The Breakdown - Meet Bitcoin's New CMO: Larry Fink

Episode Date: October 17, 2023

In the wake of CoinTelegraph's oopsie fake news tweet about BlackRock's Bitcoin Spot ETF application being approved, BlackRock CEO Larry Fink took to Fox Business to talk about why they saw demand for crypto going up. Today's Sponsor: Kraken Kraken: See what crypto can be - https://kraken.com/TheBreakdown 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 Tuesday, October 17th, and today we are talking about the new official spokesperson for Bitcoin, BlackRock CEO, Larry Fink. 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.L.Y slash breakdown pod. Well, friends, if you listened to yesterday's show or if you were alive on Twitter, you probably

saw when Coin Telegraph dropped a tweet that the SEC had approved BlackRock's Bitcoin Spot ETF application. Now, of course, news that the BlackRock product had been approved. Not only a spot ETF approval, but the one from the biggest asset manager in the world, sent Bitcoin's price skyrocketing past 30,000, a 7% move in a matter of minutes. Now, importantly, the tweet did not give any sources. And despite hundreds, if not thousands of people gleefully sharing the news immediately after, none of them had the source. Alas, within an hour, it became clear that the news was indeed fake, and Bitcoin collapsed back down to $28,000. The SEC continued its campaign of snark, tweeting, careful what you read on the internet, the best source of information about the

SEC is the SEC. Now, in the evening, Coin Telegraph published their apology. They claimed that they had published the news based on a tweet containing a screenshot which claimed to be from a Bloomberg terminal. It seems likely they are referring to a message posted to a telegram group which was uncovered throughout the day. The telegram user was anonymous and deleted their account shortly after the post. Coin Telegraph released screenshots of their internal chat log, which showed staff quickly identifying that the report was incorrect. Cointelagraph said that the post had violated their social media procedure and claim that the outlet would be, quote, thoroughly auditing and reviewing our social media management process. Now, the community was not particularly excited about their

explanation. Investor Mike Dutas said, an absolute dumpster fire response from Coin Telegraph after botching the Bitcoin ETF news. Cryptosecurity expert Taylor Monaghan said, you can be an influencer, you can be a personality, you can be a PR agency, you can be an ad network, you can be a meme queen, you can be a pump and dumper. Honey, you can be literally whatever you want, so long as you do not present that BS as effing journalism. Now, the reason that people were a little huffy about this is that across the entire move,

over 100 million in Bitcoin derivatives positions had been liquidated. Indeed, some noted that there had been a large amount of accumulation on Sunday night and Monday morning, which some saw as evidence of preparation for the event. The biggest concern that many had is that this might negatively impact those Bitcoin ETF approvals that the SEC was considering. Anthony Sasano tweeted, Gary Gensler getting ready to deny all the ETFs by citing this fake news incident

as evidence of how easy it is to manipulate the crypto markets. Before Coin Telegraph's explanation, Adam Cochran wrote, I look forward to them providing documentation on where that report came from because they just massively hurt the chances of real ETF approval and or blatantly scammed people. Others, however, were quick to point out that it didn't exactly work that way. Jeff Dorman, the CIA of ARCA, responded to Adam and wrote, Incorrect. The market manipulation that the SEC has historically referenced has nothing to

do with a rogue media outlet inaccurately reporting news that people and bots then trade on. It doesn't matter what asset class you're trading. Erroneous headlines create whipsaw price action. There's plenty of precedent here in other asset classes. In 2013, the AP Twitter was hacked and a headline said the White House was attacked, caused hundreds of billions of losses in equities in debt. Finance lawyer at Davis Polk Scott Jop. Johnson explained even further. On the suggestion that today represents heightened risk the SEC may further deny based on fraud and manipulation, can't emphasize more how dead and buried that line of thinking is, cremated in six feet below ground in an undisclosed location, never to be seen again. Even if you assume

the worst facts, someone specifically attempted to manipulate prices in a very obvious way to promulgate fake news, the argument will still not be presented as a basis to deny. This would represent a defiance of the DC Circuit Court ruling. Now, what he meant is, is that the circuit court ruling wasn't that there was no fraud of manipulation in the Bitcoin markets. It's that there wasn't any difference in spot markets as compared to futures markets which are already approved. The standard isn't about getting markets to zero fraud of manipulation. The standard is around surveillance sharing agreements and the ability to detect manipulation, so this shouldn't be material to the applications. Still, it's hard not to feel like there was some

narrative damage done. Scott Melker tweeted, Imagine you are sitting at a hedge fund or other real institution, and you see the this complete nonsense. You see Bitcoin pumped $2,000 on likely fake news. Then you see a retrace entirely. Do you think you want to be a part of this market? Embarrassing and infuriating. Now, Melgar wasn't the only person, it seems, who felt like this was enough of a deal to actually make a comment. In fact, after the dust had settled, BlackRock CEO, Larry Fink made an appearance on Fox business to comment on the events of the day. He claimed that the Bitcoin rally went, quote, way beyond the rumor. He said, quote, it's an example of the

