The Breakdown - Markets Hold Their Breath in Wyoming

Episode Date: August 23, 2025

Markets turned their attention to Jackson Hole for Jerome Powell’s final speech as Fed Chair, while crypto and AI narratives kept investors on edge. NLW unpacks how Powell’s tone could shift rate cut expectations, the signals from Wyoming’s new state stablecoin, and why the crypto lobby is racing to lock in legislation before midterms. A slow summer week on the surface, but one filled with clues about where the next big fights will emerge. Brought to you by: Grayscale offers more than 20 different crypto investment products. Explore the full suite at grayscale.com. Invest in your share of the future. Investing involves risk and possible loss of principal. To learn more, visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Grayscale.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ -- ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.grayscale.com//?utm_source=blockworks&utm_medium=paid-other&utm_campaign=brand&utm_id=&utm_term=&utm_content=audio-thebreakdown)⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

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 Friday, August 22nd, and that means it's time for the Friday 5. 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, back with another Friday 5, and finally we have kind of a slow summer week, at least when it comes to immediate news. As you'll hear, there were a lot of things going on that have, I think, bigger long-term narrative type implications, but there wasn't a lot of big

breaking news to cling on to. It felt much more ultimately like kind of a late summer week. In fact, if anything, I've been watching the markets throughout this week, both from the crypto perspective and the AI perspective, and I think it is a very very good. good time to take a step back, touch some grass, enjoy the last couple weeks. If you're in the U.S., go get yourself some Labor Day, and come back in a little bit when things get a little bit more resolved. Feels very up in the air and antsy right now for no particular reason other than anxiety being manifest across the market. In any case, we break all of that down on today's show, so let's dive in. Good morning, everybody, and happy Jackson whole day to those who celebrate. This is

the Super Bowl of financial markets, Jerome Powell, going to give a speech and we're going to deeply analyze his tone. If he sneezes it in the wrong direction, which way he coughs and every single gesture that he makes, it's Powell Day. Are you celebrating? How are you celebrating? I should say, how are you celebrating? I know you celebrate. Yeah, I mean, listen, it's, it's interesting because it is actually a useful device to go back and sort of see how each of these speeches has captured kind of the moment. They do really provide an interesting indicator of where things were. What's different about this time, obviously, is that this is the last one for him. And so there's basically less of a reason. It doesn't make as much sense for him to try to lay out some big new kind of plan for the

future, given that he's not there to implement it. So we don't exactly know what we're going to get. Yeah. I mean, is he going to, you know, throw a grenade explosions in the background as he casually walks away into the sunset like a Hollywood movie. A lot of people, I think, are looking for him to take his shots at Trump. I don't think that's his style. I don't think he's going to do that at all, even underhandedly. I mean, I don't think he's going to be like, yeah, Trump's a dick, anything like that. But, you know, he obviously has his sort of last opportunity, as you said, here to stay the course, I guess, or change nothing and kind of fly against the popular sentiment of what he should be doing. Yeah, I mean, look, there's a lot. There,

There's all sorts of prediction markets. I was just looking at Calshan Polymarket to see what people thought he was going to say. And it's all betting around like how many times he says inflation and things like that. It's not really substantive. Although I will say people do not expect him to talk about crypto at all. I think it's just a six cents trade for that one. I know, right? But I think that the obvious play for him, based on everything we've ever seen from Powell,

is to basically slightly try to tamp down the assuredness that the market has that we're getting a rate cut in September to give himself a little bit more, more breathing space, right? So much so that you're already seeing that kind of come in. Right now, I think that CME Fed Watch has the odds of a rate cut down to 70 percent or just a little under 70 percent. It was 100 last week. I'm old enough to remember when 100 percent meant something was definitely going to happen.

Yeah. On the prediction markets, it's down to 60 in both cases, 59, 60. And that's exactly what Powell wants. Powell hates being boxed into, you know, the market's sort of preempting his policy. Now, the flip side is we could get a little bit of a surprise and see a legacy speech, right, where he tries to articulate something that the future Fed chair should watch out for or something like that. Like, it's not outside the realm of possibility. I think it is pretty impossible for him to throw grenades and lob bombs, but it's not

impossible that he tries to sort of use this as a last statement to remind people or sort of have his view felt, you know, an echo through the ages. Yeah, you might try to get that, you know, JFK or MLK quote in there that he's remembered for that gives him, you know, a strong legacy. We'll see. But I mean, to your point about predictive markets, generally, even amongst Fed governors now, there's very lukewarm, certainly no consensus that there's going to be rate cuts in September. And markets really have been pricing in that that was effectively a foregone conclusion. But we're at this place now where you get speeches from. multiple Fed governors and they're in no way have this consensus of what's going to happen.

