The Breakdown - Is Tron Going Public This Cycle's Shark Jump?

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 Tuesday, June 17th, and today we are talking about Tron's Bitcoin Treasury Strategy going public in the U.S. 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, well, we are talking about a fairly shark-jumpy moment, at least in the estimation of some. But of course, I think that we're going to be doing a fairly daily update on Bitcoin and

Starting point is 00:00:49 market reaction to the ongoing conflict in the Middle East. Yesterday's price action saw Bitcoin surge as anxious traders fade escalation in the Middle East. Bitcoin gained 2% during the New York session, stopping just shy of $109,000 as the stock market closed. it then dived on fresh headlines that the conflict between Israel and Iran is ratcheting up. At around 5.30 p.m. on the East Coast, Trump posted, Iran should have signed the deal I told them to sign. What a shame and waste of human life. Simply stated, Iran cannot have a nuclear weapon. I said it over and over again. Everyone should immediately evacuate Tehran. The now-deleted post came as Trump left the G7 summit a day early

Starting point is 00:01:28 and directed White House officials to prepare the situation room for his arrival back in Washington. French President Emmanuel Macron told reporters at the summit that a ceasefire deal was on the table. Trump later rejected the idea that he'd left the summit to work on a ceasefire, posting, he has no idea why I am now on my way to Washington, but it certainly has nothing to do with a ceasefire. Much bigger than that. Whether purposely or not, Emmanuel always gets it wrong. Stay tuned. Meanwhile, footage was emerging of vehicles packing the roads out of Tehran following the president's post. Keep in mind, this is a city with the population of New York, making a full evacuation fairly impossible on short notice. Flight watchers tracked a large number of military aircraft staging to the east coast and some already

Starting point is 00:02:06 on route to the Middle East. In Congress, a group of bipartisan lawmakers are rallying around a resolution to assert their constitutional power to make the call on whether the U.S. goes to war. There is a ton of confusion, even for this fairly confusing time, but it basically feels like either preparations to enter the fray or brinksmanship as a negotiation tactic. Appearing on Fox News, Defense Secretary Pete Hegeseth asserted that, quote, What you're watching in real time is peace through strength in America first. We are postured defensively in the region to be strong in pursuit of a peace deal, and we certainly hope that's what happens here. The geopolitical whipsaw has been dislocating for traders.

Starting point is 00:02:40 Earlier in the day, investment advisor Doug Bonaparth wrote, On Friday, everyone sold stocks thinking it was World War III. Today, everyone is buying stocks thinking it's not that bad. It just goes to show you that you know nothing unless you're a U.S. politician. By the evening, everyone was back to selling again and Bitcoin followed stock futures down. The Bitcoin dump only reached 106,000, and there's still a lot of tentative bullishness around. Bitcoin Jack tweeted, war means printer. Jeff Bark of Bitwise, commenting on the people fleeing from Tehran commented, this moment is why Bitcoin exists. Author Jeff Kurekis posted,

Starting point is 00:03:11 You can't vote your way into avoiding wars, low inflation, and no corruption. You can only buy Bitcoin. Obviously, a fast-moving situation with Everyday bringing something new, but now let's get to our main story, which, as everyday, seems to be somehow about Bitcoin treasury companies. And if you are looking for signs of the top in this trend, Justin's son might just have rung the bell. The controversial Tron founder announced plans to take Tron public in the U.S. A press release stated a NASDAQ listed company called SRM Entertainment, has agreed to take a private investment of $100 million to initiate a Tron treasury strategy. It stated that the deal was being arranged by Domini Securities, which is a boutique investment bank

Starting point is 00:03:48 with ties to the Trump family. The Financial Times reported that Eric Trump was expected to take a role at the company. He later denied the reporting in an extremely diplomatic way, tweeting, I'm the biggest fan of Tron and love Justin's son. He's a great friend and an icon in the crypto space. That said, the below is inaccurate. I don't have public involvement in this company, which to many read as even though Sun invested tens of millions of dollars into the Trump family crypto ventures, they don't want to be publicly affiliated with whatever his next scheme is. The company will be renamed Tron Inc. as Sun is positioning it as a combination of the stable coin and crypto treasury investment themes.

