The Breakdown - [CORRECT] Fed Minutes Slam the Door on Rate Cuts—Bitcoin Hits New Lows

Starting point is 00:00:00 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 Thursday, November 20th, and today we are talking about the Fed Minutes sending Bitcoin to a new low. 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, the Bitcoin drawdown continues as Fed Minutes took rate cuts completely off the table. Minutes for the October FOMC meeting were released on Wednesday and made it clear that a deeply divided Fed is not likely to cut in December. The minutes underscored the two-sided risks in the

Starting point is 00:00:49 economy, with several members pointed to slowing job numbers and depressed labor demand, as signs the economy could be heading into a steep downturn. On the other side, many committee members noted that inflation hasn't shown any signs of returning sustainably to 2%, with tariff shocks and sticky prices for services still an issue. Mostly, the meeting seemed to demonstrate a two-sided outlook on the committee itself. The Minutes said that only several participants said further rate cuts would be warranted to move policy closer towards neutral. However, many argued that rates should remain on hold for the remainder of the year. The Minutes stated, in discussing the near-term course of monetary policy, participants expressed strongly differing views about

Starting point is 00:01:23 what policy decisions would most likely be appropriate at the committee's December meeting. Now, none of this is particularly shocking given how the October meeting played out. That decision to cut rates featured two dissents, with one member preferring to cut by 50 basis points and another preferring to hold rate steady. During his press conference, Jerome Powell frequently referred to a deep division on the committee, saying at the time, there is a growing chorus now of feeling like maybe this is where we should at least wait a cycle. Renaissance macro research wrote, The minutes shown what we've known. The hawks are more hawkish than the doves are dovish. To the extent that there's new information, it's simply that the committee is leaning heavily

Starting point is 00:01:55 towards a rate pause. By a quick headcount based on public statements, it seems that only governors Miran, Waller, and Bowman are strongly in favor of a cut in December. Three regional Fed presidents with a vote in December have expressed a desire to hold rate steady, and the remaining three voting members, including Powell, seemed to be leaning towards a rate pause. In the language of the Fed minutes, the many outweigh the several, and this release was enough for the markets to take a December rate cut cut off the table. The CME Fed Watch tool had a rate cut price that around 44% on Wednesday morning, by the evening markets were pricing just a 32% chance of a cut. Part of the issue compounding all of this will be a lack of data heading into December's meeting.

Starting point is 00:02:30 The October jobs report is canceled due to the government shutdown, and the November report won't be available until the morning of the meeting. Richmond Fed President Tom Barkin remarked on this issue on Wednesday stating, Without compelling data, it's actually hard to get people who have pre-existing perspectives to all come to consensus. You could argue it out, and maybe that's what we'll do. In the meantime, the sharp repricing of rate expectations sent Bitcoin for another tumble. Price action had been fairly weak on Wednesday morning, but plunged to 88,500 on release of

Starting point is 00:02:55 the minutes. It's now clear that the Fed isn't riding to the rescue to end the year, so Bitcoiners will need to put a floor on this market themselves. Velti Lunday of K-33 research is skeptical, with traders preferring leveraged bets to the kind of spot buying that can actually form a bottom. In a research note on Wednesday, he noted that Perp's open interest had seen its largest weekly growth since April 2023. In combination with a rising funding rate, Lunday said this looked like knife-catching behavior rather than defensive positioning. He wrote, the growing funding rates likely stem from resting limit orders being filled in hopes of a swift bounce with prices pushing below six-month lows. However, no bounce has materialized,

Starting point is 00:03:28 and now, this leverage represents excess overhang, increasing risks of amplified volatility driven by liquidations. The market structure was enough to change his view on a recovery, with him adding, while we have been vocally bullish in the early stages of this downtrend, we view this as a sufficiently dangerous omen, making the case for reducing overall risk. Lundia is now looking for a bottom around $85,000 or failing that at $74,500, which coincides with the April bottom and micro-strategy's average cost basis. Now, while leverage crypto traders were trying to catch the falling knife, ETF investors were simply getting out of the way. The Bitcoin ETFs have seen a staggering $3 billion in redemptions this month, putting them on track for their worst month

Starting point is 00:04:03 since launch. February of this year is the current record holder with $3.5 billion in redemptions. BlackRock's Ibit saw its worst day of outflows this Tuesday, with over half a billion redeemed in a single day. Yet, it's not all bad news. On Wednesday, the Bitcoin ETF saw inflows for the first time in a week. It was only a tiny $75 million, but that's much better than the persistent nine-figure outflows that had become the norm. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps, and outdated financing models. Communities and builders are left behind while capital sits locked out. Althea is changing that. Since 2018, their technology has powered resilient, sustainable networks across the U.S. and abroad. With Althea L1, they built the

Starting point is 00:04:43 world's first blockchain purpose built for utilities and telecom, turning infrastructure into a transparent, investable asset class. Through liquid infrastructure, networks can now be financed in real time, operated more efficiently and scaled to meet the $3 trillion-dollar telecom and utilities market. This is fintech for infrastructure, connecting capital directly to builders and returning revenue seamlessly to funders. No middlemen, no bottlenecks, just sovereign, resilient infrastructure that works for people, communities, and investors alike. Learn more at althea.net and find them on Crackin to join the future of infrastructure finance. Outside of markets, there's actually a fair bit of good news to turn to. In Washington, Senate Banking Chair Tim Skye,

