The Breakdown - Crypto's Regulatory U-Turn: The Five Most Important Stories in Crypto This Week

Episode Date: August 1, 2025

This week’s Friday Five is dominated by a stunning speech from the new SEC Chair, signaling a dramatic shift in U.S. crypto policy. NLW breaks down the speech’s implications, from safe harbors and tokenization to a renewed embrace of crypto within securities law. Also on the docket: Powell’s hawkish tone and Trump’s renewed feud with the Fed, Ray Dalio’s bold portfolio advice, a volatile week for crypto treasury companies, and the game-changing JPMorgan-Coinbase partnership that redefines institutional crypto access. All that plus Bitcoin weathers an 80,000-coin liquidation without blinking. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

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 Friday, August 1st, and that means it's time for the Friday 5. 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, back with another Friday 5, and boy, if last week was a little slow for summer, this week was absolutely not. We had a ton to talk about, but by far the most significant part of this, and you'll see it's kind of the main thing we talk about, even though there's four or five other things as well, is this speech from the new SEC chair about not only crypto, but the security system in America more broadly.

It's a really good one, so without any further ado, let's dive in. Price action may be muted at the moment, but the news cycle certainly isn't. We have another Friday 5 or we could do Friday 12. I like it. Yeah, I think last week I said it was the first one that felt like summer and the week responded in kind. Yeah, they came right back at you with like 15 stories to parse. But we're going to start with, I think, all things. U.S. government as usual.

And so I almost forgot this even happened this week. By the time we got Project Crypto, I forgot about the White House. House report we were waiting for for 180 days, but obviously we did get that report, 160 pages of, I'll go ahead and say word salad, reaffirming a lot of things that we already knew, but still good to see on paper. But I think the most notable part of that was what wasn't there, and that was an accounting of how much Bitcoin, the United States government holds. Bo Hines, of course, did follow up in an interview saying, hey, man, that's coming and you're going to love it, but it wasn't in the report. What's going on here?

I don't know. I mean, I'm kind of in the camp of lull at us just finding something new to complain about. Like, first of all, at what point did it become completely consensus that the U.S. government had to own Bitcoin for it to be good for us? Like, zoom back five years, and this was not on anyone's agenda. Like, it was symbolic for a while of the engagement that this particular administration was going to have with the U.S. government. But, like, we don't need the U.S. government to buy our backs. The whole point is to have a system of money that's outside the system. we're already dealing with a bunch of system overlap. So one, there are still people out there

who are sort of screaming in the wilderness about whether to even care about this or not. It sort of feels to me at this point, like any time this becomes the thing that we're complaining about, it's just because everything else is going well, so you've got to fixate on the next thing. I don't know, man, I don't think it matters, even a little bit.

I don't care if the U.S. government sold all its damn Bitcoin. Who cares? There are plenty of people out there who want it. Anyone who doesn't want it sucks for them. It's kind of my feeling. Now, I don't agree, yeah. So I don't think that there was anything huge in here. So to some extent, like, I don't think it's unreasonable for people to focus on what wasn't there just because there wasn't, frankly, for 160 pages, I mean, you used the phrase world salad, which is fairly accurate, you know, there wasn't a ton new here.

If you want to step back, I think what it represents and symbolizes is powerful. But yes, there was not necessarily some sort of blistering new thing to focus on. So, you know, in the absence of that, we got to go to what's missing. Totally agree, but to be honest, it had all the things we want. So what else did we actually need? They've moved on all of those things in 180 days. So there was nothing else but the strategic reserve to complain about. And to be quite frank, who gives a damn about a strategic Bitcoin reserve when you have this?

Right. So that was immediately followed obviously by Atkins speech here about Project crypto. Actually, we have two quick videos. I'll just show you. And we can put it in his own words. and then we can discuss it. Here we go. Should like to discuss what Commissioner Perce, Hester Perth and I are calling Project Crypto,

which will be the SEC's North Star and aiding President Trump in his historic efforts to make America the crypto capital of the world. And then this one. The SEC has said in the past, most cryptocurrencies or crypto assets are not securities. But the confusion over the application of the Howie test has led some innovators to prophylactically treat all crypto assets as such.

