The Breakdown - Correction Watch 2025: Bitcoin Pullback or Just Another Bull Run Pause?

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 Monday, August 18th, and today we are on Correction Watch 2025. 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. All right, friends, well, after Bitcoin saw new all-time highs last week, traders are watching out for a correction. Bitcoin rode a six-week up trend to reach an all-time high of 124,500 last week, but to some,

Starting point is 00:00:49 this rally is getting a little long in the tooth. Numerous analysts are looking at the four-year cycle and noticing there's only a few months left before the period where Bitcoin historically tops. In the shorter term, a six-week rally is about all you can typically expect from Bitcoin without a pullback. And looking at the price action this morning, it seems like Bitcoin could, could be in for some short-term pain. There was a major sell-off on Sunday night, and Bitcoin began Monday below $150,000 for the first time since the beginning of the month. This is exactly

Starting point is 00:01:15 what wrecked capital expected to see, tweeting on Sunday, historically Bitcoin Price Discovery Uptrend 1 tends to end between week 6 and 8 of its uptrend, whereas in Price Discovery Uptrend 2, Bitcoin tends to end its up trend between week 5 and 7. Week 7 of Price Discovery Uptend 2 begins tomorrow. So far this August has been abnormally strong. While we think of summer months as the doldrums, they usually lead to a sketchy August and September. September in particular is the only month where average and median price action has been negative across the past 10 years. For long-term holders, that usually isn't a big problem and many choose to hold through the pain. During bull runs, October has historically been the start of some truly insane price action, garnering the nickname

Starting point is 00:01:53 Uptober. November is actually usually stronger, but nothing beats a strong reversal as the leave start to turn for the start of fall. Don Crypto Trades laid out the historical roadmap tweeting, never in history has Bitcoin seen both a green August and September. We tend to see a quick flush followed by an explosive Q4 in most of the bull market years. Any larger flushes in the next one to two months would be welcomed and could very well be the last larger dip for the Q4 end of the year rally, which we see so often. If not, that's fine too, but I think it would pull forward a bigger high time frame top as well. Whatever happens, October and November are the months to generally be risk on. Obviously, there's no guarantee we see the same thing this year,

Starting point is 00:02:30 but there's a pretty consistent track record for those months so far. Looking more broadly, most market participants aren't quite ready to call it quits on this bull run. Canary Capital CEO Stephen McClurg told CNBC on Friday, I think there's a greater than 50% chance Bitcoin goes to 140 to 150 range this year before we see another bear market next year. That being said, he added, I don't like the economic standing at all right now. Mukherg said that the price action is really all about the big institutions, with Bitcoin ETFs and treasury companies driving this bull market. He commented, We're seeing large allocations coming in not just from small institutions, but from large sovereign

Starting point is 00:03:04 wealth funds. We're seeing insurance companies asking questions. Canary doesn't have a large Bitcoin ETF, so it's a little unclear if he's basing his statement on knowledge from inside the industry or parroting conventional wisdom. Galaxy Digital CEO Mike Novogratz is thinking a little more long-term, but doesn't think Bitcoin going up in a straight line is in anyone's best interests. During a recent podcast appearance, he said, people who'd cheer for the million-dollar Bitcoin price next year, I was like, guys, it only gets there if we're in such a crappy place domestically. I'd rather have a lower Bitcoin price in a more stable United States than the opposite. This, by the way, is always the narrative towards the end of bull runs,

Starting point is 00:03:37 with Bitcoin figures openly questioning whether we're cheering our bags or celebrating the societal dysfunction that comes with a currency collapse. Novogratz did warn that some of the macro signs are looking shaky, adding, as much as I like Scott Besson and I think he meant everything he said, he's failing at bending debt to GDP. The deficit is going to be higher, not lower. And while the U.S. fiscal deficit has been a big focus over this year, many are now turning their attention east. China is currently in the grips of a deflationary crisis,

Starting point is 00:04:04 and the past month has seen things go from bad to worse. Across multiple sectors, July was the weakest month for the Chinese economy so far this year. Infrastructure investment is set to have its steepest contraction since 2020 this year at the current pace. The PBOC has signaled that further rate cuts aren't an urgent matter, but policymakers have signaled support for the financing market. Bloomberg analysts expect the PBOC to roll out additional stimulus measures as soon as September. Economists at Nomura and Commerce Bank agreed that extra stimulus is only a matter of time. In that light, Coinbase Institutional's global head of research, David Duong, believes that Altseason will continue. In a research note on Thursday, he wrote, We think current market

