The Breakdown - Bye Bye Gary! The Five Most Important Stories in Crypto This Week

Episode Date: November 23, 2024

Scott Melker and NLW count down the most important stories in crypto this week, including presidential appointments, changes in China policy, and of course, the upcoming resignation of SEC Chair Gary Gensler. 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 Friday, November 22nd, and that means it's time for the Friday 5. 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.ly slash breakdown pod. All right, friends, well, it is a number. Another jam-packed week, no shortage of things to talk about.

We've got political appointments, political leavings, and all of that under the shadow of 100K. Without any further ado, let's kick it over to our conversation from this morning. Here we go. No slowing in the news cycle this week. A lot going on. Yeah, this is one we could have just sent AI to do for us, and it would have been fully capable, man.

You're not an AI? I'm an AI. This guy's not anything. Nothing artificial about this, baby. We've got this guy. Derek Gensler on January 20th, 2025. I'll be stepping down as SECGov chair, a thread. My instant response, I couldn't help it. I'm scared somewhere.

I ain't reading all that. I'm happy for the, you know, or sorry, that happened. I mean, did anybody actually read the thread, or did we all just read the headline and move on with our lives in celebration? I definitely 100% just read the headline and moved on with my life. life. I didn't even consider it. I didn't even think of reading it. But I think obviously that this leads into sort of another topic, which is who's going to end up in all of these positions, right? Because we're seeing a complete wholesale change and everything that's happening in government

agencies, regulators. We know that Lutnik was being floated for Department of Treasury. He ended up as Commerce Secretary. Now they're going back to the drawing board. But to me, the overweight true here is that we have a bunch of bitcoinsers literally everywhere, and we're likely to also see that at the SEC and CFTC eventually. That seems to be the way that the winds are floating, or blowing rather. The Treasury role, the SEC role, there's a difference between, you know, moderately good for crypto and really good for crypto. So I think it is, you know, the attention that the industry is paying on those positions,

I think actually particularly the Treasury is, it makes sense to me. Yeah, the Treasury. is obviously going to be a key position, but I don't think that we can lose to your point. I think we can just win bigger, depending on who they appoint. But we know that they have all these pro-bitcoinsers in positions, Vick and Elon Musk and RFK, of course,

but I think there was some concern that we might have sort of a disjointed approach to crypto, pro-crypto people in all of these positions, but the agencies, because of recovery and efficiency, not necessarily talking to one another, But we know now that Trump team moles creating first ever White House crypto role, effectively a cabinet position inside the White House to oversee all these agencies in their crypto policy. In Nashville, he did say he was looking to create a crypto counselor, basically advisors who

understood the industry that would help. But to have a single position and someone like, we've seen a lot of names floated, but like Christian Carlo, who is the head of the CFTC as a contender for Crypto czar, this is even more bullish, I think, than all of the other news that we've gotten about who may up, may end up in power, whether it's John Carlo or not, the fact that there could be somebody in this position overseeing all of these agencies and giving us a cohesive approach. Yeah, I think that part of the reason that this is so, would be so positive is that ultimately, each of these agencies has a million other things to deal with with crypto.

I mean, Gary Gensler did his level best to make it seem like the SEC's only job was going after us. But the reality is that they're dealing with a ton of issues. And so having someone who's thinking holistically and coherently and specifically about crypto in a position of actual authority and power would be huge, right? It's, I mean, it's leagues away from just a council who have the president's ear. It's a hugely, hugely bullish signal if it actually comes to be. Right. And if anyone was doubting that he's actually listening to the industry and looking for advice, he's having meetings with quite a few people. But notably, we announced he was going to have a meeting with Brian Armstrong, the CEO of Coinbase.

Well, it's been reported that now they did have a phone meeting rather than an in-person meeting and that they just flat out discussed who was going to be the next SEC chairman and who is going to head the CFTC. That was what Armstrong was the most concerned about. But it is very clear that Donald Trump is actually taking the time to talk to the biggest names in the industry and get their opinions and feedback on who will end up in the positions that impact the industry the most. You can't say it's not doing it. It's happening. Yeah. I mean, listen, the crypto industry is being treated like the broader financial sector

and Wall Street has been treated for a long time. You know, in this particular administration, it cares about the perspective of the business community. Crypto is an important part of the business community. It's one that happens to have been not only underrepresented, but actively targeted for the last four years. And so it's great to see it sort of move into the position that should have. Today's episode is brought to you by Bitkey, the hardware wallet built for Bitcoin. Made by the team behind Square and Cash App, BitKee makes securely managing your Bitcoin absurdly simple.

