The Breakdown - Texas Gets to Bitcoin Buying

Starting point is 00:00:04 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, June 24th. And today, in addition to a check-in on everything going on in foreign policy, we are also talking about the Texas governor signing a Bitcoin bill. 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, let's check in on whatever the heck is happening in the Middle East, as it is, of course, setting the backdrop for everything else right now. The first part of the day was all about the Iranian response.

Starting point is 00:00:54 We started to get signals that a response was coming and that it was going to be aimed at military bases in the region. Now, when push came to shove, what happened was a very face-saving, coordinated operation, where a very well-telegraphed response was symbolic and coordinated, frankly, with U.S. and other regional forces as a face-saving measure. In fact, 13 of the 14 missiles that Iran lobbed at U.S. bases were intercepted with zero casualties. And so with a sigh of relief, it appeared that the story would be all about de-escalation. Last night, President Trump posted, congrats to everyone, it has been fully agreed by and between Israel and Iran that there will now be a complete and total ceasefire in approximately six hours

Starting point is 00:01:30 when Israel and Iran have wound down and completed their in-progress final missions for 12 hours, at which point the war will be considered ended. Officially, Iran will start the ceasefire and upon the 12th hour, Israel will start the ceasefire and upon the 24th hour, an official end to the 12-day war will be saluted by the world. During each ceasefire, the other side will remain peaceful and respectful. On the assumption that everything works as it should, which it will, I would like to congratulate both countries, Israel and Iran, on having the stamina, courage, and intelligence to end what should be called the 12-day war.

Starting point is 00:01:57 This is a war that could have gone on for years and destroyed the entire Middle East, but it didn't and never will. God bless Israel. God bless Iran. God bless the Middle East. God bless the United States of America and God bless the world. Now to some, it seemed like Trump had simply tweeted a deal into existence. CNN initially reported that Iranian officials had not received a ceasefire proposal and saw no reason for one. One official said, at this very moment, the enemy is committing aggression against Iran and Iran is on the verge of intensifying its retaliatory strikes with no ear to listen to the lies of its enemies. An hour later, on Iranian's state official tweeted, as Iran has repeatedly made clear, Israel launched war on Iran, not the other way

Starting point is 00:02:31 around. As of now, there is no agreement on any ceasefire or cessation of military operations, however, provided that the Israeli regime stops its illegal aggression against the Iranian people no later than 4 a.m. Tehran time, we have no intention to continue our response afterwards. The final decision on the cessation of our military operations will be made later. 15 minutes later, he added that Iran's military operations continued, quote, until the very last minute, but confirmed the attacks had concluded at 4 a.m. When it appeared like the cease fire was on, there were even some non-Trump fans who were willing to give him credit. Eurasia group analyst Ian Bremmer wrote, Iranian symbolic attack purely for domestic purposes and accepted as such by

Starting point is 00:03:07 President Trump, biggest foreign policy win of his second administration to date. And yet, subsequent to that, it has just been non-stop action, non-stop bombing, back and forth recriminations, ultimately leading to President Trump, giving an angry interview where he lambasted both countries, and concluded, we basically have two countries that have been fighting so long and so hard that they don't know what the F they're doing. Trump, of course, did not actually censor himself. So far, it still appears that markets are optimistic. Bitcoin rebounded to 105,000, S&P 500 futures reached a four-month high, gold and the dollar reversed lower, but of course we'll have to see what happens when the markets actually open later today. Today's episode of The Breakdown is brought to you exclusively by Grayscale.

Starting point is 00:03:50 Grayscale is almost certainly a name you know. They've been offering exposure to crypto for over a decade now and offer over 20 different crypto investment products ranging from single asset to diversify to thematic exposure to crypto and the broader crypto industry. They have long been innovators at the intersection of tradfi and crypto. And one of the benefits for a lot of us is that grayscale products are available right through your existing brokerage or IRA. Now, of course, investing involves risk, including possible loss of principle. For more information and important disclosures, visit grayscale.com. Go to gracecale.com to explore their full suite of crypto investment products and invest in your share of the future. Let's move off that story for just a minute, though, until something else big happens,

Starting point is 00:04:38 and bring it back to one of our key themes for the year, which is these Bitcoin reserve bills. Texas has passed their Bitcoin law becoming the third state to establish a strategic Bitcoin Reserve. Governor Greg Abbott signed the bill into law on Saturday. New Hampshire was the first to approve a Bitcoin reserve at the beginning of May, and while the measure was symbolically important for the live-free or die state, they show no signs of actually purchasing Bitcoin any time soon. Arizona came later that month after multiple fall starts, and the measure that was actually passed was simply to sweep abandoned crypto out of exchange accounts in the same way as stocks. In other words, it was reported as a Bitcoin Reserve, but it had no mechanism to actually purchase

Starting point is 00:05:12 Bitcoin. Texas, on the other hand, is poised to be the first state to actually start accumulating Bitcoin. Back in February State Senator Charles Schwartner, the author of the bill, said, We can buy land, we can buy gold. I think the state of Texas should have the option of evaluating the best-performing asset over the last 10 years. CoinDesk reports that the loan star state will be appropriating $10 million to start filling up the reserve. Digging a little further on the law, the fund is intended to be a permanent reserve. Bitcoin can only be sold to cover expenses of operating the fund or covering short-term cash deficits in the Treasury. If the reserve is tab to cover budget gaps, the funds must be returned with interest. Unlike the New Hampshire