Starting point is 00:04:40 conditions now suggest a potential shift towards a full-scale alt-season as we approach September. With the Alt-coin market cap climbing and the Alt-Coin Season Index showing early positive signals, we believe conditions are setting up for a potential rotation into a more mature Al-Coin season. Joanna Liang, the founding partner of Singapore-based venture firm, J-square added, three key conditions need to align for an all-coin season to take hold, a supportive macro backdrop, declining Bitcoin dominance, and a strong new narrative. Essentially, there are signs of a pullback on the horizon, but traders are still cautiously optimistic for a positive end of the year.

Starting point is 00:05:11 Now, to the extent we have a new narrative in crypto, it's the second wave of crypto treasury companies. This month, Tom Lee has stamped his mark on the asset class by buying an absolute ton of Ethereum through his treasury company BitMine. Last week ended with BitMine announcing $24 billion in equity sales. Now, this won't happen all at once, and it kind of seems like Bitmine took a breather to end the week. The Ethereum ETF saw their first outflows after an eight-day buying streak on Friday. It was a relatively small outflow for $59 million compared to the record $2.9 billion added

Starting point is 00:05:41 to the funds last week, but still enough to take the heat off the markets a little. That said, it doesn't look like enthusiasm for crypto treasury companies is particularly slow. down. Last week, Norges Bank disclosed that they have added to their Bitcoin Treasury company position by 83% in Q2. The fund is largely invested in micro strategy, but has added some meta-planet as well. Standard Charter commented on how significant the position is, writing, The point here is that Norges is using micro-strategy as a way to gain exposure to the underlying. The increase in one quarter has to be a provocative position. Today's episode of The Breakdown is brought to you exclusively by Grayscale.

Starting point is 00:06:17 Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products ranging from single asset to diversified to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of Tradfai and Crypto, and one of the benefits for a lot of us is that grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. Now, Norges Bank famously attempts to track global

Starting point is 00:07:04 assets in their relative proportions rather than taking outsized positions. In that context, they're still vastly underweight Bitcoin with less than a tenth of a percentage point of their fund invested in Bitcoin proxies. Still, it's notable that they're adding to Bitcoin Treasury companies rather than holding the underlying directly. The natural conclusion is that they view the major Bitcoin treasury companies as a legitimate part of the global asset picture and need to get their weight up. On the horizon, we have the next big Bitcoin treasury company coming to market in the form of David Bailey's Nakamoto.

Starting point is 00:07:31 The firm closes their reverse merger with healthcare company Kindly MD on Thursday. Bailey has said the goal is to accumulate a million Bitcoin, which would be somewhere in the ballpark of $115 billion worth at current prices. For reference, micro-strategy owns around $630,000 Bitcoin. Unlike other Bitcoin treasury plays like 21 Capital, Nakamoto isn't preloaded with Bitcoin so has a lot of buying in its future. The company's balance sheet starts off with 21 Bitcoin, 540 million in cash from equity sales, and a further 200 million from selling convertible notes. As business wrapped up on Thursday, Bailey tweeted, honored to officially join Kindly M.D as CEO and

Starting point is 00:08:05 chairman. Thank you for coming on this journey with me. Together we will rebuild the world on the Bitcoin standard. One Nakamoto equals one million Bitcoin. Jeff Park, who recently left Bitwise to join Pomp's Bitcoin Treasury play had an interesting observation. He posted, I explained the thesis behind Bitcoin to my former Morgan Stanley boss this weekend. He's still cynical. But when I walked him through the thesis behind the micro-strategy convertible bond arbitrage, his eyes immediately lit up and he asked how to get in on the trade. Bullish. More roads to Bitcoin. It's entirely possible that adding some interesting financial engineering and leverage around Bitcoin is a way to make it more attractive to tradfai. And it's also an interesting sign that senior

Starting point is 00:08:42 bankers are still skeptical of the boring old digital gold narrative. With all that said, there is still deep skepticism about the crypto treasury companies within the industry. For all intents and purposes, this looks very similar to previous altcoin cycles to many. It's still difficult to find a crisp articulation of why these companies would be forced to unwind, but many are convinced it can only end in tears. Now, tilting at Michael Saylor has become something of a lost cause over the last five years he's been running the strategy, but the host of new companies present new targets. Stephen Zhang, Block's director of research, said, A lot of these digital asset treasury formations involve insiders of the very assets that these

