The Breakdown - Coinbase Trades at a $77B Valuation as BTC Heads Towards a $1T Market Cap

Starting point is 00:00:04 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. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, February 17th, and today is sort of an extended grab bag, brief style episode. We have had so much news coming so fast over the past few weeks. weeks that I haven't had a chance to put together a collection of some of the individually smaller, but still taken as a whole important news. So that's what we're going to do today. First on that front, let's do a quick check back in on the Bitcoin price. Obviously,

Starting point is 00:00:51 yesterday's episode was about breaking through that psychological barrier of 50,000 and asking what it meant in terms of this idea of a Bitcoin super cycle. Savvy listeners will note that almost as soon as we hit 50,000, we retraced back to the 48s and 49s. However, overnight, we reclaimed new highs and are currently trading firmly above 51,000. So how are people analyzing this? Well, some are pointing to the micro-strategy announcement saying that it seemed designed to help Bitcoin punch through this $50,000 mark. For evidence, those people are pointing to the previous micro-strategy bond announcement on December 7th, which helped Bitcoin get above $20,000 at that time. Others are talking about how things feel like they're getting too heated now.

Starting point is 00:01:45 A JPMorgan Research Note argues that the Bitcoin market cap has gained $700 billion on the back of $11 billion of institutional inflows. It argues that retail traders are seeing this institutional news and then aping in with leverage in a way that is disproportionate to what they should. Dovi Wan tweeted something that was at least a little reminiscent of this saying, Tether is now seeing a positive premium after a long time staying at a discount on Chinese OTC, meaning that Chinese DGens are flocking. Overall, still very bullish. And indeed, that concern aside, when all things are said and done where a lot of the attention is turning at least within this space is 53,600. That is the price at which we have a $1 trillion

Starting point is 00:02:34 market cap for Bitcoin itself. And I will say right now feels like the time most likely to swing in either direction. Bitcoin is up 53% on the month. And like I said, you're seeing some of those institutional writers who were bullish a month ago turn just a little bit. If Bitcoin heads lower, it will be confirmation of that feeling that it must be too hot. If, on the other hand, Bitcoin punches up, and especially if it hits that magical $1 trillion market cap, expect some fast follow-on announcements from other institutions in the space, and who knows where we go from there. Now let's shift our attention over to Treasury yields. Yesterday, I mentioned that I thought one of the big tests for Bitcoin would be what happens if the general mood in the economy

Starting point is 00:03:22 changes. In other words, the recovery kicks in, consumer demand returns, and inflation doesn't go up. What happens, in other words, when normal hedges retreat? We're seeing the very first tests around exactly that. Treasury yields are going up, which means there's less demand for treasuries. When there's a lot of demand for treasuries, it pushes the yield down. When there is less demand, that yield goes up again. All of this points to the recovery and the economy and a move to a move to a a risk-on type of environment. In that context, gold fell to its lowest point in two months. One analyst told CNBC that gold markets seem to be fixated on U.S. yields. So far, however, this hasn't impacted Bitcoin, which, as I mentioned, is trading firmly above 51,000.

Starting point is 00:04:12 One day isn't enough evidence to draw a conclusion, but it's certainly a good first sign and something I'll keep watching. Third, on this grab bag show, an institutional fund for decentralized finance. One of the big questions around defy is, will it be able to attract institutional investors? And more specifically, are any of them interested right now? So far, the answer has been that they're just not there yet. Firms like Nidig and people like Anthony Scaramucci who are interacting with institutional investors every day have reiterated a couple different times that in their conversations, 99 times out of 100, if not more, it's exclusively focused on Bitcoin. What they're seeing is that Bitcoin is the only asset in the crypto space that has transcended into relevance for that macro

Starting point is 00:05:04 crowd. There are, however, a couple interesting new factors. First of all, last week, the CME launched ETH Futures, and of course, CME was very early to the Bitcoin party as well. It took a number of years for that to mature into a full institutional space around Bitcoin, but certainly I think you can view them as at least a leading indicator. Many investors want to be a part of the next bull run. Others seek to build their dream home, finally launch that startup or fund their education. Try Nexos instant crypto credit lines and borrow against any major cryptocurrency with no minimum or maximum withdrawal amounts, no fees whatsoever, no credit checks,

