The Breakdown - The Biggest Acquisition in Crypto History

Episode Date: October 24, 2024

NLW argues that Stripe's acquisition of Bridge reinforces that this cycle is all about the foundational significant of Bitcoin and Stablecoins. 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 Tuesday, October 22nd, and today we are talking about perhaps the biggest acquisition in crypto history. 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 Briggers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, big news in the world of the future of finance. Fintech giant Stripe, one of the largest private companies in the world right now, has acquired Stablecoin infrastructure firm Bridge for $1.1 billion.

The acquisition is the largest in crypto history. It's also the largest purchase in Stripe's history, demonstrating their intention to double and triple down on stable coins as the future of payments. In terms of what bridge is, they provide business. business-facing software to help companies accept stable coin payments. The firm was last valued at $200 million during their Series A, making this a huge markup in a sizable exit for founders and investors. Notably, this is emblematic of something bigger that's been happening at Stripe. Throughout the year, we've seen the company accelerate their crypto strategy. In April, it started

as a pledge to add crypto, which was a big deal as Stripe had previously had crypto and then gone away from crypto. But since then, the firm added integrations for at least three different stable coins, several different crypto assets and a handful of different blockchain. They partnered with Paxos on back-end infrastructure, and by all accounts, stablecoin payments are seeing impressive early adoption. Stripe said that users across 70 countries use stablecoin payments on the first day they were available. Patrick Collis and the CEO of Stripe made it clear exactly what the plan is, tweeting,

stablecoins are room temperature superconductors for financial services. Thanks to stable coins, businesses around the world will benefit from significant speed, coverage, and cost improvements in the coming years. Stripe is going to build the world's best stablecoin infrastructure, and to that end, we are delighted to welcome Bridge to Stripe. The message is landing loud and clear across the FinTech industry. Simon Taylor of FinTech Brain Food hit the higher level points, tweeting, this will go down as an Instagram-like all-time great acquisition. It solves a huge long-term pain point for Stripe. Accessing a 24-7 instant global dollar-based rail means they can provide

new value to customers. Sell from anywhere and get paid instantly in dollars without dealing with crypto complexity. This is the largest acquisition in crypto history. It marks a narrative shift from crypto being about price to it being about business value. Just an overdraft, the head of macro at Lightspeed Ventures wrote, Stripe acquiring Bridge is an incredibly smart long-term strategic move. Paying $1 billion for Bridge could be the payment sector version of the Instagram acquisition. Folks really seem to like that comparison. Jeremy Black, a principal at FinTech firm Kinvey, commented,

Stripe didn't pay $1 billion for the technology. They paid $250 million a year to lock down a focus team of 40 for four years. They paid $1 billion to communicate their head start to customers and partners, discourage competitors, and accelerate while everyone else reacts. Stripe is all in on stablecoins because the opportunity is limitless. We are a decade into a 100-year project to migrate from paper to programmable money. Still, others think that this is even bigger than that conversation would suggest. Rob Haddock, a general partner at DragonFi Capital, tweeted. A lot of the Stripe and Bridge Talk seems to be missing the point. This isn't just about

Stripe's crypto abilities. This is about broadening Stripe's entire business, from one that ultimately depends on the merchant to one that can be its own global payment network. On-chain, stablecoin finance ultimately leads to a world where alternative payment networks on chain are rivaling traditional ones. Jacob Horne, the co-founder of Layer 2 Zora, commented, bridge and stripe means any app can have an on-ramp and off-ramp like Coinbase. This was already true pre-acquisition, but it was limited by the number of regions supported. I'd imagine that we'll fast track relatively quickly. From inside the industry, meanwhile, there was one unified take, that this will change the

incentives for crypto startups. Chow Wang of Alliance Dow tweeted, the $1 billion acquisition of Bridge by Stripe signals to VCs that Stablecoin startups, which were previously underfunded due to lack of early token liquidity, now have a more clear path towards big exits. Expect more funding and more entrepreneurs building around stablecoins. More M&A of real businesses and fewer central exchange listings of vaporware is good for the space. Nick Carter of Castle Island put a little bit more color on it, commenting, the bridge acquisition is going to turbocharge the stablecoin space like you wouldn't believe. Generalist VCs that quit crypto in 22 pivoting back, head spinning like the exorcist.

