The Breakdown - Here Are All the Institutions That Bought Bitcoin While You Weren't Paying Attention

Starting point is 00:00:00 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 nexus.io and produced and distributed by CoinDess. What's going on, guys? It is Saturday, April 17th, and that means it's time for the weekly recap. Now, the three big themes on this week's weekly recap are one, continued institutional institutionalization. Two, top signals and the first real signs of market mania this bull run. And three, global intrigue. Let's start first with continued institutionalization. Of course, the biggest news on this front, the thing that everyone was paying attention to all week, was the Coinbase public listing.

Starting point is 00:00:58 Sadly, it sort of followed the pattern that many of these recent tech IPOs have had, where it popped and then dropped significantly. Then again, it was a direct listing, which almost guarantees more volatility. Employees and other shareholders have no lockups, which means that if you've been waiting for that liquidity event for a good long time and don't care about the difference between selling at $370 or selling at $350, you might just get out fast. In IPOs, usually there's some period, six months or 12 months, where different tiers of investors can unlock their equity to sell. Second, because there weren't any institutions who had bought big tranches in advance, a direct listing doesn't involve making new equity available, there weren't any institutions to defend any

Starting point is 00:01:43 specific price, meaning again, more volatility. Finally, there was no roadshow outbuilding demand, so no one knew exactly what the demand was going to be. The cool side of this is that it's pretty raw pure market capitalism. One of the interesting sub-aspects of the story, however, was that that I mentioned on Thursday. Kathy Wood from Arc has been loading up on coin. On the first day of trading, Ark sold a bunch of Tesla to buy about $246 million worth of Coinbase stock across three of their ETFs.

Starting point is 00:02:13 On the second day, they cut their stake in square to buy about $110 million more. Eric Balcunas from Bloomberg intimated that more ETFs bought coin within the first day or so than anything he'd ever seen. Importantly, though, the Coinbase listing wasn't emblematic of the institutionalization of crypto only because it made it easier for that type of institutional buyer to buy. It was emblematic of this because part of the motivation of investors to get into the Coinbase stock is the shift to institutions inherent in their business model. We learned last week during their Q1 filings that Coinbase has about $122 billion of institutional assets stored. Out of 223 assets it has

Starting point is 00:02:55 total, that's more than 50% of their assets have come from institutions. is no small feat for a company that built its brand on retail engagement. When many people are looking at the long term of Coinbase, even when they have questions about their ability to continue to charge what are very high fees relative to other exchanges in the industry for retail investors, at least, this sort of institutional engagement is a major reason for confidence going forward. Still, over the last two to three weeks, there has been so much more than just Coinbase when it comes to the institutionalization of Bitcoin and crypto as a whole. Let's talk, for example, about Dan Loeb's third point. Third Point is a hedge fund that manages about $17 billion across its family of funds.

Starting point is 00:03:38 We discovered recently that five of the third point funds are holding crypto assets as per SEC filings. Now, those filings didn't tell us which assets they're holding or how much. However, when CoinDesk tweeted their article revealing the filings, Dan Loeb cheekly retweeted it and said, outed as a hodler and gave himself laser eyes. So yeah, pretty clear at least what one of their core assets is. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Borrow against your digital assets at just 5.9% APR. Earn passive income with yields of up to 12% and swap between more than 75 market pairs with the instant nexo exchange. Try the Nexo wallet app to get the whole 360 degrees of crypto banking. Get started at nexo.io. Next up, there is Brevin Howard.

Starting point is 00:04:40 Brevin Howard was started by billionaire Alan Howard. It was once one of the biggest macro hedge funds in the world, about $40 billion of assets under management at their peak. Now, it had come down quite a bit, but has rebounded to about $13 billion of assets under management after a huge year last year. As of this week, we learned that they are beginning to invest up to 1.5% of their $5.6 billion main hedge fund into digital assets. Now, this one is perhaps not super surprising. Alan Howard is a personal investor in crypto and crypto funds. He's been an investor in Distributed Global, which runs a crypto VC with Singapore's Temesak Holdings, and who will help allocate this new 1.5%.

Starting point is 00:05:22 He's also the owner of Elwood Asset Management, which has been investing in the space since 2018. In March, we also learned that Howard was the fourth biggest shareholder in coin shares, which is Europe's largest crypto asset manager. Finally, Brevin Howard as a firm also recently took a 25% stake in one river asset management. So given all that, it seems only natural that the main hedge fund would also start allocating to this industry. Here, however, is a different dimension of institutionalization. Canada has now officially approved two Ethereum ETFs before the U.S. approved two Ethereum ETFs

Starting point is 00:05:56 before the U.S. approves even one Bitcoin ETF. Purpose investments in CI Global Asset Management have both received approval to launch an ETF that offers exposure to ETH. Now, there are a bunch of details that I could get into, management fees, Gemini as a custodian, yada, yada, but certainly the biggest part of the deal is the implication. Between this and the CME launching ETH futures, there is a lot more credibility to the argument of ETH ascending to a mainstream macro asset alongside Bitcoin. There's also a lot of catching up that the SEC needs to do, and hopefully will now that Gary Gensler

Starting point is 00:06:31 is firmly installed as the chairman. But I said this week has three themes. Institutionalization was one, but the next was top signals and the first signs of market mania. So let's talk top signals. I don't think it's necessarily fair to call this a top signal, but it is worth noting that Sotheby's did get another eye-popping price for a collection of NFTs by Digital Artist Pack, $17 million to be exact.