the pent-up interest in crypto. We're hearing from clients around the world about the need for crypto. Indeed, he went on saying that his argument was that broader geopolitical uncertainty was driving a, quote, flight to quality. Alongside mentioning treasuries in gold, he added that, quote, I believe crypto will play that type of role as a flight to quality. Now, even though Fink has spoken positively about Bitcoin specifically, in the recent past, this still was quite a surprise to many industry watchers. Dan McArdle tweeted, I really didn't foresee Larry Fink of all people becoming Bitcoin's marketing department, pushing it as a flight to quality due to difficult geopolitical times, but here we are. Framework Ventures co-founder Van Spencer wrote, surreal, Larry Fink talking about

crypto as a flight to quality. Now for all of you, Bitcoiners wondering why he said crypto and not Bitcoin, even though they have a Bitcoin ETF application, Brad Mills shared a clip that he said explained why he used crypto instead of Bitcoin, which was Larry literally explicitly saying that because of this application, he can't speak to Bitcoin specifically, but he can talk about crypto more broadly. James Seyfart and ETF analyst at Bloomberg said, this is still weird to me. Look, all I mean is, if you came to me six months ago and told me that Larry Fink will do multiple national television appearances where he preaches about the virtues and benefits of Bitcoin and Crypto more broadly, I probably would have laughed at you. Well, Clemente got right to the point saying,

if you think Larry Fink's shilling Bitcoin on live TV is cool, wait until BlackRock's entire army of financial advisors is doing it. It was a really interesting day new ma on what was a fascinating little episode, and I think Alex Kruger has the right of it when he tweeted, One thing is for sure, whoever thinks the ETF has already priced in has just been proven wrong. Expect a 20% plus day move when it's approved. Today's episode is brought to you by Cracken. For far too long, the whole financial system has been standing still, too slow, only on for certain hours, overly designed for some types of people, but not for others. Crypto, at its best, represents progress.

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Learn more at cracken.com slash the breakdown. Disclaimer, not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures Inc. PVI, BVI, DBA, Crakken. Staying on the SEC theme for just a moment, ARC-invest founder Kathy Wood thinks the problem at the SEC when it comes to crypto is entirely about Chairman Gary Gensler. Speaking on a podcast earlier this week, Wood discussed the ongoing difficulties with

getting crypto-etiffs approved. She said, for me, the disconnect is, SEC staff know so much, and they are so good that I believe this was much more Gary Gensler standing in the way. I don't know for sure because they could never say something like that. I just know from how we have discussed Bitcoin with them that they really understand it and they understand its merits. Now, Wood agreed with the court's ruling in the Grayscale case that the decision to approve futures-based ETFs while holding up spot-based ETFs was baffling. She continued, why he allowed a Bitcoin futures ETF which involves counterparty risk, and not a Bitcoin ETF which does not involve counterparty risk? In fact, ours would be backed by Bitcoin one-for-one

in cold storage at Coinbase. That's why Grayscale won its case. It is that argument. Now, Wood was hopeful that Gensler's obstinence has finally become untenable, adding, I think Gary Gensler's personal Vietnam is coming around to haunt him. I do think the SEC is moving now. Kathy also repeated her thoughts that a single approval is unlikely and that she expects the SEC to approve a batch of ETFs all on the same day. That would align with what we saw earlier this month with the recent simultaneous launch of multiple Ethereum futures ETFs on the same day as well. Eric Balcunis, the senior ETF analyst at Bloomberg, called this notable non-fake news. Basically, he said that the fact that Kathy Wood was saying that SEC staff got it and that

Gensler was standing in the way was, quote, notable because Gary has started saying he looks forward to staff's recommendations in public settings. So positive Kathy thinks the staff think it's okay. All this is why our odds are up to 90% by January. Now, staying in the realm of regulators in compliance for a moment, Genesis Lender and two sister companies have been ordered to comply with a subpoena related to the SEC's lawsuit against Luna ecosystem creator Terraform Labs. Genesis was originally given a deadline of October 9th to produce documents related to the case. The judge's order stated that no documents had been produced so far.

Genesis will now have five days to produce the documents under subpoena. Now, the information sought from Genesis isn't contained in the case. court order. The subpoena was issued by Terraform rather than by the SEC, implying that it is likely related to trading activity surrounding the failure of the Luna ecosystem. Some suggested that Terraform may be seeking information related to loans issued by Genesis to now bankrupt trading firm Three Arrow's Capital, which had exposure to the Luna collapse. Now, so far, the SEC has had difficulty getting to the bottom of the Luna collapse. Terraform Labs co-founder Doe Kwan remains locked up in Montenegro on charges of traveling under false documents and has therefore been unavailable to give evidence

