The Breakdown - Michael Saylor’s Mission to Get 1,400 Corporations Into Bitcoin

Starting point is 00:00:00 You should be excited but also skeptical. You should watch what people do rather than what they say. And you should always try to game out what's being said to understand where the motivations are and what the potential second order consequences might be. We're entering into one of the wildest times in the history of Bitcoin and it's only getting started and it's going to get crazier from here. Welcome back to The Breakdown with me, NLW. It's a daily podcast on Macro, Bitcoin.

Starting point is 00:00:30 coin and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io and produced and distributed by coin desk. What's going on guys? It is Wednesday, February 3rd, and today we're talking about Michael Saylor's mission to Orange Pill 1,400 corporations. First up, however, let's do the brief. First on the brief today, an update on the aunt Jack Ma situation. So, quick background. I've discussed this on a couple of shows now, but last fall, China at the very last minute, canceled Ants IPO after Jack Ma, the founder of that company, made some statements that they did not like. For the next few months, Jack Ma did not appear in any media. He even canceled his appearance on a TV show that he had been hosting. People were fearing the worst. There

Starting point is 00:01:25 were all sorts of crazy rumors flying around. Last week, he resurfaced, much to the delight. of markets. Although, as I mentioned then, in a very minor way, he appeared for less than a minute on a live stream about teachers. But either way, today we got a little bit more information about the company in question, the Ant Group. The Ant Group will be combining all business segments, including its blockchain arm, into a financial holding company which will have bank style capital requirements. This is the agreement they've come to with the Chinese government. and effectively what it does is it makes a fintech company regulated much more like a bank. In other words, the Chinese government gets much more visibility into their operations.

Starting point is 00:02:10 Markets are at least happy or relieved that it looks unlikely that Ant will have to spin out part of their operations, which was one of the potential scenarios. I think that Ant is one of the clear battle lines around how the Chinese Communist Party is going to interact with business in the years going forward. so I think it's important to keep an eye on. Next up on the brief today, a story about another massive tech company, although this one a little bit closer to home in the U.S., Jeff Bezos is leaving the CEO role at Amazon. He's moving from CEO to executive chairman and will be replaced by Andy Jassy,

Starting point is 00:02:46 who's currently the head of Amazon Web Services. On the one hand, this is super weird feeling. Bezos is Amazon in the way that Jobs was Apple, or at least that's how many. of us see it. A Bloomberg piece makes the point, however, that Bezos has a lot of other interests that are sort of languishing or even actively interfering with one another. The Washington Post has impacted his Amazon business negatively more recently, for example, being snubbed with certain political leaders. The treatment of workers in Amazon factories is impacting his legitimacy with his philanthropic efforts. And of course there's his space-focused company Blue Origin, which, despite being a couple

Starting point is 00:03:25 years older than SpaceX, seems super, super far behind. That one may just simply require more of Bezos' time to actually get to the place that it needs to be. There's also the next set of challenges that lie ahead for Amazon. This next stage of revenue is even harder, and there's very, very few people in the world who have ever had to deal with companies this big. There also could be serious regulatory headwinds. While Amazon has somehow, mysteriously to me, stayed out of the political firing line, I don't think that's likely to last forever. And it could be that Andy Jassy presents less of a juicy target than the founder and embodiment of the company might. Finally on the brief today, Miami is making a play to be America's new crypto capital. So just a quick update on Miami, I did a show a few weeks ago explaining Mayor Francis Suarez's explosion onto the national scene view.

Starting point is 00:04:21 at Twitter, his attempts to make Miami a destination for not just the tech industry, but the crypto industry specifically. We're now getting more color on what his strategy is actually going to be vis-a-vis Bitcoin and crypto. According to Twitter and a recent interview with CoinDesk, he's been learning a lot about the rules in Wyoming. He's actually talked with people like Caitlin Long, and he plans on unveiling a set of rules that would make Miami a sandbox as early next week. He said, we want to make sure that there is no city or state that has more favorable laws and regulations. Indeed, he's made it clear that there's some things he can do as the mayor, but he's also doing a lot of advocating on a state level. In his own backyard, he's looking

Starting point is 00:05:03 into Bitcoin payments for municipal employees, and he's also looking to allow residents to use Bitcoin and crypto for other payments and fees. Finally, he said that while he doesn't hold Bitcoin yet, he's going to be making an announcement on that front soon. And with this, That lets transition to our main discussion, micro strategy, and Michael Saylor's mission to Orange Pill 1400 corporations. For years and years, there was a narrative around Bitcoin that as soon as the institutions came, the whole industry would be taken to another level. I remember when backed was announced in 2018, many called it the biggest news of the year.

