The Breakdown - The Five Most Important Stories in Crypto

Episode Date: October 25, 2025

NLW and Scott Melker chop up another week, with a big discussion of the controversial CZ pardon. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

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 Friday, October 24th, and that means it's time for the Friday 5. 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.L.Y. Sash Breakdown Pod. All right, friends, we have a bit of a Friday. for you here today, including me giving you my absolutely 100% unfiltered thoughts on this CZ pardon situation. So if you are interested in that, let's waste no time with the intro and dive right

in. Thank you for joining us today for the Friday 5. We're a little late and it's my fault this time. We didn't send you a link. Listen, I didn't even ask for the link until 9.05. So, you know, blame. No, that 905 is early for Friday 5. Our wheelhouse is like 906 to 908. So 910 is tried. late, unfortunately. But yeah, man, let's talk about what's going on. First of all, I got to give a very quick honorable mention to CPI, which just came in slightly soft. I don't think we need to dig into it deeply, but worth noting since it just happened. This was an improvement in inflation. I love that, you know, inflation going up, but not as bad maybe as some strange consensus for

no reason. Apparently that's good for markets. Then the White House immediately said probably no inflation data next month. Listen, I will take better than expected slightly going up at this point, you know. We'll take it. Let's not look at gift horse in the mouth when we have so many things that we have to deal with already. Yeah. And one of those obviously is the echo chamber narrative, perhaps not a widespread

narrative of the gold to a Bitcoin capital rotation. As you can see here, gold to Bitcoin capital rotation, as bitwise predicts Bitcoin could hit 242K. If you're wondering where that came from, this is based on effectively if three to four percent of the gold money flows right into Bitcoin. You can see 1%, 2%, 3%, 4%, 5%, gets us to 242,391. Of course, that is a very specific number using, I don't know how you get to a number that specific

because you don't know what the price of gold will be. You can have this rotation with gold still going up, right? So it could be much higher or gold could be crashing epically and all of those numbers could be lower. either way, if we actually see this rotation or any evidence of it, could be really, really good. Yeah, I mean, listen, this may win the prize for shortest-lived narrative of the cycle. I think it was Monday evening, a bunch of people got really excited about this. And then Tuesday, for like 37 minutes, it looked like it was happening.

And then all the charts, it was like, what's going on way? What's happening? And then it went up for six hours and dumped right back to the same price. Yeah, yeah. I mean, look, I think that like, to the extent, said that you're there's sort of, you're moving beyond the very specific, that specific moment, which I thought was actually kind of funny this week. You know, people are, they have been tracking that Bitcoin has followed a few months behind, you know, pretty closely. And so they're wondering

if that's setting us up for another sort of big leg up. You know, it's just trying to understand the relationship to gold in this new context. I think that's the real thing here is Bitcoin and gold were both sort of, you know, non-mainstream assets, or at least they're not out of the, the main financial discourse. You know, gold has always had a place, but it's sort of, you know, it's for cranks until it's not, you know? Yeah. And so I think everyone's just trying to figure out what Bitcoin's new relationship with gold

is as they try to figure out where gold goes next. What I love is I've seen some of the same people celebrating the gold to Bitcoin rotation, but in the same breath, excitedly talking about how Bitcoin follows gold by 90 days or 120 days. And if you believe gold is crashing, that means we have 90 to 100. 120 days until Bitcoin tops and crashes. So I'm not something to celebrate either. We're threading a real needle here between all the gold Bitcoin narratives. Yeah. Well, there is no one. And I will, I will be proud of this till I die. Who's better at finding the positive side of two negative

narratives like this community? We just, we have that on lock. I would also say that in many cases, we can find the negative side of infinite positive narratives. But, well, mostly, no, that's mostly about people. We just find the negatives about people. The narratives can be fine. That's true. So listen, let's talk about something that also requires a bit, I think of cognitive dissonance or bipolarity. We've got the Fed Explores payment account, pick a pull crypto into the heart of U.S. finance. Of course, those who watched with us, we had Waller here saying that crypto is woven into the fabric of the payment and financial system. The TLDR is that we had a full thing from the Fed here, basically talking about payments and crypto's involvement in that system, which, I mean,

just very hard to have on your bingo card at any point in the past. And then taking a step further and saying the activities that the Fed has participated in with Operation Chalkpoint 2.0, not giving the custodiate banks of the World Fed Master accounts, jumping way past that and saying, hey, stable coins, you can now likely connect directly into the Fed settlement system. Yeah, the sort of layer one good news of this is just the continued sort of shift in rhetoric, especially with, you know, one of the folks who's potentially being tapped as Jerome Powell's replacement. That's nothing but good, nothing but bullish there, a kind of continuation of some of the rhetorical themes that we've seen.

