The Breakdown - Coinbase exploring IEOs / Trump Tweets For Negative Rates / Bitcoin #s Beyond The Price

Episode Date: September 11, 2019

At Invest: Asia in Singapore today, Coindesk's heat of institutional sales in Asia hinted that the company is exploring IEOs, but wouldn't comment further. As he is wont to do, Trump got everyone talking by ratcheting up his pressure on the Fed to go into negative rate territory. Bitcoiners were happy to explain why this matters. And speaking of Bitcoin, some data from Coinmetrics beyond the price that shows just how the network is thriving.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back, Crypto Daily 3 at 3. All right, guys, what is going on? Happy Wednesday. So today we're going to be looking at a few things, as always. First, we're going to be looking at Coinbase exploring IEOs and what it might mean. Two, we're going to look at Trump tweet about negative interest rates that has the crypto world hopping. And then three, we're going to talk about Bitcoin data beyond the price. So let's start with a little Coinbase exploring IEOs.

I thought this tweet from NIRAS, sub-tweeting, an entire article in newspiece was pretty great. He says, I still refuse to learn what an IEO is, but I can tell you that the calculation for whether or not the resulting token is a security is exactly the same. So that's NIRASH from CoinCenter, for those of you who don't know. So anyways, let's get into the news. So this comes out of Invest Asia, which is a CoinDesk's event in single. this week. Basically, in an interview on, or a panel rather, on the kind of evolution of crypto capital formation and fundraising, one of the Kavan Pirastani, so who's the head of institutional sales for Coinbase in Asia, said, quote, in a nutshell, Coinbase is carefully exploring not

only the IEO space, but also STOs, but I can't make any formal announcements right now. So this had a whole slew of the folks in the crypto industry talking. IEOs are obviously in a really interesting spot, right? So they're one of the most discussed topics of the year, undeniably. However, it's really unclear what their impact or their net impact is both for the companies who participate in them, but also what they mean for the industry as a whole, right? Some people thought they were just going to be ICOs 2.0. The limitation on who can participate and how much they can spend, seems to have pretty well cut that off. You know, it's only people who are the part of that, who are kind of approved through that specific exchange. It's only that exchange is customers.

There's often some sort of KIC aspect, which is different, and so on and so forth. But, you know, recently the narrative around IEOs actually hasn't been that good. So Dutus today from the block actually posted a decrypt piece from Ben Munster. The quote said, the low-tier IEO scene is rather like vanity publishing. Pay bigger bills, foot bigger risk. greater risk. For the few that make back the initial cost, it's a boon, but for the rest, it's a waste of money. And so Ben is basically talking about how IEOs have effectively there now, the building, exchanges are building in the listing fee into the IEO fee. And that can be, you know, hundreds of thousands of dollars or more, whatever it is. And it's not clear exactly what the actual

value is, right? So a few months ago, or I guess, yeah, a month ago, Jesus, time goes fast. August 7th, Larry from the block said it's now obvious that ICOs were a massive bubble unlikely to ever see a recovery. The median ICO return in terms of USD is only at negative 80% and constantly dropping. Let's look at some data. And he goes through kind of extensively looking at exactly how IEOs have or haven't performed. Interestingly, Larry also commented kind of more broadly on Coinbase's recent strategy of adding more coins. He says Civic Ghalem DeCentureland had less than 12,500 of volume combined on Coinbase in the last 24 hours. That's 0.007% of Coinbase's total volume.

Coinbase, can you please remind me again why you continue to list this trash? So let's hold aside the fact or value judgments on those specific tokens just for a moment. The fact of that low volume is pretty undeniable. And it makes it an interesting question about as to why Coinbase would actually even be. interested, right? You know, effectively, a lot of people felt that as Coinbase moved into all of these additional assets, it was because they simply had to, right? They felt that they had to list some of these additional assets in order to compete with the binances of the world. The question is, how valuable are they to Coinbase as a company and to Coinbase's users? Now, the real thing with

IEOs is that they're unrevolved, right? Or unresolved. It's not clear what the story is. Some people feel like they were a flash in the pan. They were just a symptom of the bare market. Others feel like they're just kind of a part of the landscape from now on. So Joyce Yang from Global Coin Research said, hmm, I originally felt IEOs wouldn't last, but now I think IEOs will always be an alternative fundraising option that exchanges offer. Essentially, there will just be more fundraising options offered by exchanges just like banks. So in Joyce's estimation, IEOs are just going to be kind of not a dominant driving force, but something that is a part of the landscape going forward. Whether or not that remains to be seen, but Coinbase getting into the game is certainly

interesting. And to some extent, you have to believe that Coinbase, as a company that has been always from day one, thinking about regulatory implications, to the extent that they believe there's room for a regulated IEO or regulated token offering in the U.S., that will be interesting to watch. But with that, let's move on to number two. You can always count on Mr. Trump to get everyone talking. So this is Donald J. Trump this morning tweets out. This is his standard 6.45 a.m. on the toilet tweet. The Federal Reserve should get our interest rates down to zero or less.