Starting point is 00:05:42 This was a crypto-focused company that was backed by the intercontinental exchange, the same company that owned the New York Stock Exchange. Still, 2018 and 2019 came and went, and with a few notable exceptions, those institutions just didn't come. Indeed, the most notable exception was Fidelity Digital Assets, whose CEO Abigail Johnson had been exploring Bitcoin for years and years, who boasts notable alumni like Nick Carter and Matt Walsh, who went on to start Castle Island Ventures, and who are currently doing just a ton in the Bitcoin space from custody to research to venture investment through their Avon arm. So Fidelity has obviously been a pioneer, but as I said, kind of an exception proves the rule sort of thing in 2018, 2019. 2020, however, was when things

Starting point is 00:06:30 finally came to fruition. COVID-19 triggered a massive monetary and fiscal response from countries and central banks around the world, and big investors started to connect the dots between a rapidly increasing money supply at the end of a long-term debt cycle and saw only troubling issues ahead, rising taxes, more government intervention in economies, and of course, the potential for more inflation. In May of last year, Paul Tudor Jones set off the new secular phase of institutional Bitcoin investment when, in his great monetary inflation paper, he discussed why his team was actually really impressed with Bitcoin as a store of value. Now, this was just the beginning of a wild year of new entrance into the market that, as we've seen,

Starting point is 00:07:15 has catapulted Bitcoin from its years of under 20,000 to the over 30,000 price tag that seems at least currently to be something of a price floor. Now, it's pretty clear to everyone observing that this current rally is being driven at least in part by institutions. But if they are really such a force, we'd probably do well to break apart what we mean when we say institutional investors. This is actually a huge spectrum that have different risk appetites, different pools of capital available and just different characteristics that make them kind of hard to lump entirely together. The first group that we heard about coming to the Bitcoin space last year were the hedge fund folks. Paul Tudor Jones, a little later in the year, Stanley Drucken Miller.

Starting point is 00:07:58 And to be honest, this group, alongside just general high net worth individuals, was always going to be the most likely to come in. They have more autonomy over their money. They're supposed to be in the business of making unorthodox bets. so it did seem like a place where if there was going to be an infiltration into the quote-unquote institutional space, it was likely to start here. In the fall, however, we saw some more interest from perhaps unexpected sources. Mass Mutual announced that they had made a $100 million Bitcoin investment from their general account facilitated by Nydig, who they also made a $5 million

Starting point is 00:08:34 direct investment in. While this was a very small overall portion of their assets, It's obviously still a pretty significant chunk of change given the size and profile of Bitcoin. This is also especially the case in the context of, one, the general risk profile of insurance funds, which is extremely risk adverse, and two, the overall size of that category of companies. The general accounts of major insurance funds in the U.S., Europe, and Asia actually have more money on their balance sheets than central banks do. The opportunity that more of that money might make its way into Bitcoin is pretty under. unbelievable. The fact that some portion of that money could be in play for Bitcoin could have a

Starting point is 00:09:15 pretty dramatic impact on the industry. But of course, there was another group, which was corporate treasuries. In August, news broke that a tech company called Micro Strategy was potentially moving $250 million of its cash reserves into Bitcoin. By September, the final number was over $400 million. And over the next few months, the man behind that move, Michael Saylor, rose to prominence as one of Bitcoin's most powerful new evangelists. One of the colorful metaphors he used on this podcast and others was that as he watched monetary policy evolve in COVID times, it felt to him that leaving his company's reserves in USD was akin to sitting on a giant melting ice cube. A little while after the micro-strategy announcement, Square became the next big public-traded company to move

Starting point is 00:10:04 their reserves to Bitcoin, putting $50 million worth into BTC. There have also been a number of other smaller publicly listed companies to follow mostly in the crypto space and many more in the private sector. You can actually follow all of this by going to Bitcointreasuries.org. And by the way, Michael Saylor and Micro Strategy have continued to accumulate. We got another announcement yesterday that they had bought 10 million more. At this point, they've bought $1.145 billion worth of Bitcoin. Many investors want to be a part of the next bull run. Others seek to build their dream home, finally launch that startup or fund their education. Try Nexos instant crypto credit lines and borrow against any major cryptocurrency with no minimum or maximum withdrawal amounts, no fees whatsoever, no credit checks, and flexible repayment.

Starting point is 00:10:55 Not to mention the APR starts at just 5.9%. Stay on top of your investment game with nexo.io. And remember, it's your crypto, your credit, your choice. Get started at nexo.io. The question is, why might this corporate treasury movement matter? First, it is, of course, validation of the store of value digital gold thesis of Bitcoin. Second, it could represent a potentially massive new source of demand. We've already seen significant price gains as institutions have come in with their larger allocations.