Starting point is 00:06:55 Now, NFT mania, at least in terms of prices, has rolled back a little bit over the past month. Celebrity engagement with the space has absolutely not. There were more headlines around Paris Hilton getting involved in the space today. Still, for sure, the biggest thing raising people's is this a bubble hackles is the insane rally of Dogecoin. Quickly re-articulating what I talked about on the show yesterday, there are a lot of reasons for this, from TikTokers to Elon Musk miming about it constantly, to perhaps some renegade energy and cynicism or even nihilism, to who knows what, but whatever the case, the Doge is up like 570% on the month and almost 10,000% on the year. For me, the thing that I am watching more than anything else, I said this yesterday and I'll reiterate

Starting point is 00:07:42 it again, does it start to attract Normies in? Do people start to get text messages from their moms and brothers and cousins asking about whether they should buy Doge? I'm all for some ridiculous meming, but the thing I don't want to see happen is people come in, buy at the top, think it's a fun game, and lose a bunch of money that they couldn't afford to lose. That's the type of thing that sets this industry back years and we're too close to too much good stuff for that to be the case again. Finally, let's talk a little global intrigue. First of all, Peter Thiel's comments from a couple weeks ago about Bitcoin being a Chinese financial weapon are getting a pretty serious response. In testimony this week, a number of policy advisors said the concerns were overblown. Alex Wong, who's a member of the U.S.-China Economic and Security Review Commission, which was created by Congress in October to evaluate the U.S.-China relationship,

Starting point is 00:08:34 said that Bitcoin does not compete effectively with fiat currencies because of its unstable price. Yaya Finoosie, who's an adjunct senior fellow at the Center for a New American Security, and was an expert witness in Congress this week, said that Peter Thiel's concerns are overblown. His argument was that Teal was referring to the computing power to mine Bitcoin being concentrated in China. Finuci countered, however, that this won't be an issue due to Bitcoin's decentralized approach. Quote, if there were ever a case where there was so much national security leverage there or disadvantage, it's not like additional mining couldn't be built outside China. Now, if you ask many in the Bitcoin space,

Starting point is 00:09:11 exactly what Peter Thiel was trying to get people to think about was adding additional mining built outside of China. perhaps, for example, in the U.S. If Peter Thiel somehow pulls off getting a major national conversation about bringing mining home to America, it'll be a sight to see. Now, there was also a second related question inherent in Teal's comments, but that I also explored on a show this week, which is the larger question of the U.S. digital dollar and the Chinese digital yuan. I discussed reports that people in the Biden administration are getting increasingly nervous about the threat that a digital yuan represents to both short-term security. security interests around money laundering and sanctions, and in the long term, an attempt from China to undermine the U.S. as the world's reserve currency. The Bank of Japan's head of payments, however, told Bloomberg that China's digital yuan won't quickly displace the U.S.

Starting point is 00:10:01 Quote, the dollar status as the key global currency won't change so easily. In fact, the dollar's advantage may strengthen further if the U.S. goes with digitization. This is the point exactly that I made on that show, which is that I think there's a meaningful argument to be made that it is, in fact, the digitization of the dollar, both potentially officially, but also simply put through tether in USC, that could give the dollar another entire generation in the catbird seat as the world's reserve currency. Now, there is, of course, one more aspect of global intrigue worth noting. Turkey is banning Bitcoin as a payment method. Importantly, this is not stopped Turkish citizens from trading, although it could make it a lot more complicated, but this is worth

Starting point is 00:10:42 a whole show, which, barring some crazy news is coming Monday. For now, I appreciate you listening. I hope you're in the middle of a wonderful weekend. Until tomorrow, guys, be safe and take care of each other. Peace. We're witnessing the greatest paradigm shift in finance in modern history. Join thousands of newsmakers and influencers talking the future of money at Consensus by CoinDesk. A live virtual experience of leaders, change makers, virtual reality meetups, keynotes from Ray Dalio, Gary Vaynerchuk, and much more. Get an up close look at the boom in crypto, the surge in institutional investment in Bitcoin, the NFT mania, the breakneck innovation and decentralized finance, and the coming

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The Breakdown - Here Are All the Institutions That Bought Bitcoin While You Weren't Paying Attention

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