The Breakdown - Dan Held on the Mainstreaming of Bitcoin

Episode Date: November 26, 2021

This episode is sponsored by NYDIG. On part 2 of NLW’s three-part “Gratitude for Bitcoin” miniseries, he’s joined by serial bitcoin entrepreneur and Kraken’s director of growth marketing, Dan Held. Dan discusses the changes happening as bitcoin goes mainstream and argues that this sort of change is inevitable.  Find Dan Held on Twitter: @danheld NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Iryna Ustenko/iStock/Getty Images Plus, modified by CoinDesk.

When we look at the fundamentals of the economy, I mean, that's where people thought the super cycle theory that the idea that this breaks cycles or that this cycle will be different is crazy because human psychology doesn't change. I'm like, yes, you're correct in that regard. But what happens when governments across the world print tens of trillions and people lose faith in institutions? Like, Bitcoin's not going to have a normal cycle. 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 Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Friday, November 26th, and we are back for part two of the

Gratitude for Bitcoin mini-series. Part one featured Dylan LeClair, an awesome on-chain analysts and Bitcoin researcher, and today we have Mr. Dan Held. Dan is a serial Bitcoin entrepreneur and is currently the head of growth at Cracken. He is also one of the most prolific Bitcoin content creators out there. In this show, we talk about at core the evolution of Bitcoin into the mainstream. You know a show with Dan is always good, so let's get it going. Dan, welcome back to the breakdown. I feel like it seems like it hasn't been that long, but it's actually been a very long time in market cycle terms.

Well, yeah, we're talking crypto-Bitcoin years. You know, it's like it's like dog years. It's like every month that goes by is the equivalent of 10 months. It feels like forever. Seriously. It's been absolutely wild. So let's start, I guess, on just the biggest level. Let's talk market cycle, market cycle theory, I guess.

So two parts of the question. One is, as you've watched this bull market play out, how have your thoughts about what kind of the nature of Bitcoin or crypto market cycles are changed? if at all. And then second, where do you think we are based on that in whatever your kind of new sense or old continuous sense of market cycles? Where are we? Yeah, great question. So, you know, this feels very much like the 2013 cycle, you know, where we had an early kind of early surge, horizontal chop for about six months and then maybe some more action at the end of the year. So in terms of market cycles, I think timing wise, we're right on target, right? Like if we look at the duration past the halving.

If we look at on-chain data of like hoddlers and how much Bitcoin is at exchanges versus non-on exchanges and a variety of other metrics, it looks like we're right smack in the middle of a bull run. So everything on paper looks good there. I think everything price action-wise, if we look at like how far we are from the previous bull run's top and how far we are from the bottom, very smack in the middle, I think, of still a continuing bull run. And then I would say psychological-wise, like what's the same is the fear and the greed, right?

Of course, Bitcoin dips down to 30K, you know, in kind of the middle of this year. And people were like, well, I guess that was the bull run. And the old, you know, all of us old folks who've been through a couple of these cycles before, we're like, that's not what a bull run ends with. We didn't have euphoria. We didn't have a lot of the other blow-off top symptoms. So I think we're following just the classic pattern of human psychology of fear and greed and kind of elated expectations, and then all of a sudden super fearful.

But for the hoddlers, they don't care. The hoddlers survive this. The hoddlers make it all the way through the bull run. And I think there was a lot of moments where if you didn't have a strong belief in Bitcoin, then you would have sold. And like when Bitcoin hit $30,000 this year, that was a prime example. And I think this is a healthy part of the cycle, though, of like, you know, if this mimics 2013 again, we have a bunch of people who didn't have a very strong belief in Bitcoin.

they sell their Bitcoin now. Then when prices really start to go up later this year, if they do, I don't know if they will or not, then we've reduced a lot of that selling pressure because the people who didn't have that strong belief have left and everyone left who might sell, doesn't want to sell. So, you know, I think that we're very much mimicking the 2013 cycle. If you look at the price overlay and time and price, it actually mimics each other quite, I mean, look, it's TA. So it's a little bit of lines online.