Nothing like a boomer. Not using the word prophylactic. Did he even say any other words? I'm not sure. But prophylactically unpack this, because this is clearly the story of the week. They outlined basically every anti-Gensler possible policy you could imagine and more. Yeah, I mean, look, so first of all, this was not on people's radars as something that we were highly anticipating, right?

Like this report was due at some point, you know, it was going to say a bunch of things. I think what matters about the SEC is that as we've gotten deeper into this regulatory process, there are clear gaps between what Congress is going to do in its regulations versus what is still going to be the job of bodies like the SEC, right? If you look at things like the market structure bills that are floating around, they don't address every single, a lot of it they leave up to, you know, they have principles and then they leave it up to the discretion or to the design of a partner like the SEC, like the CFTC, to actually figure out how things are going to work in practice. And so despite how bad it was under Gensler, the SEC is an important part of the crypto regulatory ecosystem. And, you know, we have seen very clear indicators

of where this SEC was going to be sort of oriented, right? You know, we've had the, removal of a bunch of enforcement actions and good talk. This is the most full-throated articulation of a different vision of where crypto can fit in the overall securities regime. And I think that one really important thing that came out of this, which is subtle, but I think hugely significant, is that ever since crypto was sort of being targeted for being a security, you know, in the form of ICOs or other types of offerings, the securitiesness of it became almost like a four-letter word. Like somehow being a security was a bad thing. Securities are directly at the center of our entire kind of financial ecosystem, right?

We've talked about this a few times in the past where, you know, especially as things got to their low ebb, you know, in advance of the elections and things like that, there were some folks, I think Travis Kling articulated this a couple times really well, who basically felt like we were really running up against the limits of our ability to be creative and explore what crypto can do because we couldn't explore their more security-like properties, right? Which is not to say that all crypto assets are securities, but there are things that they can do, which are securities like, which are really interesting and open up new types of financial instruments and new types of opportunities, which have lots and lots of room for creativity,

for efficiencies, for, you know, whatever. And what was so clear in this speech was that this was not just a, hey, crypto assets are insecurities, you know, let them ride, let freedom ring. It was almost a reembrace of crypto as a potential part of a modern securities regime that was inclusive where it needed to be, but also didn't need to sort of claim and label them in circumstances where it wasn't, right? He was explicit about wanting their to be. be safe pathways for things like ICOs. And I think if you need any one sort of one line indicator,

that's such a different tenor. And what's, look, ICOs got a very bad name very quickly for very good reason, right? A huge number of those teams just saw an incredible opportunity to fleece and scam. And that's what they did. However, part of what got people so excited at the beginning is how powerful as a capital formation vehicle this was in ways that had never been possible before. There was a ton of genuine excitement before it got warped and changed. And the hope is inside an actual regulatory regime that can appreciate both what makes these types of assets similar and different. New things like that, maybe updated versions of them, can flourish.

So it was a pretty remarkable speech, honestly. I mean, Purs is basically leading this, and she's proposed safe harbor for half a decade, right? So it's nice to see that the most sensible approach to do. defining what is centralized or decentralized is going to likely be adopted. But in this, he also talked about enabling tokenization of everything, this clear token taxonomy that you mentioned, protecting self-custody and defy. I mean, it was definitely crypto's greatest hits as far as what you would possibly want to hear on that album. And all in one very quick speech, you just doesn't get much more bullish than this, in my humble opinion. I think we'll follow through.

Yeah. Well, they're in a position. to follow through. That's what makes it different, too. This isn't, you know, frankly, like, it's great to hear the highest level leaders talk about these things. There's an argument that it's even better to hear people who can then say, and so as a next step, I'm now telling my staff to go do X, Y, and Z to make it so, right? There's a big difference. Yeah, absolutely. So we're going to just touch on this one, I think, because it feels like we beat this one to death on a near, at least monthly basis. Powell says we don't have a preset course on rates. Trump obviously then, I don't know. Let's see what Trump exactly called him. We know, renewed. I love they say that Trump renews Powell

feud over rate decision. Last I checked, he was literally at the Fed in a hard hat last week. So I don't know how this is renewed or just continuation. But Jerome too late, pal has done it again. He's too late and actually too angry, too stupid and too political to have the job of bed share. It's costing our country trillions of dollars in blah, blah, blah, blah, blah, yada, yada. Total loser all caps. Going great. Yeah. I mean, he's definitely, Powell's digging in his heels more here. Nothing at all was different in some ways about what was said at this, but the tone, I think, was perceived, or just the posture, not even really the tone, but the posture was received as more defiant, let's say, right? That's why sort of people were

