The Breakdown - Liberty Mutual and State Street Are the Latest Institutions to Join the Bitcoin Party

Episode Date: April 10, 2021

Today on the Brief: Crypto Climate Accord Robinhood crypto trading  The decentralization of venture capital Our main discussion: This week was absolutely chock-full of institutions getting into the bitcoin space, yet barely anyone noticed. From Liberty Mutual and Starr Insurance investing in NYDIG to a massive real estate company moving treasury into bitcoin and accepting it for rent, the institutional infiltration of bitcoin shows no signs of stopping.  -- Earn up to 12% APY on Bitcoin, Ethereum, USD, EUR, GBP, Stablecoins & more. Get started at nexo.io -- Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW   The Breakdown is produced and distributed by CoinDesk.com

This is a report from Bloomberg that was throwing around $400,000 as a possible price target for Bitcoin this cycle. I covered it on this show but saw almost nothing else about it. If we were having this conversation in December, Bloomberg pointing to $400,000 Bitcoin this cycle as possible would have been a pretty massive point of conversation. But that's just where we started. 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.com. And produced and distributed by CoinDesk.

What's going on, guys? It is Friday, April 9th. And today, we are talking about the latest institutions to join the Bitcoin Party. First up, however, let's do the brief. First on the brief today, the crypto-climate accord. Yesterday, Ripple, Coin shares, and consensus announced that they had joined something called the Crypto Climate Accord. Apparently, the goal of the Accord is to have the crypto industry run entirely on renewable industry by 2025, and they're even aiming to achieve net zero emissions

for the entire industry and even eliminate all historic emissions by 2030. Part of what they want to do is develop open source accounting standards that come from us rather than from outside. Meltem DeMiris, the CSO at CoinShare said, quote, it's vital we correct misinformation that has persisted about Bitcoin's energy use and sources. Now, at some point, this might be deserving of a larger show in connection with energy fud, but my quick thoughts are that ultimately, I believe it's market forces that are driving us towards better energy consumption. This industry is already rapidly moving towards those sources, particularly trapped energy that can't otherwise make it onto the grip, because if you can do it, it can be a lot less expensive. That said, it does feel to

me that the language that this climate accord is speaking is also the language that the world is speaking, and so it might create in that way the context to have a different discussion with potential allies in the ESG movement who could otherwise turn into enemies. Also, I like the idea of the industry's self-designing standards rather than having them imposed on us from the outside. So all in all, I'm pretty excited to see how this develops. Next on the brief, some significant numbers from Robin Hood's crypto trading. One of the biggest battles in the public markets this year will be Robin Hood versus Coinbase, although frankly they're likely to have lots of the same investors. Coinbase shared its huge numbers earlier this week, but Robin Hood came out swinging with a big counter. While Coinbase saw 6.1 million active traders on its platform

in the first quarter of this year, Robin Hood had 9.5 million customers trade crypto in Q1. That's a 460% increase from the quarter before. Of course, that's just the top line number of individual traders. We don't have any idea about the volume. It seems fairly likely that many of these investors, traded their first crypto ever through Robin Hood because they were already there trading stocks. I might not love the app or the way that it's been run, but if it is a door for new people to start their rabbit hole journey, that could be pretty okay. In related news, the NeoBank Revolut added 11 more tokens to the now 21 total list that its users can trade, including a number of defy tokens like Uniswap, Yerin, and Synthetics. All in all, a clear indication of just how much

fintech has to come play in the crypto space. Finally on the brief today, the decentralization of venture capital. Dot, dot, dot, dot. One of the things on many people's disruption radars is the process of venture funding itself. Part of why the ICO boom exploded is that they allowed regular people into these opportunities that had been historically excluded from them. Obviously, the results of that participation in the context of literally no quality gauntlet whatsoever were really rough and took a long time for this industry to recover from. It also did show, however, that the capital formation mechanisms that we've used for many years are kind of stuck in the past. This week, a new Dow, a decentralized autonomous organization, called Neptune, from former consensers Sam Kasat,

raised $20 million to provide liquidity for defy projects so they don't have to go to VCs. It's calling itself a liquidity Dow and basically paying members pool capital and provide liquidity to defy projects again, so they don't have to go to venture capitalists. The thing that's most interesting to me, which you can probably guess from the way that I frame this, is the fact that they're explicitly trying to disrupt the traditional venture capital mechanism. I think you're going to see a lot more of that energy in the year to come. But with that, let's shift to our main discussion. We are officially at the stage of institutionalization of Bitcoin, where big announcements no longer get a ton of notice. In order to demonstrate this point, let's

go briefly through the news of institutional involvement this week. First up, there was the Bloomberg report that I mentioned in a show on Tuesday or Wednesday. This is a report from Bloomberg that was throwing around $400,000 as a possible price target for Bitcoin this cycle. I covered it on this show, but saw almost nothing else about it. If we were having this conversation in December, Bloomberg pointing to $400,000 Bitcoin this cycle as possible would have been a pretty massive point of conversation. But that's just where we started. 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

