The Breakdown - Despite Record Saylor Buy, BTC Falls

Episode Date: November 27, 2024

Last week, $92k was a dream. This week, people are already flummoxed. NLW explores another record setting purchase from Michael Saylor and Microstrategy; another record-setting week in ETF inflows, and why it still can't punch us above $100,000. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

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 Tuesday, November 26th, and today we are talking about, well, basically the same thing we've been talking about forever. Michael Saylor buying Bitcoin, ETF Lo's hitting records. Bitcoin, not quite hitting 100,000. 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.

L.ly slash breakdown pod. All right, friends, well, for the third week in a row, Michael Saylor has bought several billion dollars worth of Bitcoin. Last week's purchase was another record for MicroStrategy, acquiring 55,500 Bitcoin for around $5.4 billion. Their average price was $97,860, the highest yet. The purchase was funded by $2.46 billion in stock sales alongside the $3 billion in convertible notes issued last week. Sailor is reinforcing what he said way back in 2021, I'll be buying at the top forever. Micro Strategy has now purchased $12 billion worth of Bitcoin over the past three weeks, growing their stack by around 35% in Bitcoin terms this month. They now own around $38 billion worth of Bitcoin. This is a massive acceleration of the pace

they forecast during their October earnings report. On that, investor-call, Saylor laid out the plan to issue $21 billion in equity and $21 billion in debt to finance the next three years of Bitcoin purchases. The $21 billion equity shelf offering was the largest in the history of U.S. finance. Less than a month later, approximately 40% of the equity has been sold and 14% of the debt, way ahead of the forecast pace. The question, of course, becomes can this pace of buying be sustainable? Or will Sailor eventually run out of willing capital to fund this perpetual motion machine? Investment Bank Bernstein seems to think there's plenty of runway left.

On Monday, they boosted their price target on Micro Strategy stock from $290 to $600. That's a 50% jump on Monday's close, but only 10% higher than last week's peak. Bernstein said they expect MicroStrategy to own 4% of the world's Bitcoin by 2033. They currently hold 1.7%, so are well on their way there. Broker Kanakor took a similar view with analysts writing, traditional P&L earnings metrics no longer really apply to micro strategy, given the software company's business only accounts for a single-digit percentage of current enterprise value. They added that, quote,

dollarized Bitcoin accretion per share captures everything going on at MicroStrategy, and that accretion is running at an incredible pace. Year-to-date Bitcoin yield is at 59.3%. and in October, the company guided a target of between 6% and 10% for the next three years. Now, historically, it's never been a good sign when analysts say that the rules of company valuation no longer apply, but there is a sense in which that's true. Micro Strategy is now being priced based on how much Bitcoin they expect to hoover up, combined with the projection of Bitcoin's price.

While traditional financial analysts are calling Micro Strategy a bubble that has run its course, that's far from clear. The massive sell-off from Thursday seems to have been caused by a change in margin rules. The leveraged micro-strategy ETFs were limited by their prime brokers, so had to buy call options instead of swaps. These funds currently own around 15% of the float, so it's a pretty massive headwind until they can find a way to get more lending capacity. Reports on Twitter also suggested retail brokerages have increased margin requirements. In other words, the story of last week seems to have been a forced de-leveraging rather than a sentiment top. However, it could cause

permanent issues for micro-stratage's run-up as leverage may be permanently limited. If that happens, Sailor might have to revert back to the old-fashioned way of boosting the stock price, borrowing money at 0% to buy more Bitcoin. One thing to watch will be whether Microstrategy continues to sell stock at these levels and at what price. The logic of the shelf offering was to allow the company to sell stock regardless of price movements rather than only being able to raise capital at the top. It will be extremely telling to see how much Sailor bought this week once he reports again on Monday. The other thing that has been nearly as consistent, although not quite as consistent as Sailor, Global crypto ETFs hit a new record last week with a monstrous

$3.1 billion worth of inflows. According to CoinShare's data, weekly inflow, have been above $2 billion in four out of the last six weeks. U.S.-based Bitcoin ETFs also had a record week, recording $3.4 billion worth of inflows. Around $2 billion of that was just from BlackRock's ETF. CoinShare's head of research, James Butterfield, put the record-breaking year in context, writing, year-to-date inflows now stand at a record $37 billion, driven primarily by Bitcoin far outpacing the debut of U.S. gold ETFs, which attracted just $309 million in their first year. Monday saw a major puke, with over $700 million being drained from non-Blackrock funds.