Starting point is 00:04:21 In the press statement, he said that Tron is the quote protocol of choice for on-chain settlement serving the mass populations worldwide. Now, so far, most of the Treasury companies have had at least a veneer of being an arbitrage between trad-fi markets and crypto, using debt raises to lever up their bets. This one seems like perhaps the most blatant attempt to just straight-up backdoor list a coin on the NASDAQ. Sun is even renaming the company Tron Inc. so there's absolutely no confusion. For most of the crypto community, this is a pretty cursed piece of news and a very bad sign. Prior to Eric Trump disavowing the project, Moon Overlord tweeted, think the Trump family ruins crypto forever, honestly. It'll end up like every other one of his

Starting point is 00:04:57 businesses. Unfortunate, but at least I know when to fully exit forever. I mean, Coinbase sponsored to the military and we cheer for BlackRock to steal everyone's coins. It's over. Mike Dutas of Sixth Man Ventures, quipped, I was very surprised to see the new SEC rule that requires companies to have a Trump family board member or shareholder in order to go public on U.S. markets. One of the issues is that this isn't someone who can skate under the radar with a small Bitcoin Treasury company play. Justin's son is now known to every major newspaper in the country. after attending the Trump meme coin dinner as the top holder. The reporting focused on the SEC putting their fraud lawsuit against Sun on pause in February, which was seen as a quid pro quo

Starting point is 00:05:31 for Sun's investment in Trump's crypto projects. That news was a lifetime ago in crypto news cycles, but not so for mainstream news. This is already being reported as Sun getting a get-out-of-jail-free card from the SEC and immediately turning around and running a public market grift. For many, the sentiment is that this is just all so tiresome. Investor Maya Zahavi wrote, We should all applaud Justin Sun for helping crypto go all in on cronyism. Daniel Sinclair of Rainbow Wallet tweeted, No one was built for this corruption era more than Justin's son, just incredible all around.

Starting point is 00:06:01 Now, I will say that this could be how it ends for this cycle. Sun has a history of killing off crypto trends. Last cycle, he managed to put in the top on Metaverse tokens and NFTs by getting involved. He then launched a Luna clone a few months before that trend detonated all over the industry. Even in the depths of crypto winter, it became the largest holder of staked Ethereum, just as that narrative started to sputter. This one feels to many like Sun not only calling the top on Trump crypto projects, but also any notion of leniency in the regulatory sphere.

Starting point is 00:06:29 Some are flagging that any change in government is now almost certainly to have crypto as public enemy number one. Commenter Dennis Porto wrote, Crypto deserves what it gets after this administration is gone. Where Iceberg he commented, AOC is going to send us all to Gitmo when this is over. So that is where we are. There is a non-zero chance that Justin Sun will literally ring the bell in this cycle at the Nasdaq when he takes Tron public later this summer. And that, my friends, is the state of the industry

Starting point is 00:06:53 at this moment. Today's episode of The Breakdown is brought to you exclusively by Grayscale. Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products, ranging from single asset to diversified to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of tradfai and crypto. And one of the benefits for a lot of us is that Grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visitgrayscale.com. Go tograyscale.com to explore their full suite of crypto

Starting point is 00:07:39 investment products and invest in your share of the future. Speaking of Bitcoin Treasury companies, Metaplanet has overtaken Coinbase a top Bitcoin holder? The Japanese company now has 10,000 Bitcoin in their treasury, surpassing the 9,276 held by Coinbase. Starting at zero less than a year ago, Metaplanet has become the ninth largest corporate holder of Bitcoin. They're quickly closing in on Hut 8 and will overtake Tesla after another couple thousand of Bitcoin buys like they've executed in recent weeks. The company is currently valued at seven times their Bitcoin holdings, so they have the ability to issue a ton of shares without getting anywhere close to dilution in Bitcoin terms.

Starting point is 00:08:14 Metaplanet's stated goal is to triple their Bitcoin holdings over the course of this year and reach 210,000 BTC by 2027. Their target is a 600% increase in Bitcoin holdings or Bitcoin yield for 2025, then 233% in 2026 and 110% in 27. That plan is starting to look very ambitious, if not unrealistic, but the market is currently pricing the stock as though the 600% target is the baseline. Now, everyone who has flooded Metaplanet over the past year has ended up completely wrong, But there is still some undeniable froth in the narrative. Metaplanet is now routinely seeing their stock jump by more than 20% a day, as we saw with micro strategy toward the end of last year. That run was ended by financial plumbing issues with the leveraged ETFs and clearing houses

Starting point is 00:08:57 raising margin requirements. So maybe we see the same kind of action in the Tokyo market? Still, the stock is getting quite a lot of attention with traditional analysts puzzled. Quantian wrote, Metaplanet is probably the most insane stock on the planet now. On the news that they had bought an incremental $120 million of Bitcoin, they added an incremental $1.5 billion of market capitalization. For every dollar of Bitcoin they own, there's now nearly $8 of market cap. It's not even a Bitcoin beta play. Bitcoin against Japanese yen is unchanged over the past month, and the stock is up 200%. So, as always, we ask, is this the narrative peak? Well, not necessarily. The Tether and SoftBank Joint Venture 21 Capital is yet to really get moving,

