The Breakdown - Survey: Americans Could Spend Up to $40B in Stimulus Payments on Bitcoin

Starting point is 00:00:00 The people who are surveyed who intend to use their checks for Bitcoin are effectively using the stimulus policy mechanism against the potential negative impacts of the stimulus policy itself. It shows how much the general retail understanding of Bitcoin has changed and advanced. When you have billionaire investors and regular people speaking the same language of the macro context, it could get pretty wild, pretty fast. 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. The breakdown is sponsored by nexo.io, Casper, and NEM, and produced and distributed by CoinDes.

Starting point is 00:00:44 What's going on, guys? It is Monday, March 15th, and today we are talking about why Americans are poised to spend up to $40 billion in direct stimulus payments on Bitcoin. First up, however, let's do the brief. First, on the brief today, we have to do a little price talk. It was another weekend and another milestone. Unless you were dead or completely off the grid, you know that Bitcoin hit $60,000. In fact, it spent some significant time over $61,000. Now, the prices subsequently come back down a little bit. There was a set of cascading liquidations because people insist on trading with a huge amount of leverage. And the popular narrative around the small dip from today is that It's just profit-taking, and certainly when we've seen such a meteoric rise up, it makes sense that that would be the case.

Starting point is 00:01:37 For me, I don't care so much about the price, but what I do care about and what I do find interesting is the psychological impact of the price. It took three years to get back to 20,000 after it was first reached in 2017. It took just three months from when we hit 20,000 this time around to jump 3x to 60,000. Of course, in that sort of extreme scenario, you're going to have a bifurcated response. There are going to be many who see this as validation or even who get off the fence because the asset has proved itself. Others are going to double, triple, quadruple down on their frantic critique. And, man, did I notice a lot of boomer macro guys losing their crap on Twitter this weekend? Lin Alden seemed to as well, tweeting,

Starting point is 00:02:27 Bitcoin Bear Twitter went from It's a bubble and dead technology pumped up by Tether to America will ban it before it displaces the dollar as global reserve currency and I support this, i.e. the banning of certain property and literal information rather quickly.

Starting point is 00:02:43 While regulation and state attacks are a long-known risk factor for Bitcoin, when bears talk like this about the asset, it ironically sounds more bullish than when bulls talk about it. Bear's starting to view it as that much of a threat? As ever, this price can move around quite a bit, but it certainly does not feel like this area that we're

Starting point is 00:03:03 at in the 40s, then 50s, and all the way up past 60,000, feel like mania. It just feels like the consistent and relentless pressure of more people trying to buy a thing that there just isn't that much of. All right, next up on the brief today, an update on India and crypto. We are getting some really mixed signals. Yesterday, Reuters published a story called India to Propose Cryptocurrency Ban, Penalizing Miners and Traders. So this information came from a senior government official direct to Reuters that there is a bill that would criminalize possession, issuance, mining, trading, and transferring crypto assets. In this proposed bill, investors would have six months to liquidate their holdings. And if this happened, it would be the strictest legislation in the world around crypto, that criminalizing possession is a lot of that criminalizing possession is.

Starting point is 00:03:54 is huge and is a bridge that even a place like China hasn't crossed. But then, that's not the only thing we heard about proposed crypto legislation this weekend. Minister of Finance, Nirmala Satharaman, went on TV and had this to say about it. We've heard from the Finance Ministry, we've heard from the Reserve Bank of India, on their views on cryptocurrencies and having a law which allows for global acceptance, acceptance of global cryptocurrencies or an Indian version of a cryptocurrency. How do you personally, as finance minister, view this debate? Do you think we're heading into a zone where it's almost inevitable

Starting point is 00:04:37 that governments will have to come around to the realization that cryptocurrencies are here to stay? How do you view this outside of what we've already heard from the Arabia? How is the finance minister viewing this entire debate around cryptocurrencies? A cabinet note is getting prepared. It's almost nearing completion and then it will be taken to the cabinet, of course. And I have said my view on this, saying the Supreme Court had commented on this cryptocurrency, whilst we are very clear that the Reserve Bank may take a call on official cryptocurrency or anything of that kind. but from our side we are very clear that we are not shutting all options off we will allow a certain amount of a window for people to you know use so that experiments in the blockchain the bit bitcoin or whatever you may want to call it the cryptocurrency experiments and fintech which depend on such experiments will have that window available

