The Breakdown - Bitmain power struggle / Russian crypto intrigue / Don't call it a QE

Episode Date: October 31, 2019

Today was a quick news briefing: Bitmain power struggles as Jihan Wu pulls a coup to return China bans anti-blockchain sentiment  Russian crypto intrigue that could confirm the US' worst fears Coinlist raises $10m from Jack Dorsey (among others) The latest Fed action Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. What's going on, guys? It is Wednesday, October 30th. And so for the last few days, obviously I think anyone who's been hanging out has seen, we've been a little bit more analysis-y, to use a word that doesn't exist. You know, with the Libra hearing last week and then China going blockchain crazy right after that, it's made sense to kind of be a little bit more interpretive of the news and try to make sense of what it actually means and what conversations we should be having and so on and so forth. But in the meantime, a ton of actual, just straight up actual factual news has been happening

as well. And so today I wanted to do something kind of the reverse of what we've been doing where we just go a little bit quicker through five different topics, pieces of news that I think have been coming out. So we're going to talk about Ji Han Wu's coup at Bitmain and the drama surrounding that. We're going to talk about just the latest out of China with regard to blockchain, because that continues to come fast and furious. Third, we're going to talk about Russia. There's some interesting crypto intrigue there. Fourth, we're going to talk about funding for coin list, including from Jack, Dorsey.

And fifth, we're going to talk about just very briefly touch on the latest news out of the Fed. So let's start with Bitmain, right? So it's funny, like I had literally just gotten done on the 3 at 3 and narrative watch talking about how the narrative of China as it relates to digital currencies and digital assets. assets in this whole space more broadly had upleveled from just kind of mining companies going at each other's throats. When I turn around and all of a sudden, Jihon Wu has basically plotted a coup and executed a coup to come back and kind of gotten rid of his co-founder who was leading the company in crazy, crazy fashion. And meanwhile, Canon Interactive is also filed to go public. It came out that Bitmain is filed to go public.

So basically, what's the actual news? What happened? What happened is there's a power struggle going on at Bitmain. Ji Han, who had been the chairman but not the active CEO, came back. He gave himself a bunch of power. And apparently this had been executed kind of crazy. So Dovi, Juan, Sear says, wow, getting more details from the hashtag Bitmain drama, which makes it definitely a cryptoversion godfather movie.

McCree was out in Shen Zhen on the 28th for a press event, while Jehan turned Bitmain, Beijing, HQ upside down in the same 24 hours. Bitmain Drama Episode 6. Jihan turned Bitmain HQ upside down. Investors didn't know no shareholder consent. Three, only after the coup, Jihan started to talk with investors about how to negotiate with the ousted leader. It's a coup. Crazy face, crazy face, crazy face.

So why is this interesting? One, it's a business soap opera, and it's hard to not be interested in some of that with crazy big players and crazy big attitudes. And if you go back and actually read this piece from Wolfie at CoinDesk, the specifics are actually kind of nuts too and like where their debate and their fight came from. So there's that whole piece. But then the second piece is like there's actual unclear questions in this too, like how he could have actually been removed because basically the person who is removed from power has more shares, it seems like, than anyone else, including Ji Han. And they revealed the IPO as well. So basically, Bitmain is a,

Again, one of the big players in mining, you know, maybe its star has faded from where it was a year ago or two years ago, especially. But it still continues to be a highly influential player, and it's just another dimension of this ongoing China story. But with that, let's check in on the other parts of China. So obviously, you know, if you've been paying any attention in the wake of the Lieber hearing, you know, the Chinese president came out with huge statements on how important blockchain was. and within hours, searches were up 1,300 percent for blockchain. And then all of a sudden, you're starting to see real action, too. So you saw 500 blockchain enterprise companies announce themselves that they had registered with the Chinese government.

And there's all this signaling going on, right? So basically, what's the news? The news is that what's happening with China and blockchain keeps coming fast and furious. So one thing that I noticed this morning was this ban. China, and this was in the independent, China has banned anti-blockchain state sentiment as it prepares for the launch of state cryptocurrency. So that's the title of the independent article. And basically it says it's like a complete reversal, right? So this is a country who is historically kind of hostile. And now it's actually says that articles saying blockchain technology

is a scam are now banned, right? So this is like head spinning again. How fast we've gone from you know, one attitude towards cryptocurrencies and blockchain more broadly to a different one. Now, of course, we should always note that there's no signal that this is a difference or anything's changed in terms of their attitude towards cryptocurrencies to Bitcoin. In fact, there's some indication that maybe they'll even use this as a way to go after those projects, right, and say blockchain is really important. Basically, blockchain, not Bitcoin, but in a much more aggressive China version. So that's kind of cumping.