we're characterizing this as more hawkish, even though he was saying the same stuff he's been saying forever, which is we're going to wait for data to see. And there's too many unknowns with inflation, you know, following tariffs and blah, blah, blah, blah, blah. Now, I think to the extent that you're looking for actual notable things, there were two dissents among the governors on the rates. There haven't been two dissents since Greenspan in 1993 or something like that. Descents really fell out of favor in the Greenspan era. And so people are looking at that as sort of maybe a changing of the guard in terms of how the Fed is going to work. But by and large, from a practical policy standpoint, nothing is different. Yeah, we never break news on this show,

but I will just say job numbers came in, added 73,000 jobs in July, lower than expectations. And for those who are keeping score, when we get bad job numbers, number goes up for Bitcoin, because that means it might cut rates and we live in the upside down. But yeah, we're starting to see at least some hints in the data that the job market might be. week, which could then impact Powell's decision in September. Wasn't it also? I only just saw the first glance. I think I saw Joe Wise at Paul talking about it, that, you know, even within this,

also where job gains were concentrated was extremely concentrated. It was like a public sector. And, you know, it wasn't sort of broad base, let's say. You're doing that nuance thing again. You can't. It's one big number and we look at it and we make snap judgments and then they revise it in a month and we never go back and say that our judgments were. wrong based on false data. That's just how we go. Fair enough.

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your share of the future. The next story here, speaking of guys, who don't like the data, We got Ray Dalio recommends 15% Bitcoin in gold investment at US faces debt doom loop. I have the quotes here, but Tadio, I think we can skip it. Basically, he says, you should have 15% in Bitcoin or gold. I favor gold, but you do you. And then he effectively said we have $12 trillion basically that's going to be printed. And most of that comes from either debt service or refinancing $9 trillion of debt, etc. But Ray Dalio here, nothing really that new from him, but making headlines by putting a number

to it for your portfolio for even the most conservative investors. He basically said, like, if your flatline is nothing, you should be at 50. Yeah. And look, I think that that's, that's the most notable takeaway for people. I'm not really sure how Dalio's statements on this. Is he at this point, boy who cried debt crisis, or is it more people respect it. They know stick. And so it's sort of just each each individual time doesn't have the same impact as before, even if it's not sort of like, again, the boy who cried wolf kind of phenomenon. I'm not, I can't exactly wrap my head around what the market thinks. I think he's still held in some esteem. But to your point, the takeaway will not be the nuanced, you know, going back to nuance,

the nuanced argument that he's making about what's going to happen next. It's just a projection, right, which is exactly what you said, that at a very baseline, if you are a completely average case point of view around how things are evolving right now, you should be 15% in hard assets. That's a big blinking number for people to latch on to. Yeah, if you've been doing that whole 60-40 thing your whole life, you've got to be thinking, where do I get this 15? Rounded, carry the three minus that's 115%. Right?

So where are you taking this money out of that you should be sitting in gold or Bitcoin? Yeah. It was certainly not a full-throated endorsement of Bitcoin. It was more an acknowledgement that some people who are younger than him are going to like something different than gold. Yeah, totally agree. The next story is about treasury companies. We have to talk about this also every week in some way, shape, or form. In this case, it's Tom Lee's Crypto Treasury initiates buyback a month after debut. The interview that you can't see there, I believe, is Meltem, Demiris, but we've had a lot of up and down here. Kathy Wood was in, she was out,

she was back in at the lows. But the real story here is that because price effectively crashed so hard. It was well in the hundreds, I think at 135, came back down to 30 bucks this week. They announced a billion dollar buyback of their stock. But when your business structurally is issuing stock to buy Ethereum, it makes you scratch your head a little bit that you can then buy back said stock to try to stop the fall of that asset. Meltam, I think she put it pretty well here. I have the quote just below. she said, I think these assets trading at really high multiples to the underlying nav is a potential risk. And the people who are going to lose are the people buying these things at these really high premiums. I mean, that's pretty clear if you bought this at $135, you're not

that psyched at $30. Yeah. I think that what everyone's trying to figure out is what this is telling us. Is this a wobble based on the particular treasury vehicle? Is it a wobble based on thematics? Is it a wobble based on Ethereum? Is it a wobble based on Tom Lee, you know, just not having resonance? Is it a wobble based on the entire theme? You know, all of these things have different implications. I think, you know, as we've talked about before, any individual treasury company sort of no longer having its flywheel working is fine.

