The Breakdown - The Five Biggest Stories in Crypto This Week

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 Saturday, April 20th, and that means it's time for the weekly recap. 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. Well, friends, usually at this time we have an episode that is a live discussion with me and Scott Melker

Starting point is 00:00:42 about the most important stories that happened in crypto that week. This week, however, Scott was, like so many others in the crypto space, paddling his way through Token 2049 in Dubai, and so I decided that I would do my own version of the show, so this will be the five most important events that happened in crypto this week, counted down, based entirely subjectively on my opinions. Let's do two honorable mentions to start. The first is, well, let's call it a bunch of stuff that happened with Binance. The first is that they are trying to pay a fine in India and reenter that market.

Starting point is 00:01:15 As per local sources, that fine seems to be around $2 million, but it might end up being larger. Finance were initially banned after the government claimed noncompliance with AML, as well as not paying a 1% transaction tax on trading volume. No timeline on when finance expects to return. What we know so far is just that they are engaging with local. authorities in an effort to come back. Notably, India was a huge market for Binance. It has one of the largest per capita adoption rates in the world. And before they were banned, Binance accounted for

Starting point is 00:01:42 around 90% of local market share and estimated $4 billion in AUM. It's important to remember that for casual retail in many countries, finance effectively equals crypto. And so this could be very close to a crypto ban slash unbanned situation so far as market impact goes. A related sort of Binance story, is that in the wake of CZ's departure, they have received their license in Dubai, and then finally, Binance has converted the balance of their $1 billion Sefu Industry Emergency Fund into USC. It was previously split across BTC, B&B, Tether, and True USD. Travis Kling said, that's interesting, one more step in a series of many more steps to come when the U.S. government runs your compliance department. Wonder what's to come next?

Starting point is 00:02:23 Second honorable mention, let's shout out the Hong Kong ETFs. In Hong Kong, Bitcoin and Ethereum ETFs were granted in-principle approval on Monday. They could begin trading anywhere from Monday coming up to weeks or months away. The reactions have been mixed. Crypto-Twitter was ecstatic, thinking that this is China reopening. And Ethereum ETFs in particular were very exciting for those who are waiting for the same thing to be approved in the U.S. The ETF professionals, however, downplayed the importance. Bloomberg's Eric Balcunas estimated that they will likely only gather 500 million in AUM, compared to the roughly 55 billion in AUM for the U.S. ETFs currently. Indeed, the big thing is that this will all hinge on whether mainland Chinese investors can buy.

Starting point is 00:03:02 They don't currently have access to Hong Kong listed futures products, which doesn't mean they necessarily won't get access. In many ways, this story is a nothing burger until it isn't. As things currently stand probably won't move the needle, but with not that many changes, it could be a much bigger deal. However, now let's move into our top five, things that are a big deal. The first at number five has to be geopolitical tensions. The week began with a shock Iranian attack on Israel. They sent hundreds of drones and missiles at the

Starting point is 00:03:29 country, and while there was very little damage, Bitcoin markets took a big hit as one of the only open markets that were available to de-risk over the weekend. Israel launched a retaliatory strike on Iran last night, claiming hits on military bases and airfields, leading Bitcoin to sell off again, but less deep and in a way that bounced faster. While Bretha's commentators grabbed on to the idea of a World War III in the hours after Iran had launched the drones in the first place, markets are definitely not buying as much into it as they might have been before. One of the really interesting factors here to me is that idea that if it's after market hours, Bitcoin is the only market open that's available for derisking and hedging.

Starting point is 00:04:05 Something to watch as this happens more and more, and of course as Bitcoin gets its way deeper and deeper into the system. 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 practices and of course, to help all the new folks do the same. Ledger is the global platform for securing Bitcoin and other crypto.

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Starting point is 00:04:59 Thanks once again to Ledger for supporting the breakdown. All right, breakers. Consensus 2024 marks the 10th gathering of the biggest event that's devoted to all sides of the crypto, blockchain, and Web3 ecosystems. Join pioneering fingers and builders as they delve into the future of Defi and explore game-changing tech from AI to ZK Proofs and everything in between. The event is three days of jam-packed content, networking, and so much more. Some of the speakers at the event include Chris Dixon, the founder and

Starting point is 00:05:26 managing partner at A16Z Crypto, Sergey Nazaroff, the co-founder of Chainlink, Kathy Wood, the CEO of ARC, Hester Perce, commissioner of course, from the U.S. SEC, and Tom Emmer, Republican Majority Whip for the U.S. House of Representatives. Visit Consensus-24.com to learn more and save 15% on registration with the code breakdown. That is 15% on registration with the code breakdown. Number four on our top list this week is stablecoin legislation. Senators Lummis and Gillibrand unveiled their new stablecoin bill on Wednesday, and reactions were frankly a little cold. Many claimed that forcing large stablecoin issuers to obtain bank licenses was a form of cherry picking winners and shutting out innovation. It seemed like there was a not-so-s subtle subtext that some issuers were more

