The Breakdown - The Five Most Important Stories in Crypto Last Week

Episode Date: December 13, 2025

This Friday Five breaks down a pivotal Fed meeting marked by rare open dissent that signals a splintered FOMC and a far more politicized, harder-to-read monetary path into 2026, including what the new liquidity program really means for markets. The episode then turns to Washington, where the crypto market structure bill remains stuck in a late-year quagmire over DeFi AML rules and stablecoin yield, before digging into why markets appear finished with Bitcoin treasury companies after a high-profile debut flopped. It closes with a sober trimming of year-end Bitcoin bull cases and the sentencing of Do Kwon, a moment that feels like the final punctuation mark on the last crypto cycle.

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, December 12th, 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.ly. slash breakdown pod. All right, friends, and other solo Friday 5 today because of scheduling issues, we are talking Fed Day, market structure bill, Bitcoin Treasury companies, a trimming of the bull case,

and a sentencing from the 2022 vintage of crypto criminals. Starting with the Fed, the major headline for Fed Day has to be the silent dissenters in the breaking of consensus on the FOMC. All-month rate cut odds had been fluctuating with Fed speakers contradicting each other and whipsawing the market. It was clear heading in that there was a power struggle playing between Doves and Hawks. That battle playing out at headlines isn't new, but the level of dissent that was formalized in the voting was. We had two Fed presidents' dissent in favor of holding rates steady. In addition, four non-voting members cast their ballot on dot-plot, penciling in zero cuts for next year. There hasn't been this level of dissent since 2019, and it says a lot about where the Fed is going into 2026.

It's pretty clear that Powell's lame duck period started earlier this week. Throughout his tenure, Powell has been seen as a consensus builder. There were several meetings during the hiking cycle and again during the cutting cycle, where he implied strong disagreement behind closed doors, but those FOMC meetings never resulted in open dissent. It seemed the FOMC members valued putting up a united front more than taking a stand. That idea is now completely out the window and seems unlikely to return next year. Regardless of who Trump selects as the next Fed chair, we're likely to get even more dissent as the White House tries to ram through rate cuts. That has a couple of big implications.

First, forward guidance is likely going to become unintelligible as the Fed splinters into factions. the market is going to have a very difficult time getting its bearings without clear direction from the Fed. Second, it makes monetary policy outwardly political. There's always been a sense that politics plays a role behind the scenes, but FOMC members at least try to maintain the facade of Fed independence. Now, in specific, it makes it impossible to get a good read on where monetary policy is going next year. Right now, the markets are pricing in two rate cuts as the highest probability path for 2026 at 32% odds, but there is a really widespread between zero and four cuts, and even a little tail risk priced in that rates get slashed all the way down to 2%.

That's going to make it difficult to operate, especially in the first half of the year while the transition to the new Fed chair is underway. Now, aside from rate policy, we got the new Alphabet Soup liquidity program in the form of the reserve management purchases or RMPs. The Fed is going to be buying $40 billion worth of treasury bills each month until April, with the expectation the program will continue at a lower pace after that. Officially, the purpose is to grow liquidity in the system in line with GDP growth, and as much as some people want to push the narrative, it doesn't really seem like QE.

Probably the most important signal from this program is that the Fed is paying close attention to liquidity conditions and saw fit to do something about them. Notably, the program started immediately, so the Fed didn't think they had any time to wait around. By itself, the program isn't money printer-go-bur, and if liquidity conditions recover, we probably won't get to that stage. But the Fed program is now in place, and they stand ready to provide as much liquidity as necessary. Next up, we get an update on the market structure bill. All week, we've been tracking comments from lawmakers around getting that bill done. At the start of the week, it seemed like negotiators, had come off the rails. Senator Moreno said the talks had been decently frustrating,

and Senator Warner threw some barbs at Republicans for deferring to the White House on ethics issues. It wasn't looking great, but after another meeting, Senators Lummus and Gillibrand sat for a joint interview and said things were back on track. Lummus promised to get a draft out by the end of the week and said we're still likely to get a markup hearing scheduled for next week. We haven't seen that draft yet as I record, but what we did get was a written counteroffer from Democrats leaked via Punchbowl. Dems were asking for three main things. Stronger safeguards in the commodity security delineation. Essentially, there's concern that companies will issue security-like tokens through the commodity definition. Dems also want a lower cap on the amount of

money that can be raised without SEC registration. This one feels the most amorphous, but it could cut off a lot of the ICO-like activities that would otherwise be enabled by the bill. The second ask is tougher AML controls for defy protocols. This one has been hugely contentious than the industry. Jake Chivinsky issued a rallying cry at the end of last week, that no deal is better than something that can function as a de facto defy-bigh ban. This proposal talks about the need to apply AML rules to, quote, sham defy while keeping protections for, quote, legitimate decentralized software. The devil will, of course, be in the details here. The proposal also talks about more targeted compliance measures. Dems say they want to grant authorities the ability to isolate services

that are used by bad actors. Overall, this one feels like the Dems know what they want in theory, but the practical and technical limitations haven't really been dealt with. Finally, and this has been the big one, stablecoin yield. The proposal doesn't really nail down what the Dems want, but it does give us insight into the discussion. The Dems acknowledged that the Genius Act purposely only blocked stablecoin issuers from paying yield, implying that the so-called loophole of paying rewards through intermediaries was deliberate. However, the proposal says there was an agreement to address this issue in the market structure bill. Dems wrote that they believe Congress can find solutions to this issue that protect the banking system while still permitting

rewards and incentives. However, they wrote that they believe closing loopholes is a bipartisan issue supported by banks and consumer protection groups. Who knows what to make of this one? stablecoin yield seems like it's going to be completely up in the air. We'll probably know more by Monday, but at the moment the base case has to be that it's going to be real difficult to land this plane. Getting the bill into markup next week would help, but only if it moves the ball forward. If all we get is Elizabeth Warren grandstanding and zero issues resolved, that that will kill momentum dead heading into the end of the year. I don't know, man, right now, to me, it still looks a bit like a quagmire unless someone caves.

