The Breakdown - Is Tesla About to Sell It's BTC? Bitcoin Doesn't Seem to Care

Episode Date: October 17, 2024

Tesla shuffled all it's BTC after years of it being dormant, leading to some speculation that they're preparing to sell. Bitcoin price action shrugged off the rumors as a non-event, however, showing how embedded the current bullish sentiment is. Unlocking Bitcoin DeFi with ExSat The exSat Network aims to unlock and scale the Bitcoin ecosystem without compromising Bitcoins Ideology. The network has partnered with the largest mining pools in the world, major custodians and exchanges, Cefu, Cubolt, Matrixport, Copper, OKX and aims to have over $200M TVL at mainnet launch on the 23rd of October.  Follow exSat’s Twitter to stay up to date @exsatnetwork or visit the testnet exsat.network 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 Wednesday, October 16th, and today we are talking Tesla shuffling Bitcoin, ETF inflows ripping, open interest hitting a one-year high, and much, much more. Before we dive 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. Well, some interesting moves yesterday, Tesla has moved their entire Bitcoin stash,

triggering panic in some circles that they could be on the verge of selling. Elon Musk's carmaker was, of course, one of the first publicly listed companies to buy Bitcoin. They purchased $1.5 billion worth in February 2021, but ended up selling three quarters of it at a loss in early 2022. That final 25%, however, was still enough to make them the fourth largest corporate Bitcoin holder behind micro strategy, Marathon Digital, and Riot platforms. Their stash is currently worth around $760 million and hasn't been touched in over two years. The movement of funds was detected yesterday afternoon. Tesla sent a series of test transactions to previously unknown wallets. Over the next couple of hours, they transferred the entire stack across seven different

wallets. There doesn't seem to be any clear pattern as you would expect from a new custody arrangement. Tesla previously maintained their holdings across multiple wallets, and there were some consolidation, but the receiving wallets hold different amounts. Each is in the tens of millions of dollar range. The wallets also don't have clear links to an exchange or an OTC desk. One thing that was nice to see is that Bitcoin's price barely flinched on the news, suggesting the current bullish sentiment isn't easily spooked. Still, when you look on crypto Twitter, the sentiment was a little bit mixed.

There were a ton of freakouts, exemplified by Jacob King's tweet, Tesla has just moved a massive $760 million worth of Bitcoin in an OTC deal. Looks like they're dumping. When asked for proof, he commented that a more reasonable take doesn't get the clicks, which is in and of itself an indictment of the nature of discourse today. Others, though, simply question the timing and optics. Felix Javan, host of the Forward Guidance podcast, tweeted, why would Elon, a major endorser of Trump's campaign, which is very pro-crypto, decide to nuke Tesla Bitcoin holdings 30 days before the election? Significant lack of critical thinking going on here. Now, I'm not sure if the significant lack of critical thinking is on the part of Elon selling Bitcoin into that situation, or on the part of all the hot takers on Twitter who thought that he would be selling Bitcoin. Still, of course, this being October,

there was another genre of takes claiming this movement was a sign that Tesla would be buying more, or perhaps even going back to their original plan of accepting Bitcoin as payment. Tesla abandoned those plans pretty quickly in 2021, which you might or might not remember significantly halted the momentum that they had started, with Musk giving a reason to do with environmental concerns. If that really was, the reason a lot has changed in those three years. Over 50% of Bitcoin mining now uses renewable energy. BlackRock, who controls a large chunk of voting rights over Tesla, have also made

a hard pivot away from ESG and towards Bitcoin. Ultimately, we don't know what happened, but this is a serious chunk of Bitcoin being moved around that will need to keep an eye on. Speaking of big chunks of Bitcoin, ETF inflows have picked up massively over the past few days. Friday saw $253 million worth of inflows breaking a three-day losing streak. Monday was even better notching up $555 million, the largest single-day flow since June.

