then, of course, immediately you had Hester Perth and Uyeda coming in and questioning the ambiguity, dunking once again all over there, quote unquote boss, Gary Gensler. They even wrote out a hilarious Hollywood-level script of what it would be like to come in and register to the SEC.

It seems like this is just becoming comical if it wasn't already. Yeah, I mean, it is this sort of feeling of a last gasp of a, of, beleaguered, you know, combatant on the field, just trying to leave the field with their, with one final sort of blow, you know, to keep their own sense of their pride intact. The fact that the commissioners are in such open rebellion now, I mean, Hester Purse is not a Trumpian shi slinger by personality. Like, that's not who she is. She's an extremely reasoned, thoughtful person, who, if you look at her dissents in the past, they've always been, super highbrow and specific. So the fact that we're now seeing just outright mockery, I think is

reflective of, one, just the level of frustration that has been after this hasn't changed for so many years. But two, probably an assessment of Gary Gensler's political position. This is something that you wouldn't do if you thought the person that you were mocking and the institution that you were mocking was in a strong sort of credible position. So I think that for those of you who are watching sort of inside politics kind of baseball. It's, you know, potentially an indicator there. And Hester Purst has long been dubbed Crypto Mom. And I actually said that to her on one of my early podcast conversation with her. And she pushed back very hard and hates that title, to be clear. She says, I'm not pro crypto. I'm pro sensible regulation and rational thinking. Right. This isn't

even about her believing in these assets, which maybe she privately does. This is more about her saying, this is the way that the SEC should operate and we should give clarity and we should do the right thing and we are not. So it's not even about crypto. She dissents and pushes back when there's nonsense in other markets as well. Yeah, you're seeing more of that kind of specification happening to. One story that we didn't cover last week was the Cracken Attorney General amicus brief, where eight attorneys general kind of filed an amicus brief in the SEC versus Cracken case. And Cracken went out of its way to make sure that it was clear as they discussed it, that this was not a pro-cracken position. It was a anti-SEC overreach position.

And, you know, those things do make for strange bedfellows, but, you know, it's nice that we can have allies on the basis not of, again, people wanting to get into meme coins alongside us, but just sensible looks at the world. Yeah, we are not the only industry that's angry at the SEC, right? He's poked the nest of Wall Street, hedge funds, private equity, short sellers. It's not great for him. And I think that it's going to go pretty badly for Gary Gensler and the anti-crypto army, which gives us a very nice segue into the next topic, which is politics.

Crypto seeks to make mark on U.S. elections during Super Tuesday. Coinbase CEO, Brian Armstrong, calls primaries a chance to send a message to U.S. politicians, ignoring digital assets policy issues. And if you guys haven't been paying attention, whether this is a narrative or is actually true, I cannot speak to. But Crypto SuperPack Bear Shake had a $10 million ad campaign against Katie Porter. And they released this statement after she lost to Adam Schiff, who, by the way, is no friend to the industry. It's not like I think we're cheering Adam Schiff in this case, but basically saying that it was crypto voters and their money that cost Katie Porter her election.

and they specifically called out Senator Warren and her anti-crypto army and said, we are coming for you. Did they really swing this election and are we actually having a meaningful impact moving forward? I don't know enough about the dynamics of this particular race to know how fragile Katie was going into this or how strong her position was. I think that she came in third. So she clearly really fumbled the ball in a big way. I think a $10 million ad buy in a local campaign like that is meaningful and it's significant.

I think that the ability for the crypto industry and sort of these super PACs to frame crypto in ways that are more broadly resonant than just for hoddlers is also probably on display a little bit here. But frankly, I think that part of what we're seeing now is early inning narrative jockeying where, interestingly, both sides want crypto to claim the victory here. If you saw Katie Porter statement, she blamed it on billionaires from a way who, you know, tried to manipulate the vote. And she actually had to clarify her statement because she made it sound like there was, you know, fraud and manipulation. And she, you know, clarified that she just meant that there was too much money from outside. But, you know, fascinatingly, we have a situation where crypto, the crypto lobby wants to claim credit to seem powerful. And the people who lose to the crypto lobby also want them to claim credit so that they can use it as a bully cudgel. But

Ultimately, to some extent, these elections will be a referendum on whether the anti-crypto army or the pro-crypto army is the better bet for this election season. Right. She's squarely a member of Elizabeth Warren's anti-crypto army. She's definitely someone who gets a lie. Card carrying long since from my cold dead hands, anti-crypto army. And whether it was the effect of the crypto lobby that did this or not, we get to use that narrative moving forward.