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But here we go. First story, before we talk about micro-strategy price and convertible notes and debt offerings, Micro Strategy is Michael Seller to pitch Bitcoin Strategy to Microsoft's board. This is actually really interesting because we know that it was basically activists who even got Bitcoin on the docket for the Microsoft meeting. Now activist investor basically pitching to get Michael Saylor some time to sell Bitcoin to Microsoft. He gets three minutes, right? Apparently he also sent a letter to the CEO that's not been responded to, you know, have a deeper conversation. But Michael Saylor gets three minutes to sell Bitcoin to Microsoft to put on their ballot sheet.

Yeah, it's interesting. So we don't know, correct me if I'm wrong, but we don't know who the activist investor is. So yeah, it sounds like there are multiple channels that were approached to try to get some face time between Satchinadella and Saylor that didn't work. And so, you know, go the activist investor route. It's more a chance for analysts and other sort of shareholders to hear it and to try to get the sort of momentum behind the idea. I don't expect that we'll see any sort of big movement from Microsoft in the short term.

on Bitcoin purchases, but you never know. You absolutely never know, but still interesting that it is on the docket, and we know that it will continue to be. I didn't look too specifically, but I saw some tweets effectively saying that four or five smaller companies had added Bitcoin to their balance sheets over the last week or two that were just sort of underreported. But it is happening, I think, behind the curtain. It just hasn't been an Apple or Microsoft yet, someone with these huge cash stack.

Yeah, I mean, one of the interesting things. things is there are certainly smaller companies who are trying to basically play the same, you know, run the same playbook back. There are also other smaller companies who are sort of not trying to be micro strategy 2.0. They're just trying to sort of have a reasonable allocation. I think that the big question will be what the model is for, what the potential model is for those larger companies, given how much of the oxygen and Bitcoin in this case, micro strategy is sucking out of the room. None of these companies can play back the strategy that that he's played. This is just about, you know, sort of putting, putting some on the balance sheet as a,

as a sort of a reserve asset. So, you know, it'll be interesting to see if, you know, we don't have basically a big example of that in the way that Tesla was supposed to be, you know, forever ago. We haven't seen that sort of move yet. And I think that'll be a notable moment when it happens. There's only going to be one Michael Saylor. There's only going to be one micro strategy. And frankly, I don't think we'd want another one. Yeah. He's our, I think that the company is now in the top 100 by market cap, right? But the, Top 100 by market cap could be added to the cues, could become a part, I guess, of the S&P 500 and all effectively because of his infinite money glitch, perhaps the three most dangerous words in my mind for crypto at this moment, that we don't really need to get into that. But I think what's astounding is that obviously micro strategy stock has been flying, you know, and a lot of that as a result of these huge Bitcoin purchases, he had his biggest purchase ever over $4 billion.

dollars. And it didn't even take a day for him to announce that he was raising more money to buy more Bitcoin, even as he had just bought $4 billion at around $88,000 a coin. And that's also while raising $42 billion in a separate offering to buy more Bitcoin. So here we have. I think this started at about a $1.2 billion convertible note and then went to $1.75, I think, based on increased interest. And then by the time this came out on November 20th, a $2.6 billion aggregate, which means that there was just a hell of a lot more demand than they originally intended. And then Sailor tweets, Micro Strategy completes $3 billion offering of convertible senior note due to 2029 at 0% coupon and 55% conversion premium. Is enough ever enough?