Tuesday was a little more subdued with just $371 million worth of inflows. However, BlackRock did put up their strongest day in over 10 weeks, dragging in $288 million by themselves. In other words, even if Musk has sold the entire Tesla stack, ETF inflows have more than made up for it over the past week. Now, there is a ton of noise in this signal. Some amount of the interest is from hedge funds putting on-market neutral basis trades. There's also long-term investors shifting their on-chain Bitcoin across to the ETFs.

Still, the relative size of the Bitcoin market has changed to the point where Tesla could liquidate $760 million and it wouldn't be earth-shattering news. David Duwong, Coinbase's head of institutional research, highlighted this change in a report earlier this week. He wrote, from the runaway success of spot ETFs to the spike in on-chain activity, to the upswing in trading volumes, it's clear that markets have grown deeper, more liquid, more sophisticated, and more accessible. The report's key finding was that Bitcoin's three-month price volatility is currently sitting at 60% compared to a peak of 130% in 2021. The summer was obviously

a relatively calm period in Bitcoin's history, but even the spikes earlier this year were much less volatile than previous cycles. As for the marginal buyer of the ETFs, Nate Garassi thinks there's only one explanation. Regarding Monday's flows, he tweeted, Monster Day for Spot Bitcoin ETFs, 555 million in inflows, now approaching 20 billion net inflows in 10 months. Simply ridiculous and blows away every pre-launch demand estimate. This is not DGN retail money, in my opinion. It's advisors and institutional investors continuing to slowly adopt. This episode of The Breakdown is brought to you by XAT Network.

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scale the Bitcoin ecosystem without compromising Bitcoin ideology. Check out X-Sat.network or follow X-Sat on Twitter at X-Satnet network. That's EX-X-S-A-T-N-E-T-W-RK, and unlock Bitcoin Defi with X-Sat. Now, Bitcoin futures markets are also on fire, surging towards all-time highs in open interest. According to Coinglass data, open interest across all exchanges now stands at 38 billion. That's up more than 40% since the low point of the summer doldrums in early August. The Chicago Mercantile Exchange, which hosts institutional traders, is now firmly in the lead. They currently have 11.2 billion in open positions compared to Binance in second place with $7.8 billion. The futures market has structurally changed since the beginning of the year.

Open interest doubled between January and March and hasn't shown any sign of decline since. Even the low point in August was larger than the twin peaks of the 2021 cycle. Despite the surge of open interest, the futures premium paid by longs is still relatively subdued. It's currently around 10% on an annualized basis, elevated but nowhere near levels that would indicate a red hot bull market. This suggests that a ton of open interest is traders going short against spot holdings as a market-neutral way to capture the premium. In other words, we're not yet at the point where speculative leverage traders are willing to pay up big to go long. Another interesting market structure change for this cycle is a huge shift to using cash collateral.

During the last cycle, many traders were leveraging up on spot Bitcoin, amplifying their gains but making the liquidation cascades even more likely. Now those highly risky positions have been trimmed to represent just 20% of the futures market. James Van Stratten, the head of research at CoinDesk wrote, Cash margin contracts are relatively less vulnerable to forced liquidations and breathe less volatility. Ultimately, this could provide a more sustainable bull run moving into 2025. Standard Chartered believes this current Bitcoin push leads straight back to all-time highs.

In a Tuesday research note, bank analysts wrote, For Bitcoin, the combined factors mean a bleed up toward an all-time high of 73,800 looks likely pre-election. The note pointed out a steeping treasury yield curve, renewed enthusiasm for the Bitcoin ATFs, and the rising likelihood of a Trump victory. Perhaps more important than Trump being sworn into office next year are the chances that Congress flips red. Republicans currently have 39% odds of controlling both the House and the Senate.

