The Breakdown - ICE Invests $2 Billion in Polymarket

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. What's going on, guys? It is Wednesday, October 8th, and today we are talking about the big polymarket deal. 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, today we are talking about the New York Stock Exchange parent company investing in polymarket. But before we do a quick market update, Bitcoin suffered a 4.2% correction on Tuesday as the run at new all-time highs failed. The sell-off started as the trading day began in New York

Starting point is 00:00:52 and traded to a low of 120,600 in the early afternoon. Trading was rangebound near the lows throughout the day, but rose to 123,000 overnight. So far, this doesn't look like a trend reversal, but we'll need to see a higher high soon to avoid Bitcoin sweeping lower. Trader Bitbull commented, Bitcoin is now trying to flip its previous all-time high into support. I wouldn't be surprised to see a fake out below it, but overall a new weekly close above 123K is needed. This will set the stage for the next 20 to 30% rally in the coming weeks. Futures open interest barely moved on the drawdown and funding rates barely budged.

Starting point is 00:01:24 Don CryptoTrades noted that around 19% of global open interest was added over the past week, commenting, it's not completely out of proportions, but to get a sustainable run, I'd rather see open interest come down slightly first. If it keeps running at this pace, we risk getting overheated earlier. QCP capital, meanwhile, wasn't sure whether the recent price action should be considered sustainable or overextended. They wrote, Some may argue the 12% surge in Bitcoin over the past week appears overdone given the lack of

Starting point is 00:01:49 major catalysts. But the narratives driving this rally should not be dismissed. They listed an outperformance in gold, the government shutdown, and Bitcoin reserves on exchanges hitting six-year lows as the major narrative drivers. Concluding, they wrote, Bitcoin remains poised between price discovery and prior all-time highs. To extend its trajectory meaningfully higher, institutional participation will be key. That institutional bid looked very flat based on yesterday's ETF flows. Flow for products other than BlackRock's ETOff fell to zero on Tuesday after a very strong past week. BlackRock's

Starting point is 00:02:18 flow reporting is rumored to be delayed by a day, so we may know more after tonight's reporting. But at first glance, it looks like the institutional bid collapsed on Tuesday. Now, generally, I think the loss of momentum has more to do with the correlation to stocks rather than Bitcoin's specific sentiment. A report questioning the profitability of Oracle's AI data centers led the NASDAQ to lose 0.7% on fears of an AI bubble starting to burst. For more on that, obviously I'm going much more in-depth on the AI Daily Brief. Still for Bitcoin, the drawdown is pretty shallow, historically speaking, so we'll see if it can make another run at all-time highs.

Starting point is 00:02:48 Now to our main story, Intercontinental Exchange, the parent company of the New York Stock Exchange, has announced a $2 billion strategic investment into Polymarket. The deal values polymarket and $9 billion post-money. Intercontinental Exchange, or ICE, has dabbled in crypto for several years, including founding backed as a subsidiary back in 2018. However, they've never put anywhere close to $2 billion behind a crypto play. ICE CEO Jeffrey Sprecker says, our investment blends ICE, the owner of the New York Stock Exchange, which was founded in 1792, with a forward-thinking revolutionary company pioneering changes within the decentralized finance space. There are opportunities across markets which

Starting point is 00:03:23 ice together with Polymarket can uniquely serve, and we are excited about where this investment can take us. Shane Copland, the founder and CEO of Polymarket commented, our partnership with ICE marks a major step in bringing prediction markets into the financial mainstream. Together, we're expanding how individuals and institutions use probabilities to understand and price the future. By combining ICE's institutional scale and credibility, with polymarkets consumer savvy, we will be able to deliver world-class products for the modern investor. Realizing the potential of new technologies such as tokenization will require collaboration between established market leaders and their next generation innovators. We couldn't be more excited to build together. In addition to the new round, Copland disclosed

Starting point is 00:04:01 two previous fundraising rounds that were never announced. The first took place before the election and valued the company at $350 million. The second was completed earlier this year and valued the company at $1.2 billion. The rounds were led by blockchain capital and founders fund respectively, but some people found the long list of angel investors even more interesting. And the Nikitas of the chili peppers and legendary music producer Rick Rubin were among many names. Blockworks co-founder Jason Yannowitz highlighted another name from the NFL tweeting, Ramp, Anderil, Polymarket, Cognition, Anthropic, Neurlink, invested all endorsement money into Bitcoin, LPN, Thrive, Multicoin and Founders Fund.

Starting point is 00:04:35 Sequan Barkley, the greatest investor of our generation. Aside from deal specifics, this is obviously a huge moment for the crypto industry. We've seen a lot of partnerships and products that point towards institutional adoption over the past year, but nothing felt quite so crypto-native. Remember, Polymarket is still technically banned in the U.S. due to a 2021 settlement with the CFTC. It's not entirely clear if ICE wants to integrate Polymarket into their platform. or if they have a grander strategy. But this is a huge vote of confidence that prediction markets

Starting point is 00:05:00 built on crypto rails will have an important place in the future. Joel John, a writer at Decentralize Coe tweeted, The Polymarket story is interesting because it forces you to believe in something. It's probably the first time after Stables that we see a primitive breakthrough to the mainstream and define a new market category. It does really feel like another big turning point for crypto in a year that has been filled with turning points. Former CFTC chairman Christian Carlo posted a picture celebrating with Shane at the New York Stock Exchange after the deal was announced, referring to it as a groundbreaking partnership. Lynn Martin, the president of the New York Stock Exchange, posted from the trading floor, congrats to Shane Copland and the disruptors at Pollymarket.