So who knows how scientific that is. But I do think there's a lot left in this bull run. I think that things are probably going to get much more exciting over the next few months. But I can't predict the future. And I'm not going to put any price targets of what I think is going to happen next week or anything. But I think it'll be exciting. So, well, first of all, I love hearing you kind of make those historical comparisons because most folks who are making the line chart to 2013, like we're still in high school in 2013.

So that's that's always good. But I guess one question that sort of relates to this phenomenon of psychological behavior in bull markets, do you think, have you noticed that some of the PTSD or just, I mean, you know, call PTSD, call it experience from previous cycles, has put a dampening effect on the euphoria, which has actually been healthy on the downside as well. Like it's felt to me a couple times when it's gotten really hot, especially when it was in kind of March, April and we were surging up, you know, past 60 that there were enough people who didn't fully buy into it that we didn't have that full excess where like people were calling their friends and demanding they get in. But I'm interested in your take on that. Yeah, it's definitely, you know, I think the symptom of a blow off top or the final part of a bull run is where everyone is talking about it everywhere. Like you hear it at coffee shops. In 2017, I remember this distinctly. in New York City when Bitcoin, I think, was topping out around 10 or 20K. I forget what it was. But everyone is talking about it, coffee shops, bars.

You heard the word Bitcoin whispered everywhere. And then you had all of your high school friends DM and you asking like, hey, how do I buy Bitcoin? And just a slew, you'll know at the top when it feels like that. It feels like it's permeating every conversation. I think I haven't really seen that so far. Like there's a trickle here and there. And yeah, I've got some folks who come out of the woodwork and ask me

about how to buy by Bitcoin. Actually, most of them are like, how do I buy Doge or XRP or something? But, you know, it's really interesting to, I think in terms of like where we are and like the vibe, I think that we're still pretty early because I haven't seen this like mass euphoria, this mass like fomoing, especially with how how easy it is to buy Bitcoin. You can buy it anywhere now, you know, and so with that, I think if we were to see a blow off top or were we to see that peak, it would be much more intense. And like, you know, we do have famous people coming out.

It's kind of funny, though, maybe the transition to a, and I think, you know, your last question kind of touched on this, like, is this a normal cycle? Maybe this is the transition to something that's like a little different to where maybe it's instead of a blow off top, there's a muted bear market. And this is something I touched on with my super cycle theory a while back. But, you know, we've got big movie stars coming out on a daily basis that are like, I own Bitcoin. And that previously back in the 2017 era would have caused a 10% price spike.

So we're definitely seeing the normalization of Bitcoin ownership and normalization of the space as a whole. So I think that that I believe that there's a small chance that this cycle might be different. I vocalize that calling it like a super cycle where it could be more intensive a bull run or it could be a muted bear market. But overall, I think things seem to be going just as 2013 was. There was an intense fervor and enthusiasm at the beginning of the year. People who didn't believe left. And then at the end of the year, we had another big run up. And, you know, starting to feel like that just because the people who didn't believe in it left.

And we're starting to see kind of us, you know, we touched all time highs again just a little while ago. And yeah, I think structurally all the, everything looks great. Governments keep printed money. Bitcoin's on chain fundamentals are phenomenal. And, yeah, everything looks pretty healthy. One of the things that we talked about when we did talk about super cycle theory is the notion that super cycle theory doesn't mean radical up only. It means just a different way of organizing the cycle. And I think that, you know, if you're objectively looking, I guess, at the way that the year has proceeded. It doesn't actually look that off in the sense that there was a lot of momentum going into the beginning of the year that was all about. these new institutions coming in, and that was aided and abetted by, you know, Tesla joining and all these sort of things. And then that momentum shifted first because of Tesla and then because of China taking

very serious actions. And the market reset for a little while, leverage was washed out. And there were a few months to recover. And then as it started to recover, like, you actually talk it out and it's like, this doesn't seem unreasonable. Now, perhaps like the band of volatility overall is bigger than, you know, your average asset. But it wasn't. To your point, like euphoria based on nothing or utter fear based on nothing, there were actually meaningful indicators in both directions, right? Yeah, exactly. I think like, you know, especially with a market like this where there's, there's sort of fundamentals,

but at the same time, it's a lot of narrative-driven, like narrative-driven price action. You know, with China, Fudd and Elon Musk kind of playing around, I think that sort of was indicative of the very like, people were still uncertain about this bull run in the beginning, right? It was very rapid price increase, and that kind of cooled it off a little bit. But when we look at the fundamentals of the economy, I mean, that's where people thought the super cycle theory that the idea that this breaks cycles or that this cycle will be different is crazy because human psychology doesn't change. I'm like, yes, you're correct in that regard. But what happens when governments across the world print tens of trillions and people lose faith in institutions? Like, Bitcoin's not going to have a normal cycle.