Starting point is 00:11:31 Having mainstream corporate America shift even a small amount of balance on mass, to Bitcoin could make it a multi-trillion dollar asset class incredibly rapidly. That said, up until now, it's been very much a vanguard of companies like Micro Strategy and Square. To go mainstream, this strategy would really require a lot more dominoes to fall. Right now, we have some individual outliers. To become a real trend, more companies would have to follow suit. Well, today we get a little preview of the state of where corporate heads are at as it relates to Bitcoin Treasury Strategies. For the next two days, Michael Saylor and Micro Strategy are hosting an event called Bitcoin for Corporations. They've said that over 1,400 corporate

Starting point is 00:12:16 leaders have signed up to participate, and I want to quickly do a little review of the run of show. Day one, they're calling an overview of Bitcoin corporate strategy and operational considerations. It kicked off with a Bitcoin macro strategy session, which was the one really big rah-rah session, featuring a conversation between Michael Saylor and Ross Stevens, who's the co-founder of Nidig, the co-founder and chairman of Stone Ridge, which is the parent company of Nidig, and if you look on Twitter, you'll see exactly how that one went. The soundbites from Ross are going to be retweeted, memed, discussed for a very long time. After that session, there were a number of additional practical sessions, Bitcoin corporate strategy, corporate playbook, legal considerations, financial

Starting point is 00:13:01 considerations. Their summary of the day said that there were five topics, macroeconomic environment, outlook, treasury, and investment strategy, investing Bitcoin into the balance sheet or P&L of public and private companies, financial operational systems and execution considerations, legal and regulatory considerations, and then accounting tax and audit considerations. One of the most interesting things about the show is that they're actually open sourcing all of their documents alongside these sessions. So to correspond with that programming I just went through, there's a project roadmap. There's micro strategies treasury reserve policy. There's a Bitcoin trading policy. There's contracts for digital asset custodians. There's accounting treatment considerations. These are the real

Starting point is 00:13:44 cheat codes for people in that audience. Now day two, tomorrow is a little bit different. It's a set of strategic vendors and offerings in the marketplace. So basically, big companies that can help corporates get up and running in this space, pitching what they do. It includes Binance, Coinbase, Cracken, Genesis, Grayscale, Gemini, Nidig, Fidelity, Galaxy, and Paxos, and keep in mind that these are not the VPs of business development by and large speaking for these organizations. These are primarily the CEOs of these companies. Presumably, that means they're anticipating an audience of decision makers, people who are high enough up and with enough authority that this might be something real rather than just an interesting two-day diversion from the normal work week.

Starting point is 00:14:31 So what am I actually watching for from this event? Well, there's four different things I'm looking at. First is who shows up. Is it the decision makers that it feels to me like all of these partner companies are hoping? Or is it smaller people? Is it innovation officers? Is it VPs of business development? Is it the decision makers that are going to be there?

Starting point is 00:14:52 Two, where are these companies on their journey? In other words, are they ready to make these commitments and dive in, or are they still figuring out if it's right for them? If we just read the tea leaves of the content presented, it's really not very much about inspiring people to make these moves. It is much more about the blueprint for doing them. Ross Stevens, who I just mentioned helped kick things off with his Bitcoin macro section, is really the only content across the entire two days that's meant to convince people that they should do this versus teach them how they can do this. My presumption then is the expectation of micro-strategy and the team that put this on is that they have an audience who are basically bought in and ready to actually do something in the space.

Starting point is 00:15:37 A third thing I'm looking at is whether we get some juicy announcements designed to coincide with the conference. Will some company in attendance use this as a PR moment to announce that they've gotten involved in the space? We don't know yet whether there will be some corporate announcements, but I certainly know that Bitcoin companies are using it as an account. occasion to show their increased offering. To take one example, Swan is launching Swan Private today. This is a service specifically for corporations and high net worth individuals.

Starting point is 00:16:07 Effectively, Swan is massively increasing its capacity to help these folks get into the Bitcoin space, increasing the load that they can handle on behalf of clients all the way up to one-time purchases of $100 million with no annual limits. Finally, the last thing I'm paying attention to with this event is whether there will be any little numbers or nuggets dropped that suggest the scale of the action among institutions behind the scenes. I'll give you an example from Ross Stevens again at Nidig. He said that they currently have about 6 billion Bitcoin under management now and anticipate $25 billion by the end of the year. Last year, he said they had 25 institutional clients. Today they have 285. That's an 11-bagger for you guys at home. There's also 95.