I'm starting to think that I, the world's number one stable coin bull, have been insufficiently bullish on stable coins. As you can see, there is a lot of excitement in the market, but I think it's well justified. I'd take a step back and actually put this in the larger context of the cycle that we've seen. In many ways, so far, this cycle has been a tale of two themes. On the one hand, there is an absence of a thing which is attracting new retail investors to the market. There's no ICOs, there's no NFTs. There's nothing highfalutin, which is nominally about money go up, but which the true believers argue is about something more. To the extent that there is something in that space, more on the play-radiculous game side of crypto, it is, of course, meme coins. We talked about that

on the recent Long Read Sunday. However, I don't think meme coins have been a big draw for a bunch of new investors. They've more been a place for existing investors and D-Gens to hang out in the absence of anything else going on. On the other end of the spectrum, though, this cycle has been characterized by the ascension and continued dominance of very core underpinning assets. Specifically, Bitcoin with its ETFs and new institutional adoption, and stable coins. Now, stable coins are pretty acyclical in the sense that they've had a continuous and fairly steady ascent. But what's different about this cycle is that the world outside of the crypto industry is kind of finally starting to understand just how essential they're likely to be to financial infrastructure

in the future. Despite the fact that the industry has been beating this drum for a very long time, it's like it's only now that people are realizing that most of the world that doesn't have easy access to dollars is going to be totally overtaken by stable coins as a dominant form of payment and transaction. This episode of The Breakdown is brought to you by XAT 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 XSat Network is a great example of that. XAT Network utilizes a combined consensus mechanism of P.O.W 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 app development and enhancing security. Ultimately, the goal is for XSAT Network's decentralized asset custody to enable you to earn Bitcoin yield without sacrificing security or transparency. The XSat Network aims to unlock and scale the Bitcoin ecosystem without compromising Bitcoin ideology. Check out XSat.network or follow XSat on Twitter at X-SAT Network, that's E-X-S-A-T-N-E-T-W-R-K, and unlock Bitcoin Defi with X-Sat. On the theme of enthusiasm and this cycle, let's talk price for just a minute. The week started off

pretty great for Bitcoin. It touched 69,000 twice over the weekend, the first time at that resistance level since late July. A 3% plunge on Monday did dull enthusiasm, but it's still worth surveying the landscape as the fourth week of October gets underway. Last week was an absolute monster for the Bitcoin ETFs. They raked in over $2.1 billion to reach a new record in assets under management. This was the largest week of TradF5 flows since early March and the fourth best week on record. BlackRock's iBit is now the third best performing ETF of the year, overtaking Vanguard's total stock market index fund, ticker VTI.

Institutional interest is soaring with open interest in Bitcoin futures on the CME at all-time highs, up 36% over the past two weeks. This could suggest that a good deal of the ETF flows are the long, leg of a market-neutral carry trade. Still, rising open interest seems better than falling open interest. Looking on chain, James Van Stratton of CoinDesk noted that both small holders and whales have been accumulating over the last month. Sentiment was strong on Monday and the bullish takes were out in force. Felix Jov and the new host of Forward Guidance wrote, The Golden Catchup Trade is finally underway, complete when it meets other assets in setting all-time highs. My unrelenting macro-bullishness

remains. Joe McCann, the founder of Asymmetric, is drawing lines on charts, commenting, the last time Bitcoin had a bullish weekly MACD crossover was exactly one year ago in October 2023, when it rose from 29,000 to 72,000 in the following five months. Investment Bank Bernstein said in a Monday note that current conditions are screaming risk on their words. Yet on the negative side, it does seem as we were just discussing that retail still isn't interested. Google searches have hit their lowest point since 2020. What's more, macro conditions are getting a little worse, with bond rates rising over the past week as renewed inflation fear set in.

