The Breakdown - Does Biden Dropping Out Change Anything for Bitcoin?

Episode Date: July 22, 2024

President Biden announced via a letter shared to Twitter that he was officially leaving the presidential race. He also announced that he was endorsing his VP Kamala Harris to be the Democrat nominee. On this episode, NLW looks at the implications for crypto space, as well as providing a bit of a preview of the Bitcoin Conference coming up this week. 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 Monday, July 22nd, and today we are talking about Biden being out for president. Does it mean anything for crypto at all? A little bit of a preview for the Bitcoin conference. It's all happening. 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 conference. 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, so we're going to kick off today, guys, with the briefest overview of the Biden news and move as fast as we can into whether it has any implications for crypto. But TLDR, after weeks

of speculation, President Joe Biden has withdrawn his candidacy for this year's election. In a letter he tweeted out, he wrote, I believe it is in the best interest of my party and my country for me to stand down and to focus solely on my duties as president for the rest of my term. Now, the Democratic National Convention will be held next month in Chicago, and at this stage, it seems a little up in the air how it will run. There were plans to hold an early vote among delegates appointing the candidate before the convention begins. This plan seemed to be mostly about avoiding an open convention to minimize the risk of a delegate

revolt against Biden. With that consideration no longer relevant, the prospects of an open convention are rising if no consensus forms in the next few weeks. As the Washington Post wrote, the potential for chaos is high and the time is short. This would be the first open Democratic convention since 1968, when the deeply unpopular incumbent president Lyndon B. Johnson withdrew his candidacy partway through the primaries. Matthew Pines, the National Security Fellow at the Bitcoin Policy Institute, pointed out how fraught this deviation from the usual process can be, tweeting, the virtue of a competitive primary

process is it is deterministic and traceable to elections and delegates. Now we have a successor fight taking place between elite avatars, donor factions, and hangers on. There's no semblance of democratic choice, just pure power plays and backroom deals. At the moment, of course, the front rudder to take over as the Democrat nominee is Vice President Kamala Harris. In a follow-up tweet after withdrawing from the ballot, Biden offered Kamala his, quote, full support and endorsement. One of the biggest reasons Kamala might come out of this process as the nominee is fundraising dollars. There is currently around $96 million raised for the Biden-Harris ticket, which would be inherited by a Harris-led campaign. Any other candidate would need to

restart the fundraising effort from scratch. Harris is currently sitting at 83% odds on Polly Market to take over as the Democratic nominee. So let's try to take a look at what we're what this would mean for crypto. Harris herself is largely a blank slate on the issue. She said nothing either positive or negative about the industry during her time as VP. From very early in the Biden administration, Harris was sidelined from policy, making few public statements and having no clearly identifiable areas of responsibility. Harris is a California Democrat, so is relatively friendly to the tech industry in general, although that hasn't really shown through during her time in the administration. Many view this lack of strongly held positions as an opportunity for a wholesale reset of the

Democratic platform. The Democrats are yet to release their formal policy document ahead of the convention, so the speculation is that this could be an opportune time for something new. Jake Chavinsky, chief legal officer at Variant Fund, laid out the opportunity, tweeting, a huge number of crypto supporters identify as Democrats or left-leaning independents who aren't single-issue voters. Many of them don't want to support the Republican Party due to other issues like abortion rights, but also can't stomach another four years of catastrophic crypto policy like we've had under Biden. For those working in crypto, the choice between Biden and Trump was Stark, vote for your principles or your livelihood. Now there's a chance for a reset. A new Democratic

nominee can flip the script and win back a meaningful number of crypto voters. To be sure, a good portion were Republicans from the start, and after years of Biden, many more are lost to the Democrats for good. But if the Democratic Party is serious about winning this election, the new nominee must seize this opportunity. Chivinsky also walked through a plan for the Democrats to re-engage with the industry. It began with a recognition that the technology is important and ended with a commitment to removing members of the anti-crypto army from top regulatory positions. Still, many noted just how deep this reform would need to be in order to convince single-issue crypto voters.

