The Breakdown - SEC to Hit the Ground Running on Crypto

Episode Date: January 18, 2025

NLW and Scott Melker discuss the five most important stories in crypto this week. Sponsored by: Ledn Need liquidity without selling your Bitcoin? For 6+ years, Ledn has been the trusted choice for Bitcoin-backed lending. With transparency, security, and trust at our core, we help you access your BTC’s wealth while HODLing. Discover what your Bitcoin can do at ledn.io/borrowing. 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 Friday, January 17th, 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 today, and the themes are very clear. Macro returns to the good, Bitcoin returns to 100K,

and everything is about what happens next week when we get a new presidential administration. Let's dive in. Here we go. Trump plans to designate cryptocurrency as a national priority. Executive order expected to create a crypto advisory council. We knew that Trump allies are discussing stopping federal crypto litigation, which we'll get into later, but literally calling cryptocurrency a national priority.

What does this mean? I think that the question is, so one, you got to love when the breaking news articles on Bloomberg, not like CoinDesk or, you know, one of the crypto outlets,

it just shows kind of how different things are. So there is a flurry of information around what might come with these executive orders. It seems to me, my best read is that, There's a lot of discussion, right? I don't think that this is a question of plans are fixed and

we're just not getting the full story. I think that there's probably a lot in flux right now. We've heard the possibility of, you know, repealing or stopping, you know, existing litigation efforts. We've heard a bunch of different things. One thing that notably we haven't heard is any sort of more rumors around strategic Bitcoin Reserve as a likely Trump priority. I think the question when it comes to this idea of designating it as a national priority. The question for me will be, what does that actually mean? I actually think that that coming out of the Trump administration on day one might be less impactful if it doesn't have some specifics behind it than we would have, you know,

then it would have seemed maybe a couple months ago just because he's so now, Trump is already associated with, you know, crypto. He's already the crypto president relative to market understanding. And so it really has to be. actual action, not just symbolic action at this point. So not that it's not a good thing. Obviously, this is, you know, hyper bullish. But if it's designates crypto and national priority, by which he means point one stops all crypto litigation, point two, you know, creates a special panel to study a strategic Bitcoin reserve, you know, and step three creates incentives for

Bitcoin miners. That's a whole different ballgame. Yeah, there's some conjecture that this could basically be the inverse Biden executive order, right? Obviously, those who remember, we had this Biden executive order saying that agencies should take a deeper look into crypto policy, send him their feedback, and people actually took that as bullish at the time, if we recall, that he was mentioning cryptocurrency and it was a priority. People saying that maybe this is sort of the inverse of that where he says, hey, every agency, take a look and send me your feedback, tell me what you want to do with crypto, but in a positive light. I mean, could be that, again, that would be the more specific it is, the more action aligned it is, I think the more impactful it is.

But listen, I thought there was a meaningful chance that in the swirl of everything else that has to get done, crypto would be more like a week three priority than a day one priority. So if this really is a day one thing or a day two thing, I think that's, that does be volumes all on its own. Yeah, just like to speak to that, we have this is potentially a day one priority. We've seen news that the executive order on SAB 121 could come day one. so whether smoke, there's usually fire. I think crypto will be in the conversation now, and that makes me feel a lot better sleepy at night. Yeah, I mean, listen, Cynthia Lummis tweeted and then tried to tamp down, you know,

it's about to get crazy, don't fall for scams. And people are like, whoa, what do you know? And she's like, no, no, no, I don't know anything. It's like, well, you did this tweet. It's about to get crazy. Yeah, listen, I think that there's an element with all of this of everybody capturing the hype of this moment.

right. And so even if Trump's not mentioning an SBR, she's been leading that charge, so not surprised that she would be trying to hype the idea of that being a first 100-day priority. And listen, I mean, we have the New York Coast running articles that we could get a strategic coin reserve. You know, it's not what it said. But, you know, adding XRP, Salana, Made in America tokens, I don't think Trump really said that. But it just speaks to the fact that anyone who has the opportunity here to get some free PR, on the back of the hype around crypto and politics is taking that opportunity and should. The guy, I think another Trump goes out there and says, hey, I could add salon or XRP or whoever said it from his administration because he wants these people to keep giving him money and support him and keep the, you know, flywheel going. Well, another interesting thing, which I don't think was on our list is, you know, obviously Trump has some very loud tech supporters. Musk has been, you know, all over the place as part of this transition.

he's running Doge, more quiet, but seemingly significant. It appears that Mark Andrescent has basically been living at Mara Lago for the last month. And he's just started to talk about it a little bit. But I think on an interview in a podcast, he said that he had spending like 75 or 80% of his time on the Trump transition. And again, this is totally unannounced and not discussed. And Drison is obviously hugely focused on things like crypto policy, you know, AI and advanced technology. general, but, you know, 816Z is one of the more loud advocates for positive crypto policy. So to the extent that he is involved in actual policy making and decision making, which you

got to think that if he's been there for a month and no one has been really talking about it, he's probably hanging out with the people who are actually trying to craft the executive orders, rather than the people who are trying to make headlines. So that's another detail which suggests to me that maybe there could be more on this sphere than we might think. I was entirely unaware of that. That's really great information to have. The next story has to be the macro. This is kind of where we were going to start before that.