And it has to be on Elizabeth. Warren's radar right now, especially with John Deaton stepping up to run against her and him having a pro-crypto stance and openly talking about those things. So the loss, regardless of how it happened, I think, is a move in the right direction for our industry. And you have to wonder that even if Elizabeth Warren wins at this point, maybe she tones down the rhetoric. Maybe not. I doubt it. Maybe she's going to learn that it's not that politically popular. The question for me is much less whether Elizabeth Warren learns that, because for her, the more that crypto does, the better entrenched it is for her personal position,

I think, in some ways. The bigger question is whether other people who might be on the fence about whether they're going to join the anti-crypto army see it as a political vulnerability moving forward. I think obviously it had a big election or a big campaign to watch is Sherrod Brown in Ohio, which looks winnable based on those sort of primaries. And it's going to have an impact on individual politicians, on particularly the Democratic. side of the aisle, should these close races start going against them in areas where crypto is spending big money? They're not going to fail to notice that. Yeah, I'm hoping it's like a movie where there's an army and Elizabeth Warren steps out

front boldly and turns around and they all bail and go the other way. Exactly. Exactly. So we also have some more regulatory news outside of what we've shared before. That is the CFTC's Benham says Permetium's Ethereum stance and create interagency conflict effectively to my understanding, Prometheum, which we all know is a complete farce that's been approved by the SEC, says they came in and registered and followed the regulatory path to getting approved, but can't list anything on their exchange because we don't know what a security is. The whole thing is nonsense. Aaron Kaplan, their CEO, I guess, looks like a villain from a Stephen Seagall movie, or maybe Steven Seagall himself, if he lost a lot of weight.

It's nonsense, but they basically said that it's a security so that they can list it, and the CFTC pushed back very hard and flat out said Bitcoin and Ethereum are commodities. What do you make in this story? I mean, they pointed to years of Ethereum futures trading perfectly well without anyone being hurt, the sort of how well it's been working that there's a presumption of it. And moreover, you know, this is a detail that was called out by the industry, obviously, because of, you know, the specific battle with Prometheum and the SEC. But if you listen to sort of the full testimony as crypto came up, I think that the loud

and clear message from the CFTC Chair, Rustin Benham, who, by the way, is again, not a out-and-out-cropole or anything. I mean, he bristled when during the FTX era the CFTC was continuously referred to as the easier crypto-regulator. I mean, so much so that he actually, I think, may be overreacted in the other direction at some points. But the point being, he is not an ally crypto wolf in sheep's clothing or anything like that. What he basically said to, especially the Democrats in this hearing, was the idea that crypto is

going away, this fantasy, that this thing is just going to go away. And if you regulate it, it's going to give it legitimacy. And that could be the difference between it going away and it not going away is exactly that. It's a fantasy. It's a delusion that needs to be gotten rid of. And I think that the rational people are now looking at the destruction of the last cycle into where we are now with the market screaming loud and clear that they want this asset class, not just the DGens, but the Black Rock folks as well.

It's not going away. And at some point, the folks who have been just hoping it would have to stop burying their head in the sand and actually figure out a common sense way to do it. And now that message isn't coming from us. It's not coming from our lobby. It's coming from the CFTC chair. It's coming from SEC commissioners. It's coming from anyone rational in positions of power who doesn't have a huge axe to

grind. It's coming from Larry Fink who has a 576 and one record in ETF approvals and the last time I checked filed for an Ethereum spot ETF. Exactly. So I think that the path for Ethereum is relatively clear here. I dare not give a timeline but it's all happening. Right. The words of almost famous, it's all happening. And our final topic here, banks are collapsing again. Right. We're back to the SBB era. We've got NYCB, New York Community Bank in crisis. What the hell is happening with New York Community Bank?