Pretty key term or less. And we should start then we should then start to refinance our debt. Interest could be brought way down. That's in all caps for those of you who are listening. while at the same time substantially lengthening the term. We have great currency, power, balance sheet. The USA should always be paying the lowest rate. No inflation. It's only the naivete, all the umlots and everything on that one, of J. Powell and the Federal Reserve that doesn't allow us to do what other countries are already doing. A once-in-a-lifetime opportunity that we are missing because of

quotes boneheads. So lots and lots of different reactions to this. Why is this interesting? So a couple things. First, this is part and parcel of Trump's basically war on the Fed and war to control the Fed and exert pressure on them, right? In the absence of actual political control, he basically uses his bully pulpit and the media to effectively try to bully, right? Like, he's putting the bully and bully pulpit in this case, them into doing what he wants. He wants a dollar that is not so strong relative to the rest of the world, right? So this is also part and parcel of the broader currency, war that's going on. And when you have a currency war, basically the places that do best are the places that are best able to deal with their kind of currency or help their currency be less valuable

to attract more business or who are best able to just deal with the consequences of this. So you see a tweet like this and we're conditioned now in the crypto industry to expect the Bitcoin by solves this or buy Bitcoin after this. David Nage actually from Arka and from the Base Layer podcast even jokingly said, not seeing the cadre of buy Bitcoin after this tweet, which fully expecting it. But he must have just pruned his feet a little bit too much. So we've got the Bitcoin fixes this,

got to stay on the meme. We've got not so fast saying the president of the United States of America is pumping my Bitcoin and Altcoin bags without even realizing it. It is a glorious day to be in crypto with a sun emoji. And then you had Dan Tapiero, and this one I think is actually interesting. So Dan Tapiero is one of these global macro guys. who has recently turned a bunch of his attention to Bitcoin. He started to be noticed by our community

when he appeared with Raul Paul on a Real Vision interview and talked a lot about Bitcoin and how he sees Bitcoin as a fundamental invention that is really powerful and is likely to be a generational hedge for a new generation coming up. And Dan has been in and around the global macro world. He's been in the gold business for a long time. So he says, first president to call for negative interest

rates. Medium term, this is a direct call for a debasement of the U.S. dollar in an attempt to create excess growth into 2020 election, Federal Reserve boneheads, gold and Bitcoin should benefit as alternative stores of value. And so there's a lot of conversation going around this, but I think this is the central thesis and why people are quick to say things like buy Bitcoin when they see something like this. It's a combination of one, this weird kind of aberrational, negative interest rates that we're seeing crop up around the world and the idea that the U.S. President is pushing so aggressively for them. It's two, the fact of that aggressive push and the politicization of the Federal Reserve. Three, it's just the general instability that this

provokes in the markets when you have kind of this outlandish behavior. All of those things point to alternative assets and alternative stores of value that aren't kind of the traditional equities, et cetera. And so that's kind of what Dan is referring to. Now, I think for me, this brings up the larger question of just, again, what Bitcoin's role in a, in a, in this sort of global macro economy is, right? And so I think this is an outstanding question. It's been one of the themes of the summer is, to what extent Bitcoin is a safe haven, to what extent Bitcoin is an actual kind of macro hedge? I thought it was worth pointing this out. So I wrote a tweet this morning, a short story in three clips. The first from Wall Street Journal on currency wars and

capital controls, referencing Argentina. The second from Nick Carter about the impact of Bitcoin on countries with capital controls. The third, a piece about Bitcoin trading at a significant premium in Buenos Aires. So basically, the Wall Street Journal was writing about the cryptocurrency, sorry, about the currency war this morning. And they wrote about just the implications. And so they said, and this is their quote, a falling currency makes it harder for developing countries to service their dollar-denimated debt, too sharp a drop can unnerve investors causing a stampede as money managers ditch emerging market assets. Then jump down, one country now facing the consequences of a plunge in its currency is Argentina, with the government recently imposed capital controls

and has frozen prices for gasoline and some food products in its fight to stem inflation, which runs at over 50%. The Argentine peso has dropped more than 30% against the dollar in the last year. So you see that, and then you go over to Nick's kind of seminal article from recently where this is an academic article that he quotes and he says the existence of liquid Bitcoin markets poses a significant threat to countries that rely on capital controls in order to maintain retain a managed exchange rate. So this is a quote from that article by Gina Peters. Bitcoin creates a problem for Argentina and similar countries. It makes circumventing capital controls easier. As demonstrated by Peters and Vivanco 2016, governments attempt to regulate the