I thought Preston's tweet right here was great. So he says the First Amendment now protects your right to call a shit coin a shit coin, commenting on the difference between the U.S. and China. But then that wasn't the only stuff coming out of China, too. There's also going back to Dovey again. Local government just announced a 10 billion R&B, which is about 150 million U.S.D government funding dedicated to a blockchain subsidy for outstanding blockchain projects. And she says, I believe all other local governments will follow. Overall capital subsidy will be massive. And then she gets into the specifics of how it works.

But this is kind of something that Dovian others made the point of right after this, right after the president of she's statements came out, was that it would be a signal to local governments to start to get involved, get in the game, start supporting things. And that's exactly what we're seeing. So again, why it's interesting is that this is, it's actually fascinating to watch just how quickly the engines, are revving up in China. And I mean, this is what happens when you have kind of a very different,

much more top-down economy, right? But we've got to keep covering this basically because it's just, it's so fast-moving, so evolutionary that we need to keep seeing what's going on. But that is not the only interesting country that the U.S. has a somewhat tense relationship with that had interesting crypto news. So let's move to number three. Russia, obviously, is one of the big baddies still relative to U.S. policy, although certainly it hasn't retained its role or regained its role from where it was during the Cold War years. But still, it's pretty clear, if you look at everything, what the U.S. thinks about the state of its relationship with Russia. Well, there's an economic dimension to this as well. So, Noel, who's a director

of research at CoinDesk, she focused on institutional crypto, pointed out this article today from the financial times, Russia's Rosneft switches all export contracts to euro. So this is a huge crude oil producer that is switched from using the dollar to the euro, and it is basically to avoid U.S. sanctions, right? And the dollar right now, according to Noel, counts for about 90% of global oil trade. So seeing a major, major player in that space shift away from the dollar towards a different unit of account has implications for the U.S. dollar and its status is the global reserve currency. Now, simultaneously, you had this article pop up in Wired that is literally like a 38-minute read. This is the definition of a long read for those of you have the energy for it.

And it's called the shady cryptocurrency boom on the post-S. Soviet frontier. Dodgey energy deals, loose regulation, dubious characters with links to the Hillary Clinton email hackers are fueling a burgeoning crypto industry that could provide an end run around U.S. sanctions. So there's so much to get into with this piece. I really recommend that you just read it. A lot of it, you know, the critique I've seen is basically that it's just really like everywhere in the world, anywhere there's cheap energy, people are using that and leveraging that to mine

Bitcoin, right, because it's just a business model. But then you also saw Dennis Parker retweeted this article, The Digital Gold Rush, Russia Russia aims to mine 20% of Bitcoin supply. So all of this stuff is kind of happening simultaneously. And then the icing on the cake is Binance today on CoinDesk. Binance CEO, Russia is our key market. And he said, we're always looking for partners in any community, especially in Russia. Russia is our key market, one of the most active in the global blockchain space. In America, the regulators are very distributed.

And China is not going to move anytime soon. There is a potential bill in Russia that may pass very soon, and it will be a good thing for the industry. So all of these things taken together. And, you know, it's not hard to see how Russia is starting. to fill in this different spot in the crypto narrative space, which could actually be kind of bad for how U.S. regulators see Russia, right? Like, if Russia is simultaneously revving up its crypto engine while also trying to move big industry off of the dollar standard, that really reinforces the narrative that Congress is flirting with, I would say, that basically the cryptocurrency,

the job of cryptocurrencies is to provide an end run around sanctions and to diminish the standing of the US dollar around the world. So, you know, it's particularly worth noting in the context that the questions around the US dollar and its role are heightening, right, because of Libra and because of what's going on with Chinese digital currency. So again, another evolutionary story that I think is worth watching. We're in the back half now. So let's do the last two little bits of news. So number four, coin list. So yesterday, or I guess this was early this morning, Stephen Rousseau, Lilo from the Wall Street Journal, Stephen Sorrow, I butchered your name. He wrote an article, or he broke the news that Coinlist had raised a new $10 million round. And most notably,

