The Breakdown - BTC Hits $90,000 as Animal Spirits Return

Episode Date: November 13, 2024

Bitcoin surged over the weekend, smashing through a new all time high and just continuing on into the stratosphere. NLW covers the true return of animal spirits. 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 Tuesday, November 12th, and today we are talking about Bitcoin's monster moves. 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. Well, friends, you hardly need me to tell you that Bitcoin had a massive weekend. It carried momentum from the end of last week and broke through to new highs, topping out just below $90,000 per coin on Monday night.

Then again, this is the type of week where it could be trading anywhere by the time the show is published. As I'm recording in the morning, it's around $86,000. Monday saw the largest single-day price increase in Bitcoin history, adding more than $8,000 for the first time ever. volume was also up massively surpassing Wednesday's trading activity on most exchanges. Bitcoin is now a larger asset class than silver and is closing in on the market cap of Saudi Aramco.

Overall, Bitcoin is up 25% this month, making November the best month since February and the fourth best since the 2022 bottom. What's more, there's a feeling that things are accelerating rather than slowing down. Bitcoin Jack tweeted price discovery, let's go. On-chain analyst checkmate, he said, I'm about to have to update the upper bound of all my price charts. Moon Overlord tweeted, coins up so much, rap lyrics started hitting different.

Travis Kling of Uki-Gai Capital made an interesting observation, tweeting, Bitcoin has never been more fud-free than it is right this second. And indeed, that seems to be the story right here. It's not just October or whatever meme you want to apply to it. Regulatory risk is significantly extinguished, and much of the supply overhang is gone as well. Mount Gok shuffled another $2 billion worth of Bitcoin around on Monday, and absolutely no one cares.

Google searches for Bitcoin are hitting one-year highs, but it still feels like Normies aren't paying attention. Mike Dutus of Sixth Man Ventures tweeted, Your dentist isn't going to notice until 100K. That's where things get really silly. Bitwise, CIO Matt Hogan thinks there's a second very important driver beyond fresh retail commenting, everyone is focused on new people buying Bitcoin.

That's very real. But an equal part of this rally is that people have stopped selling. Long-term owners are no longer willing to part with Bitcoin below 100K, and short sellers don't want to step in front of a freight train. Overall, the general sentiment is that people are feeling pre-rich. Crypto Yoda wrote, you can buy a million dollars for 80K right now, take it or leave it. Unsurprisingly, the weekend run-up obliterated shorts.

There were more than 750 million in short liquidations across the past two days across all markets, with 330 million just from Bitcoin traders. We haven't seen anything close to this since the first quarter. More interesting is analysis of how overheated things are getting. Aggregate futures open interest is up by around 10% over the weekend, hitting new all-time highs. Purpose funding was relatively mild until Monday night, tripling since Friday to hit 60% annualized. Crypto Quant CEO Ki-Yung-Ju thinks this is the warning sign, going out on a limb to make a $59,000

price prediction for year-end. He commented, I expect corrections as Bitcoin futures market indicators are overheated, but we're entering price discovery and the market is heating up even more. If correction and consolidation occur, the bull run may extend. However, a strong year-end rally could set up 2025 for a bare market, in my opinion. To give it a little context, though, while funding rates are at a multi-month high, they're nowhere near some of the levels we've seen in the past. This is a similar level to late 2020 or March of this year. The first top of 2021 saw funding more than three times higher. Analyst Dylan LeClair tweeted, Bitcoin futures funding rates are the lowest we've ever seen during a

break of the previous all-time high. This is going to get insane. Flowhorse noted it's all a matter of perspective, commenting, say it with me, folks, funding matters the most when the market is starting to no longer return in excess of that carry cost. If funding is 20% annualized but the market is moving up by that much in a few hours, while not too hard to figure out that cost is worth bearing. Responding to a question about whether he's worried about overheated funding driving a sell-off, cold-blooded Schiller responded, this is a classic example of the exact analysis that screwed so many people in prior cycles. Of course, funding is high, people want along,

and funding can remain high far longer than you think. The weekend's move really didn't look like anything we've seen over the past year. On Friday, Cantonese cat wrote, This move above 79K was not driven by any cheap D-Gen liquidity grab of leveraged positions. It just wanted to pump. So either it goes back down on Monday and this was all a dream, or it was driven by huge spot supply shock and huge demand. And indeed, with the benefit of hindsight, this seems to be a supply-driven rally of epic proportions. And so, of course, the question on everyone's