Starting point is 00:05:23 has said he's hopeful about getting the market structure bill ready to move forward in December. He told Fox Business, next month we believe we can mark up in both committees and get this to the floor of the Senate early next year, so that President Trump will sign the legislation making America the crypto capital of the world. The bill saw a major breakthrough two weeks ago with the Senate Ag Committee pushing a bipartisan discussion draft. There's still a lot of issues left to negotiate, but the draft was a promising indication that the two parties were ready to come to the table. Also in the Senate, Mike Selik has sat for his confirmation hearing as CFTC chair. The nomination process for this position has been a bit of a saga, with A16Z head of policy

Starting point is 00:05:55 Brian Quintends put up by the administration and then knocked down by a public campaign, including notably from the Winkle Boss Twins. That means the CFTC has been without a confirmed chair for the first 10 months of the administration, crimping their ability to move crypto policy forward. Selig, meanwhile, is an uncontroversial choice among crypto industry folks. He's a crypto lawyer who worked through the past cycle for Wilkie Far. He tends to have a thoughtful and academic view on crypto issues, generally seen as a subject matter expert and consummate professional. Making his pitch to the Senate Ag Committee, he said, we need clear simple guidelines, we need consumer protection, and we need to stop with the regulation by enforcement. This is a real

Starting point is 00:06:28 opportunity to develop a framework that can allow software developers to thrive for new exchanges to crop up that are going to protect investors and have the type of controls that you would expect in an exchange. Committee Chair John Boosman questioned Selig about his preferred approach to defy, which has been one of the big sticking points in negotiations around the market structure bill. Selig responded, when we're thinking about defy, it's something of a buzzword, but really we should be looking to on-chain markets and on-chain applications and thinking about the features of those applications, as well as where there's an actual intermediary involved. On the Democrat side, Selig didn't face any personal concerns. Instead, the issues raised were largely about how the

Starting point is 00:07:00 CFTC has operated this year. Ranking Senator Amy Klobuchar noted that zero commissioners are currently in place, and there's no guarantee that the administration will appoint any Democrats at all. Selig hedged his response, stating that it's, quote, very valuable to have a diversity of viewpoints and that he would, quote, work with whoever the president chooses to appoint. CFTC funding was also repeatedly raised by Democrats. The CFTC has just 540 staff, around a quarter of the size of the SEC, so there's concerns it won't have the workforce to adequately police crypto markets. Selig didn't want to rock the boat, stating that he would be better placed to make a judgment on funding once he's installed as chair. Overall, the hearing seemed to be very uncontroversial when it came to

Starting point is 00:07:35 crypto. The vote should take place over the coming days, so hopefully we'll soon have a new CFTC chair and the agency can get moving on crypto policy. In institutional news, new disclosures show that the Abu Dhabi Investment Council tripled their Bitcoin position last quarter, the Sovereign Wealth Fund now holds around $500 million worth of Ibit. We've seen several of the institutions that popped Bitcoin earlier in the year scale up their position, notably the Harvard Endowment tripled their holdings to around $440 million. But the disclosure from the Abu Dhabi Investment Council is a rare glimpse into the secretive fund.

Starting point is 00:08:02 They invest mostly in private equity, infrastructure and real estate, and we have very limited knowledge about the makeup of their portfolio. Even more rare, Bloomberg managed to get an on-the-record statement from the fund about how they think about Bitcoin. An ADIC spokesperson said, we view Bitcoin as a store of value similar to gold, and as the world continues to move more towards a digital future, we see Bitcoin playing an increasingly important role alongside gold. Both assets contribute to diversifying our portfolio, and we expect to hold them as part of our near- and long-term strategy. Nothing we haven't heard before, but this could be a glimpse into how the top tier of Middle Eastern fund managers view Bitcoin.

Starting point is 00:08:34 Lastly today, Cracken has filed for an IPO. In a Wednesday, notice Cracken said that they had confidentially filed their IPO paperwork with the SEC. The filing comes shortly after news broke of 800 million in new fundraising that took their valuation to 20 billion. That was the first publicly announced fundraising in many years, so it set an independent market value for the company. Interestingly, co-CEO Argent Sethy had been fairly noncommittal about going public. Earlier this month, he said that Cracken won't, quote, race to the door as quickly as possible to get an IPO done. Now, the confidential filing process is relatively new and allows companies to have their paperwork reviewed by the SEC without disclosing everything to the public. We therefore have,

Starting point is 00:09:09 have no knowledge of IPO timing, how many shares will be sold, or pricing. Multiple other crypto companies have used this process earlier in the year, and there's typically a month or two between the filing and the IPO. The time frame could be delayed by the SEC returning to work after the government shutdown, but we can reasonably expect everything to be ready to go for early next year. At the same time, Krakens' $800 million in fresh funding means that there's absolutely no rush to go public, so if market conditions continue to slump, there's a possibility they could hold off. If they do decide to go, however, everything is now in place for arguably what would be the biggest crypto IPO of the cycle. So still a little gloomy out there, but there is more happening behind the

Starting point is 00:09:42 scenes. For now, that is going to do it for today's breakdown. Appreciate you listening as always, and until next time, peace.

The Breakdown - [CORRECT] Fed Minutes Slam the Door on Rate Cuts—Bitcoin Hits New Lows

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