The big thing is this idea that they're actually looking into a way for not just crypto, but a much wider set of fintech and financial institutions to have access to, you know, some moderated version of Fed Rails, not necessarily giving them access to all of the same facilities that are able to be accessed by big banks and, you know, existing kind of large lenders. But I think that it makes sense for the Fed just to be in kind of a constant revision and review mode about whether there are new types and categories of actors in the financial system that need access to those rails as well, right? Like it doesn't matter how much the bank lobby screeches, there are new categories of players that are encroaching on their turf. And if the goal of the Fed is

to keep a safe, sound, functioning financial system and market stability, they can't just ignore them because banks don't like it. So, you know, robustly positive, obviously a ton to be figured out in terms of how it would actually work where the lines would be drawn. But just look at Caitlin Long's tweets to get a sense of whether it's a bullish signal or not. She was definitely euphoric and rightfully so. I mean, she's been suing the Fed literally for years. She has a fully backed, effectively narrow bank in Wyoming that is not fracturally reserved, effectively carries no risk and got denied for a Fed master account just because crypto. Yeah, I reckon has struggled with this as well, but the idea of plugging, you know,

even USC and such into the financial system directly is leaps and bounds beyond what most people expected. I think going back to my original comment, though, the bipolarity or the cognitive dissonance side is this is literally the Fed. Like, if there's anything that Bit Pointers and The crypto people have rallied behind collectively is that the Fed is a corrupt private organization and enriching bankers around the world and we're against monetary policy and money printing and all these things. And now we're, of course, like the others, yeah. Yeah, I mean, you got to infiltrate, though, you know, it's sort of a build it from within.

Plus, from the outside world's perspective, it's one monolithic industry. Obviously, we know inside it that it is a wide array of different people. different stakeholders with different perspectives on this. I mean, Bitcoiners alone are having a civil war right now about cores and knots and forks and spoons. I don't know because I can't. But yeah, I mean, to your point, there's the most disjointed, quote unquote, community you can possibly find. But we do rally against things like Elizabeth Warren and, you know. It's by design. I mean, it is an extreme version of free market democracy in some way where it's supposed to be messy, you know? The less mess there is, the more

centralized it is. So, you know, it's one of the reasons that although it feels caustic sometimes, these things are actually features, not bugs. And it doesn't mean that everyone has to participate in every discussion, obviously. But it's designed to be a place where loud voices are sort of the idea. So, you know, I always have to remind myself of that, particularly when it gets real, real frenetic. Absolutely. And, you know, as we have in the title here, Bitcoin and Crypto-dominating Washington, this is one of the big stories along those lines. As the shutdown drags on, don't really know how that part is relevant, but Democrats talk with crypto CEOs. Brian Armstrong, obviously, made comments and he believes that they have enough people on board to get market structure

done by the end of the year. But it sounds like it wasn't as peaceful in Kumbaya of a meeting as many viewed from the outside. According to this, sources claim U.S. crypto policy meeting had heated exchange. Senator Gallego, Democrat from Arizona, her two sources familiar told the crypto CEOs, I'm really fucking pissed about what happened last week. Don't be an arm of the Republican Party. They used you all and your megaphones to fuck us. That is a sitting United States senator saying that apparently with maybe cameras and mics on. So what is going on here? I mean, this is one of those situations that's enormously difficult to know from the outside. So it is certainly the case that this was not a kumbaya. It was a heightened emotion meeting, for sure.

