The Breakdown - Crypto's Past, Present and Future

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. What's going on, guys? It is Sunday, March 23rd, and that means it's time for Long Read Sunday. 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. Hello, friends, back with another long reads episode today, and we're doing something a little bit different. Instead of a normal essay or op-ed, we're actually going to be cribbing from Melton Demir's presentation from her Blockworks talk at Das this week, which she called Believe in Something.

Starting point is 00:00:55 Meltem has been on this show numerous times. She's always interesting, has tons of great thoughts, and has at this point a huge amount of experience in this space, and always, no matter what, very interesting. perspectives. We're doing it a little bit differently today. I'm actually recording this as a video so you can see the slide. So if you are not watching this on YouTube or on Spotify, I suggest you go check it out over there where you can see the video. I will try to describe her memes, although they will probably have a little something lost in translation. And what I'm going to do is we're cribbing from the Twitter thread that she paired with her slides. So it'll sort of be intersecting me with Meltem's points as we go along the way. Meltem writes,

Starting point is 00:01:34 quick slide rip from my Blockworks Doss talk believe in something. She shows the classic meme of the guy pushing dominoes from very small to very large, with the very small domino being wanting to buy mushrooms on the internet, and the very large domino being destabilizing the entire financial system. Meltem continues, this is where it all began. Everything we talked about 10 years ago when we started building the world's first Bitcoin investment firm has come to pass. So why isn't Bitcoin a million dollars?

Starting point is 00:02:00 The next slide shows a five-year chart of the overall market. market cap of crypto and the overall traded volume of crypto, with the notable fact being that March 2021 and March 2025 look very similar. She writes, if we take out Bitcoin and Ethereum, this is the last five years of crypto markets. The names may have changed, but the numbers haven't. This is a big problem. There's no growth. So again, she's talking about growth or not in the altcoin market effectively. She continues, 2024 was propped up by two persistent bids, micro-strategy and BlackRock. But the buyers aren't missionary. They're mercenaries.

Starting point is 00:02:36 Microstrategy buyers are farming the conversion arbitrage. Ibit buyers are farming bases. 6% of the Bitcoin supply is in these two. This is Our Black Swan. The title of her slide is, Microstrategy and ETF flows aren't what they seem. And this, of course, gets to the question of the uncomfortable bedfellows of the crypto kids and the Wall Street traders.

Starting point is 00:02:56 Meltem continues, despite the promise of innovation and the breathless Twitter shilling of endless L1s, Bitcoin dominance is rising, not falling. This is a Bitcoin industry, a Bitcoin story, a Bitcoin market. Once again, the five-year chart of Bitcoin dominance, with the same level around 60% now as it was four or five years ago. So let's look at Bitcoin, she writes. We have so many incredible rallies driven by narrative and flow catalysts.

Starting point is 00:03:20 What possible narrative or flow could drive us higher than the U.S. stockpiling Bitcoin. The catalyst she points to on the charts include ICO mania back in 2017, the Paul Tudor Jones pump at the beginning of COVID, the ETF pump when black, BlackRock announced, and the Trump pump, once leading candidate Trump and then President elect Trump, really went all in on Bitcoin and crypto. Meltem continues, DeFi is incredible, but TradFi is winning when it comes to making money. Stable coins and ETFs are on track to generate $9.1 billion of fiscal year 25 institutional revenue. D5 protocols are on track to generate $9 billion of fiscal year 25 revenue, although much of this hinges on meme coin trading

Starting point is 00:03:57 volume. The institutions are coming. Yeah, they see the money being made and they want a piece, Nothing personal, it's just business. In the case of Trump, he's coming to Das because Papa's getting a bag. Nothing personal, it's just business. Missionaries, not mercenaries. The slide here that she presents is titled, The Institutions are here, period, to take our money, period. She points to USDT, hold 97 billion of treasuries, paying $200 million in annual fees. USDC holding $50 billion of treasuries, paying $100 million in annual fees. Biddle being a billion dollars of crypto-natives giving their money to BlackRock to manage, and Trump, she writes, between Trump, Melania, and World Liberty Fy into the hundreds of millions in fees, between all the insiders like L.A. Vap Capital, billions in profit. Her slide concludes,

Starting point is 00:04:40 every asset manager and bank doing quote-unquote crypto is earning insane fees for putting things quote-unquote on chain, i.e. holding treasuries or, in the case of Trump, selling retail crypto pipe dreams. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with The Breakdown. Many of you know, but for those of you who don't, ledger is the most secure hardware wallet for your crypto and logins. It's trusted by 7 million users and secures 20% of the world's digital assets. What's more, Ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem of products and services, all of which are designed to make digital ownership more secure and accessible.