Even if the Fed commits to rate cuts in November, the bond market is starting to narrow the opening for an aggressive rate-cutting cycle. QCP Capital ultimately thinks the week might be a wash, commenting, A break above these levels is likely to attract massive retail attention. However, with no major catalysts this week, we expect crypto to chop around these levels as it attempts to break higher. In terms of macro data, we only have PMI numbers on Thursday, where the market will look for some reassurance if the Fed will remain on their rate-cut path.

Lastly, today, a quick check-in on the state of crypto in elections. Blissfully, it's been a little while since we had to go too deep on either Kamala or Trump, but as the election creeps near, crypto executives are getting behind their preferred candidates. Brian Armstrong has given a personal endorsement for a pair of Republican Senate candidates, Dave McCormick in Pennsylvania and crypto lawyer John Deaton in Massachusetts. The Deaton endorsement is notable as Crypto Superpack, Fair Shake, has decided not to contribute to Deaton's campaign, presumably because it's an extreme long shot. Still, it costs nothing other than reputational risk to promote one of the first native crypto candidates,

and Armstrong seems happy to do so. He tweeted, Massachusetts residents should vote for John Deaton. Crypto holders in Massachusetts should realize Senator Warren is the one who got Gary Gensler his job and encouraged him to unlawfully try and kill the crypto industry in America. Luckily, they did not succeed as we and others fought back. She is anti-freedom, thinks the government should run all financial services similar to China, and has done enormous harm to this country. Now, another big endorsement came from Ripple executive Chris Larson, who, is throwing his weight behind Kamala Harris. Larson opened the checkbook, or rather the crypto wallet,

to donate $10 million worth of XRP tokens to the future forward super PAC. He wrote, It's time for the Democrats to have a new approach to tech, innovation, including crypto. I believe Kamala Harris will ensure that American technology dominates the world, which is why I'm donating 10 million in XP in support of her. Many on crypto Twitter were confused and frustrated by this move. Nick Carter posted, this is completely baffling. Now, notably, Larson has spent most of the past administration battling it out in court with the SEC. He was in fact personally named as a defendant in the Ripple case. Crypto lawyer Gabriel Shapiro commented,

If you are an ex-rp holder, you donated to Dems whether you liked it or not. Wendy O tweeted, how can you donate or support something that is threatening your livelihood? Ripple CEO, Brad Garlinghouse, however, did a little damage control, commenting, I respect Chris's and everyone's right to support whomever they think is best to lead the U.S. We need to immediately change course from this administration's misguided war on Ripple will continue to engage with both Democrats and Republicans in the final days of the campaign and after the election to promote pro-crypto policies. It's not about party lines, it's about championing policies that drive blockchain and

crypto innovation. Now on this idea of working across party lines, based carbon recognized that the industry is playing a pretty dangerous game, tweeting, from the crypto community, it's basically just the ex-rp guy and Mark Cuban who are donating to Harris. They will be the only crypto folks who have her ear if she gets elected. Not great. Rounding out the endorsements, the Bitcoin Voter Pack, largely funded by the mining industry, is now running ads in support of Texas Republican Ted Cruz. The state has just begun early voting,

and by all accounts, Cruz has been excellent on Bitcoin and mining issues. The ad was quite noteworthy being one of the first to explicitly mention Bitcoin. It features a black and white image of banking executive Jamie Diamond looking as though he's a bond villain. This image was juxtaposed against Cruz, stating, I want Texas to be the oasis on planet Earth for Bitcoin and crypto. Notably, while there have been plenty of political ads funded by crypto packs, they have all decided to focus on attacking disfavored opponents and leave crypto completely out of the picture. So maybe Bitcoin is just bigger in Texas. That is going to do it for today's breakdown.

Appreciate you listening as always. Until next time, be safe and take care of each other. Peace.