That's the core underpinning of it. is like Bitcoin is waiting for a moment like COVID to shine where people started to lose faith in their governments, governments engaged in money printing. And so I think that to believe that it'll just have a normal cycle would be surprising. But at the same time, I have no idea what the price action might look like. It could be a classic bull run than less of a bear market. It could be a normal cycle because humans don't change. And I don't know, you know, but I think it's more probable that this is going to be

different than it's probable that it'll be just the same like any other cycle. NIDIG, the sponsor of this podcast, provides banks, corporate treasuries, pensions, and hedge funds with ironclad Bitcoin custody and white glove service. Learn more at NIDIG.com slash NLW. That's nydig.com slash NLW. As you survey things that have happened this year, there's obviously been a lot of unexpected things, sovereign adoption of Bitcoin. One, you know, you and I are pretty fucking both.

going into last year. And I don't think either of us had that one on our kind of bingo card, right? Great hash rate migration, a complete move out of China. Like we forget that China control FUD was really significant for most of Bitcoin's life as a concern. Like, I don't know to do to necessarily rank order them. But what has surprised you most? What do you think is most significant of things we've seen this year? Yeah, I think the China one was probably the biggest. China FUD and Bitcoin's energy Fud are somewhat intertwined because China uses dirty China coal, as detractors would call it, right? I'm not saying that I personally believe that. So both of those narratives are squashed at the same time when China banned Bitcoin mining, when Bitcoin miners migrated to other GOs that were more hospitable.

And I think that's a really important narrative shift because that takes away one of the key pillars of FUD. And I know you and I have talked about, about, you know, fud busting before. and how there's all these different negative narratives about Bitcoin. And I think we've even gone through the exercise of speed fud busting, you know, so China FUD and dirty Bitcoin mining fud was somewhat the same-ish kind of intertwined. Both of those narratives are now removed, which makes Bitcoin more palatable to a wider set of folks. Let's take another piece of this. Let's go quickly through a couple of these things.

Significance of El Salvador. I mean, is that one that's still sort of, too? to be written based on how the experiment goes, or do you think that it's just huge on its own? So first, I think it's great for the country of El Salvador, and I think that I really love what Buckele is doing over there and really cool to see this experiment. I think on the impact score, it's still pretty low, though. So I'm a huge fan of it, really big. I really want to support it any way I can. I don't think it's, I think it's interesting in terms of like now a nation state is recognizing Bitcoin, but El Salvador is a pretty small country and also it.

has a very low economic impact. Same question in terms of kind of significance around Bitcoin futures ETF. Obviously, one of the big exciting moments for this fall. Yeah, futures ETF is a little, I mean, it's a step in the right direction of more of these financial instruments being approved for Bitcoin. So I think that shows that Bitcoin is increasingly becoming mainstream and recognized by these institutions. Future ZTF, though, doesn't really give consumers better access to the underlying asset.

there's a contango bleed, which leads to a loss if you hold it for a long time. So I don't really think that's a great financial instrument for retail traders to have. I think a spot ETF is what we're all looking for. But a futures ETF is better than not having a futures ETF. And it's a step in the right direction. What do you think, you know, how closely have you been watching the changing regulatory conversation? What's your perception of where that is right now? Yeah, I think for the first time, you know, policymakers found out that Bitcoiners have

a loud voice. Like, this is, this is pretty cool. Like, I mean, a single issue voter, like, mostly, you know, people want to defend their pocketbook. And if, if these bureaucrats are going after our money, then they're going to maybe get voted out of office. And so I think for the first time in Bitcoin or history, we really stood up with a big voice and shouted, like, don't mess with us. So I think that was very significant. I think it demonstrated a lot of, like, how Bitcoin's defense mechanism is what intertwined with ownership, the more people who own Bitcoin, the more who will care about voting in the right people that won't treat them poorly because just because they own Bitcoin.