Yeah. The last week has been weird. It's like the entire sort of, you know, business cycle, the normal business cycle of the summer has been hyper compressed into one week. We've had markets absolutely freaking out about complete non-news when it comes to AI, repricing everything wildly. Like the sort of stuff that happens over an extended couple month period, usually in July and August, is now all happening in like one week, which is adding to this weird sort of sense of trepidation and volatility. It's almost like everyone forgot it was summer up until, you know, five days ago. And now we're trying to catch up. I mean, that was my literal message to you was like, we finally have one of those slow weeks. But then, you know, we have the

slow week and Friday hits on Jackson Hole. So I guess slow is relative versus previous cycles. There's a lot more happening in Jackson Hole, beyond just this speech. Obviously, we have the Wyoming Blockchain Symposium 2025. This was presented by Saul Anthony Scaramucci. Interesting place and interesting time to go and do a blockchain summit. This wasn't really so heavily on my radar. But when you and I discussed show notes and topics, you said you could do hours and hours on everything that happened here.

Yeah, it's, you know, whatever Powell decides, to use this speech for. It's clear that the Washington sort of economic establishment decided to use the blockchain symposium to really reinforce the sort of deep integration of crypto and the financial system. We had a couple of different Fed governors who spoke. And importantly, the conversation has shifted away from just being about sort of the need for quality and even permissive regulation into even there's a whole discussion of how the Fed should use crypto rails and embrace these things. I mean, it's very clearly a sort of another inflection point moment past which we are, or kind of moving into a new era, I think, of integration for crypto.

Yeah, and I didn't get a chance to listen to many of the speeches, but as you said, they obviously took the opportunity to talk about all of the things that could happen in the future for this industry. And obviously, Lummis is from Wyoming. This week, we got the announcement, which we don't even have as one of our main topics that Wyoming launch in the frontier. stable coin, which I actually think is a relatively big story that a state is launching a stable coin. And then, of course, Lumas also saying, you know, we're going to get market structure by 2026. Actually, 26, it almost seems bearish from what we've heard before, because we were supposed to be talking about it for August and September. And that's clearly not happening yet

for clarity. But she's pretty convicted that this is going to happen. Yeah, I mean, the big, so, you know, we got a commitment to a timeline as much as a policy should commit to a timeline. It's not obviously in her control. So that part you kind of have to take with a great assault. What was more interesting is that we got a lot more information around how the Senate seems to be thinking about their bill versus the House bill. And basically what Lemis said was that the House had done a good job to get real bipartisan support for this thing.

So the Senate was probably going to lean pretty heavily on their version of the bill, on the House's version of the bill versus the Senate's version of the bill, which that was the big question coming out. There were sort of, you know, these fundamentally different definitions of how to handle the whole securities question. And it seems at least from where we're sitting now, at least from what Lemus said, that they're really going to lean on the sort of the House approach, which, you know, hold aside the debates on right or wrong. It's clear that they care about actually getting this thing through if they're kind of making a calculation on path of least resistance to do so. Yeah. And it seems like we still have this sentiment that we need to strike while the iron's hot. We're already starting to see a lot of action ramping up towards midterms and seemingly some fear that we might not have the same environment after midterms as we have now for patching legislation.

One of the other stories this week that we didn't choose was obviously the Winkleby wins choosing to give, I think, $25 million to a new super PAC. So clearly the crypto lobby is ramping up to make sure that we still have an environment for passing legislation if this doesn't get done quickly. Yeah, I think that it is the correct mindset to operate under the assumption that past the midterms we're dealing with the totally different set of circumstances. And so nothing can be taken for granted and we have to move as fast as we can. Now, there's plenty of room. And the people who are in Washington, the crypto lobby, you know, as much as our, you know, our kind of our chattering class might have given up on the left side of the aisle. Certainly the crypto political lobby hasn't. They are out courting and working and they will be working throughout this election cycle on pro-crypto Dems, not just pro-Crypto-Republicans.

However, it would be a historic for the majorities that the Republicans have right now to persist. There's lots of reasons to think, you know, just based on the normal kind of pattern of U.S. political history, that there will be a bit of a rebound. And, you know, Warren is still out there kicking. And who knows what the resurgence of the anti-crypto army could be. So I think that we have to operate under the assumption that things are, you know, relatively more difficult past the midterms, which is to say nothing of also just the fact that nothing gets done when people are campaigning for midterms. So it's a double whammy.

