The Breakdown - Michael Saylor Celebrates Bitcoin Whitepaper Day with $42B in BTC Buy Plans

Episode Date: October 31, 2024

It's been 16 years since Satoshi Nakamoto dropped the Bitcoin Whitepaper. This year, Bitcoin is in it's longest period about $70,000 in its history; a new faketoshi has emerged; and Saylor won't stop buying BTC. Unlocking Bitcoin DeFi with ExSat The exSat Network aims to unlock and scale the Bitcoin ecosystem without compromising Bitcoins Ideology. The network has partnered with the largest mining pools in the world, major custodians and exchanges, BitTrade, Cubolt, Matrixport, Everstake, OKX and aims to have over $200M TVL at mainnet launch on the 23rd of October. Follow exSat’s Twitter to stay up to date @exsatnetwork or visit the testnet exsat.network 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 Thursday, October 31st, and the identity of Satoshi has been revealed. But not really. 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. pod. Well, friends, happy Halloween and happy Bitcoin White Paper Day. Today is exactly 16 years since the Bitcoin White Paper was published, which to me feels like, I don't know, the best opportunity

we've ever had for a new all-time high on White Paper Day, although it doesn't appear that we're going to get that. Bitcoin spent all of yesterday stuck in a tight range. The lowest it got was 71,300 shortly after the stock market opened in New York. The highest it went with 72,900 right at the close. overnight trading had an even tighter range hovering a few hundred dollars above 72,000. Nothing is moving in the anticipation builds. This is now the longest Bitcoin has traded above $70,000 in history. Byzantine General remarked on how bizarre this moment is, tweeting, Bitcoin is basically at all-time high and Perp's funding is flat.

If you had told me a year ago that funding would be neutral at all-time highs, I wouldn't have believed you. The ETFs put in another monster day, recording 890 million worth of inflows in total, which was their second largest on record. Black Rock was responsible for $872 million of that on their own, which is a new record for that fund. Weekly net inflows are already above $2 billion and yet the price is completely stuck. At the time of recording, we actually had gone down a little bit, but we're still over $70,000. The price action is a little reminiscent of the end of 2020 when Bitcoin spent three weeks

ranging between $16,000 and $20,000 before finally breaking out. Now, speaking of Satoshi, the thing that I was joking about in the intro today was that earlier this week, I got a press release from PR London Live that was titled Satoshi Nakamoto to reveal legal identity on October 31st, 2024. After a decade of speculation and mystery, it says, the world will finally learn the true identity of Satoshi Nakamoto, the elusive inventor of Bitcoin and the foundational blockchain technology. On this momentous occasion, Nakamoto will reveal his legal identity in a live press conference marking a historic event in the cryptocurrency landscape. The comment that I shared this on X with pretty much sums up my feeling, which was

WTAF is this, and indeed, it wasn't a particularly compelling reveal. BBC News cyber correspondent Joe Tidy wrote, I'm at a London event billed as the unveiling of the true legal identity of Bitcoin inventor Satoshi Nakamoto, a nod set up to the press conference as the organizer asked me to pay 500 pounds to attend and appear on stage to ask questions of the billionaire mystery man. Joe continued his thread, organizer Charles Anderson takes the stage, said he's only had two hours of sleep in 48 hours since they announced this event, been bombarded with calls from all over the world. He also claims to have invented energy recovery systems in cars, and the show Britain's got talent. Joe continues, someone from the prestigious frontline club where this event is being held,

has interrupted to insist that Charles makes it clear that this is not unaffiliated or endorsed event for the club. A reporter has walked out. And finally, we get to the reveal. Joe writes, a man named Stephen Mala has taken to the stage. He claims to be Satoshi Nakamoto. He's claimed this before and is currently in legal disputes about it. He will now provide evidence, he says. Next tweet, Satoshi, quote unquote, and his organizer cannot get their laptop working so are doing the event offline for now. Mr. Mullah is explaining his background and says he is an economic and monetary scientist. He says he previously tried to out himself as Satoshi in 2016, but someone stopped him. Journalists, including myself, have interrupted Mr. Mullah's long backstory and asked for him to show

the promised evidence. Been here nearly an hour and people are restless and increasingly rude. Mr. Mulla's cheek is twitching rapidly as he stares down. a skeptical crowd. Mr. Mala is now showing a series of easy-to-fake screenshots. I asked if he will move some of the Genesis Bitcoins to finally prove he is Satoshi. He said he will in the next few months. I have left the conference. This episode of The Breakdown is brought to you by X-Sat Network. As regular listeners know, one of the things that I think is really exciting right now is all of the new builder energy around Bitcoin, and X-Sat Network is a great example of that. XAT Network utilizes a combined consensus mechanism of POW and POS, enabling miners to earn