globally accessible Bitcoin markets are generally unsuccessful, and as Bitcoin exchange rates tend to reflect the market, not official exchange rates. Should the flows allowed by Bitcoin become big enough, all countries will have, by default, unrestricted international capital markets. Now, finally, contrast this with an article from yesterday that suggested that Bitcoin is trading at a $1,200 premium above spot price in Buenos Aires, which is in Argentina, obviously, based exchange, Buenbit. The price exploded to $1,200,000. thousand seven fifty per btc a total premium of two thousand two hundred and fifty dollars immediately after argentinian president maricio mackri announced his government would reinstate restrictions on foreign

currency purchases um so this is something you know i don't like posting this type of news without actually getting it checked out i tweeted to a bunch of the argentinian crypto and bitcoin community and they confirmed that it was trading higher it might not have been this full uh two thousand dollar premium but it was definitely trading higher and so again i think this all comes back to the question of where Bitcoin fits in the macro environment. And so, you know, a couple takes on that just before we move on. Alex Kruger has been really on this band a bit. He says Bitcoin is not yet a macro asset. It should become one as the market matures, as it's increasingly seen as digital gold and is a hedge against the tail risk of fiat systems collapsing, i.e. a put option on central

banks without expiry. So that's actually a really interesting differentiation. It's not something for, you know, the negative correlation with the vagaries of the stock market right now, it's a put option on the future, right? This is echoed by ARCA. They wrote cryptos for diversification, not negative correlation. Basically, the point of this is that they are, the reason that you hedge into something like Bitcoin is a larger, systemic, a longer-term view, not just a kind of an immediate term view.

And Marad kind of said something similar. He says Bitcoin is going to start getting gradually treated as a safe haven asset just in time for a generational blow off top in the current monetary system. Seven billion people in their government chasing true scarcity with infinite monopoly money. All about real versus paper assets now. So really, this is, I think, the implication. Every time you see something like this from Trump, that's what we're dealing with is it's a new moment in this question of where Bitcoin is going to fit and where crypto assets are going to fit in the monetary landscape that is changing in front of. of our eyes. So with that, let's close with just a few interesting stats from the world of Bitcoin. So this is from Hans over at Ikegaifund. He's their senior and quantitative researcher there.

And he says, I've heard people say that being involved in Bitcoin is a game of speculation. Some say it's all about fud, fombo, fear, or greed, or following the crowd. I call BS. Let's look at the data. Here are 21 Bitcoin charts from coin metrics that tell a different story. So this is basically a coin metrics, obviously a great data source, one of the companies or research outfits that I've referenced a lot on 3 at 3. And Hans is going through and basically grabbing out a bunch of the metrics that aren't just the price metric and showing how good things are. So I'll just pull out a few that I think are interesting. So first, the amount of being data, the amount of data being stored on the blockchain has been increasing constantly regardless of the price. Why do people want to transmit data on the Bitcoin blockchain?

it's all about trust and the ability to transfer value without asking permission. Realized value is at an all-time high. This is the amount that coins are worth the last time they were moved. Look at that momentum. I thought this one was interesting. Let's turn our attention to the active supply over the last seven days. This gives us unique insights into the behavior of bitcoins, specifically if they're holding or trading.

When the blue line touches the red line, there's more hodeling going on, bullish in a bill market. Then he actually gives an interpretation of this. So he says, waxing philosophical for a moment, I suggest Bitcoin is evolving from a method of exchange that can store value to an SOV that can be exchanged. As the market value increases, look at the change in active supply percentage over the trailing year. So this is a key thing, right? The idea of moving from a method of exchange that can store value to an SOV that can be exchanged. And finally, he says, back on the demand side again for you, econ nerds, we can also look at the

number of unique addresses that hold any balance of Bitcoin, and this is at an all-time. high. So what's the point of all of this? The point of all of this is simply to say that we get really focused on the price, really, really focus on the price. And we have an unbelievable ability to get bored when the price doesn't move around. Good or bad. I mean, we might, in some ways, I feel like this industry wants to be depressed more than it wants to be bored. It wants that volatility. We're addicted to it. But the reality is, is that if you look at these fundamental questions of how people are actually using and engaging with Bitcoin specifically, things look really bright. So I want to share that data to close out the day.

We'll be back tomorrow. I think we're probably going to talk a little bit about what's been going on in Singapore and Invest Asia with CoinDesk and maybe dig into what's been happening at Blockchain Week in Tel Aviv. But for now, thanks for listening, guys. Thanks for hanging out. And I will see you tomorrow. Peace.