Starting point is 00:05:46 and flexible repayment. Not to mention, the APR starts at just 5.9%. Stay on top of your investment game with nexo.io. And remember, it's your crypto, your credit, your choice. Get started at nexo.io. The second announcement that I wanted to focus on a little bit here was a new defy index fund from Bitwise. So this is an index fund with 10 assets designed to give accredited investors

Starting point is 00:06:14 exposure to the defy space without the difficulty of having to actually go buy these assets one by one. The fund includes AVE, Uniswap, Maker, Synthetics, compound, UMA, Umb, Yern, ZeroX, and Loop Ring, and comes, at least according to Bitwise, because they saw their clients sniffing around and starting to get interested. The question, of course, is will this bring some meaningful amount of new people into the space? It feels unlikely to me, but it certainly provides an easy place to start for those institutional dabblers. And of course, at the end of the day, money is what a lot of people are paying attention to. If this fund outperforms, you can bet that people will start to notice. Speaking of making money, Christie's is auctioning

Starting point is 00:06:59 off an NFT. Christy's is a 255-year-old auction house, and they are currently partnering with Maker's Place, a digital marketplace, to sell works from Beeple, aka Mike Winkleman. Beeple is one of the most successful NFT artists making 3.5 million in NFT auctions last year. Christie's has in the past included an NFT component to other types of physical art, but this is the first standalone digital collectible auction that the auction house has ever held. The NFT space is certainly getting a lot more attention recently. Logan Paul discussed it, specifically NBA Topshot recently on his podcast. Tyga is making NFTs, and there are some indicators, including some really eye-popping prices,

Starting point is 00:07:49 that this market is getting a little frothy in terms of what people are willing to pay. Still, it's hard to deny how many different types of artists are at least exploring the space. What's more, I think, important context is that collectibles in general are super hot across the board. You're seeing crazy price growth in everything from baseball cards to baseball cards to sports memorabilia to magic cards to Pokemon. And frankly, when you go read the subreddits for all these communities, they're all pointing back to the same cheap money looking for yield sort of environment that's setting the backdrop for Bitcoin as well. When you have such a dominant macro market force as we do, it sets the tone for everything. All right, last up on today's episode,

Starting point is 00:08:39 let's talk about Coinbase's massive valuation. Coinbase has long been considered one of the juiciest IPO targets in the crypto space, and many have thought that this IPO will set a tone for what we can expect from other public crypto companies as well. No matter what, it's going to mean an unignorable presence for crypto in public markets, and one question is, what will it actually ultimately trade at? The best place currently for us to get a sense of that is on the secondary market, where investors can buy and sell privately held shares. Currently, shares are moving on Nasdaq private

Starting point is 00:09:16 market at around 303 per share. This implies a total company value of $77 billion. The question, of course, is, is that reasonable? Is it inflated? Well, it would make Coinbase more valuable than the Intercontinental Exchange, which owns the New York Stock Exchange. So it's certainly not on the low side. That said, we're clearly in price discovery mode. A couple of weeks ago, the shares were closer to $200, and on FTX's pre-IPO futures contracts, they're all the way up to $386, suggesting an even higher valuation. When it comes to volume, the sources that CoinDesk was tapping for this NASDAQ private market information, say the volume is in tens of millions of dollars a week, so clearly, even if this valuation is high, there is a lot of interest here. Anyways, guys, there is so much going on in these markets right now. It's hard to keep up with all of it.

Starting point is 00:10:11 Let me know, use Twitter, use YouTube. Ping me about which topics you want to hear more about, which of these topics you'd like to hear full shows about. I've got some great guests coming up later this week too, so stay tuned for that. As always, I appreciate you listening. If you're enjoying the show, please keep rating and reviewing it. It's making a huge difference. Until tomorrow, guys, be safe and take care of each other. Peace. Thank you.

The Breakdown - Coinbase Trades at a $77B Valuation as BTC Heads Towards a $1T Market Cap

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