revenue and stakers to earn Bitcoin yield. Their state data index mirrors Bitcoin UTXO data, creating a venue for BTCFI to flourish and a platform to trade Bitcoin assets. ExSat Network partners with MatrixPort committing 5,000 to 10,000 NBTC to the network, assisting data, assisting security. Ultimately, the goal is for XAT Network's decentralized asset custody to enable you to earn Bitcoin yield without sacrificing security or transparency. The X-SAT network aims to unlock and scale the Bitcoin ecosystem without compromising Bitcoin ideology. Check out X-SAT.network or follow X-SAT on Twitter at X-SAT Network, that's EX-S-A-T-N-E-T-W-RK, and unlock Bitcoin Defi with X-Sat.

Moving back to the realm of the real, Micro Strategy announced plans to raise a massive $42 billion to buy more Bitcoin. During yesterday's earnings call, MicroStrategy unveiled what they're calling the 2121 plan. They plan to raise $42 billion over the next three years, split evenly between stock sales and debt issuance, $21 billion each, hence the name. The company reported 252,2,2 220 Bitcoin in their treasury at the end of Q3, around $16 billion worth. That means the plan is almost three times the scope of their previous Bitcoin acquisition strategy. Now, the traditional side of micro-stratage's earnings were fairly blazze. The company reported quarterly sales of $116 million, a 5% miss on the consensus estimate. Revenue was down by 10%.

Now, from the start, Saylor has been clear the software company as a zombie, so none of this should come as a huge surprise. On the Bitcoin side, MicroStrategy hammered their preferred metric of Bitcoin yield yield. The company increased their Bitcoin holdings by 11% over the past quarter for a 17.8% Bitcoin yield year-to-date. Micro Strategy set their Bitcoin yield target for the next three years within a range of 6 to 10%. Getting started on their plan immediately, the company announced the entire $21 billion worth of stock sales would be issued immediately and available to sell as a shelf offering. This means they can sell stock into the market in reaction to conditions rather than trying to time the market with smaller offerings. Presumably,

the entire $21 billion will take quite a while to sell, but stranger things have happened in Bitcoin world. CEO Fonglei said, Q3 was another pivotal quarter for us. Our focus remains on leveraging digital assets to drive shareholder value, and our 2121 plans sets a clear path for future growth. Shares dropped by 10% in aftermarket trading immediately after the earnings report was issued, but the dip was quickly bought up. Interestingly, this sort of felt like the first earnings report of the Bitcoin financial era. Micro Strategy has been using Bitcoin as a balance sheet tool for more than four years at this point. However, their Bitcoin-focused financial metrics are now getting more refined and being placed front and center for investors. This feels like an evolution in the strategy

where Bitcoin yield is more important than Bitcoin price appreciation. They seem to be positioning themselves for an era where they aren't the only company acquiring Bitcoin, but rather the best company at acquiring Bitcoin. Sailor himself hammered this point during their earnings call, stating, in order to create a company like ours, you're going to have to actually go 100% all Bitcoin. And how do you do that at our scale? We shouldn't just be valued based on our Bitcoin reserves. The real issue is what are the opportunities for us as a Bitcoin Treasury company? The second big takeaway is that the 2121 plan is simply gargantuan. For the next three years, whether the market is up or down, Sailor is going to be in there buying Bitcoin.

This kind of financial guidance is something that micro strategy has been lacking in the past, but really help drive outside's returns this year. The stock is currently priced at 2.7 times premium to the value of their Bitcoin. Investors have had to guess how to price some indeterminate amount of Bitcoin buying and future price appreciation. For the first time, though, Microstrategy has articulated a goal to grow into that valuation, which will allow the company to better fit into valuation metrics. Lekker Capital founder Quinn Thompson, who has been pounding the table on micro strategy for over a year, tweeted, Sailor does it again. By ripping the Band-Aid off and announcing a massive at-the-money shelf offering like this, they're turning Micro Strategy into a de facto