Starting point is 00:09:35 and there's another big regional play out of the UK starting to. We haven't heard anything about a Bitcoin treasury company for the South Korean market, which is sure to be an insane version of the strategy, given the culture of high speculation. But it's definitely clear that we're past the early phase for this theme. Expect a Matt Levine think piece on whether any of this makes sense as the micro-strategy clones go mainstream. Now, with all the craziness of Bitcoin treasury companies hitting the headlines, it's easy to overlook that boring old Bitcoin exposure is also getting normalized. The high-leverage treasury companies are still a really small part of the market, even though they're grabbing a ton of mine share. The buys from Microstrategy and Metaplanetan announced on money,

Starting point is 00:10:09 summed to around $1.2 billion. That's around half a percent of weekly Bitcoin spot volume, according to Coin Gecko data. The accumulation of these companies is noteworthy, but they're not really outsized players in the overall market dynamic. The segment of the market that's no longer negligible is Bitcoin ETFs. In fact, the ETFs are on trend to consume the market share enjoyed by centralized exchanges. Over the second half of last year, the ETFs hovered around a 10% share of Bitcoin spot volume, that rose to around 15% in the final months of 2024, and has been an unupward trend ever since. ETF market share hit an all-time high of 30% at the end of May and is still sitting at 25%.

Starting point is 00:10:43 This is an asset that currently trades around $250 billion in volume a week, and the ETF issuers have managed to capture a quarter of that for themselves. When you filter out the noise of meme coins, just-in-sun projects, and micro-strategy clones, this is going to be one of the lasting shifts from this cycle. Big institutions are officially here and they're trading Bitcoin in size using the ETFs. Lastly today, the Genius Act is set to go to a floor. vote in the Senate later today. I'm recording this on Tuesday morning. Discontent among Democrats continues to bleed through into the reporting. The bill now includes an amendment in response to

Starting point is 00:11:14 the Trump family stable coin product. The amendment includes a prohibition on allowing members of Congress and the executive branch from being directly involved in the issuance of a stable coin. It also requires an annual disclosure if a government official owns 5,000 worth of a stable coin. You'll note that neither of those provisions actually prevent the current status quo, as the president has no direct involvement in the World Liberty Financial Stablecoin. His sons are listed as advisors and the president is taking a cut on licensing fees, those activities aren't covered by the amendment. A Democrat Senate aide said they'd had some difficulty actually cracking down on what the Trump family has been up to. They said there's a constitutional limitation in that it's not clear a bill

Starting point is 00:11:48 can limit the business dealings of a child of the president. They said, so we're very aware of constitutional limitations and wanted to make sure it was a direct prohibition of government officials while they were serving. The family is the difficult part. In other words, this seems kind of toothless, but if a toothless amendment is what it takes for Democrats to vote for a sensible stable-stable-stapoint legislation, then whatever. Go for it. Unchained reports that the market structure bill has become the locus of discussions for a more comprehensive ban, but efforts are hitting a brick wall. Their sources said bipartisan agreement was reached to address conflicts of interest, saying that a provision was drafted in line with existing limits on campaign finance and financial

Starting point is 00:12:22 disclosures to ensure that it wasn't viewed as a direct response to the Trump family's crypto activities. The problem, however, hasn't come from lawmakers of either party, but from the the administration itself, with one source stating, Democrats and Republicans were working in good faith to try to find some combination of language. We thought we had found one, Republicans worked on the text and submitted it for approval through their usual administrative review process. Ultimately, the White House rejected that version. The source said that negotiations around the substance of the bill have been put on

Starting point is 00:12:49 pause while this issue has addressed. Still, the bill needs at least a symbolic ethics provision to gather enough Democrats' support to move through Congress. A source believes the benchmark for the Senate to take on the bill is 100 Democrat votes in the House. The previous version of a market structure bill only gathered 71 Democrat votes last year. However, for the moment, lawmakers are at a loss to find any version of an ethics provision that won't cause Trump to veto the bill once it lands on his desk.

Starting point is 00:13:11 So is there a way to thread this needle? Or will anything that limits the Trump family's crypto activity mean that crypto legislation is destined for the junk heap during this administration? Right now, it's not looking good. However, 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.

The Breakdown - Is Tron Going Public This Cycle's Shark Jump?

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