Well, their stock was dropping circuit breakers every five seconds, seemingly 30% an hour, seemingly going to the floor. They lost 7% of their deposits in the past month slash their dividend to one cent. All of this happening over the past few days. And then the bailout. NYCB raises more than $1 billion in equity led by Steven Newton's firm. What the hell is going on in the banking system right now? Yeah, you know, I don't know. I think that my best analogy is sort of a visual analogy of, you know, that meme where the guy slaps a piece of tape on the water tank that's just exploding out. That was effectively the bank term funding program and the Fed last year, right? There are these long-term structural issues with these regional and community banks that were not solved in the wake of Silicon Valley Bank. They were just dealt with. And, you know, to his credit and to the Fed's credit, Powell,

and co didn't say they were doing anything other than trying to deal with that issue so that they could continue their program of tightening at the time, you know, they weren't trying to solve the underlying. They were focused on making sure that there was a program that could solve it. The bank term funding program is given out something like $164 billion, I think, over the last year and a half, or the last year, I guess, and it is wrapping up in three days or something like that. So all eyes are on this, and I'm sure not only this with that funding program deadline looming. Yeah, the question to me just becomes at this point, how long can the Fed and the government just continue to kick the can down the road and delay the inevitable? Because it's similar

to the narrative that the recession's always coming. This time last year, there were predictive markets pricing in three rate cuts, for example, right? And we keep saying rate cuts are coming at the next meeting and then Fed Chairman Powell keeps saying, I don't see a reason for rate cuts yet, but maybe. Right. And it seems like the government just has endless tools and levers to pull to kick more bank failures down the road or to kick a recession down the road or to kick a stock market crash down the road. And it's become just exceptionally hard to predict if and when these things will happen. I mean, if we remember when SBB went down last year, we thought a hundred of these banks were going to collapse. Right. And it's been an extremely slow trickle. I mean,

interesting. I wonder if it's been too slow of a trickle in some ways. The Fed could be viewing itself or its role in two different ways. You know, one being it's trying to solve this problem, or two, it's trying to gracefully prolong a transition period that could be really violent otherwise, where the structure of the banking center and, you know, the role of these types of regional banks changes in fairly fundamental ways based on shifting patterns and changing economics, right? And if it's viewing itself as managing the death of this type of institution, then it doesn't necessarily want them to sort of persist forever as zombie companies. It wants some amount of sort of consolidation and change.

But it's a very hard line to walk because by very nature, you know, when banks start failing, they really start failing and it goes crazy. So it's kind of hard to gracefully manage a structural shift in the banking industry. But, you know, who knows? It's interesting that Powell's had to speak to this so much, right? his job in theory is inflation and jobs, right? Commercial real estate is not necessarily normally on the docket for the Fed, but he's openly said here, we have identified the banks that have high commercial real estate concentrations for anyone who wasn't paying attention. That's

kind of what crashed NYCB here, particularly office and retail and other ones that have been affected a lot. This is a problem that we'll be working on for years more. I'm sure there will be bank failures, but not the big banks, doesn't see it as a systemic risk. And this is all because NYCB had a huge portfolio with billions of dollars in apartment loans in New York's rent regulated complexes that are coming to and going bad. Right. So we're going to, we've been talking to again, this has been 18 months of narrative of commercial real estate is going to crash the entire system. It hasn't happened. And he's saying he can manage it. Yeah. I mean, I think that even the most hardened Powell haters at this point, when he says he's going to manage something,

he's done, you know, what he said at this point. We'll see how long he can hold that tape on. That's why it's been blowing my mind about these predictive markets on the cuts. I mean, it's just like the guy never changes his tune. The other Fed governors are generally in line. They all give the same speech, yet people hear exactly what they want to hear because they just want the liquidity. It's nuts.

We live in a weird time. That financial nihilism that we spoke of earlier exists in many different forms and has many different faces, but it is everywhere. Well, I can't highly recommend that you guys nihilistically enter the meme coin casino or take out any bad commercial banking loans. That's all the topics that we have for today. I think we pretty much covered it and nailed it. It's amazing now just how normal these huge stories become. SEC cases and politics.

It's just like passing part of the news cycle probably because we're sitting at $68,000 on Bitcoin. Guys, you can follow NLW, of course, on Twitter slash X and listen to the news. the breakdown i highly encourage you to listen to every one of his shows every week just like i do it's the best download for 10 or 15 minutes to catch up on the main topics of the day so thank you for that you guys should check that out otherwise man i guess i will uh see you next friday thank you guys