It's more a question of at what point is their narrative exhaustion. And I think why people are watching this a little bit more closely is that this would be quite early for narrative exhaustion to have taken hold, you would think. It has not been too many weeks in the sun of sort of really strong excitement around this theme. So I don't know. I haven't been around enough to really make a mental decision or sort of point of view on what's driving this particular set of issues. I mean, I'm sure you guys have talked about it more on the show throughout this week. Yeah.

I think that in my opinion, this is really simple to explain, is that you have all of these treasury companies trading at various premiums to the underlying net asset value and this one way overshot. So you have to imagine that if all of these early investors made a 3,800% gain and were instantly liquid that they're going to sell because it's so irrationally high. And then as price drops, the rest of them who are not going to sell are going to sell because it's still irrationally high. I think this was still an eight or nine X at the bottom, something crazy like that. So I think this was just mean reversion.

If this had launched and doubled, everybody would be happy and nobody would be talking about. So to the extent that that's true, and I think that, you know, I'm always a fan of Occam's razor explanations, which I think that one has the feel of that. There's a possibility that that sort of recalibration would be quite healthy for the whole trend, right? For it to not get too far over at skis, for it to sort of figure out, like, look, if the next wave of investors into these vehicles have to think about, to your point, two or three, 3x gains instead of 8 or 9x gains that will limit the pool of capital that's available, but it'll also probably better align it too.

So let's hope that that's the story is as simple as that. I don't know if you've seen them, but I've seen a few of these decks and deals. And usually there's this huge pipe, like the initial investment, those people are liquid in 30 to 60 days after this transaction. Those are sellers, they're flippers, they're traders. the people who actually build these companies probably are vesting for 12 to 24 months and actually can't sell. So I think there's going to become this clear differentiation between which ones

are pump and dumps and which ones you continue to hear about and build to the future and want that 7 or 8X but over two years. Yep. Look, these types of vehicles are, and we're in sort of like the latest round of the SPAC trend. And so everyone's trying to figure out what it's going to be shaped like in general right now. But I think that it's a fair way to look at these things as trades that have a call option on turning into something real. And one of the real challenges is that you've got two separate actors who have sort of aligned incentives in the trade phase, but then one group who really wants to build it something longer. And they're basically betting that they can get enough value, basically like extract enough value from the guys who are just

doing the flip to go build whatever it is that they want to build. But that's a tough line to to thread. ICO 2025, as I continue to say. And the next story here, obviously the one that I think you've unpacked the most on the breakdown over the past few weeks is the galaxy sale of 80,000 Bitcoin. This is a really good unpack of it from GlassNode, the weekend stretch test. You're more equipped than me to give the summary. But TLDR, a lot of Bitcoin was sold and the market didn't really react. Yeah, I mean, look, that is the big clear story here. here is that, you know, this is an amount of Bitcoin that's sort of similar in scale to, you remember when Germany was selling last year and we were all freaked out and it was cratering

price. This like what took at most like three or five percent or some ridiculously small number that was then chomped right back up when it happened as opposed to, I think that the, you know, around Germany, it was 13 or 14 percent, you know, during that whole time. And they were explicitly trying to do it in a way that was sort of minimally impacting the market. So it's very clearly a different time. It's very clearly a different liquid. profile. Beyond that, sort of the rah-rah side of this, which is great, I think it is, you know, look, when the market can just eat that with no problem, it makes, you know, big, big pooled investors, the sovereign wealth funds, for example, really get more confident

and comfortable with, you know, the asset class as a whole. I do think that there are remaining interesting questions of like, under what circumstance does someone hold for 14 years without moving anything. And then all of a sudden just liquidates all of it all at once. It's like it's very hard to conceive of that scenario. What if he has 200,000 Bitcoin? Yeah. I mean, that's the thing that the only thing that makes sense to me is that actually this is a fractured or some piece or, you know, there's at least a moonbag held somewhere. Yeah. It's crazy either way that they sent some percentage of this basically to the open market and it didn't rock price.