Starting point is 00:16:52 more in the pipeline. It's going to be an interesting couple days. I'm excited to see what comes out of it, but I do want to point out that it's not the only thing happening in Bitcoin, and it's not just the only thing happening in Bitcoin corporate. Visa Today announced that it has partnered with Anchorage to allow customers at traditional banks to buy and sell Bitcoin. Effectively, it's releasing a set of APIs

Starting point is 00:17:14 that will allow traditional banks to offer Bitcoin services. Their press statements said this would be about easily connecting to the infrastructure provided by Visa's partner Anchorage, a federally chartered digital asset bank, to allow their customers to buy and sell digital assets such as Bitcoin as an investment within their existing consumer experiences. A couple things that are interesting here to me. First, this is Anchorage taking full advantage of that federal bank charter that they got from the Brian Brooks Office of the Comptroller of the currency before he left.

Starting point is 00:17:44 But second, and more important, this is more evidence of something I've been talking about coming down the pipeline, which is the competition to offer infrastructure for traditional banks and financial institutions to offer their customers' crypto services. This is what was enabled by last year's changing OCC rules, and banks are going to want to partner to get it done so they don't get left behind. Visa wasted no time on jumping on that opportunity, but they also coincided it with another announcement. Visa is partnering with five black banks and fintech companies to offer increased financial and business services to the black community. This includes but is not limited to crypto. First Boulevard is a digital bank and the first

Starting point is 00:18:26 to join Visa, and they want to do things like allow customers to put cashback rewards from buying at black-owned businesses into high-yield crypto savings accounts. The cool thing I think about this is you're seeing how this opportunity for traditional financial institutions to get into the Bitcoin in crypto space, based on these changing rules, isn't just going to be limited to offering services to customers who already know they want them, but to actively evangelizing these set of things as wealth-building tools for other audiences. Lastly, though, I want to briefly discuss the new risks that come with these new market participants. On yesterday's show about GME and Robin Hood, I said that it was inevitable that as retail becomes more of a market force, a lot of big fish

Starting point is 00:19:10 are going to try to ally with them. Sometimes I said it will be in good faith, sometimes it will be more of a mooching relationship, and sometimes even if it starts in good faith, things will go sour. The absolute same can be said of these big institutions coming to Bitcoin. By way of example, look no further than Guggenheim's CIO Scott Minard. In December, Guggenheim, a big multi-billion-dollar institution, came out and said that it thought that Bitcoin could be worth as much as $400,000 someday. The problem with this is that Guggenheim also announced that at the end of January slash beginning of February, it would be allocating up to about $500 million into Bitcoin. Well, guess what? Statements like the CIO's statement that Bitcoin could be worth $400,000 contributed to a big

Starting point is 00:19:57 run-up in price. So effectively, these guys telegraphed that they were going to be buying Bitcoin and then doubled the price at which they were going to have to acquire it. Perhaps then it was no surprise that about a month later, the same CIO was back on the cable news stations talking about how overbought Bitcoin was and why it really needed to reset to 20,000. People rightly pointed out that this felt like ass covering more than anything else and didn't really take it seriously. Then on Monday of this week, February 1st, Bitcoin Jack Sparrow tweeted this. He said, I looked into the 14,000 Bitcoin transaction from earlier, split over eight nicely mixed wallets with some outputs going to a bunch of other non-related wallets. 14,466 Bitcoin, which is approximately 500 million. He then tweeted a

Starting point is 00:20:46 photo of this statement. Guggenheim's SEC filing to invest in Bitcoin via GBT, proposed filing would become effective January 31st. Seems Minard wants to buy 500 million in Bitcoin, and as the price runs higher, he's now telling people to take profits. So we don't know if this is exactly what happened, but a couple days ago, it seems like someone, like a Guggenheim, bought about $500 million worth of Bitcoin. And then surprise, surprise. Now this morning we get headlines that the Guggenheim CIO has actually raised his estimate about Bitcoin's long potential and it's not $400,000, but $600,000. The point of all this is, well, specifically with Guggenheim, be very wary of anything coming out of these guys' mouths. But in general, you should be excited but also

Starting point is 00:21:33 skeptical. You should watch what people do rather than what they say. And you should always try to game out what's being said to understand where the motivations are and what the potential second order consequences might be. We're entering into one of the wildest times in the history of Bitcoin and it's only getting started and it's going to get crazier from here. So I appreciate you hanging out and listening. If you're enjoying this show, please give it a rating, a review. It makes a big difference. Until tomorrow, guys, be safe and take care of each other. Peace.

The Breakdown - Michael Saylor’s Mission to Get 1,400 Corporations Into Bitcoin

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