BlackRock added $267 million, but these flows are likely delayed reporting from Friday. Either way, last week, the ETFs took in almost $35,000 Bitcoin compared to the $3,150, that were mined. Historically, there's only been so long that divergence can last. And yet, despite micro-strategy and the ETF's buying at record pace, Bitcoin just can't quite punch through $100,000. After trading relatively flat all weekend, Bitcoin dove below $93,000 on Monday, representing the largest daily pullback since Election Day. We saw a slight recovery overnight, but many are perplexed about who could be selling at these levels. A big part of the puzzle is simply

leveraged wipeouts. Over 115 million in longs were liquidated on Monday, the biggest flush in almost two weeks. Calilege of Alliance Dow basically called the play in the morning, tweeting, I think people are going to lever long in an attempt to knife catch. That's exactly what happened as open interest ramped up into the downturn before the final drop in the afternoon. The other big cohort of sellers are the long-term holders cashing out. On-chain data shows showed this cohort had sold 366,000 Bitcoin so far this month, the highest sell pressure since April. Bloomberg's Eric Balcunis wrote, I see a lot of crypto-twitter baffled and frustrated as to how Sailor can buy $5 billion

of Bitcoin, but the price doesn't move up, which is the same thing I hear sometimes about ETFs after big flows. Here's data showing what I've been saying. The call is coming from inside the house, it's long-term hoddlers. Interestingly, this narrative sparked debate about who should be classified as a long-term holder in the data. Analysts like Willy Wu believe the utility of the data is important, tweeted. 155 days is technically where a seed change in behavior happens. Old-time Bitcoiners like Dan

McArdle, however, believe being a long-term holder is a badge of honor and shouldn't be used lightly, commenting, in my opinion, that's not long-term. I would name the cohort something else. Either way, we're talking about holders who bought over five months ago, and in this case, almost exclusively the people who bought between 55K and 66K back in Q1 around the launch of the ETFs. Essentially, the selling pressure is from people who put the trade on earlier in the year and are now taking profits of 50% or more. On-chain analyst checkmate, he wrote, Blame the Bitcoin 68K gang. They sold 198,000 BTC in November. The other dynamic holding price below 100K is a massive sell wall at that level, as much as

600 million was sitting in order books over the weekend ready to sell at 100K. While many are calling this the largest sell wall Bitcoin has ever seen, Neil Jacobs has a different take, tweeting, there has never been a cell wall that Bitcoin hasn't eventually broken through. Patience. Today's episode is brought to you by Bitkey, the hardware wallet built for Bitcoin. Made by the team behind Square and Cash App, BitKee makes securely managing your Bitcoin absurdly simple. BitKee is integrated with partners like Cash App, Coinbase, Robin Hood, and Blockchain.com

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and if that's you, get Bitkey and sit back and relax while the sats stack. For a limited time, you can get Bitkey for $99. That's $51 off the normal price. Get yours today online at Amazon, Best Buy, or Bitkey. That's B-I-T-K-E-Y-D-Wold. One more interesting thing on Bitcoin, Tether is reportedly in talks to partner with Kanter Fitzgerald on their multi-billion-dollar Bitcoin financing business. The Bitcoin lending division was teased by Cantor CEO Howard Lutnik at Bitcoin Nashville

in July. He said the facility would start with $2 billion in liquidity, but could grow to tens of billions over time. Over the weekend, the Wall Street Journal reported that Cantor had acquired a 5% stake in Tether, making their relationship a strategic partnership. Having tether on board could make the facility more likely to be set up, providing a ready pool of capital that is willing to lend against Bitcoin. Zero Hedge writes, Bitcoin is about to become safe collateral. And going back to the sailor theme, alternative video streaming company Rumble