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A, founded in 1792, the second oldest bank in the U.S. B, 3.1 trillion assets under management, 14th largest bank in the U.S. C, 38.8.3.8. trillion custody, the second largest custodian in the world. So what did they announce? State Street has a technology trading arm called Curranex. That arm, Curranx, is working with a London-based company called Pure Exchange, which is an infrastructure provider for the Forex world to create an institution-focused digital currency trading platform. Now, I will say that the messaging around this got a little bit muddied. Lauren Kylie, who's the CEO of Pure Digital, said, quote, that is the intention. State Street is one of many banks that will be using this platform,

and we were looking at midway through 2021, although no date is set. Later, a spokesperson for State Street said that it is evaluating use of the platform for its own trading, but they've made no commitment so far. My two cents here is that we don't need to overstate what they're doing to recognize that this partnership clearly shows that the asset class as a whole is a priority for this big, massive institution. Our next one is even more blatant. Nidig is a Bitcoin-focused institutional player that helps other big companies get involved with Bitcoin. They came to notice last fall when they facilitated mass mutuals $100 million Bitcoin buy, but they've been around in the background building for years. Earlier this year, they announced a monster $200 million financing round.

It included Morgan Stanley, New York Life, Soros, and others. Even then, I noted that given the profile of some of their investors, particularly another insurance giant, and particularly the architect of the New World Order himself, George Soros? The response was kind of muted. Yesterday's follow-up $100 million financing announcement passed with barely a mention. Liberty Mutual and Star Insurance joined the party, and what's more, they added a new head for their insurance offerings, which makes sense, given that they're basically collecting all of the insurance giants as investors and board members. They also gave some hints as to what they might do with all of this firepower. The CEO of Stone Ridge, which is the group that Nidig is a part of,

said, with Star, Liberty Mutual, New York Life, and mass mutuals as shareholders of Nidig, we will be working tirelessly to enable new Bitcoin-denominated projects for global insurance. Sounds like this collaboration is more than just a fundraise. Now, though, let's move over to the old treasury-holding side of things. I think Saylor bought the dip again. I vaguely remember reading that micro-strategy scooped another $15 million worth of Bitcoin, but honestly, at this point, what's a few hundred bitcoins among friends, right? A couple other treasury announcements, however, flew again more or less under the radar.

Chinese web firm, Me Too, has been deploying a treasury strategy that interestingly includes both Bitcoin and Ethereum. This week, it bought another 175 Bitcoin about $10 million worth. As of Thursday, the company, which is traded on the Hong Kong Stock Exchange, holds about 31,000 eth and 940 BTC. It invested roughly the same in each. Now, the Me Too stuff was known, but a new one that, again, barely moved the needle this week, was Caruso Properties allocating 1% of its treasury to Bitcoin and collaborating with Gemini to begin allowing tenants of both retail and commercial properties to pay rents in BTC. This makes it the biggest real estate company in America to accept Bitcoin

as payment. Now, what is Caruso, you ask? Well, its founder, Rick Caruso, is worth about $4.2 billion, and they're known for big outdoor malls, expensive seaside property, and more. And on top of all that, from their public statements, it sounds like it's the start of a much deeper engagement with the industry. Quote, this partnership marks the beginning of a holistic long-term relationship intended to bring cryptocurrency, non-fundable tokens, and blockchain applications to Caruso properties as a way to engage the millions of visitors throughout their ecosystem. A couple more because we're not done.

Skybridge, again, is Scaramucci's fund. They've applied for a Bitcoin ETF, and we learned this week that BNY Mellon would provide the ETF basket operations. This means things like order-taking, fund accounting, fund administration. Now, while this isn't some groundbreaking treasury announcement, it does show these major players getting to a new level of comfort with participation in the space. Of course, it wouldn't make sense for absolutely every institution to be running in this same direction, and there is one counterpoint that's also worth pointing out.

HSBC sent out a message to clients this week, and I just have to read this thing to you. We'd like to inform you that HSBC has changed the policy on virtual currencies, and products related or referencing the performance of virtual currencies. HIDC will not participate in facilitating buy and or exchange products related to virtual currencies or products related or referencing to the performance of virtual currency. Our records show that your HSBC Invest Direct account is holding micro-stratage, a virtual currency product. While we will permit the holdings of Master to be held and or sold transfer out of your

HSBC Invest Direct account, new purchasers or transfers in will not be allowed. How absolutely unfathomably patronizing that a bank would have the nerve to tell its customers what they're not allowed to spend money on. There is literally only one solution to this. If you are a customer, vote with your wallet, vote with your feet. This is a backwards financial dinosaur that is just irrevocably on the wrong side of history. But speaking of people on the wrong side and by the inverse on the right side of history, one last big one to note.

When Coinbase published earlier this week their Q1 results, one of the numbers that was comparatively less discussed was that of the 223 billion of assets on their platform, 142 billion of those were from institutions. This is a company that made its fortune on retail, yet more than half of assets are from institutions. This is a big, blaring number that adds credence to this shift that we've all been witnessing, which gets, I think, back to the main point. I've watched all of these announcements this week, and they've not only not moved the price of Bitcoin at all, they've barely registered on the radar of Bitcoin Twitter. This is a market that is maturing and it's maturing with institutions as a part of it. Of course, a question this brings up is,

does this mean we're in a new super cycle? That's a question for the weekly recap tomorrow. Until then, guys, be safe and take care of each other. Peace.