I know that Dave Weisberger has more to say on it, but I think he was under embargo, but obviously he runs coin routes. So maybe he saw something of the execution that was happening there. So I'm looking forward to a further unpack of that when I think he gets the permission, hopefully to do so. I don't know if that's fact or fiction that he did it.

I just know that when I asked him about, he said, I'll say what I can say, right? So I'm assuming we're going to get more clarity on that in the future. Last story here, I get to live in wild speculation land. Well, it's more fun. It's more fun. And nobody remembers when we were wrong because we've moved on to other things.

We're like, you know, ADHD. Look, there's a squirrel. I forgot what we were talking about. JPMorgan and Coinbase strike deal to link bank accounts and crypto wallets. This is in any other week, I can't even imagine a story being bigger than this week. This one blew my absolute mind. The three things that they listed, you're going to be able to do. Trade on Coinbase through API from your JP Morgan account.

that you'll be able to use your Chase Sapphire points to buy crypto on Coinbase. What? You go on a flight, you know, spend a little bit, make a few points, go flip that into Doge on Coinbase. And then the third one, which I still can't even conceive is possibly true. You can fund your Coinbase account with a 29% APR credit card. Yeah. The two parts of this that are interested in me, one is all just the stuff on the face of it, right?

Chase is huge retail access, yada, yada, yada, right, all those things. The thing that I find more interesting is there was a sense that when the regulatory apparatus opened up a little bit, that the Tradfai incumbents, right, the giants were going to race in with their own products. And certainly there is lots and lots of that happening. However, I think that we've seen more of them decide to actually just buy into the crypto native leaders when it comes to this stuff, then people might have thought, right? So this is certainly the story around circle, like post-IPO, the difference between pre-IPO and post-IPO, everyone was like, ah, they're just going to get eaten alive by all these people that come in. But then IPO happens. They have way more resources. a bunch of these giants throw their lot in with circle.

And all of a sudden, they have way more power, right? They have way more tailwinds to go fight those competitive battles that they're going to fight. And this to me is another indicator of that. This is like, Coinbase has demonstrated that they are a powerful financial institution in their own right. And there's going to be some number of these actors who say, even if it's a frenemy type relationship, I'm not going to just go straight up compete because they've just got too

much of a beachhead there. And I think that that's a, you know, this is a pretty powerful version of that. This isn't something like seventh out of 10 bank. This is JPMorgan Chase. Right. And I think the most important point that you just articulated is that Coinbase is the chosen partner seemingly for almost everyone. PNC Bank had the same, a similar, not exactly the same, but a similar partnership announcement. People are just basically conceding that Coinbase is the power player here and they're not going to reinvent the wheel.

Just go partner with Coinbase, make your money, and you'll get to market so much faster. But I think it's notable also that this is J.P. Morgan and, you know, as much as Jamie Diamond has a fiduciary responsibility to his shareholders, God, he's got to hate this. Oh, oh. Oh, the taste of his tears is just delicious. Yeah, once again, I keep referencing this. I don't know why we were talking about it yesterday, but I'm sure he's wiping those tears with 100s. Yeah, so somehow, somehow some way he's going to survive this, I think. That's all we got. Unpacked it. in less than 30 minutes. Perfect. Everybody, I say it every week, but listen to the breakdown.

It'll make you smarter. It helps me prep for my shows. Life is just so much easier when you do all the legwork for me. I don't even need a researcher and just listen to your show. But you guys can check that out everywhere, including the newsletter, which is awesome. I always hear it, by the way, on your show that come join the Discord and the community and whatever.

How's that going? Because I've never read that. I don't even have a Discord. Like, I don't know what it is. I'm, I'm not 12. big apology to whoever is in that community. I know there's a lot of people in there who are very active with each other,

which is good because I'm quite bad. Social media is where my line ends, and I just run out of steam. But there's a lot of really smart people who have interesting conversations there is what I'll say. Yeah, yeah. So go joining the Discord too so that you cannot talk to NLW about this show.

That's all we got for you guys today. See you next week. Later, guys.