has become the latest to adopt the Bitcoin Treasury strategy. After teasing the idea last week, CEO Chris Pavlovki announced the plan on Monday. The company will allocate a portion of their cash reserves to Bitcoin up to $20 million in total. In a press statement, Pavlovsky said, we believe that the world is still in the early stages of the adoption of Bitcoin, which is recently accelerated with the election of a crypto-friendly U.S. presidential administration and increased institutional adoption. Unlike any government-issued currency, Bitcoin is not subject to dilution through endless money printing, enabling it to be a valuable inflation hedge and an excellent addition to our treasury. We are also excited to strengthen our ties with crypto and to bolster

our efforts to become the leading video and cloud services platform for the crypto community. He later added in a tweet, I wasn't joking when I said I was going to be laser-focused on the crypto and gaming communities. It's a new era. Hottle 15 Capital, who tracks corporate Bitcoin treasuries, welcomed Rumble to the group. They noted that it only takes 45 Bitcoin to make it to the top 30, highlighting how early we are. Their $20 million spend, Rumble could accumulate over 200 Bitcoin at current prices. And right now, the market is still rewarding Bitcoin Treasury announcements, boosting the stock by 16% across the trading day and into aftermarket hours. Lastly, a kind of insane one, memecoin launchpad Pump. Fund might have finally crossed the

line as their streaming video feature went way off the rails. Pump. Dot Fun has long been viewed as the 4chan of the crypto world, but things took a turn for the worse when the platform added live streaming last week. It started off with some relatively harmless financial crime, with a 13-year-old kid rugging a meme coin live on stream while flipping off the camera. The 30% in profit hardly seemed worth it as the coin ran up 4x on the back of the entertaining content. From there, though, the content got dramatically darker. We had people sifting through their catalog of early 2000s shock videos and all manner of unseemly content. Someone tied up their girlfriend in a basement, threatening harm if their token didn't hit a million-dollar market cap.

There was another person butchering a chicken live on stream, someone featuring a goldfish with a gun and one meme coin featuring a gimp locked in a cage with unseemly tasks to perform at certain market cap targets. Suffice to say the cute animal meme coin seem extra harmless right about now. Pump. Dot Fun claimed to have an active moderation team, so either they were not competent or the volume of content got way out of control. Youhoo of Kaito Analytics posted a chart of social media sentiment around Pump. Funn. It showed a huge spike in posts and the largest ever negative sentiment is the live streaming meta spun out of control. Eddie, a legal intern at Kube referred to the feature as a pipeline of felonies. Regarding one particularly disturbing live stream, Pudgy Penguin's safety manager, Beau, wrote, absolutely heinous and it needs to come down and see if you can get them help.

Shut down the live stream feature. This is out of control. Crypto lawyers spent the day thinking about how many different ways this could end badly for Pump. Pumpt.Fund's founders. Pustin wrote, Pump. Fund does a lot very incorrectly from a social media law point of view. No terms of service, no DMCA registration, and copyright policy, no privacy policy. Assuming it's U.S. base, these are careless, stupid omissions. I wonder if the site is planning on sticking around for long. On fighting out the company is incorporated in the UK, he added,

Yikes, way worse for them if true. There's really only one country that'll tolerate low levels of content moderation, and it's not the UK. Miko Otama warned that the worst elements of crypto reflect on all of us, tweeting, pump dot fun has two options. The site keeps no moderation true to the nature of crypto-anarchism, gets closed down fast by police. The site closes the streams and gets closed down later after regulators wrap their head around it within a few years.

I advocate for freedom of speech, but these streams are causing practical issues where people are breaking the law in live broadcasts. This will trigger a shutdown when the mainstream media catches wind of this. It will become an easy target for career politicians and police to go after, and further, crypto is only for criminals' narrative. Earlier in the day, as the feature spiraled out of control, the team member called Alon wrote, let me make it abundantly clear. We actively moderate illicit comments on the site.

That includes images, videos, live streams, and comments. Although we strongly stand for free speech and expression, it's our responsibility to ensure that users don't see clearly repulsive and dangerous content and that bad actors aren't given a platform to act as they wish. By the evening, the feature was taken down, ending crypto's brief period of utterly unhinged content, at least until the next time, a protocol adds this feature. That, however, 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.