Elizabeth Warren has already released a video with a very firm endorsement of Harris, and that all and of itself is a liability for pro-crypto Dems. Bruce Fenton, host of the Satoshi Roundtable, explained how difficult reform would be, tweeting, it wasn't Biden, there is no Biden making decisions and has not been for years. We all know this now, so let's stop pretending Biden was the lone bad guy. No, his handlers and his party leaders are the ones who pushed war with Bitcoin and crypto. no quarter for the party of Warren and Gensberg. And to be clear, I think Chavinsky's point wasn't so much that the Democrats could convince the entire crypto voting base. It was more that a

Harris-led ticket could do enough to convince lifelong Democrats, working in the crypto industry that their party is no longer trying to end their livelihood and put them in jail. Still, it is notable how big that road to climb is. The other point of speculation that many are digging down is if Kamala does get the nomination, who her vice presidential pick would be. It appears to be fairly wide open at this stage. Justin Slaughter of Paradigm, for example, wrote, one number that keeps popping up in D.C. tonight as a possible Harris VP pick, Mark Cuban. I've actually also seen numerous editorials and posts about this today, which could certainly make it more interesting from the crypto perspective. The current frontrunners seem to be North

Carolina Governor Roy Cooper and Pennsylvania Governor Josh Shapiro. Also in the conversation are Senator Mark Kelly and Transportation Secretary Pete Buttigieg. Investor Adam Cochran gave us a lay of the land, tweeting, while Harris has no public stance yet on crypto, Buttigieg said it should be a commodity, not a security, Shapiro mandates crypto as money in Pennsylvania while at the State Department of Banking, Montoya, one of her former advisors on the advance team is pro-crypto. Harris and Warren hate each other. Given the backlash they've seen on the matter in the field of moderates who have reasonable crypto takes, I think you'd expect an attempt to distance themselves from Gensler, Warren, and Biden-era policy on crypto. Filling out the list a little,

Roy Cooper vetoed a bill to ban CBDCs in North Carolina earlier this month. The bill passed and Republican-controlled state legislature with near unanimous support. Cooper called the bill premature, vague and reactionary, arguing that efforts were being made at a federal level to provide the appropriate safeguards around CBDCs. Senator Mark Kelly hasn't made any significant crypto statements, but did vote alongside many Democrat senators to repeal SB 121. Hello, friends, before we get back to the rest of the show, I want to implore you to join me at Permissionless. Permissionless is the conference for Cryptonatives by Cryptonatives, and the reason it's so important this year is that despite regulators' best attempts to push industry founders, devs, and executives

out of the U.S., the United States remains the beating heart of crypto. Today, the tide is turning, policymakers have pivoted from fighting crypto to embracing it. Literally now we are in a major political party's platform, which will lead ultimately to the creation of new financial products, new applications, and ultimately new adoption. Permissionless is the conference for those using and building on-chain products. It's home to the power users, the devs, and the builders. And perhaps more importantly, I will be there. The location is Salt Lake City, the dates are October 9th to the 11th, and tickets are just $499. If you want to get 10% off, use code breakdown 10. Go to the Blockworks website, blockworks.com. There will be links to register for the conference, and again,

you can use code Breakdown 10 to get 10% off. At this stage, because we don't really have better information about who it's likely to be, the major through line in crypto conversation is the idea that a major shakeup is necessary for the Democrat Party. to have any chance of winning back the crypto vote. Finance lawyer Scott Johnson said, The new nominee should get a chance to offer a better deal for crypto, but platitudes and vague compliments should be rejected as insufficient. The Biden admin has done great harm, and they need to address those harms directly. For now, we are just going to have to wait and see. Information I anticipate will be coming very, very quickly in this area. Now, the next big

political event is Bitcoin 2024, which kicks off in Nashville on Thursday. It is still strange for many to think about the Bitcoin Conference as having a place on the political calendar, but that's how this year's event is shaping up. The speakers list features seven politicians in politics will no doubt feature across a huge portion of the panels. Galaxy Digital's Alex Thorne wonders if there's potential for even more politics to get crammed into the lineup tweeting, Biden dropping out adds an interesting wrinkle to the Bitcoin conference this week. With Trump and RFK already speaking, does Kamala or another prominent Dem make an appearance too? I heard a rumor a few days ago that Harris was looking to speak. I don't know the status of any such convos.

Now, at the moment, Rocana is the only Democrat politician scheduled to speak, but Bitcoin magazine's CEO and conference organizer David Bailey seems to be hinting at some last-minute editions, tweeting, well, we're going to need to make some more programming space. At this stage, basically, if you are a prominent person in the world, you are rumored to show up at the Bitcoin conference, it would take more time than we have on this show to catalog them one by one. Still, the big talk of the conference is speculation around what Donald Trump is planning to say during his appearance.

