The Breakdown - Crashes, Rallies and Stimulus: A Normal Week for 2021 Bitcoin

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. The breakdown is sponsored by nexo.io and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, January 16th, and that means it's time for the weekly recap. We have just concluded our second full week in January 2021 Bitcoin, and I think, think in many ways, this is a quintessential pattern-setting week for what we're going to see throughout this year. Today on the weekly recap, I'm going to talk about five things that I expect being pretty standard factors week over week throughout the year to come. And first up on that

Starting point is 00:00:53 list is volatility. Last weekend, Bitcoin hit a crazy all-time high of nearly 42,000. It was the end of a crescendo that had been going back five weeks. We had four weeks in a row of double-digit gains. However, on Sunday into Monday, it crashed down all the way back under 30,000. On Thursday, however, we were all the way back up at 40,000 again. And then on to today, Friday afternoon, as I'm recording this recap, we've slumped back down between 35 and 36,000. At first, the narrative around the first drop was minor selling, however, data shows otherwise. For the past six months, flows from mining wallets to exchanges have been steady. Since July, according to research from CoinDesk, miners have sent an average of 2,100 coins per week to exchanges, and this week

Starting point is 00:01:48 were on track to finish with them having only sent about 1,200 Bitcoins, hardly some massive new sell pressure. Perhaps a better explanation is the selling of some large firms. The larger the actor, the more constrained they are about when they take profits, and also the more concerned they are with trying to accumulate at cheaper prices. This rally had been going up so much, it perhaps seemed like a good time to try to take some profit and then buy back after the price had reset somewhat. It's worth noting, however, that even though the circumstances are different, these sort of big moves in the context of a larger bull cycle are nothing new. In 2017, there were six moves down larger than this week's on the way to a record-setting year.

Starting point is 00:02:29 that hit that 20,000 all-time high and saw more than 1,200% growth overall. Simply put, volatility will be a part of this year. Also, important to note, I'm not speaking of volatility the way that volatility is fudded as we discussed yesterday. If you're not an active trader, if you see Bitcoin as a long-term hold, short-term volatility has literally, for the entire history of this asset, always resolved to the upside. It's just about your time perspective. All right, the second feature of this week that I think is going to be a feature of this year, crazy macro tailwinds. Ever since the Georgia Senate runoffs confirmed that Dems would be in control of the Senate,

Starting point is 00:03:09 the blue wave speculation about massive stimulus and its corresponding impact on the dollar on inflation have driven all assets, but especially crypto to rise. This week, we actually got the first of Biden's plans. Instead of the $3 trillion that people had thought it might be, the total bill comes in at $1.9 trillion. The markets didn't really react except a little bit to the downside. And what's actually more interesting than the plans as they're presented is the battles they're generating. Progressive Dems are fighting for larger checks. They want the full 2000 instead of the $1,400 in this plan. The logic, by the way, of the $1,400 direct checks is that if you add that to the $600 checks that were authorized last year, it comes to $2,000,

Starting point is 00:03:52 The Progressive Wing is saying this is all ridiculous. They've promised 2000. They want to give out 2000. Hold aside the numbers of the debates. This is going to be the type of fight that plays out now that Democrats are in power, which frankly just reinforces the notion of the macro printing tailwinds for this asset. Looking for the best way to stay on top of your investment game? nexo.io has you covered in three easy steps with their high-yield savings account for digital assets.

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Starting point is 00:05:04 was, I don't know anyone who has ever used this company's products. What's more, reading their prospectus, back as burning hundreds of millions of dollars a year on building something, the result of which is a forthcoming app that has some 400,000 people signed up, which is good, but hardly justifies the $2 billion valuation they're seeking. Indeed, the entire thrust of the prospectus is to paint a vision for how big, crypto and digital assets are going to be in the future, projecting tens of trillions in market size in just a few years. This is absolutely a momentum play, looking to monetize both on the sterling brand of their backer, the intercontinental exchange, i.e. the parent of the New York Stock

Starting point is 00:05:44 Exchange, as well as give hungry investors exposure to the burgeoning newly one trillion dollar asset class of crypto. Gemini also had some IPO rumblings, as reported by Bloomberg in an interview Cameron Winklevoss said, we are definitely considering it and making sure we have that option. We are watching the market and we are also having internal discussions on whether it makes sense for us at this time. We are certainly open to it. Finally, there was Anchorage. The Crypto Custodian got the first national banking charter issued by the Office of the Comptroller of the currency for a crypto company. That plus last week's guidance that existing financial institutions could take advantage of crypto infrastructure and treat it like they treat things like Swift and ACH,

Starting point is 00:06:27 shows this convergence between traditional finance and crypto finance through the lens of banks is happening in a big way. Next up in 2021 trends that were exemplified this week, regulatory rumblings. Speaking of the OCC, the Office of the Comptroller of the Currency has had a huge role in shaping the landscape for how banks and crypto interact, so much that it's caused massive consternation with acting comptroller Brian Brooks, who has this week stepped down. Now, Representative Maxine Waters has asked President-elect Biden to roll back basically everything that Brooks did, so we are certainly not out of the waters yet. And speaking of people leaving, as a parting FU to the industry, Treasury Secretary Stephen Mnuchin introduced a rule that would

Starting point is 00:07:12 give FinCent access to a lot more data about crypto users. This week, the government extended the comment period for that rule, which was absolutely record-setting in our response. The period is now extended past when Mnuchin leaves office, leaving some to cautious optimism that we dodge the bullet this time. Regardless, privacy remains a central fault line for the battles to come. In another area, Gary Gensler appears to be Biden's pick for the SEC chairmanship. I did a whole show about Gensler, but the TLDR is that this is someone who has taught courses about Bitcoin and blockchain at MIT, and at least if nothing else, actually understands the space and many of the new. nuances of the space, so if nothing else will hopefully have a real partner, even if we disagree

Starting point is 00:07:57 with some of the ways that he's trying to regulate the industry. Finally, we had ECB President Christine Lagarde showing again that the bigger that Bitcoin gets, the more it's going to be back on government agendas as an annoyance. In an interview this week, she said that it had been involved in funny business like money laundering and needed global regulation. Lastly, on these long-term trends exemplified this week, random fud. What would a bull run be without some absolutely absurd fear, uncertainty, and doubt from the press?

Starting point is 00:08:31 On yesterday's show, Dan Held did his ripping fast 45 minutes of responses to common fud from China control of miners to climate change and energy use to tether manipulation, but even we didn't see this one coming. Reuters published an article about astrologers using the position of the planets to determine when to buy Bitcoin. Now I saw many in Twitter up in arms about this piece using it as another example of just how ridiculous mainstream media coverage of Bitcoin was. I have to believe, if only for the sake of my sanity, that they were really just out to troll us Bitcoiners and make our heads explode all over the pages of Twitter. If so, good on you. Mission accomplished.

Starting point is 00:09:17 Anyways, guys, I think that 2021 is off to quite the banging start. It's going to be so fascinating, so full of action, energy swings. If you are tired now, find a way to get some rest and regroup because we are just getting started. And of course, every day of the year, I will be here sharing content, giving you my perspective, bringing in guests, and I appreciate you listening and hanging out as well. If you like the show, go give it a rating and a review. It makes a huge difference for growing our community. And until tomorrow, guys, be safe and take care of each other. Peace.

The Breakdown - Crashes, Rallies and Stimulus: A Normal Week for 2021 Bitcoin

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