NASDAQ future is jumping 1% as Fed rate cut bets revived. You got to giggle. Of course, Bitcoin rises past 100,000 threshold amid risk rally renewal. This to me, looking at the data that we've had over the last couple weeks, right? We had job data that was difficult to parse. We've had inflation data that was difficult to parse. Is it good? Is it bad?

Is it meeting expectations good or bad or the actual number? And to me, it feels like regardless of what the data actually said, the market was just waiting for an excuse to go back up. These fears, we had yields rising, and everybody's just dying to hit the buy button. And even if they could have someone say, hey, CPI is pretty good, go. I mean, we had Bitcoin from 100 to below 90 back to 100 in like a matter of 96 hours. Yeah, I think that you're right that the market was,

waiting for it, which to me says that the market might have realized that it got, it was getting a little overly pessimistic. And, you know, it had overcorrected for something that wasn't bad news. It was just potentially less clear on the future, right? When it came to, you know, our whole discussion last week was about what these different job reports meant, right? Did they, did they portend more inflation? It was really the big thing. You know, if there were more, you know, jobs were raising at a kind of a higher rate than we thought. That means that not only is there potentially a reason to pause the cutting cycle, you know, does it actually mean that inflation might be stickier than we think and we might even have to put hikes back on the table, right? That was a fear and that sort of

insecurity was driving a lot of the market concern. Then we got the CPI report this week and it was interesting. I mean, to your point, the overall number was up slightly, but the headline CPI was down. It was down for the first time in six months. And I think beyond just the headline CBE being, down, which is obviously a more significant factor for the Fed. They've been very clear on that. We also started to see that, so shelter costs came down, was a big part of this. And or shelter costs didn't come down, but they went up by their lowest rate for some amount of time, basically. And one of the sort of, you know, nuances of the inflation conversation for months has been, does the stickiness of inflation actually reflect stickiness of

inflation or does it reflect the lag specifically in shelter data, which is sort of the hardest to calculate? I think not only did this show headline CPE down for the first time in six months, which is like not only not bad, it was actually positive. It also came from that shelter area, which added credence to the belief that perhaps even some of the previous negativeness was sort of based on a misreading or just a lag of the data. I just diggle because like the fact that we have to say, you know, the belief and the perhaps and it could be, we all know that these numbers are probably going to be revised anyways, but that they're exceptionally hard to calculate and the market is mostly animal spirits.

Yeah. I mean, look, everything for the last, you can boil everything down to is do we think inflation's going to go up or do we think inflation's going to go down and what does that mean the Fed's going do. And so the TLDR is this one pretty clearly set, this gave a bunch in the column of it's probably going to keep going down, which means we get to proceed to pace with all of our fund. Yeah, last week we were not going to cut because of strong jobs. And this week maybe we'll cut because of inflation data. The pricing in of a March rate cut went from zero to 30%. That's kind of all you need to know. That says everything you need to know. Also, I mean, we had 10 year yields just greater.

Yeah. Just for reference, for those who haven't looked at the chart, I mean, it hit basically 4.8%. I think it was on Monday and then just fell off a cliff. But at that point, it was, oh, my God, they're going way above five. We're so screwed. Yeah, one thing that is always the case is we definitely always, whatever is the latest thing that happened is the most important thing that's ever happened or will ever happen until the next thing.

And we kind of behave as such. So that's a good reminder, I think, always to try to avoid over-indexing on any one piece news. If you've been around Bitcoin for long enough, you've heard the term hoddle and the name Leden. Lennon has been the go-to leader in Bitcoin lending for over six years. They help clients unlock the liquidity of their Bitcoin, allowing them to hoddle while still accessing the wealth of their BTC. They've been battle-tested with their focus on transparency, security, and trust, allowing them to build a proven track record of client's success and security. Lettin has helped tens of thousands of clients harness the value of their digital assets, issuing more than $6.5 billion in

loans over the years. But as the crypto industry says, don't trust verify. Check out Ledin's trust pilot or their reviews on social media. And to learn more about what your Bitcoin can do for you, check out leaden.io slash borrowing. That's LEDN.com. Please visit leaden.com legal for product terms and disclosures. Product availability varies by jurisdiction. We have to go right back to Trump. It's still the biggest story and everything's around me. And I have a feeling it will be for a while. And of course, in this case, talking about Scott Besant, who will be confirmed at Treasury. He's going to wind down his hedge fund. Wow, someone from the government divesting their financial interests to become a government official crazy.