Yeah, I think one of the things that's been fascinating for me, and I had a show about this going into the fall, is the extent to which the regulatory conversation around this has become normalized so much that everything that regulators are focused on is not Bitcoin. Bitcoin is now shifted almost entirely and held up as this like sort of obviously not the thing that they're concerned with because, I mean, just for a variety of reasons, but it's a fascinating twist, you know, to that story. Yeah, I think, you know, we had, during the infrastructure bill debates, there was a lot of focus on like defy and what the SEC kind of perceived, defy and stable coins.

And there was a bunch of other stuff. I think that was onerous for bitcoinsers as well in terms of like minors having to issue 1099s, which would be impossible. You know, so I think there was, it was really. interesting to see regulators kind of come out and be like, yeah, Bitcoin seems fine, which is pretty surprising. We all, I think, expected like a bit of a tougher battle. But with the, yeah, the defy things, you know, with some of the, some of the defy and ICOs, you know, it's interesting because the SEC is really posturing in terms of like, hey, we have ownership over this. So it'll be an interesting battle to see kind of

what happens. You know, I don't, I'm not a regulatory attorney, so I don't know how that all pan out. But it is interesting to see how they've kind of split out Bitcoin and separated it from the rest of the crypto assets. Yeah. So I guess a lot of this has been us kind of catching up on just, you know, a year's worth of crazy change in Bitcoin. But one of the things that I know you spent a lot of time on is also thinking about Bitcoin futures, places we're headed, where things might go next. what have you been paying attention to creating content about thinking about in the context of, you know, the next phase in Bitcoin's life? Yeah, I think Bitcoin is finally going mainstream. I mean, this is the moment we've all been waiting for. I think there's a very important, this is a very important moment for a lot of Bitcoiners to, I think, take to heart.

A lot of Bitcoiners are trying to gatekeep the old way. They wanted to be the cool kids computer club or like only you and your buddy's hand assemble computers. And we're going to go towards a different direction. I mean, Bitcoin is going to go mainstream. You're going to have movie stars and bigger personalities start to believe in it. Like a Jack Dorsey, right? And so I think Bitcoiners need to figure out like, hey, how do we preserve Bitcoin's culture as Bitcoin goes more and more mainstream? Because eventually it'll become so mainstream that everyone's part of Bitcoin culture. There won't be this old Bitcoin culture that they have.

Like, that might still exist, but it'll be minor compared to like, what's Bitcoin's culture when it's mainstream? And I think not a lot of Bitcoiners have thought about that, right? Of like, you know, how do we preserve Bitcoin's cultural values? How do we like, what does Bitcoin's culture look like? They just like their own version of Bitcoin's culture, which is a more geeky kind of exclusive club where people are very, very technical. And they're going to have to kind of adjust to that new reality that like Bitcoin's moving away from that group and their thought leadership and probably moving more towards something more pop Bitcoin, something more generic or something a little bit, not generic, but just more mainstream, I would say,

like generic as in Bitcoin's about freedom, Bitcoin's about self-sovereignty. That's a great narrative. And I think that, you know, it's kind of like pop Bitcoin versus Metal Rock Bitcoin. The Metal Rock folks will think that the Pop Bitcoin is just, it's not as aggressive or exciting. But the thing is, a lot of people like Pop. You know, it's not anything that we can help. You know, most of mainstream folks don't really want to dig into the more technical aspects. So I think that'll be the big shift culturally for Bitcoin is it's going to kind of move beyond all of us.