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Starting point is 00:06:14 This is fintech for infrastructure, connecting capital directly to builders and returning revenue seamlessly to funders. No middlemen, no bottlenecks, just sovereign, resilient infrastructure that works for people, communities, and investors alike. Learn more at Althea.net and find them on Crackin to join the future of infrastructure finance. Now, staying on similar themes, S&P Global has announced plans to launch a first-of-its-kind crypto index tracking a combination of tokens and stocks. The S&P Digital Markets 50 Index will track a basket of 15 crypto tokens, with market caps above 300 million, alongside 35 publicly traded crypto companies with market caps above 100 million. The full list of inclusions hasn't yet been published, but that market cap cutoff allows

Starting point is 00:06:55 for a choice of over 250 different all coins. No single asset would have more than a 5% weighting, so presumably this won't be a market cap weighted index. S&P Dow Jones Industries chief product officer Cameron Drinkwater said, cryptocurrencies in the broader digital asset industry have moved from the margins into a more established role in global markets. Our expanded index suite offers market participants consistent, rules-based tools to evaluate and gain exposure. Indices are an interesting piece of financial infrastructure that has far more influence than you might think at first. Even an index like the S&P 500 is quite subjective, as some pointed out after Microstratology missed an inclusion earlier this year, despite being firmly in the top 500 companies in the U.S.

Starting point is 00:07:33 In September, Grayscale's crypto index funds started trading on public markets, and Bitwise's index fund is still pending final approval at the SEC. These funds have different compositions, largely because there's no consensus index of crypto markets. The new S&P index won't solve that problem for crypto-only funds, but it could set a reasonable benchmark for new products in the future. Interestingly, the index is being launched in partnership with tokenization platform Denari, who plan to launch a token that tracks the index. Chainlink God commented,

Starting point is 00:07:59 Crypto index funds will be as large, if not larger, than crypto ETFs like BlackRock's ibit. The introduction of crypto indices is a clear sign of crypto's growing maturity and acceptance as an asset class. Speaking of, BNY Mellon, the largest custodian bank in the world, is exploring the use of tokenized deposits. Carl Slabicki, the executive platform owner of Treasury Services at BNY, told Bloomberg the project as part of a larger initiative to modernize infrastructure, including scaling real-time, instant and cross-border payments. He said that tokenization deposits could help,

Starting point is 00:08:26 quote, banks overcome legacy technology constraints, making it easier to move deposits and payments across their entire ecosystem, and eventually across the broader market as standards mature. Without exaggeration, BNI is the main artery of Wall Street liquidity. They settle 2.5 trillion worth of payments every day. It's probably too early to know if BNY will opt for a private blockchain, perhaps integrating with J.P. Morgan's infrastructure, or take the bold move of bringing their transactions to a public blockchain, but either way, this could be one of the largest blockchain integrations thus far in financial markets. Various financial institutions have been piloting blockchain infrastructure for years, but with recent regulatory clarity, it feels like

Starting point is 00:09:01 banks are starting to think about what their in-production infrastructure should look like. In June, B Morgan began piloting tokenized deposits and set up a transaction corridor between their private blockchain and Coinbase. Then late last month, HSBC unveiled their tokenized deposit service that operates between bank branches in different countries. We also have consortions of banks in the U.S. and Europe planning to launch stable coins. Only feels like a matter of time before these disparate pieces of infrastructure start to get linked up into a larger Tradfai blockchain ecosystem. Now, one more quick thing that's getting a lot of attention on Twitter before we get out of here. ECB president Christine Lagarde still thinks Bitcoin has no value.

Starting point is 00:09:35 At a public fireside, an audience member asked her if she believes that Bitcoin can be digital gold, to which she bluntly responded, no. Continuing, she added, I'm still of the view that there is no intrinsic value and no underlying value to it. That's not to say there's no hype around which you can associate with a value that moves up and down depending on who is instrumenting all this. She also commented, by the way, I'm not thinking the same thing about stable coins. I regard that as a completely different type of digital instrument. Legarde has been one of the loudest proponents of the digital Euroc, CBDC, so that is a very noteworthy comment to make. Ligarad prefaced her comments about Bitcoin by commenting,

Starting point is 00:10:06 I hesitate to say that because I know that the social media is going to hit me like crazy. And boy, was she right. Bloomberg Zarok-Balkunis remarked, Isn't this like asking the CEO of McDonald's whether Weight Watchers has any value? Of course they're going to be like, nah. Dan McArdle commented, she said Bitcoin can't be a digital form of gold because it has no intrinsic value. Think of how ignorant a statement that is.

Starting point is 00:10:26 It implies she's thought very little about the core properties of money and value generally and gold and Bitcoin, and this is the president of the ECB. James Levisch referenced a research note from Deutsche Bank published on Monday called Gold's Rain, Bitcoin's Rise, commenting ECB President Christine Lagarde says Bitcoin has no intrinsic value. Germany's largest bank says, we beg to differ. Anyways, that one's getting all the chattering classes going. So there you go, red meat for the friends. That's going to do it for today's breakdown.

Starting point is 00:10:51 Appreciate you listening, as always. And until next time, be safe and take care of each other. Peace.

The Breakdown - ICE Invests $2 Billion in Polymarket

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