On Thursday, Satoshi Action Fund, CEO Dennis Porter, let it slip that Trump is planning to announce a U.S. Bitcoin's strategic reserve. Porter claimed to have credible sources and has only doubled down over the weekend, tweeting, this week will be massive. The world is watching. Block Tower, CIO, Ari Paul, thought this was massively overhyped, challenging the internet to bet against him. He said, I'd lay 10 to 1 against the U.S. adding Bitcoin as a strategic reserve in the next four years. Bet me now if you're going to make fun of me for being wrong in four years. With that said, plausible to me that Trump might say it, which would be very bullish for Bitcoin medium time frame. In other words, Ari wasn't confident enough to bet there wouldn't be an announcement,

just that a future Trump administration wouldn't be able to get it done. He even defined the terms of the bet so narrowly that simply holding onto the confiscated Bitcoin the government already holds wouldn't be enough. Currently, the U.S. government is one of the largest single holders of Bitcoin with around $14 billion worth in their wallets. That's about twice as much as micro strategy owns, but smaller than the $20 billion worth of Bitcoin stored in the BlackRock ETF. 45% of the U.S. government's Bitcoin was seized from the Bitfinex hackers late last year, so it will likely be subject to a stolen property claim from the exchange at some point. Total foreign currency reserves are around $35 billion, and the Strategic Petroleum Reserve

currently sits at around $30 billion worth of crude oil. In that context, the current government holdings are probably sufficient for a strategic reserve without additional purchases. Still, the policy wouldn't be so much the size, but rather the strategic role that Bitcoin plays moving forward. Last week, we got a glimpse of how Trump is thinking about Bitcoin via a newly released interview. In short, it was all about China and blocking them from leveraging Bitcoin as a geostrategic tool. Trump didn't really seem to have a clear idea on how his administration would use Bitcoin, but he knew he didn't want to cede any ground to the Chinese. Many are pointing out that it's a terrible move to make this announcement publicly rather than quietly start

accumulating. Currently, the only other government confirmed to have large holdings is the UK with around $4 billion worth. China is also known to have confiscated $190,000 Bitcoin from a Ponzi scheme called Plus Token in 2019. That stash would be worth around $13 billion today, but it's not known if the CCP held on to the Bitcoin or quickly auctioned it off. To many, the most notable thing about this narrative is simply that it doesn't sound outlandish anymore. Bitcoin trader Turbo tweeted, Trump's strategic Bitcoin Reserve rumor is actually mind-bending fever-dream stuff, just the fact that the rumor can sound debatably plausible. Lots of game left, but sometimes it feels like we've already won more than we realize.

We'll have to wait and see what Trump actually says on Saturday, but for now, Dennis Porter is sticking to his call, tweeting, people don't believe the USA could implement a Bitcoin strategic reserve, but at this point, it's inevitable. Meanwhile, Bitcoin is trading as though another run at all-time highs is coming. The price is up 8% over the past week and more than 20% since local lows earlier this month. It touched 68,000 late last night on the back of a strong Sunday night rally. The bulk of the recent move came on Friday as global computer systems were plunged into chaos. An update to Microsoft operating systems was pushed by cybersecurity firm CrowdStrike, which ended up crashing servers across the world. The outage brought services from hospitals to airlines

to a sandstill for several hours as a fix was propagated. For many, it was a reminder of the problems of centralization. Paradine Policy Director Justin Slaughter tweeted, that one company can crash most of modern tech almost by accident should be both a huge scandal and an emergency, on par with semiconductor production almost entirely in one country. The other big catalyst over the weekend was obviously President Biden's withdrawal and subsequent endorsement of Kamala Harris. Price action saw a massive plunge when Biden announced he would not seek re-election, seeking either A, that markets hate uncertainty, or B, that they thought that anyone had a better chance at beating Trump than Biden did. Still in general, commentary right now surrounding Bitcoin price

action is focused on whether or not the rally has gone too far. The market is clearly recovered from the German selling over the last month, and Mount Gok's distribution fears seem to have faded already. Chris Berniske of placeholder ventures has his read on the situation, tweeting, with ETH ETF slated to go live, Trump speaking at the Bitcoin Conference and Bitcoin Ethan's sole charts that look like this while equities are weak, it's hard to see a world where we don't send next week. So friends, that is what we are watching out for. And of course, I will be bringing you the news all week. But for now, that is going to do it for today's breakdown. Until next time, be safe and take care of each other. Peace.