The Breakdown - Is the Bitcoin Bull Market Over?

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, June 5th, and that means it's time for the weekly recap. So what happened this week? I mean, honestly, it felt eerily quiet. It could be how many people were down in Miami and not on Twitter, it could be that the last few weeks have been a never-ending reign of fud bombs from Elon to energy to China that this week felt comparably mild. It could also be price action or the lack thereof. This was the type of week where your eyes sort of blur

Starting point is 00:00:51 and every time you check the price, it feels more or less the same, even though you can't exactly remember what it is. What this week certainly didn't have is any sort of rebound momentum, didn't have any big exciting announcements that propelled the market forward. In fact, we instead saw the creep in of not only bare market predictions, but bare market preparation. First, the prediction side. Boutique Investment Research Firm, MRB Partners, released a report last week titled, Has the Crypto Fever Broken? They point to a couple potential reasons.

Starting point is 00:01:23 First, the FUD. They note two main dimensions to this, environmental concerns and regulatory risks. These are things we've discussed extensively on this show. environmental concerns have been particularly acute and in the media first since Tesla made their big Bitcoin buy and second since Elon walked it back because of environmental reasons. Regulatory risks feel frankly more like a forward projection as we'll get into in a moment. But the second reason they gave for a potential downturn is a reduction in monetary stimulus. They wrote, quote,

Starting point is 00:01:56 Easy money has helped fuel the crypto bubble and a slow unwinding of this trend globally will ultimately become a headwind for the speculative digital action. asset. Will Clemente and Pomp's newsletter adds some technical oomph to this as well? He writes, Zooming out, you get this divergence between short and long-term holders. Based on historic behavior of these cohorts, we are either headed into a full-fledged bear market or in a mini-bear market similar to the consolidation between the two double pumps, but still in a broader bull market. At that time, there was a similar phenomenon of long-term holders stepping in and doing the heavy lifting while short-term holders panic sold. Based on metrics looking at the broader cycle, I

Starting point is 00:02:33 tend to side more with the latter, but I could be wrong. Interestingly to me, this is not just analysis or speculation that we're seeing as well. There's actually some amount of preparation. Coin desk wrote a story this week called Dow's Prepare for the next crypto winter with treasury diversification. It's basically about how many decentralized autonomous organizations, many of whom are funded by governance tokens, are selling some of those governance tokens now to move into fiat denominated stable coins that could help them weather a downturn.

Starting point is 00:03:02 Now, I remember 2018 really well, and frankly, teams that managed Treasury well were often not only able to survive, but put themselves in a hugely powerful position relative to their peers. Those that didn't and just hope that their tokens would return to their previous highs tended to perish. So I don't think it's silly for these Dow's to be starting to think in those terms, regardless of where we actually are in the cycle. But what do I think? Well, first, actually, let's talk about what you guys think. I did a poll last night on Twitter, and here's how it came out. Out of about 1,000 votes, 15% of you said the bull market was over,

Starting point is 00:03:37 54% said it's just a temporary break, and 31% said, who cares. There is a part of me that feels like the 54% is a little high and reflects what people actually hope for rather than what they think, but that's all right. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. borrow against her digital assets at just 6.9% APR, earn passive income with yields of up to 12%, and swap between more than 100 market pairs with the instant nexo exchange. Try the NXO wallet app to get the whole 360 degrees of crypto banking.

Starting point is 00:04:15 Get started at nexo.io. That's N-E-X-O-I-O to get started today. As for me, well, first let's talk about risks. Where does all this FUD rank in terms of its capacity to end a bull market? There's a lot of it. I've discussed this week how ransomware has come storming onto the scene as the latest one that piles onto China and environment and everything else. I think Fudd can be enthusiasm and momentum dampening. But these aren't really the type of things that have the power to end a true bull market,