It's certainly never enough per Sailor. I think what's more interesting in this particular cases, the market's huge appetite for this. There's a lot of speculation and no single answer that everyone agrees on consensus answer when it comes to why the market is so interested in this offering. But I think that the best that anyone can tell, there is a broad sense of kind of waking up feeling massively under exposed to crypto right now that's been happening basically since the election. And, you know, you hear it, you see it reported by investors who are in a position to sort of you know, be on the receiving end of those emails. You have a lot of folks who are completely non-shilly, like Chris Bernisky talking about just how many people are hitting him up, you know, in his DMs,

in his emails, trying to get exposure to the sector. It's clear that there is a scramble for for kind of, you know, crypto exposure. And the micro strategy stock is sitting there as an easy way in, even if your plan is to sort of move to the underlying at some point. Worth taking a look at the chart. Obviously, yesterday, it topped at about $542, close the, day at 400. So it was a wild ride. This was the most traded stock on Wall Street over the past few days, highest volume. But you're talking about a move that basically took it from 470. It opened pre-market at 500 or something like that, went up to 540 and then dumped on tremendous volume. A lot of people pointing to this as could be a blow off top. Like maybe, I don't think forever,

but people saying that, you know, maybe this was enough of the euphoria. You got the blow off top on huge volume, big down day by the end of the day. I guess we will see. But it, We all know that nothing goes up forever. And a lot of people pointing to this, Microstrategy tumbles after Citron research shorts the stock. This was the most polite shorting of a stock I've ever seen in history. If you guys didn't see the tweet, how did this one age?

Nearly four years ago to the date, Citron was the first to tell readers that Microstrategy was the ultimate way to invest in Bitcoin setting a $700 target. Fast forward today, MSTR has skyrocketed to over $5,000 adjusted. There was a 10-10 split. Kudos to Michael Saylor for his, visionary Bitcoin strategy. Oh, and by the way, now with Bitcoin investing easier than ever, ETF's coin hood, micro strategy's volume has completely detached from Bitcoin fundamentals.

While Citron remains bullish on Bitcoin, we've hedged with a short micro strategy position, much respect to Saylor, but even he must know, micro strategy is overheated. Like bowing and kissing the ring while having your friend stab him right in the back. That's just markets, though. You know, I look, if every market participant explain their actions in this way, it'd be a much, much better market. But here we are. Yeah, I have a feeling that's not the catalyst. I think that we, you know, anything that gets this overheated and there's that

much action and there's that much options activity around it, you're eventually going to just get extreme volatility and flush. Somebody's going to take advantage of all that long sentiment and make a lot of money. And now you can do that in Bitcoin, too, because we have options on the ETF. Ibit options launched this week and had a massive day. historic day one. We all know, of course, that Bitwise, an arc and gray scale also got options a day later, but we've long discussed what would options mean for the market. We can get into that a little more deeply. But here from Jeff Park, Ibit options trading recap.

Today marks the historic day one of Bitcoin ETF options. This is on the 19th. Did not disappoint with over 1.86 billion intonational traded. I mean, the Bitcoin ETF's spot are about to pass all gold ETFs in volume. We're over 100 billion. BlackRock's got over 40 billion. There's the most successful ETF launch in history. And now they've finally got options. What does this mean? And are you surprised at how successful these were the first day? I'm not surprised. I think it's, we've been telling the same story for the entire year, which is institutional acceptance of Bitcoin, financial products that allow it to sort of fit in the existing system fully and a context that surrounds it politically and societally, which sort of

drives more activity towards it. That's the cauldron that's sort of just crescendoing right now. And so you're seeing basically, you know, new product options that better fit into the models that investors already have alongside a totally transformed sort of narrative and public opinion space. You're going to get, you know, a lot of activity. And that's what we're seeing. Yeah, I totally agree. And this comes obviously with massive inflows and all the other metrics that we've been watching. It's really launching at the perfect time, I think. Getting these more complex ways to trade around Bitcoin at a time when the bull run is sort of just starting and we're talking about 100,000, it's really poetic. It just lines up exceptionally well. Absolutely. It also relieves these options of having the narrative duty of sort of explaining why there's excitement, right? This is the type of launching. in the past that would have been good because it creates more options and, you know, the sort of availability of these options is going to make opportunity for a particular

category of investors. But because there's so much going on, you don't have anyone sort of trying to claim that, you know, because these options exist, that's sort of the catalyst for this next huge, huge bullish action. And I think that that's, it's a healthier space to understand that it's part of just a larger shift. And I did have James Safert on from Bloomberg the day after these options launched. They point out at a few key facts. One was that the actual maximum contracts is 25,000, which is very low. I guess the CFDC kind of getting their feet wet here saying, we don't want the underlying market to be manipulated, but normally you'd see like 200,000 options.