Jack Dorsey of Square fame, of Twitter fame, obviously, and of being a huge proponent for Bitcoin had bet on the company. He had invested in the company. Now, this is kind of an interesting move. So what's interesting about this? why would we cover this instead of any other funding? Well, I think one, Jack Dorsey is a notable enough figure that when he invest in things, people start talking about it, particularly because Jack is such a vocal proponent of Bitcoin specifically. And so the question is, why would he care about Coinlist? And he had kind of a vague quote that was clearly gone through PR and everything that knew,

new types of tokens needed a place, a legitimate place to launch. And this, you know, coinless was the best platform for that. And so what we don't know, and I think what people are interested in is what types of tokens Jack is interested in outside of Bitcoin, because he's clearly not interested in necessarily these base layer coins. And so I think that's an interesting and open question that people are just curious about. The second piece that makes us interesting that some people are talking about is looking at the larger kind of just shifting business models that characterize this industry, right? Like, crypto has never had really a single clear business model outside that's persisted for years at a time outside of exchanges. And one of the things that's

interesting about this raise is that Coinlist is they announced that they were launching an exchange. And so Frank Shapiro from the block, he says, another crypto business pivots to exchange. Make sense as token sales aren't the hot business they once were. Coinless has done three sales. this year, according to its website. Coinless follows blockchain and Bitcoin.com in launching an exchange apropos of nothing. Long term, it would be interesting to see all of the tokens that have raised money through Coinless, also trade on this platform, maybe exclusively. I imagine that's a vision, but there will be a lot of regulatory hurdles.

And this, I think, is the key part. Professional traders in the crypto world constantly tell me they want fewer venues and less fragmentation, and retail platforms are incredibly sticky. We've seen how hard it is for longtime market participants, Gemini Polo, etc. to snag market share. Tough climb for coin list. So, we've got two dimensions that make this coinless news interesting. One is what Jack is so excited about, which is going to continue to be an open question until he kind of talks about it. And two is just, you know, how does coinless differentiate in the exchange space? You know, I mean, I think for my part, those guys are trying to do things

in really interesting ways, trying to create clear, easy mechanisms for, interesting projects that do want to experiment with tokens to do so in a way that's compliant. So I'm interested to see what they can do, and I think it's great that they have some dry powder to go with it. So congrats to them, and I'll be interested to see more about what Dorsey is particularly excited about himself. And finally, let's move on to number five. So last night, the infamous Travis Kling, he tweeted out and he says, tomorrow, the Fed will, one, buy $2 billion of treasury bills permanently. Two, buy up $120 billion of treasuries and MBS overnight.

Three, cut the federal funds rate, 25 BPS basis points for the third consecutive time. Bitcoin is a non-sovereign hard cap supply, global immutable, decentralized digital store of value. And so this section, like I said, I'm calling it, don't call it a QE. And the point that I want to make, I don't want to dig too deep into this. It's not that long after it's happened. And, you know, I think that the reason that Bitcoiners keep coming back to this sort of thing is we are, as Travis Kling has previously put it himself, in one of the longest running experiments in modern monetary history as it relates to just the interventionism of central banks. And the, you know, what Travis has likened to a heroin addiction of quantitative easing. So in Bitcoin macro, which is a pop-up podcast I produced with CoinDesk for the upcoming Invest New York Conference,

Travis, basically, he was like, we're going to see more and more exotic forms of QE because the same thing that worked before isn't going to keep working. You're going to need a bigger and bigger and a different hit. And so, again, it's just kind of worth noting what the situation is. One more tweet from this. Joe, the stalwart from Bloomberg, he says, ah, folks, Powell cleared everything up. Powell, T-bill purchases shouldn't be confused with quantitative easing. Gabor from Van Neck says, huh, feel relieved now.

So, again, the point here, the point for sharing this news is just to to continue to keep one side eye on the state of the global markets that represent kind of why Bitcoin was built and born and continues to attract new people to it as Central Banks continue to build to build the roller coaster while they're on the ride. So anyways, guys, that's my quick news rundown for today, a little bit different than the analysis from yesterday. Hope this was helpful and I think I'll be back tomorrow. We're doing some traveling. We got baby's first birthday, dad and mom's six anniversary coming up over the weekend. So we're going to be out of here, but I think I'll be able to get one in tomorrow. So for now,

anyways, thanks for listening. If you were listening, thanks for watching, if you were watching, and I will catch you tomorrow. Peace, guys.