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, networks can now be financed in real time, operated more efficiently and scaled to meet the $3 trillion dollar telecom and utilities market. This is fintech for infrastructure. connecting capital directly to builders and returning revenue seamlessly to funders.

No middlemen, no bottlenecks, just sovereign, resilient infrastructure that works for people, communities, and investors alike. Learn more at Althea.net and find them on Crackin to join the future of infrastructure finance. Next up today, markets are done with Bitcoin treasury companies. For the past month, we've been tracking these companies a little more closely than normal because their narrative is hanging over this Bitcoin drawdown. This week felt like the breaking point where markets are officially done with the theme. We had the big debut of 21 Capital, the Bitcoin Treasury Company sponsored

by Tether, Cantor Fitzgerald, and SoftBank with Jack Mahlers at the helm. They raised $3.9 billion for their initial Bitcoin Treasury before they close this back deal, enough to make them the third largest Bitcoin Treasury company right out of the gate. And the market just shrugged. The stock was down around 25% on day one, vaporizing the entire premium to their Bitcoin Treasury. It traded listlessly sideways on days two and three, and it seems like the market is sending a pretty clear signal. With current market conditions, these companies are worth exactly the value of their Bitcoin treasury and no more. That is, of course, a huge problem for the business model of raising cash to buy Bitcoin in an endless loop. The other big overhang is Micro Strategies

possible removal from MSCI indices, and we got some more news on that front. MSCI is proposing that any company that holds more than 50% of their assets in Bitcoin will be removed. The logic is that these companies are more like ETFs for mutual funds than operating companies, so they shouldn't be indexed. Now, Micro Strategy is fighting it, but honestly, the big takeaway from this week is that everyone is just done with Bitcoin treasury companies. MSCI doesn't want to keep them in their indices, and investors don't want to fund them. The structure was always a regulatory arbitrage first and foremost,

and now that levered Bitcoin ETFs are available, it's not really clear what the corporate structure adds. For today, some price predictions. With two weeks left in the year, the bulls are hanging it up. The Bitcoin drawdown hasn't been all that bad in terms of price, but it's done a real number on sentiment. We've covered multiple small recoveries over the past month and every time the story has been the same.

Bitcoin takes up slightly, a ton of leverage gets added, a big liquidation purges the market. At this stage in the year, it's way too late for Bitcoin to get meaningfully back above $100,000, so many are starting to throw in the towel. That's been happening for some time now, but this week's research note from Standard Charter really topped off the narrative. Their head of digital assets research, Jeff Kendrick, has been possibly the strongest bull of the past two years. At the end of last year, he nailed his colors to the wall and said Bitcoin would see $200,000 by the end of 2025. In this week's note, he admitted he had been

wrong and revised his target down to $100,000. Now, he did keep a long-term target of a half-million on the table for 2030, and he's still bullish for every year until then. But Kendrick articulated a thesis that described not just the end of the cycle, but the end of the market structure that we've known since the white paper was published. Basically, in his estimation, Bitcoin is just becoming a normal asset. No more four-year cycles, no more parabolic runs, less volatility, less excitement, and a neutered price prediction to end the year. Lastly, today, a quick one, Luna founder, Doe Kwan, was sentenced to 15 years in jail. In many ways, this really closes the chapter on the last cycle. The impact of the Luna collapse hasn't been lost on anyone who lived through

it, but now that all the details have come out, it's clear that Kwan represents the absolute worst of the crypto industry. In 2022, he was one of the most active posters among the major crypto founders. Whenever Luna would dip, he would be out there with his legion of investors pumping the token back up. Some of those tweets had very specific claims about behind-the-scenes action being taken to support the token. One event in particular comes to mind from the very end stage, when the Luna Foundation bought a billion dollars worth of Bitcoin as a reserve fund. We now know that most of Kwan's claims about stabilizing the algorithmic stablecoin were lies. The Bitcoin Reserve was never deployed as the stable coin unwound.

In the sentencing, the judge absolutely threw the book at Kwan. Prosecutors had asked for 12 years, and typically they pitched their recommendations as high as possible. As it turns out, the judge thought they were going too easy on Kwan and came in over the top with a 15-year sentence. You can feel the contempt from the judge as he handed down his sentence. Quoting from inner-city press, the judge said, Your fraud was unusually serious. For four years, you publicly lied to the market. You lied that it was a stable coin. You had a backstop to buttress the peg. The peg failed, and you called

on jump trading. This was a pivot point. You chose to lie. You chose poorly. You pretended the peg it held. In July 21, a British economist questioned you, and you said, I don't debate the poor on Twitter. The historian Robert Caro says these things show who you are. You were an icon in the crypto world. In 2022, the death spiral took down hundreds of thousands of investors. The sentencing report is not publicly available, but it is devastating. You lied about the mirror protocol. You lied about chai. You wrote, deploying capital, steady lads. You have been bitten by the crypto bug, and I don't think that's changed. You must be incapacitated. And so ends that particular period of crypto history. Good riddance, man. And with that, we also end this Friday 5. Appreciate you listening, as always,

and until next time, be safe and take care of each other. Peace.