Kristen Smith, basically reputable sources who were there like Kristen Smith, formerly the Blockchain Association, now of Salonah Policy Institute, made it clear that there was tempers running high. However, a lot of the other folks have also kind of come out after the first wave of coverage and basically said that the tension part was way overblown because it was a hot story and that there was actually still much more productive room. And so those comments that you just read were the specific kind of like the hot button comments. And on the one hand, you know, I got a little feisty about this on my show and I basically said, you guys stop trying to sneak in backdoor bands of entire segments of the industry and we'll stop leaking your dumb, you know, your dumb proposals. You know what I

mean? Like, come on, man. But at the same time, here's the other read though. If you want to be generous and give them the benefit of the doubt, which at this point, I would not forgive anyone for not giving the Democrats the benefit of the doubt when it comes to crypto policy. But if you want to be generous, you've got a set of Democrat senators who are desperately in the minority in their party, who are trying to find a way to threat, talk about threading a needle, you know, and we haven't even talked about as the president pardon CZ, these senators are trying to find a way to have enough cloud cover to themselves support something. and then also get just enough folks on board that this can move through.

And so I think that there's the other way to read his frustration is basically like, look, dudes, we are trying in a very difficult situation. And I know that the party isn't great for you. But like if you just basically he's, you know, the other way to read this is he's saying if you turn it into a just Republican thing, if you lean as the industry all the way into the partisanship of this, it just means that the Democrats, no Democrats are going to be able to get behind it. You know, so I think that there's a different way to look at that frustration.

Again, if you were inclined to give benefits of the doubt here. But at the end of the day, stop sneaking backdoor bans into your bills and then we'll stop being mad about it, man. Yeah, I mean, this had such tailwinds. It seemed like a slam dunk before that letter from these effectively same 11 senators kind of undermine the entire thing, right? So I guess it's encouraging to see them back at the table and that their tailwinds once again. and optimism that this will get done,

but it's hard not to be skeptical. That said, to your point, I mean, this is just an impossibly difficult situation for them to be in. I can't imagine the pressure they're taking from the Elizabeth Warren side and such. Chuck Schumer. There ain't that many Democratic senators, right?

I mean, you're like, yeah. Chuck Schumer was at the meeting, which is if you want, like, you know, sort of like signals that don't have to do with what was said, that's a good one. Yeah, I think that's a good one for sure. Actually, I very rarely listen to the all-in, podcast, but I saw they had an interview with Joe Manchin and listened to it while driving my kid to

school. And if you want an idea of just how fundamentally broken and difficult it is to get policy like this past, it's an incredible conversation. Definitely worth listening to because you'll remember he was kind of the one standout holdout that blocked a lot of things. And he talks a lot about the Bernie Sanders and Elizabeth Warren's side and how difficult it is to deal with them. Definitely a good listen. There's a quick plug there. I think it came out today or yesterday. But I do give these few credit for trying to fight upstream. I really do. Yeah, it would be, like I said, it would be a reasonable position at this point to say, I'll believe it when I see it and just sort of say, I'm done with that entire side of the aisle. But the people who are trying to do stuff in Washington don't have that

luxury. So this is what we got. This is what we got to deal with. And, you know, we are, we are staring down the barrel of another election cycle that could change things dramatically. And once again, as hard as it is to cheer politics when it comes to crypto. It's really important that we get the Clarity Act passed in some form because it will not last forever this Goldilocks moment we have for the industry in the United States on executive orders and grand statements. We have to see it quantified into law so it can't be immediately reversed and it will be. We need things that get policy locked in that make it hard to change and that allow for other institutions that don't give a fig about us one way or another to come participate in the market such that it becomes even more. hard to reverse. Like, that's the game. And I still think as many companies and crypto natives have returned to the United States, there's still a skepticism that it will remain this way. So I don't

think that we've gotten all the companies back that left. Hell no. Or that we have near any level of certainty that you are safe to build. No, absolutely not. I can't imagine at this stage going all in on the U.S. It's just, it would be nuts. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps, and outdated financing models. Communities and builders are left behind while capital sits locked out. Althea is changing that. Since 2018, their technology has powered resilient, sustainable networks across the U.S. and abroad. With Althea L1, they built the world's first blockchain purpose-built for utilities and telecom, turning infrastructure into a transparent, investable asset class. Through liquid infrastructure,