Starting point is 00:04:48 at least not what we've seen so far. So far, all of the regulatory intrigue has been much more about wondering what the shape and texture of the Biden administration's relationship to crypto is going to be, not specific things that are caused for concern. Perhaps a really aggressive regulatory turn in the U.S. could actually totally stomp out a bull market. Something like the OCC reversing Brian Brooks era changes to how banks can interact with crypto and even explicitly disallowing them to have relationships with crypto companies. That would put a huge amount of what has driven this new bull run on ice. But what's actually happening now, the idea that they're simply reviewing those rules and how they

Starting point is 00:05:28 were made, that's not something that ends a bull market. Instead, I might turn to bigger macro forces to understand this cool-down period. Let's turn to Chow Wang, who a couple weeks ago sum this up in this way. Quote, I'm seeing a growing tapering narrative in the macro world. This is by far the most important thing you should pay attention to as far as the bull market is concerned. More important than any chart, metrics, or narratives you are looking at. Let's not pretend otherwise.

Starting point is 00:05:54 Virtually every coin, company, and product, and crypto is at least indirectly fueled by central bank-induced speculative fervor. So long as this is the case, we are highly vulnerable to central bankers' decisions. I also discussed this with Kathy Wood from ARC at Consensus last week. The market has been in a serious cool-off period with tech and innovation stocks. While all assets have benefited from the zero-bound interest rates of the last year, especially, but even longer, this category of stocks have seen the greatest inflation in their valuation. The period of things like ARC's ETFs falling in the traditional stock market, coincides pretty well with the legs down from the Bitcoin highs in April. If one believes that this

Starting point is 00:06:34 Bitcoin price run-up was caused by a combination of one, the narrative fuel of institutional investors getting into the space, in part as an inflation hedge and in part because they're structurally being moved out on the risk curve, and two, leveraged crypto-traders trading that narrative, then what would happen when the narrative fuel starts to wear out? What would happen when the whole macro-market environment enters a cooling wait-and-see period, where they're wondering, how will recovery proceed? Will inflation cause a big policy change? Will big government spending shift to a new normal that makes corporates double down on Bitcoin? These are all questions that feel very indeterminate and very relevant. Because of that, there's none of that big external narrative

Starting point is 00:07:13 juice. Yes, long-term holders are scooping up Bitcoin at these prices, but not enough to drive it back up in a significant way. So to me, I kind of think it's impossible to tell whether we're in that double bubble situation or a shift back to winter. I will say, however, that the position I resonate most with on the poll is who cares. And I'm not just being glib. Think about the last bear market. During that time, there was the space for a huge number of strong, durable, Bitcoin-centric institutions to go out and evangelize the next wave of converts to the space, focused on the fundamentals of the asset, not the fomo of the price. There was space for the Ethereum community to shift its priorities from tokenize the world ICO projects to decentralized finance, a new set of composable

Starting point is 00:07:57 financial rails again, which were born and grew up in a bear market, and frankly didn't even have a chance to run this time around in the bull market. Third, speaking of things percolating, the NFT craze again grew developed and eventually popped off during the bare market before this bull market even started. If anything, you could argue that the bull market did NFTs a disservice by inflating prices so quickly that so much stupid BS crowded out a lot of the interesting new approaches to digital art and fandom. Bare markets might not have the hype that bull markets do, but real things happen during them. Still, when pushed, I kind of have a hard time believing that we're going to see the same sort of multi-year crypto winters we saw in the past. There are just

Starting point is 00:08:37 too many different competing forces and groups now that can be catalysts for shorter-term booms and busts. There are also structural forces, like I've mentioned on a previous show, such as the amount of capital that is out of the markets but still in stable coins and easy to move back in. There are still tons of companies that have been orange-pilled and are working on their buys. So I guess if really pushed, what it all comes down to for me or what it makes me is a who cares with the side of some version of a super cycle or at least a new type of cycle. You can bet that whatever the case, I will be here every day talking to you about it and waiting to see what comes next. For now, guys, I hope you're having a great weekend. I appreciate you listening. And until tomorrow,

Starting point is 00:09:15 be safe and take care of each other. Peace.

The Breakdown - Is the Bitcoin Bull Market Over?

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