That's so like eight years ago to have somebody do that. But yes, he's actually going to do that. I mean, this is his hedge fund. He's going to divest dozens of assets, but including, I believe it was up to $500,000 in Bitcoin Spot ETF. So if there was doubt that this guy is a believer, he owns it himself, and he's also opposed to Central Bank digital currencies, and much more likely to be crypto-friendly as we know. Yeah, I mean, look, the headline here is, home he owns Bitcoin ETFs, a small portion of his portfolio, but it's a small portion of basically everyone like his portfolio if it exists at all, and for many it still doesn't. So it's the signal that he's not.

just giving lip service to it. He's actually put some of his capital into it is real. He's an interesting one. I think relative to all of the other Trump officials, this is a guy who definitely has a point of view on structural shifts happening in the world and how the next generation plays out and wants to have a role. And I think that him fully leaning into this role, right, not hedging a bit, divesting himself of everything, is further reflection of the idea that this for him is not just, oh, cool, I'll go, you know, LARP is a government official for a few weeks until I get fired. It's, this is what he wants to be doing. And he's, he's, he's strapping in to go. He's going to last more than one scaramucci for sure. I think so. Yeah. I mean,

this is honorable mention on the treasury side, but I'm sure you saw this story that Chinese hackers breach U.S. Treasury computers apparently had access to Jeddick Yellen's laptop. Oh my God. We didn't talk about it at all, but have you been watching the memes as, as TikTokers have angrily started downloading this Red Note app, which is actually owned by the CCP? I saw one very enthusiastic young woman talking about going to China and finding a husband there and hoping that they were tall because Red Note was so much read the TikTok, and she didn't because the TikTok was disappearing. It was quite entertaining, but only one. I know. I know. It's a trend.

The memes are hilarious. I mean, holding aside, whatever you think about TikTok and about the generation, nothing could be more quintessentially American than telling the government to piss off by downloading an app from the enemy that they're trying to get, you know, out of their, out of their face. I mean, it's just, it is so, it's the most petulant side of rebellious America. It is hard about to lap at. You want our data?

Yeah. Here you go. But so, yeah, I mean, the takes in even that one video, but the obvious ones, it's just so funny. Like, you know, taking our data of us twerking. Here you go. Americans love to twerk. You got us. So, listen, moving from percent to the SEC, as the next story, obviously, Trump's new SEC leadership poised to kickstart crypto overhaul sources say this, of course, now pivoting to Paul Atkins, likely to be the SEC chair.

but we also know that there will be sort of a period where Gensler steps down. There were only before SEC chairman during that time. Uyeda and Perse, obviously, the two Republicans. And as Atkins is getting confirmed, one of those two, most likely O'Yeda, it seems, will become the acting chairman while he's getting confirmed. But basically already saying they're going to stop these enforcement actions against Coinbase Crackin or any crypto enforcement or at least take a very deep look at them and probably we're not going to see any more of those coming in the future,

which also is hilarious, by the way, in the fact that the SEC decided, or at least it really came out yesterday, that they were going to appeal the ex-RPA decision days before we headed to a new administration that's obviously going to drop these things. Yeah. Yeah, this is a fun one. I think, you know, going back to that idea of we are quickly going to shift from stories of what could be having resonance to stories of what actually is.

is and it being a put up or shut up moment. And this feels like, uh, commissioner person, your way to have been let off the leash to make sure that the moment that Paul Atkins sits down, his desk has 10 proposals sitting there for stuff they should actually do right away and move. You know, it's the collective set of things that, uh, that, that I think that, you know, that set of commissioners, things should have been done or should have been looked at differently. Um, I think that this is very positive and, and will be significantly meaningful in terms of its actual impact. Yeah, they're taking the governor off the crypto industry in the United States, right? I mean, and it's been nothing but antipathy from the government stopping us at every turn.

Choke point 2.0, of course, that's not the SEC, but all these things are going to be lifted. To me, actually, and I've said this before, it kind of puts the onus on the crypto industry to actually put up or shut up as well. Right. Like if we have no more excuses, we have to prove that we're worthy of this limelight and this moment. And so I'm really hoping that we don't go through another period where some scammer or failure or collapse steals the limelight from the things that are actually being built and might have a chance to shine.