ETO ETF. Now, instead of waiting for big premium spikes before issuing converts, they can constantly issue shares via twop and capitalize on day-to-day movements. Benefits, one, smooths the Bitcoin purchases over time so they aren't just buying tops that coincide with the premium rising. Two, increases the market cap of micro-strategy so they can get into passive indices. Three, once number two is completed, they will benefit from the constant passive flows into equity and can simultaneously issue shares into that bid. In other words, this turns the equity into another de facto Bitcoin ETF vehicle, and once they are added to passive indices, that essentially adds the Bitcoin ETF to those passive flows. People are underestimating how bullish this

micro strategy announcement is for Bitcoin. Sticking with micro strategy for a moment, traders are flocking to lever up to get more juice out of their micro strategy bets. Earlier this year, a pair of leveraged micro strategy ETFs were launched, one offering 1.75% exposure and another offering 2x leverage. Bloomberg senior ETF analyst Eric Balcunis remarked on how well these products are performing, tweeting, T. Rex's 2x microstrategy ETF launched a mere six weeks ago and is already up 225% an equivalent of 57,000% annualized. Trades half a billion in volume among top 1% of ETFs. Has a billion in AUM, more than the first-to-market 1.75x micro-strategy ETF.

Just a little bit of extra juice made that big of a difference. He noted that the pair of funds are now seeing as much volume as the gold ETF or IBM, adding, it's so funny, they've had 3xMSTR ETFs in Europe, but no one cares, no assets, no volume. It's not that market for that amount of heat. No D-Gens. The U.S. on the other hand, it's make it volatile and they will come. In contrast to micro-strategy, coin-based stocks slumped on the back of soft earnings. The exchange reported Q3 revenue of $1.2 billion, a slight miss on expectations, and a 17% drop

from Q2. Earnings also came in a little week at $449 million, again a small miss. The company acknowledged softer market conditions in their letter to shareholders. However, they noted average growth across their staking, stable coin and custody divisions, which would help diversify revenue over the long run. They also cited 55% quarter-on-quarter growth in transactions on base, as early validation of their still tiny on-chain strategy. The core business of charging transaction fees on trading was the main issue, with a 27% quarter-on-quarter drop. Coinbase blamed a lack of volatility in crypto markets,

which they said was down 5% on average in Q3. The stock fell by 6% and after-hours trading once the report was released, bounced slightly and then trailed off into the night. Ultimately, earnings weren't a disaster. They just lacked any real pop. Ibida earnings were down slightly quarter-on-quarter, but still well above the dismal results in 2023. The big news from the earnings call is that Coinbase will begin their first major stock buyback program. One billion dollars will be used to repurchase shares with timing based on market conditions. The company has managed to accumulate $8 billion in cash equivalence on their balance sheet, including a $400 million cash boost over Q3. Buybacks can sometimes be a sign that a growth company is running out of ways to invest internally,

but this seems more like a normalization to the way large U.S. companies operate. Coinbase CFO, Alessia Ha, said, We are being more strategic with our capital and look to create an opportunity to return this capital through repurchases. More quick stories from the earning session. First, Reddit has dumped their crypto holdings. According to their quarterly financials, the firm sold most of their Bitcoin and Ethereum in Q3. They noted that the quote, net-carrying value of our cryptocurrencies, as well as the gain recognized on sale, was immaterial for the periods presented. In other words, Reddit only owned

around 6 million of crypto assets, and it was never a substantial part of their balance sheet. To the extent that the sale matters, maybe it's important for symbolic reasons. Reddit originally bought the crypto assets for use by their product and engineering teams, presumably as part of testing to launch crypto-related products. The website did bring multiple crypto products to market, most notably NFT avatars that traded on the Polygon blockchain. This could therefore be read as the end of an era that never truly began. Robin Hood, meanwhile, also had earnings that were a big miss sending the stock tumbling 11% in after-hours trading. However, there was a solitary bright spot, a thriving crypto business. Robin Hood reported 112% growth in crypto volume

year-on-year, compared to 65% growth for stock trading. Crypto trading revenue was up 165% from last year, now representing one-fifth of transaction-based revenue. The quarterly change in crypto revenue was a little soft, down 25% since Q2. Generally, the crypto business has slowed down substantially from Q1, but it's still much larger than it was at the end of 2022. All in all, to sum up, one thing that is notable about this is that we're now officially in a period where when it's earning season, there are a slew of traditional market companies that we have to discuss because of their interaction with crypto and Bitcoin. Sign of the Times and something that it might have even been hard for Satoshi to imagine 16 years ago when they pressed send on the white paper. That, friends, is going

to do it for today's breakdown. Appreciate you listening as always. And until next time, peace.