Yeah, people need to remember that Elizabeth Warren would become the chair of the Senate Finance Committee once again if somehow the Senate flips. And we would have the Queen of the Anti-Crypto Army leading the Senate Finance Committee. That can be a very, very bad situation. So you can't get complacent, I guess, if you're going to be lobbying and pushing for the end. industry in Washington. 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 diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of TradFi 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 to Grayscale.com to explore their full suite of crypto investment products and invest in your share of the future. I think the next big story that we have here kind of crazy is Michael Saylor making some waves.

I haven't dug too deeply into the fights that are clearly happening on X amongst the community, but micro strategy eases MSDR stock sale limits as shares hit lowest level since April. We got basically, I think, a 21% retraced on strategy this week. And last I checked, Bitcoin certainly not down 21% this week. So clearly this is something unique to micro strategy and strategy that is not dependent on the price of Bitcoin. It is a nice compression of MNAV, though, you'd have to imagine. Yeah, so I think it's really hard for me to parse out how much of this is strategy or micro-strategy-specific

versus risk-off. Now, to your point, the fact that Bitcoin hasn't fallen that much suggests that at least some amount of it is specific to micro-strategy. But if you look at sort of more broadly what's been happening with markets, a lot of the market's recent favorite stocks from a risk's perspective have just been hammered, right? Palantir has been hammered. The AI stuff has been hammered. There's a real concern right now. Basically, the way that the nervousness heading into the rate season is being manifest is everything that has been a pillar of stock market performance in a way that people have worried seems like

it's way too much of a pillar of stock market performance is being questioned right now. And I think that strategy obviously isn't quite the same as, you know, invidia when it comes to that. But it's certainly in this basket of things which have been willful out performers throughout the course of the market that sort of seem to not care and have their own gravity vis-a-vis everything else that's happening in the markets. And so maybe some part of it is that. The other part is that obviously, you know, the short of it is, you know,

strategy had announced certain guidelines for themselves around when and how they couldn't buy based on, you know, sort of ratios. And then we're like, eh, actually, we're going to do whatever we want. Which is like, have you been watching Sailor forever? Like, of course he's going to do whatever he wants. You know, like, this is not surprising. But, you know, look, when you're a public company and you say one thing and then you immediately kind of go and turn around and say, no, actually, we're going to do it a different

way. It causes nervousness, especially because, you know, micro strategy for better or worse are the Exhibit A of a trend that people are both exuberant about right now, but also nervous that they might be wrong about or at least sort of like listening for when musical chairs ends, let's put it, on the whole theme. Yeah, in a vacuum, what he did doesn't concern me greatly. But when it's at a period where Bitcoin is sort of trading sideways, which we know without volatility is generally bad for micro strategy or anybody who's taking this approach to buying Bitcoin, and then he changes it, they're going

to be market participants who haven't done too deeply into the strategy who are going to feel a bit panicked. Or they're going to feel like he's a bit panicked. He's making this decision that he's basically like creating a floor because he's concerned. Yep. Yep. So I don't know. I think I've had to watch the markets really closely recently, not just for crypto-related things, but because there's a huge explosion of sort of like the

nervousness around AI narrative. And my read broadly is that one, as much as we have felt like we are not in a normal summer, we still are dealing with thin liquidity and sort of, you know, normal summer trading environments. And two, there is so much narrative going on right now. Like all the decisions are being made, not based on fundamentals, but based on narratives and conversations. You know, there's this unbelievably weak MIT study in the AI space that said that 95% of pilots are failing based on interviews with like 52 executives. And numerous analysts have cited that as a reason by Palantir and NVIDIA are going. Like, it's just, it's a weird moment. You know,

we haven't had to touch much grass this summer because there's been so much to actually do and pay attention to. It's a real good touch grass moment is sort of my TLDR. Yeah, I agree with that. And listen, I just happened to bring this up because on spaces yesterday, Toma, Strollite mentioned this, but this is strategy variable rate perpetual stretch PRF share series. A, yeah. One of micro strategies, many assets here, this was STRC, obviously, the, you know, biggest IPO of the year. You might remember, this trading now at 94.44 was down to about 93. This is supposed to trade on par at 100. And this is an asset that gives, I believe, an 8 or 9% yield. So if you believe that micro strategy, this is just fun and it dropped for no reason,

this thing, you basically, they have the incentive to push it back up to 100 and then you get the yield on top. This seems like you could be a really, really good trade if you believe that micro strategy is fine here. Yeah. I mean, look, about six percent, you know, six, seven percent, and you should get the nine percent yield on it. Yeah, look, in moments like this, the touch grass is a really reasonable approach. The be greedy when others are fearful is also, you know, long-term historic wisdom. You can get caught without your shirt on, but for those who've got the long-term conviction, there are not a lot of better moments in this.