Yeah. So the next story we have here, interesting. US government says seized Bitcoin from 2016 and half should be returned to BitFenex. You can see the story here on Twitter. Government says seized Bitcoin should be returned in kind, right? So this is really interesting because, ladies and gentlemen, here's your United States strategic stockpile of Bitcoin, right? We know that the, uh, the U.S. Marshals or the DOJ

has potentially begun selling or intends to sell the Silk Road Bitcoin, but the largest tranche, I believe, left. It's almost 100,000 Bitcoin here is from Bitfinex. If you guys don't remember, this was hacked from Bitfinex. You had Rosal Khan and her boyfriend, uh, basically finally being caught, but the United States government is holding this as if they own the asset. But that, as I've said before, is like somebody coming in my house, stealing my wife's engagement ring. The United States government recovers it and then says it's theirs instead of my wife's. Yeah. I mean, that's why the response that this has been like, huh, doing the right thing, not really sure what to do with it. A lot of... How was there even a question? It's fair.

A lot of Bitcoin Twitter had a tough time writing a set of tweets after this. this one. It's like looking for something to do wrong, but actually agreeing with the U.S. government on something. Look, I mean, the other dimension of this, which is important to note, is that part of this decision is basically that they believe that BitFinex made sort of fair accounting with its customers. So in their estimation, BitFinex is the sole victim at this point, right? Like, this is going back to BitFinex not to be redistributed to those customers because Bidfinex did something else to make them whole based on the previous situation. So this is just a big pile of Bitcoin that's going to come back and land with these folks.

I think it's fair to say, though, if it's not going to be a strategic stockpile, and that's not going to be added there, which I think we all believe is morally wrong based on where these came from, that Bipfinex, aka Palo Arduino, aka Tether, is a really good place for this to land, considering that they add Bitcoin to their actual balance sheet on a regular basis and are likely to be diamond-handed with this into Berk too. Yeah, they're also just about the only institution in the world that might literally plausibly not give a crap about $9 billion showing up in their accounts. $9 billion.

It's a rounding error. Yeah. Yeah, I agree. If you're going to plop $9 billion down, a Bitcoin down with someone that's about as good a place as you can do it. Yeah, because every other time we've had a situation like this, you know, FTCS creditors getting money back or Celsius or anything. anything, whatever it is. It's always, are they going to buy, are they going to sell? Where's that

money going to go? Is it going to be bullish or bearish from the market? I think that this is decidedly bullish. We have one final story here, but I haven't really unpacked. So I'm counting on you. Tech Group, Sue US CFPB to block rule on payment apps, digital wallets. Peter Van Van Valkenberg. So we have get two midnight rulemakings for the price of one this year. Here's our take on the recent CFPP rule to apply regular to crypto. It's unclear whether they intend to cover self-custancy wallet developers. They do include self-walled, cost-y-walt developers. The rule would be beyond CFPB's statutory authority. Okay, go ahead, man. It's the perfect capstone to the last four years, midnight rule, trying to get a last one in. And, you know, the idea is

the Consumer Financial Protection Bureau, which, by the way, has sort of got very high up on the doge chop chopping block by all reports, is saying that, you know, they're used. to be consumer protections around crypto wallets and they're you know and and stable coin transactions and as always is the case there's either a lack of consideration of self custody and how that means how that is fundamentally different than you know third party uh owned wallets and and infrastructure or an actual attempt to just bury self custody and that's sort of what van balkenberg is saying there it's like we can't tell from as it's written if it was you know if they're stupid or malicious, but, you know, one way or another, it's not going to work if they intend to,

uh, to drag net that in. It's this one as opposed to, for example, the last minute stuff at the end of the last, uh, Trump administration with Steve Mnuchin, doesn't, it doesn't really, you know, raise the hackles because it's just so clearly not going to go anywhere. I think it's more, of course we were going to get a last minute, you know, that, listen, the only thing left for Biden to do to flow, throw the double middle fingers up is to pardon Sam on the way out the door. You know, That's it. Everything else they've done. So, I can't see it.

I don't think so. I think it. Biden does not have any to give left to this point for a variety of reasons. And I can't imagine this one being there. I think unfortunately for Sam and what maybe some people are forgetting

is that Sam's influence was entirely predicated on how fast he was accumulating wealth. That is gone now. He doesn't really have that. So, dude, if you know, if you can't just show up in the club and start making it rain.

nobody really cares you know it's weird guys when you go to strip club they don't like you if you don't throw the money at them and it's the same in the united states congress and senate apparently indeed yeah all right guys that's all we got for you today quick friday five love it we'll be back of course next week follow n lw on x youtube everywhere else and check out of course his daily show the breakdown which is amazing thank you very much always a pleasure guys we will see you on monday thanks soon later