Starting point is 00:05:47 for them we are not going to shut it off all. But yet what kind of a formulation, even for a crypto, will have to be the content of the cabinet note, which will get ready soon? So obviously there's still a lot we don't know, but it seems pretty clear that she's saying that they are not going to cut it off entirely. There will be some window or approved way to interact with crypto.

Starting point is 00:06:10 Given how much of the fud around this space right now is governments banning it, I think this continues to be an extremely important situation to watch. Finally on the brief today, let's talk about Elon Musk. This is not in any way structurally important, but it is some good internet trolling. Tesla submitted an 8K filing to the SEC, announcing that Elon Musk would now hold the title of Techno King of Tesla, while CFO Zach Kirkhorn has taken the title Master of Coin. The filing also said they will maintain their respective CEO and CFO positions, and the internet is absolutely loving it. The coin reference

Starting point is 00:06:47 seems to be at least a little bit towards Bitcoin, at least Yahoo Finance and other media outlets are making that connection, but also just a more generic Game of Thrones fantasy type reference as well. Still, all in all, you'll love to see it. Looking for the best way to unlock your crypto's liquidity? Nexo.io is exactly what you need. Borrow against your digital assets at just 5.9% APR, earn passive income with yields of up to 12%, and swap between more than 75 market pairs with the instant nexo exchange. Try the nexo wallet app to get the whole 360 degrees of crypto banking. Get started at nexo.io. Until now, blockchain technology has been a series of compromises. No layer one protocol exists in the market that supports everything enterprises,

Starting point is 00:07:37 developers, and consumers need from decentralized applications. Mead Casper. Casper provides the blockchain ecosystem with a solution that makes no compromises around decentralization, security, or performance. Learn more at casper.network. Hey guys, I'm excited to share that this week we have a special product launch sponsor. Symbol, the next-gen public blockchain from NEM, is here. Symbol from NEM is the connector between blockchain and business. It boasts enterprise great security and programmability, bringing cutting-edge technical features to projects at the heart of the new economy. Symbol from NEM is built to be interoperable. It supports public and private hybrid models, trustless cross-chain swaps, and easy integration with existing business systems and processes.

Starting point is 00:08:26 Join us in building the new economy. Visit simpleplatform.com or nem.io for more information. With that, let's shift to our main discussion. Last week, we discussed the potential impact of the latest $1.9 trillion stimulus on Bitcoin. I said that it mostly came down to two things. The big one is long-term, the perception that this is still the beginning of a new monetary and fiscal era, one that is inevitably locked into policies that can't help but diminish the value of the dollar and fiat money in general over time, leading to more demand for something like Bitcoin.

Starting point is 00:09:07 To wit, with this $1.9 trillion stimulus on the books, we've spent a significant amount more on the battle against the COVID-19 virus and economy than we did on World War II. This extends a growing and increasing balance sheet and is bringing with it totally new interpretations of just how big that balance sheet can grow. But for skeptics who see that at some point that balance sheet will have to be addressed, it comes down to default taxation or devaluation of the currency, and of those devaluation of the currency seems by far the most likely. So this is kind of the big, long-term perspective on how the stimulus could impact an asset like Bitcoin. The more short-term impact is also the more obvious. And it's really a question. What part of the direct payments to Americans

Starting point is 00:09:52 would find its way into Bitcoin directly? Well, on that front, we got some really interesting numbers from a survey released by Mizzouho Securities Today. And briefly, lest you think this is some second-rate bucket shop running this survey, this is a Japanese investment banking and securities firm with 7,000 plus employees. It's not some little fly-by-night company. Here's the headliner. The poll found that two out of five responses from people who expect to get the stimulus planned to invest at least some part of it into Bitcoin and stocks. They suggested that based on the responses, about 10% of the total gross payments, $40 billion of the $380 billion in direct checks, could be allocated to this space.