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crypto offerings. Can you unpack this for me? This one wasn't particularly on my radar. Yeah, I mean, the short of this is that one of the big downward price pressures throughout this cycle has been whales selling into the market, right? We've known this for some time. And one of the reasons for that is that basically that BlackRock is enabling those whales to effectively deposit their Bitcoin and get ETF shares back. So they don't have to deal with the tax implications of selling and then converting it into it. So it's a way to get more sort of traditional financial market liquidity and all the benefits that come with it being inside the traditional system without, again, without sort of having that big. tax hit. This is something that we've known as been going on. It's been well followed. In fact, it's been one of the biggest sort of downward price pressures throughout this cycle.

And this is just sort of confirmation about how much of that has happened. BlackRock came out and basically said that it's, you know, about $3 billion worth at least have done that. Yeah. So it's very clear. We've even had some of the bigger Bitcoin whales say, hey, I'm converting a lot of my holdings into ETFs because it just makes a hell of a lot more sense for estate planning. it's easier to hedge, tax advantages of putting it into their retirement portfolios, whatever it is. There are now, if you're not fighting the libertarian fight and believe that you're going to need to hold Bitcoin as a hedge against government collapse. There are a lot of reasons that even some ardent supporters would rather hold or partially

hold ETFs than spot Bitcoin. Yeah, it's mostly an interesting sort of little footnote sort of story in the mechanics of things. crypto is a combination of extremely clear price catalysts and lots and lots of subtle, less clear price catalyst that we spend a ton of time pouring over and trying to understand. And throughout this cycle, in that second category, I believe, has been a lot of the sort of whale selling, whale movement shifting around. You get to 100 and you got to cash them out. And so this is sort of more of a, I think it's not like a big game-changing announcement or

anything like that. It's more just sort of understanding what's going on behind the scenes and how that that might be impacting things that you're seeing sort of more in front of our faces. Absolutely. And outside of Fed Waller, basically saying that they're going to weave crypto into the financial system, I would say this is the biggest story of the week. Trump pardons convicted Biden's founder Chang Peng Zhao. We all know that it happened. Of course, the industry largely celebrating it. Trump himself saying that CZ was effectively targeted by lawfare from the previous administration should have never been in jail in the first place.

and that he's writing a wrong. Critics will say that all the bad things about Cizzi, right? That he was a money launderer and criminal allowing Hamas and North Korea to use finance, that he was fixing markets. And then, of course, many saying that he basically bribed his way to this pardon by a $2 billion surcuitous investment through other entities into World Liberty Financials, U.S.D.1. A lot going on here. I'm definitely in the glad CZ is pardoned camp.

also the dude already did his time and was free anyways. So this seems like more of a symbolic gesture than a lifting him out of jail and sending him home situation. But a lot to unpack here. I have a hard time getting real stoked about this. I mean, look, CZ, he went to jail. He did his time. I don't care. As someone who is rather close to this, a lot of what happened for the last three years was big bullshit billionaire big dick games. CZ wouldn't have sold F. Z. wouldn't have sold FTT into the market if Ryan and Sam from FTX hadn't made fun of him. It's all just big fucking ego. So I don't really, whatever, throw away the key in my estimation. I don't think he's good for crypto. I don't think he helps crypto. Binance is doing just fine without him.

Couldn't give a shit about what happens to ZZ for the rest of his life. So I don't care that he's parted. I don't think that it's, I don't have any sort of particular need to see him punish forever. but, you know, whatever. The dude admitted to financial wrongdoing. Like, whatever. What I find interesting, yeah, what I find interesting about this is he was supposed to effectively be banned from Binance. And the minute he got out of jail, it seemed like in everything but title, he jumped right

back in. And I don't know how that happened. And maybe that's what the pardon allows. That's what it. That's what it allows for it. And again, I don't even particularly care. Like, CZ's very good at running finance. I don't mind that.