mind is how high can Bitcoin go? Price predictions vary, but everyone is looking much higher. Heading into the election investment bank Bernstein predicted Bitcoin could hit between 80 and 90,000 by end of year following a Trump victory. Less than a week later, we're already there. To say they've adjusted their price targets is an understatement. In Monday's research note, Bernstein analysts wrote, Don't fight this, welcome to the crypto bull market, buy everything you can. Their longer term view was 200,000 by the end of next year. Standard Chartered suggested the next few years could be a paradigm shift for the entire

crypto market. They predicted that total market cap could rise from $2.5 trillion to $10 trillion by the end of 2026. Analysts wrote, the rising tide should lift all digital assets. Those most exposed to end use cases are set to benefit most. More general sentiment is also a line that we're heading much higher. Polymarkets prediction market on breaking $100,000 by the end of the year surged over the weekend. It's now pricing that in at 61% odds up from 17% pre-election.

According to an investor survey from MV Global, almost half of investors expect the market top to come in the second half of next year. They expect Bitcoin to reach between 100,000 and 150,000. What's more, that survey was released on Monday so likely didn't take into consideration the weekend price action. Putting context on all this was a research note from Nidig, where head of research Greg Sipelaro wrote, while some investors have allocated to Bitcoin the most common allocations for investors is still zero. There are no excuses now. Not only is the asset available through easy to access well-regulated products such as ETFs, but it is now becoming a political imperative. Investors who may have found it easy to dismiss or ignore the asset for various reasons

will continue to do so at their financial peril. Not owning the asset is going to become a liability in the future. This will be one of the wild cards over the coming months. In previous cycles, there was massive career risk in suggesting a Bitcoin allocation within Tradfifibirms, and investment advisors were seen as cowboys for suggesting an allocation. This is completely flipped now, with flow horse writing, a higher Bitcoin price strengthens its Lindy effect, reducing the career risk for those allocating to it. In my opinion, once Bitcoin surpasses 100K, it becomes far more likely to be added to portfolios. Higher prices equal higher prices. Unsurprisingly, the ETFs had a monster week, even with the largest outflow day and months on Monday, more than 1.6 billion in fresh capital was

added to the U.S.-based ETFs. Globally, that figure was almost $2 billion. Monday saw a further $1.1 billion come in with the BlackRock ETF seeing a $760 million inflow. The U.S. Bitcoin ETFs have now seen around $3.5 billion added in the four trading days since the election. That's the same volume of inflows as the four days leading up to the March all-time high, but that period also featured $1.2 billion worth of grayscale outflows. In other words, this is the hottest streak of inflows on record, and it makes March look a little tentative. Bloomberg's Eric Balcunis reflected on how crazy Monday was, tweeting, the Bitcoin Industrial Complex, i.e. ETFs, master, and coin, saw 38 billion in trading volume today,

lifetime records being set all over the place, including Ibit, which did 4.5 billion, which points to a robust week of inflows. Another important point is that this looks like strong directional buying rather than hedge funds adding to their basis trade. Checkmatey wrote, Spot Bitcoin ETF inflows massively outpaced the growth in CME open interest last week. True directional spot buying has returned. Monday likely to see FOMO and momentum buyers as well. Strap in. In contrast how big a shift this is, FC benchmarks estimated that 40% of ETF flows last month were related to the basis trade. Now it looks closer to 20% and falling away fast.

One company that was not shy about buying into this historic rally? You guessed it, micro-strategy. On Monday, the company announced the purchase of 27,200 Bitcoin for almost $2 billion. They managed to get an average price of around $75,000, implying they got most of the money invested by Friday. This is the largest Bitcoin purchase in the company's history and marks the start of their plan to accelerate Bitcoin accumulation. You'll remember that two weeks ago, Michael Saylor announced that the firm would be issuing $21 billion in stock and selling $21 billion in debt over the next three years to fund their Bitcoin purchases. All $21 billion worth of stock was immediately issued as a shelf offering, meaning micro strategy can sell it into the market at any time. That makes it

the largest shelf offering in the history of U.S. markets. The stock is up 30% since the election, including a 25% jump on Monday following the announcement. Micro Strategy is now officially back to its 2000, all-time high, and trading at a near-record 2.78 multiple on their Bitcoin stash. Saylor suggests that he's not interested in slowing down any time soon. Referring to a popular website tracking his buys, Saylor tweeted, I think SailorTracker.com needs more green dots. But how has the performance of this thing been? Well, basically, in a word, it's unignorable.