And we can either kind of ride that wave or try to like, you know, you can just stay and kind of own your own narrative on what you think Bitcoin should be and kind of stick to the old narratives. But I think like Bitcoin's going mainstream. And there's a big opportunity for all of us to tell all of our messages to this new audience. but we got to make the messages palatable to the mainstream. Do you think that the fundamental rules of Bitcoin being as strong and socially enforced as they are actually should make us less stressed out about cultural differences? Yeah, totally. I think people buy into Bitcoin due to its extreme sort of protection over 21 million hard cap

and other Bitcoin properties that are necessary for it to keep its level of decentralization. So I don't think, I'm not too worried about this transition. I'm just more worried for like the folks who, the different people in the space who have different voices. I think they have good voices. But if they don't start to position their narrative and then what they talk about and position it more for a mainstream audience, they risk being sidelined in other people kind of crafting Bitcoin's culture and narrative. So I think it's that's, I'm not worried about Bitcoin. I'm just, I think there's a lot of great voices from earlier eras in Bitcoin.

that they should, I hope that they grow and their voice grows because more people need to hear their message. What do you think is the most important through line that if you could write the script, even if the way that it's delivered is different, even if the messengers are different, the through line between, you know, Bitcoin of your and new people coming in, what is it? You know, what are the key things or the key thing to preserve at the core? Yeah. Are you talking like what value should be preserved? Like what matters? Is it the idea of self-sovereignty? Is it the idea of a kind of math-based rule system? You know, I mean, what is, I mean, it could be a couple of things, you know?

But what's what's the key thing, you know? It's definitely about self-sovereignty, decentralization, freedom, all of those things. I think, you know, freedom slash immutability, being able to transact with anyone you like. I think these are some of the pillar principles that Bitcoin, Bitcoin. needs to have going forward. You know, it's funny, like, I'm an old libertarian type, and I've definitely noticed that my audience is not libertarian, which has been wild, because I'm like, you understand if you believe in Bitcoin, like, that's a very libertarian value.

And like, if you explore any other aspect of your life, you're going to, you'll have to start to question the nature of your reality. But it's definitely shown me that, like, the principles that Bitcoin is retaining, and I hope should retain, are those principles of decentralization, uh, socialization, uh, socializing. sovereignty and, you know, freedom slash immutability. It's very interesting to me. I, you know, I think that I think that we underestimate how politically cross-cutting self-sovereignty is as a value if we remove it from like kind of party identity.

That is so it's very difficult to do. It's very difficult to remove political philosophy from political identity, especially in America right now, you know, but, but I do think there's, there's a lot more room for self-sovereignty even if you have different expectations about what the government's relationship to self-sovereity is. You know what I mean? There's a lot of different ways to come at it. Yeah. It was surprising.

I tweeted something about like how Bitcoin and guns go hand in hand, you know, and I had like 2,000 comments of like very angry, more European type folks. And that was interesting because I was like, I thought we're all on board with self-sovereignty for our money. And if you want self-sovereignty over your body, there's no other way to do. it than having a gun. Otherwise, you're giving up your self-suffering to the state. And it seems like a lot of people haven't made that leap yet. So that was a surprising moment when I realized, yeah, people are getting the idea of libertarian ideology with their money, but they have a ways to go on things about their body and other sort of more libertarian ideals. Listen, I think it's cool to be in a place where this asset that was maligned, written off,

misunderstood for a decade is now provoking a real interesting, in-depth and complex conversation about political, civic, and personal life. So it's a pretty cool place to be. Dan, is always awesome to have you on the show. Let's not wait another seven years in crypto years to do it again. And happy Thanksgiving. Absolutely. Well, thankful for us. Thankful for having Bitcoin. Really thankful for the Bitcoin community. And always a pleasure hopping on. Definitely, we got to make it shorter next time. I got to come in a little bit shorter than waiting a year to come on. Absolutely. Reflecting on that conversation, for sure, the big takeaway idea is this notion of Bitcoin culture evolving in what it means. I think the takeaway is that this is a

process that's happening whether we want it to or not, whether we have some golden age idea about a Bitcoin of your. And ultimately, when it comes down to it, the only way to have a seat at the table of how things are changing is to put yourself there, to be involved, to understand that it's a process that is going to happen with or without you, so you have to decide to be a part of it. Certainly, I think everyone here who listens to this show is an active part of that conversation, and I feel very lucky to have you all here. Until tomorrow, guys, be safe and take care of each other. Peace.