I think it's a big useful. I think it's been a. net positive institution when it comes to crypto adoption around the world. I think my issue with this is that it's so, so easily painted with the brush of corruption. If you cared at all as this administration about the perception of whether you were corrupt or not, there's not a universe in which you would do this right now. There's no need to do this right now. Nothing changes about TZ except maybe things that he wants to do right this moment. You could do this later. You could do this away. Whether it is an example of corruption or not, it makes everyone in crypto who's trying to do anything in the system,

it makes our jobs enormously harder. This makes it so much harder for those Democrats to do things. And yes, you can be all pissed off that Elizabeth Warren said that he did the wrong thing on Twitter. It's Elizabeth Warren. I'm sorry. I did that. I'm sorry. No, what are you? I did push for the community note, though. I had to. No, you should. I'm fine with that. I'm so, you know, over that. But ultimately, That is just exemplary of the problem that all the people who are trying to quietly get things done are going to deal with. This is a move that does nothing, period, full stop, nothing to help the crypto industry

and makes it enormously harder for meaningful change to happen. So I don't care if I'm in the minority on this. I think you are. This sucks. I think you're saying the quiet part out loud. But whether it sucks for crypto or not, this is actually just one tiny drop in the bucket of the Trump in crypto story. Yes.

Right? It's the bigger story. Well, I'm just saying like World Liberty Financial, Trump meme coin. I'm just saying like, people already believe it's a grift in crypto with him. So it's just reinforcement to those critics, obviously. It's a whole different level to pardon criminals, which is what the rest of the world sees. That's a next level. Like, it is, I think it is meaningfully different. I got so many text messages about this yesterday when that news broke.

anyone who thinks that it's not different, you're diluting yourself. It's also a bit wild. And I don't think that CIS, I don't know, I'm not saying CZ had anything to do with it, but the timing of this right after the liquidation event on Binance with all eyes on that particular exchange at this particular time also makes, to your point, the timing a little brutal. Yeah, well, listen, to be clear, I am not actually accused. I'm not in the camp that this is definitely an example of corruption. I have no evidence of that.

I don't, like, I don't think. it's that clear cut. I'm strictly in the camp of this creates really pain in the ass things, and I don't particularly care about sort of helping CZ out. By the way, the other thing is, if I'm CZ, I'm using every tool in my toolkit to try to give myself maximum of Lilley. I have no hate for him playing the cards that are dealt to him either. It's just my take is that it's bad for crypto. That's all. Polymarket has an SBF pardon at like 16 or 18 percent now. That's when I quit, by the way. I know you. You 10 times more than me.

Like, I don't know what cave you'll decide to go live in to turn off social media in the world if that happens, obviously, with having been at FDX. But that would. I'm actually, I mean, to the extent that you do think that this is an example of corruption, I'm a little bit less worried about that because boy, don't have no money anymore. CZ never, never really gave up his capital access at least. So, yeah, he says there are overestimations, but I'm still saying like 87 billion, 19. billion depending on the given price of BNB on any given day. So listen, I think most people watching and here would go through everything CZ went through if you knew you would come out the other side in his exact situation. Like four months at Club Fed and a presidential pardon to change the optics

and you get to keep your $90 billion. He gave up four, you know, $4 billion, I think, and a fine. So things have worked out pretty swimmingly for CZ. It's crypto, baby. What if Trump wasn't president? Would we have SBF out and CZ in jail? I don't even know. I don't know. There's not a lot of political will, I think, around Sam, considering how many people have been having to run away from their association with him.

So it seems a little bit harder. All right. We're going to wrap it there. There's a bunch of, like, ancillary stories that I don't think are too worthy of digging into. I think we covered the bulk of it. And we'll be back. for another Friday 5 where I will actually send NLW the link to show up, which is useful.

I mean, I have people for that, but we collectively sort of blew it. And otherwise, I highly, highly recommend once again that you all listen to the breakdown, read the breakdown newsletter, check out everything else that LW has, because he will keep you far better abreast of what's happening in the market and the industry than I will. So thanks, man, for that. It's really the best, best show. Best show on radio. I don't know what we say.

It's pretty radio. Yeah, it's radio on internet. Have you ever thought about going video? Not on that show. I got video for the AI show. Awesome, I know you do. All right, guys, that's all we got. See you next week.

Thank you. Later.