MicroStrategy has now made a 100% gain on their Bitcoin stash. Accumulation, which Saylor refers to as the Bitcoin yield, is now at 26.4% year-to-date, with a 7.3% increase in November. We're seeing a similar effect for other large entities that bought throughout the bare market. After making their first Bitcoin purchase in 2021, El Salvador began buying one Bitcoin per day in November 2022, two weeks after the FTX collapse. At the bottom, their portfolio was down 63%, and President Naibu Kelle received stern warnings from the IMF. Now El Salvador has doubled up their investment and continues to buy one Bitcoin every day. It's still a relatively modest $500 million portfolio that won't make or break the future of the country,

but throughout the bull run, El Salvador can be held up as an example of how conviction can play out. Meanwhile, over here in the U.S., the rumor mill around a potential Bitcoin strategic reserve is spinning up. Daniel Batten, who has been working with sovereign wealth funds over the past few years, tweeted, Today I received confirmation that another nation is currently discussing a Bitcoin strategic reserve, drafting Bitcoin mining regulations so they can improve their electrical grid and better monetize stranded energy. Dennis Porter of the Satoshi Action Fund tweeted, I just got off another international call. Nation states are moving rapidly.

It's all happening much faster than expected. The strategic Bitcoin reserve momentum is incredible. Danish bitcoiner Eric Dale tweeted, I was asked to delete my last post, but all you need to know is that Europe is coming. I'll say there is a clear split between a few who saw it coming and are moving fast, and many who are completely unprepared in doing nothing at all. Things are going to get very interesting also internally in Europe. And actually quite a few who saw it coming, but are frustrated by legal limitations that they've been low to trigger a public discourse on. Now, obviously it's one thing if a few Gulf oil states in South American countries by Bitcoin,

This is impressive, but something we've been expecting for over a year. It would be an entirely different thing if a few Scandinavian nations start buying and trigger the larger countries like France and Italy to take a look. Bitcoin analyst Tur de Mester wrote, I still can't wrap my head around it. Nation state, FOMO is here now. Another clear signal going out over the last week was that Coinbase stock was absolutely ripping.

Coin is now up 75% since the election and hit its highest mark since November 2021. The analysis was fairly obvious. Exchanges are benefiting from the anticipated change in regulatory environment. Coinbase in particular is viewed as likely to be able to shake off SEC lawsuits in the near future and get back to focusing on their business. Arka-CIO Jeff Dorman wrote, Coinbase has added $35 billion of market cap since the election in five trading days. That's 23x-ebae earnings. That's one U.S. company focused entirely on crypto.

If you're wondering how much the incumbent regulatory or political leaders held back crypto growth potential. Another thing to keep an eye out for with a change in administration is a rush of crypto IPOs. Galaxy Digital's uplisting from the Toronto Stock Exchange seems like a no-brainer. CEO Mike Novogratz, reflected on the frenzy of activity last week, commenting, our franchise was operating at full board, trading with counterparties both in the U.S. and abroad, lending and derivatives desk. It really felt like an affirmation of everything we've been working for. Cracken and Circle, meanwhile, have been widely rumored to be preparing to go public,

so we'll likely see those early next year as well. Sentiment is so high we're even starting to hear suggestions of who else might be in line. Security firm chain analysis seems like it could be on the radar, and would be an interesting new vertical for public market investors. One interesting side effect, however, of the election results is that it could paradoxically make crypto legislation less likely in the short term. With Republicans in full control of Congress, there's no urgency to settle the compromise bills during the lame doc session. Comprehensive market structure would obviously be a benefit, but most of the pressing issues can be resolved

through regulatory guidance. T.D. Cowan analysts wrote, We believe crypto enforcement will likely be placed on hold once Trump names a new SEC chair, which he can do on day one regardless of whether Gary Gensler resigns his seat as an SEC commissioner. That doesn't mean it will be the Wild West for crypto without any SEC oversight. It's more that we expect a new chair to reassess existing cases and look for ways to provide more clarity on how crypto companies can comply with existing laws. The other point is that the Trump agenda is extremely broad and goes beyond crypto. Analyst added, crypto will not be an initial priority for Team Trump given the focus on extending the tax cuts and tackling tariffs and trade. Despite the landslide

victory, Trump will only have so much political capital and will need to spend it wisely. A comprehensive market structure bill will take a huge amount of work and influence and could distract from other issues. Still with Bitcoin racing into the top of the market agenda, it's going to be a very interesting couple of months. For now, though, that is going to do it for today's episode. It is fun times over here at The Breakdown. I hope you are feeling the energy. Until next time, be safe and take care of each other. Peace.