The Breakdown - The Bitcoin Bull Mood (Starts) to Return

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 Monday, May 6th, and today we are talking about, well, a small return of bullishness. 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. Hello, friends. Well, Bitcoin is back above 64,000 after a big push on Friday, and the vibes are beginning to improve. As we discussed recently, April closed as the worst month for Bitcoin since

Starting point is 00:00:51 November 2022. The price was down 16% breaking its streak of seven straight green months. Sentiment was starting to get dire, with growing calls for a premature end to the bull market. Now, with a 13% recovery over the last three days, we're starting to see some cautious optimism that the drawdown could be over. The most obvious trigger was a clearing of macro overhangs. On Wednesday, Fed Chair Jerome Powell essentially took rate hikes off the table and suggested the central bank was still looking for a reason to cut. Friday's payroll report came in as soft as we've seen in several quarters. It wasn't weak enough to justify rate cuts by itself, but it validated the Fed's focus on a weakening labor market

Starting point is 00:01:26 rather than renewed inflation. Looking at the Bitcoin chart, analysts are pointing to 60,000 as the critical support level. Wrecked capital suggests we're now out of the post-having danger zone if this cycle is similar to 2016. That having was a sell-the-news event, with an 11% drawdown over the following three weeks. Others warned not to take too much signal from thin weekend trading. Don Crypto wrote, had a great push into the market close on Friday. While I am liking how the charts are shaping up on the higher timeframes, I'll be patient and not start adding on green candles during the weekend. We'll see how this plays out. Looking on chain, though, it seems as though big traders are not waiting to add to their positions. Crypto Quant founder,

Starting point is 00:02:01 Kiyong Ju noted on Friday night that Wales had accumulated 47,000 Bitcoin, that day, worth around $2.9 billion. This category in crypto-quant data is largely custodial and exchange wallets, but he suggested that recent accumulation is not related to the ETFs. Drew took this as a bullish sign, commenting, we're entering a new era. One of the most notorious whales of the last few years has been dubbed Mr. 100 due to their recurring 100 Bitcoin buys. The wallet stopped making purchases the day before the halving, but started up again on Thursday. Mr. 100 has added 4,100 Bitcoin since then. The wallet is suspected to be the up-bit cold wallet, so it is likely a fairly good leading indicator for retail interest returning in South Korea.

Starting point is 00:02:39 Looking for more examples of people who are potentially shifting their point of view, BitMex co-founder Arthur Hayes has flipped bullish after a few months of watching out for downside risk. In his most recent research note, Hayes described the last 12% Bitcoin drawdown as a, quote, well-needed market cleansing. Arthur has been on the lookout for macro events over the past few months that could drain liquidity out of the system. He flagged the end of the Fed's bank term funding program and U.S. taxis and as potential liquidity drains. With those events out of the way, Arthur now expects Bitcoin to begin a slow grind higher. He took note of the Fed announcing a large slowdown in quantitative tightening, alongside the Treasury set to begin

Starting point is 00:03:11 buybacks of government bonds. Arthur's takeaway was very clear, writing, are the recent Fed and Treasury policy announcement stealth forms of money printing? Yes, he added, the slow addition of billions of dollars of liquidity each month will dampen negative price movement from here on out. It's not that Hayes is predicting a return to a raging bull market. He's still expecting a lot of chop over the summer. The only difference is that his bias is now positive. To be sure, it's exactly difficult to get a bullish prediction out of Arthur. But this view of slowly improving price action is becoming more consensus among crypto money managers. Dr. Jeff Rosh of Vailshire Capital tweeted. Lots of Bitcoin doom and gloom out there again today. You do you, but I'm still respecting the

Starting point is 00:03:47 ongoing bullcrab market. The FOMC rhetoric pivot was the official transition from bad to less bad liquidity conditions in my opinion. As an aside, analysts and traders calling for the end of the Bitcoin bull market may be dismayed to learn that the actual bull market hasn't even started yet. I consider the coming weeks and months to be the last great opportunity to gather corn on the cheap. End quote. Hello, breakers. Today's episode is sponsored by Ledger. As another cycle ramps up, it's another chance to think about your Bitcoin custody best

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Starting point is 00:04:54 development. Thanks once again to Ledger for supporting the breakdown. A few months of sideways price action would be broadly in line with previous cycles. In 2020, the post-having doldrums continued well into October, around five months of consolidation before the end-of-year breakout. If the logic is that the money printers are getting warmed up, we actually have a little bit of evidence to support that view. Measures of M2 money supply have flipped positive for the first time since November 2022, suggesting that the money supply is no longer contracting on a 12-month basis. To be sure, M-2 is a deeply flawed metric, but it's usually directionally correct. It's also worth noting that outright contractions in M2 are highly unusual.