Starting point is 00:10:37 Now, something interesting about this. The media is loving this report. Obviously, it's a sexy headline, but also there's some precedent from last year. Market Watch wrote, quote, that's in keeping with findings from other surveys and with a narrative that's accompanied a surge in individual investor activity over the course of the COVID-19 pandemic. Analysts and economists have speculated that boredom induced by the lockdowns, coupled with earlier stimulus payments and a lack of activities to spend them on, have sparked a surge in the opening of online brokerage accounts. I might take issue with the boredom piece, or at least

Starting point is 00:11:11 the idea that boredom alone versus a sense that the world is off-kilter and wanting to have agency within it is the driving force. However, the point is that there is a ready narrative here. So instead of this survey being received skeptically, it's being received as part of a larger story. What's more, it's not the only survey that has found something similar. Deutsche Bank did a survey last month and also found investors ready to use any stimulus money they get for trading. That survey estimated that we could see 170 billion in potential stock market inflows from what was then estimated to be 465 billion overall in trade. direct payments, which as we know is a little bit lower than that. Now, a few more details from the

Starting point is 00:11:51 Mizzou-ho survey. 20% of check recipients expect to allocate up to 20%, 13% expect to allocate 20% to 80% and 2% expect to put in 80% of their check or more. Also, and this is the big one to me, Bitcoin kicked the slats out of stocks as the preferred investing choice. 61% prefer Bitcoin to stocks 39%. Based on the overall $40 billion that could go into investments, this would imply something like $25 billion of incremental spend on Bitcoin, which is 2 to 3% of the market cap with a single event. This survey was also featured on Bloomberg's opening bell show on TV, and they also looked at the performance of these markets after the first two checks came in. In the month after the $1,200 April 2020 direct payment, Bitcoin was up 36.8%. In the month after the $600 December check,

Starting point is 00:12:44 Bitcoin was up 28%. Keep in mind, that means that the people who put their stimulus checks in Bitcoin were correct to do so. Don't underestimate the fomo of that fact, assuming that any of those people talk to their friends and family. Those people who bought in April, if they've held and if they used most of that check, could be sitting on something more like $10,000 from their stimulus. than the thousand bucks they got in the first place. So what's most interesting to me about this? Well, first of all, I will say that even if that $40 billion was to entirely pile in in short order, I still think that the potential long-term impact of the narrative is much bigger and much more important. But when it comes to this survey specifically, to me, the easily most important part

Starting point is 00:13:29 is the slide that shows investor preferences of Bitcoin over stocks. That's 61% to 39% that I mentioned just a minute ago. To me, there are three possibilities here. Either one, the sample is way off, and that's actually completely unreflective of the investor base. Always possible, although as I said, this is a quality firm with presumably quality survey methodology. The second possibility is that Bitcoin has flippin stocks as investors' general preference. Awesome as that would be, I think given the comparative size of these two markets, it still seems unlikely. Now, the third possibility is that there is a narrative correlation, where regular everyday people actually see Bitcoin the same way all of us enfranchised people see it as well, as something you buy because of never-ending money

Starting point is 00:14:15 printing. Basically, the idea here, if this is accurate, is that the people who are surveyed who intend to use their checks for Bitcoin are effectively using the stimulus policy mechanism against the potential negative impacts of the stimulus policy itself. So of these three possibilities, the sample being way off, Bitcoin generally flippinging stocks as investor preference, or just regular people actually understanding Bitcoin as a hedge, this third one feels by far the most likely, and it shows how much the general retail understanding of Bitcoin has changed and advanced. When you have billionaire investors and regular people speaking the same language of the macro context,

Starting point is 00:14:56 it could get pretty wild, pretty fast. Anyways, guys, I hope you had a great weekend, and I hope your Monday is off to a killer start. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Survey: Americans Could Spend Up to $40B in Stimulus Payments on Bitcoin

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