So institutions right now actually can't come in individually to these with massive size. So the call to put ratio is like 88% calls, 12% puts. This was literally people just taking massive directional bets that the price of Bitcoin will be higher in the future. because of those limits, it really wasn't institutions doing the cash and carry trade. They can't get enough size, actually, to make it meaningful and earn that yield. So these are people truly going long from institutions betting on much higher prices. Yeah, I mean, this also gets at another theme that we've been tracking, which is when do we say that retail is actually back? I'm not sure.

I mean, what we have seen is applications are racing up the App Store rankings. You're seeing Google searches go up across these different assets. These indicators that a broader set of buyers is coming back, you still don't really see it in the discourse in the community, but that may be a disconnect between the pathways in for people to the conversation space of crypto and crypto Twitter versus their availability to get access and exposure to the asset just via Coinbase or whatever Robin Hood that they're using. Well, you had shared a great actually tweet thread with me from Annie Trade Travel Chill, who's awesome.

People are saying retail is just arriving now because the search for Bitcoin and Google Trends is now waking up. But what if we've all been searching for the wrong thing? So first of all, as context, I think the Bitcoin search specifically is kind of nonsensical at this point because most people know what Bitcoin is. It's just become a mainstream term, even if you don't know deeply what it is. I would just imagine less people have to Google it for the basic information on what is Bitcoin. But actually, Solana searches all-time high, meme coin searches all-time high. And of course, Ethereum not there yet. So she kind of jokes about that. But her conclusion here, maybe retail

arrived months ago, but they're just not looking for Bitcoin until now. It's a really interesting take on this conversation. Retail also might be disinterested in hanging out with us on crypto-twiter, which honestly I couldn't fault them for. A huge part of our- Yeah, with us on crypto-tweller. I do feel like a huge part of our perception of retail being back or not is dictated by two things. One, the very impressionistic limited window we have around friends, colleagues, peers, Uber drivers talking about the asset class or changes in the voices on crypto Twitter. And we haven't seen that much, but there's a lot of reasons that people are turning away from Twitter at the moment. So who knows if that will actually hold up as a meaningful signal. The community might get more and more fractured as threads and blue sky and all these other channels become more of a place where people are spending time.

It may become more fractured. Kind of makes me think about a conversation I had recently with a number of crypto lobbyists. And they were saying it's already getting fractured in Washington, even the way that we lobby politicians because every PAC or company that's coming into lobby now has their own agenda and are not even on the same page. So I think fracturing comes with size. And yeah, one thing that was interesting and will be interesting to see if there are new communities that emerge this time around. By the end of the last cycle, there were so many people in the NFT space who didn't give a crap about anything else happening in crypto. It had this whole new class of influencers and key opinion leaders, although we didn't call them by that stupid term yet back then. And, you know, people with hundreds of thousands of followers who could have.

pick, you know, the famous, quote unquote, crypto Twitter people out of a lineup. So it just is, the industry is getting sufficiently large where everyone's not going to know everyone. It just feels weird if you've been here for, you know, going on a decade now. I'm sure it happens to you, but almost on a daily basis, I see something come up in my feed and it's a person who's in crypto with like a million followers that I've never seen before. Yeah. And I think, I mean, people forget that NBA Top Shot was what set off the entire NFT trend. last time, I don't know a single person that was like deeply involved in trading NFTs of the sixth man off the bench for the bulls dunking, right? And I certainly never got too deep in the

NFT communities. And I do think that that's coming back. It also reminds you that the last bull run was not driven by Bitcoin as that thread would tell you even with interest. It was driven by NFTs and people trading Doge. 100%. Absolutely. The pattern has pretty historically been Bitcoin gets it cooking and then something new captures energy and attention that makes people feel like they're on the ground floor rather than in on the thing that's been around for a while. There's sort of just, there's a lot of human psychology to that. The question is whether meme coins can actually play that role on mass. They're certainly doing a little bit of playing that role. I think we saw some meme coin funds start this week and things like that. So far, it doesn't appear that they have the

same power to draw in new people that ICOs did in 2017 or NFTs did in 2021. which I don't think is a bad thing. I'm not sure that we want people to come in through that channel. Something's coming. It just may not be that. Yeah. We will find our way to rope in retail one way or another into something completely stupid that we shake our heads at four years later

and they're talking about on this show. I think we still have to talk about price action, of course. Bitcoin nears 100,000 with crypto market cap at record $3.4 trillion. So it's pretty remarkable. Obviously, Bitcoin got to about $99,200, depending on the exchange you're looking at. it's been a rocket ship, as we all know since the election. The crypto market cap number is very interesting to me because it topped at $3 trillion in the last bull market.