Starting point is 00:09:16 firms were created to buy. These structures obviously bring up ethical questions on who gets privileged access and information around their formations and strategies. Discussing the new wave of treasury companies that are going further down the top 50 coins list, Komoto CTO, Caddahn, Staddleman said, this is the kind of circular economy optics that gives cryptosceptics something to talk about for years. When a treasury firm takes money from VCs or foundations to buy tokens, those same VCs already hold, you're not managing assets, you're manufacturing. exit liquidity. It's self-dealing dressed up as capital deployment. Now, these are all publicly listed companies with reporting duties to the SEC, so there is a limit on how much you can get away with.

Starting point is 00:09:51 When asked about private token deals, Mill City Ventures CIO Stephen McIntosh said, Insider trading is a crime. He added that his Sway Treasury company hasn't purchased, quote, any locked tokens from investors who wanted to get out of their vesting schedule. The company has purchased Sweed tokens at a discount from the Sway Foundation. However, McIntosh said the discount was reasonably small compared to the deals arranged with World Liberty. financial and ton strategy. In short, while there are signs of froth, pretty much everywhere you look, there are certainly no reason things can't get even more frothy from here. Crypto Chast wrote, As much as I'd love to see the Treasury companies blow up, I'm going to be absolutely amazed if

Starting point is 00:10:26 C.T collectively calls the top. Every prior cycle, the majority get it terribly wrong. If a super obvious self-fulfilling prophecy that everyone can see marks the top, well, oof. Meanwhile, at this point, as market enthusiasm continues, Gemini is lining up to go public, following the surprisingly successful debut from Bullish. The offshore institutional exchange managed to see a 200% pop when it began trading on Wednesday, and while the price is now down 60% from its one-day high, it's still trading it more than double the private IPO price. Gemini wants a slice of the action and updated their paperwork on Friday. Initially filed confidentially, the financials disclose heavy losses over recent years. Gemini recorded a $282.5 million loss for the first half of this year, and a $41 million

Starting point is 00:11:07 loss in the first half of 2024. The filing also revealed the creditors. arrangement with Ripple. Gemini can draw up to $75 million in Ripple Staplecoin and is able to scale that up to $150 million once the initial amount is fully drawn. To date, Gemini hasn't drawn on the credit facility. Gemini further disclosed plans to transition most users to their moon base entity registered in Florida, shifting away from the Gemini Trust, which is regulated in New York. Moving away from New York State is a knock on the bit license, which is starting to show its age. While the bit license was never popular, in an earlier era, it was viewed as the best way to operate as a fully licensed crypto entity with an active regulator. The New York Department of Financial

Starting point is 00:11:43 Services, however, has failed to update the Bit license, so crypto firms are beginning to look elsewhere. In addition, Gemini plans to go public with dual-class shares. The Winklevoss twins will retain all Class B shares, giving them 10-to-one voting rights and full control of the company. Gemini didn't disclose an IPO price or a target valuation, but have signed with Goldman, City, Morgan Stanley, and Cantor Fitzgerald to underwrite the offering. Now, going public with deep losses on the books isn't necessarily a great look, but given how hot recent crypto IPOs have been, many think it's unlikely to matter. Rick Heitzman, a partner adventure firm Firstmark said, the IPO window is open. You've seen a cross-industry broad-based

Starting point is 00:12:17 support for IPOs, and therefore, we're advising companies we're invested in to get ready and go public. We don't know when Gemini will begin trading, but the assumption has to be as soon as possible. All eyes, meanwhile, are still on Cracken, which is the last really big crypto company aiming to hit this IPO window. Still, markets are fickle and there's no telling how long the window will last. The response on CT overall was general surprise that Gemini has managed to lose money in a bull market, with Gould ID tweeting, Gemini must be desperate for an IPO as these are some terrible results given crypto market growth the past year. Must just be losing market share. Still, CT has been wrong before, declaring that Circle was vastly overvalued before they went

Starting point is 00:12:53 4x in their first two weeks. Bullish is also an unprofitable crypto exchange and traders don't seem to care in the slightest. So, who knows, man? Strike, I guess, while the iron is hot. For now, that's going to do it for today's breakdown. Appreciate you listening as always. And until next time, be safe and take care of each other. Peace.

The Breakdown - Correction Watch 2025: Bitcoin Pullback or Just Another Bull Run Pause?

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.