in a deposition. The judge overseeing the case insisted that some way of interviewing Kwan should be figured out, but has so far been unable to pin down arrangements. He noted in a September order that, quote, the laws of physics do not make it impossible for him. Now over in a different jurisdiction, Binance has stopped accepting new customers from the UK in compliance with new marketing rules. Under the new regulations, crypto firms are required to authorize their advertising materials using a domestically registered entity. Binance had attempted to partner with a local peer-to-peer lending firm called Rebuilding Society, but the UK Financial Conduct Authority nipped that plan in the bud last week. The FCA said that Rebuilding Society was not authorized to sign off on crypto ads,

leaving Binance with no option but to refrain from onboarding new UK customers. A Binance spokesperson said, we are working closely with the FCA to ensure that our users are not harmed by these developments and are looking to find another suitable FCA authorized firm to approve our financial promotions as soon as possible. End quote. Now, existing customers will be able to access services if they've completed the investor declaration and appropriateness test, which is another branch of these new regulations. Still, these customers will be unable to access additional services for the time being, such as margin lending or derivatives trading. Autism Capital tweeted, Binance says they're no longer accepting UK users. The circle continues to tighten around CZ's

empire in a post-FTX world. Gabe Shapiro, the general council at Delphi Lab, said, it's not just CZ. UK's new crypto rules are very tough to comply with. On the other hand, Steve Krowke wrote, no more Binance accounts in the UK then. Looks like regulated crypto is here to stay, and I guess it's all about to pay off for those exchanges that chose to play it by the books in the end. Now, speaking of FTX, tomorrow I am doing a trial update that will include both testimony from former BlockFi CEO, Zach Prince, from last week, as well as from the testimony of head of engineering, Nasad Singh, who has already pled guilty to a variety of charges. Still, on the bankruptcy front, on Monday, the FTX bankruptcy team announced a settlement

proposal for customer clawbacks. Customers who withdrew funds worth less than $250,000 during the final nine day of operations would make no repayment and would be free to retain their funds. Customers who withdrew more than $250,000 within the nine-day period could settle clawback claims by repaying 15% of the withdrawn funds. Customers who had insider knowledge about the insolvency or who modified their KYC information to facilitate withdrawals would not be eligible to accept this settlement. FDX did not provide an update on how much customer creditors could expect in a final payout, but noted that they, quote, anticipate that customers of both exchanges will not be paid in full. They said that they expect that non-customer creditors

will incur a larger percentage of losses than customers. The current plan is still subject to approval by the court and creditors committees, and if approved, the estate anticipates that 90% of assets could be distributed by the middle of next year. Now, while generally, customer clawbacks aren't seen as a good thing and they introduce all sorts of new challenges and risks, this news has been greeted widely as a positive development. Ikega's Travis Kling wrote, big update on the FTX bankruptcy. Debtors waiving customer clawbacks for withdrawals less than 250k in a 15-day window. Withdrawals over 250K can settle for a 15% haircut. Biggest deal about that 15% settlement offer is it implies 85% plus recovery. First time we've seen that number put out there

implicitly or explicitly by the debtors. That's a big number and it likely gives little to no credit for FTX 2.0. Great news. Now lastly today, a little bit of drama over at Uniswap. Uniswap Labs, which is of course the firm behind the decentralized exchange, has begun charging a 0.15% fee on trades involving Ethereum, USDC, and some other tokens. The fee will be different to the existing protocol fee, which is controlled by governance token holders, although that has not been distributed to them to date. This separate fee will be collected directly by Uniswap Labs, which they state is an effort to, quote, sustainably fund our operations. Only swaps that execute through the Uniswap front end will pay the fee. Now, there has been some controversy and it relates to perceived hypocrisy

on the part of Uniswop Labs. Specifically, governance token holders have often agitated for protocol fees to be distributed as a way of returning value to the notional owners of the protocol. Uniswap labs have sometimes been viewed as standing in the way of that choice, claiming that distributing fees could put the governance tokens at risk of being labeled an unregistered security by regulators. Uniswop founder Hayden Adams pushed back on criticism in a tweet, saying, this interface fee is one of the lowest in the industry, and it will allow us to continue to research, develop, build, ship, improve, and expand crypto and defy. It really first feels trying to dig into the conversation here, that the outrage is less about them taking this

fee, and more about broken promises. Eric Connor tweeted, so let me get this right. Uniswop launches uni, and an original launch post hypes a fee switch that gets people excited. Uniswop VCs, tied closely to labs, continue to make sure fee switch doesn't happen. Then Uniswap Labs enables a fee for themselves? Cryptotrater John says, the fee switch is never getting turned on, but instead they'll take their own separate 0.15%. Absolutely comical. This plus KYC hook. means uniswap is getting replaced as the default decks next cycle, in my opinion. There'll be room for actual competitors. Let me just say right now that I think defy drama is going to be a big part of the next cycle,

both here and in the regulatory sphere. So, hey, maybe we're just getting prepped for that to come. For now, that is going to do it for today's breakdown. Thanks one more time to my sponsor, Cracken. Go to Cracken.com slash the breakdown and see what crypto can be. And thanks, of course, to you guys for listening. Until next time, be safe and take care of each other. Peace.