Starting point is 00:05:18 You can buy your Bitcoin with Ledger and Ledger Live and so much more. Basically, not only did they want to keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks, and Ledger Flex introduced the world's first secure touchscreens, making it easier and safer to manage your transactions and assets. Alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app, offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks, once again, to Ledger for sponsoring the show.

Starting point is 00:05:53 Meltem continues, The institutional innovators tweeting about adoption and the Trench Warriors tweeting about meme coins have more in common than you might think. We need to stop simping and start thinking. She writes, stop being dumb, myself included in all of this, by the way. You know what the most profound thing about crypto is, Meltem writes? Proof of work. Bitcoin showed the world how to build an energy to compute value chain, and this created $60 billion in public equity value. Her slides call this our biggest victory, and she points to 24 publicly listed Bitcoin miners with $24 billion in market cap, Corweave going public at $36 billion, and Crusoe winning two Stargate facility contracts.

Starting point is 00:06:29 Melton moves on, almost done with the spice. I've said this so many times. Bitcoin has accelerated AI by at least a decade. Bitcoin created a new data center business model, including behind the meter co-location, flexible loads, demand response, hedging with the underlying. It's profound. Her slide reads, the AI boom would not have reached this magnitude without Bitcoin capitalizing hundreds of billions of dollars of data center buildout, fueled by lowest cost electrification, driving persistent demand for hardware, and pioneering behind the meter co-location. And that spice she was talking about comes in the next. slide. I've never said this in public before, but it's time. Proof of stake was a mistake.

Starting point is 00:07:05 Ethereum could have been a trillion dollar protocol with its own robust energy to compute ecosystem. Instead, MEV extracts billions in value from users and apps. Her slide reads, Proof of stake was a mistake. Ethereum would be a trillion dollar protocol if it was still proof of work. Dilution of ETHL1 via infinite L2s would not happen. The Ethereum ecosystem would have dozens of infrastructure companies benefiting from the AI boom. Ethereum miners would be pioneering GPU innovation. She points out that back in 2022, Invidia was an Ethereum story, writing Ethereum once led the great Nvidia pump. Now it can't pump. Her conclusion, we need to get back to the basics. It's the time of reckoning in so many markets in crypto is no exception.

Starting point is 00:07:45 You cannot defy the laws of physics. Her slide reads, economic systems are comprised of matter, energy, and information. So she asks, where do we go from here? Our salvation lies in, energy, compute, crypto. It is truly that simple. Her slides read, The Future is about atoms and energy. The rest of the story she writes is unfolding in real time. A decade ago, I believed in Bitcoin and committed all my time and energy to it. A group of crazies on the internet meme to global reserve currency into existence. Imagine what else we can do. Believe in something. I think Meltem here is getting at the question of besides Bitcoin, what? Now I know for many of you, the answer has for a long time been clear, which is, well, nothing. But for so many who are still in the crypto space and who are not Bitcoin

Starting point is 00:08:32 only, the reckoning of which she mentions is really profound this cycle. ICOs might have in many cases been a cesspool of grift, but many of them were also principled and were at least attempting to show how a different alternative to the relationship between owners and users could be materialized. Defi, obviously tons of ridiculous financial games there, but also the plumbing for a totally alternative financial system. NFTs? You might have thought that pictures on the internet being sold for hundreds of thousands of dollars was incredibly stupid, but many people cared. These things organized communities that did for a time go beyond just their value. This cycle, what's the equivalent? Meme coins. Only the most tepid of attempts have ever been made to actually

Starting point is 00:09:17 intellectualize meme coins, and even that small attempt has faded at this point. The industry, in other words, has given nothing besides the mainstreaming of Bitcoin this cycle to get anyone new interested in the space. We are seeing now, in sentiment and price, the cost and the consequence of not having new blood and new ideas and new capital enter the crypto space during a cycle. Meltem's point about the institutions is that, while yes, they are a new source of all those things, they also in many, many cases are going to have very different objectives than ours. Ultimately, is this a bleak view? Depends on how you look at it. I think it's mostly just a real view, you and a set of questions about what we might do differently. I don't have the answers, but I'm glad

Starting point is 00:09:57 folks like Meltem are asking the questions, and I hope they have you thinking as well. For now, that is 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 - Crypto's Past, Present and Future

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