I guess, you know, as they say, when the tide goes out and can see who's swimming naked, maybe you can just be the one stealing the clothes from those people on the beach. So the next story that we have here, really interesting, actually, in context of everything that's been going on with Roman Storm is that we have some clarity from the U.S. Department of Justice saying writing code without bad intent is not a crime. Making that clear, this is one of the biggest talking points that we've had for years. Obviously, we have samurai wallet, guys just effectively pleading guilty. Roman Storm being charged in one of the three. and it seems like the O'Don's saying what they did is fine. So we have this really kind of conflicted moment.

There's obviously good news, but I'm not sure that the court's got the memo. Yeah, I mean, look, there's a difference between an administration and the representatives of an administration saying a thing and trying to articulate it and trying to sort of like influence policy and it being shrined, you know, in law and the judicial process. And I think that if you're a developer, every sort of statement like that, one is helpful and we want more of them. The more that that can become sort of like the norm, the better. But it's still, I don't think anyone's sort of looking at that and saying,

okay, great, now I can go do the thing that I was going to do without any concern. I can't imagine this ever being a fully resolved issue, frankly, in the U.S. It's just always going to be some amount of gray area for interpretation. Maybe if you're Roman stormed, though, you're sitting there thinking my appeal just got still more bullish. No, 100%. I mean, look, that's why it's one of those things where you neither want to overstate how important it is in terms of actual practical implications, but you don't want to understate

the significance of, you know, leading officials coming out and saying a thing that we've wanted officials to embrace as as policy. So it's entirely 100% bullish. It's just how positive is its actual impact? That's the only thing. Yeah, how much will it end up matter? in the individual cases. And the final story we have today, China weighs Yuan back stable coins and major policy shift. China's cabinet or review a roadmap that includes yuan pegged stable coins to bolster Yuan internationalization sources told Reuters. This is really interesting to me because

it seems obvious. And they've already been piloting and using a Juan central bank digital currency for years. So how is their policy to not have stable coins if they have a central bank digital currency. I think it's the difference is how much control they're willing to give up for sort of the private sector to do the work of digital yuanification of the world, right? Like, that's really the question. China is watching the U.S. dollar have its best long-term resurgence potential created because of stable coins, right? You know, as much as people talk about what's going to take down the dollar as sort of an international currency of the world, it's stable coins are arguing. arguably the thing that is extending its dominance as the world's reserve currency, right?

When you have people who have used $20 bills forever as their favorite currency and all of a sudden they have access to a proxy that's easier to get, works just as well. Everyone accepts it. It means that they don't really have to look elsewhere, right? And it's very clear that stable coins are now a geopolitical force, right? The U.S. has gotten that memo. And I think China is as well. And with China, it's just a question of, like I said, how much they're willing to give up control, right? With a digital yuan, the actual CBDC, they have control of the supply, the issuance, the redemption, all that, you know, if they allow or if they sort of encourage private digital yuan in the same way that there's a, you know, a circle equivalent or whatever, there's some control that's lost. But the tradeoff is that the influence of their currency might be a lot broader if they allow that to happen. So I think that that's sort of the calculation right now. Yeah, it's not going to work. I mean, one is a stable

coin backed by anything other than U.S. dollars gained any traction anywhere. I get why they're doing it and you're 100% correct, but that doesn't to me mean that anybody's going to all of a sudden want to use Chinese currency. Yeah, supply in this case, I do not think creates demand. But, you know, there's also things that China can do to influence sort of adoption of, you know, their currency in this ways. And who knows, like, what sort of international trade pressure they can put on to use, whatever. You know, like, there's, yeah, you do not get your small plastic toys unless you transact in Wandaq stable quotes. We're not sending them. It's not happening. All right. I think we unpacked everything. This is, I think, our slowest week, but the reality is we're good to see what

happens in Wyoming today. And that's going to probably dictate, uh, next week, or at least the next three days worth of news and how people interpret it. I think the big takeaway from today's stream, as you said, is just go touch grass. Yep. That's what I'm going to do. All right. Yeah, me too. Guys, go check out, obviously, the breakdown, everything else NLW has going on. It's funny. I see people, like, in the comments sometimes referring to, like, the AI guy is here. And I've just never, I've never thought of you as the AI guy. You were the crypto guy before you were the AI guy. Yeah, times keep changing, man. Like I said, it's a little Asian girl. Why not both?

Anyways, that's what we got for you today. We will see you next week for the next Friday 5. Thanks, man. Later.