We have just had a huge move on Bitcoin, which is obviously contributing massively to this. But when you take a look at Bitcoin dominance and altcoin charts, they're largely just absolutely destroyed. And we're just now breaking into blue sky territory for crypto market cap. I mean, imagine if the market cap sees the sort of move it did last time. when it's already sitting at all-time highs. To me, this just shows the massive potential if that retail comes on what market cap can do and where that money's going to flow, which would obviously have to be all coins for this to happen.

The next big question, right now we're all focused on what's Trump and the Trump administration going to do vis-a-vis Bitcoin? Are we going to get a strategic Bitcoin reserve? What's the policy going to be? From a market-moving perspective, the big question is going to be, what new legal space is created for altcoins, for tokens. Are things allowed to be security like? Is there a sandbox like Hester Persis push for? Or is there just an openness to different assets? You're certainly seeing market participants position for this. I mean, the ETFs being proposed left and right. There's a huge competition for Solana ETFs, but then other all coins are getting in there as well. There's an anticipation that perhaps part of the way that this goes is a bigger legal opening

for those assets. That is the catalyst that would actually trigger. I think a huge, huge transformational change in the size of the market is the actual green light, not just the not red light to dig into the tokens beyond Bitcoin and those at the top. As we move towards the last stories here, anyone who's been around crypto for a while knows that we have some garden varieties of fud that come around in every single cycle. If you thought about it in the past, we always had boiling the oceans and the environmental impact of mining. We had Chinese New Year. Remember that? We had Wall Street traders. You're going to use their bonuses to buy it. We have institutions are here, knock on, but perhaps the single biggest piece

of cyclical news and fud in crypto is whether China is banning or unbanning crypto. And here we are, guys, Bitcoin nears 100,000 as China clarifies personal crypto rights. You're allowed to own Bitcoin in China. it's property, you're good to go, no more bands. Wow, we're so back in China, baby. We'll see. I mean, this is one where the, at least there is, yeah, supposed to, for example, the Wall Street bonuses, which is always just really pulling, you know, pulling at straws. This one, if this huge global market comes back online, I mean, it never really leaves. That's the secret when it comes to China investment. But if it becomes easy again and, reasonable, it is a huge amount of capital that gets unlocked. So this one is maybe worth paying a

little bit more attention to to see how it actually plays out. Listen, I mean, the people point to the top of the last bull market being when China banned mining and then sort of doubled down and got very aggressive in their position against the industry. I would argue that ended up being a net positive because 70% of hash rate was in China and then it moved to places like Kazakhstan and largely the United States and decentralized the network further. So I think China, even though it hurt prices at the time, did us a favor. And now them coming back when Bitcoin's saying, you $100,000 would be epic. Totally epic.

I have to give you one honorable mention. Justin's son bought the banana for $6 million. My God. A bunch of people on Twitter asked what the hell this was. And I just decided not to try to explain it. So I watched the video. This was, if you guys don't remember, I just have. to talk about it, but from Art Basil, somebody taped a duct taped a banana to a wall,

and it was the viral hit of Art Basil, true modern art. Well, it went on auction at Sotheby's and Justin's son bought it for $6.2 million and is going to eat it. Didn't know if you saw that part, but it's years old, it's going to eat it. It's like that Banksy that as soon as the auction closed, it's self-destructed. Maybe it gets more valuable if it's just the peel. Who knows? I wonder if Justin's son is going to self-destruct if he keeps doing these things. Also, I don't know if he ended up getting it, but didn't he buy the $69 million people? Or was he like the last bidder before it went to 69? Either way, he was in there into the 60s.

Sounds right, but I can't say that I know for sure. Must be nice. Must be nice. It's there are $6.2 billion at a banana for a laugh. Guys, that's all we've got for you today. Probably off next week. Thanksgiving in the United States going to be an epic week. I'm sure that we will not be unpacking.

but follow NLW and The Breakdown. As always, guys, thank you for listening to the Friday 5. Have a good one, man. Cheers.