Starting point is 00:05:47 plan, which is capped at 5% of state funds, the Texas Reserve has no limit. Legislators can appropriate cash from the budget, direct revenue streams, or accept Bitcoin donations from residents to add to the preserve. Will Baxter, Executive VP of Brains Mining, wrote, the recent boom in Bitcoin Treasury companies shows that the race to acquire Bitcoin is well and truly on the way for institutions, but for nations and states, it's just beginning, and Texas is leading the way. Well, Cole tweeted, you should not sell your Bitcoin to Texas because they won't sell it back to you. Texas is not the only group with conviction, by the way. Throughout the geopolitical shocks of recent days, Bitcoin ETF buyers didn't miss a beat. Last week saw over a billion dollars worth of

Starting point is 00:06:24 inflows into the U.S. products despite markets being closed on Thursday and nearly zero flows on Friday. The ETFs haven't seen a single day of net outflow since early June, with dip buyers overpowering the sellers throughout the 12-day war. Zooming out, global crypto ETFs are on a 10-week streak of net inflows, despite some pretty negative. In negative weeks in February and March, crypto-etifs have taken in more than $15 billion year-to-date. This is a bit smaller than at the same time last year, which had seen about $19 billion of net inflows at this time, but still, given everything that's going on, most people find this pretty impressive.

Starting point is 00:06:55 Ecoinometrics wrote, geopolitical shocks stir markets, but institutional behavior speaks louder than price. Bitcoin ETF inflows haven't just held up. They've resumed climbing since mid-April and the long-term trend remains strong. The price may be under pressure after the U.S. strikes on Iran, but the flows tell you how long-term capital is thinking. And right now, the capital is still buying exposure. Speaking of exposure and market hunger, the surprise breakout of the Circle IPO remains one of the largest stories in crypto equities. In fact, it's been so successful that some are starting to

Starting point is 00:07:24 wonder if it's been too successful. The stock was up another 9% yesterday and is now up 8x from its IPO price and almost 4x from where it opened its first day of trading. The company's fully diluted market cap reached 77 billion at its intraday high. That mark was briefly higher than Coinbase's market cap and far exceeds the $61 billion of USDC in circulation. Coinbase, remember, currently has a revenue-sharing agreement that sees them take around 50% of gross revenue. Circle is also more valuable than Robin Hood and New Bank, which both have more diversified business models. It's trading currently at 32 times revenue and 152 times EBDA profits. Nick Carter tweeted, these are the things that people shrug off in real time, but in hindsight,

Starting point is 00:08:02 you're like, hmm, yeah, something was a miss here. Nothing against Circle at all, but there's a mini retail bubble in stonks right now, be cautious, just stating the obvious. CMS Holdings, though, continues to fade CT's opinion on this matter, tweeting, boomers ripping Circle talking about investing in Stable Coins and CT getting worked up about how its bad business is poetic. In other words, like I've said a bunch of times on this show, it's very clear that all the market cares about is exposure to the stable coin theme, and this is their one play. Van Eck remains extremely long the stock and doesn't seem to care about valuation metrics. Matthew Sigil Vanek's head of digital asset research wrote, Circle is now the number one weight in Van Nex's Global Digital

Starting point is 00:08:36 Assets Equity Index at 13%, with smaller positions in active strategies. The index is tracked by a passive ETF offered by Van Eck, with Sigil added, our total holdings now exceeds CEO Jeremy Allaire's. Kathy Wood's arc, however, has been taking profit over the past week, exiting another 15% of their position on Monday for $81 million. The shorts are starting to get very loud on the timeline, but many are noting that IPO lockups run until December. Weekly options currently have a 22% implied move higher. And so in some ways, it kind of feels like this IPO is a fitting, interesting to Altcoin trading for the Wall Streeters. Speaking of IPO, OKX is looking to go public on the U.S. following its relaunch in the country.

Starting point is 00:09:14 The exchange resumed U.S. operations in April with a new domestic entity. In past cycles, they had been unofficially servicing U.S. customers while pretending to geo-block them. The exchange got the message in early 2024 with a DOJ lawsuit alleging failure to maintain anti-money laundering controls, which led to a settlement in February with an admission of guilt and an agreement to pay $500 million in fines. With that out of the way now, the exchange is now operating as a fully regular entity out of a San Jose regional headquarters. Rocheon Robert, formerly of Morgan Stanley and Barclays,

Starting point is 00:09:42 and now the exchange's U.S. CEO, said in May, our long-term vision, of course, is to become a category defining super app, and we plan to slowly work towards that goal. To that end, OkX has stood up a crypto wallet, a Dex, and other on-chain infrastructure. Robert added, the U.S. is no longer what you would consider an impossible market. It's an untapped opportunity, if approached in the right manner. Now, of course, if OKX manages to go public, it could be an interesting test of Wall Street's enthusiasm for crypto companies. So far, we've only really seen Blue Chip American crypto firms go public with strong results. And despite OKX coming into compliance and opening a domestic entity, they don't have anywhere near that type of brand. There's another issue,

Starting point is 00:10:18 which I think that the market is maybe getting a little bit ahead of itself by calling this all a crypto theme, when really what they're interested in is on the one hand stable coins and on the other hand, Bitcoin Treasury companies. Doesn't mean that can expand, but I do think that that's different than just wanting anything crypto that they can get. Anyways, continues to be interesting times, geopolitics don't slow down, markets don't seem to care, and we are just along for the ride. For now though, that is going to do it for today's breakdown. Appreciate you listening, as always, and until next time, be safe and take care of each other. Peace.

The Breakdown - Texas Gets to Bitcoin Buying

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