Starting point is 00:05:29 This was the first contraction in M2 since 1949 and the deepest contraction since the Great Depression. Trader Oliver Veles is all bulled up on the news, tweeting, M2 money supply is about to go ballistic like it's never done before. Can you say bur? All I can say is buckle up and stack harder. Any and all dips are viable. Consider them gifts and ignore the bozos calling for doom. We are nowhere near the end of Bitcoin's bull. Real Vision founder Raul Paul takes a lot of signal from Global M2, stating that expansions are, quote, when BTC outperforms the NASDAQ and crypto becomes the supermassive black. hold. Research houses are also getting in on the game. The latest note from Coinbase research suggests

Starting point is 00:06:04 that last month's pullback was indicative of broader macro weakness rather than a Bitcoin-specific problem. Since topping in mid-April, gold and U.S. equities also participated in the downside. Analysts argued that this pullback wasn't even that bad, writing, what leaves us optimistic in this pullback is that Bitcoin's maximum drawdown from peak is at 23 percent, below its historical range. We believe that this trend of overall reduced drawdowns will persist, in part because of the legitimization of Bitcoin as a macro asset. The note pointed out the launch of ETFs has a sign that Bitcoin is becoming more accepted. Alongside products traded in the U.S., Canada and Europe, Bitcoin ETFs were added to the Hong Kong Stock Exchange last week and are expected

Starting point is 00:06:39 to go live in Australia soon. The Hong Kong debut was widely viewed as a disappointment due to tiny first-day volume. A combination of pre-sales and direct share creation meant that most of the inflows didn't go through the order books, however, leaving the products with 240 million in assets after the first day. Infloes dropped off for the rest of the week. That again, the products are only expected to gather a billion in assets by the end of the year, making this a relatively successful launch for the much smaller market. Coinbase analysts suggested the sentiment is more important than the size of the inflows, writing, we think they represent an important signal for regulatory engagement with the asset class globally. The note pointed out that volume on centralized

Starting point is 00:07:12 exchanges during the first quarter was roughly eight times larger than USETF volume, with analysts writing, this discrepancy and activity leads us to believe that Bitcoin's price discovery still remains rooted in global demand trends. Another reason to be optimistic here is stabilization of ETF flows. The last two weeks saw net ETF outflows for seven trading days in a row. Negative flows peaked on Wednesday with more than half a billion dollars redeemed from the funds. Every single products saw net outflows that day. Friday training was a turnaround, with 378 million in net inflows across the products. Notably, Grayscale recorded 63 million worth of inflows, its first positive day breaking a 78-day outflow streak. Most commentators were bewildered

Starting point is 00:07:50 that anyone would be buying GBTC instead of the other lower-cost ETFs. Analysts 10 Delta had a mechanical explanation, tweeting, Friday's bizarre ETF inflow dynamics were probably due to a combination of discount arbitraging the large dislocation produced by the earlier week sell-off. Note that EZBC, BRRR, and ARC, which had some of the largest discounts, also had unusually large inflows, shorting GBTC and leveraging the 1.5% management fee to their advantage, either for a Delta neutral arbitrage of other ETF discounts, using it as a short leg for some other market opportunities, or to simply take directional short exposure on BTC. Then again, many analysts are beginning. to suggest it's time to take a step back and stop focusing on the minutia of day-to-day

Starting point is 00:08:29 ETF flows. If Friday's inflows were just a sign that market makers were arbitraging of price divergence, then we're beginning to get much less signal on shorter timeframes. David Luant, the head of research at Falcon X, said, while monitoring these flows is crucial and short-term fluctuations may capture headlines, I think it's essential to filter out the short-term noise and focus on the factors that are more relevant in the long run. Bloomberg Senior ETF analyst Eric Balcuna said, All of this is just beginning if we zoom out.

Starting point is 00:08:53 These ETFs will be around for years, decades. They tend to win, assets, and volume compared to other vehicles over time, albeit not always in a perfectly straight line. In other words, could we be already reaching the stage where Bitcoin ETFs are fading into the background as just another investment vehicle? Brian Armour, director of North American Passive Strategies Research at Morningstar noted that the ETF's, quote, rapid ascension had an outsized impact on the price of Bitcoin, but the broader Bitcoin ecosystem will regain its influence as US ETF flows stabilize. Finally, while we may be out of the sentiment slump, it's worthwhile remembering that most people consider Bitcoin a long-term investment. The network hit a major milestone this week that really

Starting point is 00:09:29 puts it all in perspective. The Bitcoin blockchain is now processed over one billion transactions since it was launched in 2009. Every day on the network now clears around 500,000 transactions with no intermediaries. BitWise CEO Hunter Horsley marked the occasion by reflecting on how far Bitcoin has come, tweeting, Satoshi, likely an individual, dreamed of a piece of software. 15 years later, it has securely processed over one billion transactions, stores over a trillion in value, is used by over 200 million people across the globe. Bitcoin is a true testament to the impact an individual with a powerful idea can have on the world. So friends, not a bad way to start the week. The vibes are coming back. We're getting ready for our little crab walk into the summer,

Starting point is 00:10:07 but a sideways crab walk pointed up is a lot nicer than a sideways crab walk pointed down. One more big thank you to my sponsor for today's show. Check out the ledger Bitcoin Orange Nano. Five percent of sales will go to support Bitcoin Develop. Until next time, be safe and take care of each other. Peace.

The Breakdown - The Bitcoin Bull Mood (Starts) to Return

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