Starting point is 00:06:10 likely to be shepherded through regulatory hurdles than others. Lemmiss seemed to confirm this notion in an interview on Thursday stating, let's say you're a U.S. customer. If that were me, I'm would choose circle over tether. The question is not so much whether concessions should be made in a U.S. regulatory scheme to fit around tether, as that's clearly not happening. It's more just the point that regulatory moats make it difficult for competition to thrive more generally. We're still very early in the development of the stablecoin industry, and this is not the stage at which I want the government to be picking winners. Still, Lemmas said, we're very glad we got it out just to get some good feedback. And frankly, regardless of whatever you think of the details of the bill, confirms that

Starting point is 00:06:44 these are two actors acting in very good faith. On top of that, Sherrod Brown sounds like he's getting closer to approving the McHenry Waters version of a stablecoin bill, but wants additional consumer protections in AML KYC. How much that's going to be a blocker remains to be seen, but it does seem like, knock on wood, there is some progress on that House bill. Meanwhile, the UK government said that they intend to get stable coin legislation on the books by July. European regulations are coming into force towards the end of this year, and Japan, Singapore, and Hong Kong are also in advanced stages of setting up stable coin regulations. Number three, we got a verdict in the Mango Markets Exploit case.

Starting point is 00:07:19 The jury found Avi Eisenberg guilty on three counts, commodities fraud, commodities manipulation, and wire fraud. The most interesting part of this case was the way in which it looked into the defy idea of code is law. The defense ran the argument that when taking a defy loan, there is no agreement beyond the way the smart contract executes, i.e., there was no implicit representation that the loan would be paid back, so there was no fraud in taking that loan. Ultimately, the jury didn't agree, and there was enough other conduct to make the fraud-charged stick.

Starting point is 00:07:47 Crypto-Loyer Gabriel Shapiro wrote, Not surprised Avi got held liable for manipulating the price of mango on centralized exchanges, but I thought his lawyers did a great job showing that smart contract transactions are not representations to a party, so it can't be fraud in that sense. But too subtle a point for a jury question mark? Avi case is pretty flagrant and extreme, but this is not a great precedent or example for defy. Expect to see a lot more D-Y-D-X style this guy profited a lot, and the price action was suspicious,

Starting point is 00:08:12 Let's get the FBI on this to cover up Dow's poor risk management decisions. Tim and Crypto wrote, Turns out that code is not, in fact, law. As Gabe Shapiro said, Avi's lawyers did a great job showing that smart contract interactions are not representations to a party. Regardless, it's a classic case of play stupid games, win stupid prizes.

Starting point is 00:08:31 Number two this week, the subject of a recent show, it's not actually an event, but a question. Is the rally over? Bitcoin is down 12% this week. It dipped to 60K for the second time this week on Thursday, night, and although the Bitcoin dip was in range for bull market drawdowns, Alts have been an absolute bloodbath. A big part, it seems, of why the timeline has been so bearish, is that many mid-cap Alts retraced the last three to six months of gains. To many, it has felt like a hugely

Starting point is 00:08:57 punishing moment for traders going too far out on the risk curve too early. Trader Gibus said, in Altcoin land, it was kind of like the COVID crash. Less wild because global leverage didn't get pulled, but everything down to the bare market support level is basically what COVID was. Overall, now that we've seen another week of price action, there's a lot more people talking about the idea that we're done for weeks or months, that the summer could just be downwards chop. The counterpoint, however, comes from Chow Wang, who wrote, my current base case, were climbing a wall of worry and will go up a lot higher in the next six months. The powers that be need to pump all markets in order to win the election. Comfy and spot then come November

Starting point is 00:09:31 decide whether or not to take profit. In other words, even if the market wasn't overheated, it was certainly getting there, and it didn't seem like we had the firepower to move meaningfully above 70K. So maybe a summer of miserable downward chops is actually the most healthy move. That would also open the door for a lot more of the big new folks that would drive the next cycle. Whether it's pension funds, sovereign wealth funds, or eccentric billionaires, we don't know. But it makes a lot more sense for someone like, say, Bill Ackman to show up and say, Bitcoin is undervalued at 50K, I bought a billion dollars worth. As opposed to it not being super likely that someone credible would come along and do that at

Starting point is 00:10:03 80K as a FOMO move. Still, this is a very sentiment-driven thing, and we will see over the next week, if it stays gloomy, or if something new comes along to push us in a different direction. Lastly today, number one, most important thing, a thing that hasn't happened yet, and a thing which we always overestimate its impact in the short term, I am talking, of course, about the Bitcoin halving. It is anticipated to happen over the weekend on 420 because, of course, it is. And if you are interested in more discussion and analysis on the halving, I would suggest you go check out my episode on the halvings through history. It's a fun little retrospective on what

Starting point is 00:10:36 was going on in the world and in the Bitcoin scene during the previous halvings, and also listen for this week's LRS. For now, though, I am going to leave it there. Hope you guys had a great week. Of course, a big thank you to my sponsor for today's show. Check out the Ledger Bitcoin Orange Nano. 5% of your purchase will go to support Bitcoin development. Until next time, be safe and take care of each other. Peace.

The Breakdown - The Five Biggest Stories in Crypto This Week

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