However, Standard Charter noted that, in conditional probability terms, if Trump wins, there is a 70% chance of Republican sweep, which could create favorable conditions for risk assets, including Bitcoin. The note also paid lip service to the growing sentiment that the choice of president doesn't matter for Bitcoin. They added that even if Trump doesn't win, the broader trend towards digital asset adoption remains intact. Still, many attributed yesterday's Bitcoin price action to Trump's odds moving up. Thomas Ferrer of Hay Apollo tweeted, Bitcoin is starting to sniff out a Trump victory. Speaking of Trump, however, Trump's ICO seems to have been a big letdown. World Liberty Financial opened their token sale yesterday, and the website was inundated with interest,

crashing multiple times across the afternoon. According to the team, the website received 72 million unique visits. However, clicks didn't translate into sales. Earlier this week, the project posted that 100,000 U.S. investors were whitelisted. At the end of the first day, though, only 5,500 unique wallets bought a total of 600 million tokens. That's around $9 million raised, a far cry from the 300 million tokens on sale. Perhaps it's still early days, but so far the demand doesn't seem to justify the $1.5 billion market cap implied by the sale price. The morning launch also, saw the release of a gold paper explaining further details of the protocol. It largely served to confirm what was already known. The protocol will be the same as Ave offering borrowing and lending in Bitcoin

Ethan Stablecoins with user-created liquidity pools. The paper also confirmed the governance tokens would be locked indefinitely and untradable. A governance vote could unlock the tokens in the future, but there was no definite unlock schedule or promise made. While most Bitcoiners were just grumbling about Trump going full defy-Dgen, and in general, crypto-natives largely wrote off the launch as a non-event, the launch did serve to drive Trump's political rivals crazy. Ron Filipkowski, the editor-in-chief of Midas Touch wrote, Trump announces tonight that you now have an amazing opportunity to lose your life savings on his crypto scam. Progressive and regular technology antagonist Matt Stoller tweeted, it's embarrassing that Harris is promoting crypto as a policy to appeal to black men,

but remember Donald Trump is actually launching his own coin this week. One more little story today. Japan's answer to micro-strategy meta-planet has been on a Bitcoin buying spree. On Tuesday, the firm announced the purchase of around 107 Bitcoin worth about $6.7 million. This is their fourth Bitcoin buy so far this month, each size that a billion yen. The firm has more than doubled their Bitcoin holding since the beginning of October, bringing the total value to $56 million. After trading relatively flat for the past few weeks, the stock finally responded to this aggressive Bitcoin buying schedule pumping by 15% on Tuesday. The firm has also revised their option strategy. At the start of October, Metaplanet sold options representing 223 Bitcoin. These

These options required Metaplanet to purchase the Bitcoin at a fixed price of $62,000 should it fall below that strike by the end of the year. Metaplanet received around 22 Bitcoin in payment. That made the options trade profitable as long as Bitcoin stayed above 55,000 and below 69,000. The options have now been rewritten with a strike price of 66,000, and Metaplanet have received an additional 6 Bitcoin in payment. The trade is now unprofitable if Bitcoin ends the year below 57,000 or above 75,000.

Metaplanet said, by increasing the strike price, this approach allows for a higher yield potential, while keeping in line with the company's objectives to enhance Bitcoin holdings and support its path towards profitability. Now, that path to profitability could be the key to the strategy. Before their transformation into a Bitcoin holding company, Metaplanet was a zombie hotel chain. As they were unprofitable, the firm had limited access to funding in the debt market. Selling options allows Metaplanet to book revenue rather than capital gains and could give them expanded access to fundraising options. When the options were sold, much of the analysis was centered around whether Metaplanet would have been better off simply buying

spot Bitcoin, as if it were a trade-off. With Metaplan planet's rapid pace of Bitcoin acquisition, it's now clear the company can and will do both. Investor Ben Weckman tweeted, Dylan Leclair and the Metaplanet team have been on an absolute tear acquiring Bitcoin. Seems like every week I'm seeing them pick up another 100 BTC. Very, very strong execution coming out of this team. This is a fun one to watch, so I will keep an eye on it. For now, though, that 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.